One of the United States’ most well-known living scientists, astrophysicist Neil Degrasse Tyson, is a very vocal advocate for NASA and its importance to virtually every aspect of American life. “NASA, as best as I can judge, is a force of nature like none other,” Tyson said during a speech he gave at the University of Buffalo, N.Y. “What worries me is if you take away the manned program—a program where when you advance frontiers, heroes are made—there [no longer] is a force operating on the educational pipeline that will stimulate the formation of scientists, engineers, mathematicians and technologists. You birth these people into society. They are the ones that make tomorrow come.”
The oldest life-sciences company in the United States, Parke-Davis, was founded in Detroit in 1866. Image courtesy of the Environmental Protection Agency. |
A key to understanding what drives innovation is that all technology feeds each other. When NASA is funded, so is medical technology, so is manufacturing, and myriad other industries by trickle-down effect. A prime example of this kind of inter-industry complementarianism is the state of Michigan, which is known not just throughout the United States but worldwide as the home of the automobile industry. Most people know that Henry Ford began manufacturing the first automobile for the masses, the Model T, in Detroit. But Detroit didn’t just spit out a car, fully formed, into the world. The Ford manufacturing plant also was responsible for the world’s first assembly line and mass-production system, which was in turn only able to exist because of the already-established machine tool and coach-building industry in the city. The road to the automobile can be traced all the way back to when Detroit was a small fur-trading post of New France in the early 1700s.
Built Tough
The medical device industry in Michigan, likewise, is helped by the existing automotive capabilities of the Ford legacy. In fact, when delving into the true history of life science in the state, it becomes clear that the industry goes back even further than the automobile industry. Michael Hagen, director of entrepreneurial services—biosciences at the Michigan Economic Development Corporation (MEDC), likes to refer to the life-science industry in the state, because when you look at that industry as a whole, it predates the automobile industry by about 50 years.
“I talk about the ‘life-science’ industry because that’s 140 years old,” Hegan told Medical Product Outsourcing. “When I talk about industry, I also say well, that’s great, we put the world on wheels, but Parke-Davis was founded in Detroit in 1866 and [in 1886], the Upjohn Company in Kalamazoo—the first dissolvable pill was invented by Dr. William Upjohn in 1884. So you can look at Michigan being an automobile industry, but we were really doing life sciences much longer than we’ve been producing automobiles. This rich tradition in successful entrepreneurship has given birth to some of the leading life science, medical instrument and supply companies in the world located right here in Michigan.”
Parke-Davis once was the world’s largest pharmaceutical company but now is a subsidiary of Pfizer Inc. The Upjohn Company also is a pharmaceutical company, but as Hegan pointed out, the manufacture of the world’s first dissolvable pill required specialty machinery and dyes, which now are used in all kinds of medical device manufacturing.
Despite Michigan currently being seventh-best in the nation for corporate taxation, it once was very low on the list. Pfizer was disgruntled for a long time about the tax structure in Ann Arbor, where it was located, and petitioned for a tax abatement, which it received—to the tune of $84.2 million over 20 years—in 2001. But it wasn’t good enough. Just seven years later in 2008, Pfizer left, leaving a gaping hole in the state’s life-science landscape and the economy of Ann Arbor. It seemed a nightmare of epic proportions to see Pfizer dump 3,000 jobs and abandon a $300 million facility in the U.S. economy’s worst financial year in decades, but out of the ashes rose a phoenix: Ann Arbor SPARK’s Michigan Life Science Innovation Center (MLSIC).
Ann Arbor SPARK started out as a Pfizer facility, but after Pfizer left, MEDC took it over and founded the MLSIC.
“When Pfizer left, they left a big hole in Ann Arbor’s economy, but left us a glut of talent,” explained Hagen. “We were able to take on this facility as a public-private partnership between the states, the counties, and local economic development. We were able to procure this building and decided to turn it into a high-tech incubator for life sciences, which includes medical devices. Today we have more than 24 companies here in the high-tech industries, from early-stage drug discovery to mid-stage medical device companies.”
Ann Arbor SPARK operates as a non-profit organization, and depends on donations, especially from businesses, to help support its mission to incubate new companies. One company to receive funding from the center is Plymouth-based Delphinus Medical Technologies Inc., which makes a full-breast ultrasound imaging device called SoftVue. Delphinus emerged from Wayne State University’s Barbara Ann Karmanos Cancer Institute.
SoftVue works by effectively differentiating between benign and malignant masses in breast tissue. It is designed to help eliminate false positives and reduce unnecessary biopsies. Reportedly, it also can accurately measure breast density, a known risk factor for developing breast cancer, as well as detect many early stages of cancer in women with dense breast tissue, which often is not picked up by mammography. SoftVue works by surrounding a breast submerged in warm water with an ultrasound ring that captures detailed, 3-D images with sound waves. The results are similar to an MRI, but the procedure takes only a few minutes and costs much less. The procedure was the inspiration for the company’s name, the Latin word for “dolphin.”
“What they’re doing is pretty incredible,” enthused Hagen, clearly passionate about the opportunities MLSIC offers small companies such as Delphinus. “They produce a medical device that is going to change breast examination for breast cancer. There has been a lot of negative press about how [breast examination] is performed, and now they have a different type of device that uses sonar. It’s an incredible company that is now placing these instruments in offices and hospitals to start doing their due diligence, their clinical trial, so to speak. It’s amazing. They have grown from just a few people sitting around a table at Karmanos to 20 people.”
What’s so “incredible” about the success of a company like Delphinus is how quickly it’s grown in such a short space of time, and that was made possible by the availability of the support system offered by MSLIC. The company was founded in 2010, but already it is seeking a second round of funding. “Our current investors are willing to put in a substantive portion of this round,” company CEO Bill Greenway told Ann Arbor SPARK in February.
In 2010, Delphinus won $8 million in venture capital (VC) in a round of funding led by Arboretum Ventures of Ann Arbor. The Michigan Economic Growth Authority awarded the company almost $800,000 in tax credits the same year, followed by $1.5 million more from the original VC consortium. The U.S. Internal Revenue Service then gave Delphinus a tax credit of $250,000 under the Qualifying Therapeutic Discovery Project program. In its current Series B round of funding, the company is looking for $17 million to put toward the commercialization of SoftVue, which at present is not cleared or approved for sale by the U.S. Food and Drug Administration (FDA). According to SPARK, Greenway expects to ramp up commercialization and sales of SoftVue by the end of this year. The first prototype of SoftVue is being used at the Karmanos Cancer Institute, and St. Mary’s Hospital at the University of Toronto is in line to receive the second one. This quick growth is possible when a company has the support of state government behind it, and Michigan makes that a priority.
“The medical device industry is one of Michigan’s best kept secrets and we need to let the world know about this growing industry here in our state, employing over 12,000 with acombined sales of over $4.8 billion dollars,” concluded Hagen. “The low cost of doing business in Michigan, our stable and educated workforce, one of the best tax climates in the country and access to markets internationally through our top-ranked airports makes Michigan a great place to grow or expand your business. In short,Michigan has the culture, people, technology, and support in place that position it as a key player in the dynamic medical device industry.”
Busy in the Beehive State
Strong state support is impressive in a state like Michigan that ranks ninth-highest for population size in the United States, with a population of almost 10 million. A state like Utah, which is only slightly smaller in geographical size than Michigan, has a much smaller population of just under 3 million—and this, said Mike O’Malley, marketing director for the Governor’s Office of Economic Development, brings a significant advantage to businesses, as the state’s small size makes its government more able to work closely with local companies. Utah ranks 34th in the nation for population size.
Utah’s medtech industry is young, but has been growing exponentially since 2001. The state has more than 600 life science companies with 26,800 employees in the life science industry, out of which 9,000 are in medical devices. Nationwide, between 2001 and 2010, sector growth was flat, partly affected by the economic crash of 2008. Utah, however, experienced 5.5 percent growth over the decade. “The state has shown healthy, consistent growth in all weathers,” said O’Malley.
The healthy medtech ecosystem in Utah is bolstered by several large companies that have chosen to either headquarter or establish significant operations there. Bard Access Systems Inc., a subsidiary of CR Bard Inc., is headquartered in the state’s capital of Salt Lake City. The company makes a range of vascular access devices. Becton Dickinson & Company has its Medical Systems–Infusion Therapy division located in Sandy City, which is in Salt Lake County. Edwards Lifesciences Corp., which makes heart valves and hemodynamic monitoring devices, has significant manufacturing operations in Draper, which straddles Salt Lake and Utah counties. Varian Medical Systems Inc. has its X-ray products headquarters in Salt Lake City. Maker of disposable instruments for interventional cardiology and radiology Merit Medical Systems Inc. has its global headquarters in South Jordan, a suburb of Salt Lake City. A pattern emerges: Most of the significant medical technology companies are highly concentrated around the state’s capital, which has created quite a hub in the north-central region of Utah.
It’s not a coincidence that cardio-centric medtech companies such as Edwards and CR Bard are attracted to the state, either. The University of Utah is the birthplace of the artificial heart, though that history is somewhat controversial. In the 1950s comedian and inventor Paul Winchell met Henry Heimlich, M.D., famous for inventing the Heimlich Maneuver, used to aid choking victims. After observing Heimlich performing surgery, Winchell came up with the idea to create “an artificial heart that he thought could help keep blood pumping through a difficult open-heart surgery procedure so that a patient might have a better chance of getting through it in dire circumstances.”1 With Heimlich’s assistance, Winchell designed an artificial heart and built a prototype, which was successfully used in a dog but not a human. He filed for a patent in 1956 and was awarded the patent in 1963. Later, Robert Jarvik, M.D.—who also has a master’s degree in medical engineering—started to develop a similar device at the University of Utah to be used in humans. Upon request, Winchell donated his patent to the institution, and Jarvik’s Jarvik-7 artificial heart device was implanted in a human, dentist Barney Clark, for the first time in 1982. The device was a pump made of plastic and titanium powered by compressed air delivered by a large external air compressor through two tubes that passed into the body via incisions in the abdomen. Clark survived the surgery for 112 days, while Winchell’s dog lived for just 90 minutes on his artificial heart.2
The University of Utah’s Cardiovascular Research and Training Institute (CVRTI) today employs physicians, bioengineers, physiologists, biochemists and computational modelers to study the electrical signals of normal and diseased hearts. Recruiting and retaining top talent from various fields depends heavily on the support the state and its institutions can offer. Besides the CVRTI, the University of Utah also has a high level of expertise in its bioengineering department, and the school’s Nano Institute of Utah is “world class,” according to O’Malley. The institution “has expertise not only in dry nano technology, but also wet nano technology—devices that can be implanted into the human body,” he explained.
Institutions such as those at the University of Utah are funded and supported by the Utah Science Technology and Research Initiative (USTAR). The state-funded organization was founded in 2006, and aims to create and commercialize innovative technologies in collaboration with the University of Utah and Utah State University. It is this kind of state government support that creates a close and warm relationship between lawmakers and industry workers, as O’Malley points out. “That’s the advantage of being a small state. From the governor’s office down, the state government is absolutely willing to work with businesses. We treat businesses as customers, and things move quickly because of our small size.”
For instance, there was a local medical manufacturing company—which will remain anonymous since the process is still ongoing—that was struggling with traffic flow from its manufacturing site. “Utah has been working directly with the company for the past several months, and is invested in getting that stop light to improve traffic flow, which will, in turn, make the company more efficient,” said O’Malley. Utah’s state government is willing to work intimately with a local business for a simple traffic light that would dramatically improve efficiency in and around its manufacturing operations. This, as O’Malley said, is the kind of thing small states are good at.
USTAR even funds Spiderman. Not the real Spiderman, but Randy Lewis, Ph.D., might be even cooler than the Marvel Comics superhero. Lewis’ work at Utah State University focuses on growing spider silk proteins in living goats’ milk. “An inch-thick rope of this material would be able to stop a jet fighter landing on an aircraft carrier,” said Lewis of the proteins he grows.3 These particular spider silk proteins can be used in artificial ligaments and tendons as well as for bullet proof vests and automobile airbags. Working alongside him is Irina Polejaeva, Ph.D., who USTAR and Utah State University managed to attract from ViaGen, an Austin, Texas-based livestock cloning and genomic company where she worked as vice president of research and development for eight years.
Besides leveraging its small size for the benefit of local industry, Utah also is unique in that it has the sixth most diverse economy in the United States, according to the University of Utah-developed Hachman index, which ranks how closely state economies mirror the diversity of the national economy. Historically, the state has had a strong mining industry that is still active today. Copper, gold, silver, molybdenum, zinc, lead, and beryllium, and fossil fuels including coal, petroleum, and natural gas continue to play a major role in Utah’s economy, especially in the eastern part of the state in counties such as Carbon, Emery, Grand, and Uintah. Proximity to raw materials always is a plus for any manufacturing industry, including medical manufacturing. Another big player in the state is aerospace engineering, which generates cutting-edge research in materials science including innovative metal alloys such as those used in orthopedic implants. This industry also innovates in extremely lightweight materials, which feeds Utah’s large outdoor sports industry, which always is looking for lighter, stronger materials for equipment such as skis and snowboards. Finally, medtech companies that choose to locate in Utah will have access to investment banking firm Goldman Sachs’ branch in Salt Lake City, its largest location outside of Manhattan.
Maryland, My Maryland
When it comes to inter-disciplinary synergy, other states would be hard-pressed to prove they have it better than Maryland in terms of proximity to governmental industry. While Maryland’s economy, like Utah’s, is very diverse, explained Steve Dubin, principal at SDA Ventures LLC in Columbia, Md., and board member of the Maryland Health Care Product Development Corporation, a supporting member of the Tech Council of Maryland (TCM), “one of its big concentrations is businesses that interact with the federal government in different ways. You’re close to the center of power in the country—Washington, D.C.—and all of the bodies that govern your business.” In fact, one of the most important entities to medical device companies in the United States is headquartered in the state: the FDA.
It’s not all roses, however. Though Maryland borders both D.C. and Virginia, cooperation between the clustered states is not as optimized as it could be.
“Sometimes you think the other [states are] a foreign country, you know,” said Dubin, who has lived in Maryland his whole life. “It’s a traffic issue to some extent. It’s kind of hard to go back and forth. If you’re in central Maryland towards the Baltimore area, to get to D.C. or Virginia, it’s not easy sometimes. Traffic impedes the cooperation.”
Better communication with D.C. is desirable because the lawmakers on Capitol Hill set the scene for a lot of what medical technology companies deal with in terms of import and export laws, taxes, and all manner of laws that affect the regulatory body of the FDA and the agency’s Center for Devices and Radiological Health. Getting in front of lawmakers physically makes an impact, and can make a big difference for medical technology industry advocacy. The TCM differentiates itself from similar bodies in other states by taking a serious interest in Maryland companies’ relationship with the federal government as well as the state government.
Maryland’s life-sciences industry is a huge player in the state. There are more than 500 companies that generate over $5 billion in revenues annually, and employ more than 30,000 people. That, in a state that is almost a fraction of the size, geographically, of Utah and Michigan, with a population of just under 5 million.
“The other big emerging industry in Maryland is cyber security and information technology,” said Dubin. TCM represents and supports biosciences companies and telecommunications, software, hardware and other advanced technologies companies. “There is some back and forth between those industries. A lot of medical devices are now computer assisted; they have chips embedded in them. So I think there are more interactions there.” However, Dubin said, the cross-pollination currently “is not as deep as one would hope,” but is improving in leaps and bounds.
Invest Maryland, which falls under Maryland’s Department of Business and Economic Development, works to fund companies at any stage of growth. It is a tax credit program that was granted $70 million by Maryland lawmakers during the 2011 general assembly, and is the largest venture investment initiative in the state’s history. “The government has had a big program on a biotech tax credit for a long time, and that keeps growing,” said Dubin. “I think it’s getting better and better. It’s not where we want to be ultimately, but you can’t change things overnight. I think the intent and the direction is very encouraging for businesses.”
Another key factor that brings and keeps a valuable, educated workforce to any region is just plain old good quality of life. While Michigan is slowly phasing out personal property tax and Utah boasts 14 world-class ski resorts and five large national parks, Maryland offers proximity to both the beach and the mountains. “I’m biased, of course,” laughed Dubin, waxing poetic on the virtues of his home state, “but I love it here, I’ve never thought about moving anywhere else. Yeah there are challenges sometimes—a lot of permitting hurdles—but on the other hand, we don’t have some of the environmental issues that some other states might have. You have to look at everything in a balanced way.”
Canada, Northern Utopia?
One of the most attractive factors about Canada, according to Andy Shaw, an international trade media consultant based in Toronto with expertise in the medical technology market, is just how much cheaper it is to get a device to market there. While the United States remains the largest medical device market in the world, the FDA’s regulations are still some of the most stringent.
Toronto boasts a ‘Boston-like complex of medical research and development.’ |
Shaw related an instance where he came into contact with a company based just outside Geneva, Switzerland. Biosensors International Ltd. made the first biological stent, coated with a biodegradable polymer coating that disseminates in the body after six to nine months. During a press conference, a company representative explained it had received the CE mark to market the device in the European Union, and would soon be bringing the device to Canada. However, the native Californian was adamant the device would not be brought to the United States. In Canada, the cost to bring the stent to market would be $3 million, while in the United States, it would run the company $400 million, according to company estimates.
“From a Canadian point of view—although the first thing we do as companies is to look south, because the United States is still the world’s largest medical technology market—there are significant hurdles to getting into that market, so there’s a fair bit of push to look to Europe and the rest of the world as potential markets,” said Shaw. Canada’s industry is very internationally- oriented, with some medtech companies boasting up to 98 percent international business. “We are pretty good exporters—we have to be, because we have a small population.”
Canada is in the middle of a high-tech industry overall. “For years we had a brain drain of our high-tech people, especially those coming out of the University of Waterloo,” said Shaw. “Now we’re experiencing a reverse. We’re experiencing graduates who have gone off and made their fortunes elsewhere and want to come home. That has something to do with lifestyle, particularly in the Toronto area, but we’re not experiencing the brain drain that we had before.”
The Society of Manufacturing Engineers, headquartered in Dearborn, Mich., with offices in Markham, Ontario, recently conducted a survey of the manufacturing industry in Canada. The results suggested that manufacturing sales there are rising in eight provinces, led by Ontario, Quebec and New Brunswick. One of the top concerns that emerged from the survey was the worry over the lack of an educated workforce—which, if Shaw is right, is changing, at least for the medtech industry.
Canada has a very low level of crime. According to the most recent available data, there are only 31 guns per 100 people in the country, compared with the United States, which has about 90 guns per 100 people.4 From Shaw’s perspective in Toronto, the multicultural atmosphere makes the country more attractive to graduates from Pakistan, India, or the European and African continent who “feel more comfortable here than in other countries.” In fact, Canada is the only country in the world with a department of multiculturalism at a federal level.
“Agencies such as the National Research Council in Ottawa offer both money and technical help in your neighborhood for startups and small companies,” said Shaw. “There’s also a wonderful federally-funded program called Canada Health Infoway (CHI) which is charged, in simple terms, with creating a national electronic health record for all Canadians. CHI has a budget of about $4.9 billion (U.S.), and what they’ve done a lot of across the country is to put seed money into health care organizations that are sharing diagnostic imaging. So thanks to that federal money we will eventually have a set up whereby if you break your leg skiing in Whistler, they’ll have your records from Toronto at the hospital bedside. That doesn’t happen yet, but that’s where it’s going and will happen.”
CHI just awarded a grant of $5.9 million (U.S.) to the Sunnybrook Hospital in Toronto to develop an electronic medical record system for its ambulatory patients.
Medtech is mainly clustered around three hotspots in Canada: Ottawa, the nation’s capital, and the Ottawa Valley, which refers to itself as the “silicon valley of the north”; Toronto, which has a “Boston-like complex of medical research and development,” as Shaw describes it, around Toronto General Hospital, Toronto Western Hospital, Princess Margaret Cancer Centre and Toronto Rehabilitation Institute which all make up the University Health Network; and the twin cities of Kitchener and Waterloo, which is where RIM Ltd., the maker of Blackberry cell phones, is located. True to the theme of technology feeding technology, Ottawa’s “silicon valley” was born when two British engineers founded Mitel, a business communications and software company, there in 1973. Similarly, RIM is what kick-started the high-tech and then medtech cluster in Kitchener-Waterloo.
References:
- http://web.mit.edu/invent/iow/winchell.html
- http://www.discoveriesinmedicine.com/Apg-Ban/Artificial-Heart.html
- http://www.guardian.co.uk/world/2000/may/20/martinkettle
- Small Arms Survey 2007, by the Graduate Institute of International Studies, Geneva, Switzerland.