By Stephen Jewkes

MIRANDOLA, Italy | Mon Jun 4, 2012 1:49pm EDT

MIRANDOLA, Italy (Reuters) - The rich biomedical industry nestled around the mediaeval town of Mirandola has shut up shop after being hit by two earthquakes in May, raising concern that serious economic damage could be done to one of Italy's most productive regions.

Mirandola, near the epicenter of the May 29 earthquake that killed 17 people and injured 350, is home to Europe's leading biomedical industry district, hosting companies such as the Italian group Sorin (SORN.MI), Covidien (COV.N), of the United States, Germany's B-Braun BBRMG.UL and Sweden's Gambro Dasco.

A violent tremor of 5.1 magnitude late on Sunday shattered hopes that the quake threat might be waning.

"I reckon the damage done just in the Mirandola area is in the region of a couple of billion euros. Everything has collapsed," Luigi Mai, president of the city of Modena's small business association CNA, told Reuters.

Italy's business association Confindustria and the EU Commissioner for Enterprise and Industry, Antonio Tajani, have spoken of total damage to the area in excess of 5 billion euros ($6.18 billion).

The government has set aside 2.5 billion euros for reconstruction, including measures to help companies to relocate temporarily to restart production.

The biomedical business park around Mirandola, No. 3 in the world behind U.S. parks in Los Angeles and Minneapolis, is an important part of the economy of Emilia Romagna - a wealthy centre-north region that is one of Italy's engines of growth.

Biomedical Valley, created almost 50 years ago by the pharmacist-entrepreneur Mario Veronesi, is home to about 100 biomedical companies employing around 5,000 workers, producing disposable medical items along with equipment for dialysis, heart surgery and transfusions.

In 2009, the business park achieved sales of close to 750 million euros, about one-third of national sales of 2.2 billion euros, half of which were for export, according to Assobiomedica, the Italian biomedical industry association.

The worry now is that the industry, already hit by economic crisis and delayed payments from cash-starved local health authorities, could lose market share.

"We're very worried the biomedical sector could suffer at the hands of foreign competition. We don't want to damage this crucial part of the local economy," said Modena mayor Giorgio Pighi.

Italy's ageing population has boosted the sector, which until a few years ago enjoyed double-digit sales growth. But recession and competition from the United States, Japan and, for plastic sanitary appliances, Asia have squeezed margins and shrunk sales.

ASSESSING DAMAGE

Plans that many of the companies had to restart production after the first quake on May 20 had to be torn up last Tuesday as buildings were damaged further or quarantined because of continuing tremors.

Listed Sorin, the world's leading cardiovascular equipment maker, kept shipments moving to and from its Mirandola plant after the first quake but was forced to stop when the second quake hit.

Sorin chief executive Andre-Michel Ballester told Reuters on Monday the company's factory had not suffered major damage but that with safety the priority it would be weeks before the group was able to restore full production.

"We might temporarily rent clean rooms (sterile environment) further afield in the area but we have no intention of moving to other facilities," Ballester said.

He said the company, one of the biggest employers in the area, was under pressure from its employees to resume work.

Artech, which recently provided the mini-heart that a Rome hospital transplanted into a 16-month-old baby, was so badly damaged that it will have to be pulled down and local workers are worried the group could decide to relocate.

Pighi, who has called for temporary facilities to be offered to companies, is worried that multinationals could move production to other sites to reduce losses.

Concern is also growing over the impact that prolonged closure could have on the supply chain in Italy and for overseas customers.

"We are worried about the supply of products to patients suffering certain conditions, like dialysis," said Stefano Rimondi, chief executive of Mirandola-based Bellco, which accounts for more than 50 percent of Italy's dialysis equipment.

Covidien, shut since the first earthquake, has told some of its workers that it will take a further two weeks before any decision can be made.

Assobiomedica managing director Fernanda Gellona said: "We met with the Health Ministry to set up a crisis group to avoid interruption of services. There is no reason for panic." ($1 = 0.8089 euros)

(Reporting By Stephen Jewkes; Editing by David Goodman and Ralph Gowling)

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