Like virtually every other sector, Michigan’s life sciences industry faces a key obstacle in trying to attract and retain talent, many of whom are leaving for opportunities out of state.
However, Michigan’s industry is persevering as capital continues to flow and innovation from higher education and entrepreneurs holds steady.
That’s according to a panel of experts MiBiz convened for an executive roundtable discussion sponsored by Kalamazoo-based Keystone Solutions Group.
The panel featured:
- Rob Ball, CEO of Shoulder Innovations Inc., a Grand Rapids-based portfolio company of venture capital fund Genesis Innovation Group;
- Jill Bland, managing partner at Kalamazoo-based economic development organization Southwest Michigan First;
- Jim Medsker, president at Keystone Solutions Group, a contract manufacturer of medical devices; and
- Dr. Stephen Rapundalo, president and CEO of industry trade group MichBio.
Here are some highlights from the conversation:
How would you characterize the state of Michigan’s life sciences industry more than two years into the pandemic?
BLAND: From my vantage point, it has gone very well. Obviously, the products that are coming out of the Pfizer global supply facility have really put our region on the radar, nationally as well as globally. The most recent announcement on Paxlovid also coming out of the Kalamazoo facility has really elevated that quite a bit. It’s kind of an interesting scenario because they had started the projects to put in the new injectable facilities … long before COVID was even on the horizon. But the investment and the intent that they had is part of the reason that they were able to do what they did at this facility, as well as obviously the talent at the facility. By the time we’re done with both of those investments, they will have added over 700 employees to this facility. So, pretty significant.
We have (also) seen continued growth in the (medical device) space. It’s transitioned a bit with going through the process to figure out the remote work strategy and what that’s going to look like with R&D and some of those other things that you can do at home. But it’s all very positive for us.
BALL: I have a much earlier stage perspective on the subject. For me, you could probably characterize it as: What could have, should have, might have been an absolute catastrophe to the medical device space, particularly in southern Michigan … just has not happened, honestly. There has had to be some rationalizations among various portfolios, but by and large, the companies that were thriving pre-pandemic have continued to thrive and have been able to, kind of, achieve equity fundraising that was necessary to drive growth.
We raised our biggest round of capital right smack in the middle (of the pandemic). And the comment about work from home adjustments, man, those happened fast. I’d never raised capital without meeting someone before, but I raised a whole bunch without meeting anybody face to face. That’s something that’s changed very much for the positive, and I think it bodes well for Michigan because it has eliminated some barriers as it relates to geography. Not all of them, but some of them.
MEDSKER: It’s been a bit schizophrenic, actually. What I mean by that is certain markets, especially in 2020, exploded. Sample collection products, diagnostic products, that type of thing. Keystone was in the right place at the right time, so we were able to capitalize on that peak. The challenge is the follow-on business and durability of that business as this standard supply chain caught up. We are lean and mean. We were able to respond to a pandemic crisis, whereas the big players were not as agile. But the big players caught up, so we did see havoc. We made hay while the sun shined, but that kind of dropped off.
The other challenging part is many of the products that we produce and develop are actually used in elective procedures. Obviously, we all know how electives have been. Now they’re picking back up. So in some cases we’re drinking from a fire hose and other things are slower. It’s been an interesting dynamic for us the last couple of years.
RAPUNDALO: As Jim pointed out, I would say there was, and continues to be, plenty of volatility and challenges that companies have really struggled to deal with. I think most companies were and are busier than they ever have been, but they’ve had to address all sorts of issues that perhaps were festering or slowly evolving and came to a crisis point because of the pandemic and continued to have to deal with those, not the least of which are workforce and costs and supply chain and so forth.
How is the flow of capital into the industry going these days?
BALL: A year ago, all stages of companies were finding it relatively easy to, at least, identify the kind of investors that were interested, at least hearing the pitch and engaging in a conversation. I think that’s become a little more stratified in the sense that there’s more stress in the later stage environment than there is in the early stage environment. There’s this pretty healthy and robust availability of capital in relatively small check sizes — less than $5 million. You see many, many more companies taking smaller checks from a larger number of sources to put together financing. In that environment, you can create a lot more competition and a lot more interest and momentum, frankly. I think early stage companies will continue to have a robust experience. Later stage is much more difficult right now.
Where’s the innovation coming from today? Are the university labs spinning out enough? Is it individuals developing the next great idea? Has the origin of ideas changed?
BALL: I haven’t seen that shift myself. We see a lot of circumstances where perhaps an innovation began or a technology began in a lab and it’s now transitioned out or in the process of transitioning out to a business leader, seeking to innovate a business model around it. But I think we still see many private individuals and experts in the industry finding new pathways.
MEDSKER: I would second that. We serve a lot of startups, entrepreneurs and early-stage companies. If you look at the pie chart of things that we’re quoting or working on right now that are brand new, it is a healthy mix of tech transfer-type projects from universities or health care groups or single entrepreneurs. Much like Rob, I don’t see that mix has changed for us. We’re still getting a good influx from all those channels.
RAPUNDALO: The only thing that I would add — that I’m just starting to see early signs of — is anecdotally some of the health systems are pulling back from their innovation initiatives and efforts because their bottom lines are hurting and that’s a cost center that has to be contended with.
BLAND: As we watch Stryker and some of these other companies: They’re looking for those companies that are right next up so that a lot of their growth is coming through the acquisition mode of those later stage, mid-size, companies. It’s kind of an interesting time if you’re right in that middle space, because that’s how those big companies are growing.
Is the industry feeling the same talent crunch that has affected so many other sectors?
BALL: It’s the biggest challenge. I just don’t understand why this is so hard. There’s got to be an engineer in an automotive casting facility that understands quality systems and would love to get into medical devices, and it’s just not happening. It’s just very challenging. All of our suppliers express risk as it relates to the ability to hire employees and satisfy the capacity that we need for growth. It’s the No. 1 issue.
RAPUNDALO: And that’s universal — I don’t care how big or small you are. It is an enormous challenge. Again, this is where the state has lagged relative to others. And I’m not talking about the big hub areas like California and Massachusetts. I’m talking about the Georgias and the Virginias and the Utahs, the Colorados. … We’re a top 10 supplier of STEM talent, but they all walk out the door.
BLAND: Kalamazoo is a little bit unique. We just went through a process for about the last five years, looking at our career tech education programs. Stryker, Pfizer, Zoetis, some of the mid-size pharma companies and med device companies came to the table to talk about that K-12 pipeline, and how we need to change our system to create that pathway. How do we create that pipeline that then meshes well into the university system for those that need that? They’ve been at the table and we’re very fortunate.
MEDSKER: The dynamic I see is it is very tough to even get production folks. Let me tell you: We use every recruiting tool you can list, every staffing firm, every temp agency, you name it. On the production side, we actually get a decent flow of candidates, but they don’t last, which is fascinating when you’re talking to a person who grew up on a dairy farm, used to bale hay and worked 18 hours a day. We’ve got this cushy, environmentally controlled factory that’s quiet and clean and it’s very, very light work. And it’s like a revolving door.
What’s the next frontier for this industry?
MEDSKER: In the device world, what you see is a lot of advancements in sensor technology that have made sensors a lot smaller and more readily available and affordable. Apple has created this whole plethora of wearable devices and devices that plug into your iPhone. You couple that with virtual health care and it all sort of converges in this fascinating thing that’s going on. Eventually, these wearables and iPhone plug-ins and all these things are going to be ubiquitous. I think that’s a trend that’s happening now and it’s going to increase exponentially.
BALL: There’s interest in devices that do things or enable things like that, but devices that enable those interactions cause step-function shifts in the way clinical practice happens, which is going to lead to the Earth shifting in terms of the way physicians practice or interact with their patients, and thus the way patients arrive at receiving health care, pay for health care, are reimbursed for health care. That entire environment is ripe for change, significant change in the relatively near future. The implications that they can have on the patient interaction are so dramatic that the business model begins to be contemplated more as a clinical model, not as a selling-the-device model.
BLAND: Would you say there’s going to be more crossover between drugs and med devices with the drug delivery system? For example, the diabetes market where you attach something to your body and it can read your sugar levels and know when to inject. Do you see more of that coming?
BALL: 100 percent. Think about respiratory health, for example. There are enormous resources going into various pharmaceuticals around respiratory health broadly. The problem in respiratory health is the diagnostic sensitivity is very, very low. Your ability to detect whether your molecule is having a positive or negative impact for the patient is very challenged. From a pharmaceutical company’s perspective, if they can prove that their pharmaceutical is actually having an impact and then on an ongoing basis, continue to prove to the patient or to the health care provider that there’s a positive impact, it’s an extremely powerful marketing element that doesn’t exist today. I think we are going to see many more pharmaceutical innovations being coupled with a device that proves or monitors the effectiveness of the pharmaceutical.