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Growth opportunities for medical device outsourcing in Malaysia

Dato’ Hans Brenner Executive Chairman and Board Member, Small Bone

Innovations Asia Pacific Sdn Bhd CEO of GMMI Sdn Bhd

6/17/2012 All rights reserved 1

Content

- Market overview MEDTECH global, Asia

- Growth drivers and major growth segments

- Trend of outsourcing to Asia

- Contract manufacturer point of view

- Customer point of view


Global vs. APAC: The New Frontier


Growth drivers for health care in

Asia

> Fast aging Population > Increasing wealth > Funding and health insurance system available > Surgeons are much better trained in the meantime

> Outsourcing to Asia - Main reasons: reduce time to market; focus on core competencies; access to low cost supply base; entry into new markets; augment R&D; rationalize complex operations. “Without doubt, outsourcing is here to stay. The value of the medical device outsourcing sector is around $17 billion globally “(Source CLINICA).


The Healthcare Industry Has Been Growing in Asia on

Average by 14-16% Annually Because of Rising Domestic

Demand and Increased Outsourcing

Rising domestic demand – the pull factor

Young populations with increasing disposable income

Aging population requiring more expensive healthcare treatment

Increasing Contract Manufacturing, Contract Research and Medical Tourism – the push factor

Outsourcing trend – transfer of manufacturing and R&D from developed countries to Asia has only just begun

3.8

3.3

2.8

2.4

2.0

1.7

0

1

2

3

4

2006 2007 2008 2009 2010 2011

3.8

3.3

2.8

2.4

2.0

1.7

0

1

2

3

4

2006 2007 2008 2009 2010 2011

Revenues

($bn)

2006-2011 CAGR: 17.7%

Medical outsourcing to Asia

(Source: Broker’s research report)

14449

327

61 5

587

2,165

483

60 85 58 5

693 690

0

500

1,000

1,500

2,000

2,500

China India Japan Korea Singapore 5 Asian

Countries

US

2007E Incremental annual demand by 2015E

(US$ bn)

Healthcare Expenditure


Medical Device Growth Areas

Cardiovascular Devices

Orthopaedic Devices

In Vitro Diagnostic Devices

Electro medical Equipment

Wound care products

Home-healthcare products

High Technology Medical Devices

Contract Manufacturing Organizations

Contract Research Organizations

Most growth areas represent a Large Cross Section of the Malaysian Focus Areas


Contract manufacturer point of view

- Capabilities

- Markets

- Pre requisites


Capabilities

Precision Molding & Extrusion

Assembly & Packaging

Box building/Electronics

CNC machining

R & D / Process Engineering

Capabilities

Medical Quality

Control / Regulatory

ISO 3485/FDA

TOTAL MEDICAL

DEVICE

SOLUTIONS

Technologies


Markets

Regional strategy – questions to answer Malaysia as home market Focus markets Asean, China and India first? Other emerging markets such as South America Developed markets Australia, Japan, EU, US


Major Foreign Medical Devices Companies in Malaysia

4

New Local Companies and MNC’s are Considering

Malaysia as a Home Every Day – potential customers 6/17/2012 All rights reserved 10

Example 2011E Orthopedic Market (USD)

United States

Europe

APAC

Americas Middle East

APAC:

$3.4 Billion

Growing >5%

Annually

Total = $43 Billion

Source: Viscogliosi Bros., LLC

APAC Ortho Market Outpacing ROW Driven by strong Population,

Technology, Education and GDP Trends 6/17/2012 All rights reserved 11

Orthopedic Disease Demographic

Large Bone & Joint 60%

Spine 25%

SB&J 10%

CMF 5%

25 Yrs Ago Now 15 Yrs from Now

“Specialty Medical Products”

“Orthopedics” “Musculoskeletal Disease Specialization”

“Grandparents” Hip & Knee

“Weekend Warriors”

“Everyone” Movement = Living

Large Bone & Joint

Spine

SB&J - 5%

CMF - 5%

71%

19%

Large Bone & Joint 85%

Spine 9%

SB&J 3%

CMF 3%


Top 5 Why Focus on Orthopedics?

1. #1 Most Common Causes of Physical Disability & Severe Long-term Pain in the are Musculoskeletal Related Conditions

2. #1 Reason For Doctor Visits Musculoskeletal Impairment

3. #1 Chronic Condition Reported by the Elderly in the is Arthritis

4. Arthritis is a More Frequent Cause of Activity Limitation Than Diabetes, Cancer or Heart Disease

5. Over ½ of the Population Over 65 Years of Age Has a Chronic Musculoskeletal Condition

100% of Population Living an Average Life Expectancy Will Suffer From an Orthopedic Injury or Musculoskeletal Disorder

Source: AGV (USA Data)


Ortho Cluster GmbH' Tuttlingen

Aesculap – The “Anchor Tenant”

Spawned 200+ Suppliers / Competitors

Attracted MNC’s to Establish Operations

◦ Spine Solutions, Inc ◦ Small Bone Innovations, Inc ◦ Paradigm Spine, LLC ◦ Smith & Nephew ◦ Syntes

Employment Growth 5x German Avg

Leader In World Wide Manufacturing Standards

The Orthopaedic Industry of Tuttlingen Provides its Workers with

Quality of Life far Exceeding EU and German Averages 6/17/2012 All rights reserved

(eg.) Ortho Cluster Northern Corridor, MY

Eco-system Has Evolved Over 40 Years

◦ Experience in dealing with large and small as well an foreign and local corporations.

◦ Broad range of engineering-based baseline skills.

◦ Businesses are geared towards internationally recognized standards.

◦ Creation of an ideal base for the design, development and manufacturing of “intelligent” life science technologies.

Readily Available Skilled and Industry-Relevant Workforce

◦ Setting up of Centers of Excellence to facilitate collaborative efforts

Excellent Market Outreach via Experienced Logistics Network

◦ The logistics sector has been a key enabler of trade for the NCER, along with an established cluster of support services.

The Orthopaedic Industry of Malaysia Would Enable “The Malaysia

Brand” to be Recognized on a Global Scale

Source: 2011 Northern Corridor Implementation Authority

6/17/2012 All rights reserved

Plastics Prototyping Clean room moulding ISO 7/8 Injection moulding Precision Extrusion

(materials e.g. PEEK, PE, PP, PVC, PA, TPE)

Precision LSR moulding Injection mould fabrication Blow film extrusion Thermoforming

Manufacturing Fully-automatic assembly Semi-automatic assembly Manual assembly (cell based) Clean room assembly

e.g. Capabilities – Single used medical device players in Malasysia


Packaging Form-Fill-Seal Blister pack Pouch pack

Sterilization (acc. to ISO 11135/11137) EtO (Ethylene Oxide) Gamma Irradiation

R&D / Designing Rapid Prototyping Product Improvements New Product Development Autocad, Unigraphic, Solidworks & Cimatron

e.g. Capabilities – Single used medical device players in Malasysia


PACKAGING

STERIL- IZATION

Opportunities in Malaysia

MANUFACTURING

QUALITY

CONTROL R & D

TRAINING

CLINICAL

TRIALS

IMPORT –

EXPORT

Malaysia Has a Myriad of Opportunities to Exploit in Development of a Medical device outsourcing Cluster

BIO TECH


Pre requisites

Knowing the target market – MOST IMPORTANT! Competitive products/components (Price, quality) – FOCUS! ISO 13485 and CE mark, SFDA, TGA etc. Supply chain Sales team to build distribution network Marketing back up Exhibitions and congresses Funding


Customer point of view

What has Malaysia to offer for potential contract manufacturer customers?


Advantages of Malaysia

Asian footprint (service business from India thru Japan) Better IP protection Extensive high-tech electronics and medical device environment Lower labor cost (Europe & NA) Scalability (growth opportunity for customers) – local market as test market Local funding available for R&D investment to accelerate new product development English!


Summary

Population Dynamics – ↑ Population Age 65+

Growing Current Demand & Long-Term Expansion in the region and globally

Fragmented markets Penetrate & Capture Market Share

Majority of Market is Controlled by Small and medium Players

First Mover Advantage Available to Capture Opportunity

Move Now as Market Forces Converge

Opportunity to benefit from outsourcing trend to Asia


Thank you


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