America’s COVID-19 swab supply depends on two cousins who hate each other
When Giroir heard about the lawsuit, he assumed Cartwright and Templet would set aside their animosities. He also knew what might happen if they didn’t: The government would have to buy Puritan – or buy out one of the cousins – at an outrageous price. “Either they were a good, stable company, or we were going to do something to make it that way,” he says. What the government did was invoke the Production Act, invest a $US250 million ($322.5 million) into Puritan to boost output tenfold, and hope would it make a good, stable company, at least for the duration of the pandemic.
In the year since that first call, Puritan has retrofitted two idle plants in Pittsfield, Maine, and made plans to build one in Tennessee. Giroir estimates Puritan produced as much as 90 per cent of the 195 million swabs the US government bought through January, when he left with the Trump administration. (He’s now an adviser to Gauss Surgical, which makes rapid at-home COVID tests.)
The company used to make about 20 million swabs a month. Soon it will be almost 300 million. Puritan and Hardwood had sales of about $US55 million a year in 2019. Government contracts will likely have doubled that. As protocols changed to emphasise rapid antigen testing, which requires three-inch foam or polyester nasal swabs, Puritan’s role only expanded. It makes those, too. “The world is still exquisitely dependent on Puritan,” Giroir says.
Speaking on his mobile phone while driving to one of the new factories back in June, Templet was happy to talk about Puritan’s success. “Our employees have gone way beyond the call of duty for the company and the United States,” he said. When it came to the lawsuit, he had less to say. “I’m not going to comment. It’s personal. It’s not your business, and Puritan is in a great position for America. Trust me.”
I had this sinking feeling, like my entire blood supply just went to my feet.
— Admiral Brett Giroir, former assistant secretary of health
Later he wrote in an email: “Our families along with all our employees have worked hard since March 2020 to provide swabs for COVID testing.” He said that doing so is their first priority and also that he, Cartwright, and the company’s senior managers meet regularly. He wouldn’t discuss the company’s finances over the past year. Cartwright declined to comment, instead referring to a previous statement from his lawyer: The family trust Cartwright represents does not “think the press or the public have any basis for asking to know the details of the differences between two cousins in how they run their company.”
The fight between the owners over Puritan’s fate continues in private courtroom sessions, according to previously sealed legal documents. Puritan now has three factories and soon a fourth, hundreds of new employees, and a dominant share of a multibillion-dollar industry. But the US never developed a national testing strategy under President Donald Trump. He tried to diminish its importance and discounted available data. More than 540,000 Americans have died from COVID-19, far more than in any other country. And in Guilford, those close to the cousins say their dispute over the future of the company is likely to become even more fraught now that Puritan is worth so much more.
Guilford, population 1,500, is about a two-hour drive north of Portland, Maine, and surrounded by birch forest. Those woods made it an ideal location 100 years ago for Lloyd Cartwright to manufacture flavoured toothpicks and later other disposable products such as ice cream sticks and tongue depressors. By 1950 his two sons, Joe and Edgar, and son-in-law Don Templet had taken over. The “three generals,” as they were affectionately called, ran the company as equals. Former employees recall them often visiting the factory. . In the 1960s, the generals made an aggressive push into the disposable medical products industry under the trade name Puritan.
Puritan manufactures more than 65 different types of swabs: for cleaning electronic devices, collecting blood samples at crime scenes, testing for strep throat and sexually transmitted diseases. Flocked nasopharyngeal swabs were one of its most niche products, typically used only if a patient was sick enough with a respiratory virus to be hospitalised. The medical community prefers them because the tiny fibres on the tip easily absorb viral particles and quickly release them for testing.
They’re more complex than they look. A swab has to be able to travel up the narrow shaft of the nose, through a passageway less than 4 millimeters wide, to an area roughly halfway between the ears. It has to be soft enough not to damage the nasal canal, yet sturdy enough to push through mucus and collect cells from the nasopharynx, where viruses grow.
Puritan’s proprietary machines can produce about 2000 flocked swabs a minute, employees say. First, an extruder pushes thin sticks out of a big vat of molten plastic, similar to the way a pasta maker squeezes out strands of spaghetti. Then the sticks are loaded into a vibrating container with a thin slot at the bottom that feeds them individually into the grooves of a conveyor belt chain. There an apparatus places a tiny dot of specialised adhesive on one end and then each tip is inserted into a box full of synthetic fibres. An electrostatic charge causes these fibres to stand on the tip of the stick, like a delicate pipe cleaner; every tip is measured within a few thousandths of an inch. A weighted razor blade scores an indent onto the stick, allowing clinicians to snap the tip off into a vial after extraction. Finally, the swabs are sanitised, heat-sealed between two layers of paper, and sent to distributors.
Before the pandemic, US hospitals needed only about a million nasopharyngeal swabs a year. Puritan and Copan manufactured all of them; Copan, the bigger of the two, provided about 60 per cent of those. Both companies have patented their swabs and repeatedly sued one another for design infringement. Rival manufacturers have had no interest in entering a static market for a relatively low-profit-margin product dominated by two litigious incumbents.
In 2005, when the generals retired and “the younger fellas took over,” the easy relationship between management and the 500 or so workers ended, says Frank Conner, who spent four decades with the company.
As older workers left and Guilford’s population began to shrink, with younger people headed to college, Templet and Cartwright struggled to recruit. Puritan and Hardwood’s factories are in the poorest county in Maine, with an average household income of about $US30,000 in 2018. The company is one of the few options there for a steady income.
For years the cousins have paid fully trained employees $US15 an hour, higher than the state’s $US12.15 minimum wage, and offered full benefits. But the mill’s 10-hour shifts, which either start at 5am or end at 1.30am, cramped social life, and the ban on mobile phones on the factory floor scared off Millennial hires and the college students who used to work there in the northern hemisphere summers.
The company is important to Guilford in all the ways thriving companies are to small towns everywhere. It contributes to the local food pantry, donates playground equipment, offers scholarships to employees’ children, and encourages staff to volunteer for the fire department by keeping them on the clock if they’re called to help during work. “It’s the bread and butter of Guilford,” says William Thompson, who’s served on the town board for more than 40 years.
Locals can still point out the three generals’ former homes, clustered on the edge of town, and now used as company housing. Five family members still live in Guilford. The sour relationship between Cartwright and Templet is common knowledge, says Tom Goulette, Guilford’s former town manager. When news of the lawsuit broke in Maine newspapers last February, few were surprised.
Some in Guilford say the feud started with a backyard fist-fight when the cousins were kids. Others say it began later, when their fathers died. Despite jointly running the company for two decades, the two have never been seen on the factory floor together, according to a dozen former and current employees. Even family members can’t recall when the cousins last spent time together. At Hardwood Products’ 100th anniversary celebration picnic in Guilford in 2019, they avoided each other the entire day.
“I think the town is holding its breath as to what will happen next,” Goulette says. “Everybody thinks that maybe with these multimillion-dollar grants that this is going to fix things. Maybe it’s enough to make them say, ‘Let’s resolve our differences.’ ” He pauses a moment. “Dream on.”
Early in their careers, Templet and Cartwright ventured beyond the family business. Templet worked as a salesman on the West coast, and Cartwright as a contractor in Alaska. By the mid-’90s, they were both back in Maine and both in sales, Templet with Puritan and Cartwright with Hardwood. Jerry Noble was the general manager of the businesses at the time.
Studies show that 30 per cent of family businesses survive through the second generation, but only 13 per cent through the third.
“I was aware there could be conflict, even back then,” he says. “The Cartwright family was primarily interested in the wood-working side, and Templet was primarily interested in the medical side. There were some underlying conflicts on what direction they wanted to take the company in.”
Noble says the dispute is a result of classic cousin rivalry. “If you do any research on businesses, when the third generation and cousins come along, that’s when a lot of the problems start,” he says. Studies show that 30 per cent of family businesses survive through the second generation, but only 13 per cent through the third.
Those close to Templet and Cartwright say it’s not only their business priorities that clash. Cartwright is known as a methodical thinker, a frugal planner, and a sometimes-distant boss.
He also owns another business in Guilford with his wife, Stephanie, that supplies plastic knives, forks, and straws. He’s become increasingly private as his fortune has grown.
“Not many people know him now. That’s John’s personality,” says Janie Lander, a former classmate.
Cartwright and his wife built a sprawling estate, at the end of a 100-metre driveway and next to the home he grew up in. He’s one of only a few homeowners in Guilford to ban the local four-wheeler group from crossing his property.
Templet is more approachable, to a point. During his early dealings with the government, White House officials called him Mr Templet, not Timothy –and definitely not Tim. Templet lives with his wife, Elise, in Cumberland, on the coast, and commutes two hours to Guilford. Relatives and associates say he considers himself a visionary.
He’s as stubborn as his cousin, more willing to spend money on the company, and more likely to stay in five-star hotels when he travels for work. He’s also more comfortable in the role of company spokesman. Throughout the pandemic he’s appeared on national TV and radio. Relatives describe Templet and Cartwright as having a kind of tortoise-and-hare relationship: Cartwright moves slowly but with purpose, while Templet “will run for the sake of running, even if he doesn’t know where he’s going.”
Former employees say conflict was inevitable as Hardwood and Puritan grew into completely separate businesses operating at different speeds and generating different profit margins. Alvin McDonald, who used to keep track of how much it cost to make all the products, says Hardwood’s business was “nowhere near” as profitable as Puritan’s.
“The medical side was always interested in investing money in new equipment, because they had the resources available, whereas the Hardwood plant was on a tight budget,” McDonald says. The summer before last, in an interview with the business journal Mainebiz, Templet said the connection between the companies could be frustrating: “They’re linked by family, and that’s all.” The forests surrounding Guilford are great for Hardwood, but no longer necessary for Puritan, he said. And the town’s remote location makes it harder to keep the factory fully staffed.
The growing tension turned into a full-blown corporate fight in the summer of 2018, according to the lawsuit Templet filed, which was shifted to Maine’s Business & Consumer Docket.
“The Partnership formerly held multiple meetings per year to approve budgets, salary increases, and capital expenditures. Cartwright walked out of the last meeting in May 2018 and no subsequent meetings have taken place,” the document states. The pair disagreed on salary increases, capital investments, upgrading technology systems – pretty much everything.
Michael Coombs, who spent two decades at Puritan, recalls how the rift would spill over onto the factory floor. Three years ago computerised power bars were installed at Puritan, allowing machine operators to insert an ID key card rather than fill out paperwork at the start of every shift. Coombs, who was excited to use the new technology, remembers the power bars were “there one day and gone the next” – without explanation. The lawsuit refers to an incident where the company spent hundreds of thousands of dollars on a technology upgrade organised by Templet and abruptly terminated by Cartwright.
In 2019, Templet began seeking support among relatives for a potential sale of the company, according to people who didn’t want to be identified discussing private information. At one point he approved a buyout bid from an investment fund. Cartwright rejected it. Templet also sought an appraisal, hoping he could sell his stake in the company, but deemed the valuation too low. The Cartwright-Templet family partnership terminates in 2026, and the contract states that unless both sides agree to end it early, the partnership must remain in effect.
Templet had one other option. In Maine a court may end a limited partnership if it’s impracticable to maintain. Templet asked the court to dissolve ownership of the company and supervise its sale – and, in the meantime, appoint the company’s general manager, Terry Young, as its interim custodian, with the power to break deadlocks between the owners. Young had worked at Hardwood Products for 20 years, and for much of that time he’d been the go-between for Cartwright and Templet. A few weeks after Templet filed the suit, Young retired. When reached at his new home in Florida, he declined to comment.
It was Admiral Giroir who managed to bring Cartwright and Templet together, if only for a telephone call. After Templet disclosed the lawsuit to White House officials, Giroir spoke with both cousins. He thanked them for their service and asked them to rise above their differences.
“I remember telling them how critical they were,” the admiral says. “I said they may not realise it now, but a lot of the pandemic response will depend on them. I said the country is counting on them.”
Rachael Baitel, the former deputy chief of staff at the US International Development Finance Corporation and Puritan’s point of contact, says the call lasted only a few minutes and Giroir was the only one who spoke.
“He knew they needed a motivational speech of sorts,” she says. “I don’t think any of us realised how fundamental that call was in the scheme of Puritan’s history.” Templet seemed to agree. When he next spoke to Baitel, he said, “That was exactly what we needed to hear.”
In April 2020 the Department of Defence said it was investing $US75.5 million in Puritan to double its production of the foam-tip swabs used for rapid antigen testing. The company renovated a dormant 8825-square-metre factory in Pittsfield in eight weeks, with government contractor Bath Iron Works building proprietary swab-wrapping machines in a quarter of the time normally required. This facility is now making about 100 million swabs a month.
On June 4, former President Trump’s motorcade pulled up outside the Puritan headquarters. He was the first sitting president ever to visit Guilford in an official capacity, and residents lined the streets. Trump spoke to a crowd that included the owners. It wasn’t lost on employees that it was the first time many had seen Cartwright and Templet together.
“Powered by the dedication of the men and women in this room, America has become the world leader in coronavirus testing,” Trump said. “And now Puritan is doing better than it’s ever done, I guess by a factor of a lot, right?”
Indeed, by a factor of a lot. One month later, Puritan received an additional $US51.2 million grant from the Cares Act and repurposed a second facility in Pittsfield to produce about 50 million flocked nasopharyngeal swabs a month. In November $US11.6 million in other funds arrived, and in January an additional $US110 million allowed Puritan to procure equipment to increase production of its foam-tipped swabs.
The government is also likely to fund Puritan’s fourth facility, in Tennessee, say people familiar with the situation who didn’t want to be identified. The government made a modest investment in Copan, too. In September it provided $US10 million to help increase production of flock-tip swabs at a factory in Puerto Rico.
Nonetheless, Puritan almost has a monopoly on the market for COVID swabs in the US now and is positioned to dominate a global medical swab industry that could be worth as much as $US4 billion by 2027. Even with vaccines, the virus won’t disappear, variants will likely continue to emerge, and testing will still be important.
For now, new competitors don’t seem much of a threat. Experts did design injection-molded and 3D-printed testing swabs, but production is expensive, and clinicians are reluctant to switch to devices from new companies. A dental brush manufacturer in Wisconsin also started making flocked swabs last May and by September had produced 20 million.
US Cotton – best known for its Q-tips – modified seven of its 180 machines to switch from cotton, which interferes with COVID test results, to spun-polyester swabs. The company is producing about 80 million swabs a month for COVID testing, says CEO John Nims, and plans to keep expanding to meet demand. But its machines aren’t able to produce foam or flocked swabs, which the medical community still prefers.
The rise of saliva-based testing could plausibly dampen Puritan’s sales growth, what with spitting into a tube or onto a strip of paper being considerably less uncomfortable than having a swab up your nose. But saliva tests have their limitations (eg, leakage in transit), and Puritan will continue to benefit from its lucrative agreement with the government.
A deadly pandemic, an extraordinary business opportunity, and $US250 million in federal funding haven’t quelled the cousins’ feud. Court records show they have fought over the location of the case. Cartwright sought to shift it to Piscataquis County, where he lives, but Templet demanded it remain in Cumberland County, where he lives. When Businessweek filed a motion to unseal the case file, they disagreed about that, too. Cartwright fought to block access, and Templet chose not to.
Last March, as the lockdown began, Templet wanted to expedite the case because of Puritan’s crucial role in the COVID response. Cartwright objected. In April, with infection rates rising, Cartwright filed a counterclaim that denied all of Templet’s allegations, including that they were at an impasse, and asked the court to instead require Templet to sell his stake back to the company. Templet objected.
Cartwright accused Templet of “secretly” seeking business opportunities and of filing the original complaint, and sending a subsequent news release, as part of a “smear campaign” against him. He alleges Templet has wanted to sell the company, not save it: “Mr Templet insists that everyone’s interest in this family gift must be put up for sale because John Cartwright does not agree often enough with Mr Templet and Mr Templet could make more money by selling to a third party, to heck with everyone else in the family.“
A document Templet filed in May suggests the pandemic had exacerbated the cousins’ dispute: “The tremendous surge in demand for Puritan’s swabs and the need for decisive decision-making to respond to that demand are among the primary factors that have caused ongoing and critical conflict between Cartwright and Templet.”
In July, as the US death toll surged past 150,000, Templet requested a temporary stay so the case didn’t distract Puritan. Cartwright objected. His motion alleged that Templet wanted to delay so he could “goose the pandemic numbers,” that is, the sales numbers. “Mr Templet picked this fight and he should not be allowed to walk it back because it is going to cost him some time and money, and because he wants more time to see how the dust settles before deciding whether he is in or out of the family business.”
A relative says the cousins are “tolerating” each other, communicating only when necessary.
The judge stated, “They were able to set aside their differences – at least for now – in order to come to agreement on an extraordinary and presumably lucrative arrangement.”
The company remains busy; the case is on hold. And Templet and Cartwright are biding their time.
— Bloomberg Businessweek