Sigma pumped over new deal

MEDINA, May 18, 2009 (The Buffalo News - McClatchy-Tribune Information Services via COMTEX) -- BAX | Quote | Chart | News | PowerRating -- Roger Hungerford and his employees at Sigma International are pretty pumped up these days.

Hungerford is pumped because the Medina maker of medical infusion pumps just signed a $100 million deal with medical device maker Baxter International for a 40 percent stake in the Orleans County company and exclusive distribution rights over the next three years.

The deal also gives Baxter the option to buy the rest of Sigma for as much as $130 million more during that three-year time, assuming that Sigma hits certain performance targets.

Hungerford is optimistic that the company will continue its recent growth spurt, which has been spurred by its 2005 launch of a new line of medical infusion pumps that include technology that make it harder for care providers to accidentally program the pump to deliver too much medication to a patient.

Sigma's sales over the last three years have jumped from $10 million annual to $65 million in 2008, and Hungerford expects the company's growth to continue. Sigma expects to hire as many as 75 new workers during the next six to nine months, on top of the 15 new engineers the company plans to add during that time.

That growth would push Sigma's work force, which now totals 230 people, including a 25-person sales force based at locations outside Medina, above 300 at a time when the weak economy is shrinking the overall Western New York job market. Its expansion plans include doubling the 125,000-square-feet of space it now occupies in the former Fisher-Price factory, which Hungerford bought in the mid-1990s.

The company's growth has been a boon for Sigma's workers, too. The company shared about $4 million of the proceeds from the Baxter deal with all of its employees, passing out checks to workers a couple of weeks ago at a party.

'These were not small checks,' Hungerford said, declining to provide a range of the size of the bonus checks. 'Every employee got a check. We didn't want to leave anybody out.'

Why share the proceeds with workers? Hungerford, who heads a 12- member ownership group made up mainly of Sigma managers and private-equity firm Lovett Miller & Co., said he'd always promised Sigma's workers that they'd get a piece of the proceeds if Sigma ever was sold. And with Baxter holding the rights to buy the rest of the company, Hungerford said he's treating the deal like a sale.

'As a principal owner, you kind of look at it as though the benefits that you and your family got, you wouldn't have received them without the work that they had done,' Hungerford said.

And if Baxter goes ahead and buys the rest of the company, Hungerford said the plan is to share about 4 percent of those proceeds with Sigma's workers, too.

Behind Sigma's growth is its line of Spectrum infusion pumps, which are used by U. S. hospitals to deliver mediation to patients in precise amounts.

One of Spectrum's main selling points is its technology that blocks care providers from entering incorrect dosage information on the controls of the pump, which controls the flow of medication from an IV bag.

Those bags can contain the equivalent of several hundred pills, Hungerford said, so the consequences can be serious if a care provider accidentally sets the machine to deliver, say, 55 micrograms of medication, when the correct dosage is just 5 micrograms.

'If you overadminister these drugs, you can end up with a lethal dose in a matter of minutes,' he said. 'By the time you observe [the physical symptoms of an overdose], you already have a problem.'

The Spectrum pumps include an electronic library of safe dosage levels for up to 1,000 different drugs, which triggers an alarm if the pump is set for more than the recommended dosage.

'We've got to be able to detect and stop errors,' Hungerford said. 'We have to be the last line of defense.'

For Baxter, the deal gives the company access to a broader line of infusion pumps, said Kevin McCulloch, the general manager of Baxter's global infusion systems business. It also opens the door for the sale of the disposable tubes and administration sets that must be replaced each time the pump is used.

For Sigma, the deal gives it access to Baxter's broader U. S. sales force, which Hungerford believes could triple the company's weekly pump production from the current 500 to around 1,500 within the next six to nine months.

'They're putting us in a position where we're well-funded,' Hungerford said. 'I have a bigger opportunity to take our technology out to a bigger audience.'

That still could be a tall order, since the recession has cause many hospitals to deeply curtail their spending on new equipment, including infusion pumps. Hungerford believes industry sales will fall by more than half this year to around 60,000 units, from 125,000 in 2008, yet he predicts that Sigma's market share will grow to nearly 50 percent this year.

Sigma also plans to push into the home health care market in the United States, while also launching its products in Canada and other countries, pending local regulatory approvals, he said.

Hungerford staunchly believes Sigma's growth spurt and the Baxter investment stem from the company's focus on investing in product development and finding new technology to improve its infusion pumps.

The 'smart pump' technology that Sigma developed, for instance, grew out of suggestion from the top pharmacist at Massachusetts General Hospital in Boston. 'It's the better technology that wins the day with the customers,' Hungerford said.

'It was really tight for a number of years,' Hungerford said. 'We were a $10 million a year company with 15 percent of that going to research and development. We were roughly breaking even.'

drobinson@buffnews.com

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