The Liberty Bridge, a landmark pedestrian walkway, overlooks Reedy River Falls and Falls Park in the Historic West End of Greenville, SC. The area has been attracting more life sciences businesses (see page 49 for more information). The bridge is approximately 355 feet long, 12 feet wide, has a horizontal curve radius of 214 feet and 90-foot towers weighing 26 tons each. Photo courtesy of Duke Energy.
Planning to Relocate? Expand Your Horizons, and More Than the Bottom Line May Benefit
Stacey L. Bell
Call them the new American pioneers. In the past, medical device companies clustered in technology-rich hubs in California, Minnesota and Massachusetts, to name just a few hot spots. Today, experts report, firms have much more flexibility in selecting a site. Company leaders are applying the same independent thinking and sound business decisions that allowed their businesses to flourish in the first place to their site selection process—leading them to locate in some surprising areas.
"There's a new trend to locate new facilities away from the clusters," said Dana Olson, CEO of Ecodev, LLC, a Bloomington, MN-based site selection analysis and implementation firm. "In clusters, you end up sharing resources, including personnel and services, which drives up costs substantially. Idaho, west Texas—it doesn't matter where a facility is if the labor is qualified. As long as an area can support a company's transportation, distribution and labor needs, there isn't a need to cluster."
Indeed, the January 2007 Battelle/BIO study, The Biosciences in the United States: A Regional Perspective, found that regions not previously associated off the top of one's head with medical devices—including Flagstaff, AZ; Kansas City, MO; and Madison, WI—are investing to create the research base, talent pool, capital markets and commercialization capabilities to attract more life sciences firms to their areas.
"An interesting finding in small and medium metro areas that fared well in this study is that they tend to be university-centric towns. Increasingly, medical device firms are spun out of university research or are started by pele upon graduating. Or there's a genealogy tree, and one firm begets several more," noted Walter H. Plosila, PhD, vice president of the Battelle Technology Partnership Practice in Cleveland, OH. For companies focused on research and develment work, or that value a more skilled, educated talent pool, university towns such as State College, PA, Bloomington, IN and Fort Collins, CO have much to offer, he said.
The cost of doing business also can be a driving factor in site selection, so low workers' compensation rates and other expenses in Iowa, Milwaukee and other small-to-medium metrolitan areas can be a draw. "Most people don't think of Nebraska or Winston-Salem, NC, but they should," Plosila said.
Following are five off-the-beaten-path places medtech companies may want to call home.
Idaho: Showing Entrepreneurs the Money
When you think about access to capital markets and innovative thinkers, do you think about Idaho? The Gem State—long known for its potatoes, lumber and mining—also has become an emerging bioscience stronghold.
"Venture capitalists have taken notice of the Boise Valley because of the strength of the foundation it has built to support the biosciences and technology," reported Phil Stiffler, a former banker and now economic development manager for the City of Meridian. The Greater Boise Valley is comprised of six cities: Boise, Meridian, Nampa, Eagle, Emmett and Caldwell.
Home to Hewlett-Packard and Micron Technology, Inc., Boise Valley boasts a pro-business environment, an educated, skilled workforce and numerous research centers, including a just-announced Idaho State University initiative to consolidate several satellite campuses into one location in Meridian. The facility will feature a new Health Sciences Education Center. A 175-acre research campus, the Pinebridge Medical Technology Park—modeled after a similar center at North Carolina's Research Triangle and medtech campuses in Salt Lake City and Denver—also is slated to open in spring 2008.
According to the Idaho Commerce and Labor departments, the Boise Valley already generates more patents per capita than any other region in the United States and ranks fifth in the nation in the creation of new companies. This innovative environment has been recognized by numerous investors, including the Boise Angel Alliance, Highway 12 Ventures and the Keritsu Forum, one of the largest networks of angel investors in North America, which created a Boise/Sun Valley chapter in 2006.
ImQuant, Inc., formed in late 2004 by Timothy Sawyer, MD, raised its first round of financing—some $550,000—in late 2005 through mid-2006. ImQuant has develed proprietary, software-based technology that uses advanced medical images to tailor therapy to individual patients. Angel investors will fund the next round of financing.
"It's relatively easy to attract an audience here," Sawyer said. "There are a lot of angel investors as well as VC firms in the area now."
And, indeed, medical technology is hot. In the first quarter of 2007, venture capitalists invested $7.1 billion into 778 deals, the highest quarterly dollar amount since the fourth quarter of 2001, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Assoc-iation, based on data by Thomson Financial. Biotechnology surpassed software to become the top industry for investment, with $1.5 billion poured into 102 deals. Medical device investing was at an all-time high, with $1.08 billion invested in 96 deals, a 60% increase in dollars over Q4 2006. While California and New England continued to lead the pack in dollars invested, the Northwest performed more strongly than some other traditional medtech centers.
Sawyer is further develing his product with a group of biomedical imaging engineers from the Mayo Clinic in Rochester, MN. "The difference in geography is a minor inconvenience," he said. "The great thing about Boise is that when we're ready to bring engineering talent in-house, it will be easy to recruit. We're a short hop to San Francisco, Seattle, San Diego, Los Angeles. Those cities have become prohibitively expensive for people, especially if you have a family. Plus, Boise State and Idaho State offer engineering talent." Also benefiting the recruitment equation: a below-national-average cost of living and a typical commute time of just 18 minutes.
Arizona: Building More Technology Centers
Flagstaff, AZ is collecting kudos. Battelle/BIO's most recent study noted that the area is among the top three small metropolitan areas with the most concentrated employment in medical devices. Expansion Management magazine included the city in its list of 50 hottest cities in which to expand or relocate a company.
Shown above is a western view of Cincinnati’s skyline. Photo courtesy of the Cincinnati USA Regional Chamber.
Greater Flagstaff offers the environment of a thriving college town and growing research facilities. Last year, Northern Arizona University (NAU) educated more than 13,000 students and conducted research in 50 departments and research centers, earning more than $58 million in new external grants and contracts. Within the Flagstaff Innovation Park, the city is building a $3.6 million, 10,000-square-foot Northern Arizona Science, Technology and Clean Energy Incubator, which will include wet and dry labs, and is scheduled to open in Fall 2008. The companion 200,000-square-foot Flagstaff Science and Technology Park will offer research, lab and production space for science and technology companies and open in 2009, Jaronik said.
Another science and technology park located near the airport serves as home for Machine Solutions, Inc. James Kasprzyk, director of global sales and marketing for Machine Solutions, said that the area's high quality of living and university environment—coupled with the existing scientific and research base (W. L. Gore & Associates and TGen are local also)—provide for a great medtech business setting. In fact, the location has aided the company in finding employees.
"We've hired a number of NAU interns who have worked for us, and we have at least one intern at all times. NAU is a good source of employees for entry-level jobs for us," Kasprzyk said. "NAU alumni are an equally valuable pool. Many graduates left the area for their first or second job, but now that they have families, they'd like to return for the quality of life. Every month we get résumés from former residents."
Machine Solutions also has collaborated with NAU's Capstone Program. Local companies provide a technical challenge they'd like to have solved, and a student team develops several solutions that are presented to the organization at the end of the semester.
Wisconsin: A Partnership Powerhouse
The same Battelle/BIO study that pointed out Flagstaff's growing bioscience expertise also shined a spotlight on Madison, WI. "Of the 361 metropolitan areas in the country studied, Madison was singled out as one of only two cities with a significant presence in all four bioscience sectors: drugs and pharmaceuticals; medical devices and equipment; research, testing and medical labs; and agricultural feedstocks and chemicals," reported Jim Leonhart, executive vice president of the Wisconsin Biotechnology and Medical Device Association (WBMA). "The bioscience industry in the state is on a significant maturation curve. We have 340 bioscience companies and 175 medical device companies, so we're develing a critical mass."
Networking among the various bioscience sectors has led to increased innovation as well as bottom line savings. "Our association has a tremendously active purchasing consortium that saved members a couple million dollars last year," Leonhart said. The consortium offers discounts on lab supplies, dry ice, packaging and shipping services as well as telecommunications services. A group health insurance program is expected to be offered by mid-July.
The area also has focused on commercializing the science develed at the University of Wisconsin at Madison. The Wisconsin Alumni Research Foundation licenses research for entrepreneurs, and collaborations have increased dramatically in recent years.
Such activity has attracted venture capitalists' attention. "We have two homegrown venture funds in the state that are committed to investing in bioscience in Wisconsin," Leonhart said, noting that local Tomo Therapy recently netted more than $280 million in its IPO.
To assist other local companies in their funding efforts, WBMA, in conjunction with BIO, is hosting the BIO Mid-America VentureForum in Milwaukee Sept. 24-26. Seventy-five leading VC firms will be on hand to hear presentations from Wisconsin-based companies.
"Wisconsin is branding itself as the State of Bioscience," Leonhart concluded. "We have all the key subsets here. We're sneaking up on San Diego, Boston and Philadelphia."
Ohio: Rich in Research
Located within 600 miles of 60% of the US population and 50% of Canadians, the Buckeye State is perfectly positioned to ease its business community's distribution needs and expenses. But the state's largest bioscience claim to fame lies in its dominance in research.
In 2004, Ohio hosted 26% of US clinical trials, and according to ClinicalTrials.gov, as of May 8, 2007, Ohio outnumbered all other Midwestern states with 1,599 clinical trials in progress. Ohio ranked sixth in the nation, behind California, New York, Texas, Maryland and Pennsylvania.
The Ohio Business Develment Coalition noted that collaboration between private and public entities makes such success possible. The Third Frontier Project—a $1.6 billion initiative to help catalyze connections among medical institutions, universities, corporate partners and entrepreneurs—supports clinical capabilities.
The collaborative environment also has appealed to companies seeking to relocate. The number of medical device companies in the state grew from 346 in 2005 to 400 in 2006, according to BioOhio.
"Proximity and easy access to markets and great research opportunities contribute to Ohio's growth," said David Smith, director of economic develment for Duke Energy Ohio & Kentucky, which provides electricity and site selection services to businesses in the greater Cincinnati area. He noted that Johnson & Johnson's Ethicon Endo-Surgery, Inc. calls Cincinnati home, creating a unique clustering portunity for other medical technology companies.
Another contributor to future growth lies in the state's new tax code, Smith added. By 2010, the reforms will give Ohio the lowest state taxes in the Midwest for companies making new capital commitments.
South Carolina: Legislating Life Science Success
To attract life science companies to its towns, in 2004 South Carolina passed the Life Sciences Act, providing incentives requested by biotech leaders in the state. For instance, the act doubles the rate of equipment depreciation and offers larger cash rebates on eligible expenses for specified levels of investment and job creation. It also provides for additional biotech research funds for South Carolina schools. In 2005, the South Carolina legislature enacted the Venture Capital Investment Act to improve equity capital access and opportunities for the commercialization of new technologies.
New legislation bolstering an environment conducive to life science success is only one benefit of locating in the Palmetto State, noted Paige Sheehan, spokesperson for Duke Energy Corp.'s Economic Develment Group. "Medical device and pharmaceutical companies need access to good, high-quality power at a low price," she said. "Duke's rates are 27% below the national average. When you have a significant energy bill, those savings can add up quickly."
South Carolina's rich history in manufacturing, furniture and textiles has created an infrastructure that now stands ready for medical device firms, since so many of these other industries have closed doors or moved overseas, Sheehan added.
Perhaps most important, South Carolina boasts a skilled workforce, eager for production jobs. The state's workforce was one of the deciding factors when St. Jude Medical, Inc. in Liberty, SC (with headquarters in St. Paul, MN), sought to expand. The company looked at several locations for the new facility, including Puerto Rico, China, Ireland and India.
"We chose to expand our existing St. Jude Medical facilities in Liberty primarily because our Cardiac Rhythm Management Division had already established a presence in the area. [All of the company's high-voltage capacitors for implantable cardioverter defibrillators are manufactured at this location.] In addition, the quality and training of the available workforce in Liberty also made it a desirable option," reported Amy Jo Ellis, senior media relations specialist for St. Jude Medical. The new facility is expected to open early next year and employ 300 additional workers.
To date, the Center for Accelerated Technology Training has trained more than 228,000 employees in customized programs for nearly 1,800 companies since its inception in 1961. Employees learn about good manufacturing practices, laboratory skills, etc., all at no cost to the employer. AdvanceSC, funded by Duke Energy, provides grants of up to $250,000 annually to technical and community colleges so they can create manufacturing and training programs to further the area's economic develment.
The MGE Innovation Center, located three miles west of the University of Wisconsin-Madison campus in the internationally recognized University Research Park, has helped more than 70 early stage bioscience companies grow since 1989. The center includes more than 50,000 square feet dedicated to office and laboratory suites for start-up and early stage companies, most of which have been spun out of the university. Photo courtesy of the Wisconsin Bioscience and Medical Device Association.
Certainly, medical device industry clusters will continue to exist and remain essential to the prosperity of some firms, particularly R&D-driven companies. Some of these clusters inevitably will develop in locations that medical device firms previously hadn't considered in their site selection plans.
"More and more state governments are providing matching funds to universities to encourage developmental work between the public and private sectors, which will make these locations more attractive to bioscience companies," Plosila said. In addition, universities increasingly are partnering with corporations in developing internship programs, supplying part-time employees and forming co-op programs.
As this collaboration continues, pioneering medical device firms may just find a new perfect place for new branches to call home.