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Sunday, 03 August 2014 22:00

Southwest Michigan links to other regions to foster life science, med device sector

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Stryker Corp.'s corporate offices Stryker Corp.'s corporate offices COURTESY PHOTO

An effort that began two years ago to nurture Southwest Michigan medical device startups has since taken on a broader reach that now extends across Michigan and even over state lines.

The Michigan Medical Device Accelerator, a part of Southwest Michigan First in Kalamazoo, now works to support startups and connect companies involved in medical devices across an area that stretches from the east side of Michigan and into northern Indiana.

The intent behind the broader reach is that a company developing a device could use the expertise of other firms located across the state or across the border. The group also hopes to better connect the supply chain serving the industry.

“We continue to see a Michigan, northern Indiana ecosystem develop and foster,” Southwest Michigan First CEO Ron Kitchens said. “It’s about connection to suppliers, parts, connections, ideas. It’s an ecosystem and you do not need to own everything in-house to succeed.”

The effort has a strong base to build upon.

Across Michigan, the medical device industry directly employed 11,100 people at 240 companies in 2012, according to a recent research report from the Bio Industry Organization, or BIO. The report rated Michigan as having a “concentration” of employment in the medical device industry.

The same report also ranked the Kalamazoo-Portage area — the home of Stryker Corp. — second in the U.S. in the concentration of medical device employment among medium-sized metropolitan statistical areas. Ann Arbor was sixth among medium-sized MSAs, and the report rated the Niles-Benton Harbor area seventh, Jackson ninth, and Saginaw 12th among small-sized MSAs across the country.

That kind of cluster in Michigan, combined with the supply chain around Medtronic Inc.’s operations in Warsaw, Ind., requires a broad, regional approach from economic developers, Kitchens said.

“It really is this huge concentration. There’s a concentration of both device and medical product companies and their supply chain that rivals anywhere in the country,” he said. “We’ve completely embraced this idea of open-source success. Whoever we can work with today that increases our opportunities for success tomorrow is what we want to do.

“If somebody comes to us and says, ‘I need this service,’ we may go, ‘That’s great, but the best person to do that is in Grand Rapids or Ann Arbor.’”

A statewide consortium of device companies set up last year is presently working with the University of Michigan to determine the exact size, scope, capabilities, niches and areas of expertise of the industry in Michigan. The report is due back by the end of September, said Kevin McLeod, managing director of the Michigan Medical Device Accelerator.

“What we really need to know is who are our real players and what are they doing so that we can leverage it better,” McLeod said. “We’ll also understand what we need in this state.”

The Michigan Medical Device Accelerator is presently working with five companies, two of which launched products in the last year, McLeod said. They include Impact Athletic in Kalamazoo, a maker of portable athletic tables and cabinets. Two more companies are in the early stages of products development, he said.

McLeod described the device sector around Southwest Michigan as “active and growing.”

“We’re definitely pushing to have a more lively startup, early stage company atmosphere here,” said McLeod, who’s also a partner in a new venture capital fund that formed to support medical device startups.

The Novus Biotechnology Fund I has so far raised $2 million of its $10 million goal and has invested in two companies, Ablative Solutions Inc. in Kalamazoo that’s developing a device to deactivate renal nerves to treat severe hypertension and Pennsylvania-based Trice Medical that developed a camera-enabled disposable needle for diagnostic imaging in a physician office.

Across Michigan last year, about 40 percent of the $120 million in venture capital invested went to life science companies, and 41 percent of that went into device startups, according to the Michigan Venture Capital Association.

As economic developers look to support startups and connect companies, much of the medical device industry in the Kalamazoo area remains centered around Stryker, which has in the last year made a series of acquisitions.

Most recently, Stryker announced June 30 that it was buying the assets of an ankle replacement system produced by Small Bone Innovations Inc. in Morrisville, Penn., for $375 million. That deal came after Stryker completed three acquisitions earlier in 2014. They were:

  • The April 15 acquisition of Bechtold Holding AG for $172 million. Bechtold, with facilities in Germany and France, produces health care equipment, including tables, surgical booms and lighting.
  • The March 24 deal for Patient Safety Technologies Inc. in Irvine, Calif., for $120 million. The company produces a software system to prevent what’s known as “retained foreign objects” in the operating room.
  • The March 7 deal for Pivot Medical Inc., a Sunnyvale, Calif., maker of hip arthroscopy products.

This year’s deals came after the 2013 acquisitions of Trauson Holdings Co. Ltd in China for $764 million and the $1.65 billion transaction in December for Mako Surgical Corp. in Ft. Lauderdale, Fla.

In a conference call last month to discuss quarterly results, Chairman and CEO Kevin Lobo told analysts that Stryker continues to seek out acquisitions to drive sales growth.

“We are not stopping that activity. That doesn’t predict that we will do a certain number of deals, but the ongoing activity doesn’t stop,” Lobo said. “Whether a division is ready to absorb another one is obviously one of the factors that will be considered, but we have so many divisions within the company that we can take on multiple deals at one time.”

Stryker (NYSE: SYK) last month reported net sales of $2.4 billion for the second quarter, up 6.8 percent from a year earlier, and net income of $215 million, or 56 cents per share. The company expects full-year organic sales growth for 2014 of 5 percent to 6 percent.

Read 39858 times Last modified on Sunday, 03 August 2014 15:32

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