Kalamazoo-based Keystone Solutions Group has experienced strong growth in recent years that President Jim Medsker expects to continue in 2020. The company is a product designer for the medical device, aerospace and automotive industries, and also offers contract manufacturing for medical devices. Keystone currently employs 58 people in Oshtemo Township and is targeting $15 million to $20 million in revenue for 2020, coming off a year of 50 percent year-over-year revenue growth.
Where do you see the medical device industry heading in 2020?
We see continued growth and also continued trending toward many of the medical device OEMs outsourcing the manufacturing aspect of their products so that they can focus on selling the product. We’ve heard that feedback from the very, very large OEMs all the way down to the privately-held smaller companies as well. … There also is definitely an ever-increasing focus on risk mitigation and risk monitoring. If you’re the patient lying on the OR table, you’re happy to know that they keep continually improving and making risk mitigation more rigorous. As a manufacturer, it obviously makes you level up on a constant basis in your quality management system, your infrastructure and so forth.
Given Keystone’s growth spurt, how are you handling expanding your workforce?
It’s been one of our bigger challenges this year and I anticipate it will continue to be a big challenge in 2020. With our growth rate, we are hiring at all levels of the organization. … We are utilizing every resource we know in terms of staffing firms, recruiters, headhunters, websites, you name it, and we’re still struggling to find the talent.
Outside of just keeping up with growth, what are some of the emerging challenges for your company?
Probably one of the biggest challenges we faced tactically this year is the ETO (ethylene oxide) sterilizers and what’s going on with them. The single-use sterile products that we produce are sterilized after final packaging. As a contract manufacturer, we rely heavily on outside sterilization resources. A number of them have come under fire this year and have been shut down by the EPA for various reasons.
Viant shut down (its Grand Rapids facility), and they were one of our smaller suppliers, but still a key supplier. Now we’re not sterilizing in Grand Rapids anymore. We had another sterilizer that was shut down over in the Chicago area.
How did you react to those closures?
This year, we’ve validated four new sterilizers, which was quite a lift. Validating a sterilizer is three- to six-month effort with many, many people involved, ranging from microbiologists to engineers to quality people, manufacturing engineers, that sort of thing.
Are you having to go farther outside of Michigan to find product sterilization services?
The radius has expanded, for sure. … We have now validated a handful of sterilizers, but they’re located in New Jersey, they’re located in Virginia. We have another one that’s in the Boston area. We have had to expand the radius a bit. There is actually talk from some of our larger clients of even exploring the potential of offshore sterilizing services, which I’d rather not do because it’s a logistics nightmare, of course.
What does the Charter Growth Capital Partners investment from earlier this year do to position your company in the months ahead?
What it does is it gives Keystone the dry powder to continue on this fairly steep growth path. In addition to the working capital that the Charter deal provides, the Charter team and their experience and their connections with other medical device and life science companies is synergistic as well. Having that type of financial partner — as well as a partner that can provide advising and provide additional contacts and the synergy — does help ensure continued growth, sustainability, and it also helps with risk mitigation as well.
Does the fact that Keystone was able to find that funding within Michigan say anything about the strength of the medical device sector and the capital availability in the state?
I believe it does. It’s an example of the strength of both the available capital and the investing that’s going on in this region especially. One of our values here at Keystone is we value long-term collaborative relationships. I personally and Keystone have had a long-term collaborative relationship with Charter Capital and their team, and that’s important to us. While capital is important and advising is important, there is also a comfort level that comes along with a strategic partner that you’ve known for over a decade to go down a path together with.
As you look ahead to 2020, where do you see changes that Keystone will need to address?
It’s very possible that on the horizon for 2020 is an additional facility. We have expanded within this facility two or three times and we’re getting close to maxing it out. We’re landing gigs that take up larger initiatives and take up more square footage. It’s not just for available space but also for risk mitigation so that we can have that duality of facilities.
This is part of the Charter infusion of capital: We are implementing a new ERP system for the company and that will probably be wrapped up and fully implemented near the end of 2020. That’s a big program for us.
What’s keeping you up at night as you look out to 2020?
The biggest one is the ETO sterilization, quite frankly, because we have to sterilize our products. While there are other sterilization methods out there, ETO sterilization has been out there for a long time for a wide variety of products for good reason. It doesn’t attack the plastics and other materials like the other processes, for example, like gamma radiation sterilization. That (issue) is probably the highest on the radar. Quite frankly, without a sterilization base, we don’t get sterile products.