Top defibrillators makers in the region, vying to dominate the market

In mid-September, a visitor sitting in a theater at the Seattle's Museum of Flight suddenly slumped over, a victim of cardiac arrest.

Security staff members jolted his heart back into action with a portable device, keeping him alive until an ambulance arrived.

"Once they employed the shock, the heartbeat started again — it was a pretty remarkable situation," said museum Vice President Laurie Haag.

The device that restarted the unnamed visitor's heart is an easy-to-use, hand-carried version of the professional defibrillators used in emergency rooms for over half a century. Now these smaller gadgets — called automated external defibrillators, or AEDs — can be found in golf courses, office buildings and other places.

Ground zero in this defibrillating revolution is the Seattle area, from where the three top AED makers battle to dominate this fast-growing global market, employing about 1,200 people here.

Their competition received its own jolt in January when market leader Physio-Control, of Redmond, a unit of Medtronic, called a self-imposed halt to U.S. sales as it sought to address issues with its quality systems. Rivals saw an opportunity to increase their market share and break into Physio's exclusive distribution channels.

"A lot of the distributors who previously would carry only Medtronic have now opened up to carry ourselves and other brands," said Cardiac Science President John Hinson.

The Bothell company's third- quarter domestic defibrillation sales increased by 78 percent after Physio's halt, and it now controls about 20 percent of the U.S. market, according to analyst Jonathan Block of Suntrust Robinson Humphrey Capital Markets.

Running neck and neck with Physio in sales is the third competitor, the Seattle-based AED unit of medical giant Philips, which built the HeartStart defibrillator used at the Museum of Flight. Founded as Heartstream in the early-1990s by former Physio engineers, the startup fought a two-year legal battle with their former employer that was settled months before the company was acquired in 1998.

After almost a year of its interruption, Physio says it has made significant progress on its quality issues and has begun distributing products to key professional customers and ramping up its U.S.-oriented production. Executives say they remain confident in the strength of Physio's brand and its long-standing relations in the health-care sector, but analysts think competitors may retain some enduring benefits from its ordeal.

Many AED sales "are first-time sales; in that case you're not going to wait for Physio-Control to come back," said Suntrust's Block.

But the lull in Physio's production will likely be too short for others to take over the company's market.

"One year is not enough even for Philips to be able to fill that gap," said Mike Arani, a consultant with Frost and Sullivan.

Philips HeartStart President Chuck Little downplayed the effect of Physio's eventual return to the market on Philips' sales.

"Internationally, we're growing fairly rapidly and there we're competing head to head right now," Little said.

A growing market

When a heart goes into arrest, it stops pumping oxygen-laden blood.

Death comes in just a few minutes, but an immediate high-voltage jolt can restart the beating.

As many as 50,000 deaths from sudden cardiac arrest could be avoided by broadly deploying AEDs, according to the National Conference of State Legislatures.

Increasing awareness about this danger, aided by better technology, decreasing costs and a strong marketing and legislative push by manufacturers have made automated external defibrillators a familiar sight in recent years.

The passage of "good Samaritan" laws — which shield bystanders from liability if they help someone in distress — also has helped make the devices, which cost between $1,000 and $2,000, more common. But some wonder whether installing these devices in places with few resources and where occurrences are rare — such as public schools — is worth the cost.

AEDs, first deployed in trans-Atlantic airliners and ambulances, are increasingly found in the workplace, too. Washington Mutual installed 42 AEDs this summer in its new downtown headquarters — one on each floor. It also has a program to help employees purchase a device for their home.

The program's instigator, Vice President Craig Tall, is a heart-attack survivor.

He became aware of defibrillators because his neighbor was W. Hunter Simpson, the former president of Physio-Control, whose company created an early home defibrillator in 1983. "I'm a firm believer in the efficacy of AEDs," Tall said. "If I had [my] dream, they would be everywhere."

And that's the way things are going, it seems. A law mandating the installation of an AED in every public school is pending in the Legislature.

Casinos, prime settings for heart attacks, also have high survival rates as staff members can quickly detect an episode and dispatch a defibrillator, according to Physio executives.

The U.S. AED market was about $300 million in 2006, not including parts and service plans; its growth rate of 20 percent is expected to accelerate over the coming years, according to Frost and Sullivan.

Some 58.5 percent of all AEDs are sold into the public-access market, in places like schools, museums and airports.

The industry's final frontier, though, is to make AEDs as ubiquitous as fire extinguishers.

"Our goal, ultimately, is to reach out wherever sudden cardiac arrest exists," said Philips' Little. "Eighty percent of sudden cardiac arrests occurs in the home."

In 2004, Philips obtained the first — and so far the only — Food and Drug Administration approval to sell an AED over the counter for home use.

Intense competition

Physio's jockeying in the domestic AED market ground to a halt in January. The company voluntarily stopped shipping to U.S. clients after the firm and the FDA found problems related to internal documentation, management oversight and the procedural follow-through of quality documentation processes. The suspension didn't stem from device malfunctions or incidents related to patients, and no products have been recalled, the company said.

After it stopped shipping, the division's revenue for the July quarter fell 41 percent to $60 million from the previous year. The company, with 920 employees at the start of 2007, laid off about 20 percent of its work force and about 80 contractors. Its parent, Minnesota-based Medtronic, had to delay an intended spinoff of the defibrillator maker.

Physio, however, is already staging its comeback. It began shipping products to U.S. customers who had an urgent need for its defibrillators, and its headcount has reached 800 people as it prepares for another FDA audit "that will happen in the next three or four months," said President Brian Webster.

The ramping up, "a slow process," he said, will focus on the core business of hospitals and emergency services. The lightly penetrated consumer market for AEDs, which accounts for a minority of its revenues, "will be the last market we re-enter," Webster said.

Many Physio professional clients may remain loyal, either because of its deep history and the hefty name recognition of its Life-Pak brand, analysts say.

The speed of Physio's recovery remains to be seen. The company may be able "to get their position back, but it's going to take a few years," Frost and Sullivan's Arani said.

But the lull may have provided Cardiac Science and Philips with new distribution partnerships. Chicago-based School Health, one of the largest providers of medical equipment to schools, used to buy exclusively from Physio but now sells AEDs from Cardiac Science and others.

"We shifted from our historical reliance from a single manufacturer to multiple manufacturers to prevent ourselves from similar and prolonged events," said Chief Operating Officer Rob Rogers.

Rogers expects to resume selling Physio-Control's products, which have a large installed customer base.

But his company has gained "a pretty good experience" with competing defibrillators in the interim.

"At the end of the day they all save lives," Rogers said.

Ángel González: 206-515-5644 or agonzalez@seattletimes.com