🔒After ‘long road’ to FDA clearance, Waterbury’s Northeast Scientific finds growing niche in medical device reuse market

Back when Waterbury-based medical device manufacturer Northeast Scientific had three staff members and no product to sell, there were years when CEO Craig Allmendinger didn’t take a paycheck.

Founded in 2004, the company didn’t get its first U.S. Food and Drug Administration approval — for a process to clean and repackage venous catheters for reuse — until 2011. It has since received six more FDA approvals for other devices.

Today, Northeast Scientific employs 78 staff. It has grown from a single, 5,000-square-foot building on Thomaston Avenue in Waterbury, to three neighboring buildings, totaling nearly 45,000 square feet, in the same industrial complex.

Revenue is up to $20 million a year and growing, Allmendinger said.

“It was a long road and a long struggle,” Allmendinger said. “For a long time, there was no money, no income. A couple of years I went without a paycheck. The FDA review is not easy, and for good reason.”

Northeast Scientific was founded on the premise that polymer catheters snaked through the human body for diagnosis and treatment can be used more than once.

It’s a concept that has gained wider acceptance in the medical community. The company has tapped into a multibillion-dollar reprocessed medical devices market that is expected to grow significantly in the years ahead as the population ages and medical care providers face pressure to reduce costs.

“We are saving physicians about 50% on the costs of the devices for all the procedures they do, and saving a lot of waste from going into the waste stream,” Allmendinger said.

Counterintuitive path

Allmendinger grew up in Farmington and attended the Kingswood Oxford private school in West Hartford. He graduated from Colorado State University in 1993, with a bachelor’s degree in natural resource management.

After college, he worked in sales for Bell Atlantic mobile (now Verizon Communications), then GE Capital. In 2000, he co-founded Telefunken North America in South Windsor with a friend from high school.

Telefunken got its start by reverse-engineering replacement parts for high-end microphones. It eventually built its own line of microphones that sold for as much as $15,000 each in Telefunken’s early years. Customers have included artists like Anita Baker and Bruce Springsteen.

Allmendinger doesn’t have an engineering degree, but was always good with his hands and technically adept.

As a youngster, he frequently tinkered with go-karts and motorbikes. At age 14, he repaired a derelict 1961 Honda motorcycle in the family barn that was otherwise headed for the scrap heap.

Allmendinger left Telefunken after four years to launch a business dedicated to refurbishing catheters. He got the idea from a Wall Street Journal article about reprocessed medical devices. He thought it was a “cool idea” — recycling and creating a circular economy.

Allmendinger had been around medicine his entire life. His father — Dr. Philip Allmendinger — spent a career specializing in thoracic, cardiovascular and vascular surgery. The elder Allmendinger also invested $600,000 in Northeast Scientific to help launch the business.

The ‘right’ location

As Allmendinger had done with microphones, he reverse-engineered his way into the catheter reuse business, meticulously researching medical manufacturing and sterilization processes.

Allmendinger said he searched for suitable space to launch the business in Hartford, Farmington and Middletown, but eventually settled on a 5,000-square-foot building along Thomaston Avenue in Waterbury, which was cheaper and “felt right.”

The location has worked out. The city has supplied a steady workforce — Waterbury residents make up more than 80% of the company’s employees. Employee referrals are the strongest source of new applicants, he said.

Today, new basic production staff start at $17 to $18 per hour and can earn as much as $40, with training provided in-house. There are also higher-paid professional salaried engineers.

All jobs are posted internally first, and the company leans heavily on training lower-skilled staff to grow a highly skilled workforce.

“It’s very family-oriented here,” said 30-year-old Waterbury resident Abby Lopez, a training effectiveness supervisor. “A lot of friends and family work here. Usually, people are referred here, and it works very well.”

Lopez said she was recruited by her sister. She helped steer two friends to the company. They’ve recruited their sisters.

Growing sales

Northeast Scientific has FDA approval to reprocess seven different catheter devices, in various sizes, for a total of 15 varieties. Each must be cleaned of human blood and tissue, sterilized and fed through human body models to simulate use and functionality.

When necessary, Northeast Scientific might replace portions of a catheter, such as a damaged tip.

The company uses 3,000 gallons of ionized water daily for its cleaning process. Most catheters have a protective coating reapplied. It uses ethylene oxide gas in its sterilization process.

For end users, reprocessed catheters cost between $150 to $500, rather than $300 to $1,000 for unused devices. It can take up to two years of testing and presentation for each FDA clearance, Allmendinger said.

“They work equivalently well, there is no difference” compared to new and unused catheters, said Dr. Harold Mast, who buys Northeast Scientific products for his interventional radiology practice in New Jersey.

Mast said he reduces costs by about 40% using Northeast Scientific products.

“When I call them, generally the catheters get shipped the same day, so I get them the next day,” Mast said. “They have great customer service, without a doubt.”

Northeast Scientific’s payroll hovered around three to five employees until 2012, when the company began to ramp-up production and sales following its first FDA clearance, which allowed for the reuse of a central venous catheter.

These are long polymer tubes used to diagnose and treat damaged arteries.

Northeast Scientific sold about 10,000 units in 2012, and 30,000 the following year. Today, the company sells not only reconditioned catheters, but also a device it manufactures to move the esophagus during heart ablation surgery.

Northeast Scientific has sold more than 100,000 units in each of the past five years, using Federal Express to ship to customers in every state. It’s on track to move more than 140,000 units this year, Allmendinger said.

And he expects sales to quickly climb to more than 200,000 units. He put the company’s current gross annual revenue at $20 million.

Northeast Scientific is continually looking to add new devices to its list of approved recyclables. It’s currently working on four new products. It’s also looking to grow its customer base, particularly outpatient surgical centers and hospitals.

“We continue to see more and more doctors getting on the bandwagon because it’s the right thing to do,” Allmendinger said.

Waterbury Mayor Paul Pernerewski said Northeast Scientific is exactly the type of well-run, innovative manufacturer the city is hoping to attract.

“They are an up-and-coming company, a very progressive company,” Pernerewski said. “It’s the sort of out-of-the-box thinking we are looking for here, to get businesses into Waterbury.”