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Swiss medical technology industry 2010 report
 

Swiss medical technology industry 2010 report

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This report provides an industry insight of the Swiss MedTech Industry based on a sample basis of >250 participating companies. Focusing on Growth, Challenges, Management Actions needed, Innovation, ...

This report provides an industry insight of the Swiss MedTech Industry based on a sample basis of >250 participating companies. Focusing on Growth, Challenges, Management Actions needed, Innovation, Product Positioning. It provides comparison to the SMTI 2008 data.

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    Swiss medical technology industry 2010 report Swiss medical technology industry 2010 report Presentation Transcript

    • The Swiss Medical Technology Industry2010 Report – "MedTech at the Crossroads" 1
    • On the mind of the SMTI CEO community "The MedTech business of non-reimbursed "The MedTech pioneer era is products has started to reach a plateau in over, the industry is now mature traditional markets. The business is now cyclical and competition is global." and growth is not endless." "Our business model will change – We need to grow from a simple box-mover to a full "IP protection and proprietary solution provider." systems have become essential to secure market shares." “Pace of innovation and changes in health care system are faster than a decade ago.” "The crisis has demanded to set "Market access management is key for priorities and to constantly remain growth – start-ups should engage in out- focused on optimizing these licensing deals to Big MedTech." priorities."Source: SMTI 2010, Advisory Board 2
    • SMTI 2010 – At the crossroads to adapt current business modelsIn 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 companys 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 3
    • Contents PageManagement Summary 5A. State of the MedTech Industry 9B. Trends and Challenges 24C. Strategic Actions 29D. Winning through Innovation 34E. Collaboration and Bundling 44F. International Opportunities and Threats 51G. International Positioning 59H. Outlook 65Appendix 1: Additional Data 69 Abbreviations 70Appendix 2: SMTI Knowledge Base 88 4
    • Management Summary 5
    • MANAGEMENT SUMMARYManagement summary (1/2)This report was written in the summer of 2010 involving 252 companies in the field of medical devices in Switzerland. It makes use of thedatabase of the Medical Cluster, Advisory Board input, additional expert interviews and desk research • 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 CHF • 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 abroadSource: SMTI 2010 6
    • MANAGEMENT SUMMARYManagement summary (2/2) • 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 • 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 well1) 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 sampleSource: SMTI 2010 7
    • MANAGEMENT SUMMARYThe house of MedTech by 2012 – Our working hypotheses1) SMTI PRODUCT VIEW MARKET VIEW COLLABORATION & INTERNATIONALI- INNOVATION POSITIONING BUNDLING SATION • Above-average growth • Price pressure leads • Growth in international • Smaller companies lack expectations due to an companies to push markets correlates with export strength due to innovative, young product bundled offerings in order innovation shortage of know-how and portfolio or best in class to maintain their turnover commercial co-operations • Success in emerging products level and market share economies is highly • Sound, long-term patient • Higher cost pressure leads • Companies that focus on correlated to strong outcome data will ensure to a shift from radical bundling tend to reduce regulatory affairs positive sales impact in innovation towards their R&D expenditures capabilities mature markets incremental innovation in • A bundling strategy • Healthcare system • Improved market established/mature favours collaboration within changes and arising orientation becomes a segments the same value chain for opportunities propel export priority due to an increase • Companies that focus on incremental innovation levels of suppliers and of competitiveness network innovation can manufactures amongst providers and • Demand of buyers will expect above-average pressures from payers drive “solutions”, forcing growth companies to change their business models1) Are addressed in chapters D-GSource: SMTI 2010 8
    • A. State of the MedTech Industry 9
    • A STATE OF THE MEDTECH INDUSTRYSwitzerland is among the global hotspots for MedTechINTERNATIONAL MEDTECH FOCUS [% of respective total]1) COMMENTS 1,1 Switzerland • Switzerland possesses an active medical 0,3 Germany technology industry that can rely on a strongEmployment 0,2 UK network of related companies and institutions EU that create an ideal breeding ground for the 0,2 USA industry (cluster) 0,2 • Compared to other countries the relative 1,9 domestic share of the SMTI is significantly higher 0,7 • Remarkable – and in line with several otherGDP 0,6 Swiss industries – is the high relative share of 0,5 exports reflecting the international strength of 0,5 Swiss MedTech products 5,0 1,4Exports 1,7 n.a. 2,81) Data from 2008 or, where not available, from 2007Source: SMTI 2010, Destatis, Eucomed, Eurostat, UK National Statistics 10
    • A STATE OF THE MEDTECH INDUSTRYSwitzerland is highly attractive for international companies –Top 10 companies employ around ¼ of SMTI employees1) 1 Year sales R&D Sales/ Head- Employees in Sales R&D/sales No. Company Sub-section of market growth expenses employee quarters Switzerland [CHFm] [%] 3) [%] [CHFm] [CHFk] 1 Synthes Orthopedics USA 2900 3523 6 175 5 329 Roche 2 In-vitro diagnostics CH 1750 10055 4 987 10 387 Diagnostics J&J 3 2) Orthopedics USA 1400 24492 2 1830 7 556 Medical 4 Zimmer Orthopedics USA 1150 4250 -1 213 5 518 5 Sonova Hearing systems CH 1030 1500 20 87 6 221 6 Ypsomed Injection systems CH 1000 254 -8 32 12 212 Active and passive implants, 7 Medtronic USA 900 15151 8 1406 9 399 vascular diseases and diabetes 8 B. Braun Orthopedics, hospital aids DE 840 5992 6 207 3 152 9 Straumann Dental implants CH 800 736 5 39 5 339 10 Stryker Orthopedics USA 600 6977 0 349 5 375 ∑ 12020 Ø 4 Ø 71) 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 diagnosticsSource: SMTI 2010, Annual reports, Companies press offices, Factiva, Oanda 11
    • A STATE OF THE MEDTECH INDUSTRYSwitzerland is a strong medical technology cluster –Several organizations and institutions support the industry Greater Zurich COMMENTS Basel Area Area • Switzerland has a strong medical technology network, supported by several organisations and institutionsBerne Capital • Regional support organisations are e.g.Area – Basel Area – Berne Capital Area – Bio Alps – Biopolo TicinoBioAlps – Greater Zurich Area • National institutions are e.g. – CTI/KTI – FASMED – Medical Cluster – Medtech Switzerland – Osec Biopolo – SIX Swiss Exchange Ticino – Swiss Life Science Marketing Alliance Location of suppliers Location of manufacturersSource: SMTI 2010, relief swisstopo 12
    • A STATE OF THE MEDTECH INDUSTRYThe SMTI has a strong home market – Investments in high-classmedical infrastructure meets patients demandsSWISS HEALTHCARE EXPENDITURES [CHF bn per year] COMMENTS • Continuous investments in up-to-date medical infrastructure leads to rising healthcare expenditures – during the last ten years by CAGR 63,3 nearly 50% 4,0% 61,0 58,1 • The CAGR of healthcare expenditures of 55,2 52,8 4.0% is significantly higher than the 51,0 52,0 47,4 49,3 respective GDP growth of 1.1% 45,6 42,8 FURTHER OBSERVATIONS • 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 2000 2001 2002 2003 2004 2005 2006 2007 2008E1) 2009E 2010F1) adapt the business model accordingly1) E = Expected 2) F = ForecastSource: SMTI 2010, BAG, BfS, Healthcare Monitor 2009, KOF 13
    • A STATE OF THE MEDTECH INDUSTRYThe established SMTI value chain is highly cross-institutional1)Basic Applied Suppliers Manufacturers International Customers andresearch research sales stakeholdersBasic research for Developing Highly specialized Manufacturing Worldwide sales of Worldwideradical product and prototyping and internationally industry with broad Swiss medical customers andinnovations supported by sought-after range of high-tech technology products stakeholders, e.g.• National • CTI/KTI MedTech suppliers in key products, e.g. by traders and • Patients, esp. in universities and • R&D programs technologies, e.g. • Active- and non- distributors out-of-pocket international e.g. ManuFuture- • Information- and active implants supported by markets knowledge CH Communication • Anaesthetic and • Company • Individual networks • Universities and technology (ICT) respiratory affiliates hospitals, hospital• Five university universities of • New materials, devices • Export Platform chains and hospitals in applied sciences, surface • Dental Medtech purchasing Geneva, incl. technology technology • Electro- Switzerland associations Lausanne, Berne, transfer • Robotics and mechanical • Osec together • Healthcare Basel and Zurich organizations nanotechnology equipment with its Swiss professionals• National research • Specialized • Micro-technology • Hospital hardware business hubs • Diagnostic organizations like companies, e.g. • Metal-, plastics-, • Diagnostics abroad laboratories PSI and EMPA for contract and ceramic • Ophthalmology • Swiss pavilions at • Research• National research engineering processing • Reusable and international laboratories programs • International • Automation and single-use exhibitions/fairs • Key Opinion• European knowledge assembly instruments • International Leaders (KOLs) framework networks • Tool and mould • Technical aids for industry • Reg. authorities programs manufacturers disabled associations • Certification support1) Service providers, depending on their specialization are part of any of the value chain building blocksSource: SMTI 2010 14
    • A STATE OF THE MEDTECH INDUSTRYSMTI manufacturers are evenly segmented across the differentindustry categoriesMANUFACTURERS BY CATEGORY [%, 2010] COMMENTS • The manufacturing base of SMTI is segmented into 16 categories, ranging from a Hospital share of 16% for hospital hardware to 1% forOthers1) hardware biological products 16% 19% • SMTI manufacturers exhibit a broad technological knowledge base andReusable Dental diversificationinstruments technology – Bulk risks are reduced 5% 14% – Benefits interdisciplinary R&DRadiotherapy 5% collaborationsdevices – Strengthens network innovationDisposable 6%items 11% Inactive FURTHER OBSERVATIONSTechnical aids 7% implantsfor disabled 8% 8% • There exists a high degree of collaborationIn-vitro Electro- amongst suppliers, manufacturers, anddiagnostics mechanical academia to – broaden the offering scopen = 320 – obtain key skills and know-how1) Others include, in descending order: lab equipment, ophthalmology, patient aids, anaesthetic and respiratory technology, active implants and biological productsSource: SMTI 2010 15
    • A STATE OF THE MEDTECH INDUSTRYSuppliers and service providers support the MedTech industry withessential know-how within augmentable value chain processesSUPPLIERS BY CATEGORY [%, 2010] SERVICE PROVIDERS BY CATEGORY [%, 2010] Components,Others1) Financing HR systemsAuxiliary material, 11% 5% Analytics ITgreen ware 1% 5% 25% 18% 30%Electronics 7%Surface 8%treatment 19% 20%Machines, auto- 11% Metal Engineering,mated devices processing planning, 26% 13% Management design Plastics consulting processingn = 410 n = 410• The SMTI supplier base is broadly specialized, • IT and management consulting are the most although components, systems and material prominent categories among service providers processing contribute to more than 55% • Support SMTI with growth capabilities1) Others (in descending order) include: medical packaging, measuring, ceramics and sterilizationSource: SMTI 2010 16
    • A STATE OF THE MEDTECH INDUSTRYManufacturers and traders/distributors are highly focused onmedical devices salesSHARE OF TURNOVER [%, 2009] COMMENTS • Many SMTI companies are not exclusively 100 100 100 100 focused on medical technology – the share 15 of sales to other industries and consumers is 19Turnover from 39% 47other products 56 • Traders and distributors as well as suppliersand services Ø 61 show an increased focus on MedTech compared to 2007 81 85 • Suppliers are more diversified in theirTurnover from 53 44 customer portfoliomedical devices FURTHER OBSERVATIONS Suppliers Manu- Traders Service facturers and providers • A high focus on medical devices is needed in distributors order to meet the industry specific traitsTurnover and sales requirementsfrom medical • On the whole, SMTI remains unchanged 39% 84% 80% 59% Ø 65devices in since 2007, indicating that consolidation has2007 not been triggered yet by the financial crisis • For many suppliers from other industries,2009 n = 212 2007 n = 122 MedTech became highly attractiveSource: SMTI 2010 17
    • A STATE OF THE MEDTECH INDUSTRYManufacturers form the backbone of the industry –Average turnover per company is CHF 68 millionAVERAGE COMPANY TURNOVER1) [CHF m, 2009] COMMENTS • The SMTI has a manufacturer centric market model 68 • 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 22 FURTHER OBSERVATIONS • Future sustainable turnover is mainly 11 determined by the following influencers 3 – Overcome critical mass – Achieve higher expertise to maintain Suppliers Manu- Traders and Service compliance facturers distributors providers – Anticipate power shift towards payers – Meet changes in sourcing strategies ofn = 171 payers1) Only with medical devices or components for medical devicesSource: SMTI 2010 18
    • A STATE OF THE MEDTECH INDUSTRYManufacturers and suppliers provide the highest employment,accounting for 92% of the total SMTI workforceDISTRIBUTION OF EMPLOYEES [%, 2009] COMMENTS • The surveyed companies employ around 27% of the total SMTI sector workforce 56% • Traders, distributors and service providers account for 8% of the surveyed workforce • Across all SMTI firms approximately an average of 59 people are employed 36% – 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 5% – 75% employ less than 50 employees 3% – 42% employ less than 10 employees Suppliers Manu- Traders and Service facturers distributors providersn = 199Source: SMTI 2010 19
    • A STATE OF THE MEDTECH INDUSTRYAverage turnover was influenced by high staff levels – This led toan underperformance of turnover per capita for manufacturersAVERAGE TURNOVER PER EMPLOYEE AVERAGE GROWTH IN NUMBER OF EMPLOYEES[CHF k] [% change vs. previous two years] 2008/2009 Ø = +10% 2006/2007 Ø = +20% 244 11Suppliers 246 7 530 30Manufacturers 465 5Traders and 683 15distributors 818 12 301 2007 n = 185 18 2007 n = 186Service providers 287 2009 n = 163 21 2009 n = 164• 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 & salesSource: SMTI 2010 20
    • A STATE OF THE MEDTECH INDUSTRYPutting past SMTI growth expectations into perspective –Adjustments were taken fast and early in the downturnGROWTH EXPECTATIONS FOR 2008 AND 2009 [%] COMMENTSGrowth Share of responses • In 2008, SMTI expected an average growth ofexpectations 100% 6%. 77% of CEOs predicted a positive growth rate1)Strong growth • The "crisis resistance" of the MedTech(> 10%) 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 itsModerate growth full impact in 2009 on a global scale, SMTI(0 to 10%) companies adjusted their growth expectations – Then, only 54% of companies expected aNeutral (0%) positive growth rateModerate decline – The number of companies expecting a(-5 to 0%) negative impact on sales doubledStrong decline – Suppliers with a higher non-MedTech(< -5%) product portfolio proportion were hit harder 2008 2009 – Manufacturers of non-reimbursed product n = 280, Ø = 6% n = 21, Ø = 0.1% suffered1) SMTI 2008 data collected in spring and report released end of August 2008Source: SMTI 2010 (based on SMTI survey May 2010), CS Economic Research, OECD 21
    • A STATE OF THE MEDTECH INDUSTRYThe global economic crisis also hit the MedTech industry –Fears exist regarding severe cuts in public healthcare spendingSTOCK MARKETS – SELECTED INDICES GLOBAL AND CH MANUFACTURING – PMI INDEX110 90100 80 90 70 80 60 70 50 60 40 50 30 40 20 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 SIX Bio and Medtech Europe-DS Pharm & Bio Swiss PMI Index Global New Order Index SMI MSCI World Global PMI Index Global Price Index DJ Euro Stoxx 50Compared to the SMI, shares of SIX listed MedTech Since June 2008, the global manufacturingcompanies declined stronger. It anticipates market production rose steadily for 13 month in a row butfears of e.g. tightening healthcare budgets negatively slowed since the beginning of 2010. The Swiss PMIaffecting MedTech companies is currently stable, outperforming other marketsSource: SMTI 2010, Bloomberg, Credit Suisse, JP Morgan 22
    • A STATE OF THE MEDTECH INDUSTRYReview of crisis 2008/09 and impact on SMTI – Lessons learned TRADERS & SUPPLIERS MANUFACTURERS SERVICE PROVIDERS DISTRIBUTORS • Right customer and portfolio mix • Focus on relevant R&D projects • Sales force excellence • Investing/acquiring know-how • Innovation leadership fosters a and innovative products • Good product mix with high and teams special, high value product and • Positioning in markets and reimbursement • Proactive positioning to "To strengthen" component portfolio preparing NPIs consistently • High focus on industry segment anticipate revitalization of sector • Networked innovation applying • Acquiring know-how • High service competency • Develop solution offerings unconventional know-how • Continue to recruit, especially • Very good understanding of copying other industry • Closeness to IT industry and to abroad buyer‟s needs and buying successes new materials • Focus on business model culture • Engage SMTI interfaces • Continuous recruitments optimization • Profit from strong CHF (as management • Scouting and M&A • Lean/efficient processes importer) • Strong skill set and high value • Well managed S-curve of core • Strong regulatory capabilities return offerings competencies • Closeness to pharma/biotech • High flexibility to support • Foreign exchange issues with challenges an impact on margins • Depending on single large • Weak or reactive attitudes (e.g. • Mismanagement of currency • "Copy cat" and no sound track customers and reactive market engaging too late in cost cutting) hedges records strategy • Lack of listening to customers • No product portfolio • "Me-too" approach • Over-capacities in production • Mismanaged generation jump "To avoid" differentiation • Large capital investments made within product portfolio • High inventories based on boom forecasts • Non value based pricing • Decline in demand for • Tight EBIT margins strategy commodities • High diversity of client portfolio • High OPEX/Sales ratio • Lack of service offerings (non-LS/non-core business) • Me-too product sales decline • Lack of international clients with non proprietary goods • High inventories and poor • Late shift in crisis management liquidity management • High COGS & inventorySource: SMTI 2010 23
    • B. Trends and challenges 24
    • B TRENDS AND CHALLENGESTaking the pulse of the SMTI – Top buzzwordsSource: SMTI 2010, www.wordle.net 25
    • B TRENDS AND CHALLENGESImminent growth of SMTI companies is shaped by major trends inthree categoriesCOMPANY REGULATION1) MARKET• Solutions will meet future offering • Tightening of regulatory • Patient centric models arise due to demand requirements2) in mature markets on – external/remote patient monitoring• Networked innovation is rising quality, testing, safety and off-label – ICT and improved RFID technology (led by micro/start-up firms) usage • Bundling of purchasing power among hospitals,• Broader know-how is needed to • Growing/tightening regulatory clinics, and specialists; they will meet regulatory requirements requirements in Asian markets – drive margin erosion (e.g. market access, conformity, • Introduction of DRGs will – favour broader offerings patent infringements, out- – increase pressure on pricing – seek solution providers licensing) – delay or decrease investments into • Convergence (MedTech & pharma/biotech)• Improved clinical trial design radical innovation – drives innovation opportunities needed to demonstrate cost- • Demonstrating comparative – exposes the MedTech industry to additional benefit effectiveness drives the need to compliance/regulatory measures• Institutional patient registries generate relevant treatment outcome • Export shift to emerging markets due to growing arising in multiple core markets, data middle-class with rising public and private health driving segmentation • Non-reimbursed/cosmetic/or capital expenditures intensive investments products face a • Consolidation of "Big MedTech" towards stronger toll in sales conglomerates ("The winner takes it all") • Growing niche potentials for start-ups, especially with new technologies (e.g. ICT) IMMINENT GROWTH OF THE SMTI1) 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 companiesSource: SMTI 2010, SMTI Advisory Board 26
    • B TRENDS AND CHALLENGESCompetition for the SMTI intensified severely since 2008 –Costs and prices are under pressure in a changing marketRANKING OF MAJOR CHALLENGES[% of answers, 2010]1) COMMENTS Ranking • As of 2009, SMTI companies experienced 2008​1. Increasing price intensifying competitive pressures 79 3. competition – Suppliers with a high proportion of non- healthcare clients were hit first2. Increasing cost pres- 77 4. – Manufacturers of non-reimbursed products sure from purchasers were hit by tighter consumer spending3. Intensified competition 75 5. • Today, the majority of SMTI managers are still in the "crisis mode" observing operational4. Increasing pressure to challenges, e.g. higher price competition, cost 68 - pressure and an intensified competition2) reduce production costs5. Availability of FURTHER OBSERVATIONS 68 1. skilled employees • Current management thinking may fuel6. Access to specialized consolidation to maintain critical mass to 59 2. know-how obtain7. Organizational issues – A more diverse/innovative product portfolio 53 6. resulting from growth – Better access to knowledge poolsn = 232; multiple answers possible1) Challenge is of "high relevance" or "very high relevance" to SMTI companies 2) These represent a "triple challenge" to the SMTISource: SMTI 2010 27
    • B TRENDS AND CHALLENGESMegatrend – Clinical based evidence requirements forcecompanies to focus on higher product efficacy and communicationDEVELOPMENTS IN HEALTHCARE MARKET[% of answers, 2010]1) COMMENTS • Increasing competition and tightening publicHigher requirements for evidence healthcare budgets force companies to investof product efficacy 87 more into proofing product efficacy • Gaining data from comparative effectivenessIncreasing communication needs with research and cost-benefit-analyses will gainwith authorities/healthcare institutions 73 in importance for many SMTI companies • The communication efforts with customers andGrowth of purchasing cooperatives 61 authorities need to be intensified in order to(among customers) optimally position own productsHigher competition for reim- FURTHER OBSERVATIONSbursement entitlement 56 • Recent healthcare developments will driveHigher requirements for product – Higher costs to register and fulfil increasingpositioning among DRGs 51 compliance requirements – Substantial price decreases in mature marketsNegative impact of DRG introduction 45 • EU wide harmonization of pharma prices ison average product price currently discussed; this will also influence the SMTIn = 1341) Companies describing the development "applicable" or "partially applicable"; no 2008 data existSource: SMTI 2010 28
    • C. Strategic Actions 29
    • C STRATEGIC ACTIONSSMTI companies are focusing on profitability to meet currentchallenges at the cost of potentially losing their innovative edgeRANKING OF ACTIONS 2010[% of answers]1) COMMENTS Ranking • In contrast to 2007 CEOs express a strong 2008 shift in priorities1. Improving profitability 85 6. • To support future growth, three rather operational actions are in focus2. Optimizing marketing 77 3. – Improving profitability3. Further development of 77 7. – Optimizing marketing & sales effectiveness org. structure and processes – Enhancing organizational structures and4. Optimizing distribution 67 4. processes5. Strengthening FURTHER OBSERVATIONS 63 1. product innovation • SMTI companies seem to approach business6. Developing new business models 62 5. conservatively before returning to a "growth mode"7. Integrating new partners 59 8. • An international Life Sciences survey2)8. Geographic expansion/ indicated contrary management responses 56 2. internationalization – Developing a robust R&D pipeline – Accelerating geographical expansionn = 232; multiple answers possible – Forming alliances with pharma/biotech1) Strategic actions mentioned as being relevant to SMTI companies 2) Deloitte/The future of the Life Science industriesSource: SMTI 2010 30
    • C STRATEGIC ACTIONSSMTI companies expect 10-12% growth p.a. in the next two yearsEXPECTED GROWTH FOR 2010 AND 2011 [%, p.a.] COMMENTS • On average SMTI CEOs are highly confident Ø =10% Ø =12% 100% – 10% growth for 2010 – 12% growth for 2011 • Some caution should remain; these expectations are related to the economicStrong growth situation in May 2010 55% 59%(> 10%) • Start-ups are particularly enthusiastic • Established companies expect moderate growth as they face stronger price pressuresModerate growth(0 to 10%) FURTHER OBSERVATIONSNeutral (0%) 28% 26%Moderate decline(-5 to 0%) • If such up-turn is achievable, a shift towards 6% strategic investments and increasedStrong decline 1% 13%(< -5%) 10% convergence will occur 1% 1% • Current economic forecast for the Swiss Life 2010 2011 Sciences sector as a whole is 6.5% n = 194 n = 188Source: SMTI 2010, Credit Suisse, SwissRe 31
    • C STRATEGIC ACTIONSEngaging in the right strategic actions correlates with above-average growth expectationsEXPECTED GROWTH RATES 2010 AND 2011[%, companies having the respective strategic action in focus] COMMENTS 16 Companies focusing 15 • Several CEOs focus on a set of strategic on strengthening Ø 12 actions to enhance their growth potential regulatory know- Ø 10 how/studies, e.g. – Strengthening regulatory know- cost-benefit analyses how/studies n = 51 – Establishing new production/service facilities 17 – Engaging in new business models Companies focusing on establishing new 12 Ø 12 • If a company focuses e.g. on strengthening production/service Ø 10 of regulatory know-how/studies, they expect facilities, e.g. in a growth rate that is 6% above the average emerging markets n = 42 for 20101) 15 FURTHER OBSERVATIONS Companies focusing on engaging in new 10 Ø 12 business models, Ø 10 • Companies focusing on new business models e.g. new kind of do not expect an immediate above-average services n = 64 effect on their growth rate 2010 2011Ø = average growth expectations across all survey participants1) Data does not support a cumulative growth impact of combining the actionsSource: SMTI 2010 32
    • C STRATEGIC ACTIONSThe majority of SMTI companies face increasing challenges –Negative impact on growth is expectedEXPECTED GROWTH RATE [%, companies that areaffected by the mentioned challenges] COMMENTS Ø 12 • 50% of SMTI companies face a triple challenge 10 – Increasing price pressureØ 10 – Increasing cost pressure 8 – 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 FURTHER OBSERVATIONS • Tighter public healthcare expenditures will 2010 2011 – Keep the pressure on prices Companies experiencing the "triple challenge"1) – Intensify competition among companiesØ = Average growth expectations across all survey participants – Force them to decrease their costs basis • Within this setting companies tend to invest2010 n = 128, 2011 n = 221 more in product line extensions/renovations1) Companies stating that increased pressure on prices, costs and intensifying competition were of "high relevance" or "very high relevance" to themSource: SMTI 2010 33
    • D. Winning through Innovation 34
    • D WINNING THROUGH INNOVATIONInnovation is the major success factor for the SMTI – Dependingon company maturity, different innovation behaviours applyTHE INNOVATION BEHAVIOUR MODEL COMMENTS Currently three different innovation behaviours can be observed: 1 Network 1 • "Network innovators" are innovation winners and innova- extended tors – Responsible for product innovations, accounting for 25% ~25% of the total SMTI products on the market (20% by start- 2 Renovators ups and micro/small companies; 5% by mature, largerNetwork type firms) – Are considered to be the innovation engine of the SMTI ~25% – Strengthen the SMTI long-term value growth 2 • "Renovators" – Contribute 25% to the total of SMTI products ~50% – Adopt a fast renovator strategy for early line extensions restricted 3 Commodity 3 • "Commodity exploiters/bundlers" exploiters/ – 50% of total SMTI products, that were neither innovated bundlers nor renovated during the last three years explorative exploitative – Adopt a niche/market expansion strategy per product Innovation type 1• Use extended networks of adjacent industries,explorative way, leading institutions and FURTHER OBSERVATIONS academia to develop radical innovations in an to product innovation • Larger companies tend to acquire innovation as they are 2• Focus on the innovation network within their value chain (e.g. suppliers, traders) to exploit the current portfolio with product renovation, i.e. cash-rich to balance their lack of own product innovations incremental innovation to expand the product life cycles • Smaller and start-up companies are averse to out-licensing 3• Focus only on exploiting the current product portfolio and desire to exploit their product innovations themselvesSource: SMTI 2010, Kyburz 35
    • D WINNING THROUGH INNOVATIONThe SMTI shows a balanced product portfolio maturity –Especially smaller companies drive product innovationAGE OF PRODUCT PORTFOLIO BY COMPANY SIZE1, 2)[in %, 2010] COMMENTSYears • In general, the maturity of the product portfolio is well balanced – but the larger the 100% company, the more mature the portfolio+10 20% 26% 27% • 25% of the (weighted) SMTI product portfolio 33% is younger than three years • 81% of the product portfolio of larger5-10 21% companies is older than three years 27% FURTHER OBSERVATIONS 33% 20%3-5 25% • Lower priority of product innovation combined with cost constraining measures 20% 25% is likely to 24% – Lead to fewer novelties0-3 34% – Prompt more renovation activities 27% • Close attention should be paid to the 22% 16% maturing product portfolio (see strategic actions) in order not to fall into an Micro Small Medium Large innovation gap, as average product development time is around three yearsn = 1241) Only manufacturers and suppliers 2) In proportion of their product portfolioSource: SMTI 2010 36
    • D WINNING THROUGH INNOVATIONRelative R&D expenditure is highest for small companies –Manufacturers spend more on innovation than suppliers BENCHMARKSR&D EXPENDITURES [% of turnover]1,2) [in % of turnover, 2009]4) COMMENTSBY COMPANY TYPE • R&D expenditures remained 12 12 stable or even increased since 10 Biotech 22 2007, but were increasingly 5 shifted to incremental innovation • Manufacturers drive SMTI innovation; their share of R&D Pharma 16 2007 2009 spending is higher than for n = 90 suppliers • The less turnover a SMTI MedicalBY TURNOVER company has, the higher the technology 11[in CHF and % of turnover 2009]3) industry relative spend on R&D 14 FURTHER OBSERVATIONS 11 10 9 Ø 10.6 Electronics 7 7 5 • Compared with adjacent industry industries, the SMTI spends less on R&D than the biotech and pharma industry, but < 5m 5-10m 11-50m n = 90 Machine significantly more than the 4 industry mechanical engineering and Suppliers Manufacturers electronics industry1) Only manufacturers and suppliers 2) R&D expenditure was not weighted to turnover3) Companies with more than CHF 50m turnover were omitted due to a limited sample size 4) Based on a sample of selected companiesSource: SMTI 2010 37
    • D WINNING THROUGH INNOVATIONShortening of the innovation cycle is of significant relevance,especially to medium and large sized companiesSIGNIFICANCE OF A SHORTENED INNOVATION CYCLE [2010, in %]1)BY COMPANY TYPE BY COMPANY SIZEManu- 45 25 30 Micro 36 26 38facturersSuppliers 62 17 21 Small 60 16 24 No or low significance Medium 80 16 4 High significance Very high significance Large 78 22 0n = 129• The majority of companies feel the market and • Micro companies seem to be flexible enough to adapt competitive pressures to shorten innovation to shortened innovation life cycles. Their dependency cycles in order to launch new or improved products on often only one or two products makes it a critical more rapidly task to stay ahead of competitors• It seems that manufacturers are partly passing on • The larger a company is, the less flexible it seems to this pressure, evaluating different suppliers for the speed-up the innovation cycle, mainly because of most innovative and cost effective solution internal processes and compliance requirements1) Only manufacturers and suppliersSource: SMTI 2010 38
    • D WINNING THROUGH INNOVATIONLaunches during the last three years were difficult – On averagenew products achieved less than 30% of companies turnoverREVENUE SHARE OF PRODUCTS THAT WERE LAUNCHEDSINCE 20071) [in % of each company class, 2010] COMMENTS 29 • Product launches in the last three yearsVery small 16 were also affected by the global economic(0%-10%) 13 setbacks 16 • A majority of companies stated that new 31 products contribute only to a minor partSmall 37 (less than 30%) to the current turnover(10%-30%) 42 45 • For micro companies there seems to be a clear split: 3Medium 25 – Either they are older companies with a(30%-50%) 26 mature "cash-cow" product portfolio 16 – Or they are start-ups with a successful 20 product launch just on the brink ofHigh 18 growing rapidly(50%-70%) 13 • The other companies capture less returns 23 from new product launches 17 MicroVery high 4(>70%) 6 Small 0 Medium Largen = 1281) Only manufacturers and suppliersSource: SMTI 2010 39
    • D WINNING THROUGH INNOVATIONCompanies with a young product portfolio show above-averagegrowth expectationsEXPECTED GROWTH RATES OF COMPANIES ACCORDINGTO PRODUCT PORTFOLIO MATURITY1) [%] COMMENTS • Companies with a young product portfolio 17 have significantly higher growth expectations 16 • Companies with a more mature product portfolio may face – especially if combined with decreased R&D rates – an innovation Ø 12 gap that harms future growth rates • In order to increase growth rates again, theseØ 10 9 companies need to take into account an 7 average "idea to launch" time of approx. three years FURTHER OBSERVATIONS • The SMTI is an innovation-centred industry based on network innovation 2010 2011 – Launching new products is an essential growth factor Older portfolio (companies with less than 15% of the product portfolio younger than three years), n = 42 – High priority on profitability2) drives bottom- Younger portfolio (companies with more than 15% of the product portfolio line improvements, but does not lead to younger than three years), n = 56 higher growth rates1) Only manufacturers and suppliers 2) 85% of survey participants stated improving profitability is a key strategic actionSource: SMTI 2010 40
    • D WINNING THROUGH INNOVATIONCompanies with a high focus on innovation show above-averagegrowth expectationsEXPECTED GROWTH RATES AND INNOVATION FOCUS1)[%] COMMENTS • Compared to 2008, strategic priority moved away from strengthening product innovation 15 to profitability improvement measures 14 • Additionally, relative R&D expenditures have – on average – declined Ø 12 • Both of these two findings lead to assume aØ 10 9 lower focus on innovation 8 • 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 2010 2011 FURTHER OBSERVATIONS Low focus on innovation (low R&D ratio and strengthening of product innovation not a priority), n = 33 • Listen to/involve patient groups in prototyping High focus on innovation (high R&D ratio and strengthening of reviews to enable product generation jumps product innovation a priority), n = 181) Only manufacturers and suppliersSource: SMTI 2010 41
    • D WINNING THROUGH INNOVATIONR&D contribution to growth expectations –Increased R&D expenditureGROWTH EXPECTATIONS BY R&D EXPENDITURES[% of turnover] COMMENTSGrowth R&D expenditures 2009 R&D • The focus of many companies on profitabilityexpectation expenditures2011 2007 improvement measures lead to a decrease of average R&D spend to 10.6%1) from 15% in 0% 2007Neutral 1(0% p.a.) • However, a few exceptions exist: suppliers n.a. 5% and manufacturers must invest more in order to achieve moderate growth 8 2% • Companies that hardly invest in R&D do notModerate growth(0-10% p.a.) expect a positive growth rate, strengthening 10 6% the assumption that R&D is a key driver for SMTI growth 7 10% FURTHER OBSERVATIONSStrong growth(> 10% p.a.) 16 15% • Suppliers needed to invest heavily into R&D to meet shorter innovation cycle time Suppliers expenditures on R&D • They may find themselves in a R&D trap due Manufacturers expenditures on R&D to a high dependency on MedTech2010 n = 61, 2008 n = 154 manufacturers1) R&D expenditure was not weighted to turnoverSource: SMTI 2010 42
    • D WINNING THROUGH INNOVATIONThe Innovation Promotion Agency CTI – From Science to Market 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 • In 2009 CTI had an absolute record year by processing a total of 717 R&D funding FIGURES 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 servicesSource: SMTI 2010, CTI/KTI 43
    • E. Collaboration and Bundling 44
    • E COLLABORATION AND BUNDLINGSMTI companies focus on collaborations between manufacturersand suppliers – Strengthening incremental innovationSHARE OF COMPANIES WITH COLLABORATIONS[% of answers, by inter-industry collaboration type, 2010] COMMENTS • The majority of SMTI companies closelyManufacturers/ 88 collaborate with other manufacturers andsuppliers 82 suppliers, positioning themselves often as "Renovators" working on improvements of 43 existing productsUniversities 59 • Already second are collaborations withTechnology/IT service 13 universities; there SMTI companies often actproviders 28 as "Network innovators", working on product innovations 12Support organizations 24 • On average manufacturers show a higher degree of collaboration – this is mainly due toPrivate research 9institutes 24 – Technology leadership in projects with several collaborating partiesStrategy 9 – Higher value chain integrationconsultants 4 • Not very widespread are collaborations with service providers Suppliers Manufacturers • Roughly less than a quarter of SMTI companies have respective collaborationsn = 122, multiple answers possibleSource: SMTI 2010 45
    • E COLLABORATION AND BUNDLINGSMTI companies focus on applied research to drive incrementalinnovationsFUNCTIONAL COLLABORATION WITH PARTNERS[% of answers, by type, 2010] COMMENTS SMTI companies, particularly manufacturers,Applied research 43 61 engage in functional collaboration. Predominantly, such activities are sought in the field of:Quality control 45 46 • Applied research; underlining the focus on 25 incremental innovationBasic research 35 • Quality control and production certificationProduct certification 12 – Strengthening compliance and regulatory 41 know-howMarketing/sales 30 – Managing innovation cycle 20 – Shifting innovation risks to suppliersDistribution 17 • Basic research; focus on break-through 28 technology and materialsTraining 12 13 • Training, launch/post launch, and after salesAfter sales 7 collaborations are of minor importance to SMTIservices 7 firms despite – Under-proportional returns on new products 5Product launch 7 – Rising OPEX to sales ratios and process costs Suppliers – Expected shifts in business models and offerings Manufacturersn = 106, multiple answers possibleSource: SMTI 2010 46
    • E COLLABORATION AND BUNDLINGThe national innovation programs of CTI/KTI reach 29% of SMTIcompanies – More than twice as much as international programsNATIONAL PROGRAMS INTERNATIONAL PROGRAMS[% of participation in innovation promotion programs1), 2010] [participation in %, 2010] 65 100 87 OTHER OTHER CTI/KTI 22 EU 29 35 6 32 29 17 13 2 11 NO YES CTI/KTI micro small medium large NO YES (distribution by company type)n = 154 n = 155 EU programs: e.g. FP6, FP7 Other: e.g. COST, EUREKA1) Suppliers and manufacturersSource: SMTI 2010 47
    • E COLLABORATION AND BUNDLINGThe SMTI gets an influx of new ideas from the technologicaldevelopment in four other major industriesRESEARCH AREA (ILLUSTRATIVE) COMMENTS • Two main research trends can be identified: Visualization/ Teleservices/ ICT Combined – Many SMTI companies apply electronics Simulation Telemetry products and mechanical engineering know-how to Navigation RFID medical devices - New combinations of different disciplines provide input for highly innovative ELECTRONICS INDUSTRY PHARMA 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. Software MedTech Convergence e-Health), and is a success factor due to engineering the flexibility and ease of operation Biomarkers – Technological developments fuel the convergence between pharma/biotech and MECHANICAL MedTech, creating novel products with a BIOTECH ENGINEERING combination of different action principles (device/drug or drug/device) Genetic Materials Robotics Nanotech SoHo1) • These developments will – together with Engineering regulatory changes – lead to the creation of MedTech research area new business models1) Substances of human origin 2) Swiss universities are important contributors to the heterogeneous, networked innovation landscapeSource: SMTI 2010, CCMT, CTI/KTI 48
    • E COLLABORATION AND BUNDLINGThe SMTI business model will change – A stronger focus onbundled offerings and a higher patient centricity arisesBUSINESS MODELDIMENSIONS DEGREE PER CHARACTERISTIC FOR 2012 COMMENTSKnowledge • Major shifts in business models arecreation In-house External foreseen due to – Changes in health care systemsInnovation Me-too Novelty – Growing cost pressures by payers product product – Increased transparency demand (e.g. DRG, CER)Offering Single Bundled • Expressed strategic focus is products offering – Driving bundled offerings (provenMarket products paired with novelties)1 Technology Marketorientation push pull – Becoming further patient centric – Focusing on market pull activitiesProduction Make Buycapability FURTHER OBSERVATIONSSales channels GP/provider Patient • Notions regarding long-term strategic centric centric orientation areReimbursement No reim- Full – "From Box-Mover to Solution bursement coverage Providers"n=6 – "Best in class" vs. "One Stop Shop" Degree of Change Start point 2010 End point 20121) 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"Source: SMTI 2010, SMTI Advisory Board 49
    • E COLLABORATION AND BUNDLINGOfferings are challenged by price pressures –Changes ahead for 2012POSITIONING AND BREADTH OFOFFERINGS [illustrative] CHARACTERISTICS OF OFFERING STRATEGIES BY 2012 With reduced funding in health care systems, price pressure will Best in Class further increase. Paired with DRG, transparency on patient outcome high becomes available to payers Own product This will influence the companies„ offering strategy – thus they may choose from the following positioning in the future:Price Multiple indications Commodity • "Best in Class" products – Unique IP, processes, technology or materials and best Commodity treatment outcome, thus often benefit drivers product, single – Yield premium price positions indication • "Commodity" (less innovative or "me too"/single) products low low Benefits high – Aim at high volumes/lower margins pricingProduct categories – Must provide supply flexibility/reliability Single product Bundling types • "Bundling" (to obtain an overall higher price benefit ratio) own product – Own products, services, consumables, training and IT updates convergence product – Convergences (combined pharma/biotech and MedTech solutions 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 indicativeSource: SMTI 2010, SMTI Advisory Board 50
    • F. International Opportunities and Threats 51
    • F INTL OPPORTUNITIES AND THREATSSMTI companies still perceive the strongest growth potential in theSwiss home market, closely followed by the EUCOUNTRIES WITH HIGHEST EXPECTED GROWTHPOTENTIAL FOR THE NEXT 2 YEARS [% of mentions, 2010]1) COMMENTSSwitzerland Abroad • Compared to 2008, there were no significant2010: 35% 2010: 65% changes:2008: 34% 2008: 66% – The Swiss market is still expected to have the 35 34 highest growth potential – More than half of the SMTI companies expect 30 the highest potential in the EU, USA and BRIC 29 markets • For the other geographical regions, Swiss companies tend not to expect important growth 13 13 contributions: 11 10 – In Japan registration and regulatory 7 requirements, as well as cultural differences, 6 are a major hurdle 3 3 2 2 1 1 – The rest of the world market does not yet contribute significantly to the growth of SMTISwitzerland EU USA / Japan BRIC Other Other Other companies Canada countries countries countries in Asia in Latin 2010 n = 141 America 2008 n = 1321) Includes suppliers, manufacturers, traders/distributors and service providersSource: SMTI 2010 52
    • F INTL OPPORTUNITIES AND THREATSManufacturers are more internationalized than suppliers – Morethan 50% perceive strongest growth outside EU and SwitzerlandCOUNTRIES WITH HIGHEST EXPECTED GROWTHPOTENTIAL FOR THE NEXT 2 YEARS [% of mentions, 2010] COMMENTSSwitzer- • Companies expect the strongest stimulus from EUland Abroad countries, followed by Switzerland • Overall manufacturers seem to be more 35 internationalized than suppliers 32 – About 54% of manufacturers expect highest 30 growth from business with countries outside the EU and Switzerland – In the focus are EU, USA/Canada, the BRIC 20 countries and only fourth the Swiss home 18 16 market 14 – Suppliers have a higher focus on the EU and the Swiss home market, representing for more 8 8 than two thirds of companies the regions with 6 6 the highest growth potential 2 2 2 0 1 FURTHER OBSERVATIONSSwitzerland EU USA / Japan BRIC Other Other Rest of Canada countries countries the world • Suppliers seem to need a geographical closeness in Asia in Latin to manufacturers in order to optimally fulfil their Suppliers n = 49 America customer requirements Manufacturers n = 72Source: SMTI 2010 53
    • F INTL OPPORTUNITIES AND THREATSThe economic outlook for main SMTI export markets is positive –Return to growth expectedGDP GROWTH [% change vs. previous year] COMMENTS • Most of the main SMTI export markets are 3,1 expected to return to growth in 2010 (0.8 and 2,7 3.1%) and 2011 (1.5 and 2.7%) 2,4 2,1 1,8 1,8 • The OECD average growth rate is expected 1,6 1,5 to slightly outperform Switzerland and to 0,8 recover considerably faster than in the EU-27 0,7 0,5 0,4 • 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 Switzerland emerging economies in Asia and South OECD America -2,4 EU-27 -2,5 USA -3,3 -4,2 2008 E 2009 E 2010 F 2011 FE = Estimate, F = ForecastSource: SMTI 2010, BAG, BfS, KOF 54
    • F INTL OPPORTUNITIES AND THREATSA world of opportunities and threats by 2012Selected global highlights WORLDWIDE 4 2 • Faster increase of "Western 1 2 diseases" e.g. diabetes, obesity, etc. 6 7 2 8 • Growing demand for 5 2 established/new 2 treatments/technologies 9 Regional opportunities 3 Regional threats 1 • USA is the world‟s largest MedTech market 3 • South Africa‟s MedTech industry is expected 7 • 7„000 new hospitals and medical centres (close to 40% of total) with an expected to grow at CAGR of 7.1% to 2015 planned in China CAGR of 2.8% until 2015 • Around 90% supplied by imports • Growing MedTech know-how with new and • Expected pricing pressure on MedTech smarter competitors arising with a significant manufacturers due to financial alliances 4 • Russian MedTech market is estimated at lower cost basis between hospitals and doctors USD 5.6bn • New regulations, e.g. 510 k, CER and excise • Around 81% supplied by imports 8 • Japan is the second largest MedTech market tax burden (next 10 years around USD 20bn worldwide anticipated) 5 • Indian market valued at around USD 3bn and • Latest reimbursement price revisions favour expected to grow around 10% a year innovative products • For BRIC countries (incl. Turkey), the • IT service providers cater for MedTech needs • Expensive distribution system 2 expected aggregated growth is around 10- • Price increases anticipated 12% for Life Sciences industry 6 • Rising of new competitors? Chinese & Indian • High potential for multiple-brand strategy in generics manufacturers ready to substitute 9 • Increased regulation to be implemented in developing markets OEM products Australia, Singapore and IndiaSource: SMTI 2010, Espicom, IMS Health, Moodys Investor Service, Reuters 55
    • F INTL OPPORTUNITIES AND THREATSA world of opportunities and threats by 2012Selected European highlights EUROPE WIDE • EU price harmonization plans for pharma 5 sector is expected to affect the MedTech industry 3 6 10 • EU to boost high-tech budget for research 7 & innovation to EUR 6.4bn in 2012 2 8 4 • eHealth policy implementation project en 1 9 National opportunities route for 2020 National threats1 • The Spanish MedTech market is valued at 4 • Per capita spending on MedTech in 8 • Expected MedTech market growth of 4.7% in USD 4.8bn in 2010 Switzerland is among the highest in the world Austria • Government budget cuts ahead due to debt with USD 544 • France continues to lag behind its EU markets, 5 • Small scale of domestic MedTech production in 9 • Italy is the fourth largest MedTech market in2 e.g. in imaging and radiotherapy equipments Norway with anticipated higher import needs Europe (high-tech in hospitals) • Expected to be one of Europe‟s slower 6 • Central patient registers in Denmark growing MedTech markets over the next five • Several reform programmes planned for the 7 • Focused MedTech “Research for Health years with a potential impact on Swiss export healthcare sector in France 2011”program launched in Germany with3 • In UK, the expected MedTech market growth is budget of EUR 1.2bn 10 • In Poland, around 85% of the MedTech at around 3.6% • Increasing regulations (MPKPV regulation market is supplied by imports • Current government plans involve a 15% cut in early 2010) in Germany and growing power of • Healthcare spending accounts for about 6.2% health spending as of 2011 purchasing organisations (DRGs) of GDPSource: SMTI 2010, DeviceMed, Espicom, Meditec, Specatris 56
    • F INTL OPPORTUNITIES AND THREATSThe US Healthcare Reform will also influence SMTI companiesCONVERGENCE OF FOUR FORCES [illustrative] EXPECTED OPPORTUNITIES • 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 THREATS • 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 burdenSource: SMTI 2010 57
    • F INTL OPPORTUNITIES AND THREATSRegistration and introduction of new products are perceived to beless difficult in Europe than in other marketsESTIMATED DIFFICULTIES FOR PRODUCT REGISTRATIONAND INTRODUCTION [% of mentions, 2010]1) COMMENTS • Registration and introduction of new products 1 2 are expected to be a challenging task for 45%Very difficult 15 13 of manufacturers and suppliers 23 27 26 • However, Switzerland as well as the EU 42 (almost the same processes and structures) are expected to be less complex thanDifficult 30 38 registration in the US, Japan or BRIC markets • Japan is considered to be a very difficult 39 52 market due to high requirements regarding 51 28 sensible documents (drawings, IP etc.), high fees, and long approval timesNeutral 43 • US FDA regulations are perceived as hard to 46 be met, even for large companies 30 20 27 • FDA recently announced higher regulatoryEasy 20 requirements, increasing registrationVery easy 11 4 5 complexity and processing time 1 0 0 0 3 0 3 • Especially smaller SMTI companies face the Total Switzerland EU USA JAPAN BRIC challenge to meet these requirements due ton = 90 the lack of internal expertise1) Only manufacturers and suppliersSource: SMTI 2010, SMTI Advisory Board, Swissmedic 58
    • G. International positioning 59
    • G INTERNATIONAL POSITIONINGFor the first time the SMTI work-force abroad grew at a higher ratethan in Switzerland, showing an increasing internationalizationGROWTH IN LOCAL VS. FOREIGN EMPLOYMENT[% over last 2 years, end 2007 & 2009]1) COMMENTS • SMTI companies continue to hire – but at a 21 reduced rateSwitzerland 7 • For the first time growth of employee 16 numbers has been bigger abroad and signalsAbroad 8 a shift in management focus 20072007: n = 186 • This result documents the increasing 20092009: n = 81 internationalization effort of SMTI companies • The survey results indicate that no significantWORKFORCE ABROAD work-force shifts from and to Switzerland[% of total workforce according to company size, 2009]1) have taken place • Micro to small companies employ around 4%Micro 4 of their workforce abroad compared to 20- 40% of medium to large sized companiesSmall 4Medium 20 FURTHER OBSERVATIONSLarge 42 • Micro and small companies are lacking access to experienced hires in order to obtainn = 139 international expert know-how1) Only manufacturers and suppliersSource: SMTI 2010 60
    • G INTERNATIONAL POSITIONINGManufacturers and suppliers are strongly export driven andachieve on average 63% of revenues abroadAVERAGE SHARE OF EXPORTS[% of turnover, 2009] 1) COMMENTS 78 • Manufacturers generate around 78% of sales abroad Ø 63 • Suppliers play an important role in the local 53 market as 47% of their products and services are sold within Switzerland 35 • Their export share decreased significantly, reflecting economical difficulties in many Ø 29 markets, e.g. declining demand, fiercer 16 competition, and adverse currency fluctuations • The same applies to a majority of Suppliers Manu- Traders Service traders/distributors; they only achieved an facturers and providers2) export share of 16% (-50% vs. 2007) distributors • Service providers are generating 35% of their2007 data 62% 74% 34% turnover abroad, benefitting from the high expertise gained in the home marketn = 1741) 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 2008Source: SMTI 2010 61
    • G INTERNATIONAL POSITIONINGA young product portfolio helps manufacturers to increase theirexport shareEXPORT SHARE[%, according to age of product portfolio, 2010] COMMENTS • Suppliers and manufacturers realize different 82 export shares in respect to the age of their Ø 78 product portfolio 72 • Suppliers 61 – Can export above-average mature productsØ 53 46 – Were faced with difficulties in capturing export shares with young product • Manufacturers – Can capitalize on an innovative product range in export markets Younger PP1) – Tend to introduce new products or line extensions faster abroad Older PP2) – Expect below avg. growth from mature Suppliers Manufacturers productsn = 931) More than 50% of product portfolio younger than 5 years2) More than 50% of product portfolio older than 5 yearsSource: SMTI 2010 62
    • G INTERNATIONAL POSITIONINGGrowth expectations and export share – Positive correlation formanufacturers, negative correlation for suppliersEXPECTED GROWTH ACCORDING TO EXPORT SHARE[%, only manufacturers and suppliers, 2010] COMMENTS • Export is a “Must do” for growth 18 • Manufacturers are much stronger export focused than suppliers • Manufacturers with an above-average export share – expect significantly higher growth rates 10 – will outperform the marketØ 10 – will outperform suppliers by far 7 • For suppliers, the situation is reversed – the home market remains the key to growth. 4 They face difficulties to – Overcome the external market access trap Suppliers – Find niches in a growing commodity market Manufacturers • By focusing on export, firms can Low export share1) High export share2) – Expand the potential customer base – Drive regional account managementn = 1141) 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/manufacturersSource: SMTI 2010 63
    • G INTERNATIONAL POSITIONINGTo exploit export growth potentials the new organization "MedtechSwitzerland" will support SMTI companies "Medtech Switzerland" is a federal platform to promote Swiss Medical Technology worldwide • Provide extensive information • Connect different actors to Main objectives of identify business opportunities on target markets the Export • Provide guidance when • Facilitate market exploration Platform "Medtech entering a new market and Switzerland" is to and match making expanding in existing markets bring together • Drive target group tailored • Support communication via Swiss Medtech campaigns an integrated portal, specific supply with foreign • Prepare targeted information events, and delegation visits Medtech demand about focus markets • Build-up MedTech brand and • Position Switzerland as a major image MedTech competence hubSource: SMTI 2010, Medtech Switzerland 64
    • H. Outlook 65
    • H OUTLOOKSMTI 2012 and beyond – Selected success factors for growth BUSINESS MODELS INNOVATION INTERNATIONAL GROWTH COMPLIANCE• Review of current “crisis” • Strengthen network • Drive international product • Optimize key markets strategy innovation beyond 20% to launch earlier regulatory know-how• Review and overhaul of maintain innovation base • Engage in out-licensing (by and approach current business models for • Conduct product portfolio start-ups) to convergence • Achieve high compliance larger companies and R&D strategy review partners (i.e. zero complaint) in• Define strategic shift or • Engage in extra-industry • Focus on growth markets/ all markets desired repositioning (i.e. technology scouting niche segments • Align pricing strategy to convergence or innovation • Actively search talents respond on agency leader) globally harmonization efforts OPERATIONS COLLABORATION & BUNDLING POSITIONING INTERN. MARKET WATCH• Expand business knowledge • Form stronger, early stage • Drive for global innovation • Track purchasing via increasing in- alliances leadership position in organizations and price sourcing/recruiting of • Active collaboration in IT promising niches pressures software capabilities and platform developments • Establish/provide supportive • Strengthen legal material science needed CER data on key products capabilities regarding• Drive rigorous cost • Expansion of business and markets out-licensing or patent optimization programs knowledge via increasing in- • Build-up value proposition infringements• Strengthen alliance culture sourcing of software and solution orientation • Master growing and processes capabilities and material • Establish proximity to international competition science specialists/clinics and substitute products IMPROVING THE GROWTH POTENTIALS OF THE SMTI COMPANIESSource: SMTI 2010 66
    • H OUTLOOKStrategic key guiding principles for future growth of the SMTI atthe crossroadsINNOVATIONS • 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 poolsCOLLABORATION • Evaluate me-too portfolio strategy for bundling possibilities in order to increase volumes and& BUNDLING 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 solutionsINTERNATIO- • Ensure build-up of comparative effectiveness data sets to ensure access to key marketsNALIZATION • 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 marketsPOSITIONING • 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 strategySource: SMTI 2010 67
    • H OUTLOOKSMTI companies have to choose their individual future R&D focusin a quickly changing business environmentINFLUENCERS FUTURE R&D FOCUSCOMPANY Different degrees of future product portfolio development• Future solution offerings are possible, depending on the company strategy• Network innovation• Regulatory know-how• Clinical trial design• Patient registriesREGULATION• Healthcare reforms• Regulatory requirements RENOVATORS NETWORK INNOVATORS• Rising payer power • Bundling of products, services or know-how • Leading with cutting-edge innovations• Comparative effectiveness • Exploiting the current product portfolio • Strengthening basic research• eHealth enabled processing • Engaging in scouting and M&A • Building up a high value product portfolio • Driving innovation by adapting and integrating • Engaging on inter-industry collaborators • Collaborating within existing value chain • Focusing on out-licensingMARKET • Growing through volume focused exports • Adopting a niche-growth strategy as early mover• Patient centricity• Bundling• Convergence• Global competition • Collaborate to acquire know-how• Consolidation • Drive operational excellence• New competitors • Strengthen regulatory capabilities • Establish supportive CER dataSource: SMTI 2010 68
    • Appendix 1: Additional Data 69
    • AbbreviationsBAG Schweizer Bundesamt für Gesundheit m Million Micro-sizedbn Billion Less than 10 employees companyCAGR Compound Annual Growth Rate MPKPV regulation Regulation on clinical trials of medical productsCER Comparative Effectiveness Research NPI New product introductionCTI/KTI Innovation Promotion Agency CTI NOGA Nomenclature Générale des Activités Économiques Swiss Centre for Electronics and Microtechnology, Inc./SuisseCSEM OPET Federal Office for Professional Education and Technology dElectronique et de Microtechnique SA Osec Business Network Switzerland; an association underDRGs Diagnosis Related Groups Osec private law supporting Swiss foreign tradeE Expected Manufacturers Companies producing medical devices under their own brand Swiss Federal Laboratories for Materials Testing andEMPA PMI Purchasing Managers Index Research Eidgenössische Technische Hochschule/Ecole PolytechniqueETH/EPF PSI Paul Scherrer Institut Federale Companies providing specialized services to medical deviceEUCOMED European Medical Technology Industry Association Service providers companies or for medical devicesF Forecast Small company Between 10 and 49 employeesFTE Full-time equivalent SMI Swiss Market IndexGDP Gross Domestic Product SMTI Swiss medical technology industryGP General Practitioner SoHo Substances of human origin Companies supplying major components to the medicalICT Information- and Communication technology Suppliers technology industry (and others) without having their own brand. Traders and Companies trading in or selling medical devices, such as localIT Information technology distributors wholesalers and affiliates of national or international companiesk ThousandSource: SMTI 2010 70
    • Additional SMTI 2010 data1 2 3 4 5HEALTHCARE CHALLENGES STRATEGIC INNOVATION AND GROWTHMARKET TREND ACTIONS SUPPORT EXPECTATIONS6SMTI 2010 REPORT DATA BASE 71
    • 1 HEALTHCARE MARKET TRENDSHealthcare market developments by company category andcollaboration intensity COMPANY CATEGORY1) COLLABORATION INTENSITY2) Supp- ServiceDEVELOPMENTS Manuf. liers Traders prov. None Medium HighHigher regulatory requirementsfor product accreditations 1 1 2 2 1 1 1Higher requirements for evidenceof product efficacy 3 2 1 2 2 3 3Higher regulatory requirementsfor process compliance 2 2 2 1 4 2 2Selective perception of only afew manufacturers by consumers 4 4 4 2 4 5Increasing communication needswith authorities 4 4Delays during productaccreditation 4 5 5 5 5 4The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in thetop 5 are listed1) n = 188 2) n = 164Source: SMTI 2010 72
    • 1 HEALTHCARE MARKET TRENDSHealthcare market developments by company size and age COMPANY SIZE1) COMPANY AGE2)DEVELOPMENTS Micro Small Medium Large <5 y 5 y or olderHigher regulatory requirementsfor product accreditations 2 1 1 2 3 1Higher requirements for evidenceof product efficacy 1 3 2 1 2 3Higher regulatory requirementsfor process compliance 3 2 3 3 1 2Selective perception of only afew manufacturers by consumers 5 4 4 5 4 4Increasing communication needswith authorities 4Delays during productaccreditation 5 5 4 5 5The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in thetop 5 are listed1) n = 189 2) n = 159Source: SMTI 2010 73
    • 2 CHALLENGESChallenges by company category and collaboration intensity COMPANY CATEGORY1) COLLABORATION INTENSITY2) Supp- ServiceCHALLENGES Manuf. liers Traders prov. None Medium HighIncreasing price competition 1 1 1 4 1 1 2Cost pressure from purchasersand health care institutions 3 3 2 2 2 3 3Intensified national & inter-national competition 1 4 3 2 2 2 1Increasing pressure to reduceproduction costs 4 1 4 4 4Availability of skilled employees 5 5 5 1 5 5 5Access to know-how 4 4Organizational issues due togrowth 4The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in thetop 5 are listed1) n = 188 2) n = 164Source: SMTI 2010 74
    • 2 CHALLENGESChallenges by company size and age COMPANY SIZE1) COMPANY AGE2)CHALLENGES Micro Small Medium Large <5 y 5 y or olderIncreasing price competition 2 1 1 1 1 1Cost pressure from purchasersand health care institutions 3 1 3 3 2 2Intensified national & internationalcompetition 1 4 3 1 3 4Increasing pressure to reduceproduction costs 3 2 3 2Availability of skilled employees 4 5 5 3 3 5Access to know-how 5 5The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in thetop 5 are listed1) n = 189 2) n = 159Source: SMTI 2010 75
    • 3 STRATEGIC ACTIONSStrategic actions by company category and collaboration intensity COMPANY CATEGORY1) COLLABORATION INTENSITY2) Supp- ServiceSTRATEGIC ACTIONS Manuf. liers Traders prov. None Medium HighImproving profitability 3 1 2 3 1 1 1Optimizing marketing 1 3 3 2 5 2 3Further development of org.structure and processes 5 2 4 4 2 3 2Optimizing distribution 4 5 1 5 5Strengthening product innovation 1 4 5 3 3Developing new businessmodels 4 1Geographical growth/internationalization 4 4 3The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in thetop 5 are listed1) n = 188 2) n = 164Source: SMTI 2010 76
    • 3 STRATEGIC ACTIONSStrategic actions by company size and age COMPANY CATEGORY1) COLLABORATION INTENSITY2)STRATEGIC ACTIONS Micro Small Medium Large <5 y 5 y or olderImproving profitability 1 2 1 1 2 1Optimizing marketing 2 3 2 3 3 2Further development of org.structure and processes 3 1 3 1 3Optimizing distribution 4 3 3 4Strengthening product innovation 5 5 1 5Developing new businessmodels 4 5 3 4Geographical growth/internationalization 5 3 5The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in thetop 5 are listed1) n = 189 2) n = 159Source: SMTI 2010 77
    • 4 INNOVATION AND SUPPORTShare of newly introduced products and distribution of productportfolioSHARE OF SALES OF NEWLY INTRODUCED DISTRIBUTION OF PRODUCT PORTFOLIOPRODUCTS (SINCE 2007) ACCORDING TO PRODUCT AGE[% of answers, 2010] [% of answers, 2010] 28 28 27Very small proportion 21 25(0% - 10%) 18 24 23 23 22Small proportion 36(10% - 30%) 38Medium proportion 21(30% - 50%) 16High proportion 16(50% - 70%) 20Very high proportion 6(> 70%) 8 0-3 years 3-5 years 5-10 years `+10 years Suppliers Manufacturersn = 127Source: SMTI 2010 78
    • 4 INNOVATION AND SUPPORTShare of inter-industry collaborations by partnerBY COMPANY CATEGORY [% of partners, 2010] BY COMPANY SIZE [% of partners, 2010] 88 94Manufacturers/ Manufacturers/ 88suppliers 81 suppliers 83 73 50 43 43Universitites Universitites 59 55 91 13 9IT service providers IT service providers 18 28 28 36 13 12 20Support organizations Support organizations 24 14 27 9 16Private research Private research 15institutes 24 institutes 21 18 Micro Suppliers 6 Small 9 8Strategic consultants Manu- Strategic consultants Medium 4 facturers 7 9 Largen = 105, multiple answers possible n = 105, multiple answers possibleSource: SMTI 2010 79
    • 4 INNOVATION AND SUPPORTShare of functional collaborationsBY COMPANY CATEGORY [% by type, 2010] BY COMPANY SIZE [% by type, 2010] 43 54Applied research Applied research 39 52 61 80 50Quality control 45 Quality control 55 46 37 30 21 25 27Basic research Basic research 37 35 40 21 12 24Product certification Product certification 30 41 30 30 29Marketing/sales Marketing/sales 21 33 20 17 15 25Distribution Distribution 28 19 40 4 12 15Training Training 19 13 20 7 MicroAfter sales service 7 After sales service Suppliers 7 Small 7 20 Manu- 4 MediumProduct launch 5 Product launch 7 facturers 3 11 Large 10n = 105, multiple answers possible n = 105, multiple answers possibleSource: SMTI 2010 80
    • 4 INNOVATION AND SUPPORTSelected sample of highly innovative, networked start-upsOverview of selected companies Research Year University areaNo. Product and service offering Key differentiator founded spin-off M E B 1 2007 X Tissue engineering Cutting-edge bioprinting solutions on a versatile and cell-friendly printing platform X X X Computer assisted soft Real-time visualization and simulation of surgical tools and soft tissue leveraging or navigation 2 2009 X X X tissue surgery (similar to GPS navigation) MicroCT services (data Analysis of samples or biomaterials in a reproducible and cost-efficient manner (service 3 2008 X X analysis) provider) Repeatable, observer independent, objective and reproducible forensic assessment method 4 2004 X Virtual forensic autopsy X (based on MRI technology) 3D physical web-based simulation technology (pictures uploaded to internet and simulated 5 2008 X Plastic surgery simulation X surgery outcome available in short period of time) Gel which is introduced into tumor and heated up (only locally) using magnetic field to destroy 6 2007 Tumor removal X the tumor 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 Artificial muscles incorporated in devices which are then deployed to mimic the action of 11 2004 Artificial muscle technology X X X sphincters Stroke and brain injuries Optical spectroscopy & imaging based on near infrared spectroscopy (NIRS) which is a 12 2007 X X X diagnosis paradigm shift from pulse oximetry System of carefully positioned polystyrene pearls and inflatable air chambers to e.g. reduce 13 2008 X Devices for medical scanning X MRI time Automated and miniaturized New particles handling concept – resolving in a unique way the particles agglomeration and 14 2004 X X X X systems therefore opens new perspectives in bio-assays in micro-fluidic environment Micro-systems for medical Contact lenses with integrated eye pressure sensor. An external system sends RF power to 15 2003 X X X devices the sensing site and receives in return measurement information (similar to RFID) 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 XLegend: Research areas – M: Mechanical engineering, E: Electronics, B: BiotechSource: SMTI 2010 81
    • 4 INNOVATION AND SUPPORTCTI/KTI initiatives are well known – The use of knowledge transferinstitutions is limitedKNOWLEDGE ABOUT CTI/KTI INNOVATIONPROMOTION PROGRAMS1) USE OF KNOWLEDGE AND TECHNOLOGY[% of respondents that know CTI/KTI, 2010] TRANSFER INSTITUTIONS1) [%, 2010] 77 69 53 27 26 25 4 R&D Project Start-up Innovation Platform & No Yes Do not know any Promotion Promotion Check Network Transfer Institutions Promotionn = 81, multiple answers possible n = 1541) Suppliers and manufacturersSource: SMTI 2010, CTI/KTI 82
    • 4 INNOVATION AND SUPPORTCompanies of all sizes use CTI/KTI services and supportDISTRIBUTION OF CTI/KTI USERS ACCORDING TOCOMPANY TURNOVER [%, 2010] COMMENTSSUPPLIERS • If analyzed by company turnover, the 56 distribution of CTI/KTI users roughly Ø 56 represents the total survey sample 32 • One major exception are manufacturers, Ø 24 where companies with more than CHF 50m in Ø 17 6 6 turnover are overrepresented Ø3 – 50% of manufacturers that use CTI/KTI programs have more than CHF 50mCHF m <5 5-10 10-50 > 50n = 16 turnover – But only 23% of companies in the sample have a turnover of more than CHF 50mMANUFACTURERS 50 • However, these findings should not be over- Ø 36 interpreted, as 19 19 Ø 23 Ø 23 – larger manufacturers usually have several Ø 18 12 R&D projects running in parallel – one CTI/KTI supported project therefore only represents a fraction of all R&DCHF m <5 5-10 10-50 > 50 projectsn = 16 – early CTI start-ups are not covered by this Distribution of total SMTI sample, n = 105 reportSource: SMTI 2010, CTI/KTI 83
    • 4 INNOVATION AND SUPPORTDistribution of CTI/KTI users according to company age showslittle deviationDISTRIBUTION OF CTI/KTI USERS ACCORDING TOCOMPANY AGE1) [%, 2010] COMMENTS 61 • If analysed according to company age, the Ø 61 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 Ø 26 24 24% of CTI/KTI users – slightly less than their 26% survey share 15Ø 12 • Older companies (> 10 years) account for 61% of both CTI/KTI users and share of overall survey participants Very young Young Older (< 5 years) (5 to 10 years) (> 10 years)n = 41 = Distribution of total sample n = 1371) Suppliers and manufacturers, CTI/KTI start-up support is not representedSource: SMTI 2010, CTI/KTI 84
    • 5 GROWTH EXPECTATIONSGrowth expectations by segment and company sizeGROWTH EXPECTATIONS BY SEGMENT GROWTH EXPECTATIONS BY COMPANY SIZE[% of answers] [% of answers] 9 13Suppliers Micro 11 14 13 9Manufacturers Small 12 11Tracers and 9 8 Mediumdistributors 9 11 10 8Service Providers Large 16 7 2010 2011n = 215Source: SMTI 2010 85
    • 6 SMTI REPORT DATABASEResults are based on 252 participating companies –A solid databaseDistribution of participating companies according to categoryCompanies that trade or Traders and Suppliers Companies that supplysell medical distributors major components to thedevices, such as local medical technology 14%wholesalers and industry without havingaffiliates of national or their own brandinternational companies 3.9% 37% Usually these companies also supply components to other related industries 25%Companies that Servicesprovide specialized providersservices to medicaltechnology companiesor for medical devices 24% Manufacturers Companies that produce medical devices under their own brandn = 227, the other survey participants did not indicate their categorySource: SMTI 2010 86
    • 6 SMTI REPORT DATABASEThe SMTI 2010 survey sample represents the whole industryfairly wellDistribution of participating companies according to turnoverACCORDING TO COMPANY TURNOVER ACCORDING TO COMPANY SIZE[CHF] [number of employees] Large > 50m (250 and more) 8% 7% Medium (50 to 249) Micro 21%11-50m 24% 40% (< 10) 68% < 11m 32% Small (10 to 49)Source: SMTI 2010 87
    • Appendix 2: SMTI Knowledge Base 88
    • Three strong parties joined forces to examine the SMTI in 2010 SHARING TOP EXPERTISE • 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 Switzerlands 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 ZurichSource: SMTI 2010 89
    • This is the fifth report on the SMTI 2005 2006 2008 2009 2010 REPORT Wissensbasierte Cluster Herausforderungen und SMTI 2008 Schweiz – weiterhin SMTI 2010 in der Schweiz: Realität Chancen der Schweizer führend in DESCRIPTION oder Fiktion? – Das MedTech Branche Medizintechnik Beispiel der Medizinal- Quick-Check on SMTI technikbranche 2008 • MedTech Industry • MedTech Industry • MedTech Industry • MedTech Industry • MedTech Industry • Innovation • Challenges and • Challenges and • Growth expectations • Challenges and FOCUS • Knowledge based opportunities strategic actions • Challenges and strategic actions actors • R&D strategic actions • Development of • Structure and cluster healthcare market of the SMTI • R&D Dr. Patrick Dümmler Dr. Patrick Dümmler Dr. Patrick Dümmler Beatus Hofrichter Dr. Patrick Dümmler Beatus Hofrichter Beatus Hofrichter René Willhalm Beatus Hofrichter AUTHORS René Willhalm Peter Biedermann ETH Zürich Helbling Medical Cluster Helbling Medical Cluster JOINTED Helbling Roland Berger PARTIES Roland Berger Deloitte, CTI/KTISource: SMTI 2010 90
    • An in-depth survey, selected interviews and additional advisoryboard reviews form the basis of the SMTI 2010 ReportOBJECTIVE METHODOLOGY APPROACH• The SMTI 2010 Report • A questionnaire-based approach • Under the umbrella of the – Aims to embrace the widest with six focal points was used Medical Cluster, three strong industry sample possible – General company data and parties joined forces to carry out – Provides an up-to-date micro- profile a sound industry analysis and macro-economic overview – Business development • The results are comparable with of this important industry – Challenges along the MedTech other studies on an international – Reflects on the trends, value chain level, as internationally challenges and priorities along – Management response recognized definitions are used the SMTI value chain – Developments in the – Highlights and interprets healthcare market • The intention is to update the changes in the industry – Innovation, R&D and report every two years, allowing compared to the situation collaboration tracking of SMTI trends and reported in the "SMTI 2008 issues • Direct market insight and current Report" management thinking was accessed through an Advisory Board • Additional subject matter expertise interviews and desk research helped to complete the reportSource: SMTI 2010 91
    • The publisher of the SMTI 2010 Report and your main contact PETER BIEDERMANN Medical Cluster• 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 BaselMail: peter.biedermann@medical-cluster.chTel.: +41 76 324 31 15The 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 92
    • The authors of the 2010 SMTI Report DR. PATRICK DÜMMLER BEATUS HOFRICHTER Roland Berger Strategy Consultants Deloitte Consulting AG• Dr. Patrick Dümmler is Project Manager at Roland Berger • Beatus Hofrichter is a Senior Manager in Deloitte Consulting – Strategy Consultants in Zurich and the designated Managing Life Science practice in Zurich Director of the Export Platform Medtech Switzerland (starting • He is co-author of the "Swiss MedTech Industry 2008 Report" on September 1st) and the 2006 Helbling Report "Challenges & Opportunities of• He has published over 65 articles and books, including the Swiss MedTech Industry" numerous reports about the medical devices industry, e.g. the • He has more than 10 years of consulting experience in a 2006 and 2008 SMTI Reports variety of industries, predominately in the biotech, chemicals,• He has large experience from various consulting projects within medical devices and pharma the medical devices industry • Beatus Hofrichter worked at Helbling Management Consulting• Dr. Patrick Dümmler studied Economics at the University of AG, KPMG/BearingPoint Consulting, and Cilag AG Zürich and completed his PhD at the ETH Zurich. His PhD International (a Johnson&Johnson Company) thesis was entitled "Knowledge-based clusters in Switzerland: • He is a specialist in strategy, business transformation and Reality or fiction? The example of the Medical Devices operational excellence Industry" (2005)Mail: patrick.duemmler@medtech-switzerland.com Mail: bhofrichter@deloitte.chTel.: +41 76 532 53 16 Tel.: +41 79 254 09 68Source: SMTI 2010 93
    • Renowned industry leaders and subject matter experts supportedthe SMTI 2010 ReportSMTI 2010 – ADVISORY BOARD SMTI 2010 – SUBJECT MATTER EXPERTS Gilbert Achermann Christoph Eigenmann Stefan Blum Director BB MedTech Fund Chairman of the Board Business Unit Director - DePuy Bellevue Asset Management AG Straumann Spine DACH Martin Bopp Section Start-up & Entrepreneurship CTI MedTech Federal Department of Economic Affairs (DEA) Sonja Keppler Roland Marti Lutz-P. Nolte Investment Manager EPS Value Plus AG CEO B. Braun Medical Head of the CTI MedTech Schweiz Initiative Pasqual Kyburz MBA Graduate at ETH Zürich, MTEC Erwin Locher Director MedTech Switzerland Richard Fritschi Eric Perucco Patrick Roth Director Competence Center Medical Technology (CCMT) CEO Ypsomed CEO Stryker Osteonics Switzerland Dr. Margit Widmann Head of Medical Device Division Swissmedic 94 9
    • Input on thought leadership – Further reading1)MEDICAL CLUSTER ROLAND BERGER DELOITTEExportplattform Umfrage über die Trends in European Pharma at the Destination 2025 - 2010 Survey of HealthMedtech Switzerland Bedürfnisse nach health care – How to crossroads – Choosing Future of the Medical Care Consumers in Exportunterstützung create value in a directions in a trans- Device Industry Switzerland: dynamic environment forming healthcare world Behaviors, attitudes and unmet needsMedical Cluster Medical Cluster Strategische Möglichkeiten SwissDRG – Chancen The future of the Life The future of the LifeBooklet 2009 Booklet 2011 dank eHealth – Neue und Risiken für Science industries: Science industries: Angebote, neue Schweizer Spitäler Transformation amid Aftermath of the Wettbewerber rising risk global recession1) These publications can be obtained upon request from the respective partiesSource: SMTI 2010 95 9
    • How to order additional copies "A4rb_standard" – 20100111 – do not delete this text object! DRAFT, AUGUST 17 – NOT to be published 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, The Swiss Medical Technology Industry redistributed, stored in a 2010 Report – "MedTech at the Crossroads" retrieval system or transmitted in any form by any means, electronic, mechanical, 1 photocopying, recording or otherwise, without the prior written permission of the publisher and the authors. 96
    • DisclaimerNo 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 theMedical Cluster, Advisory Board input, additional expert interviews and desk research. The statistical data presented reflects the opinion of theparticipating companies at the time of the data gathering (April to May 2010) and may therefore not reflect the current market environment at the time ofreading.The parties involved in the study confirm that the collection, analysis and interpretation of all data was carried out carefully and anonymously. Thispublication contains information in summary form and is therefore intended for general guidance only. The publisher and the authors cannot accept anyresponsibility 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, RolandBerger AG Strategy Consultants, Deloitte, Innovation Promotion Agency CTI) 97