Originally Published MDDI May 2005

NEWSTRENDS

Maria Fontanazza

In a deal that could produce one of the largest fully integrated contract medical manufacturers, Ethox Corp. (Buffalo, NY) has acquired STS duoTEK Inc. (Henrietta, NY).

With the addition of STS, Ethox will incorporate microbiology, toxicology, and analytical chemistry into its services. It should be able to help OEMs with everything from research to sterilization to product release, says Ethox president and CEO Thomas Bienias. “I believe that we're the only contract manufacturer now with that complete capability,” says Bienias.

Being different could create stronger competition in the market. “In our business, the demand for fully integrated contract manufacturers and allied service providers continues to grow,” says Bienias. “A lot of companies just operate singularly in one of the facets of our business. I think a number of companies will keep an eye on what we're doing.”

“They complement each other well,” says Jeffrey Stephens, president of Ixian Consulting Inc. (Jefferson, GA). “There wasn't a lot of redundancy.” Stephens says Ethox's approach goes against industry trends. “It seems that everyone else is becoming more specialized, niche providers. What they're doing is distinctly different.”

Although the terms of the deal are undisclosed, the union will boost Ethox's yearly revenue to $30 million, says Bienias. “Frankly, I'll be disappointed if we're not in the $75-million to $100-million range in the next five years.”

Stephens predicts that Ethox will probably appeal to two markets. Small entrepreneurs with an idea for a device can have Ethox take a proj-ect all the way to launch. Very large companies that want to reduce staffing might see the company as an alternative to in-house product development. “Instead of having your own suite of analysts, labs, and design departments, you might use Ethox as either a complete substitution or to augment your own capabilities. Everyone's trying to get more products out,” Stephens explains.

The deal also reflects the desire of medical OEMs to do all of their shopping in one place. “Although companies want to outsource as much as possible, they also don't want to have to handle a long list of potential suppliers,” says Richard Malo, vice president of contract sales at Ethox. “It's cost- effective to eliminate the amount of people handling a product from beginning to end.”

STS will continue to operate under the STS duoTEK name for the time being.

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