Monday, November 26, 2007

STD Med boosts growth by selling equity stake

By Ryan McBride

A Stoughton medical devices maker plans to sell a $40 million stake in its business to fuel growth and raise capital to launch its own startups.

STD Med Inc., originally Stoughton Tool & Die Inc., is a contract manufacturer of medical devices that also incubates and spins off startups with proprietary technology. The family-owned company is in talks with undisclosed private equity investors to grow both sides of the business, Steven Tallarida, president of STD Med, confirmed.

"You can only do so much through internal growth," said Tallarida. "We're very interested in becoming one of the larger players in the medical device industry."

Tallarida said the private equity would enable STD Med to acquire other contract manufacturers in the Boston area, become less reliant on outside investors to fund its startups, help fund the launch of a new spinal device startup, and pay for capital equipment upgrades at its production facilities.

The company has annual revenue of about $30 million from manufacturing contracts with such medical technology giants as Natick-based Boston Scientific Corp., as well as Johnson & Johnson and Becton, Dickinson and Co., both headquartered in New Jersey. With the infusion of capital, Tallarida said, he would like to grow the contract business to an operation with $130 million in annual revenue.

On the spinoff front, STD Med has already incubated and launched four Massachusetts medical devices startups, including AngioLink Corp., Arthrosurface Inc., Spirus Medical Inc. and Cardiosolutions Inc.

However, STD has had to rely on outside venture investors for most of the capital to finance the startups, Tallarida said. Therefore, he would use part of the private equity to build an internal VC fund.

Meantime, STD is in discussions to acquire a smaller contract manufacturer of medical devices in the Boston area within six months, company officials said. The undisclosed firm has about 20 employees and annual revenue of $2 million to $3 million.

Tallarida noted the acquisition would likely be made before his firm brings on a private equity partner, which is expected to happen before the end of the first half of 2008. "This is probably the first major financial move of many to come," he said.

The company would also achieve a first by forming a partnership with a private equity firm. The Tallarida family has owned the company without such partnerships for the past 55 years.

Yet the company, originally run by Steven Tallarida's father, Primo Tallarida, has a history of changing course to adapt to market conditions. In the early 1990s, the firm changed its focus from aerospace manufacturing to medical devices due to a slowdown in the former business after the end of the Cold War.