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In latest Covidien deal synergy, Medtronic to build $14M manufacturing facility in Ireland

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The In.Pact Admiral drug-coated balloon in an artery--Courtesy of Medtronic

Medtronic announced that it will build a €13 million ($14.3 million) facility in Galway, Ireland, to manufacture its fast-selling In.Pact Admiral drug-coated balloon for peripheral artery disease.

The facility, meant to serve markets around the world, including the U.S., will be 20,000 square feet, with 8,000 of them dedicated to manufacturing. It will add to Medtronic's presence in the Irish med tech hub.

In addition to Galway, Medtronic ($MDT) sites in Tijuana, Mexico, and Brescia, Italy, also play key roles in the manufacturing of the product, according to a Medtronic spokeswoman.

Now-Ireland's Medtronic described the move to expand production in Galway as a synergy from its $50 billion merger with Covidien, which enabled it to move its tax domicile to the country, resulting in significant tax savings, including $3 billion by repatriating $9.8 billion to the U.S. under a 5% tax rate for inverted companies instead of the standard 35%. Total "value capture" synergies from the deal are projected to be $300 million to $350 million.

"Medtronic Galway has developed a specific expertise in producing these drug-coated balloons, making the site the right choice for this investment. The people employed at this new facility have strong experience in manufacturing combination devices, including drug eluting stents," the Medtronic spokeswoman wrote in an email to FierceMedicalDevices.

According to the release, about 100 "highly skilled professionals from other parts of the Medtronic organization" will work in the new facility, including those who specialize in quality and manufacturing engineering as well as supply chain and production management. The spokeswoman added that the "highly skilled professionals from other parts of the organization are selected based on their expertise."

Expect more Medtronic jobs to be created (or transferred) to Ireland in the future. For, in a statement, Tony Semedo, president of the company's aortic and peripheral vascular unit, promised that a "notable amount" of Medtronic's growth will be "fueled by products coming out of Ireland."

In addition to the company's new home country, the move reflects strong sales of the In.Pact drug-coated balloon, which was launched in February, shortly following the closure of the Covidien transaction. Sales have no doubt been accelerated by the enlarged sales force that arose from the merger.

"In Peripheral, we continue to execute on our U.S. launch of the IN.PACT Admiral drug-coated balloon and maintain our leading market position on the strength of our exceptional clinical and economic data. Data presented at TCT and published in JACC showed sustained superiority in primary patency and re-intervention rates over balloon angioplasty at two years, and cost-effectiveness data released at VIVA showed In.Pact Admiral lowers the overall cost of treatment," said Medtronic CFO Gary Lee Ellis during the company's Q2 FY 2016 earnings call, referencing data dumps during recent conferences in San Francisco and Las Vegas respectively.

Medtronic said it is conducting four global studies of the device and supporting about 20 other physician-initiated ones.

The In.Pact faces strong competition from C.R. Bard's ($BCRLutonix drug-coated balloon. Boston Scientific ($BSX) helps distribute the Lutonix to help Bard combat Medtronic's large sales force.

Both devices coat blocked superficial femoral arteries in the leg with paclitaxel following traditional angioplasty. Both receive additional reimbursement for inpatient and outpatient procedures from the federal Centers for Medicare & Medicaid Services (CMS) in recognition of their innovative nature and strong outcomes.

In a win for Ireland, Germany's phenox GmbH concurrently announced that it will manufacture interventional neurovascular medical devices for the treatment of aneurysms and stroke in Galway, creating 65 jobs.

Medtronic and phenox GmbH cited the efforts of IDA Ireland, the country's semipublic investment promotion authority, in attracting them to the country.

The companies were also certainly influenced by the network effect that benefits industry hubs like Galway. Boston Scientific and Zimmer Biomet ($ZBH) also have operations in Galway, along with a number of other small and medium-sized players.  

- read the release from Medtronic
- here's the release from phenox GmbH

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