Steris says it is holding off on adding sterilization capacity as the Trump Administration reconsiders the EPA’s new ethylene oxide (EtO or EO) regulations.
The agency issued a final rule last year requiring most commercial sterilizers to monitor and report emissions of EtO, a toxic gas that is the most commonly used sterilant for medical devices. But the Trump Administration said last month that it was reconsidering the regulations along with a host of other Biden-era air pollution rules.
Speaking today at the Needham Healthcare Conference, the company’s leaders said they have already met most of the new EtO regulations, but could save about $20 million on emissions monitoring if the Trump Administration repeals the regulations.
Steris provides contract sterilization for medical device manufacturers through its Applied Sterilization Technologies (AST) unit and makes sterile products for hospitals.
Steris is “reluctant to expand capacity until the EO regulations are sorted out,” Needham & Co. said in a summary of the presentation, which the investment firm hosted for its clients.
Steris is operating near maximum capacity, which Steris management putting it in the high 90% range, Needham said. Opening a new AST plant costs $40 million to $50 million, they said.
Steris disclosed costs of up to $48 million last month to settle personal injury lawsuits connected to an EtO plant in Illinois. Today, Steris leaders said AST’s litigation risk appears to be low.
The FDA, commercial sterilizers and medical device manufacturers have been working on EtO alternatives and emission reductions to lessen the health risks to workers and communities from emissions.
Steris leaders also said it was too soon to quantify the impact of Trump’s new import taxes. The tariffs affect nearly all countries and have roiled global markets in a manner comparable to the global financial crisis of 2008.
Steris has manufacturing plants in Mexico and Canada but said it “may not have to pay tariffs on products from these facilities since they are compliant with the USMCA trade agreement,” according to Needham.
“Importantly, management noted that the European tariffs serve to level the playing field with its European-based competitors,” Needham said. Steris “is evaluating options to combat any tariff impact, including supplier alternatives and pricing. [Steris] also expects minimal impact from China tariffs since it has largely exited the country.” Medical Design & Outsourcing