Hole in manufacturing: State has many companies, few dialed in to devices

Manufacturing in Michigan has good news and bad news for medical device companies.

The state might have a well-established manufacturing base for sourcing metal and plastics parts or even finding a contract manufacturer to take control of the whole process.

But the regulatory environment, different quality control systems and investment in resources like clean rooms scares off some traditional tool and die shops and plastic molders.

“The fact that we’ve got so much manufacturing horsepower is certainly additive, in terms of that we can do a lot in medical devices. I always tell people, ‘We’re in the Midwest. We make things,’ ” said Andy McColm, head of Cleveland-based Early Stage Partners’ Ann Arbor office.

While challenging, finding manufacturers isn’t an insurmountable problem, said device makers and their investors. Getting something made outside the state is an option.

“In this day and age, it doesn’t matter. You could get a part from the other side of the world, and it’ll be here in three days,” said Kalyan Handique, CEO of DeNovo Sciences Inc. in Plymouth Township.

Although he would have preferred to keep things local, Tim Fischell, M.D., CEO of Kalamazoo-based Ablative Solutions Inc., had to get a California company to make a stent positioning device with gold-plated Nitinol legs for one of his previous companies, Ostial Solutions LLC in Kalamazoo.

There’s a benefit to having suppliers within driving distance, said Christine Gibbons, president of HistoSonics Inc. in Ann Arbor.

“But the luxury of having suppliers in your backyard … that’s not the reality of today’s global backyard,” she said.

Aspen Surgical Products Inc. in Caledonia near Grand Rapids had designed, developed and made the first commercial devices but backed out after Aspen was sold to RoundTable Healthcare Partners LP in 2006.

New management deemed the product too challenging to make, Fischell said. He ended up finding Nitinol Development Corp., in Fremont, Calif.

Fischell said the change nearly ruined the company and illustrates the kind of hole Michigan has in its medical device capabilities.

“It’s a great product, and it could be manufactured in Grand Rapids right now,” he said. “That’s one place where we need an increase in expertise, technology and investment.”

Dan Bowen, the founder and head of Aspen Surgical prior to the sale, said the new owners didn’t want parts of Aspen that weren’t central to the business. “When it came time to do the contract manufacturing, Aspen didn’t want to do it (after I left the company),” he said.

There might be more contract manufacturers around the state than it seems, Bowen said. They can be hard to find because they keep their heads down. “They’re here.” (See Page 19 for a sampling of companies open for medical device business.)

Pioneer Surgical Technology Inc., now RTI Surgical Inc., found a straightforward way around this problem beginning with its founding way up north in Marquette in 1992: vertical integration. Everything is done in-house, from design through manufacturing.

“Specialized medical device manufacturing was limited in this area,” said Fred Taccolini, chief compliance officer.

Plenty of Michigan manufacturers are missing out on a solid line of business, said David Brophy, director of the Center for Venture Capital and Private Equity Finance at the University of Michigan and founder of the Michigan Growth Capital Symposium.

“That’s an old disease in Michigan. They’d rather make cars,” Brophy said. “If you’re not on your toes enough to recognize opportunities and do something about it, it’s your own problem. I’ve come across a lot of guys who spend money to modernize and went in a different direction and were glad they did.”

Mario Sciberras will take the rigors of the medical device world over auto any day.

“Automotive is really difficult to work with,” said the president of Saline Lectronics Inc. in Saline. The company designs and builds electronic assemblies for medical device companies, including HistoSonics and Accuri Cytometers.

Sciberras moved the company away from automotive when he bought the predecessor company in 2002, preferring U.S. Food and Drug Administration regulations and ISO 13485:2003 quality certification requirements over carmaker cost pressures and automotive market cycles.

But it’s not a side track to be taken lightly by any shop with a drill press.

“Our industry is not for the faint-hearted, mostly for the fact that it’s highly regulated,” said Stephen Rapundalo, head of MichBio, an industry association in Ann Arbor. “Suppliers have to get past major hurdles at some expense just to be a medical device supplier.”

Oct. 13, 2013 | Crain’s Detroit Business – New Michigan Deal Supplement