AngioDynamics, the region’s largest medical device manufacturer as measured by local payroll, announced Thursday a plan to reorganize its facilities in Glens Falls and Queensbury.
The move will result in the loss of 80 to 100 jobs over the next three years, as the company spends $5 million to $7 million to consolidate manufacturing operations into its Glens Falls plant.
President and CEO Joseph DeVivo said the move will result in a stronger company more capable of adding to its payroll in future years, as demand for its products increases.
He added that 30 of the jobs slated for cuts have already been eliminated through attrition. The jobs to be cut are coming “across the board” from several departments and salary levels, he said.
“This is not a story of us leaving the area,” he said. “What we’re doing is a rational next step.”
AngioDynamics employs about 900 in Glens Falls and Queensbury.
Under the plan announced Thursday, manufacturing operations from its Queensbury plant on Queensbury Avenue will be moved to the Glens Falls facility, which is located in the Glens Falls Tech Park off Dix Avenue. The Queensbury plant will be turned into a distribution center.
DeVivo said work will begin soon to convert a 20,000-square-foot warehouse facility at the Glens Falls operation into a 14,000-square-foot clean room space. The remainder of the warehouse will be turned into offices to support the new clean room operation, he said.
“We have all of our approvals, and we have identified our (construction) vendors,” DeVivo said. “Work will start in a couple of months.”
The changes are expected to save AngioDynamics $15 million to $18 million over the course of the next three years — welcome savings, in light of what DeVivo called rising “cost pressures.”
When asked whether a new excise tax implemented as part of the Affordable Care Act was among those pressures, DeVivo said it was.
The 2.3 percent tax on the sale of medical devices in the United States took effect Jan. 1 and had resulted in $2.5 million in new tax payments by AngioDynamics as of September.
The tax is among the provisions aimed at helping to pay for the health care reform law, which is also called Obamacare. The excise tax is expected to put a total of about $2.9 billion annually toward implementation of the new law.
DeVivo cautioned, however, that reorganizing the operations of two standalone medical device manufacturing facilities about 3 miles apart was a step that would have been undertaken by the company at some point, anyway.
“Honestly, even though we’re feeling the pressure and the device tax is creating even greater pressure for us to take costs out, this is a really obvious thing,” he said.
AngioDynamics bought the Glens Falls manufacturing plant, along with the rest of Navilyst Medical, from a venture capital company in May 2012 in a deal valued at about $372 million.
When the company announced the deal in February of that year, the firm said both local plants would continue to function as normal after the merger.
On Thursday, DeVivo said that made sense at the time, as the company had recently undergone a series of product recalls and had received an FDA warning letter regarding the firm’s NanoKnife device. The FDA took the company to task for not following the proper channel for approval of a software update on the tumor-zapping technology, and AngioDynamics was flagged for further FDA oversight.
“We’ve spent the last year remediating those issues, so we were not in a position to go through a hard integration until we got past these quality issues,” DeVivo said.
After the integration, the Queensbury facility will likely have far fewer employees, as the bulk of the company’s local workforce is moved to the Glens Falls facility, DeVivo said.
Having separate facilities for manufacturing and distribution will allow both operations to excel in their appointed roles, according to Senior Vice President and Chief Technology and Operations Officer George Bourne.
“We believe bringing our New York manufacturing teams under one roof and centralizing our distribution center will result in the propagation of best practices and continuous improvement techniques, while also contributing to our overall efforts to reduce costs,” he said in a prepared statement.
Ed Bartholomew, president of EDC Warren County, said Thursday he’s glad the company is going forward with a consolidation that most people felt was inevitable.
“I think anytime you have a merger of two companies within 4 miles of each other, you have to wonder,” he said. “The key is the company is remaining within Warren County, and yes, there’s a reallocation of employees within the two communities, but we all know a lot of people who live in Glens Falls and work in Queensbury and vice versa.”
Bartholomew said he learned of the company’s plans last week, when DeVivo met with him to discuss the move. Now, he said an effort will begin to see if there might be government tax breaks or other support for the company’s plans.
“We’re going to see how we can be helpful, both at the local and state levels, and also, importantly, on the medical device tax,” Bartholomew said, adding he expects local officials to step up efforts to lobby for repeal of the tax.
He added DeVivo, during last week’s meeting, expressed support for the overall health care reform law, but he explained a tax on revenues — rather than profits — is hurting many companies like AngioDynamics.
Queensbury Supervisor-elect John Strough also said Thursday he sees the company’s efforts to streamline as a sign the firm is committed to being in the area for the long term.
“It looks like they’re consolidating to make a stronger company,” Strough said. “It’s still in the local area, so I’m looking forward to their future expansion. Queensbury certainly is going to do anything that they can to help them out.”
News of the consolidation was greeted favorably by investors, as AngioDynamics’ stock price rose 54 cents, or 3.5 percent Thursday to close at $15.82. The Dow Jones industrial average fell 68.26 points, or 0.43 percent, to 15,821, and the Nasdaq composite fell 4.84 points, or 0.12 percent, to close at 4,033.