european medical devices industry assessment -- a symptomatic evaluation

Medical Devices Industry Assessment

– A Symptomatic Evaluation

Sree Vidhya Praveen

Senior Research Analyst

Medical Devices

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Agenda

Medical Device Industry: A Symptomatic Evaluation

Medical Device Industry – A Brief Outlook

Macroeconomic Trends Affecting Medical Device Market

Medical Device Market Segment Analysis

Health Care Regulations Across Europe

Medical Device Industry Competitor Analysis

Mergers and Acquisitions in the Medical Device Industry

Conclusion

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Market Segmentation

Anesthetic and Respiratory Devices

Cardiology and Thoracic Surgery

Cosmetic Surgery & Lifestyle Products

General Surgical & Therapeutic Devices

Intravenous & Infusion Devices

Minimally Invasive Surgical Devices

Neurology & Neuromuscular Devices

Ophthalmic & Optical Devices

Orthopedic and Prosthetic Devices

Single use Surgical & Disposables

Urology & Gynecology Devices

Wound Care and Biomaterials

2010

MEDICAL DEVICE MARKETUSD 296.81 Billion

(GLOBAL)

SEGMENT 2011 STAR RATING

NOTE: Star rating for segments is to represent the potential markets within the medical device industry in 2011

Medical Device Market: Segmentation (World), 2010

Source: Frost & Sullivan

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Historical Revenue of Medical Device Market

268.31

283.07

288.16

296.81

314.62

200.00

220.00

240.00

260.00

280.00

300.00

320.00

340.00

2007 (e) 2008 (e) 2009 (e) 2010 (e) 2011 (f)

Technology innovations, demographics and hospital austerity measures will drive the global medical device

market above USD 300 billion in 2011

Revenue ($

Bill

ion)


Medical Device Market: Total Revenue (World), 2007-2011

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Cross-regional Comparison of Economic Recovery

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

The United States Europe Asia Pacific Rest-of-World

2007 (e)

2008 (e)

2009 (e)

2010 (e)

2011 (f)

After a brief lull, the Medical Device Industry has quickly rebounded

Fading RecessionFading Recession

2008 2009 2010

Slow Economic ActivityRise in Unemployment

Decrease in consumer Spending

“Signs of Growth”

Medical Device Market: Cross-regional Revenue Comparison (World), 2007-2011


Revenue ($

Bill

ion)

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Challenges ahead for Europe

• Austerity measures were announced by several European governments, towards the end of Q3 2010, in a bid to improve

government finances and the confidence in their economies. Germany led the way with USD 96.0 billion in spending cuts between

2011 and 2014. Greece, Ireland and Spain also announced deficit reducing measures and the French government is pushing to

reduce pensions. While these policies will improve the state of government finances, they will also lead to increased unemployment

and reduce domestic demand driving down consumption.

• Western Europe's ageing population will provide challenges and opportunities in the future as the share of the population aged 65

plus and is forecast to rise from 16.4 percent of total population in 2010 to 18.7 percent in 2020. The increase in the number of

pensioners will place added stress on government finances, but it will also provide opportunities for some sectors like health and

medical services and leisure.

• Unemployment will continue to be a concern particularly in Spain, Greece, Turkey and Ireland. Unemployment rate in Spain is

forecast to exceed 20.0 percent in 2011 and is expected to taper down to 15.0 percent by 2020. These high levels of unemployment

will continue to suppress consumer spending and make economic recovery difficult.

Rising unemployment, an ageing population and strict austerity measures could impede long term growth prospects in Europe.


Medical Device Market: Key Challenges (Europe), 2011-2015

Rising unemployment

Ageing population

Austerity measures

ChallengesChallenges

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European Macroeconomic Forecast

Western Europe's GDP contracted by 4.1 percent in 2009

as the global economic crisis of 2008-’09 hit every

economy in this region. This led to annual disposable

incomes to decline, dragging down consumer

expenditures in most sectors including Medical Devices.

Unemployment remained a problem in the EU-27 where

it held at 9.6 percent for most of H1 2010, but there is a

divergence between the economies. From September

2009 to July 2010 German unemployment dropped from

7.6 to 6.9 percent as the economic recovery progressed.

Meanwhile, Spain's massive unemployment problem has

only deepened from 19.0 to 20.3 percent over the same

period.

Adding on to this will be the ageing populations of

Western European countries which remains a liability for

future economic growth as the share of economically

productive citizens decreases while the state pension

burden increases. This will affect consumer spending

patterns with expenditure on every sector including

health goods and medical services.

Source: Oxford Economics

General Market: Macroeconomic Forecast (Europe), 2000-2014

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Is the Recovery Sustainable?

• Western Europe’s economic activity returns to growth

• Fiscal stimulus packages in developed and developing markets further encourage consumer spending and boost manufacturing

• Emerging markets to lead Western Europe out of recession

• A shift from export to consumption-led growth in key markets like Germany

• Specter of unemployment remains

• Increase in the number of pensioners will place added stress on government finances

• Indebted consumers unlikely to return to old consumption patterns in the short term

• Austerity measures, higher taxes, public spending cuts is expected to drive down consumption in all the sectors

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

2005 2006 2007 2008 2009 2010

UK Spain Italy Germany France

Recovery Factors Restraining Factors

General Market: Real GDP Growth (Western Europe), 2005-2010


Year

GD

P G

row

th R

ate

(%

)

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Historical Pattern of Healthcare R&D Investment


India and China are the hottest R&D destinations

New frontiers in Medical technology and Pharmaceutical industries are investing in the East aggressively

2005 2006 2007 2008 2009 2010

Germany

UK

Italy

France

Spain

US

India

China

Medical Device Market: Historical Pattern of Healthcare R&D Investment

(World), 2005-2010

R&D Investment is Rising in the East

Low

A

vera

ge

H

igh

Year

12







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2010 Medical Device Market Revenue

5.94

6.53

8.90

12.47

14.25

18.40

20.48

21.07

23.45

37.10

48.08

55.80

24.34

0.00 10.00 20.00 30.00 40.00 50.00 60.00

Cosmetic Surgery & Lifestyle Products












Others

SEGMENTSCosmetic











Cardiology and Thoracic Surgery Others

Revenue ($ Billion) 5.94 6.53 8.90 12.47 14.25 18.40 20.48 23.45 21.07 37.10 48.08 55.80 24.34

Medical Device Market: Total Revenue (World), 2010


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Segment Revenue Analysis

0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00

2008

2009

2010

2011 (

f)

Cosmetic Surgery andLifestyle

Neurology &Neuromuscular Devices

Intravenous & InfusionDevices

Urology & GynecologyDevices

Ophthalmic & OpticalDevices

General Surgical &Therapeutic Devices

Single use Surgical &Disposables

Wound Care andBiomaterials

Minimally InvasiveSurgical Devices

Orthopedic andProsthetic Devices

Anesthetic andRespiratory Devices

Cardiology and ThoracicSurgery

Others

Medical Device Market: Total Segment Revenue (World), 2008 to 2011


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Cosmetic Surgery and Lifestyle Products

0.00

2.00

4.00

6.00

8.00

10.00

2008 2009 2010 2011 (f)Revenue ($ Billion) 9.34 1.44 5.94 9.12

Cosmetic Surgery and Lifestyle Products

Rhynoplasty

Chemical Peeling

Microdermal Abrasion

Skin Resurfacing

Aesthetic Hair Removal Laser Treatments

Dermal Fillers (Collagen based)

Breast Enhancement

Liposuction and Body contouring

Botox Therapy & Others


Cosmetic Surgery and Lifestyle Product Market: Revenue (World), 2008-2011

Revenue (

$ B

illio

n)

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Neurology and Neuromuscular Devices

Neurosurgical Products

Hydrocephalus Shunting Devices

Neuroendoscopes

Neurostimulation Devices

Spinal Cord Stimulators

Vagus Nerve Stimulators

Interventional Neuroradiology Devices

Aneurysm Clips and Stereotactic Systems

Neurosurgical Therapeutic Products

CyberKnife Radiosurgery and

Others


Stryker’s acquisition of the Neurovascular Division of Boston Scientific

Corporation early in 2011 for USD 900 Million is an evidence of positive

growth happening in the Neurology and Neuromuscular Segment Market.

0.00

2.00

4.00

6.00

8.00

10.00



Neurology and Neuromuscular Device Market: Revenue (World), 2008-2011

Revenue (

$ B

illio

n)

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Ophthalmic and Optical Devices

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00


Ophthalmic Surgical Devices

Electro Optical Devices

Implantable Micro-Optic Devices

Intra Ocular Lens

Phacoemulsification Equipment

Ophthalmic Viscoelastic Devices (OVD)

Ophthalmic Lasers

Refractive Surgery Devices

(Microkeratomes)

Ophthalmoscopes

Optical Coherence Tomography

and Others

Ophthalmic and Optical Devices


Ophthalmic and Optical Device Market: Revenue (World), 2008-2011

Revenue (

$ B

illio

n)

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0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

Revenue ($ Billion) 20.10 38.04 21.07 27.37

2008 2009 2010 2011 (f)

Minimally Invasive Surgical Devices find

application across all segments in Medical

Device Industry:

Endoscopic Devices

Electrosurgical Devices

Monitoring and Visualization Devices

Angiographic Devices with Installed Base

Ablation Devices

(Radiofrequency, Ultrasound etc)

Cryosurgical Units

Imaging Technology

Medical Robotics

Biopsy Devices

and Others



Minimally Invasive Surgical Device Market: Revenue (World), 2008-2011R

evenue (

$ B

illio

n)

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42.00

43.00

44.00

45.00

46.00

47.00

48.00

49.00


Anaesthesia Machine/Workstations

Patient Monitoring Systems

Ventilators and

Others

Anaesthetic and Respiratory Devices


Anesthetic and Respiratory Device Market: Revenue (World), 2008-2011R

evenue (

$ B

illio

n)

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0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00


Cardiology and Thoracic Devices


Cardiology and Thoracic Surgery Device Market: Revenue (World), 2008-2011

Cardiac Rhythm Management Devices

Interventional Cardiology Devices

Cardiac Ablation Devices

Cardiac Monitoring Devices

Interventional Pulmonary Devices

Thoracic Endoprosthetic Devices

Pulmonary Function Test Monitors

Pulmonary Diagnostic Devices and

Others

Revenue (

$ B

illio

n)

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2010 Medical Device Market Regional Analysis

40.7%

10.1%8.1%

3.8%

3.6%

3.4%

2.7%

2.2%

2.1%1.8%

21.5%

The United States

Japan

Germany

France

I taly

The United Kingdom

China

Spain

Canada

Switzerland

Rest-of-WorldSource: Frost & Sullivan

Medical Device Market: Percent Split of Revenues by Geographical Region (World), 2010

The majority of medical device manufacturers' markets are set on a global basis and manufacturers are seeking expansion into new

regions, such as Asia, Eastern Europe and Latin America, in order to achieve greater profits. In Europe, local companies usually have

subsidiaries, direct sales offices or distributors in several European countries. Non-European companies tend to establish a head

office in Europe and direct sales offices in major markets. The intensive coverage of the European sales territory has resulted in

strong competition in all regional markets. Accordingly, local manufacturers do not have monopolies in their own countries, and

smaller companies are forced to market their products on an international level.

22







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2010 Global Competition in Medical Device Market

0

5

10

15

20

25

30

Joh

nso

n &

Jo

hn

so

n

Sie

men

s H

ealt

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Healt

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tern

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Ph

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ealt

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Ab

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tt L

ab

ora

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Bo

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Co

vid

ien

Becto

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ickin

so

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yker

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un

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inal

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h

St.

Ju

de M

ed

ical

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are

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mer

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mp

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ith

& N

ep

hew

Ho

sp

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Dan

ah

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rpo

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on

Syn

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Beckm

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sen

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ed

ical

Care

C.R

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ard

Den

tsp

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Vari

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ical

Bio

met

Drä

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Revenues

($ B

illio

n)

The medical device industry is facing a high degree of consolidation, which has led to strenuous competition. The major participants in

the market try and acquire the smaller ones, making it difficult for the niche participants to survive. Brand loyalty of devices forms an

additional factor that creates vexatious platform to the new entrants, because customers have relatively high attitude towards the

brand which reflects in their repurchase behaviour.

“Segmentation is the key to success

in this environment”


Medical Device Market: Industry Competition (World), 2010Large Device Manufacturers’ Dominate Global Market

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2004 2010

RANK COMPANYGlobal Market Share (%) RANK COMPANY

Global Market Share (%)

1 Johnson & Johnson 6.8 1 Johnson & Johnson 8.3

2 GE Healthcare 4.9 2 GE Healthcare 5.9

3 Siemens Healthcare 3.8 3 Siemens Healthcare 6.2

4 Medtronic 4.0 4 Medtronic 5.3

5 Baxter International 4.2 5 Baxter International 4.5

6 Philips Healthcare 3.5 6 Philips Healthcare 4.3

7 Boston Scientific 2.5 7 Boston Scientific 3.0

8 Becton Dickinson 1.2 8 Becton Dickinson 2.7

9 Stryker 1.9 9 Stryker 2.5

10 B. Braun 1.7 10 B. Braun 2.1


Medical Device Market: Top Ten Industry Competitors Global Market Share (World), 2004 and 2010

Global Market Share of Top Ten Industry Competitors

Fragmentation Provides

Acquisition Opportunities

25







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Acquisitions Boost Business

0

10

20

30

40

50

60

70

80

0

50

100

150

200

250

Transaction ($ Billion) Number of Deals

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Year

Transa

ctio

n (

$ B

illio

n)

Num

ber o

f Deals


Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Transaction ($ Billion) 10.44 6.8 14.66 21.42 42.14 73.27 58.33 50.41 13.92 41.85

Number of Deals 120 175 166 133 140 150 194 167 136 172

Medical Device Market: Mergers and Acquisitions (World), 2001-2010

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2010 Major Acquisitions

2010 Major Acquisitions in Medical Device Industry

4473.5

2600.0

1500.0

587.0 480.0

810.0 800.0

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Boston ScientificCorporation -

Asthmatx, I nc.

Covidien - eV3Inc,

StrykerCorporation -

Boston ScientificCorp.’s pain-managementdevice unit

3M Company -Arizant I nc.

Medtronic, I nc -Ardian, I nc.

GE Healthcare -Clarient, I nc.

J ohnson &Johnson - Micrus

EndovascularCorporation

Transaction Value ($ Million)


Reven

ue (

$

Million

)

2010 Major Acquisitions in Medical Device Industry

4473.5

2600.0

1500.0

587.0 480.0

810.0 800.0

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Boston ScientificCorporation -

Asthmatx, I nc.

Covidien - eV3Inc,

StrykerCorporation -

Boston ScientificCorp.’s pain-managementdevice unit

3M Company -Arizant I nc.

Medtronic, I nc -Ardian, I nc.

GE Healthcare -Clarient, I nc.

J ohnson &Johnson - Micrus

EndovascularCorporation

Transaction Value ($ Million)

Acquirer - Target Company

Medical Device Market: Major Acquisitions (World), 2010

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27.5 28.026.0

29.5 30.2

34.4

39.2 39.5

0

5

10

15

20

25

30

35

40

Italy The UnitedKingdom

Canada Germany France The UnitedStates

Japan

Corp

ora

te T

ax (

%)

The UK corporate tax rate will be 26.0% from April 2011

NOTE: Tax rate refers to the basic combined central and sub-central corporate income tax rate

Source: OECD/ Frost & Sullivan

2010 Corporate Income Tax Rate

Medical Device Market: Corporate Tax (G7 Economies), 2010

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Healthcare Regulation Flow Chart

Government provides right environment for

businesses to succeed by removing barriers

that are preventing investors from

performing to their complete potential

Increasing Healthcare Expenditure

Austerity Measures

Government Health Reforms

Encourage investment and exports as a route to a more

balanced economy

Promote competitive tax system Business rate relief for small firms

“Manufacturer-Friendly” Governments on the Rise

Annual real term growth witnessed

Increase in General Tax

Economy remains under pressure

Consumer spending pattern remains low

Inflation Rises

Threat for a “double-dip” recession

Manufacturer PerspectiveEnd-User Perspective


Medical Device Market: Healthcare Regulation Flowchart (World), 2010

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Medical Device Industry

Global presence becomes more important in today’s competition

Competition intensifies as private label share grows

Product innovation drives organic growth

Small to medium-sized acquisitions focus on geographic expansion

Mergers and acquisitions boosts businesses

Key Take-away Messages

Manufacturer-friendly Governments are on the rise

Medical Device Market is lucrative and sustainable1

Global branding is a key strategy

Medical Device Market: Key Take-away Messages (World), 2010

2

3

4

5

8

7

6

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european medical devices industry assessment -- a symptomatic evaluation

Business

global medical device

agendamedical device

medical services

percent of total population

strict austerity measures

hospital austerity measures

total revenue world

increased unemployment