medical & pharmaceutical trends impacting the chemicals and materials industry - feb09
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Know Your End-Market!Medical & Pharmaceutical Trends Impacting the
Chemicals and Materials Industry
A panel discussion with Frost & Sullivan's leading Chemicals &Materials analysts:
Hariharan Ramasubramanian, Dr Leonidas Dokos
27 February 2009
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Focus Points
Introduction
Impact of Economic downturn
Key Medical & Pharmaceutical Trends Materials for Medical Devices
Product Segmentation
Challenges, Drivers and Growth
Chemical Excipients Product Segmentation
Challenges, Drivers and Growth
Major Industry Participants
Conclusion
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Introduction
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The Integrated Industry Perspective Healthcarerepresents a crucial downstream end-user
Source: Frost & Sullivan
Plasticsand
Polymers
Coatings,Adhesives
andSealants
Packaging
AerospaceAerospace
& Defense& Defense
Automotive &Automotive &TransportationTransportation
ElectronicsElectronics
HealthcareHealthcare
AerospaceAerospace
& Defense& Defense
Automotive &Automotive &TransportationTransportation
ElectronicsElectronics
HealthcareHealthcare
Automotive &Automotive &
TransportationTransportationAutomotive &Automotive &
TransportationTransportation
ElectronicsElectronics
HealthcareHealthcare
Automotive &Automotive &
TransportationTransportation
EnvironmentEnvironment
HealthcareHealthcare
ElectronicsElectronics
EnvironmentEnvironment
EnergyEnergy
HealthcareHealthcare
PerformanceMaterials
SpecialtyChemicals
ConstructionConstruction
ConstructionConstruction
ConstructionConstruction
FoodFood
Source: Frost & Sullivan
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The Medical and Pharmaceutical end-use markets forMaterials and Chemicals
Chemicals Excipients forPharmaceutical Drugs
Materials inHealthcare
Healthcare
Medical & Pharmaceutical
Materials in
Medical Devices
Materials in
MedicalPackaging
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Economic Downturn
Impact on Medical and Pharmaceutical Markets
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Impact on Sectors of the EconomyMarket Indices as an Indicator for Industry Prospects
The effects of the downturn has disproportionately affected different segments of theeconomy
The healthcare sector has outperformed the broader market
US Market Indices
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Dec-07 Feb-08 Mar-08 May-08 Jul-08 Aug-08 Oct-08 Nov-08
Indicesv
alue(units)
Dow Jones Industrial Average NasDaq Biotech
NasDaq Financials NASDAQ Transportation
S&P HEALTHCARE INDEX PHLX SEMICONDUCTOR SECTOR INDEX
HealthcareIndices, whiledeclining,have stilloutperformedthe broader
market
This implies that investors expect that, while the healthcare sector will beaffected by the downturn, it will still out-perform the general economy
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Winners and Losers
Elite: Companies which havehigh cash reserves, butunable to do much to improvetheir business because of the
unfavorable situation
Winners: Companies whichhave high cash reserves and
are able to leverage thissituation successfully through
strategies like M&A /alliances.
Opportunists: Companieswhich have the bestopportunity to grow during the
economic downturn
Losers: Companies likely toloose their revenues due toeconomic downturn
High
Low
High Low
FinancialLeverage
Business risks in economic downturn
Winners
OpportunistsLosers
EliteBig Pharma
Big IVD
Generic
manufacturers
Big imaging
companies
Home care
companies
Discretionary productmanufacturers
Big devicecompanies
Small device
companies
Source: Frost & Sullivan
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What is the way forward ?
Medical devices becomes a more attractive segment for plasticssuppliers facing declines in their other key end user segments.
The prospects for higher margins and a stable demand acts as a
major incentive for companies to invest. However, a focussed - rather than piecemeal approach to the
market will be important for companies looking for long term growthin this segment.
Plastics in Medical devices to grow at a CAGR of 5.4% in the period
2009-2015.
Companies such as Invibio(Victrex) and LyondellBasell
that have built up a separate
brand image and identity fortheir medical products are
well placed to grow in thissegment
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What is the way forward ? (contd)
In over 23 years in the industry,I've never really seen pharma
sales being affected by an
economic downturn in thewestern world. We're probably
one of the industries that will beaffected the last and the least." CEO of one of worlds top 30
pharma companies.
As the era of blockbuster drugs continues to approach its end, thesmaller and specialist companies are better placed for survival.
The pharmaceutical industry is more apprehensive about the upcomingexpirations of patented drugs than the global economic contraction.
The expiration of patents means that manufacturers of excipients need tobe prepared to do business with a larger number of companies in a widergeographical spread and at a more cost-driven supply basis.
Strategic partnerships and
alliances will become morecrucial than ever.
Even amidst the currentchallenging economic climatethe market for pharmaceutical
excipients will perform betterthan other chemicals marketswith a forecast CAGRbetween 2009-2015 of 3.3%.
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Key Medical & Pharmaceutical Drivers and Trends
Doctor, I feel a pain in
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Pharmaceutical trends with Respect to Chemicals &Materials what lies ahead
In 2000, 10% (606 million) of the global population was aged 60+. By 2050 thiswill be more than 21% (2 billion).
The aging of population and the need for more medical devices andsophisticated drugs will create undisputedly more demand for materials, active
ingredients and chemical excipients. There is increasing
competition from low-costmanufacturers. These arelocated in Asia, especially in
India and China, and arecontinuously enlarging their
capacity while improving atthe same time the quality,credibility and reliability.
Source: Frost & Sullivan
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Pharmaceutical trends with Respect to Chemicals &Materials what lies ahead (contd)
Source: Frost & Sullivan
Global mortality from chronic diseases will increase 50% by 2025.
Cardiovascular diseases will remain the main global mortality chronicdisease by 2025 with cancer and respiratory diseases increasingly
affecting more people.
75% of people aged 60+ have
one chronic condition, while50% have two or more
chronic conditions. Chronic diseases account
for more than 60% of allhealth care spending.
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Performance Material Trends in the Medical Devicesand Pharma Packaging Markets
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Plastics in Medical Devices
Polypropylene Polyethylene PVC Eng Plastics
Syringe Plungers
Labware
Medical Bags
AdministrationSets
Catheters
Medical Bags
AdministrationSets
SurgicalEquipment
SterilisationTrays
Medical DeviceHousings
Implants
Market SegmentationPlastics in Medical Devices
Syringes
Labware
Medical Bags
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Performance Materials Market: Impact of Key Industry Themes,
2009
Supply chain
Expansion
Sustainable
production
Performance
Security Conservation of resources
Lifestyle trends
Safety
Differentiation
Multiple
functionalities
0
5
10
0 5 10
Internal Impact
Marke
tImpact
Source: Frost & Sullivan
Performance Materials Market: Impact of Key Industry Themes,
2009
Supply chain
Expansion
Sustainable
production
Performance
Security Conservation of
resources
Lifestyle trends
Safety
Differentiation
Multiplefunctionalities
0
5
10
0 5 10
Internal Impact
Mark
etImpact
Source: Frost & Sullivan
Key Themes in the Performance Materials IndustryTrends of Specific Importance to the Medical Device Industry
Key selling points for
engineering and highperformance plastics
PVC Replacement
Trends with High Impact on the Medical Devices Market
Technical and ServiceDifferentiation
Key
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Key Themes in the Performance Materials Industry (Contd)Changing Lifestyle Trends
Patient Driven
Available personalised healthcareand choice
Patient knowledge through multiplechannels
Public pressure on government
One stop shop
Consumer responsive providers,products and services
Demand Volume
Affordability
Waiting Lists
Public Anxiety Development of demand
management policies and strategiese.g. demand driven financing
20052005
20102010
Primary Care
20152015Home Care/ Self
Testing
Changes in the
demand forhealthcarediagnostics
Changes in thedemand for
healthcarediagnostics
Source: Frost & Sullivan
Secondary Care
Implications for Material Selection
Unique design principles required
High robustness required off thedevice
Aesthetics also assume higher
importance Opportunities are created therefore
for engineering plastics in theseapplications
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European Markets for Plastics in Medical DevicesStrong Growth Prospects
Revenues forecast to grow at a CAGR of 6.2% in the period 2008-15
Source: Frost & Sullivan
Plastics in Medical Devices: Volume and Revenue
Forecasts (Europe), 2005-2015
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
kt
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
M
illio
n
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Plastics in Medical Devices Market: For Plastics Suppliers DevelopingRelationships with Key End User Groups is Crucial to Success
Note: companynames are intended
as examples onlyand do not represent
real relationships
LyondellBasell
BoehringerIngelheim
Gerresheimer
Wilden
Polymer Suppliers
Compounding
Tier 1 Component Producers
Pharma Companies
Source: Frost & Sullivan
RTP Compounding
Direct supply isthe mostpreferred route
High influence onmaterial selectionand often specifymaterials to beused
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Plastics in Medical Packaging:The Pharmaceutical Blisters Market Excerpt
Key Market Segments
Containers Vials & Ampoules
Blister Packs Sachets & Strips Container Tubes Pre-fillable Syringes
2008 2014 and beyond
KeyGrowthDrive
rs
Blister MarketGrowth
IncreasingBarrier
Requirements
Increasing
Regulations for
Compliance
Increasing
Efforts in
Drug
Compliance
Increase
in Calendared
Smart
PackagingGrowth in
Anti-
Counterfeiting
Efforts
Growth inCombination
Drugs
Cost Efficiency
of High
Volume
ContainersRestraintsRestraintsRestraintsRestraints
DriversDriversDriversDrivers
The Pharmaceutical Blisters Market Example
Strong Drivers for Growth
Source: Frost & Sullivan
The pharmaceutical
blisters market isexpected to grow at aCAGR of 6.6% in the
period 2008-14
Source: MediSeal
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Frost & Sullivan Studies in the Area
Plastics in Medical Devices Medical Packaging
European Markets for Plastics inMedical Devices M348 - Feb, 09
U.S. Markets for Plastics in MedicalDevices N540 Apr, 09
U.S. Polymers in Medical Tubingsand Catheters N498 Jan, 09
Western European Medical Silicones
Markets M04A Nov, 06
European Markets for PharmaPackaging M137 Apr, 09
Materials for Medical Packaging TI D0E9 Dec, 07
End Market Studies of Interest Medical Devices IRG
US Infusion Pumps Market N3A5 - Feb, 09
European Insulin Delivery Devices Market M2CD Oct, 08
Others..
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Chemical Excipients for the Pharmaceutical Industry
Product Segmentation
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Pharmaceutical trends with Respect to Chemicals theexpected shift
PrePre
20052005
Blockbuster Model
20152015
Niche Drugs and R&D
20202020
Integration & Supply Chain
Opportunitiesin the Global
PharmaMarket
Source: Frost & Sullivan
New opportunities in the global pharmaceutical market will appear asthe business and market models are evolving.
Liposomal technologies have the potential to increase the effectiveness
of compounds especially in the anti-cancer, neurological and anti-fungaldrug areas.
By 2015 opportunities willbe more prominent in nichedrugs and research and
development. By 2020 integrated
packages of products andservices will focus on patientmonitoring & compliance.
Integration of pharma,
diagnostics, medical devices,patient monitoring and
healthcare IT.
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Chemical Excipients - Main Product Types
Sweeteners
Flavourants &
Colourants
Disintegrants
Binders & Fillers
Preservatives &
Antioxidants
Glidants &Lubricants
Coatings
Excipients
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Major Challenges
The global adoption of Current Good Manufacturing Practices (cGMPs) is themajor challenge for this industry representing the required total commitment of a
company to a set of regulations, codes, and guidelines for the highest possible
quality in manufacture of drugs, medical devices, diagnostic products, foodproducts and Active Pharmaceutical Ingredients (APIs).
Source: Colorcon
Asian companies are trying to incorporate
cGMPs with various degrees of success.
Since 2004, several blockbuster drugs have
lost patent protection and this trend isexpected to become more prominent up to2011.
The active promotion of generics as a high-quality low-expense alternative is expected to
widen the market base for these products.
Source: Innercap Technologies
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Major Drivers
The fastest growing region is Asia, due to its growing economy, andcontinued improvement in the health care system.
The changing attitude of pharmaceutical industry towards excipientsconsidering them more than just inactive ingredients but crucial in improving the
performance of the end-product (medicinal drug). The outsourcing of services in the
pharmaceutical industry is growing. The reasonsinclude the declining investments in research anddevelopment (R&D), increasing generic
penetration, and the growing development costs.
Modern contract manufacturing organisations(CMOs) offer a wide range of services ranging frompre-clinical development to commercial batch
manufacturing to active/non-active manufacturing,as well as packaging and distribution.
Smooth delivery of a consistent dosage over time is the objective, withthe need for fewer administrations, optimal use of the delivered drug, and
increased patient compliance with the treatment programme.
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The global pharmaceutical excipients market will performbetter than other chemicals markets
The downturn in growth is expected to last throughout 2009 and 2010affecting at a different degree different regions.
Source: Frost & Sullivan
The market is expected to
return to previous level ofactivities and growth from2011.
Even amidst the currentchallenging economic climate
the market for pharmaceuticalexcipients will perform betterthan other chemicals markets.
The CAGR of the period
2009-2015 will be 3.3%.
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Source: Frost & Sullivan
Technologically advanced excipients and environmentally friendlyproducts will grow faster than commoditised excipients
The Global Pharmaceutical Excipients market is valued at $2.28 billion andwas divided among the following excipients market segments as shown below.
The market for pharmaceutical excipients will perform better than other chemicals
markets.
Binders represent the largest market segment, albeit mostly includingcommoditised products.
Disintegrants are expected toexhibit a CAGR of 4.6% duringthe period 2009-2015.
The market for controlled-release pharmaceuticals isgrowing rapidly with companiesincreasingly turning to drugdelivery technologies as a means
of expanding product lifecycles,enhancing drug efficacy andmaximizing revenues.
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Major Industry Participants
Pharmaceutical Excipients - Materials for Medical Applications
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Conclusion
The healthcare sector (medical & pharmaceutical) continues to provide
opportunities for innovative companies, even in the current economic scenario Companies willing to enter/strengthen their position in the market will however
have to invest in developing the R&D capabilities, and also strong business
development and technical service teams to cater to this segment
In the pharmaceuticals segment, industry participants need to forge business
relationships with generics manufacturers and align accordingly their distributionnetworks.
Individual markets researched by Frost & Sullivan recently including theplastics in medical devices and packaging and the global pharmaceuticalexcipients are all showing excellent potential for market participants
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Next Steps
Register for Frost & Sullivans Growth Opportunity Newsletter and keepabreast of innovative growth opportunities(www.frost.com/news)
Register for the next Chairmans Series on Growth:(www.frost.com/growthEU)
Join us at our 3rd Annual Customer Contact Executive MindXchange (June2009, Europe)
Join us in London on 19 20 May at Growth, Innovation and Leadership2009: A Frost & Sullivan Global Congress on Corporate Growth Event(www.frost.com/giluk)
Request a proposal for a Growth Partnership Service to support you and yourteam to accelerate the growth of your company.
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For Additional Information
Medical & Pharmaceutical Trends Impacting the Chemicals and Materials Industry
Steve LeeStrategic Account Manager
Chemicals, Materials and Food, Asia Pacific(65) 6890 [email protected]