Medical Device Link.

INDUSTRY NEWS

Silicone technical parts are supplied to med-tech OEMs by Silroc CZ, currently one of the principal manufacturers of high-end silicone nose pads for eyeglasses.

Go east, young OEM. That seemed to be the message of Czech Trade at MEDTEC Ireland in September, where it promoted a pool of national suppliers from its stand. And it seemed fitting that Galway, which has had enormous success building a medical manufacturing hub, should pass the baton, so to speak, to one of the newest EU member states. Ireland initially began attracting med-tech companies to its shores by promoting a skilled and educated workforce that, at the time, was a relative bargain in terms of labour costs. It didn’t hurt that governmental agencies were eager to help companies set up shop by offering a range of services and incentives. All of those ingredients are present today in the Czech Republic, plus a little something called flexibility.

“We represent approximately 20 suppliers in the Czech Republic, but of course the actual supplier base is much larger,” says Czech Trade official Toma Pisa. “Precision engineering and metal fabrication are traditional industries, but we also have firms that provide plastic injection moulding, electronics outsourcing, and assembly.” Production costs are significantly lower than in Western Europe, notes Pisa, but he is quick to point out that this “is only part of the picture.” The combination of technical expertise, research capabilities, and the availability and flexibility of the labour force in a central European location are driving growth, he says. Flexibility is a word I would hear a lot when I visited Czech suppliers at the end of January, almost becoming a leitmotif of my trip.

Competitive Edge

“The Czechs are a flexible people, and that characteristic is one of our strengths as a supplier to medical technology OEMs,” says David Bríza, chairman and business director of Gama Group. “At our company, we pride ourselves on being problem solvers.” He is equally proud of his stunningly modern and very spacious facility tucked away in Jimramov, in the Bohemian-Morovian highlands.

The 24,000-m² facility offers a full range of contract services. It is equipped with state-of-the-art injection moulding machines, extruders, assembly and packaging stations, and an EtO sterilizer. A 2200-m² Class 100,000 cleanroom is on the premises. The primary products manufactured on-site include infusion and transfusion sets, blood lines, tubing, and related disposable devices. For some medical products, the firm has a 60% market share in the Czech Republic, notes Bríza. The company operates four other facilities in the Czech Republic, one of which is a joint venture with Dutch outsourcer Medisize CZ s.r.o. Although the company does a brisk business with EU OEMs, Bríza is keenly aware that his company’s cost advantages are facing stiff competition from manufacturers in the Asia-Pacific region, and notably China.

Chinese manufacturers are, indeed, importing products into the Czech market, notes Bríza, but while the price point is low, the quality can be questionable. “In some cases, we have seen medical products with a CE mark that are not consistent with EU norms. That is our edge: we can manufacture products at a reasonable cost that meet global standards.” The firm’s Ceské Budejovice facility is certified to ISO 9000:2003 and ISO 13485:2003 by TÜV Product Service.

China is also very much on the mind of Silroc CZ chairman and CEO Emil Hamernik. Located just outside of Liberec in Smrzovka, Silroc’s core activity is the production of silicone nose pads for eyeglasses. The manufacture of eyeglasses has largely moved to China, and it is only a matter of time until nose pad production follows suit, says Hamernik.

“Chinese manufacturers tend to use PVC nose pads,” says Hamernik. Silicone supports have more-desirable tactile qualities, but they require greater technical skill to produce and are more expensive. “We use a special silicone formulation that is supplied only to us by the German company Wacker AG . . . we like to think of our product as the BMW of nose pads,” says Hamernik. Although some Chinese manufacturers have tried to move up the value chain by offering their own silicone nose pads, they have been unsuccessful thus far, mostly because they use inferior materials, says Hamernik. But ultimately they will succeed, and they will control the market in three to five years, he adds. “In the meantime, we need to reorient our company by leveraging our technical and materials expertise into the production of technical parts.”

In the medical arena, the firm currently produces silicone parts for a German manufacturer, who assembles the device at a facility in Thailand. The OEM intends to increase orders for parts from Silroc by 10–15%, notes Hamernik, who is manifestly proud that his company’s expertise has trumped the low cost lures of Asia-Pacific suppliers.

“The medical market currently accounts for 25% of our business. We project that it will grow to around 35% by the end of 2006,” says Hamernik. While he is realistic about the challenges posed by China’s manufacturing industry, he cites the flexibility of Czech manufacturers and their workforce as a key competitive advantage.

“Silroc’s flexibility resides in our ability to provide small-series parts rapidly. Chinese manufacturers focus on mass production, and inflexibility is built into that business model. Our niche,” adds Hamernik, “is in rapid small series and prototype production. That will continue to be our hallmark.”

Electronics Expertise

For electronics outsourcing firm TSE (Ceské Budejovice), flexibility is practically ingrained. Founded in 1959 to serve the telecommunications industry, the firm’s electronics expertise eventually came to the attention of a maker of incubators, that contracted TSE to perform maintenance work. “Our engineers saw improvements that could be made to the product, and in 1992 we introduced our own line of incubators,” says general manager Karel Fiedler. The company eventually added anaesthesia products and other devices to its medical portfolio.

TSE also has a significant PCB assembly activity, produces transformers and coils, and operates a tool and die shop. It wants to marshal these varied resources to provide large-scale electronics outsourcing services to medical device OEMs.

“We have experience integrating electronics into plastic parts,” says Fiedler. “And our tool and die workshop provides us with single-source capabilities.” The firm’s standing as a med-tech manufacturer, adds Fiedler, gives it firsthand knowledge of industry’s regulatory and quality system requirements. And it has a success-oriented mindset. “Automotive and telecommunications are traditional industries in the Czech Republic. Medical technology is the industry of the future.” And the future of the Czech Republic’s med-tech industry lies, in large part, due east of Ceské Budejovice in the city of Brno.

In March, researchers at the International Clinical Research Centre (ICRC) in Brno announced a collaboration with the Mayo Clinic in Rochester, MN, USA, to develop a world-class medical and biotech research facility. The cluster will strengthen joint EU and US research into cardio and neurovascular disease, internal medicine, neurology, oncology, and related disciplines. The ICRC will be located at St. Anne’s University Hospital, with some projects conducted at the Bohunice campus of Masaryk University.

According to Czech Invest, the governmental inward-investment agency that is partly responsible for the project, this effort will establish ICRC Brno as one of the largest platforms for medical and biotech research in the European Union. It will also significantly raise the profile of the Czech Republic’s so-called biotech corridor, which also includes the MediPark complex at Masaryk University. MediPark is designed to support the creation of incubators and spin-off centres, as well as to attract biotech firms and investors to the region. An incubator for biotech projects is slated to open at the complex in 2007.

Contacts

Czech Invest: phone: +420 296 342500; fax: +420 296 342502; marketing@czechinvest.org; www.czechinvest.org

Czech Trade: phone: +420 224 907587; fax: +420 224 913817; marek.houda@czechtrade.cz; www.czechtrade.cz

Gama Group: phone: +420 389 000451; fax: +420 386 354351; dbriza@gama.cz; www.gama.cz

Silroc CZ: phone: +420 483 346100; fax: +420 483 382675; hamernik@silroc.cz; www.silroc.cz

TSE: phone: +420 386 721100; fax: +420 386 721102; fiedler@tse.cz; www.tse.cz