St. Jude Launches Costa Rica Plant – Analyst Blog

Medical devices giant St. Jude Medical (STJ) has reportedly inaugurated a new manufacturing plant in Costa Rica in a grand ceremony. The 350,000 square-foot facility, located in the El Coyol Free Zone, Alajuela, now employs more than 250 people.

 

St. Jude targets to create an additional 50 jobs before end-2010 and plans to invest $670 million in Costa Rica and eventually employ 2,000 people over the next five years. The new plant will specialize in the manufacture of heart valves for patients globally. The Costa Rican President Mrs. Laura Chinchilla, one of the guests at the inauguration, labeled the first product for shipment.

 

St. Jude announced its plans to set up the manufacturing facility in Costa Rica in January 2009. The company originally intended to invest more than $40 million to construct a roughly 215,000 square-foot plant, which could potentially create up to 500 new jobs by 2010. Moreover, St. Jude planned to begin exporting heart valves produced in the plant by end-2010.

 

The Costa Rica facility, which was launched with much fanfare, has been designed to boost production of St. Jude’s heart valve products and augment the manufacturing capacity of its Cardiovascular division. The heart valves production will include the Trifecta tissue valve which is used as a replacement for the damaged or malfunctioning aortic heart valve (controls blood flow from the heart through entire body).

 

St. Jude offers its heart valve (mechanical and tissue) replacement and repair products through its Cardiovascular segment, the second-largest contributor to its revenues. The company has been an industry leader in mechanical heart valves, which have been implanted in more than 1.8 million patients globally.

 

Heart valves products fetched revenues of $323 million in fiscal 2009, accounting for roughly 34% of St. Jude’s Cardiovascular sales. The company’s key competitors in the heart valve market are Edwards Lifesciences (EW), Medtronic (MDT) and Sorin CarboMedics.

 

Costa Rica represents a lucrative expansion market for St. Jude. The medical devices industry has emerged as the third-largest exporter in the Central American country with annual exports of roughly US$1.1 billion. We currently have a Neutral recommendation for St. Jude, which is supported by a Zacks #3 Rank (Hold).