Countdown to Michigan 2031: Will Medical Devices Lead the Way?

3/28/11Follow @xconomy

If Michigan was looking for an industry to bolster its future high tech economy beyond automobiles, medical devices would appear to be a good bet.

HandyLabs and Accuri Cytometers, both University of Michigan spinoffs based in Ann Arbor, MI, were recently purchased by Benton, Dickinson & Co.

With nearly $8 billion in revenue last year, Stryker is rapidly becoming a major player in medical devices. The company, based in Kalamazoo, MI, recently spent $1.5 billion to acquire the neurovascular business of Boston Scientific.

Traditional auto supply manufacturers, including Roush Life Sciences and Delphi Medical, are now expanding into medical devices. Two new medical schools are in the works in Michigan while the U-M medical school is ramping up efforts to convert its research into bankable technology.

“All of the pieces seem to be falling into place,” said Tim Peterson, managing director of Arboretum Ventures in Ann Arbor, which funded HandyLabs and Accuri. “The trend line looks really good.”

Ten or 15 years from now, Michigan will view this moment as a turning point, he says.

Whether Peterson’s prediction is a sound one is just one of the important questions that will be debated at Xconomy’s Michigan 2031 forum next month. The April 14 event—which will bring together some of Michigan’s most prominent investors, academics, and entrepreneurs at Detroit’s TechTown—will discuss the shape and makeup of the state’s high tech economy 20 years from now, including the role medical devices will play in that economy.

Michigan has a lot of work to do in the meantime. The state’s medical device community is largely scattered, disorganized, and underfunded, observers say.

“We have no good, strategic plan,” says Stephen Rapundalo, CEO of MichBIO Institute in Ann Arbor. “We don’t even know what we have.”

From 2004 to 2009, Michigan attracted $439.6 million in bioscience-related venture capital, good enough for 18th place in the United States, according to the Battelle Report.

Of that money, medical devices (diagnostic and therapeutic products) captured only 21 percent, or $92 million, with the vast majority going to pharmaceuticals and biotechnology. By contrast, venture investments in Minneosta medical device firms totaled $1.2 billion and Ohio medical device startups grabbed $394.2 million.

Michigan’s medical device sector has actually shrunk over the past several years, the Battelle Report says. In 2008, the state had 500 device-related “organizations,” down 13.1 percent from 2001, compared to 0.4 percent gain for the entire country.

In that time period, the number of Michiganders working in medical devices fell 4.3 percent to 12,339, while employment in the industry across the United States rose 2 percent to 435,509 people.

But some experts think money is not the main problem. Scott Merz, president of MC3, a medical device incubator in Ann Arbor, says the state lacks “anchor” companies that entrepreneurs and investors can build around.

Minnesota, for example, boasts three major medical device makers—Medtronic, Boston Scientific, and St. Jude Medical. Alumni from those companies in turn launch their startups and invest in and advise others.

“There are a lot of [device] companies here,” Merz says. “What we’re missing is the presence of … Next Page »

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