Preserving a Midwest Medtech Hub

Nancy Crotti

The Minneapolis–St. Paul medical device industry thrives off robust manufacturing suppliers and skilled workers. But it needs even more talent—as well as cash—to continue.

Jay Miller loved living in Silicon Valley a few years back, but he’d much rather work in the Twin Cities.

Miller is the president and CEO of IMRIS Inc., which itself relocated from Winnipeg, Canada to Minnetonka, MN, about a year ago. The company, which makes surgical suites with MRI and CT scanners, made the move because of the larger and more experienced pool of job candidates. Other reasons include a less expensive supply chain—another reason Miller prefers Minneapolis–St. Paul over either Canada or other U.S. medical device hubs.

The Twin Cities are arguably not as “sexy” as the other two major U.S. medical device hubs in California or Massachusetts. But what Minneapolis–St. Paul lacks in pizzazz, it makes up for in a dense cluster of medtech companies, and all of the talent and supply manufacturers that go with it.

The region, though, is also at a crossroads—with even more talent, not to mention money, needed to preserve one of the United State’s great medical device industry hubs.

Refresh your medical device industry knowledge at MD&M Minneapolis, October 29-30, 2014.
Centered around the Twin Cities, Minnesota's history in medtech stretches back more than a half century. Minneapolis image courtesy of Wikipedia.

What Makes Minneapolis–St. Paul Great

Minnesota’s history in research, development, and manufacturing of medical devices dates back to 1949 and includes a number of significant medical “firsts” including the first implantable pacemaker, as we reported last year.

It is also worth noting that both Minnesota and Massachusetts have a greater density of medtech manufacturers than California, added author Bill Betten, vice president of business solutions for Logic PD, a global medtech design and development company. Wisconsin, particularly Milwaukee, further strengthen the Upper Midwest’s standing.

The Twin Cities cluster is tightly focused geographically. It includes such giants as Medtronic and St. Jude Medical. Boston Scientific and Covidien both have a strong presence in the region. 3M Co. is also a major local player in the industry.

Even after Medtronic’s planned $43 billion merger with Covidien, and subsequent headquarters move to Ireland, it will still be run operationally out of Fridley.

Ask Miller why Minneapolis–St. Paul is a better fit, and he’ll cite the tight-knit medtech community, in which companies help each other. Their employees socialize together and with ancillary professionals such as lawyers and bankers, he says.

Minneapolis–St. Paul also has a strong trade association and industry booster in LifeScience Alley, according to Miller. “Working with them has given this business dramatically more visibility in the market in general.”

While Massachusetts has a strong medtech trade organization in MassMEDIC, there is no comparable organization like it in California.

The strength of the Twin Cities’ medtech community—the potential to network and secure business partners, expertise, mentors and funding—is the major selling point for the region, said LifeScience Alley spokesperson Ryan Baird.

“Once we bring them to town and we start telling them who’s here, … they start to realize the connections they can make in town,” Baird said. “It’s a very, very easy and compelling argument.”

The state Department of Employment and Economic Development works closely with the industry, as does the University of Minnesota, and the state’s public and private four-year and two-year colleges.

Large law firms in Minneapolis and St. Paul have developed IP departments to assist with regulatory issues, and the labor force has a strong work ethic, according to industry insiders.

The Manufacturing Advantage

The Twin Cities also have a strong medtech supplier base supporting growth.

Minnetronix, which primarily makes cardiovascular and surgical devices, has moved to larger quarters twice since its founding 18 years ago, according to co-founder and chief technical officer Dirk Smith. Smith counts the proximity of suppliers as a big plus.

“Our customers expect flexibility from us, and it’s important for our suppliers to operate in that environment,” he said. “The key to that is really close communications and establishing a relationship with our suppliers.”

Minnesota’s manufacturing sector, including medtech, is “robust,” according to Bob Kill, president and CEO of Enterprise Minnesota, a manufacturing consulting outfit.

“Once you prove you’re adept at precision parts with unique coatings and other aspects, there’s a lot of opportunities,” Kill said. “I wouldn’t say that the number continues to grow, but the market continues to be very vibrant.”

Minnesota’s medtech companies and allied service providers depend on one another in addition to acting as partners, said Todd Anderson, vice president of sales and marketing for IRD Glass, a glass optics and ceramics design and manufacturing company headquartered in Litchfield, MN. Like many other Minnesota companies, IRD does not rely solely on the medtech industry, but its medtech customer base has expanded to more than 53 since 1994, according to Ron Antos, an IRD sales engineer and project liaison.

“After California, I would say that Minnesota is probably number two,” Antos said. “However you want to look at the bio business, the components are here, including manufacturing."

Finding the Talent

Not everything is coming up roses in Minnesota, however. The state’s medtech manufacturers are struggling to find well-trained workers.

California ranked first in 2012 (the latest data available) with 64,000 medtech workers compared with Minnesota’s nearly 29,000. Massachusetts ranked seventh at 15,528, according to the Minnesota Department of Employment and Economic Development (DEED).

Minnesotans are not standing still while jobs sit vacant, however. DEED has a matching grant program, the Minnesota Job Skills Partnership, which enables companies to engage four-year and two-year state colleges to train workers for specific needs.

For example, North Hennepin Community College won a $230,000 grant in June to help the non-native-English-speaking employees of AdvancedCath (Eden Prairie, MN) to improve math and writing skills, according to an award document shared by DEED.

AdvancedCath designs and manufactures medtech products for other companies. It is contributing $385,781 to the education and training program, and the college will kick in $27,042, the document noted.

Even giant Medtronic takes advantage of the grant program. With Hennepin Technical College, Medtronic is developing a curriculum to educate 359 employees at two Minnesota plants to better communicate with auditors. The job skills programawarded the college $226,089. Medtronic will contribute $397,778, and the college will provide $9,177, a separate DEED document said.

A private technical college, the Dunwoody Institute in Minneapolis, receives 400 inquiries from medtech companies for the 40 machinist and manufacturing students it graduates every year, said Frank Jaskulke, director of membership for LifeScience Alley.

“Their main manufacturing program is a two-year program,” he said. “In the second semester of their first year, they start losing students because companies start hiring them out.”

Finding the Money

Besides trying to preserve the supply of talent, there’s also the issue of money for the Twin Cities, which lag behind other major U.S. medtech hubs when it comes to venture capital investment.

Minnesota medical device companies received $160 million in venture capital in 2013, according to the MoneyTree Report, compiled by Thomson Reuters for PricewaterhouseCoopers and the National Venture Capital Association. It was $581 million in Silicon Valley, $383 million in Boston, and $249 million in Irvine/Orange County, CA.

Angel investors, however, have been popping up to fill Minnesota’s post-recession VC gap, according to Jaskulke.

“On the medical device side, we’ve seen a dramatic increase in angel investment and corporate investment,” Jasulke said.

Member companies headquartered in other states and countries have been investing in Minnesota’s medtech industry. Last year was the best for investment in the past five or six years, said Jasulke, who believes 2014 will top it.

Data gathered for a LifeScience Alley report revised in August “indicates that companies are finding creative sources of capital and that new company formation and funding is increasing.” Last year, 92 Minnesota life science companies raised approximately $332 million in equity, $117 million more than in 2012, just exceeding the level last seen in 2009.

A 2013 Wall Street Journal article quoted executives at Medtronic, Boston Scientific and St. Jude Medical as being interested in pursuing deals with companies in earlier stages of development while venture capitalists focus on later-stage deals.

Still, Minnesota’s public medtech investment pales to Massachusetts, which in 2008 launched The Massachusetts Life Sciences Initiative, administered by the Massachusetts Life Sciences Center (MSLC). It reached its halfway point last summer and has, as of MSLC's Fiscal Year 2013 Annual Report, directly invested or committed almost $468 million. This has attracted more than $1.2 billion in additional third-party investments.

The one silver lining in Minnesota with public funds for medtech is indirect, and involves the state’s plans to spend $455 million to support infrastructure around the Mayo Clinic—more than 80 miles to the southeast in Rochester, MN.

Creating Innovation

On the research side, the University of Minnesota opened its Medical Devices Center in 2008, according to founder Arthur Erdman, a professor of mechanical engineering. The center moved to larger quarters last year and took with it $2 million worth of equipment and supplies donated by the industry.

“Companies recognize that the more equipment we have there, the better trained future employees will be,” Erdman said. “This is part of the glue and part of the ecosystem that’s important here.”

University of Minnesota research fellows have generated 120 invention disclosures since 2008. The university also has a manufacturing operations management program that trains medtech managers. Members of Stanford’s medical and engineering faculty have authored more than 250 medical device patents, the university website said.

Although the Medical Designs Center was initially modeled after Stanford’s program, Erdman said the engineering and medical faculty regularly customizes it to Minnesota’s companies.

“We’re a technology hotspot in the middle of agriculture,” Erdman said. “I think that makes us pretty special and also in a situation where we’re needing to build and work together. It’s an industry that has layers and layers of companies that you need, but you don’t have to go elsewhere.”

This article written by MPMN contributor Nancy Crotti and MPMN senior editor Chris Newmarker.