Product 'you don't want to hear about' pays off for Rochester Medical

Jeff Kiger

Aug. 25, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- In a classic business story, Anthony Conway cooked up a device in his Rochester kitchen in 1979 that he, his brother and a partner have built into a $36 million, rapidly growing company.

However, it was nothing as sexy as a spicy pizza recipe or a super-fast computer chip that stunk up his newly built kitchen.

Curing in his oven was a very early version of external male catheters, a condom-like device that patients wear to collect urine.

"If you need one, they are a life-saver," Conway says of the line of catheters his current company, Rochester Medical, makes. "If you don't need them, you don't want to hear about them."

Today, Rochester Medical is the largest maker of silicone catheters in the world, and it ships products to 65 countries. Manufacturing equipment in Stewartville runs 24 hours a day, with a worldwide staff of about 285 employees.

So why catheters?

It goes back to a third Conway brother -- Chris -- who had a Minneapolis-based medical supplies company. He was having trouble getting catheters, so brothers Anthony and Phillip, along with partner Ricard Fryar, created the company Arco in 1979 to make latex catheters.

Later they sold the company, and the trio founded Rochester Medical in 1988, which eventually focused on making silicone catheters.

For a while, they considered making sports equipment like tennis racket grips and bicycle gears.

Eventually, they settled on making what they knew best -- catheters.

To compete in what is now a $1.5 billion market in the United States and Europe, the small startup company zeroed in on a strategy.

"If you don't have something better and unique, you can't compete with the big guys, you just can't," says Phillip Conway while standing among manufacturing equipment.

The result is products like antibacterial-coated catheters and Foley catheters -- ones inserted in the body -- made with super-soft silicone. Industry competitors made those catheters with a stiff PVC material.

Anthony Conway has spearheaded creating unique products, while tinkering in his research and development lab. It is Phillip's job as vice president of production and advanced technologies to take the research from prototype to production.

"He (Anthony) tells me, 'if we can make one, we can make a hundred,'" says Phillip with a laugh.

Being accepted into the market dominated by medical giants like C.R. Bard (NYSE:BCR) and Hollister meant lean years and eventually some lawsuits.

But those struggles appear to be behind the company, as major hospital buying groups add Rochester Medical products to their portfolio.

Since 2003, Rochester Medical has approximately quadrupled in size.

The Conways decline to give specific predictions. They anticipate more growth and more employees, and have more products in the pipeline.

They are watching two Medicare changes and an United Kingdom medical study for growth opportunities. In April, Medicare changed its reimbursement plan for intermittent catheter from one a week to multiple ones a day.

Patients typically use several of the one-time-use devices per day. The one-a-week plan forced patients to boil, sterilize and re-use them. Now, that no longer is necessary.

"That means going from four catheters a month per patient to 200," explains Anthony Conway. That means the intermittent market grew from an estimated $470 million worldwide to $800 million overnight.

Another Medicare move coming in October also should play in Rochester Medical's favor. Medicare will no longer pay for infections caused by catheter use.

That could make hospitals more willing to invest in Rochester Medical's medicine-coated and more expensive catheters.

The United Kingdom is doing a multiyear study comparing medicine-coated catheters -- which only Rochester medical makes -- to silver-coated ones made by their competitors.

The Conways expect their product to fare the best, and that could result in a sales boom in Europe.

"We believe that would be a transformational moment for Rochester Medical," says Anthony Conway.

And then there's the FemSoft product, which is unique to the company.

It is a soft silicone insert with a fluid-filled bulb at the end. It is used to help women dealing with leaking or incontinence brought on by a cough or a laugh.

Being the only such product out there, the need is great for marketing to help consumers and physicians to adopt the product.

However, as the company moves into a position that is stronger than when FemSoft was first developed, that marketing push is coming.

"We think the potential for this product is greater than any of our others," he said.

Newstex ID: KRTB-0171-27652348