Treasure Valley med-tech industry on a slow burn

An Idaho native returns to open a device startup company.

adutton@idahostatesman.comApril 14, 2014 

  • THE STORY OF ONE DEVICE

    Hundreds of surgical patients around the world have a special plate in their shoulders that was invented and made in the Treasure Valley.

    Dr. Scott Humphrey, a local shoulder specialist, approached Boise manufacturing company AceCo in 2009.

    "He had an idea ... a rough sketch on paper," said Jeff Gasser, AceCo account manager. The sketch was for a plate Humphrey wanted to use in rotator-cuff surgeries.

    AceCo engineers started working with Humphrey on prototypes.

    It took two years for AceCo to get approval from the Food and Drug Administration to start making the plate.

    "It's just not that easy for a company to come in and say, 'We're a machine shop, which we've been since 1960, and we're going to start making medical devices for your grandma,' " Gasser said.

    The device - which looks like the world's tiniest hockey mask with two bolts going through it - was ready to go in 2011.

    AceCo invested "quite a bit of money" in the development of the cuff-repair device. The company, whose manufacturing campus is on Gekeler Lane, is now a contractor for Shoulder Options, the company Humphrey started to make and sell the device.

    AceCo churns out about 200 to 300 of the devices each year, Gasser said. They are sold internationally and are FDA-approved for use in the U.S., he said.

    Gasser thinks med-tech entrepreneurs may not think of Boise as a home for their startups, since San Diego and cities in the Midwest are more popular. But they should, he said.

    "Not only is it fairly inexpensive to start a business here, for tax reasons, and maybe pay rate," Gasser said, "we just have a lot of resources on the education side (that can help) take concept to production."

    -- Audrey Dutton

Randy Werneth is immersed in a project he calls the Med-Tech Furnace - an incubator that he hopes will help ignite a local medical-technology industry.

He's not alone in his quest. The Boise area is far from a hotbed of med-tech action, but many people want to change that.

"I looked at it as an opportunity but also a huge challenge," said Werneth, who pulled up roots in his longtime home of San Diego to return to the Treasure Valley, where he grew up.

Werneth was raised in the Fruitland area and graduated from Ontario High School in 1979. "After high school, I high-tailed it out of Idaho," he said.

He studied engineering, attending Arizona State University and UCLA. He found his calling in the med-tech industry. His specialty? Developing devices for the heart.

About five years ago, Werneth made a trip to McCall. Then another. He realized how much he missed living in Idaho.

As soon as their youngest son finished high school, Werneth and his wife started making plans to relocate.

BOISE OVER TEXAS

Werneth connected with Betti Newburn, who spent years as an executive with California med-tech startups and now runs the Small Business Development Center in Boise. She and others put Werneth in touch with other people, including Mark Rudin, vice president for research and economic development at Boise State.

Rudin got Werneth an 1,800-square-foot space in the university's Ron and Linda Yanke Family Research Park at 220 ParkCenter Blvd. That's where a crew of professionals from San Diego will work, joined eventually by local engineers.

Before he found that office space, Werneth also was considering Texas as a location for the incubator. He had attended a conference at which Gov. Rick Perry met with the med-tech community in Southern California. Texas was offering "lots of incentives" to Werneth to move there, including money to help offset costs of relocating his senior technical team and money to train recent graduates in med-tech work.

But he wanted to move back to Idaho and "get something started there," he said.

"What I said is, for this to work and be a partnership, I wanted a commitment from Idaho - Boise - and that commitment comes in the way of the space Boise State is providing to me at a very low expense to me," he said.

That lower overhead helps him fund the move and incubator growth without spooking potential investors who might worry their money would be used for startup costs instead of for the devices he is making, Werneth said.

TRYING TO DRAW OTHERS

The incubator's first device is a treatment for atrial fibrillation - a medical problem that occurs when your heart's electrical circuitry isn't working as it should.

Werneth will be CEO of the company developing that device. He has five employees. But he sees the incubator as a home for other businesses as well.

"This is just step one," he said. "I definitely envision where, say, a physician in Boise or engineer in Idaho says, 'I've got this great idea, and I want your help.' "

Over time, Werneth hopes to foster "an ecosystem" in the Treasure Valley that fosters med-tech growth.

The Core - a local coalition - was already working toward that goal when Werneth came along.

CORE BACKS THE INCUBATOR

The Core is a nonprofit made up of public and private stakeholders in health care, technology and education. It started in 2009 as a Meridian-centered med-tech cluster.

The Core is about to celebrate a milestone: groundbreaking on a cadaver lab at the Idaho State University-Meridian Health Science Center.

The second phase of that initiative is to build a bio-skills lab for medical professionals to use.

Medical device companies, including those in Werneth's incubator, could use the lab to demonstrate - and train doctors to use - a device or technique, said Earl Sullivan, a business consultant who is Core's executive chairman.

"That space also would be prime to do additional research on potentially developing" new devices, he said.

Sullivan thinks Werneth's incubator will be "a great outlet for students to see a real, functioning company" - and a potential source of employment when they graduate.

"It's actually the catalyst we're going to need," Sullivan said.

PROGRESS TAKES TIME

The growth of med-tech in the Valley has been slow. Entrepreneurs say that's how the industry works.

It can take years for what looks like a simple piece of metal with holes and screws to make it from the idea stage to being used. It requires a team of engineers, medical experts and people who can navigate the Food and Drug Administration's testing and regulatory approval process.

"It's not like making a toy," Werneth said. "It's something that goes in the body, (and) there's a lot of testing that has to go on."

Development also requires piles of money from patient investors. Angel investors might pour millions of dollars into a gadget that could either boom or bust, years down the line.

Zona Health CEO Steve Wood has managed to raise about $10 million in angel investor funds for his device - something that looks like a glorified joystick but is sold overseas to treat high blood pressure. His Boise business has five employees.

The device is headed for clinical trials in the U.S., but Wood said he needs to raise an additional $5 million to $15 million.

That's not easy to do in Idaho, because investors aren't used to med-tech's quirks, he said.

"Zona Health is here because I'm here, and basically, there probably aren't a whole lot of other reasons," said Wood, a longtime Boisean.

IN IDAHO FOR GOOD?

Out-of-state investors often ask Wood whether he'd move to another state.

"My answer is always yes. For enough money, I'd consider it," he said.

He said he doesn't want to live anywhere else, but it's harder to fly somewhere to meet with investors than it would be to pitch to someone you run into at the golf course.

It's also hard to draft a large team from Boise, he said.

"My regulatory affairs person is based out of Minnesota," Wood said. "When I started this company, the only listed regulatory person in town, there was only one" whose area of expertise was condoms, he said.

But Wood is optimistic, as more institutions such as Boise State, Idaho State University and local hospitals start talking seriously about med-tech.

"Things are changing in this valley," he said.

Audrey Dutton: 377-6448, Twitter: @IDS_Audrey

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