Boston Scientific has continued to diversify to meet new challenges, writes Dominic Coyle.

Innovation. Like a mantra the word peppers the comments of Noel Fogarty as we discussed the prospects for the Irish medical device sector and his own company, Boston Scientific.

But it is not simply an aspiration. Innovation has been central to the success of the US company and its Irish operations. It was, after all, a Galway team that developed the Taxus drug eluting stent - the core product of the US industry leader.

Stents are tiny mesh devices used to prop open arteries during coronary angioplasty procedures. The drug eluting versions are designed to overcome the problem of arteries closing later on. Taxus is one of just two drug eluting stents on the market - the other is Johnson & Johnson's Cypher.

"Taxus drug technology is the cornerstone of what Boston Scientific offers and has more than 50 per cent of what is a $6 billion [ €4.5 billion] market and it was developed in Galway by our R&D team," said Fogarty, managing director and vice-president of operations at Boston Scientific Ireland.

Boston Scientific has come a long way in the 13 years since it opened an operation in Galway. At the time, optimistic projections were that the unit would employ "up to 500 people". In the event, more than 3,000 people now work there.

The success of Boston Scientific's Irish operation reflects the progress of the sector here. Ireland is, outside the US, the main producer of medical devices. "We really do have a massive proportion of overall production in this country," says Fogarty, who is also chairman of the Irish Medical Devices Association.

"Of the top 10 global device manufacturers, seven are represented in Ireland and many of those have very significant operations."

He notes that 40 per cent of Boston Scientific's worldwide capacity is based in Ireland, where the company has several plants.

It's a good industry to be in. Medical devices are now a $180 billion worldwide business. Demographics, especially in more developed economies, means that demand for products is in general growing at a double-digit rate, although there has been a slight hiccup this year.

"The industry has grown phenomenally and the whole notion of how such devices are used is changing with ongoing innovation," says Fogarty.

Cardiovascular therapy is Boston Scientific's speciality, a $15 billion business that covers stents and cardiac rhythmic management - ie pacemakers, defibrillators etc.

"That is why we bought Guidant, to get access to the other big-growing area of our industry," says Fogarty. "Boston Scientific saw itself as having been successful in developing and launching a drug eluting stent platform and growing very quickly as a result. But it was in a position where one product made up a significant proportion of its overall sales and realised that, strategically, there was an opportunity to diversify its portfolio of products.

"I think Boston Scientific made a bold but calculated decision to buy into a whole new arena that traditionally we hadn't been involved in."

However, it hasn't all been plain sailing. Drug eluting stents have been in the headlines for the wrong reasons this year, with some studies indicating that the products are more likely to cause blood clots in patients than the preceding generation of bare metal stents.

That led the regulator, the US Food and Drug Administration, to convene a special advisory panel of medical experts earlier this month. The panel found there was no evidence of any greater risk with the more modern drug eluting stents. However, it has cautioned against the high level of off-label usage of the stents in treating patients with complicated coronary conditions.

Boston Scientific has also come under fire over the price it paid for rival medical devices firm Guidant. The company got caught in a bidding war with its major rival Johnson & Johnson that eventually pushed the purchase price up to $27 billion.

"We are very happy that we acquired Guidant. We understood that there were challenges as there are in any acquisition but we have absolutely no regrets. We are very positive that it can be a transforming event for Boston Scientific.

"Guidant was not an acquisition to replace drug eluting stents; it was to complement us as a company and an obvious way to continue our growth strategy."

Ireland has come under increasing pressure recently over worries about declining competitiveness.

The American Chamber of Commerce Ireland, which represents the bulk of the multinational sector, has been among the more vocal on the issue.

However, Fogarty insists Ireland remains "a very favourable place to do business".

"Some of the fundamentals that brought companies here still exist and some don't to the same extent.

"I guess our cost advantage in doing business here is not as strong as it used to be but where we have compensated for, as an industry, is that our innovation has come on in leaps and bounds.

"Eighty per cent of all companies in medical devices in Ireland have some level of R&D here, including all the big players.

"As an industry, our competitive position has clearly changed over the last number of years. At Boston Scientific, our answer was to add more and more value to the Galway operation. You have to think of cost and efficiency and ensure that the overall value you give to the parent company exceeds what can be done in any other region."

Fogarty's background - involving 20 years in the electronics sector - has given him an appreciation of the cluster of medical device expertise in Ireland. "One of the big differences which is very positive for the medical devices sector in Ireland is that it has grown a cluster in the true sense," he says, with smaller Irish-based companies supplying the multinationals or addressing niche areas.

"That did not really happen in the electronics industry and it is important for the sustainability of the sector in Ireland in the long term."

He is also a strong advocate of channelling investment outside Dublin and warns about talking down the manufacturing sector. "The medical devices industry in Ireland is heavily manufacturing-oriented at the end of the day.

"If we think manufacturing is dead and going elsewhere, it will happen," he cautions. In this regard, he welcomes the Government's decision to hold a forum on manufacturing early in the new year.

For Boston Scientific, the focus is clear: "Our job in Ireland is to make sure that we maintain relevance and continue to add value. I think the Taxus was an example of that but it is not a laurel that you can rest on. We are heavily involved in next generation products for the company."