Tools are the trade for hidden sector.

Nestled in the upscale canyon enclave of Agoura Hills, the folks at Caldera Medical Inc. are getting the word out about their new surgical kits for treating urinary incontinence.

In Signal Hill, where L.A.'s oil industry was born, Integrated Medical Systems Inc, has developed a high-tech stretcher that serves as a portable intensive care unit on the battlefield.

And over in Pasadena, Calhoun Vision Inc. founder Dan Schwartz commutes from San Francisco to check the progress on an experimental lens for cataract patients developed with his partners at Caltech, including a Nobel Prize winner.

These are examples of Los Angeles' surprisingly robust medical device industry.

An estimated 400 to 500 companies countywide make all sorts of medical hardware. In fact, the greater Los Angeles region, including Orange County, is considered to have the nation's largest concentration of biomedical device jobs, according to a recent study by the Biotechnology Industry Organization. The 28,000 medical device jobs make that sector a bigger employer here than broadcasting (with 20,700 jobs in June) or home builders (24,800 jobs).

Didn't know that? You're not alone. L.A.'s medical device industry largely remains under the radar.

That's not by design. The local industry gets little notice nationally because big pharmaceutical hubs such as San Francisco and San Diego get most of the attention.

And the medical device industry doesn't get much attention locally, either, because the spotlight is on the entertainment industry, among others.

"Medical devices don't have the large brand-name image here the way aerospace and entertainment do," said Gerald Loeb, director of the Medical Device & Diagnostic Engineering Program at the University of Southern California. "But cumulatively it's a large factor in the local economy."

Perhaps ironically, the once-dominant aerospace industry is a big reason for the rise in the medical devices. The aerospace industry provided not only technology that was adapted for medical use but it also provided trained engineers who could be tapped as aerospace businesses contracted.

As a result, innovation is keen: At least 13 percent of patents issued in the Los Angeles area between 2000 and 2005 are related to devices, the biotech industry study found.

But the Los Angeles area is not a perfect Petri dish to cultivate the industry. A shortage of laboratory and manufacturing space plus limited financial capital for entrepreneurs means that often the most promising companies get bought by larger, outside firms.

"A large company makes an offer you cannot refuse," said Ahmed Enany, director of the Southern California Biomedical Council trade association. "But then the local company never really has a chance to grow as an independent company, branch out into new product lines, make acquisitions themselves."

Despite the challenges, medical device companies continue to form, grow and flourish here.

Consider Calhoun Vision, which has developed a plastic lens that is implanted after cataract surgery and can be adjusted using ultraviolet lights, thus decreasing the chance a patient will have to wear glasses. The lens could gain European approval by the end of this year, with mid-stage clinical trials in the United States scheduled for early 2007.

Chairman Dan Schwartz, decided in 2000 to base the company in Pasadena rather than the Bay Area because of his longtime collaboration with researchers at the California Institute of Technology, particularly chemistry professor Robert Grubbs, a 2005 Nobel winner.

Schwartz, associate professor of ophthalmology at the University of California, San Francisco, commutes to Los Angeles several times a month. He is also working with other Caltech researchers on commercializing experimental drug and light therapies to treat macular degeneration, an eye disease that can lead to blindness.

Despite Silicon Valley's larger private investment community, Schwartz said Calhoun has been able to raise all its $36 million of funding to date from National Institutes of Health grants and Southern California angel investors, many from the entertainment industry.

Ophthalmology is a hot target for medical device investors because of an improved Medicare reimbursement structure for surgically implanted lenses. "It's been a real huge market driver," Schwartz said.

Another San Gabriel Valley firm in the sector: Monrovia-based Staar Surgical Co. Its latest product is an implantable contact lens to treat nearsightedness. The unique design of the lens results in a less invasive surgery and quicker recovery time.

Aerospace roots

However, the biggest long-term driver for development of the region's medical device companies has been the aerospace industry, despite what might seem like a gap between the technologies.

From the South Bay to the west San Fernando Valley, where Boeing, Lockheed Martin and Northrop Grumman went, mom-and-pop medical device companies often followed. And even when the county's aerospace industry began its decline, the device companies often prospered.

Components for artificial joints and jet aircraft often have a lot in common. Titanium hip replacements, for example, were inspired by the metal's widespread use in aerospace, where it was valued for its light weight and sturdiness. And then it was found to be biocompatible, that is, not rejected by the human immune system.

"L.A. has always been a hotbed of the medical device industry because a lot of medical devices came out of the defense industry which for many years was huge here," said Mitch Horowitz, co-author of the Biotechnology Industry Organization study and director of strategy at the global science and technology consulting firm Battelle.

Device companies also piggybacked on the infrastructure that suppliers and subcontractors created for the aerospace industry. In addition to raw materials and manufacturing techniques, the same quality standards that the defense industry demanded of its contractors were similarly employed by device companies that needed approvals from U.S. regulatory agencies.

Alfred Mann had founded and sold off two aerospace-related tech companies before entering the pacemaker business in the early 1970s after learning that researchers were having trouble developing small, long-lasting and reliable batteries for the devices.

"There were a lot of people who came out here for the aerospace industry and when that sort of faded over the years, lot of these highly skilled technical people, mechanical types, start to look around at what else they could do," Mann said. "A lot of them would start their own companies."

Stephen Neushul, a mechanical design engineer, is an example. He left his job with a NASA contractor in 1990 to start Torrance-based Icrco Inc., a privately held company that makes digital medical imaging equipment.

"I wanted to get more of the value from the work I was doing," said Neushul, who ran his company on a shoestring without outside investors until a large order in 1997 provided the stepping stone to grow his company from a handful of employees to 45 today.

Attractive targets

The defense industry continues to spin off medical device technologies with civilian applications, though to a lesser extent than in past years. Los Angeles-based Northrop Grumman Corp. is a major shareholder in Signal Hill-based Integrated Medical Systems, which developed a high-tech stretcher that can serve a portable intensive care unit on the battlefield. While the U.S. Army is its main customer, the company has plans for a version that can be used in civilian medical operations.

But the region's shortage of laboratory and manufacturing space as is challenging L.A.'s leadership as a home for the most innovative device companies.

Both Horowitz and Shaun Stiles, a Colliers Seeley International vice president who specializes in life sciences real estate, say Los Angeles County loses companies because of a chronic shortage of appropriate laboratory and manufacturing space.

"In the Los Angeles market, the burden is placed on the firm to do the tenant improvements. There isn't ready space to go at reasonable rates," Horowitz said. "As a venture capitalist, if I have to have my money going to fixing up the building, I'm very unhappy."

In addition, the region has long faced challenges in keeping its medical device industry home-grown and growing. Successful small to medium-size companies tend to get snapped up by large East Coast and Midwest competitors.

Examples are numerous. Cardiovascular catheter pioneer Biosense Webster in Diamond Bar is now a part of New Jersey-based Johnson & Johnson. San Fernando-based SamCo Scientific, which has made secure, disposable containers for biological specimens since 1971, is now a subsidiary of New Hampshire-based Fisher Scientific International. Brentwood Medical in Torrance, which makes portable, digital electrocardiogram monitors and similar diagnostic devices, is now called MidMark Diagnostics Group, part of Ohio-based Midmark Corp.

Though manufacturing operations, and sometimes research and development may remain, having corporate control several states away can deprive Los Angeles of opportunities that an edgy independent local company might create.

"One of the problems today is that once you get to a certain size, there's no longer any way to realize value unless you go public or become acquired," said Mann, who has sold three device companies that are still based locally, including insulin pump maker MiniMed Inc., now a unit of Medtronic Inc.

"The system as it has evolved effectively denies public capital to smaller companies. When there's no value in the public markets, it's tough to turn down a good offer from another company," he said.

Incubating innovation

The region's bioscience leaders, though, are not unaware of the problem.

With Los Angeles lacking large parcels of land to serve as centralized bioscience cluster such as one developed in San Diego, Enany's SoCal Bio has been working with the region's academic research institutions to develop bioscience parks around the county.

USC is proceeding with efforts to launch such a park on its own campus, with the hope that adjacent county and private land will eventually become available to one day create a full scale research and business park. The proposal has stalled for years but the ground has finally been broken on the first building.

The university also has been the beneficiary of a $160 million endowment from Mann, who worked out a deal with the university to found the Alfred E. Mann Institute for Biomedical Engineering. The institute is designed to encourage commercialization of academic research.

Elsewhere in the county, Cal State Polytechnic University in Pomona is in the middle of building out a technology incubator and business park called Innovation Village. And in the private sector, Duarte's City of Hope National Medical Center is working with a developer on a technology business park and incubator to support the commercialization ambitions of its own researchers, among others.

"Emerging biomedical companies need to have the right kind of environment to development. The more a region can facilitate that, the more you can nurture and foster the growth of very strong companies," Horowitz said. "Ultimately the companies have to have good business plans, they have to understand their markets and so forth, but you can create an environment and helps them get over the commercialization hurdles."

Well Deviced

L.A. County has a large medical equipment industry.

* The area is home to the nation's largest concentration of biomedical device jobs. There were more than 28,000 in the L.A., Long Beach and Santa Ana corridor in 2004.

* The sector is comprised of an estimated 400-500 companies, the majority of them small and privately held.

* These companies produce a diverse array of products, with specialties in medical imaging, ophthalmic, diagnostic and patient monitoring devices.

* Manufacturers take advantage of the infrastructure and skilled workforce drawn to the L.A. basin by the aerospace industry.

Source: Business Journal research