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The Swiss Medical Technology Industry 2010 Report – "MedTech at the Crossroads"
2
On the mind of the SMTI CEO community
"The MedTech business of non-reimbursed products has started to reach a plateau in traditional markets. The business is now cyclical and growth is not endless."
"The crisis has demanded to set priorities and to constantly remain focused on optimizing these priorities."
"Our business model will change – We need to grow from a simple box-mover to a full solution provider."
"IP protection and proprietary systems have become essential to secure market shares."
"Market access management is key for growth – start-ups should engage in out-licensing deals to Big MedTech."
"The MedTech pioneer era is over, the industry is now mature and competition is global."
“Pace of innovation and changes in health care system are faster than a decade ago.”
Source: SMTI 2010, Advisory Board
3
SMTI 2010 – At the crossroads to adapt current business models
In recent years, this report helped to provide better insights on the importance of the Swiss Medical Devices Industry (SMTI). We havemonitored this industry closely since 2005, have seen it mature and are now in a position to derive first lessons from a vast data set.Thus, we are now able to analyse trends that may shape SMTIs mid- to long-term future. This report intends to provide a generaloutlook on the industry. However, it is highly heterogeneous and therefore our conclusions may vary based on a company's productportfolio and economic situation.
As already identified in Spring 2009, mainly manufacturers of non-reimbursed products and suppliers with a high proportion of non-healthcare clients were strongly exposed to the downturn. As external pressures grew, other players were exposed to the effects of theeconomic crisis. High price pressure in export healthcare markets, adverse currency effects of the Euro and US-Dollar against the SwissFranc, reduced investments by the Swiss cantons for hospital equipment, or a declining demand in non-reimbursed products are a fewexamples. Paired with increased pressure by payers and governments in major markets towards cost effectiveness and treatmentoutcome, the Life Sciences industry is now faced with a paradigm shift in its future business model. Today, the "crisis resistance" dueto cash-rich reimbursement systems may be history as healthcare markets are changing rapidly.
Therefore, cost consciousness continues to influence many management actions. The management of SMTI companies increasinglyfind themselves at the crossroads, refocusing their R&D spending. Today, manufacturers either drive full cutting-edge networkinnovations or they focus on incremental innovation.
The first group are "network innovators". Their strengths reside in a cross-industries (e.g. MedTech/pharmaceutical/biotech/IT) as well ascross-academia (e.g. local and international universities and hospitals) collaboration network allowing radical innovation and obtainingmarket premium prices for the novel niche products in major markets.
The second group are "renovators". They focus less on innovation, but rather drive bundling (device/technology, software, single-usematerials, local maintenance/service, and/or training) or incremental product innovations (e.g. line-extensions). This secures their matureproduct portfolio in mature markets. Additionally, renovators increasingly shift their attention to emerging economies to extend the life-cycle of their products, catering to a growing and quality conscious middle class.
Peter Biedermann, Dr. Patrick Dümmler, Beatus HofrichterPublisher and authors of the SMTI 2010 Report August 2010
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Contents Page
Management Summary 5
A. State of the MedTech Industry 9
B. Trends and Challenges 24
C. Strategic Actions 29
D. Winning through Innovation 34
E. Collaboration and Bundling 44
F. International Opportunities and Threats 51
G. International Positioning 59
H. Outlook 65
Appendix 1: Additional Data 69
Abbreviations 70
Appendix 2: SMTI Knowledge Base 88
5
Management Summary
6
Management summary (1/2)
Source: SMTI 2010
• The SMTI consists of 720 - 740 suppliers and manufacturers, as well as 630 - 660 traders and distributors and service
providers
• The manufacturing base is highly diversified across all product categories, many companies are among international
thought and market leaders
• The SMTI value chain is well established and is facilitated by a vast network of academia, specialized service providers,
suppliers and institutions, forming a national MedTech cluster
• The Swiss MedTech cluster is highly attractive for leading international MedTech companies, not only for headquarter
functions but also for development and manufacturing
• Total gross revenue is CHF 22.9bn, own value added is CHF 11.1bn, representing 2.0% of the Swiss GDP
• The turnover per employee is about CHF 460,000; manufacturers realize 81% of their turnover with medical devices
• The expected SMTI growth rate is 10% and 12% for 2010 and 2011 respectively; this is significantly above expected
growth rates for the Life Sciences industry (6.5%) and Swiss GDP (1.9%)
• Above 75% of SMTI CEOs are still focusing on crisis management activities
• However, engaging in the right strategic actions will drive above-average growth, i.e. strengthening R&D know-how,
establishing new production/service facilities, and engaging in new business models
• Today around 49,000 employees work for the SMTI, this equals 1.4% of the Swiss workforce
• 75% of SMTI companies have less than 50 employees, building a strong innovation basis
• The total number of employees during the last two years increased by 10%
• In the next two years SMTI companies expect further growth in headcount; the authors anticipate approximately 55,000
employees by 2013
• Especially micro and small companies hire predominantly in Switzerland while large companies also expand their
workforce abroad
CHF
MANAGEMENT SUMMARY
This report was written in the summer of 2010 involving 252 companies in the field of medical devices in Switzerland. It makes use of the database of the Medical Cluster, Advisory Board input, additional expert interviews and desk research
7
Management summary (2/2)
Source: SMTI 2010
• The average rate of export is 63%; manufacturers and suppliers export 78% and 53% of products, respectively
• For more than 70% of SMTI companies, registration and introduction of new products are perceived as less difficult in
Europe than in other markets
• Compared to 2008 higher growth in 2010 is expected from Switzerland, the EU and the BRIC countries
• International opportunities will continue to drive SMTI growth; export-oriented manufacturers expect a growth rate of 18%
• The SMTI is well positioned for the future
• Two megatrends influence the industry
– the triple challenge of price and cost pressures and intensifying competition
– the clinical evidence requirements for cost-benefit of treatment
• The focus on profitability to meet current challenges is at the cost of potentially losing the competitive innovative edge
• Larger companies may review their current business models, the R&D strategy as well as offerings to improve future
growth potential
• The authors anticipate increased global consolidation activities impacting SMTI companies as well
• 10.6% of the turnover is invested into research and development (R&D)1)
• Approximately 25% of the overall SMTI product portfolio was developed in the last three years
• Shortening of the innovation cycle is of significant relevance especially to medium and large sized companies
• Focusing on R&D and fostering a young product portfolio leads to an additional 6% of above-average growth expectation
• However, today companies need to spend more on R&D to generate strong growth rates
• More than 50% of SMTI companies are engaged in network innovation across industry and academia functions
• Collaboration along the value chain is excessive between suppliers and manufacturers, especially large companies tend to
renovate and bundle their current product portfolio
• Many companies focus on collaboration for applied research, quality control and to a lesser extent, on post-launch activities
MANAGEMENT SUMMARY
1) The average R&D expenditure is not weighted to turnover, thus is may be skewed upwards by the large number of small companies in our sample
8
The house of MedTech by 2012 – Our working hypotheses1)
SMTI
MARKET VIEWPRODUCT VIEW
COLLABORATION &
BUNDLINGINNOVATION POSITIONING
INTERNATIONALI-
SATION
Source: SMTI 2010
• Above-average growth
expectations due to an
innovative, young product
portfolio or best in class
products
• Higher cost pressure leads
to a shift from radical
innovation towards
incremental innovation in
established/mature
segments
• Companies that focus on
network innovation can
expect above-average
growth
• Price pressure leads
companies to push
bundled offerings in order
to maintain their turnover
level and market share
• Companies that focus on
bundling tend to reduce
their R&D expenditures
• A bundling strategy
favours collaboration within
the same value chain for
incremental innovation
• Demand of buyers will
drive “solutions”, forcing
companies to change their
business models
• Smaller companies lack
export strength due to
shortage of know-how and
commercial co-operations
• Sound, long-term patient
outcome data will ensure
positive sales impact in
mature markets
• Improved market
orientation becomes a
priority due to an increase
of competitiveness
amongst providers and
pressures from payers
• Growth in international
markets correlates with
innovation
• Success in emerging
economies is highly
correlated to strong
regulatory affairs
capabilities
• Healthcare system
changes and arising
opportunities propel export
levels of suppliers and
manufactures
1) Are addressed in chapters D-G
MANAGEMENT SUMMARY
9
A. State of the MedTech Industry
10
Switzerland is among the global hotspots for MedTech
Exports
2,8
1,7
1,4
5,0
GDP
0,5
0,6
0,7
1,9
Employment
0,2
0,2
0,2
0,3
1,1
0,5
USA
EU
UK
Germany
Switzerland • Switzerland possesses an active medical
technology industry that can rely on a strong
network of related companies and institutions
that create an ideal breeding ground for the
industry (cluster)
• Compared to other countries the relative
domestic share of the SMTI is significantly higher
• Remarkable – and in line with several other
Swiss industries – is the high relative share of
exports reflecting the international strength of
Swiss MedTech products
Source: SMTI 2010, Destatis, Eucomed, Eurostat, UK National Statistics
1) Data from 2008 or, where not available, from 2007
n.a.
INTERNATIONAL MEDTECH FOCUS [% of respective total]1) COMMENTS
A STATE OF THE MEDTECH INDUSTRY
11Source: SMTI 2010, Annual reports, Companies press offices, Factiva, Oanda
Switzerland is highly attractive for international companies –Top 10 companies employ around ¼ of SMTI employees1)
No. Company Sub-section of marketHead-
quarters
Employees in
Switzerland
Sales
[CHFm]
1 Year sales
growth
[%]
R&D
expenses
[CHFm]
R&D/sales
[%]
Sales/
employee
[CHFk]3)
1 Synthes Orthopedics USA 2'900 3'523 6 175 5 329
2Roche
DiagnosticsIn-vitro diagnostics CH 1'750 10'055 4 987 10 387
3J&J
Medical2) Orthopedics USA 1'400 24'492 2 1'830 7 556
4 Zimmer Orthopedics USA 1'150 4'250 -1 213 5 518
5 Sonova Hearing systems CH 1'030 1'500 20 87 6 221
6 Ypsomed Injection systems CH 1'000 254 -8 32 12 212
7 MedtronicActive and passive implants,
vascular diseases and diabetesUSA 900 15'151 8 1'406 9 399
8 B. Braun Orthopedics, hospital aids DE 840 5'992 6 207 3 152
9 Straumann Dental implants CH 800 736 5 39 5 339
10 Stryker Orthopedics USA 600 6'977 0 349 5 375
∑ 12'020 Ø 4 Ø 7
1) Approximately, manufacturers only, figures for reporting year 2009/10, exchange rates: USD/CHF: 1.03, EUR/CHF: 1.49 on 31.12.20091) J&J Medical: Numbers are the total for orthopaedics, surgery, cardiology and diagnostics
A STATE OF THE MEDTECH INDUSTRY
12
Switzerland is a strong medical technology cluster –Several organizations and institutions support the industry
Source: SMTI 2010, relief swisstopo
• Switzerland has a strong
medical technology network,
supported by several
organisations and institutions
• Regional support
organisations are e.g.
– Basel Area
– Berne Capital Area
– Bio Alps
– Biopolo Ticino
– Greater Zurich Area
• National institutions are e.g.
– CTI/KTI
– FASMED
– Medical Cluster
– Medtech Switzerland
– Osec
– SIX Swiss Exchange
– Swiss Life Science
Marketing Alliance
COMMENTS
BioAlps
Berne Capital
Area
Basel AreaGreater Zurich
Area
Biopolo
Ticino
Location of suppliers
Location of manufacturers
A STATE OF THE MEDTECH INDUSTRY
13
• Continuous investments in up-to-date medical
infrastructure leads to rising healthcare
expenditures – during the last ten years by
nearly 50%
• The CAGR of healthcare expenditures of
4.0% is significantly higher than the
respective GDP growth of 1.1%
The SMTI has a strong home market – Investments in high-class medical infrastructure meets patients demands
Source: SMTI 2010, BAG, BfS, Healthcare Monitor 2009, KOF
CAGR
4,0%
2010F1)
63,3
2009E
61,0
2008E1)
58,1
2007
55,2
2006
52,8
2005
52,0
2004
51,0
2003
49,3
2002
47,4
2001
45,6
2000
42,8
SWISS HEALTHCARE EXPENDITURES [CHF bn per year] COMMENTS
• Today Switzerland has the third highest GDP
share of healthcare expenditures (10.6%)
after the USA (16% in 2007) and France
(11% in 2007)
• To constrain rising national healthcare costs,
policies will increasingly focus on cost-
benefit comparison of treatments
• The SMTI companies will have to monitor
upcoming policy changes and be ready to
adapt the business model accordingly
FURTHER OBSERVATIONS
1) E = Expected 2) F = Forecast
A STATE OF THE MEDTECH INDUSTRY
14Source: SMTI 2010
Basic research for
radical product
innovations
• National
universities and
international
knowledge
networks
• Five university
hospitals in
Geneva,
Lausanne, Berne,
Basel and Zurich
• National research
organizations like
PSI and EMPA
• National research
programs
• European
framework
programs
Developing
and prototyping
supported by
• CTI/KTI MedTech
• R&D programs
e.g. ManuFuture-
CH
• Universities and
universities of
applied sciences,
incl. technology
transfer
organizations
• Specialized
companies, e.g.
for contract
engineering
• International
knowledge
networks
Highly specialized
and internationally
sought-after
suppliers in key
technologies, e.g.
• Information- and
Communication
technology (ICT)
• New materials,
surface
technology
• Robotics and
nanotechnology
• Micro-technology
• Metal-, plastics-,
and ceramic
processing
• Automation and
assembly
• Tool and mould
manufacturers
Manufacturing
industry with broad
range of high-tech
products, e.g.
• Active- and non-
active implants
• Anaesthetic and
respiratory
devices
• Dental
• Electro-
mechanical
equipment
• Hospital hardware
• Diagnostics
• Ophthalmology
• Reusable and
single-use
instruments
• Technical aids for
disabled
Worldwide sales of
Swiss medical
technology products
by traders and
distributors
supported by
• Company
affiliates
• Export Platform
Medtech
Switzerland
• Osec together
with its Swiss
business hubs
abroad
• Swiss pavilions at
international
exhibitions/fairs
• International
industry
associations
Applied
research
Suppliers Manufacturers International
sales
Customers and
stakeholders
Worldwide
customers and
stakeholders, e.g.
• Patients, esp. in
out-of-pocket
markets
• Individual
hospitals, hospital
chains and
purchasing
associations
• Healthcare
professionals
• Diagnostic
laboratories
• Research
laboratories
• Key Opinion
Leaders (KOLs)
• Reg. authorities
• Certification
support
The established SMTI value chain is highly cross-institutional1)
Basic
research
1) Service providers, depending on their specialization are part of any of the value chain building blocks
A STATE OF THE MEDTECH INDUSTRY
15
MANUFACTURERS BY CATEGORY [%, 2010] COMMENTS
• The manufacturing base of SMTI is
segmented into 16 categories, ranging from a
share of 16% for hospital hardware to 1% for
biological products
• SMTI manufacturers exhibit a broad
technological knowledge base and
diversification
– Bulk risks are reduced
– Benefits interdisciplinary R&D
collaborations
– Strengthens network innovation
FURTHER OBSERVATIONS
• There exists a high degree of collaboration
amongst suppliers, manufacturers, and
academia to
– broaden the offering scope
– obtain key skills and know-how
SMTI manufacturers are evenly segmented across the different industry categories
19%
5%
6%
8%
14%
16%
5%
7%
8%
11%
Source: SMTI 2010
1) Others include, in descending order: lab equipment, ophthalmology, patient aids, anaesthetic and respiratory technology, active implants and biological products
n = 320
Others1)
Radiotherapy
devices
Disposable
items
Technical aids
for disabled
In-vitro
diagnostics
Reusable
instruments
Hospital
hardware
Inactive
implants
Electro-
mechanical
Dental
technology
A STATE OF THE MEDTECH INDUSTRY
16
SERVICE PROVIDERS BY CATEGORY [%, 2010]
Engineering,
planning,
design
IT
HR
Management
consulting
Suppliers and service providers support the MedTech industry with essential know-how within augmentable value chain processes
18%
26%
30%1%
5%
20%
Source: SMTI 2010
SUPPLIERS BY CATEGORY [%, 2010]
• The SMTI supplier base is broadly specialized,
although components, systems and material
processing contribute to more than 55%
• IT and management consulting are the most
prominent categories among service providers
• Support SMTI with growth capabilities
n = 410 n = 410
Others1)
Electronics
Surface
treatment
Auxiliary material,
green ware
Metal
processing
Components,
systems
Plastics
processing
Financing
Analytics
1) Others (in descending order) include: medical packaging, measuring, ceramics and sterilization
Machines, auto-
mated devices
19%
11%
5%
11%
25%
7%
8%
13%
A STATE OF THE MEDTECH INDUSTRY
17
Manufacturers and traders/distributors are highly focused on medical devices sales
56
19 15
47
Ø 61
Turnover from
medical devices
Turnover from
other products
and services
Service
providers
100
53
Traders
and
distributors
100
85
Manu-
facturers
100
81
Suppliers
100
44
2009 n = 212 2007 n = 122
39%
Turnover from medical devices in 2007
84% 80% 59%
Source: SMTI 2010
SHARE OF TURNOVER [%, 2009] COMMENTS
• Many SMTI companies are not exclusively
focused on medical technology – the share
of sales to other industries and consumers is
39%
• Traders and distributors as well as suppliers
show an increased focus on MedTech
compared to 2007
• Suppliers are more diversified in their
customer portfolio
Ø 65
• A high focus on medical devices is needed in order to meet the industry specific traits and sales requirements
• On the whole, SMTI remains unchanged since 2007, indicating that consolidation has not been triggered yet by the financial crisis
• For many suppliers from other industries, MedTech became highly attractive
FURTHER OBSERVATIONS
A STATE OF THE MEDTECH INDUSTRY
18
Manufacturers form the backbone of the industry –Average turnover per company is CHF 68 million
3
22
68
11
Service
providers
Traders and
distributors
Manu-
facturers
Suppliers
1) Only with medical devices or components for medical devices
n = 171
Source: SMTI 2010
AVERAGE COMPANY TURNOVER1) [CHF m, 2009] COMMENTS
• The SMTI has a manufacturer centric market
model
• Turnover with medical devices is driven by
– Offering/portfolio strategy, i.e. niche vs. big
player
– Company size
– Upfront investments, i.e. machinery, IP
– Position within the value chain
– Competitive landscape, i.e. number of
competitors within/adjacent to the industry
FURTHER OBSERVATIONS
• Future sustainable turnover is mainly
determined by the following influencers
– Overcome critical mass
– Achieve higher expertise to maintain
compliance
– Anticipate power shift towards payers
– Meet changes in sourcing strategies of
payers
A STATE OF THE MEDTECH INDUSTRY
19
Manufacturers and suppliers provide the highest employment, accounting for 92% of the total SMTI workforce
n = 199
Source: SMTI 2010
DISTRIBUTION OF EMPLOYEES [%, 2009] COMMENTS
• The surveyed companies employ around
27% of the total SMTI sector workforce
• Traders, distributors and service providers
account for 8% of the surveyed workforce
• Across all SMTI firms approximately an
average of 59 people are employed
– 126 by manufacturers
– 55 by suppliers
– 25 by traders and distributors
– 7 by service providers
• However, a significant bandwidth has to be
taken into account; of all surveyed companies
– 94% employ less than 250 employees
– 75% employ less than 50 employees
– 42% employ less than 10 employees
Service
providers
3%
Traders and
distributors
5%
Manu-
facturers
56%
Suppliers
36%
A STATE OF THE MEDTECH INDUSTRY
20
• Traders/distributors experienced growth in turnover per capita, the others remained stable or declined vs. 2007
• The build-up of employees in 2006/2007 led to an overcapacity in 2008/2009, SMTI companies responded by
adapting their recruitment policies
• Unlike many other Swiss industries the SMTI continue to hire above market average, but at a slower pace,
continuing to provide attractive jobs for skilled employees, especially in the fields of R&D, regulatory affairs and
international marketing & sales
Average turnover was influenced by high staff levels – This led to an underperformance of turnover per capita for manufacturers
AVERAGE TURNOVER PER EMPLOYEE
[CHF k]
AVERAGE GROWTH IN NUMBER OF EMPLOYEES
[% change vs. previous two years]
530
301
683
244
287
818
465
246
Manufacturers
Suppliers
Service providers
Traders and
distributors
11
5
21
18
15
30
12
7
2006/2007 Ø = +20%2008/2009 Ø = +10%
2009 n = 164
2007 n = 186
Source: SMTI 2010
2009 n = 163
2007 n = 185
A STATE OF THE MEDTECH INDUSTRY
21
GROWTH EXPECTATIONS FOR 2008 AND 2009 [%] COMMENTS
100%
Strong decline
(< -5%)
Moderate decline
(-5 to 0%)
Neutral (0%)
Moderate growth
(0 to 10%)
Strong growth
(> 10%)
20092008
n = 280, Ø = 6% n = 21, Ø = 0.1%
Source: SMTI 2010 (based on SMTI survey May 2010), CS Economic Research, OECD
Putting past SMTI growth expectations into perspective –Adjustments were taken fast and early in the downturn
• In 2008, SMTI expected an average growth of
6%. 77% of CEOs predicted a positive growth
rate1)
• The "crisis resistance" of the MedTech
industry became attractive for non-industry
players (mainly suppliers), they were
– Trying to enter a profitable market
– Broaden sales channels and offerings
• As the market turned in Q3 2008 and took its
full impact in 2009 on a global scale, SMTI
companies adjusted their growth expectations
– Then, only 54% of companies expected a
positive growth rate
– The number of companies expecting a
negative impact on sales doubled
– Suppliers with a higher non-MedTech
product portfolio proportion were hit harder
– Manufacturers of non-reimbursed product
suffered
1) SMTI 2008 data collected in spring and report released end of August 2008
Growth expectations
Share of responses
A STATE OF THE MEDTECH INDUSTRY
22
40
50
60
70
80
90
100
110
Jan 10Jan 09Jul 08 Jul 09 Jul 10
MSCI World
Europe-DS Pharm & Bio
DJ Euro Stoxx 50
SMI
SIX Bio and Medtech
GLOBAL AND CH MANUFACTURING – PMI INDEXSTOCK MARKETS – SELECTED INDICES
20
30
40
50
60
70
80
90
Jul 10Jan 10Jul 09Jan 09Jul 08
Global Price Index
Global New Order Index
Global PMI Index
Swiss PMI Index
Compared to the SMI, shares of SIX listed MedTech
companies declined stronger. It anticipates market
fears of e.g. tightening healthcare budgets negatively
affecting MedTech companies
The global economic crisis also hit the MedTech industry –Fears exist regarding severe cuts in public healthcare spending
Since June 2008, the global manufacturing
production rose steadily for 13 month in a row but
slowed since the beginning of 2010. The Swiss PMI
is currently stable, outperforming other markets
Source: SMTI 2010, Bloomberg, Credit Suisse, JP Morgan
A STATE OF THE MEDTECH INDUSTRY
23
Review of crisis 2008/09 and impact on SMTI – Lessons learned
Source: SMTI 2010
• Right customer and portfolio mix
• Innovation leadership fosters a
special, high value product and
component portfolio
• Networked innovation applying
unconventional know-how
• Closeness to IT industry and to
new materials
• Continuous recruitments
• Scouting and M&A
• Well managed S-curve of core
competencies
SUPPLIERS MANUFACTURERSTRADERS &
DISTRIBUTORSSERVICE PROVIDERS
"To
str
en
gth
en
"
• Focus on relevant R&D projects
and innovative products
• Positioning in markets and
preparing NPIs consistently
• Acquiring know-how
• Continue to recruit, especially
abroad
• Focus on business model
optimization
• Lean/efficient processes
• Strong regulatory capabilities
• Closeness to pharma/biotech
• Foreign exchange issues with
an impact on margins
• Sales force excellence
• Good product mix with high
reimbursement
• High focus on industry segment
• High service competency
• Very good understanding of
buyer‟s needs and buying
culture
• Profit from strong CHF (as
importer)
• Investing/acquiring know-how
and teams
• Proactive positioning to
anticipate revitalization of sector
• Develop solution offerings
copying other industry
successes
• Engage SMTI interfaces
management
• Strong skill set and high value
return offerings
• High flexibility to support
challenges
• Depending on single large
customers and reactive market
strategy
• Over-capacities in production
• Large capital investments made
based on boom forecasts
• Tight EBIT margins
• High diversity of client portfolio
(non-LS/non-core business)
• Lack of international clients
• High inventories and poor
liquidity management
• Weak or reactive attitudes (e.g.
engaging too late in cost cutting)
• Lack of listening to customers
• Mismanaged generation jump
within product portfolio
• Non value based pricing
strategy
• High OPEX/Sales ratio
• Me-too product sales decline
with non proprietary goods
• Late shift in crisis management
• High COGS & inventory
• Mismanagement of currency
hedges
• No product portfolio
differentiation
• High inventories
• Decline in demand for
commodities
• Lack of service offerings
• "Copy cat" and no sound track
records
• "Me-too" approach
"To
avo
id"
A STATE OF THE MEDTECH INDUSTRY
24
B. Trends and challenges
25
Taking the pulse of the SMTI – Top buzzwords
Source: SMTI 2010, www.wordle.net
B TRENDS AND CHALLENGES
26
Imminent growth of SMTI companies is shaped by major trends in three categories
Source: SMTI 2010, SMTI Advisory Board
COMPANY REGULATION1) MARKET
IMMINENT GROWTH OF THE SMTI
• Solutions will meet future offering
demand
• Networked innovation is rising
(led by micro/start-up firms)
• Broader know-how is needed to
meet regulatory requirements
(e.g. market access, conformity,
patent infringements, out-
licensing)
• Improved clinical trial design
needed to demonstrate cost-
benefit
• Institutional patient registries
arising in multiple core markets,
driving segmentation
• Tightening of regulatory
requirements2) in mature markets on
quality, testing, safety and off-label
usage
• Growing/tightening regulatory
requirements in Asian markets
• Introduction of DRGs will
– increase pressure on pricing
– delay or decrease investments into
radical innovation
• Demonstrating comparative
effectiveness drives the need to
generate relevant treatment outcome
data
• Non-reimbursed/cosmetic/or capital
intensive investments products face a
stronger toll in sales
• Patient centric models arise due to
– external/remote patient monitoring
– ICT and improved RFID technology
• Bundling of purchasing power among hospitals,
clinics, and specialists; they will
– drive margin erosion
– favour broader offerings
– seek solution providers
• Convergence (MedTech & pharma/biotech)
– drives innovation opportunities
– exposes the MedTech industry to additional
compliance/regulatory measures
• Export shift to emerging markets due to growing
middle-class with rising public and private health
expenditures
• Consolidation of "Big MedTech" towards
conglomerates ("The winner takes it all")
• Growing niche potentials for start-ups,
especially with new technologies (e.g. ICT)
1) Harmonization between EU-Directive and Swissmedic leads to faster implementation of new requirements2) Introduction of EUDAMED leads to growing transparency, both at agencies level and towards the companies
B TRENDS AND CHALLENGES
27
Ranking
2008
53
59
68
68
75
77
79
6. Access to specialized
know-how
7. Organizational issues
resulting from growth
5. Availability of
skilled employees
4. Increasing pressure to
reduce production costs
3. Intensified competition
2. Increasing cost pres-
sure from purchasers
1. Increasing price
competition
Competition for the SMTI intensified severely since 2008 –Costs and prices are under pressure in a changing market
1) Challenge is of "high relevance" or "very high relevance" to SMTI companies 2) These represent a "triple challenge" to the SMTI
n = 232; multiple answers possible
Source: SMTI 2010
3.
4.
5.
-
1.
2.
RANKING OF MAJOR CHALLENGES
[% of answers, 2010]1) COMMENTS
• As of 2009, SMTI companies experienced
intensifying competitive pressures
– Suppliers with a high proportion of non-
healthcare clients were hit first
– Manufacturers of non-reimbursed products
were hit by tighter consumer spending
• Today, the majority of SMTI managers are still
in the "crisis mode" observing operational
challenges, e.g. higher price competition, cost
pressure and an intensified competition2)
• Current management thinking may fuel
consolidation to maintain critical mass to
obtain
– A more diverse/innovative product portfolio
– Better access to knowledge pools
FURTHER OBSERVATIONS
6.
B TRENDS AND CHALLENGES
28
• Increasing competition and tightening public
healthcare budgets force companies to invest
more into proofing product efficacy
• Gaining data from comparative effectiveness
research and cost-benefit-analyses will gain
in importance for many SMTI companies
• The communication efforts with customers and
authorities need to be intensified in order to
optimally position own products
45
51
56
61
73
87
Negative impact of DRG introduction
on average product price
Higher requirements for product
positioning among DRGs
Higher competition for reim-
bursement entitlement
Growth of purchasing cooperatives
(among customers)
Increasing communication needs with
with authorities/healthcare institutions
Higher requirements for evidence
of product efficacy
Megatrend – Clinical based evidence requirements force companies to focus on higher product efficacy and communication
1) Companies describing the development "applicable" or "partially applicable"; no 2008 data exist
n = 134
Source: SMTI 2010
DEVELOPMENTS IN HEALTHCARE MARKET
[% of answers, 2010]1) COMMENTS
FURTHER OBSERVATIONS
• Recent healthcare developments will drive
– Higher costs to register and fulfil increasing
compliance requirements
– Substantial price decreases in mature markets
• EU wide harmonization of pharma prices is
currently discussed; this will also influence the
SMTI
B TRENDS AND CHALLENGES
29
C. Strategic Actions
30
56
59
62
63
67
77
77
85
8. Geographic expansion/
internationalization
7. Integrating new partners
6. Developing new
business models
5. Strengthening
product innovation
4. Optimizing distribution
3. Further development of
org. structure and processes
2. Optimizing marketing
1. Improving profitability
Ranking
2008• In contrast to 2007 CEOs express a strong
shift in priorities
• To support future growth, three rather
operational actions are in focus
– Improving profitability
– Optimizing marketing & sales effectiveness
– Enhancing organizational structures and
processes
6.
3.
7.
4.
1.
5.
8.
2.
SMTI companies are focusing on profitability to meet current challenges at the cost of potentially losing their innovative edge
1) Strategic actions mentioned as being relevant to SMTI companies 2) Deloitte/The future of the Life Science industries
n = 232; multiple answers possible
Source: SMTI 2010
RANKING OF ACTIONS 2010
[% of answers]1) COMMENTS
FURTHER OBSERVATIONS
• SMTI companies seem to approach business
conservatively before returning to a "growth
mode"
• An international Life Sciences survey2)
indicated contrary management responses
– Developing a robust R&D pipeline
– Accelerating geographical expansion
– Forming alliances with pharma/biotech
C STRATEGIC ACTIONS
31
28%26%
55% 59%
100%
Strong decline
(< -5%)
Moderate decline
(-5 to 0%)
Neutral (0%)
Moderate growth
(0 to 10%)
Strong growth
(> 10%)
2011
1% 1%
13%
2010
10%
1%6%
SMTI companies expect 10-12% growth p.a. in the next two years
EXPECTED GROWTH FOR 2010 AND 2011 [%, p.a.] COMMENTS
n = 194 n = 188
Source: SMTI 2010, Credit Suisse, SwissRe
• On average SMTI CEO's are highly confident
– 10% growth for 2010
– 12% growth for 2011
• Some caution should remain; these expectations are related to the economic situation in May 2010
• Start-ups are particularly enthusiastic
• Established companies expect moderate
growth as they face stronger price pressures
FURTHER OBSERVATIONS
• If such up-turn is achievable, a shift towards
strategic investments and increased
convergence will occur
• Current economic forecast for the Swiss Life
Sciences sector as a whole is 6.5%
Ø =10% Ø =12%
C STRATEGIC ACTIONS
32
15
Ø 12
2011
Engaging in the right strategic actions correlates with above-average growth expectations
16
Ø 10
n = 51
n = 42
n = 64
• Several CEOs focus on a set of strategic
actions to enhance their growth potential
– Strengthening regulatory know-how/studies
– Establishing new production/service facilities
– Engaging in new business models
• If a company focuses e.g. on strengthening
of regulatory know-how/studies, they expect
a growth rate that is 6% above the average
for 20101)
Companies focusingon strengthening regulatory know-how/studies, e.g. cost-benefit analyses
Companies focusing on establishing new production/service facilities, e.g. in emerging markets
Companies focusing on engaging in new business models, e.g. new kind ofservices
Source: SMTI 2010
EXPECTED GROWTH RATES 2010 AND 2011
[%, companies having the respective strategic action in focus]
Ø = average growth expectations across all survey participants
1) Data does not support a cumulative growth impact of combining the actions
FURTHER OBSERVATIONS
• Companies focusing on new business models
do not expect an immediate above-average
effect on their growth rate
15
Ø 12
12
Ø 10
17
Ø 12
10Ø 10
2010
COMMENTS
C STRATEGIC ACTIONS
33
The majority of SMTI companies face increasing challenges –Negative impact on growth is expected
• 50% of SMTI companies face a triple
challenge– Increasing price pressure– Increasing cost pressure– Intensifying competition
• These companies– Expect a below average growth rate for
2010/2011 – Cannot hope for a fast improvement of their
situation
• All survey participants face at least one of the
three mentioned challenges
8
Ø 10
2010
Companies experiencing the "triple challenge"1)
Source: SMTI 2010
EXPECTED GROWTH RATE [%, companies that are
affected by the mentioned challenges] COMMENTS
2010 n = 128, 2011 n = 2211) Companies stating that increased pressure on prices, costs and intensifying
competition were of "high relevance" or "very high relevance" to them
Ø = Average growth expectations across all survey participants
FURTHER OBSERVATIONS
• Tighter public healthcare expenditures will – Keep the pressure on prices– Intensify competition among companies– Force them to decrease their costs basis
• Within this setting companies tend to invest more in product line extensions/renovations
10
Ø 12
2011
C STRATEGIC ACTIONS
34
D. Winning through Innovation
35
Currently three different innovation behaviours can be observed:
• "Network innovators" are innovation winners and– Responsible for product innovations, accounting for 25%
of the total SMTI products on the market (20% by start-ups and micro/small companies; 5% by mature, larger firms)
– Are considered to be the innovation engine of the SMTI – Strengthen the SMTI long-term value growth
• "Renovators"– Contribute 25% to the total of SMTI products– Adopt a fast renovator strategy for early line extensions
• "Commodity exploiters/bundlers"– 50% of total SMTI products, that were neither innovated
nor renovated during the last three years– Adopt a niche/market expansion strategy per product
THE INNOVATION BEHAVIOUR MODEL COMMENTS
exte
nd
ed
re
str
icte
d
Innovation typeexplorative exploitative
Ne
two
rk t
yp
e
Innovation is the major success factor for the SMTI – Depending on company maturity, different innovation behaviours apply
Source: SMTI 2010, Kyburz
Network
innova-
tors
~50%
Commodity
exploiters/
bundlers
Renovators
~25%
• Use extended networks of adjacent industries, institutions and academia to develop radical innovations in an explorative way, leading to product innovation
• Focus on the innovation network within their value chain (e.g. suppliers, traders) to exploit the current portfolio with product renovation, i.e. incremental innovation to expand the product life cycles
• Focus only on exploiting the current product portfolio
1
2
3
1
2
3
FURTHER OBSERVATIONS
• Larger companies tend to acquire innovation as they are cash-rich to balance their lack of own product innovations
• Smaller and start-up companies are averse to out-licensing and desire to exploit their product innovations themselves
1
2
3
~25%
D WINNING THROUGH INNOVATION
36
• Lower priority of product innovation
combined with cost constraining measures
is likely to
– Lead to fewer novelties
– Prompt more renovation activities
• Close attention should be paid to the
maturing product portfolio (see strategic
actions) in order not to fall into an
innovation gap, as average product
development time is around three years
The SMTI shows a balanced product portfolio maturity –Especially smaller companies drive product innovation
• In general, the maturity of the product
portfolio is well balanced – but the larger the
company, the more mature the portfolio
• 25% of the (weighted) SMTI product portfolio
is younger than three years
• 81% of the product portfolio of larger
companies is older than three years
Source: SMTI 2010
AGE OF PRODUCT PORTFOLIO BY COMPANY SIZE1, 2)
[in %, 2010] COMMENTS
n = 1241) Only manufacturers and suppliers 2) In proportion of their product portfolio
FURTHER OBSERVATIONS
34%27%
16%22%
21%
27%33% 20%
20%26% 27%
33%
3-5
5-10
Large
25%
Medium
0-3
+10
100%
25%
Micro
20%
24%
Small
Years
D WINNING THROUGH INNOVATION
37
Relative R&D expenditure is highest for small companies –Manufacturers spend more on innovation than suppliers
77
119
10
14
Ø 10.6
11-50m< 5m 5-10m
Suppliers Manufacturers
Source: SMTI 2010
1) Only manufacturers and suppliers 2) R&D expenditure was not weighted to turnover 3) Companies with more than CHF 50m turnover were omitted due to a limited sample size 4) Based on a sample of selected companies
• R&D expenditures remained
stable or even increased since
2007, but were increasingly
shifted to incremental innovation
• Manufacturers drive SMTI
innovation; their share of R&D
spending is higher than for
suppliers
• The less turnover a SMTI
company has, the higher the
relative spend on R&D
COMMENTS
BY COMPANY TYPE
BENCHMARKS
[in % of turnover, 2009]4)R&D EXPENDITURES [% of turnover]1,2)
10
5
1212
20092007 n = 90
11
Machine
industry4
Pharma
Electronics
industry
16
5
Biotech
Medical
technology
industry
22
FURTHER OBSERVATIONS
• Compared with adjacent industries, the SMTI spends less on R&D than the biotech and pharma industry, but significantly more than the mechanical engineering and electronics industry
BY TURNOVER
[in CHF and % of turnover 2009]3)
n = 90
D WINNING THROUGH INNOVATION
38
26
16
16
22
38
24
4
Large 78 0
Medium 80
Small 60
Micro 36
Shortening of the innovation cycle is of significant relevance, especially to medium and large sized companies
25
17
30
21Suppliers 62
Manu-
facturers45
n = 129
• The majority of companies feel the market and
competitive pressures to shorten innovation
cycles in order to launch new or improved products
more rapidly
• It seems that manufacturers are partly passing on
this pressure, evaluating different suppliers for the
most innovative and cost effective solution
• Micro companies seem to be flexible enough to adapt
to shortened innovation life cycles. Their dependency
on often only one or two products makes it a critical
task to stay ahead of competitors
• The larger a company is, the less flexible it seems to
speed-up the innovation cycle, mainly because of
internal processes and compliance requirements
Very high significance
High significance
No or low significance
Source: SMTI 2010
SIGNIFICANCE OF A SHORTENED INNOVATION CYCLE [2010, in %]1)
BY COMPANY SIZEBY COMPANY TYPE
1) Only manufacturers and suppliers
D WINNING THROUGH INNOVATION
39
Launches during the last three years were difficult – On average new products achieved less than 30% of companies turnover
17
45
20
3
31
29
4
18
25
37
16
6
13
26
42
13
0
23
16
16
Very high
(>70%)
High
(50%-70%)
Medium
(30%-50%)
Small
(10%-30%)
Very small
(0%-10%)
Micro
Small
Medium
Large
• Product launches in the last three years were also affected by the global economic setbacks
• A majority of companies stated that new products contribute only to a minor part (less than 30%) to the current turnover
• For micro companies there seems to be a clear split:
– Either they are older companies with a mature "cash-cow" product portfolio
– Or they are start-ups with a successful product launch just on the brink of growing rapidly
• The other companies capture less returns from new product launches
Source: SMTI 2010
REVENUE SHARE OF PRODUCTS THAT WERE LAUNCHED
SINCE 20071) [in % of each company class, 2010]
n = 128
1) Only manufacturers and suppliers
COMMENTS
D WINNING THROUGH INNOVATION
40
Companies with a young product portfolio show above-average growth expectations
• Companies with a young product portfolio have significantly higher growth expectations
• Companies with a more mature product portfolio may face – especially if combined with decreased R&D rates – an innovation gap that harms future growth rates
• In order to increase growth rates again, these companies need to take into account an average "idea to launch" time of approx. three years
7
16
Ø 10
2010
1) Only manufacturers and suppliers 2) 85% of survey participants stated improving profitability is a key strategic action
9
17
Ø 12
2011
Source: SMTI 2010
EXPECTED GROWTH RATES OF COMPANIES ACCORDING
TO PRODUCT PORTFOLIO MATURITY1) [%] COMMENTS
FURTHER OBSERVATIONS
• The SMTI is an innovation-centred industry based on network innovation
– Launching new products is an essential growth factor
– High priority on profitability2) drives bottom-line improvements, but does not lead to higher growth rates
Older portfolio (companies with less than 15% of the product portfolio
younger than three years), n = 42
Younger portfolio (companies with more than 15% of the product portfolio
younger than three years), n = 56
D WINNING THROUGH INNOVATION
41
Low focus on innovation (low R&D ratio and strengthening ofproduct innovation not a priority), n = 33
Companies with a high focus on innovation show above-average growth expectations
• Compared to 2008, strategic priority moved away from strengthening product innovation to profitability improvement measures
• Additionally, relative R&D expenditures have – on average – declined
• Both of these two findings lead to assume a lower focus on innovation
• However, firms that still focus on innovation expect significantly higher growth rates
• They outperform expected average growth by 6% and 3% for 2010 and 2011 respectively, assigning them a leading role in the further development of the SMTI
Source: SMTI 2010
EXPECTED GROWTH RATES AND INNOVATION FOCUS1)
[%] COMMENTS
High focus on innovation (high R&D ratio and strengthening ofproduct innovation a priority), n = 18
1) Only manufacturers and suppliers
8
15
Ø 10
2010
9
14
Ø 12
2011FURTHER OBSERVATIONS
• Listen to/involve patient groups in prototyping reviews to enable product generation jumps
D WINNING THROUGH INNOVATION
42
2010 n = 61, 2008 n = 154
• The focus of many companies on profitability
improvement measures lead to a decrease of
average R&D spend to 10.6%1) from 15% in
2007
• However, a few exceptions exist: suppliers
and manufacturers must invest more in order
to achieve moderate growth
• Companies that hardly invest in R&D do not
expect a positive growth rate, strengthening
the assumption that R&D is a key driver for
SMTI growth
0%
5%
2%
6%
10%
15%
R&D contribution to growth expectations –Increased R&D expenditure
Source: SMTI 2010
GROWTH EXPECTATIONS BY R&D EXPENDITURES
[% of turnover] COMMENTS
R&D expenditures 2007
7
8
1
16
10
Strong growth
(> 10% p.a.)
Moderate growth
(0-10% p.a.)
Neutral
(0% p.a.)n.a.
Manufacturers' expenditures on R&D
Suppliers' expenditures on R&D
Growth expectation 2011
R&D expenditures 2009
FURTHER OBSERVATIONS
• Suppliers needed to invest heavily into R&D
to meet shorter innovation cycle time
• They may find themselves in a R&D trap due
to a high dependency on MedTech
manufacturers
D
1) R&D expenditure was not weighted to turnover
WINNING THROUGH INNOVATION
43
D WINNING THROUGH INNOVATION
Source: SMTI 2010, CTI/KTI
The Innovation Promotion Agency CTI – From Science to Market
• In 2009 CTI had an absolute record year by processing a total of 717 R&D funding
applications
• 25 Entrepreneurs received the CTI Start-up Label in 2009
• The total of generated venture capital by the CTI-coached Start-ups was CHF 170m last year
• Start-ups with the CTI Start-up Label have an above-average success rate of 85%
• 2800 students and graduates participated in the venturelab courses in 2009
• Fifteen regional and thematic networks help SME‟s and universities to better share
knowledge and efficiently convert their ideas into products and services
The CTI is the Confederations Innovation Promotion Agency
As such its main three areas of activities are the following:
• Market-oriented R&D projects, in which companies and universities work together
to develop products and services
• The creation and expansion of scientifically-based companies
• Knowledge and technology transfer through platforms and networks
KEY
FIGURES
44
E. Collaboration and Bundling
45
12
43
9
9
13
88
4
24
24
28
59
82
Strategy
consultants
Private research
institutes
Support organizations
Technology/IT service
providers
Universities
Manufacturers/
suppliers
SMTI companies focus on collaborations between manufacturers and suppliers – Strengthening incremental innovation
Source: SMTI 2010
• The majority of SMTI companies closely
collaborate with other manufacturers and
suppliers, positioning themselves often as
"Renovators" working on improvements of
existing products
• Already second are collaborations with
universities; there SMTI companies often act
as "Network innovators", working on
product innovations
• On average manufacturers show a higher
degree of collaboration – this is mainly due to
– Technology leadership in projects with several collaborating parties
– Higher value chain integration
• Not very widespread are collaborations with
service providers
• Roughly less than a quarter of SMTI
companies have respective collaborations
SHARE OF COMPANIES WITH COLLABORATIONS
[% of answers, by inter-industry collaboration type, 2010]
n = 122, multiple answers possible
COMMENTS
Manufacturers
Suppliers
E COLLABORATION AND BUNDLING
46
30
5
7
12
17
12
25
45
43
7
7
13
28
20
41
35
46
61
Product launch
After sales
services
Training
Distribution
Marketing/sales
Product certification
Basic research
Quality control
Applied research
SMTI companies focus on applied research to drive incremental innovations
Source: SMTI 2010
FUNCTIONAL COLLABORATION WITH PARTNERS
[% of answers, by type, 2010] COMMENTS
n = 106, multiple answers possible
Manufacturers
Suppliers
SMTI companies, particularly manufacturers,
engage in functional collaboration. Predominantly,
such activities are sought in the field of:
• Applied research; underlining the focus on
incremental innovation
• Quality control and production certification
– Strengthening compliance and regulatory
know-how
– Managing innovation cycle
– Shifting innovation risks to suppliers
• Basic research; focus on break-through
technology and materials
• Training, launch/post launch, and after sales
collaborations are of minor importance to SMTI
firms despite
– Under-proportional returns on new products
– Rising OPEX to sales ratios and process costs
– Expected shifts in business models and
offerings
E COLLABORATION AND BUNDLING
47
22
29
32
17
100
largemediumsmallmicroCTI/KTI
The national innovation programs of CTI/KTI reach 29% of SMTI companies – More than twice as much as international programs
87
YES
13
11
2
NO
1) Suppliers and manufacturers
n = 155
EU programs: e.g. FP6, FP7
Other: e.g. COST, EUREKA
6
65
YES
35
29
NO
EU
OTHER
CTI/KTI
OTHER
n = 154
NATIONAL PROGRAMS [% of participation in innovation promotion programs1), 2010]
(distribution by company type)
INTERNATIONAL PROGRAMS [participation in %, 2010]
Source: SMTI 2010
E COLLABORATION AND BUNDLING
48
The SMTI gets an influx of new ideas from the technological development in four other major industries
RESEARCH AREA (ILLUSTRATIVE) COMMENTS
MedTech research area
Source: SMTI 2010, CCMT, CTI/KTI
1) Substances of human origin 2) Swiss universities are important contributors to the heterogeneous, networked innovation landscape
MedTech Convergence
PHARMA
MECHANICAL
ENGINEERINGBIOTECH
RoboticsMaterials SoHo1) Genetic
EngineeringNanotech
Combined
products
• Two main research trends can be identified:
– Many SMTI companies apply electronics
and mechanical engineering know-how to
medical devices
- New combinations of different disciplines
provide input for highly innovative
products (network innovation)2) through
software engineering
- Especially ICT plays an increasingly
important role as a key component to
innovative products and services (e.g.
e-Health), and is a success factor due to
the flexibility and ease of operation
– Technological developments fuel the
convergence between pharma/biotech and
MedTech, creating novel products with a
combination of different action principles
(device/drug or drug/device)
• These developments will – together with
regulatory changes – lead to the creation of
new business models
Software
engineering
ELECTRONICS
INDUSTRY
RFID
ICTVisualization/
Simulation
Teleservices/
Telemetry
Navigation
Biomarkers
E COLLABORATION AND BUNDLING
49
The SMTI business model will change – A stronger focus on bundled offerings and a higher patient centricity arises
• Major shifts in business models are foreseen due to – Changes in health care systems– Growing cost pressures by payers– Increased transparency demand
(e.g. DRG, CER)• Expressed strategic focus is
– Driving bundled offerings (proven products paired with novelties)1
– Becoming further patient centric– Focusing on market pull activities
BUSINESS MODEL
DIMENSIONS
In-house
Me-too
product
Single
products
Technology
push
Make
GP/provider
centric
No reim-
bursement
External
Novelty
product
Bundled
offering
Market
pull
Buy
Patient
centric
Full
coverage
Knowledge
creation
Innovation
Offering
Market
orientation
Production
capability
Sales channels
Reimbursement
Source: SMTI 2010, SMTI Advisory Board
1) Combined offering such as a) "own device/technology, software, consumables materials, local maintenance/service, and/or training", or b) "combined products" (pharma/biotech and medical devices incl. third party product, or c) enhancements through value added "solutions"
DEGREE PER CHARACTERISTIC FOR 2012 COMMENTS
• Notions regarding long-term strategic
orientation are
– "From Box-Mover to Solution
Providers"– "Best in class" vs. "One Stop Shop"
FURTHER OBSERVATIONS
Start point 2010 End point 2012Degree of Changen = 6
E COLLABORATION AND BUNDLING
50
Offerings are challenged by price pressures –Changes ahead for 2012
POSITIONING AND BREADTH OF
OFFERINGS [illustrative] CHARACTERISTICS OF OFFERING STRATEGIES BY 2012
Pri
ce
Benefits
hig
hlo
w
highlow
Multiple
indications
Best in Class
Own product
Commodity
product, single
indication
Commodity
Source: SMTI 2010, SMTI Advisory Board
With reduced funding in health care systems, price pressure will further increase. Paired with DRG, transparency on patient outcome becomes available to payers
This will influence the companies„ offering strategy – thus they may choose from the following positioning in the future:
• "Best in Class" products
– Unique IP, processes, technology or materials and best treatment outcome, thus often benefit drivers
– Yield premium price positions
• "Commodity" (less innovative or "me too"/single) products
– Aim at high volumes/lower margins pricing
– Must provide supply flexibility/reliability
• "Bundling" (to obtain an overall higher price benefit ratio)
– Own products, services, consumables, training and IT updates
– Convergences (combined pharma/biotech and MedTech product)
– Solutions1 (extended value creating services or complementary products for a full DRG treatment incl. competitor products)
1) Solutions serving DRG related treatments are currently in early stage discussions amongst leading firms; positioning here is rather indicative
Product categories
Single product Bundling types
own product
convergence product
solutions
E COLLABORATION AND BUNDLING
51
F. International Opportunities and Threats
52
11
6
11
3
13
30
35
22
10
7
3
13
29
34
Other
countries
in Asia
BRICJapan Other
countries
in Latin
America
Other
countries
USA /
Canada
EUSwitzerland
• Compared to 2008, there were no significant
changes:
– The Swiss market is still expected to have the
highest growth potential
– More than half of the SMTI companies expect
the highest potential in the EU, USA and BRIC
markets
• For the other geographical regions, Swiss
companies tend not to expect important growth
contributions:
– In Japan registration and regulatory
requirements, as well as cultural differences,
are a major hurdle
– The rest of the world market does not yet
contribute significantly to the growth of SMTI
companies
SMTI companies still perceive the strongest growth potential in the Swiss home market, closely followed by the EU
Abroad
2010: 65%
2008: 66%
Switzerland
2010: 35%
2008: 34%
2010
2008
n = 141
n = 132
Source: SMTI 2010
COUNTRIES WITH HIGHEST EXPECTED GROWTH
POTENTIAL FOR THE NEXT 2 YEARS [% of mentions, 2010]1) COMMENTS
1) Includes suppliers, manufacturers, traders/distributors and service providers
F INTL OPPORTUNITIES AND THREATS
53
10
88
2
14
35
32
22
6
18
6
20
30
16
Rest of
the world
Other
countries
in Latin
America
Other
countries
in Asia
BRICJapanUSA /
Canada
EUSwitzerland
• Companies expect the strongest stimulus from EU
countries, followed by Switzerland
• Overall manufacturers seem to be more
internationalized than suppliers
– About 54% of manufacturers expect highest
growth from business with countries outside the
EU and Switzerland
– In the focus are EU, USA/Canada, the BRIC
countries and only fourth the Swiss home
market
– Suppliers have a higher focus on the EU and
the Swiss home market, representing for more
than two thirds of companies the regions with
the highest growth potential
Manufacturers are more internationalized than suppliers – More than 50% perceive strongest growth outside EU and Switzerland
AbroadSwitzer-
land
Suppliers
Manufacturers
n = 49
n = 72
Source: SMTI 2010
COUNTRIES WITH HIGHEST EXPECTED GROWTH
POTENTIAL FOR THE NEXT 2 YEARS [% of mentions, 2010] COMMENTS
FURTHER OBSERVATIONS
• Suppliers seem to need a geographical closeness
to manufacturers in order to optimally fulfil their
customer requirements
F INTL OPPORTUNITIES AND THREATS
54
The economic outlook for main SMTI export markets is positive –Return to growth expected
1,6
2010 F
3,1
0,8
2,4
1,8
2009 E
-2,4
-4,2
-3,3
-2,5
2008 E
0,40,7
0,5
1,8
2011 F
2,7
1,5
2,1
USA
EU-27
OECD
Switzerland
Source: SMTI 2010, BAG, BfS, KOF
GDP GROWTH [% change vs. previous year] COMMENTS
• Most of the main SMTI export markets are
expected to return to growth in 2010 (0.8 and
3.1%) and 2011 (1.5 and 2.7%)
• The OECD average growth rate is expected
to slightly outperform Switzerland and to
recover considerably faster than in the EU-27
• This increases the growth potential through
sales – both in Switzerland and abroad
• Growth prospects are even brighter outside
the traditional European markets, e.g. in the
emerging economies in Asia and South
America
E = Estimate, F = Forecast
F INTL OPPORTUNITIES AND THREATS
55
A world of opportunities and threats by 2012
Source: SMTI 2010, Espicom, IMS Health, Moody's Investor Service, Reuters
• For BRIC countries (incl. Turkey), the
expected aggregated growth is around 10-
12% for Life Sciences industry
• High potential for multiple-brand strategy in
developing markets
2
• Japan is the second largest MedTech market
worldwide
• Latest reimbursement price revisions favour
innovative products
8
• Expensive distribution system
• Price increases anticipated
• Russian MedTech market is estimated at
USD 5.6bn
• Around 81% supplied by imports
4
• Rising of new competitors? Chinese & Indian
generics manufacturers ready to substitute
OEM products
6
• Indian market valued at around USD 3bn and
expected to grow around 10% a year
• IT service providers cater for MedTech needs
5
• South Africa‟s MedTech industry is expected
to grow at CAGR of 7.1% to 2015
• Around 90% supplied by imports
3• USA is the world‟s largest MedTech market
(close to 40% of total) with an expected
CAGR of 2.8% until 2015
1
• Expected pricing pressure on MedTech
manufacturers due to financial alliances
between hospitals and doctors
• New regulations, e.g. 510 k, CER and excise
tax burden (next 10 years around USD 20bn
anticipated)
Regional opportunities
Regional threats
4
8
3
6
2
2
22
2
1 7
5
9
• Increased regulation to be implemented in
Australia, Singapore and India
9
• 7„000 new hospitals and medical centres
planned in China
7
• Growing MedTech know-how with new and
smarter competitors arising with a significant
lower cost basis
Selected global highlights
WORLDWIDE
• Faster increase of "Western
diseases" e.g. diabetes, obesity, etc.
• Growing demand for
established/new
treatments/technologies
F INTL OPPORTUNITIES AND THREATS
56
A world of opportunities and threats by 2012
Source: SMTI 2010, DeviceMed, Espicom, Meditec, Specatris
• France continues to lag behind its EU markets,
e.g. in imaging and radiotherapy equipments
(high-tech in hospitals)
• Several reform programmes planned for the
healthcare sector in France
2
• In Poland, around 85% of the MedTech
market is supplied by imports
• Healthcare spending accounts for about 6.2%
of GDP
10
• The Spanish MedTech market is valued at
USD 4.8bn in 20101
National opportunities
National threats
• Italy is the fourth largest MedTech market in
Europe9
• Expected to be one of Europe‟s slower
growing MedTech markets over the next five
years with a potential impact on Swiss export
Selected European highlights
EUROPE WIDE
• EU price harmonization plans for pharma
sector is expected to affect the MedTech
industry
• EU to boost high-tech budget for research
& innovation to EUR 6.4bn in 2012
• eHealth policy implementation project en
route for 2020
5
63
107
42
1 9
8
• In UK, the expected MedTech market growth is
at around 3.6%
• Current government plans involve a 15% cut in
health spending as of 2011
3
• Small scale of domestic MedTech production in
Norway with anticipated higher import needs5
• Increasing regulations (MPKPV regulation
early 2010) in Germany and growing power of
purchasing organisations (DRGs)
7
• Central patient registers in Denmark6
• Per capita spending on MedTech in
Switzerland is among the highest in the world
with USD 544
4 • Expected MedTech market growth of 4.7% in
Austria8
• Focused MedTech “Research for Health
2011”program launched in Germany with
budget of EUR 1.2bn
• Government budget cuts ahead due to debt
F INTL OPPORTUNITIES AND THREATS
57
The US Healthcare Reform will also influence SMTI companies
EXPECTED THREATS
• Higher numbers of patients
• Opportunity for highly innovative treatment
demand
• Opportunity to position bundled offerings/solutions
to buying consortiums
• Increased opportunities for preventive/early
indication devices
EXPECTED OPPORTUNITIES CONVERGENCE OF FOUR FORCES [illustrative]
Source: SMTI 2010
• Higher price transparency
• Higher compliance and registration efforts for new
products, incl. registration fees
• Higher re-negotiation costs of existing products
• Tighter reimbursement for me-too products
• Higher tax burden
F INTL OPPORTUNITIES AND THREATS
58
n = 90
2327
38
28
39
30
13
42
2615
3
27
USA
05
BRIC
Very easy
Easy
Neutral
Difficult
Very difficult
0 3
46
30
EU
0
20
JAPAN
2
Switzerland
4
20
5251
Total
1
11
43
0
1
Registration and introduction of new products are perceived to be less difficult in Europe than in other markets
Source: SMTI 2010, SMTI Advisory Board, Swissmedic
ESTIMATED DIFFICULTIES FOR PRODUCT REGISTRATION
AND INTRODUCTION [% of mentions, 2010]1) COMMENTS
• Registration and introduction of new products
are expected to be a challenging task for 45%
of manufacturers and suppliers
• However, Switzerland as well as the EU
(almost the same processes and structures)
are expected to be less complex than
registration in the US, Japan or BRIC markets
• Japan is considered to be a very difficult
market due to high requirements regarding
sensible documents (drawings, IP etc.), high
fees, and long approval times
• US FDA regulations are perceived as hard to
be met, even for large companies
• FDA recently announced higher regulatory
requirements, increasing registration
complexity and processing time
• Especially smaller SMTI companies face the
challenge to meet these requirements due to
the lack of internal expertise
1) Only manufacturers and suppliers
F INTL OPPORTUNITIES AND THREATS
59
G. International positioning
60
For the first time the SMTI work-force abroad grew at a higher rate than in Switzerland, showing an increasing internationalization
42
20
4
4
Large
Small
Medium
Micro
1) Only manufacturers and suppliers
n = 139
7
16
21
8
Switzerland
Abroad
2007: n = 1862009: n = 81
Source: SMTI 2010
GROWTH IN LOCAL VS. FOREIGN EMPLOYMENT
[% over last 2 years, end 2007 & 2009]1) COMMENTS
WORKFORCE ABROAD
[% of total workforce according to company size, 2009]1)
• SMTI companies continue to hire – but at a
reduced rate
• For the first time growth of employee
numbers has been bigger abroad and signals
a shift in management focus
• This result documents the increasing
internationalization effort of SMTI companies
• The survey results indicate that no significant
work-force shifts from and to Switzerland
have taken place
• Micro to small companies employ around 4%
of their workforce abroad compared to 20-
40% of medium to large sized companies
FURTHER OBSERVATIONS
• Micro and small companies are lacking
access to experienced hires in order to obtain
international expert know-how
2007
2009
G INTERNATIONAL POSITIONING
61
Manufacturers and suppliers are strongly export driven and achieve on average 63% of revenues abroad
AVERAGE SHARE OF EXPORTS
[% of turnover, 2009] 1)
• Manufacturers generate around 78% of sales
abroad
• Suppliers play an important role in the local
market as 47% of their products and services
are sold within Switzerland
• Their export share decreased significantly,
reflecting economical difficulties in many
markets, e.g. declining demand, fiercer
competition, and adverse currency
fluctuations
• The same applies to a majority of
traders/distributors; they only achieved an
export share of 16% (-50% vs. 2007)
• Service providers are generating 35% of their
turnover abroad, benefitting from the high
expertise gained in the home market
1) Average for suppliers and manufacturers , based on average export share of all companies, not based on value of exports. Therefore varies from the value mentioned in the management summary 2) Share of export of service providers was not surveyed in 2008
n = 174
2007 data 62% 74% 34%
Source: SMTI 2010
COMMENTS
78
53Ø 63
Suppliers Manu-
facturers
35
16
Ø 29
Traders
and
distributors
Service
providers2)
G INTERNATIONAL POSITIONING
62
A young product portfolio helps manufacturers to increase their export share
Source: SMTI 2010
EXPORT SHARE
[%, according to age of product portfolio, 2010]
1) More than 50% of product portfolio younger than 5 years2) More than 50% of product portfolio older than 5 years
• Suppliers and manufacturers realize different
export shares in respect to the age of their
product portfolio
• Suppliers
– Can export above-average mature
products
– Were faced with difficulties in capturing
export shares with young product
• Manufacturers
– Can capitalize on an innovative product
range in export markets
– Tend to introduce new products or line
extensions faster abroad
– Expect below avg. growth from mature
products
n = 93
COMMENTS
46
61
Suppliers
Ø 53
82
72
Manufacturers
Ø 78
Younger PP1)
Older PP2)
G INTERNATIONAL POSITIONING
63
Growth expectations and export share – Positive correlation for manufacturers, negative correlation for suppliers
Source: SMTI 2010
EXPECTED GROWTH ACCORDING TO EXPORT SHARE
[%, only manufacturers and suppliers, 2010]
1) Defined as less than 44%/81% of revenue from exports for suppliers/manufacturers2) Defined as more than 44%/81% or revenue from exports for suppliers/manufacturers
• Export is a “Must do” for growth
• Manufacturers are much stronger export
focused than suppliers
• Manufacturers with an above-average export
share
– expect significantly higher growth rates
– will outperform the market
– will outperform suppliers by far
• For suppliers, the situation is reversed – the
home market remains the key to growth.
They face difficulties to
– Overcome the external market access trap
– Find niches in a growing commodity market
• By focusing on export, firms can
– Expand the potential customer base
– Drive regional account managementn = 114
COMMENTS
7
10
18
4
Ø 10
Low export share1) High export share2)
Suppliers
Manufacturers
G INTERNATIONAL POSITIONING
64
To exploit export growth potentials the new organization "Medtech Switzerland" will support SMTI companies
• Connect different actors to
identify business opportunities
• Facilitate market exploration
and match making
• Drive target group tailored
campaigns
• Prepare targeted information
about focus markets
• Position Switzerland as a major
MedTech competence hub
• Provide extensive information
on target markets
• Provide guidance when
entering a new market and
expanding in existing markets
• Support communication via
an integrated portal, specific
events, and delegation visits
• Build-up MedTech brand and
image
Source: SMTI 2010, Medtech Switzerland
Main objectives of the Export
Platform "Medtech Switzerland" is to
bring together Swiss Medtech
supply with foreign Medtech demand
"Medtech Switzerland" is a
federal platform to promote Swiss
Medical Technology worldwide
G INTERNATIONAL POSITIONING
65
H. Outlook
66
OPERATIONS COLLABORATION & BUNDLING POSITIONING INTERN. MARKET WATCH
SMTI 2012 and beyond – Selected success factors for growth
BUSINESS MODELS INNOVATION INTERNATIONAL GROWTH
IMPROVING THE GROWTH POTENTIALS OF THE SMTI COMPANIES
• Review of current “crisis”
strategy
• Review and overhaul of
current business models for
larger companies
• Define strategic shift or
desired repositioning (i.e.
convergence or innovation
leader)
• Strengthen network
innovation beyond 20% to
maintain innovation base
• Conduct product portfolio
and R&D strategy review
• Engage in extra-industry
technology scouting
• Drive international product
launch earlier
• Engage in out-licensing (by
start-ups) to convergence
partners
• Focus on growth markets/
niche segments
• Actively search talents
globally
COMPLIANCE
• Optimize key markets
regulatory know-how
and approach
• Achieve high compliance
(i.e. zero complaint) in
all markets
• Align pricing strategy to
respond on agency
harmonization efforts
Source: SMTI 2010
• Drive for global innovation
leadership position in
promising niches
• Establish/provide supportive
CER data on key products
and markets
• Build-up value proposition
and solution orientation
• Establish proximity to
specialists/clinics
• Form stronger, early stage
alliances
• Active collaboration in IT
platform developments
needed
• Expansion of business
knowledge via increasing in-
sourcing of software
capabilities and material
science
• Track purchasing
organizations and price
pressures
• Strengthen legal
capabilities regarding
out-licensing or patent
infringements
• Master growing
international competition
and substitute products
• Expand business knowledge
via increasing in-
sourcing/recruiting of
software capabilities and
material science
• Drive rigorous cost
optimization programs
• Strengthen alliance culture
and processes
H OUTLOOK
67
Strategic key guiding principles for future growth of the SMTI at the crossroads
• Secure sufficient influx of networked innovative products to expand current product portfolio
• Ensure the ability to drive radical innovation and/or incremental innovation of products depending
on market environment
• Check technology strategy to include IP development for in- and/or out-licensing
• Adopt a high degree of network innovation, using complementary know-how pools
INNOVATIONS
• Evaluate me-too portfolio strategy for bundling possibilities in order to increase volumes and
turnover
• Shorten development cycles and time-to-peak-sales through the use of more collaborations
• Evaluate possibilities to maximize product value proposition by integrating services and creating
end-to-end solutions
COLLABORATION
& BUNDLING
• Ensure build-up of comparative effectiveness data sets to ensure access to key markets
• Build-up or ensure access to local markets to exploit opportunities in growing economies
• Check geographical out-of-pocket markets for additional growth opportunities
• Plan multiple market introductions for new products, including possible out-licensing to selected
key players in local markets
INTERNATIO-
NALIZATION
• Ensure timely switch of the strategic priorities in correlation to market movements
• Make use of national support institutions to maximize growth potential
• Emphasize customer segmentation and adopt an international account strategy
POSITIONING
Source: SMTI 2010
H OUTLOOK
68
SMTI companies have to choose their individual future R&D focus in a quickly changing business environment
INFLUENCERS FUTURE R&D FOCUS
Source: SMTI 2010
COMPANY
• Future solution offerings
• Network innovation
• Regulatory know-how
• Clinical trial design
• Patient registries
REGULATION
• Healthcare reforms
• Regulatory requirements
• Rising payer power
• Comparative effectiveness
• eHealth enabled processing
MARKET
• Patient centricity
• Bundling
• Convergence
• Global competition
• Consolidation
• New competitors
NETWORK INNOVATORS
• Leading with cutting-edge innovations
• Strengthening basic research
• Building up a high value product portfolio
• Engaging on inter-industry collaborators
• Focusing on out-licensing
• Adopting a niche-growth strategy as early mover
• Collaborate to acquire know-how
• Drive operational excellence
• Strengthen regulatory capabilities
• Establish supportive CER data
Different degrees of future product portfolio development
are possible, depending on the company strategy
RENOVATORS
• Bundling of products, services or know-how
• Exploiting the current product portfolio
• Engaging in scouting and M&A
• Driving innovation by adapting and integrating
• Collaborating within existing value chain
• Growing through volume focused exports
H OUTLOOK
69
Appendix 1: Additional Data
70
Abbreviations
Source: SMTI 2010
BAG Schweizer Bundesamt für Gesundheit m Million
bn BillionMicro-sized
companyLess than 10 employees
CAGR Compound Annual Growth Rate MPKPV regulation Regulation on clinical trials of medical products
CER Comparative Effectiveness Research NPI New product introduction
CTI/KTI Innovation Promotion Agency CTI NOGA Nomenclature Générale des Activités Économiques
CSEMSwiss Centre for Electronics and Microtechnology, Inc./Suisse
d'Electronique et de Microtechnique SAOPET Federal Office for Professional Education and Technology
DRGs Diagnosis Related Groups OsecOsec Business Network Switzerland; an association under
private law supporting Swiss foreign trade
E Expected Manufacturers Companies producing medical devices under their own brand
EMPASwiss Federal Laboratories for Materials Testing and
ResearchPMI Purchasing Managers Index
ETH/EPFEidgenössische Technische Hochschule/Ecole Polytechnique
FederalePSI Paul Scherrer Institut
EUCOMED European Medical Technology Industry Association Service providersCompanies providing specialized services to medical device
companies or for medical devices
F Forecast Small company Between 10 and 49 employees
FTE Full-time equivalent SMI Swiss Market Index
GDP Gross Domestic Product SMTI Swiss medical technology industry
GP General Practitioner SoHo Substances of human origin
ICT Information- and Communication technology SuppliersCompanies supplying major components to the medical
technology industry (and others) without having their own brand.
IT Information technologyTraders and
distributors
Companies trading in or selling medical devices, such as local
wholesalers and affiliates of national or international companies
k Thousand
71
Additional SMTI 2010 data
HEALTHCARE MARKET TREND
CHALLENGES STRATEGIC ACTIONS
INNOVATION AND SUPPORT
GROWTH EXPECTATIONS
1 2 3 4 5
SMTI 2010 REPORT DATA BASE
6
72
Healthcare market developments by company category and collaboration intensity
Source: SMTI 2010
1) n = 188 2) n = 164
DEVELOPMENTS
Higher regulatory requirements for product accreditations
Higher requirements for evidence of product efficacy
Manuf.Supp-liers Traders
Serviceprov.
COMPANY CATEGORY1)
None Medium High
1 1 2 2 1 1 1
COLLABORATION INTENSITY2)
3 2 1 2 2 3 3
Higher regulatory requirements for process compliance
Selective perception of only a few manufacturers by consumers
Increasing communication needs with authorities
Delays during product accreditation
2 2 2 1 4 2 2
4 4 2 4 5
4
4
4 4
5 4555
1 HEALTHCARE MARKET TRENDS
The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in the top 5 are listed
73
Healthcare market developments by company size and age
1) n = 189 2) n = 159
DEVELOPMENTS
Higher regulatory requirements for product accreditations
Higher requirements for evidence of product efficacy
Micro Small Medium Large
COMPANY SIZE1)
<5 y 5 y or older
1 2 1
COMPANY AGE2)
21 23 1
1 HEALTHCARE MARKET TRENDS
2 1 3
3
Higher regulatory requirements for process compliance
Selective perception of only a few manufacturers by consumers
Increasing communication needs with authorities
Delays during product accreditation
2 2
4 4
4
4
4
5555
3 3 3 1
5 5 4
Source: SMTI 2010
The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in the top 5 are listed
74
Challenges by company category and collaboration intensity
Source: SMTI 2010
1) n = 188 2) n = 164
CHALLENGES
Increasing price competition
Cost pressure from purchasers and health care institutions
Intensified national & inter-national competition
Increasing pressure to reduce production costs
Availability of skilled employees
Access to know-how
Manuf.Supp-liers Traders
Serviceprov.
COMPANY CATEGORY1)
None Medium High
1 1 1 1
COLLABORATION INTENSITY2)
3 2 2 3 3
22
4 4
4
2 CHALLENGES
Organizational issues due to growth
4
1 2
3 2
1 4 3 2 1
1 4 4
55 555 5 1
4
4
The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in the top 5 are listed
75
Challenges by company size and age
Source: SMTI 2010
1) n = 189 2) n = 159
CHALLENGES
Increasing price competition
Cost pressure from purchasers and health care institutions
Intensified national & international competition
Increasing pressure to reduce production costs
Availability of skilled employees
Access to know-how
2 CHALLENGES
Micro Small Medium Large
COMPANY SIZE1)
<5 y 5 y or older
1 1
COMPANY AGE2)
1 23
2 1
2
4 4
4 5
5
5
5
3 3
1 1
3 3
11
3 32 2
5 3 3
The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in the top 5 are listed
76
Strategic actions by company category and collaboration intensity
Source: SMTI 2010
1) n = 188 2) n = 164
STRATEGIC ACTIONS
Improving profitability
Optimizing marketing
Further development of org. structure and processes
Optimizing distribution
Strengthening product innovation
Developing new business models
Manuf.Supp-liers Traders
Serviceprov.
COMPANY CATEGORY1)
None Medium High
1 1 1
COLLABORATION INTENSITY2)
2 32
2
4
3 STRATEGIC ACTIONS
Geographical growth/ internationalization
4
3
2
5 55
5
5
4
3 3 1
1 3 5
2 4 4 3 2
1
1 4 33
1
4 3
The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in the top 5 are listed
77
Strategic actions by company size and age
Source: SMTI 2010
1) n = 189 2) n = 159
STRATEGIC ACTIONS
Improving profitability
Optimizing marketing
Further development of org. structure and processes
Optimizing distribution
Strengthening product innovation
Developing new business models
Micro Small Medium Large
COMPANY CATEGORY1)
1 1
COLLABORATION INTENSITY2)
2 2
2
4
3 STRATEGIC ACTIONS
Geographical growth/ internationalization
4
3
2
3
3
1
<5 y 5 y or older
1 1
32
3 1 3 1
33 4
5 5 5
5 3 4
5 3 5
The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in the top 5 are listed
78
Share of newly introduced products and distribution of product portfolio
n = 127
18
38
20
6
16
21
36
21
8
16
Very high proportion
(> 70%)
High proportion
(50% - 70%)
Medium proportion
(30% - 50%)
Small proportion
(10% - 30%)
Very small proportion
(0% - 10%)
Manufacturers
Suppliers
22
27
23
28 28
2423
25
`+10 years5-10 years3-5 years0-3 years
Source: SMTI 2010
SHARE OF SALES OF NEWLY INTRODUCED
PRODUCTS (SINCE 2007)
[% of answers, 2010]
DISTRIBUTION OF PRODUCT PORTFOLIO
ACCORDING TO PRODUCT AGE
[% of answers, 2010]
4 INNOVATION AND SUPPORT
79
Share of inter-industry collaborations by partner
9
9
12
13
43
88
4
24
24
28
59
81
Strategic consultants
Private research
institutes
Support organizations
IT service providers
Universitites
Manufacturers/
suppliers
Manu-
facturers
Suppliers
43
20
15
83
28
73
91
6
16
13
9
50
94
8
18
88
7
21
14
55
9
18
27
36
IT service providers
Universitites
Manufacturers/
suppliers
Strategic consultants
Private research
institutes
Support organizations
Large
Medium
Small
Micro
Source: SMTI 2010
BY COMPANY CATEGORY [% of partners, 2010] BY COMPANY SIZE [% of partners, 2010]
n = 105, multiple answers possible n = 105, multiple answers possible
4 INNOVATION AND SUPPORT
80
Share of functional collaborations
20
28
5
7
12
17
30
12
25
45
43
7
7
13
41
35
46
61
Product launch
After sales service
Training
Distribution
Marketing/sales
Product certification
Basic research
Quality control
Applied research
4
7
4
25
29
21
21
50
54
15
24
27
55
11
7
19
33
30
37
37
52
10
20
20
40
30
40
30
80
3
After sales service
Training
Distribution19
15
Marketing/sales 21
Product certification
Basic research
Quality control
Applied research 39
Product launchManu-
facturers
Suppliers
Large
Medium
Small
Micro
Source: SMTI 2010
BY COMPANY CATEGORY [% by type, 2010] BY COMPANY SIZE [% by type, 2010]
4
n = 105, multiple answers possible n = 105, multiple answers possible
INNOVATION AND SUPPORT
81
Selected sample of highly innovative, networked start-ups
No.Year
founded
University
spin-offProduct and service offering Key differentiator
Research
area
M E B
1 2007 X Tissue engineering Cutting-edge bioprinting solutions on a versatile and cell-friendly printing platform X X X
2 2009 XComputer assisted soft
tissue surgery
Real-time visualization and simulation of surgical tools and soft tissue leveraging or navigation
(similar to GPS navigation)X X
3 2008 XMicroCT services (data
analysis)
Analysis of samples or biomaterials in a reproducible and cost-efficient manner (service
provider)X
4 2004 X Virtual forensic autopsy Repeatable, observer independent, objective and reproducible forensic assessment method
(based on MRI technology)X
5 2008 X Plastic surgery simulation 3D physical web-based simulation technology (pictures uploaded to internet and simulated
surgery outcome available in short period of time)X
6 2007 Tumor removal Gel which is introduced into tumor and heated up (only locally) using magnetic field to destroy
the tumorX
7 2007 Surgical simulation High fidelity, realistic simulation including e.g. instrument force feedback system X X
8 1996 Robotic rehabilitation therapy Innovative new rehabilitation therapy products leveraging motion sequence X X
9 2003 Injectable medical devices Monophasic reabsorbable gels (a genuine revolution in the world of aesthetic dermatology) X X
10 2006 Medical diagnostic tests Inexpensive, portable and simple-to-use quantitative laboratory-quality immunoassays X X
11 2004 Artificial muscle technologyArtificial muscles incorporated in devices which are then deployed to mimic the action of
sphinctersX X X
12 2007 XStroke and brain injuries
diagnosis
Optical spectroscopy & imaging based on near infrared spectroscopy (NIRS) which is a
paradigm shift from pulse oximetryX X
13 2008 X Devices for medical scanningSystem of carefully positioned polystyrene pearls and inflatable air chambers to e.g. reduce
MRI timeX
14 2004 XAutomated and miniaturized
systems
New particles handling concept – resolving in a unique way the particles agglomeration and
therefore opens new perspectives in bio-assays in micro-fluidic environment X X X
15 2003 XMicro-systems for medical
devices
Contact lenses with integrated eye pressure sensor. An external system sends RF power to
the sensing site and receives in return measurement information (similar to RFID)X X
16 2008 X Catheter system Innovative system to treat cardiac fibrillation using two different sensors X X
17 2009 X Therapy system Bed in constant motion to avoid e.g. decubitus ulcers X X
4
Overview of selected companies
Source: SMTI 2010
Legend: Research areas – M: Mechanical engineering, E: Electronics, B: Biotech
INNOVATION AND SUPPORT
82
CTI/KTI initiatives are well known – The use of knowledge transfer institutions is limited
1) Suppliers and manufacturers
2526
53
77
Platform &
Network
Promotion
Innovation
Check
Start-up
Promotion
R&D Project
Promotion
n = 81, multiple answers possible
27
4
69
No Do not know any
Transfer Institutions
Yes
n = 154
KNOWLEDGE ABOUT CTI/KTI INNOVATION
PROMOTION PROGRAMS1)
[% of respondents that know CTI/KTI, 2010]
USE OF KNOWLEDGE AND TECHNOLOGY
TRANSFER INSTITUTIONS1) [%, 2010]
Source: SMTI 2010, CTI/KTI
4 INNOVATION AND SUPPORT
83
50
Ø 23
> 50
12Ø 23
10-50n = 16
19
Ø 36
< 5
Companies of all sizes use CTI/KTI services and support
COMMENTS
• If analyzed by company turnover, the
distribution of CTI/KTI users roughly
represents the total survey sample
• One major exception are manufacturers,
where companies with more than CHF 50m in
turnover are overrepresented– 50% of manufacturers that use CTI/KTI
programs have more than CHF 50mturnover
– But only 23% of companies in the sample have a turnover of more than CHF 50m
• However, these findings should not be over-
interpreted, as– larger manufacturers usually have several
R&D projects running in parallel– one CTI/KTI supported project therefore
only represents a fraction of all R&D projects
– early CTI start-ups are not covered by this report
DISTRIBUTION OF CTI/KTI USERS ACCORDING TO
COMPANY TURNOVER [%, 2010]
Source: SMTI 2010, CTI/KTI
CHF m
19Ø 18
5-10
6Ø 3
> 50
56Ø 56
< 5
32
Ø 24
10-50
6Ø 17
5-10CHF m
SUPPLIERS
MANUFACTURERS
n = 16
Distribution of total SMTI sample, n = 105
4 INNOVATION AND SUPPORT
84
Distribution of CTI/KTI users according to company age shows little deviation
1) Suppliers and manufacturers, CTI/KTI start-up support is not represented
COMMENTS
• If analysed according to company age, the
distribution of CTI/KTI users shows little
deviation from the survey average
• Very young companies (< 5 years) account
for 15% of CTI/KTI users – slightly more
than their 12% share of the survey
• Young companies (5 to 10 years) make up
24% of CTI/KTI users – slightly less than
their 26% survey share
• Older companies (> 10 years) account for
61% of both CTI/KTI users and share of
overall survey participants
DISTRIBUTION OF CTI/KTI USERS ACCORDING TO
COMPANY AGE1) [%, 2010]
Source: SMTI 2010, CTI/KTI
15
Very young
(< 5 years)
Ø 12
n = 41= Distribution of total sample n = 137
24
Young
(5 to 10 years)
Ø 26
61
Older
(> 10 years)
Ø 61
4 INNOVATION AND SUPPORT
85
GROWTH EXPECTATIONS BY SEGMENT
[% of answers]
GROWTH EXPECTATIONS BY COMPANY SIZE
[% of answers]
Growth expectations by segment and company size
10
9
13
9
16
9
12
11
Manufacturers
Suppliers
Service Providers
Tracers and
distributors
20112010
8
8
9
13
7
11
11
14
Large
Medium
Small
Micro
n = 215
Source: SMTI 2010
5 GROWTH EXPECTATIONS
86
Results are based on 252 participating companies –A solid database
Manufacturers
Suppliers
Companies that produce
medical devices under
their own brand
Companies that supply
major components to the
medical technology
industry without having
their own brand
Usually these companies
also supply components
to other related industries
Services
providers
Traders and
distributors
Companies that
provide specialized
services to medical
technology companies
or for medical devices
3.9%
Companies that trade or
sell medical
devices, such as local
wholesalers and
affiliates of national or
international companies
n = 227, the other survey participants did not indicate their category
14%
24%
37%
25%
Source: SMTI 2010
Distribution of participating companies according to category
6 SMTI REPORT DATABASE
87
The SMTI 2010 survey sample represents the whole industry fairly well
24%
68%
> 50m
8%
11-50m
< 11m
Source: SMTI 2010
ACCORDING TO COMPANY TURNOVER
[CHF]
ACCORDING TO COMPANY SIZE
[number of employees]
7%
32%
40%
Large
(250 and more)
Medium
(50 to 249)21%
Small (10 to 49)
Micro
(< 10)
Distribution of participating companies according to turnover
6 SMTI REPORT DATABASE
88
Appendix 2: SMTI Knowledge Base
89
Three strong parties joined forces to examine the SMTI in 2010
• About Medical Cluster
Medical Cluster brings together manufacturers, suppliers, service
providers and research and development companies from all over
Switzerland. We offer platforms and assistance to ensure that
medical technology in Switzerland continues to enjoy the optimal
conditions for growth. The main focus is on supporting innovation,
knowledge exchange, technology transfer, and exports
• About Roland Berger Strategy Consultants
The Roland Berger Pharma & Healthcare Competence Center
supports life-science players in seizing opportunities and mastering
challenges. Besides traditional consulting areas such as marketing,
organization, cost-cutting and M&A, we also provide input from our
intensive analysis of current market trends and developments
• About Deloitte
Deloitte is one of Switzerland's leading professional services firms,
offering services in Audit, Tax, Consulting and Corporate Finance.
We are investing heavily and for the long term in Switzerland. We
currently have more than 1000 professionals operating out of 7
cities: Basel, Bern, Dübendorf, Geneva, Lausanne, Lugano and
Zurich
SHARING TOP EXPERTISE
Source: SMTI 2010
90
This is the fifth report on the SMTI
2005 2006 2008 2009 2010
Wissensbasierte Cluster
in der Schweiz: Realität
oder Fiktion? – Das
Beispiel der Medizinal-
technikbranche
Herausforderungen und
Chancen der Schweizer
MedTech Branche
SMTI 2008 Schweiz – weiterhin
führend in
Medizintechnik
Quick-Check on SMTI
2008
SMTI 2010
• MedTech Industry
• Innovation
• Knowledge based
actors
• Structure and cluster
of the SMTI
• MedTech Industry
• Challenges and
opportunities
• MedTech Industry
• Challenges and
strategic actions
• R&D
• MedTech Industry
• Growth expectations
• Challenges and
strategic actions
• MedTech Industry
• Challenges and
strategic actions
• Development of
healthcare market
• R&D
Dr. Patrick Dümmler Dr. Patrick Dümmler
Beatus Hofrichter
Dr. Patrick DümmlerBeatus HofrichterRené WillhalmPeter Biedermann
Beatus HofrichterRené Willhalm
Dr. Patrick DümmlerBeatus Hofrichter
ETH Zürich Helbling Medical Cluster
Helbling
Roland Berger
Helbling Medical Cluster
Roland Berger
Deloitte,
CTI/KTI
Source: SMTI 2010
DESCRIPTION
FOCUS
AUTHORS
JOINTED
PARTIES
REPORT
91
An in-depth survey, selected interviews and additional advisory board reviews form the basis of the SMTI 2010 Report
OBJECTIVE METHODOLOGY APPROACH
Source: SMTI 2010
• The SMTI 2010 Report
– Aims to embrace the widest
industry sample possible
– Provides an up-to-date micro-
and macro-economic overview
of this important industry
– Reflects on the trends,
challenges and priorities along
the SMTI value chain
– Highlights and interprets
changes in the industry
compared to the situation
reported in the "SMTI 2008
Report"
• A questionnaire-based approach
with six focal points was used
– General company data and
profile
– Business development
– Challenges along the MedTech
value chain
– Management response
– Developments in the
healthcare market
– Innovation, R&D and
collaboration
• Direct market insight and current
management thinking was
accessed through an Advisory
Board
• Additional subject matter
expertise interviews and desk
research helped to complete the
report
• Under the umbrella of the
Medical Cluster, three strong
parties joined forces to carry out
a sound industry analysis
• The results are comparable with
other studies on an international
level, as internationally
recognized definitions are used
• The intention is to update the
report every two years, allowing
tracking of SMTI trends and
issues
92
The publisher of the SMTI 2010 Report and your main contact
• Peter Biedermann is Managing Director of Medical Cluster in Berne
• He is author of various publications on the Swiss Medical Device Industry and co-author of the "Swiss MedTech Report 2008"
• Within the national Swiss Life Science Marketing Alliance, he is in charge of the Medical Device Industry
• Mr. Biedermann is involved in various innovation programs in Switzerland, such as ManuFuture-CH
• Prior to joining Medical Cluster he was Director of the innovation agency innoBE AG in Berne. Here, he was responsible for various
management consulting projects in different industries, including machining, micro-technology and microelectronics
• Peter Biedermann studied Chemistry and Environmental Sciences at the Universities of Applied Sciences in Berne and Basel
PETER BIEDERMANNMedical Cluster
Mail: peter.biedermann@medical-cluster.ch
Tel.: +41 76 324 31 15
The publisher and the authors would like to thank the following persons and organizations:
• The SMTI Advisory Board; the subject matter experts; René Willhalm; Celinda Hampe (Medical Cluster); Aleksandar Ruzicic, Roland Mathys, Georg Thomas, and Sara Schaufelberger (all Roland Berger); Andrin Waldburger, Robert Reppas, Lukas Lang (all Deloitte) for their input and support in preparing the SMTI 2010 Report
• CTI/KTI for their financial support in conducting and publishing this report
93
The authors of the 2010 SMTI Report
• Dr. Patrick Dümmler is Project Manager at Roland Berger
Strategy Consultants in Zurich and the designated Managing
Director of the Export Platform Medtech Switzerland (starting
on September 1st)
• He has published over 65 articles and books, including
numerous reports about the medical devices industry, e.g. the
2006 and 2008 SMTI Reports
• He has large experience from various consulting projects within
the medical devices industry
• Dr. Patrick Dümmler studied Economics at the University of
Zürich and completed his PhD at the ETH Zurich. His PhD
thesis was entitled "Knowledge-based clusters in Switzerland:
Reality or fiction? The example of the Medical Devices
Industry" (2005)
Source: SMTI 2010
DR. PATRICK DÜMMLERRoland Berger Strategy Consultants
Mail: patrick.duemmler@medtech-switzerland.com
Tel.: +41 76 532 53 16
• Beatus Hofrichter is a Senior Manager in Deloitte Consulting –
Life Science practice in Zurich
• He is co-author of the "Swiss MedTech Industry 2008 Report"
and the 2006 Helbling Report "Challenges & Opportunities of
the Swiss MedTech Industry"
• He has more than 10 years of consulting experience in a
variety of industries, predominately in the biotech, chemicals,
medical devices and pharma
• Beatus Hofrichter worked at Helbling Management Consulting
AG, KPMG/BearingPoint Consulting, and Cilag AG
International (a Johnson&Johnson Company)
• He is a specialist in strategy, business transformation and
operational excellence
BEATUS HOFRICHTERDeloitte Consulting AG
Mail: bhofrichter@deloitte.ch
Tel.: +41 79 254 09 68
94
Renowned industry leaders and subject matter experts supported the SMTI 2010 Report
9
4
Gilbert Achermann
Chairman of the Board Straumann
Christoph Eigenmann
Business Unit Director - DePuy Spine DACH
Richard Fritschi
CEO Ypsomed
Roland MartiCEO B. Braun Medical Schweiz
Lutz-P. NolteHead of the CTI MedTech
Initiative
Eric Perucco
CEO Stryker Osteonics Switzerland
SMTI 2010 – ADVISORY BOARD SMTI 2010 – SUBJECT MATTER EXPERTS
Stefan BlumDirector BB MedTech Fund
Bellevue Asset Management AG
Martin BoppSection Start-up & Entrepreneurship CTI MedTech
Federal Department of Economic Affairs (DEA)
Sonja KepplerInvestment Manager EPS Value Plus AG
Pasqual KyburzMBA Graduate at ETH Zürich, MTEC
Erwin LocherDirector MedTech Switzerland
Patrick RothDirector Competence Center Medical Technology (CCMT)
Dr. Margit WidmannHead of Medical Device Division Swissmedic
95
Input on thought leadership – Further reading1)
9
5
Trends in European
health care – How to
create value in a
dynamic environment
SwissDRG – Chancen
und Risiken für
Schweizer Spitäler
Strategische Möglichkeiten
dank eHealth – Neue
Angebote, neue
Wettbewerber
Pharma at the
crossroads – Choosing
directions in a trans-
forming healthcare world
DELOITTEMEDICAL CLUSTER ROLAND BERGER
The future of the Life
Science industries:
Transformation amid
rising risk
2010 Survey of Health
Care Consumers in
Switzerland:
Behaviors, attitudes
and unmet needs
Destination 2025 -
Future of the Medical
Device Industry
The future of the Life
Science industries:
Aftermath of the
global recession
1) These publications can be obtained upon request from the respective parties
Source: SMTI 2010
Medical Cluster
Booklet 2009
Umfrage über die
Bedürfnisse nach
Exportunterstützung
Exportplattform
Medtech Switzerland
Medical Cluster
Booklet 2011
96
How to order additional copies
An additional copy of this report can be ordered on
www.medical-cluster.ch
at the price of CHF 390.-
Please note that no part of this report may be reprinted, sold, redistributed, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher and the authors.
1
"A4rb
_sta
ndar
d"
–20100111
–do n
ot dele
te this
text
obje
ct!
DRAFT, AUGUST 17 –NOT to be published
The Swiss Medical Technology Industry 2010 Report – "MedTech at the Crossroads"
97
Disclaimer
No part of this publication may be reprinted, sold, redistributed, stored in a retrieval system or transmitted in any form by any means, electronic,
mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher and the authors.
This report was written in the summer of 2010 involving 252 companies in the field of medical devices in Switzerland. It makes use of the database of the
Medical Cluster, Advisory Board input, additional expert interviews and desk research. The statistical data presented reflects the opinion of the
participating companies at the time of the data gathering (April to May 2010) and may therefore not reflect the current market environment at the time of
reading.
The parties involved in the study confirm that the collection, analysis and interpretation of all data was carried out carefully and anonymously. This
publication contains information in summary form and is therefore intended for general guidance only. The publisher and the authors cannot accept any
responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication
© All rights relating to this publication are the exclusive property of the publisher, authors and their respective companies (Medical Cluster, Roland
Berger AG Strategy Consultants, Deloitte, Innovation Promotion Agency CTI)
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