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The Swiss Medical Technology Industry 2010 Report – "MedTech at the Crossroads"

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On the mind of the SMTI CEO community

"The MedTech business of non-reimbursed products has started to reach a plateau in traditional markets. The business is now cyclical and growth is not endless."

"The crisis has demanded to set priorities and to constantly remain focused on optimizing these priorities."

"Our business model will change – We need to grow from a simple box-mover to a full solution provider."

"IP protection and proprietary systems have become essential to secure market shares."

"Market access management is key for growth – start-ups should engage in out-licensing deals to Big MedTech."

"The MedTech pioneer era is over, the industry is now mature and competition is global."

“Pace of innovation and changes in health care system are faster than a decade ago.”

Source: SMTI 2010, Advisory Board

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SMTI 2010 – At the crossroads to adapt current business models

In recent years, this report helped to provide better insights on the importance of the Swiss Medical Devices Industry (SMTI). We havemonitored this industry closely since 2005, have seen it mature and are now in a position to derive first lessons from a vast data set.Thus, we are now able to analyse trends that may shape SMTIs mid- to long-term future. This report intends to provide a generaloutlook on the industry. However, it is highly heterogeneous and therefore our conclusions may vary based on a company's productportfolio and economic situation.

As already identified in Spring 2009, mainly manufacturers of non-reimbursed products and suppliers with a high proportion of non-healthcare clients were strongly exposed to the downturn. As external pressures grew, other players were exposed to the effects of theeconomic crisis. High price pressure in export healthcare markets, adverse currency effects of the Euro and US-Dollar against the SwissFranc, reduced investments by the Swiss cantons for hospital equipment, or a declining demand in non-reimbursed products are a fewexamples. Paired with increased pressure by payers and governments in major markets towards cost effectiveness and treatmentoutcome, the Life Sciences industry is now faced with a paradigm shift in its future business model. Today, the "crisis resistance" dueto cash-rich reimbursement systems may be history as healthcare markets are changing rapidly.

Therefore, cost consciousness continues to influence many management actions. The management of SMTI companies increasinglyfind themselves at the crossroads, refocusing their R&D spending. Today, manufacturers either drive full cutting-edge networkinnovations or they focus on incremental innovation.

The first group are "network innovators". Their strengths reside in a cross-industries (e.g. MedTech/pharmaceutical/biotech/IT) as well ascross-academia (e.g. local and international universities and hospitals) collaboration network allowing radical innovation and obtainingmarket premium prices for the novel niche products in major markets.

The second group are "renovators". They focus less on innovation, but rather drive bundling (device/technology, software, single-usematerials, local maintenance/service, and/or training) or incremental product innovations (e.g. line-extensions). This secures their matureproduct portfolio in mature markets. Additionally, renovators increasingly shift their attention to emerging economies to extend the life-cycle of their products, catering to a growing and quality conscious middle class.

Peter Biedermann, Dr. Patrick Dümmler, Beatus HofrichterPublisher and authors of the SMTI 2010 Report August 2010

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Contents Page

Management Summary 5

A. State of the MedTech Industry 9

B. Trends and Challenges 24

C. Strategic Actions 29

D. Winning through Innovation 34

E. Collaboration and Bundling 44

F. International Opportunities and Threats 51

G. International Positioning 59

H. Outlook 65

Appendix 1: Additional Data 69

Abbreviations 70

Appendix 2: SMTI Knowledge Base 88

5

Management Summary

6

Management summary (1/2)

Source: SMTI 2010

• The SMTI consists of 720 - 740 suppliers and manufacturers, as well as 630 - 660 traders and distributors and service

providers

• The manufacturing base is highly diversified across all product categories, many companies are among international

thought and market leaders

• The SMTI value chain is well established and is facilitated by a vast network of academia, specialized service providers,

suppliers and institutions, forming a national MedTech cluster

• The Swiss MedTech cluster is highly attractive for leading international MedTech companies, not only for headquarter

functions but also for development and manufacturing

• Total gross revenue is CHF 22.9bn, own value added is CHF 11.1bn, representing 2.0% of the Swiss GDP

• The turnover per employee is about CHF 460,000; manufacturers realize 81% of their turnover with medical devices

• The expected SMTI growth rate is 10% and 12% for 2010 and 2011 respectively; this is significantly above expected

growth rates for the Life Sciences industry (6.5%) and Swiss GDP (1.9%)

• Above 75% of SMTI CEOs are still focusing on crisis management activities

• However, engaging in the right strategic actions will drive above-average growth, i.e. strengthening R&D know-how,

establishing new production/service facilities, and engaging in new business models

• Today around 49,000 employees work for the SMTI, this equals 1.4% of the Swiss workforce

• 75% of SMTI companies have less than 50 employees, building a strong innovation basis

• The total number of employees during the last two years increased by 10%

• In the next two years SMTI companies expect further growth in headcount; the authors anticipate approximately 55,000

employees by 2013

• Especially micro and small companies hire predominantly in Switzerland while large companies also expand their

workforce abroad

CHF

MANAGEMENT SUMMARY

This report was written in the summer of 2010 involving 252 companies in the field of medical devices in Switzerland. It makes use of the database of the Medical Cluster, Advisory Board input, additional expert interviews and desk research

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Management summary (2/2)

Source: SMTI 2010

• The average rate of export is 63%; manufacturers and suppliers export 78% and 53% of products, respectively

• For more than 70% of SMTI companies, registration and introduction of new products are perceived as less difficult in

Europe than in other markets

• Compared to 2008 higher growth in 2010 is expected from Switzerland, the EU and the BRIC countries

• International opportunities will continue to drive SMTI growth; export-oriented manufacturers expect a growth rate of 18%

• The SMTI is well positioned for the future

• Two megatrends influence the industry

– the triple challenge of price and cost pressures and intensifying competition

– the clinical evidence requirements for cost-benefit of treatment

• The focus on profitability to meet current challenges is at the cost of potentially losing the competitive innovative edge

• Larger companies may review their current business models, the R&D strategy as well as offerings to improve future

growth potential

• The authors anticipate increased global consolidation activities impacting SMTI companies as well

• 10.6% of the turnover is invested into research and development (R&D)1)

• Approximately 25% of the overall SMTI product portfolio was developed in the last three years

• Shortening of the innovation cycle is of significant relevance especially to medium and large sized companies

• Focusing on R&D and fostering a young product portfolio leads to an additional 6% of above-average growth expectation

• However, today companies need to spend more on R&D to generate strong growth rates

• More than 50% of SMTI companies are engaged in network innovation across industry and academia functions

• Collaboration along the value chain is excessive between suppliers and manufacturers, especially large companies tend to

renovate and bundle their current product portfolio

• Many companies focus on collaboration for applied research, quality control and to a lesser extent, on post-launch activities

MANAGEMENT SUMMARY

1) The average R&D expenditure is not weighted to turnover, thus is may be skewed upwards by the large number of small companies in our sample

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The house of MedTech by 2012 – Our working hypotheses1)

SMTI

MARKET VIEWPRODUCT VIEW

COLLABORATION &

BUNDLINGINNOVATION POSITIONING

INTERNATIONALI-

SATION

Source: SMTI 2010

• Above-average growth

expectations due to an

innovative, young product

portfolio or best in class

products

• Higher cost pressure leads

to a shift from radical

innovation towards

incremental innovation in

established/mature

segments

• Companies that focus on

network innovation can

expect above-average

growth

• Price pressure leads

companies to push

bundled offerings in order

to maintain their turnover

level and market share

• Companies that focus on

bundling tend to reduce

their R&D expenditures

• A bundling strategy

favours collaboration within

the same value chain for

incremental innovation

• Demand of buyers will

drive “solutions”, forcing

companies to change their

business models

• Smaller companies lack

export strength due to

shortage of know-how and

commercial co-operations

• Sound, long-term patient

outcome data will ensure

positive sales impact in

mature markets

• Improved market

orientation becomes a

priority due to an increase

of competitiveness

amongst providers and

pressures from payers

• Growth in international

markets correlates with

innovation

• Success in emerging

economies is highly

correlated to strong

regulatory affairs

capabilities

• Healthcare system

changes and arising

opportunities propel export

levels of suppliers and

manufactures

1) Are addressed in chapters D-G

MANAGEMENT SUMMARY

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A. State of the MedTech Industry

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Switzerland is among the global hotspots for MedTech

Exports

2,8

1,7

1,4

5,0

GDP

0,5

0,6

0,7

1,9

Employment

0,2

0,2

0,2

0,3

1,1

0,5

USA

EU

UK

Germany

Switzerland • Switzerland possesses an active medical

technology industry that can rely on a strong

network of related companies and institutions

that create an ideal breeding ground for the

industry (cluster)

• Compared to other countries the relative

domestic share of the SMTI is significantly higher

• Remarkable – and in line with several other

Swiss industries – is the high relative share of

exports reflecting the international strength of

Swiss MedTech products

Source: SMTI 2010, Destatis, Eucomed, Eurostat, UK National Statistics

1) Data from 2008 or, where not available, from 2007

n.a.

INTERNATIONAL MEDTECH FOCUS [% of respective total]1) COMMENTS

A STATE OF THE MEDTECH INDUSTRY

11Source: SMTI 2010, Annual reports, Companies press offices, Factiva, Oanda

Switzerland is highly attractive for international companies –Top 10 companies employ around ¼ of SMTI employees1)

No. Company Sub-section of marketHead-

quarters

Employees in

Switzerland

Sales

[CHFm]

1 Year sales

growth

[%]

R&D

expenses

[CHFm]

R&D/sales

[%]

Sales/

employee

[CHFk]3)

1 Synthes Orthopedics USA 2'900 3'523 6 175 5 329

2Roche

DiagnosticsIn-vitro diagnostics CH 1'750 10'055 4 987 10 387

3J&J

Medical2) Orthopedics USA 1'400 24'492 2 1'830 7 556

4 Zimmer Orthopedics USA 1'150 4'250 -1 213 5 518

5 Sonova Hearing systems CH 1'030 1'500 20 87 6 221

6 Ypsomed Injection systems CH 1'000 254 -8 32 12 212

7 MedtronicActive and passive implants,

vascular diseases and diabetesUSA 900 15'151 8 1'406 9 399

8 B. Braun Orthopedics, hospital aids DE 840 5'992 6 207 3 152

9 Straumann Dental implants CH 800 736 5 39 5 339

10 Stryker Orthopedics USA 600 6'977 0 349 5 375

∑ 12'020 Ø 4 Ø 7

1) Approximately, manufacturers only, figures for reporting year 2009/10, exchange rates: USD/CHF: 1.03, EUR/CHF: 1.49 on 31.12.20091) J&J Medical: Numbers are the total for orthopaedics, surgery, cardiology and diagnostics


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Switzerland is a strong medical technology cluster –Several organizations and institutions support the industry

Source: SMTI 2010, relief swisstopo

• Switzerland has a strong

medical technology network,

supported by several

organisations and institutions

• Regional support

organisations are e.g.

– Basel Area

– Berne Capital Area

– Bio Alps

– Biopolo Ticino

– Greater Zurich Area

• National institutions are e.g.

– CTI/KTI

– FASMED

– Medical Cluster

– Medtech Switzerland

– Osec

– SIX Swiss Exchange

– Swiss Life Science

Marketing Alliance

COMMENTS

BioAlps

Berne Capital

Area

Basel AreaGreater Zurich

Area

Biopolo

Ticino

Location of suppliers

Location of manufacturers


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• Continuous investments in up-to-date medical

infrastructure leads to rising healthcare

expenditures – during the last ten years by

nearly 50%

• The CAGR of healthcare expenditures of

4.0% is significantly higher than the

respective GDP growth of 1.1%

The SMTI has a strong home market – Investments in high-class medical infrastructure meets patients demands

Source: SMTI 2010, BAG, BfS, Healthcare Monitor 2009, KOF

CAGR

4,0%

2010F1)

63,3

2009E

61,0

2008E1)

58,1

2007

55,2

2006

52,8

2005

52,0

2004

51,0

2003

49,3

2002

47,4

2001

45,6

2000

42,8

SWISS HEALTHCARE EXPENDITURES [CHF bn per year] COMMENTS

• Today Switzerland has the third highest GDP

share of healthcare expenditures (10.6%)

after the USA (16% in 2007) and France

(11% in 2007)

• To constrain rising national healthcare costs,

policies will increasingly focus on cost-

benefit comparison of treatments

• The SMTI companies will have to monitor

upcoming policy changes and be ready to

adapt the business model accordingly

FURTHER OBSERVATIONS

1) E = Expected 2) F = Forecast


14Source: SMTI 2010

Basic research for

radical product

innovations

• National

universities and

international

knowledge

networks

• Five university

hospitals in

Geneva,

Lausanne, Berne,

Basel and Zurich

• National research

organizations like

PSI and EMPA

• National research

programs

• European

framework

programs

Developing

and prototyping

supported by

• CTI/KTI MedTech

• R&D programs

e.g. ManuFuture-

CH

• Universities and

universities of

applied sciences,

incl. technology

transfer

organizations

• Specialized

companies, e.g.

for contract

engineering

• International

knowledge

networks

Highly specialized

and internationally

sought-after

suppliers in key

technologies, e.g.

• Information- and

Communication

technology (ICT)

• New materials,

surface

technology

• Robotics and

nanotechnology

• Micro-technology

• Metal-, plastics-,

and ceramic

processing

• Automation and

assembly

• Tool and mould

manufacturers

Manufacturing

industry with broad

range of high-tech

products, e.g.

• Active- and non-

active implants

• Anaesthetic and

respiratory

devices

• Dental

• Electro-

mechanical

equipment

• Hospital hardware

• Diagnostics

• Ophthalmology

• Reusable and

single-use

instruments

• Technical aids for

disabled

Worldwide sales of

Swiss medical

technology products

by traders and

distributors

supported by

• Company

affiliates

• Export Platform

Medtech

Switzerland

• Osec together

with its Swiss

business hubs

abroad

• Swiss pavilions at

international

exhibitions/fairs

• International

industry

associations

Applied

research

Suppliers Manufacturers International

sales

Customers and

stakeholders

Worldwide

customers and

stakeholders, e.g.

• Patients, esp. in

out-of-pocket

markets

• Individual

hospitals, hospital

chains and

purchasing

associations

• Healthcare

professionals

• Diagnostic

laboratories

• Research

laboratories

• Key Opinion

Leaders (KOLs)

• Reg. authorities

• Certification

support

The established SMTI value chain is highly cross-institutional1)

Basic

research

1) Service providers, depending on their specialization are part of any of the value chain building blocks


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MANUFACTURERS BY CATEGORY [%, 2010] COMMENTS

• The manufacturing base of SMTI is

segmented into 16 categories, ranging from a

share of 16% for hospital hardware to 1% for

biological products

• SMTI manufacturers exhibit a broad

technological knowledge base and

diversification

– Bulk risks are reduced

– Benefits interdisciplinary R&D

collaborations

– Strengthens network innovation


• There exists a high degree of collaboration

amongst suppliers, manufacturers, and

academia to

– broaden the offering scope

– obtain key skills and know-how

SMTI manufacturers are evenly segmented across the different industry categories

19%

5%

6%

8%

14%

16%

5%

7%

8%

11%

Source: SMTI 2010

1) Others include, in descending order: lab equipment, ophthalmology, patient aids, anaesthetic and respiratory technology, active implants and biological products

n = 320

Others1)

Radiotherapy

devices

Disposable

items

Technical aids

for disabled

In-vitro

diagnostics

Reusable

instruments

Hospital

hardware

Inactive

implants

Electro-

mechanical

Dental

technology


16

SERVICE PROVIDERS BY CATEGORY [%, 2010]

Engineering,

planning,

design

IT

HR

Management

consulting

Suppliers and service providers support the MedTech industry with essential know-how within augmentable value chain processes

18%

26%

30%1%

5%

20%

Source: SMTI 2010

SUPPLIERS BY CATEGORY [%, 2010]

• The SMTI supplier base is broadly specialized,

although components, systems and material

processing contribute to more than 55%

• IT and management consulting are the most

prominent categories among service providers

• Support SMTI with growth capabilities

n = 410 n = 410

Others1)

Electronics

Surface

treatment

Auxiliary material,

green ware

Metal

processing

Components,

systems

Plastics

processing

Financing

Analytics

1) Others (in descending order) include: medical packaging, measuring, ceramics and sterilization

Machines, auto-

mated devices

19%

11%

5%

11%

25%

7%

8%

13%


17

Manufacturers and traders/distributors are highly focused on medical devices sales

56

19 15

47

Ø 61

Turnover from

medical devices

Turnover from

other products

and services

Service

providers

100

53

Traders

and

distributors

100

85

Manu-

facturers

100

81

Suppliers

100

44

2009 n = 212 2007 n = 122

39%

Turnover from medical devices in 2007

84% 80% 59%

Source: SMTI 2010

SHARE OF TURNOVER [%, 2009] COMMENTS

• Many SMTI companies are not exclusively

focused on medical technology – the share

of sales to other industries and consumers is

39%

• Traders and distributors as well as suppliers

show an increased focus on MedTech

compared to 2007

• Suppliers are more diversified in their

customer portfolio

Ø 65

• A high focus on medical devices is needed in order to meet the industry specific traits and sales requirements

• On the whole, SMTI remains unchanged since 2007, indicating that consolidation has not been triggered yet by the financial crisis

• For many suppliers from other industries, MedTech became highly attractive



18

Manufacturers form the backbone of the industry –Average turnover per company is CHF 68 million

3

22

68

11

Service

providers

Traders and

distributors

Manu-

facturers

Suppliers

1) Only with medical devices or components for medical devices

n = 171

Source: SMTI 2010

AVERAGE COMPANY TURNOVER1) [CHF m, 2009] COMMENTS

• The SMTI has a manufacturer centric market

model

• Turnover with medical devices is driven by

– Offering/portfolio strategy, i.e. niche vs. big

player

– Company size

– Upfront investments, i.e. machinery, IP

– Position within the value chain

– Competitive landscape, i.e. number of

competitors within/adjacent to the industry


• Future sustainable turnover is mainly

determined by the following influencers

– Overcome critical mass

– Achieve higher expertise to maintain

compliance

– Anticipate power shift towards payers

– Meet changes in sourcing strategies of

payers


19

Manufacturers and suppliers provide the highest employment, accounting for 92% of the total SMTI workforce

n = 199

Source: SMTI 2010

DISTRIBUTION OF EMPLOYEES [%, 2009] COMMENTS

• The surveyed companies employ around

27% of the total SMTI sector workforce

• Traders, distributors and service providers

account for 8% of the surveyed workforce

• Across all SMTI firms approximately an

average of 59 people are employed

– 126 by manufacturers

– 55 by suppliers

– 25 by traders and distributors

– 7 by service providers

• However, a significant bandwidth has to be

taken into account; of all surveyed companies

– 94% employ less than 250 employees



Service

providers

3%

Traders and

distributors

5%

Manu-

facturers

56%

Suppliers

36%


20

• Traders/distributors experienced growth in turnover per capita, the others remained stable or declined vs. 2007

• The build-up of employees in 2006/2007 led to an overcapacity in 2008/2009, SMTI companies responded by

adapting their recruitment policies

• Unlike many other Swiss industries the SMTI continue to hire above market average, but at a slower pace,

continuing to provide attractive jobs for skilled employees, especially in the fields of R&D, regulatory affairs and

international marketing & sales

Average turnover was influenced by high staff levels – This led to an underperformance of turnover per capita for manufacturers

AVERAGE TURNOVER PER EMPLOYEE

[CHF k]

AVERAGE GROWTH IN NUMBER OF EMPLOYEES

[% change vs. previous two years]

530

301

683

244

287

818

465

246

Manufacturers

Suppliers

Service providers

Traders and

distributors

11

5

21

18

15

30

12

7

2006/2007 Ø = +20%2008/2009 Ø = +10%

2009 n = 164

2007 n = 186

Source: SMTI 2010

2009 n = 163

2007 n = 185


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GROWTH EXPECTATIONS FOR 2008 AND 2009 [%] COMMENTS

100%

Strong decline

(< -5%)

Moderate decline

(-5 to 0%)

Neutral (0%)

Moderate growth

(0 to 10%)

Strong growth

(> 10%)

20092008

n = 280, Ø = 6% n = 21, Ø = 0.1%

Source: SMTI 2010 (based on SMTI survey May 2010), CS Economic Research, OECD

Putting past SMTI growth expectations into perspective –Adjustments were taken fast and early in the downturn

• In 2008, SMTI expected an average growth of

6%. 77% of CEOs predicted a positive growth

rate1)

• The "crisis resistance" of the MedTech

industry became attractive for non-industry

players (mainly suppliers), they were

– Trying to enter a profitable market

– Broaden sales channels and offerings

• As the market turned in Q3 2008 and took its

full impact in 2009 on a global scale, SMTI

companies adjusted their growth expectations

– Then, only 54% of companies expected a

positive growth rate

– The number of companies expecting a

negative impact on sales doubled

– Suppliers with a higher non-MedTech

product portfolio proportion were hit harder

– Manufacturers of non-reimbursed product

suffered

1) SMTI 2008 data collected in spring and report released end of August 2008

Growth expectations

Share of responses


22

40

50

60

70

80

90

100

110

Jan 10Jan 09Jul 08 Jul 09 Jul 10

MSCI World

Europe-DS Pharm & Bio

DJ Euro Stoxx 50

SMI

SIX Bio and Medtech

GLOBAL AND CH MANUFACTURING – PMI INDEXSTOCK MARKETS – SELECTED INDICES

20

30

40

50

60

70

80

90

Jul 10Jan 10Jul 09Jan 09Jul 08

Global Price Index

Global New Order Index

Global PMI Index

Swiss PMI Index

Compared to the SMI, shares of SIX listed MedTech

companies declined stronger. It anticipates market

fears of e.g. tightening healthcare budgets negatively

affecting MedTech companies

The global economic crisis also hit the MedTech industry –Fears exist regarding severe cuts in public healthcare spending

Since June 2008, the global manufacturing

production rose steadily for 13 month in a row but

slowed since the beginning of 2010. The Swiss PMI

is currently stable, outperforming other markets

Source: SMTI 2010, Bloomberg, Credit Suisse, JP Morgan


23

Review of crisis 2008/09 and impact on SMTI – Lessons learned

Source: SMTI 2010

• Right customer and portfolio mix

• Innovation leadership fosters a

special, high value product and

component portfolio

• Networked innovation applying

unconventional know-how

• Closeness to IT industry and to

new materials

• Continuous recruitments

• Scouting and M&A

• Well managed S-curve of core

competencies

SUPPLIERS MANUFACTURERSTRADERS &

DISTRIBUTORSSERVICE PROVIDERS

"To

str

en

gth

en

"

• Focus on relevant R&D projects

and innovative products

• Positioning in markets and

preparing NPIs consistently

• Acquiring know-how

• Continue to recruit, especially

abroad

• Focus on business model

optimization

• Lean/efficient processes

• Strong regulatory capabilities

• Closeness to pharma/biotech

• Foreign exchange issues with

an impact on margins

• Sales force excellence

• Good product mix with high

reimbursement

• High focus on industry segment

• High service competency

• Very good understanding of

buyer‟s needs and buying

culture

• Profit from strong CHF (as

importer)

• Investing/acquiring know-how

and teams

• Proactive positioning to

anticipate revitalization of sector

• Develop solution offerings

copying other industry

successes

• Engage SMTI interfaces

management

• Strong skill set and high value

return offerings

• High flexibility to support

challenges

• Depending on single large

customers and reactive market

strategy

• Over-capacities in production

• Large capital investments made

based on boom forecasts

• Tight EBIT margins

• High diversity of client portfolio

(non-LS/non-core business)

• Lack of international clients

• High inventories and poor

liquidity management

• Weak or reactive attitudes (e.g.

engaging too late in cost cutting)

• Lack of listening to customers

• Mismanaged generation jump

within product portfolio

• Non value based pricing

strategy

• High OPEX/Sales ratio

• Me-too product sales decline

with non proprietary goods

• Late shift in crisis management

• High COGS & inventory

• Mismanagement of currency

hedges

• No product portfolio

differentiation

• High inventories

• Decline in demand for

commodities

• Lack of service offerings

• "Copy cat" and no sound track

records

• "Me-too" approach

"To

avo

id"


24

B. Trends and challenges

25

Taking the pulse of the SMTI – Top buzzwords

Source: SMTI 2010, www.wordle.net

B TRENDS AND CHALLENGES

26

Imminent growth of SMTI companies is shaped by major trends in three categories

Source: SMTI 2010, SMTI Advisory Board

COMPANY REGULATION1) MARKET

IMMINENT GROWTH OF THE SMTI

• Solutions will meet future offering

demand

• Networked innovation is rising

(led by micro/start-up firms)

• Broader know-how is needed to

meet regulatory requirements

(e.g. market access, conformity,

patent infringements, out-

licensing)

• Improved clinical trial design

needed to demonstrate cost-

benefit

• Institutional patient registries

arising in multiple core markets,

driving segmentation

• Tightening of regulatory

requirements2) in mature markets on

quality, testing, safety and off-label

usage

• Growing/tightening regulatory

requirements in Asian markets

• Introduction of DRGs will

– increase pressure on pricing

– delay or decrease investments into

radical innovation

• Demonstrating comparative

effectiveness drives the need to

generate relevant treatment outcome

data

• Non-reimbursed/cosmetic/or capital

intensive investments products face a

stronger toll in sales

• Patient centric models arise due to

– external/remote patient monitoring

– ICT and improved RFID technology

• Bundling of purchasing power among hospitals,

clinics, and specialists; they will

– drive margin erosion

– favour broader offerings

– seek solution providers

• Convergence (MedTech & pharma/biotech)

– drives innovation opportunities

– exposes the MedTech industry to additional

compliance/regulatory measures

• Export shift to emerging markets due to growing

middle-class with rising public and private health

expenditures

• Consolidation of "Big MedTech" towards

conglomerates ("The winner takes it all")

• Growing niche potentials for start-ups,

especially with new technologies (e.g. ICT)

1) Harmonization between EU-Directive and Swissmedic leads to faster implementation of new requirements2) Introduction of EUDAMED leads to growing transparency, both at agencies level and towards the companies


27

Ranking

2008

53

59

68

68

75

77

79

6. Access to specialized

know-how

7. Organizational issues

resulting from growth

5. Availability of

skilled employees

4. Increasing pressure to

reduce production costs

3. Intensified competition

2. Increasing cost pres-

sure from purchasers

1. Increasing price

competition

Competition for the SMTI intensified severely since 2008 –Costs and prices are under pressure in a changing market

1) Challenge is of "high relevance" or "very high relevance" to SMTI companies 2) These represent a "triple challenge" to the SMTI

n = 232; multiple answers possible

Source: SMTI 2010

3.

4.

5.

-

1.

2.

RANKING OF MAJOR CHALLENGES

[% of answers, 2010]1) COMMENTS

• As of 2009, SMTI companies experienced

intensifying competitive pressures

– Suppliers with a high proportion of non-

healthcare clients were hit first

– Manufacturers of non-reimbursed products

were hit by tighter consumer spending

• Today, the majority of SMTI managers are still

in the "crisis mode" observing operational

challenges, e.g. higher price competition, cost

pressure and an intensified competition2)

• Current management thinking may fuel

consolidation to maintain critical mass to

obtain

– A more diverse/innovative product portfolio

– Better access to knowledge pools


6.


28

• Increasing competition and tightening public

healthcare budgets force companies to invest

more into proofing product efficacy

• Gaining data from comparative effectiveness

research and cost-benefit-analyses will gain

in importance for many SMTI companies

• The communication efforts with customers and

authorities need to be intensified in order to

optimally position own products

45

51

56

61

73

87

Negative impact of DRG introduction

on average product price

Higher requirements for product

positioning among DRGs

Higher competition for reim-

bursement entitlement

Growth of purchasing cooperatives

(among customers)

Increasing communication needs with

with authorities/healthcare institutions

Higher requirements for evidence

of product efficacy

Megatrend – Clinical based evidence requirements force companies to focus on higher product efficacy and communication

1) Companies describing the development "applicable" or "partially applicable"; no 2008 data exist

n = 134

Source: SMTI 2010

DEVELOPMENTS IN HEALTHCARE MARKET

[% of answers, 2010]1) COMMENTS


• Recent healthcare developments will drive

– Higher costs to register and fulfil increasing

compliance requirements

– Substantial price decreases in mature markets

• EU wide harmonization of pharma prices is

currently discussed; this will also influence the

SMTI


29

C. Strategic Actions

30

56

59

62

63

67

77

77

85

8. Geographic expansion/

internationalization

7. Integrating new partners

6. Developing new

business models

5. Strengthening

product innovation

4. Optimizing distribution

3. Further development of

org. structure and processes

2. Optimizing marketing

1. Improving profitability

Ranking

2008• In contrast to 2007 CEOs express a strong

shift in priorities

• To support future growth, three rather

operational actions are in focus

– Improving profitability

– Optimizing marketing & sales effectiveness

– Enhancing organizational structures and

processes

6.

3.

7.

4.

1.

5.

8.

2.

SMTI companies are focusing on profitability to meet current challenges at the cost of potentially losing their innovative edge

1) Strategic actions mentioned as being relevant to SMTI companies 2) Deloitte/The future of the Life Science industries

n = 232; multiple answers possible

Source: SMTI 2010

RANKING OF ACTIONS 2010

[% of answers]1) COMMENTS


• SMTI companies seem to approach business

conservatively before returning to a "growth

mode"

• An international Life Sciences survey2)

indicated contrary management responses

– Developing a robust R&D pipeline

– Accelerating geographical expansion

– Forming alliances with pharma/biotech

C STRATEGIC ACTIONS

31

28%26%

55% 59%

100%

Strong decline

(< -5%)

Moderate decline

(-5 to 0%)

Neutral (0%)

Moderate growth

(0 to 10%)

Strong growth

(> 10%)

2011

1% 1%

13%

2010

10%

1%6%

SMTI companies expect 10-12% growth p.a. in the next two years

EXPECTED GROWTH FOR 2010 AND 2011 [%, p.a.] COMMENTS

n = 194 n = 188

Source: SMTI 2010, Credit Suisse, SwissRe

• On average SMTI CEO's are highly confident

– 10% growth for 2010

– 12% growth for 2011

• Some caution should remain; these expectations are related to the economic situation in May 2010

• Start-ups are particularly enthusiastic

• Established companies expect moderate

growth as they face stronger price pressures


• If such up-turn is achievable, a shift towards

strategic investments and increased

convergence will occur

• Current economic forecast for the Swiss Life

Sciences sector as a whole is 6.5%

Ø =10% Ø =12%

C STRATEGIC ACTIONS

32

15

Ø 12

2011

Engaging in the right strategic actions correlates with above-average growth expectations

16

Ø 10

n = 51

n = 42

n = 64

• Several CEOs focus on a set of strategic

actions to enhance their growth potential

– Strengthening regulatory know-how/studies

– Establishing new production/service facilities

– Engaging in new business models

• If a company focuses e.g. on strengthening

of regulatory know-how/studies, they expect

a growth rate that is 6% above the average

for 20101)

Companies focusingon strengthening regulatory know-how/studies, e.g. cost-benefit analyses

Companies focusing on establishing new production/service facilities, e.g. in emerging markets

Companies focusing on engaging in new business models, e.g. new kind ofservices

Source: SMTI 2010

EXPECTED GROWTH RATES 2010 AND 2011

[%, companies having the respective strategic action in focus]

Ø = average growth expectations across all survey participants

1) Data does not support a cumulative growth impact of combining the actions


• Companies focusing on new business models

do not expect an immediate above-average

effect on their growth rate

15

Ø 12

12

Ø 10

17

Ø 12

10Ø 10

2010

COMMENTS

C STRATEGIC ACTIONS

33

The majority of SMTI companies face increasing challenges –Negative impact on growth is expected

• 50% of SMTI companies face a triple

challenge– Increasing price pressure– Increasing cost pressure– Intensifying competition

• These companies– Expect a below average growth rate for

2010/2011 – Cannot hope for a fast improvement of their

situation

• All survey participants face at least one of the

three mentioned challenges

8

Ø 10

2010

Companies experiencing the "triple challenge"1)

Source: SMTI 2010

EXPECTED GROWTH RATE [%, companies that are

affected by the mentioned challenges] COMMENTS

2010 n = 128, 2011 n = 2211) Companies stating that increased pressure on prices, costs and intensifying

competition were of "high relevance" or "very high relevance" to them

Ø = Average growth expectations across all survey participants


• Tighter public healthcare expenditures will – Keep the pressure on prices– Intensify competition among companies– Force them to decrease their costs basis

• Within this setting companies tend to invest more in product line extensions/renovations

10

Ø 12

2011

C STRATEGIC ACTIONS

34

D. Winning through Innovation

35

Currently three different innovation behaviours can be observed:

• "Network innovators" are innovation winners and– Responsible for product innovations, accounting for 25%

of the total SMTI products on the market (20% by start-ups and micro/small companies; 5% by mature, larger firms)

– Are considered to be the innovation engine of the SMTI – Strengthen the SMTI long-term value growth

• "Renovators"– Contribute 25% to the total of SMTI products– Adopt a fast renovator strategy for early line extensions

• "Commodity exploiters/bundlers"– 50% of total SMTI products, that were neither innovated

nor renovated during the last three years– Adopt a niche/market expansion strategy per product

THE INNOVATION BEHAVIOUR MODEL COMMENTS

exte

nd

ed

re

str

icte

d

Innovation typeexplorative exploitative

Ne

two

rk t

yp

e

Innovation is the major success factor for the SMTI – Depending on company maturity, different innovation behaviours apply

Source: SMTI 2010, Kyburz

Network

innova-

tors

~50%

Commodity

exploiters/

bundlers

Renovators

~25%

• Use extended networks of adjacent industries, institutions and academia to develop radical innovations in an explorative way, leading to product innovation

• Focus on the innovation network within their value chain (e.g. suppliers, traders) to exploit the current portfolio with product renovation, i.e. incremental innovation to expand the product life cycles

• Focus only on exploiting the current product portfolio

1

2

3

1

2

3


• Larger companies tend to acquire innovation as they are cash-rich to balance their lack of own product innovations

• Smaller and start-up companies are averse to out-licensing and desire to exploit their product innovations themselves

1

2

3

~25%

D WINNING THROUGH INNOVATION

36

• Lower priority of product innovation

combined with cost constraining measures

is likely to

– Lead to fewer novelties

– Prompt more renovation activities

• Close attention should be paid to the

maturing product portfolio (see strategic

actions) in order not to fall into an

innovation gap, as average product

development time is around three years

The SMTI shows a balanced product portfolio maturity –Especially smaller companies drive product innovation

• In general, the maturity of the product

portfolio is well balanced – but the larger the

company, the more mature the portfolio

• 25% of the (weighted) SMTI product portfolio

is younger than three years

• 81% of the product portfolio of larger

companies is older than three years

Source: SMTI 2010

AGE OF PRODUCT PORTFOLIO BY COMPANY SIZE1, 2)

[in %, 2010] COMMENTS

n = 1241) Only manufacturers and suppliers 2) In proportion of their product portfolio


34%27%

16%22%

21%

27%33% 20%

20%26% 27%

33%

3-5

5-10

Large

25%

Medium

0-3

+10

100%

25%

Micro

20%

24%

Small

Years


37

Relative R&D expenditure is highest for small companies –Manufacturers spend more on innovation than suppliers

77

119

10

14

Ø 10.6

11-50m< 5m 5-10m

Suppliers Manufacturers

Source: SMTI 2010

1) Only manufacturers and suppliers 2) R&D expenditure was not weighted to turnover 3) Companies with more than CHF 50m turnover were omitted due to a limited sample size 4) Based on a sample of selected companies

• R&D expenditures remained

stable or even increased since

2007, but were increasingly

shifted to incremental innovation

• Manufacturers drive SMTI

innovation; their share of R&D

spending is higher than for

suppliers

• The less turnover a SMTI

company has, the higher the

relative spend on R&D

COMMENTS

BY COMPANY TYPE

BENCHMARKS

[in % of turnover, 2009]4)R&D EXPENDITURES [% of turnover]1,2)

10

5

1212

20092007 n = 90

11

Machine

industry4

Pharma

Electronics

industry

16

5

Biotech

Medical

technology

industry

22


• Compared with adjacent industries, the SMTI spends less on R&D than the biotech and pharma industry, but significantly more than the mechanical engineering and electronics industry

BY TURNOVER

[in CHF and % of turnover 2009]3)

n = 90


38

26

16

16

22

38

24

4

Large 78 0

Medium 80

Small 60

Micro 36

Shortening of the innovation cycle is of significant relevance, especially to medium and large sized companies

25

17

30

21Suppliers 62

Manu-

facturers45

n = 129

• The majority of companies feel the market and

competitive pressures to shorten innovation

cycles in order to launch new or improved products

more rapidly

• It seems that manufacturers are partly passing on

this pressure, evaluating different suppliers for the

most innovative and cost effective solution

• Micro companies seem to be flexible enough to adapt

to shortened innovation life cycles. Their dependency

on often only one or two products makes it a critical

task to stay ahead of competitors

• The larger a company is, the less flexible it seems to

speed-up the innovation cycle, mainly because of

internal processes and compliance requirements

Very high significance

High significance

No or low significance

Source: SMTI 2010

SIGNIFICANCE OF A SHORTENED INNOVATION CYCLE [2010, in %]1)

BY COMPANY SIZEBY COMPANY TYPE

1) Only manufacturers and suppliers


39

Launches during the last three years were difficult – On average new products achieved less than 30% of companies turnover

17

45

20

3

31

29

4

18

25

37

16

6

13

26

42

13

0

23

16

16

Very high

(>70%)

High

(50%-70%)

Medium

(30%-50%)

Small

(10%-30%)

Very small

(0%-10%)

Micro

Small

Medium

Large

• Product launches in the last three years were also affected by the global economic setbacks

• A majority of companies stated that new products contribute only to a minor part (less than 30%) to the current turnover

• For micro companies there seems to be a clear split:

– Either they are older companies with a mature "cash-cow" product portfolio

– Or they are start-ups with a successful product launch just on the brink of growing rapidly

• The other companies capture less returns from new product launches

Source: SMTI 2010

REVENUE SHARE OF PRODUCTS THAT WERE LAUNCHED

SINCE 20071) [in % of each company class, 2010]

n = 128


COMMENTS


40

Companies with a young product portfolio show above-average growth expectations

• Companies with a young product portfolio have significantly higher growth expectations

• Companies with a more mature product portfolio may face – especially if combined with decreased R&D rates – an innovation gap that harms future growth rates

• In order to increase growth rates again, these companies need to take into account an average "idea to launch" time of approx. three years

7

16

Ø 10

2010

1) Only manufacturers and suppliers 2) 85% of survey participants stated improving profitability is a key strategic action

9

17

Ø 12

2011

Source: SMTI 2010

EXPECTED GROWTH RATES OF COMPANIES ACCORDING

TO PRODUCT PORTFOLIO MATURITY1) [%] COMMENTS


• The SMTI is an innovation-centred industry based on network innovation

– Launching new products is an essential growth factor

– High priority on profitability2) drives bottom-line improvements, but does not lead to higher growth rates

Older portfolio (companies with less than 15% of the product portfolio

younger than three years), n = 42

Younger portfolio (companies with more than 15% of the product portfolio

younger than three years), n = 56


41

Low focus on innovation (low R&D ratio and strengthening ofproduct innovation not a priority), n = 33

Companies with a high focus on innovation show above-average growth expectations

• Compared to 2008, strategic priority moved away from strengthening product innovation to profitability improvement measures

• Additionally, relative R&D expenditures have – on average – declined

• Both of these two findings lead to assume a lower focus on innovation

• However, firms that still focus on innovation expect significantly higher growth rates

• They outperform expected average growth by 6% and 3% for 2010 and 2011 respectively, assigning them a leading role in the further development of the SMTI

Source: SMTI 2010

EXPECTED GROWTH RATES AND INNOVATION FOCUS1)

[%] COMMENTS

High focus on innovation (high R&D ratio and strengthening ofproduct innovation a priority), n = 18


8

15

Ø 10

2010

9

14

Ø 12

2011FURTHER OBSERVATIONS

• Listen to/involve patient groups in prototyping reviews to enable product generation jumps


42

2010 n = 61, 2008 n = 154

• The focus of many companies on profitability

improvement measures lead to a decrease of

average R&D spend to 10.6%1) from 15% in

2007

• However, a few exceptions exist: suppliers

and manufacturers must invest more in order

to achieve moderate growth

• Companies that hardly invest in R&D do not

expect a positive growth rate, strengthening

the assumption that R&D is a key driver for

SMTI growth

0%

5%

2%

6%

10%

15%

R&D contribution to growth expectations –Increased R&D expenditure

Source: SMTI 2010

GROWTH EXPECTATIONS BY R&D EXPENDITURES

[% of turnover] COMMENTS

R&D expenditures 2007

7

8

1

16

10

Strong growth

(> 10% p.a.)

Moderate growth

(0-10% p.a.)

Neutral

(0% p.a.)n.a.

Manufacturers' expenditures on R&D

Suppliers' expenditures on R&D

Growth expectation 2011

R&D expenditures 2009


• Suppliers needed to invest heavily into R&D

to meet shorter innovation cycle time

• They may find themselves in a R&D trap due

to a high dependency on MedTech

manufacturers

D

1) R&D expenditure was not weighted to turnover

WINNING THROUGH INNOVATION

43


Source: SMTI 2010, CTI/KTI

The Innovation Promotion Agency CTI – From Science to Market

• In 2009 CTI had an absolute record year by processing a total of 717 R&D funding

applications

• 25 Entrepreneurs received the CTI Start-up Label in 2009

• The total of generated venture capital by the CTI-coached Start-ups was CHF 170m last year

• Start-ups with the CTI Start-up Label have an above-average success rate of 85%

• 2800 students and graduates participated in the venturelab courses in 2009

• Fifteen regional and thematic networks help SME‟s and universities to better share

knowledge and efficiently convert their ideas into products and services

The CTI is the Confederations Innovation Promotion Agency

As such its main three areas of activities are the following:

• Market-oriented R&D projects, in which companies and universities work together

to develop products and services

• The creation and expansion of scientifically-based companies

• Knowledge and technology transfer through platforms and networks

KEY

FIGURES

44

E. Collaboration and Bundling

45

12

43

9

9

13

88

4

24

24

28

59

82

Strategy

consultants

Private research

institutes

Support organizations

Technology/IT service

providers

Universities

Manufacturers/

suppliers

SMTI companies focus on collaborations between manufacturers and suppliers – Strengthening incremental innovation

Source: SMTI 2010

• The majority of SMTI companies closely

collaborate with other manufacturers and

suppliers, positioning themselves often as

"Renovators" working on improvements of

existing products

• Already second are collaborations with

universities; there SMTI companies often act

as "Network innovators", working on

product innovations

• On average manufacturers show a higher

degree of collaboration – this is mainly due to

– Technology leadership in projects with several collaborating parties

– Higher value chain integration

• Not very widespread are collaborations with

service providers

• Roughly less than a quarter of SMTI

companies have respective collaborations

SHARE OF COMPANIES WITH COLLABORATIONS

[% of answers, by inter-industry collaboration type, 2010]

n = 122, multiple answers possible

COMMENTS

Manufacturers

Suppliers

E COLLABORATION AND BUNDLING

46

30

5

7

12

17

12

25

45

43

7

7

13

28

20

41

35

46

61

Product launch

After sales

services

Training

Distribution

Marketing/sales

Product certification

Basic research

Quality control

Applied research

SMTI companies focus on applied research to drive incremental innovations

Source: SMTI 2010

FUNCTIONAL COLLABORATION WITH PARTNERS

[% of answers, by type, 2010] COMMENTS


Manufacturers

Suppliers

SMTI companies, particularly manufacturers,

engage in functional collaboration. Predominantly,

such activities are sought in the field of:

• Applied research; underlining the focus on

incremental innovation

• Quality control and production certification

– Strengthening compliance and regulatory

know-how

– Managing innovation cycle

– Shifting innovation risks to suppliers

• Basic research; focus on break-through

technology and materials

• Training, launch/post launch, and after sales

collaborations are of minor importance to SMTI

firms despite

– Under-proportional returns on new products

– Rising OPEX to sales ratios and process costs

– Expected shifts in business models and

offerings


47

22

29

32

17

100

largemediumsmallmicroCTI/KTI

The national innovation programs of CTI/KTI reach 29% of SMTI companies – More than twice as much as international programs

87

YES

13

11

2

NO

1) Suppliers and manufacturers

n = 155

EU programs: e.g. FP6, FP7

Other: e.g. COST, EUREKA

6

65

YES

35

29

NO

EU

OTHER

CTI/KTI

OTHER

n = 154

NATIONAL PROGRAMS [% of participation in innovation promotion programs1), 2010]

(distribution by company type)

INTERNATIONAL PROGRAMS [participation in %, 2010]

Source: SMTI 2010


48

The SMTI gets an influx of new ideas from the technological development in four other major industries

RESEARCH AREA (ILLUSTRATIVE) COMMENTS

MedTech research area

Source: SMTI 2010, CCMT, CTI/KTI

1) Substances of human origin 2) Swiss universities are important contributors to the heterogeneous, networked innovation landscape

MedTech Convergence

PHARMA

MECHANICAL

ENGINEERINGBIOTECH

RoboticsMaterials SoHo1) Genetic

EngineeringNanotech

Combined

products

• Two main research trends can be identified:

– Many SMTI companies apply electronics

and mechanical engineering know-how to

medical devices

- New combinations of different disciplines

provide input for highly innovative

products (network innovation)2) through

software engineering

- Especially ICT plays an increasingly

important role as a key component to

innovative products and services (e.g.

e-Health), and is a success factor due to

the flexibility and ease of operation

– Technological developments fuel the

convergence between pharma/biotech and

MedTech, creating novel products with a

combination of different action principles

(device/drug or drug/device)

• These developments will – together with

regulatory changes – lead to the creation of

new business models

Software

engineering

ELECTRONICS

INDUSTRY

RFID

ICTVisualization/

Simulation

Teleservices/

Telemetry

Navigation

Biomarkers


49

The SMTI business model will change – A stronger focus on bundled offerings and a higher patient centricity arises

• Major shifts in business models are foreseen due to – Changes in health care systems– Growing cost pressures by payers– Increased transparency demand

(e.g. DRG, CER)• Expressed strategic focus is

– Driving bundled offerings (proven products paired with novelties)1

– Becoming further patient centric– Focusing on market pull activities

BUSINESS MODEL

DIMENSIONS

In-house

Me-too

product

Single

products

Technology

push

Make

GP/provider

centric

No reim-

bursement

External

Novelty

product

Bundled

offering

Market

pull

Buy

Patient

centric

Full

coverage

Knowledge

creation

Innovation

Offering

Market

orientation

Production

capability

Sales channels

Reimbursement


1) Combined offering such as a) "own device/technology, software, consumables materials, local maintenance/service, and/or training", or b) "combined products" (pharma/biotech and medical devices incl. third party product, or c) enhancements through value added "solutions"

DEGREE PER CHARACTERISTIC FOR 2012 COMMENTS

• Notions regarding long-term strategic

orientation are

– "From Box-Mover to Solution

Providers"– "Best in class" vs. "One Stop Shop"


Start point 2010 End point 2012Degree of Changen = 6


50

Offerings are challenged by price pressures –Changes ahead for 2012

POSITIONING AND BREADTH OF

OFFERINGS [illustrative] CHARACTERISTICS OF OFFERING STRATEGIES BY 2012

Pri

ce

Benefits

hig

hlo

w

highlow

Multiple

indications

Best in Class

Own product

Commodity

product, single

indication

Commodity


With reduced funding in health care systems, price pressure will further increase. Paired with DRG, transparency on patient outcome becomes available to payers

This will influence the companies„ offering strategy – thus they may choose from the following positioning in the future:

• "Best in Class" products

– Unique IP, processes, technology or materials and best treatment outcome, thus often benefit drivers

– Yield premium price positions

• "Commodity" (less innovative or "me too"/single) products

– Aim at high volumes/lower margins pricing

– Must provide supply flexibility/reliability

• "Bundling" (to obtain an overall higher price benefit ratio)

– Own products, services, consumables, training and IT updates

– Convergences (combined pharma/biotech and MedTech product)

– Solutions1 (extended value creating services or complementary products for a full DRG treatment incl. competitor products)

1) Solutions serving DRG related treatments are currently in early stage discussions amongst leading firms; positioning here is rather indicative

Product categories

Single product Bundling types

own product

convergence product

solutions


51

F. International Opportunities and Threats

52

11

6

11

3

13

30

35

22

10

7

3

13

29

34

Other

countries

in Asia

BRICJapan Other

countries

in Latin

America

Other

countries

USA /

Canada

EUSwitzerland

• Compared to 2008, there were no significant

changes:

– The Swiss market is still expected to have the

highest growth potential

– More than half of the SMTI companies expect

the highest potential in the EU, USA and BRIC

markets

• For the other geographical regions, Swiss

companies tend not to expect important growth

contributions:

– In Japan registration and regulatory

requirements, as well as cultural differences,

are a major hurdle

– The rest of the world market does not yet

contribute significantly to the growth of SMTI

companies

SMTI companies still perceive the strongest growth potential in the Swiss home market, closely followed by the EU

Abroad

2010: 65%

2008: 66%

Switzerland

2010: 35%

2008: 34%

2010

2008

n = 141

n = 132

Source: SMTI 2010

COUNTRIES WITH HIGHEST EXPECTED GROWTH

POTENTIAL FOR THE NEXT 2 YEARS [% of mentions, 2010]1) COMMENTS

1) Includes suppliers, manufacturers, traders/distributors and service providers

F INTL OPPORTUNITIES AND THREATS

53

10

88

2

14

35

32

22

6

18

6

20

30

16

Rest of

the world

Other

countries

in Latin

America

Other

countries

in Asia

BRICJapanUSA /

Canada

EUSwitzerland

• Companies expect the strongest stimulus from EU

countries, followed by Switzerland

• Overall manufacturers seem to be more

internationalized than suppliers

– About 54% of manufacturers expect highest

growth from business with countries outside the

EU and Switzerland

– In the focus are EU, USA/Canada, the BRIC

countries and only fourth the Swiss home

market

– Suppliers have a higher focus on the EU and

the Swiss home market, representing for more

than two thirds of companies the regions with

the highest growth potential

Manufacturers are more internationalized than suppliers – More than 50% perceive strongest growth outside EU and Switzerland

AbroadSwitzer-

land

Suppliers

Manufacturers

n = 49

n = 72

Source: SMTI 2010

COUNTRIES WITH HIGHEST EXPECTED GROWTH

POTENTIAL FOR THE NEXT 2 YEARS [% of mentions, 2010] COMMENTS


• Suppliers seem to need a geographical closeness

to manufacturers in order to optimally fulfil their

customer requirements


54

The economic outlook for main SMTI export markets is positive –Return to growth expected

1,6

2010 F

3,1

0,8

2,4

1,8

2009 E

-2,4

-4,2

-3,3

-2,5

2008 E

0,40,7

0,5

1,8

2011 F

2,7

1,5

2,1

USA

EU-27

OECD

Switzerland

Source: SMTI 2010, BAG, BfS, KOF

GDP GROWTH [% change vs. previous year] COMMENTS

• Most of the main SMTI export markets are

expected to return to growth in 2010 (0.8 and

3.1%) and 2011 (1.5 and 2.7%)

• The OECD average growth rate is expected

to slightly outperform Switzerland and to

recover considerably faster than in the EU-27

• This increases the growth potential through

sales – both in Switzerland and abroad

• Growth prospects are even brighter outside

the traditional European markets, e.g. in the

emerging economies in Asia and South

America

E = Estimate, F = Forecast


55

A world of opportunities and threats by 2012

Source: SMTI 2010, Espicom, IMS Health, Moody's Investor Service, Reuters

• For BRIC countries (incl. Turkey), the

expected aggregated growth is around 10-

12% for Life Sciences industry

• High potential for multiple-brand strategy in

developing markets

2

• Japan is the second largest MedTech market

worldwide

• Latest reimbursement price revisions favour

innovative products

8

• Expensive distribution system

• Price increases anticipated

• Russian MedTech market is estimated at

USD 5.6bn

• Around 81% supplied by imports

4

• Rising of new competitors? Chinese & Indian

generics manufacturers ready to substitute

OEM products

6

• Indian market valued at around USD 3bn and

expected to grow around 10% a year

• IT service providers cater for MedTech needs

5

• South Africa‟s MedTech industry is expected

to grow at CAGR of 7.1% to 2015

• Around 90% supplied by imports

3• USA is the world‟s largest MedTech market

(close to 40% of total) with an expected

CAGR of 2.8% until 2015

1

• Expected pricing pressure on MedTech

manufacturers due to financial alliances

between hospitals and doctors

• New regulations, e.g. 510 k, CER and excise

tax burden (next 10 years around USD 20bn

anticipated)

Regional opportunities

Regional threats

4

8

3

6

2

2

22

2

1 7

5

9

• Increased regulation to be implemented in

Australia, Singapore and India

9

• 7„000 new hospitals and medical centres

planned in China

7

• Growing MedTech know-how with new and

smarter competitors arising with a significant

lower cost basis

Selected global highlights

WORLDWIDE

• Faster increase of "Western

diseases" e.g. diabetes, obesity, etc.

• Growing demand for

established/new

treatments/technologies


56

A world of opportunities and threats by 2012

Source: SMTI 2010, DeviceMed, Espicom, Meditec, Specatris

• France continues to lag behind its EU markets,

e.g. in imaging and radiotherapy equipments

(high-tech in hospitals)

• Several reform programmes planned for the

healthcare sector in France

2

• In Poland, around 85% of the MedTech

market is supplied by imports

• Healthcare spending accounts for about 6.2%

of GDP

10

• The Spanish MedTech market is valued at

USD 4.8bn in 20101

National opportunities

National threats

• Italy is the fourth largest MedTech market in

Europe9

• Expected to be one of Europe‟s slower

growing MedTech markets over the next five

years with a potential impact on Swiss export

Selected European highlights

EUROPE WIDE

• EU price harmonization plans for pharma

sector is expected to affect the MedTech

industry

• EU to boost high-tech budget for research

& innovation to EUR 6.4bn in 2012

• eHealth policy implementation project en

route for 2020

5

63

107

42

1 9

8

• In UK, the expected MedTech market growth is

at around 3.6%

• Current government plans involve a 15% cut in

health spending as of 2011

3

• Small scale of domestic MedTech production in

Norway with anticipated higher import needs5

• Increasing regulations (MPKPV regulation

early 2010) in Germany and growing power of

purchasing organisations (DRGs)

7

• Central patient registers in Denmark6

• Per capita spending on MedTech in

Switzerland is among the highest in the world

with USD 544

4 • Expected MedTech market growth of 4.7% in

Austria8

• Focused MedTech “Research for Health

2011”program launched in Germany with

budget of EUR 1.2bn

• Government budget cuts ahead due to debt


57

The US Healthcare Reform will also influence SMTI companies

EXPECTED THREATS

• Higher numbers of patients

• Opportunity for highly innovative treatment

demand

• Opportunity to position bundled offerings/solutions

to buying consortiums

• Increased opportunities for preventive/early

indication devices

EXPECTED OPPORTUNITIES CONVERGENCE OF FOUR FORCES [illustrative]

Source: SMTI 2010

• Higher price transparency

• Higher compliance and registration efforts for new

products, incl. registration fees

• Higher re-negotiation costs of existing products

• Tighter reimbursement for me-too products

• Higher tax burden


58

n = 90

2327

38

28

39

30

13

42

2615

3

27

USA

05

BRIC

Very easy

Easy

Neutral

Difficult

Very difficult

0 3

46

30

EU

0

20

JAPAN

2

Switzerland

4

20

5251

Total

1

11

43

0

1

Registration and introduction of new products are perceived to be less difficult in Europe than in other markets

Source: SMTI 2010, SMTI Advisory Board, Swissmedic

ESTIMATED DIFFICULTIES FOR PRODUCT REGISTRATION

AND INTRODUCTION [% of mentions, 2010]1) COMMENTS

• Registration and introduction of new products

are expected to be a challenging task for 45%

of manufacturers and suppliers

• However, Switzerland as well as the EU

(almost the same processes and structures)

are expected to be less complex than

registration in the US, Japan or BRIC markets

• Japan is considered to be a very difficult

market due to high requirements regarding

sensible documents (drawings, IP etc.), high

fees, and long approval times

• US FDA regulations are perceived as hard to

be met, even for large companies

• FDA recently announced higher regulatory

requirements, increasing registration

complexity and processing time

• Especially smaller SMTI companies face the

challenge to meet these requirements due to

the lack of internal expertise



59

G. International positioning

60

For the first time the SMTI work-force abroad grew at a higher rate than in Switzerland, showing an increasing internationalization

42

20

4

4

Large

Small

Medium

Micro


n = 139

7

16

21

8

Switzerland

Abroad

2007: n = 1862009: n = 81

Source: SMTI 2010

GROWTH IN LOCAL VS. FOREIGN EMPLOYMENT

[% over last 2 years, end 2007 & 2009]1) COMMENTS

WORKFORCE ABROAD

[% of total workforce according to company size, 2009]1)

• SMTI companies continue to hire – but at a

reduced rate

• For the first time growth of employee

numbers has been bigger abroad and signals

a shift in management focus

• This result documents the increasing

internationalization effort of SMTI companies

• The survey results indicate that no significant

work-force shifts from and to Switzerland

have taken place

• Micro to small companies employ around 4%

of their workforce abroad compared to 20-

40% of medium to large sized companies


• Micro and small companies are lacking

access to experienced hires in order to obtain

international expert know-how

2007

2009

G INTERNATIONAL POSITIONING

61

Manufacturers and suppliers are strongly export driven and achieve on average 63% of revenues abroad

AVERAGE SHARE OF EXPORTS

[% of turnover, 2009] 1)

• Manufacturers generate around 78% of sales

abroad

• Suppliers play an important role in the local

market as 47% of their products and services

are sold within Switzerland

• Their export share decreased significantly,

reflecting economical difficulties in many

markets, e.g. declining demand, fiercer

competition, and adverse currency

fluctuations

• The same applies to a majority of

traders/distributors; they only achieved an

export share of 16% (-50% vs. 2007)

• Service providers are generating 35% of their

turnover abroad, benefitting from the high

expertise gained in the home market

1) Average for suppliers and manufacturers , based on average export share of all companies, not based on value of exports. Therefore varies from the value mentioned in the management summary 2) Share of export of service providers was not surveyed in 2008

n = 174

2007 data 62% 74% 34%

Source: SMTI 2010

COMMENTS

78

53Ø 63

Suppliers Manu-

facturers

35

16

Ø 29

Traders

and

distributors

Service

providers2)


62

A young product portfolio helps manufacturers to increase their export share

Source: SMTI 2010

EXPORT SHARE

[%, according to age of product portfolio, 2010]

1) More than 50% of product portfolio younger than 5 years2) More than 50% of product portfolio older than 5 years

• Suppliers and manufacturers realize different

export shares in respect to the age of their

product portfolio

• Suppliers

– Can export above-average mature

products

– Were faced with difficulties in capturing

export shares with young product

• Manufacturers

– Can capitalize on an innovative product

range in export markets

– Tend to introduce new products or line

extensions faster abroad

– Expect below avg. growth from mature

products

n = 93

COMMENTS

46

61

Suppliers

Ø 53

82

72

Manufacturers

Ø 78

Younger PP1)

Older PP2)


63

Growth expectations and export share – Positive correlation for manufacturers, negative correlation for suppliers

Source: SMTI 2010

EXPECTED GROWTH ACCORDING TO EXPORT SHARE

[%, only manufacturers and suppliers, 2010]

1) Defined as less than 44%/81% of revenue from exports for suppliers/manufacturers2) Defined as more than 44%/81% or revenue from exports for suppliers/manufacturers

• Export is a “Must do” for growth

• Manufacturers are much stronger export

focused than suppliers

• Manufacturers with an above-average export

share

– expect significantly higher growth rates

– will outperform the market

– will outperform suppliers by far

• For suppliers, the situation is reversed – the

home market remains the key to growth.

They face difficulties to

– Overcome the external market access trap

– Find niches in a growing commodity market

• By focusing on export, firms can

– Expand the potential customer base

– Drive regional account managementn = 114

COMMENTS

7

10

18

4

Ø 10

Low export share1) High export share2)

Suppliers

Manufacturers


64

To exploit export growth potentials the new organization "Medtech Switzerland" will support SMTI companies

• Connect different actors to

identify business opportunities

• Facilitate market exploration

and match making

• Drive target group tailored

campaigns

• Prepare targeted information

about focus markets

• Position Switzerland as a major

MedTech competence hub

• Provide extensive information

on target markets

• Provide guidance when

entering a new market and

expanding in existing markets

• Support communication via

an integrated portal, specific

events, and delegation visits

• Build-up MedTech brand and

image

Source: SMTI 2010, Medtech Switzerland

Main objectives of the Export

Platform "Medtech Switzerland" is to

bring together Swiss Medtech

supply with foreign Medtech demand

"Medtech Switzerland" is a

federal platform to promote Swiss

Medical Technology worldwide


65

H. Outlook

66

OPERATIONS COLLABORATION & BUNDLING POSITIONING INTERN. MARKET WATCH

SMTI 2012 and beyond – Selected success factors for growth

BUSINESS MODELS INNOVATION INTERNATIONAL GROWTH

IMPROVING THE GROWTH POTENTIALS OF THE SMTI COMPANIES

• Review of current “crisis”

strategy

• Review and overhaul of

current business models for

larger companies

• Define strategic shift or

desired repositioning (i.e.

convergence or innovation

leader)

• Strengthen network

innovation beyond 20% to

maintain innovation base

• Conduct product portfolio

and R&D strategy review

• Engage in extra-industry

technology scouting

• Drive international product

launch earlier

• Engage in out-licensing (by

start-ups) to convergence

partners

• Focus on growth markets/

niche segments

• Actively search talents

globally

COMPLIANCE

• Optimize key markets

regulatory know-how

and approach

• Achieve high compliance

(i.e. zero complaint) in

all markets

• Align pricing strategy to

respond on agency

harmonization efforts

Source: SMTI 2010

• Drive for global innovation

leadership position in

promising niches

• Establish/provide supportive

CER data on key products

and markets

• Build-up value proposition

and solution orientation

• Establish proximity to

specialists/clinics

• Form stronger, early stage

alliances

• Active collaboration in IT

platform developments

needed

• Expansion of business

knowledge via increasing in-

sourcing of software

capabilities and material

science

• Track purchasing

organizations and price

pressures

• Strengthen legal

capabilities regarding

out-licensing or patent

infringements

• Master growing

international competition

and substitute products

• Expand business knowledge

via increasing in-

sourcing/recruiting of

software capabilities and

material science

• Drive rigorous cost

optimization programs

• Strengthen alliance culture

and processes

H OUTLOOK

67

Strategic key guiding principles for future growth of the SMTI at the crossroads

• Secure sufficient influx of networked innovative products to expand current product portfolio

• Ensure the ability to drive radical innovation and/or incremental innovation of products depending

on market environment

• Check technology strategy to include IP development for in- and/or out-licensing

• Adopt a high degree of network innovation, using complementary know-how pools

INNOVATIONS

• Evaluate me-too portfolio strategy for bundling possibilities in order to increase volumes and

turnover

• Shorten development cycles and time-to-peak-sales through the use of more collaborations

• Evaluate possibilities to maximize product value proposition by integrating services and creating

end-to-end solutions

COLLABORATION

& BUNDLING

• Ensure build-up of comparative effectiveness data sets to ensure access to key markets

• Build-up or ensure access to local markets to exploit opportunities in growing economies

• Check geographical out-of-pocket markets for additional growth opportunities

• Plan multiple market introductions for new products, including possible out-licensing to selected

key players in local markets

INTERNATIO-

NALIZATION

• Ensure timely switch of the strategic priorities in correlation to market movements

• Make use of national support institutions to maximize growth potential

• Emphasize customer segmentation and adopt an international account strategy

POSITIONING

Source: SMTI 2010

H OUTLOOK

68

SMTI companies have to choose their individual future R&D focus in a quickly changing business environment

INFLUENCERS FUTURE R&D FOCUS

Source: SMTI 2010

COMPANY

• Future solution offerings

• Network innovation

• Regulatory know-how

• Clinical trial design

• Patient registries

REGULATION

• Healthcare reforms

• Regulatory requirements

• Rising payer power

• Comparative effectiveness

• eHealth enabled processing

MARKET

• Patient centricity

• Bundling

• Convergence

• Global competition

• Consolidation

• New competitors

NETWORK INNOVATORS

• Leading with cutting-edge innovations

• Strengthening basic research

• Building up a high value product portfolio

• Engaging on inter-industry collaborators

• Focusing on out-licensing

• Adopting a niche-growth strategy as early mover

• Collaborate to acquire know-how

• Drive operational excellence

• Strengthen regulatory capabilities

• Establish supportive CER data

Different degrees of future product portfolio development

are possible, depending on the company strategy

RENOVATORS

• Bundling of products, services or know-how

• Exploiting the current product portfolio

• Engaging in scouting and M&A

• Driving innovation by adapting and integrating

• Collaborating within existing value chain

• Growing through volume focused exports

H OUTLOOK

69

Appendix 1: Additional Data

70

Abbreviations

Source: SMTI 2010

BAG Schweizer Bundesamt für Gesundheit m Million

bn BillionMicro-sized

companyLess than 10 employees

CAGR Compound Annual Growth Rate MPKPV regulation Regulation on clinical trials of medical products

CER Comparative Effectiveness Research NPI New product introduction

CTI/KTI Innovation Promotion Agency CTI NOGA Nomenclature Générale des Activités Économiques

CSEMSwiss Centre for Electronics and Microtechnology, Inc./Suisse

d'Electronique et de Microtechnique SAOPET Federal Office for Professional Education and Technology

DRGs Diagnosis Related Groups OsecOsec Business Network Switzerland; an association under

private law supporting Swiss foreign trade

E Expected Manufacturers Companies producing medical devices under their own brand

EMPASwiss Federal Laboratories for Materials Testing and

ResearchPMI Purchasing Managers Index

ETH/EPFEidgenössische Technische Hochschule/Ecole Polytechnique

FederalePSI Paul Scherrer Institut

EUCOMED European Medical Technology Industry Association Service providersCompanies providing specialized services to medical device

companies or for medical devices

F Forecast Small company Between 10 and 49 employees

FTE Full-time equivalent SMI Swiss Market Index

GDP Gross Domestic Product SMTI Swiss medical technology industry

GP General Practitioner SoHo Substances of human origin

ICT Information- and Communication technology SuppliersCompanies supplying major components to the medical

technology industry (and others) without having their own brand.

IT Information technologyTraders and

distributors

Companies trading in or selling medical devices, such as local

wholesalers and affiliates of national or international companies

k Thousand

71

Additional SMTI 2010 data

HEALTHCARE MARKET TREND

CHALLENGES STRATEGIC ACTIONS

INNOVATION AND SUPPORT

GROWTH EXPECTATIONS

1 2 3 4 5

SMTI 2010 REPORT DATA BASE

6

72

Healthcare market developments by company category and collaboration intensity

Source: SMTI 2010

1) n = 188 2) n = 164

DEVELOPMENTS

Higher regulatory requirements for product accreditations

Higher requirements for evidence of product efficacy

Manuf.Supp-liers Traders

Serviceprov.

COMPANY CATEGORY1)

None Medium High

1 1 2 2 1 1 1

COLLABORATION INTENSITY2)

3 2 1 2 2 3 3

Higher regulatory requirements for process compliance

Selective perception of only a few manufacturers by consumers

Increasing communication needs with authorities

Delays during product accreditation

2 2 2 1 4 2 2

4 4 2 4 5

4

4

4 4

5 4555

1 HEALTHCARE MARKET TRENDS

The ranking is based on the number of mentions and degree of importance of the respective developments. Only those developments appearing in the top 5 are listed

73

Healthcare market developments by company size and age

1) n = 189 2) n = 159

DEVELOPMENTS

Higher regulatory requirements for product accreditations

Higher requirements for evidence of product efficacy

Micro Small Medium Large

COMPANY SIZE1)

<5 y 5 y or older

1 2 1

COMPANY AGE2)

21 23 1

1 HEALTHCARE MARKET TRENDS

2 1 3

3

Higher regulatory requirements for process compliance

Selective perception of only a few manufacturers by consumers

Increasing communication needs with authorities

Delays during product accreditation

2 2

4 4

4

4

4

5555

3 3 3 1

5 5 4

Source: SMTI 2010


74

Challenges by company category and collaboration intensity

Source: SMTI 2010

1) n = 188 2) n = 164

CHALLENGES

Increasing price competition

Cost pressure from purchasers and health care institutions

Intensified national & inter-national competition

Increasing pressure to reduce production costs

Availability of skilled employees

Access to know-how


Serviceprov.

COMPANY CATEGORY1)

None Medium High

1 1 1 1


3 2 2 3 3

22

4 4

4

2 CHALLENGES

Organizational issues due to growth

4

1 2

3 2

1 4 3 2 1

1 4 4

55 555 5 1

4

4


75

Challenges by company size and age

Source: SMTI 2010

1) n = 189 2) n = 159

CHALLENGES

Increasing price competition

Cost pressure from purchasers and health care institutions

Intensified national & international competition

Increasing pressure to reduce production costs

Availability of skilled employees

Access to know-how

2 CHALLENGES


COMPANY SIZE1)

<5 y 5 y or older

1 1

COMPANY AGE2)

1 23

2 1

2

4 4

4 5

5

5

5

3 3

1 1

3 3

11

3 32 2

5 3 3


76

Strategic actions by company category and collaboration intensity

Source: SMTI 2010

1) n = 188 2) n = 164

STRATEGIC ACTIONS

Improving profitability

Optimizing marketing

Further development of org. structure and processes

Optimizing distribution

Strengthening product innovation

Developing new business models


Serviceprov.

COMPANY CATEGORY1)

None Medium High

1 1 1


2 32

2

4

3 STRATEGIC ACTIONS

Geographical growth/ internationalization

4

3

2

5 55

5

5

4

3 3 1

1 3 5

2 4 4 3 2

1

1 4 33

1

4 3


77

Strategic actions by company size and age

Source: SMTI 2010

1) n = 189 2) n = 159

STRATEGIC ACTIONS

Improving profitability

Optimizing marketing

Further development of org. structure and processes

Optimizing distribution

Strengthening product innovation

Developing new business models


COMPANY CATEGORY1)

1 1


2 2

2

4

3 STRATEGIC ACTIONS

Geographical growth/ internationalization

4

3

2

3

3

1

<5 y 5 y or older

1 1

32

3 1 3 1

33 4

5 5 5

5 3 4

5 3 5


78

Share of newly introduced products and distribution of product portfolio

n = 127

18

38

20

6

16

21

36

21

8

16

Very high proportion

(> 70%)

High proportion

(50% - 70%)

Medium proportion

(30% - 50%)

Small proportion

(10% - 30%)

Very small proportion

(0% - 10%)

Manufacturers

Suppliers

22

27

23

28 28

2423

25

`+10 years5-10 years3-5 years0-3 years

Source: SMTI 2010

SHARE OF SALES OF NEWLY INTRODUCED

PRODUCTS (SINCE 2007)

[% of answers, 2010]

DISTRIBUTION OF PRODUCT PORTFOLIO

ACCORDING TO PRODUCT AGE

[% of answers, 2010]

4 INNOVATION AND SUPPORT

79

Share of inter-industry collaborations by partner

9

9

12

13

43

88

4

24

24

28

59

81

Strategic consultants

Private research

institutes


IT service providers

Universitites

Manufacturers/

suppliers

Manu-

facturers

Suppliers

43

20

15

83

28

73

91

6

16

13

9

50

94

8

18

88

7

21

14

55

9

18

27

36

IT service providers

Universitites

Manufacturers/

suppliers

Strategic consultants

Private research

institutes


Large

Medium

Small

Micro

Source: SMTI 2010

BY COMPANY CATEGORY [% of partners, 2010] BY COMPANY SIZE [% of partners, 2010]

n = 105, multiple answers possible n = 105, multiple answers possible


80

Share of functional collaborations

20

28

5

7

12

17

30

12

25

45

43

7

7

13

41

35

46

61

Product launch

After sales service

Training

Distribution

Marketing/sales


Basic research

Quality control

Applied research

4

7

4

25

29

21

21

50

54

15

24

27

55

11

7

19

33

30

37

37

52

10

20

20

40

30

40

30

80

3

After sales service

Training

Distribution19

15

Marketing/sales 21


Basic research

Quality control

Applied research 39

Product launchManu-

facturers

Suppliers

Large

Medium

Small

Micro

Source: SMTI 2010

BY COMPANY CATEGORY [% by type, 2010] BY COMPANY SIZE [% by type, 2010]

4

n = 105, multiple answers possible n = 105, multiple answers possible


81

Selected sample of highly innovative, networked start-ups

No.Year

founded

University

spin-offProduct and service offering Key differentiator

Research

area

M E B

1 2007 X Tissue engineering Cutting-edge bioprinting solutions on a versatile and cell-friendly printing platform X X X

2 2009 XComputer assisted soft

tissue surgery

Real-time visualization and simulation of surgical tools and soft tissue leveraging or navigation

(similar to GPS navigation)X X

3 2008 XMicroCT services (data

analysis)

Analysis of samples or biomaterials in a reproducible and cost-efficient manner (service

provider)X

4 2004 X Virtual forensic autopsy Repeatable, observer independent, objective and reproducible forensic assessment method

(based on MRI technology)X

5 2008 X Plastic surgery simulation 3D physical web-based simulation technology (pictures uploaded to internet and simulated

surgery outcome available in short period of time)X

6 2007 Tumor removal Gel which is introduced into tumor and heated up (only locally) using magnetic field to destroy

the tumorX

7 2007 Surgical simulation High fidelity, realistic simulation including e.g. instrument force feedback system X X

8 1996 Robotic rehabilitation therapy Innovative new rehabilitation therapy products leveraging motion sequence X X

9 2003 Injectable medical devices Monophasic reabsorbable gels (a genuine revolution in the world of aesthetic dermatology) X X

10 2006 Medical diagnostic tests Inexpensive, portable and simple-to-use quantitative laboratory-quality immunoassays X X

11 2004 Artificial muscle technologyArtificial muscles incorporated in devices which are then deployed to mimic the action of

sphinctersX X X

12 2007 XStroke and brain injuries

diagnosis

Optical spectroscopy & imaging based on near infrared spectroscopy (NIRS) which is a

paradigm shift from pulse oximetryX X

13 2008 X Devices for medical scanningSystem of carefully positioned polystyrene pearls and inflatable air chambers to e.g. reduce

MRI timeX

14 2004 XAutomated and miniaturized

systems

New particles handling concept – resolving in a unique way the particles agglomeration and

therefore opens new perspectives in bio-assays in micro-fluidic environment X X X

15 2003 XMicro-systems for medical

devices

Contact lenses with integrated eye pressure sensor. An external system sends RF power to

the sensing site and receives in return measurement information (similar to RFID)X X

16 2008 X Catheter system Innovative system to treat cardiac fibrillation using two different sensors X X

17 2009 X Therapy system Bed in constant motion to avoid e.g. decubitus ulcers X X

4

Overview of selected companies

Source: SMTI 2010

Legend: Research areas – M: Mechanical engineering, E: Electronics, B: Biotech


82

CTI/KTI initiatives are well known – The use of knowledge transfer institutions is limited

1) Suppliers and manufacturers

2526

53

77

Platform &

Network

Promotion

Innovation

Check

Start-up

Promotion

R&D Project

Promotion


27

4

69

No Do not know any

Transfer Institutions

Yes

n = 154

KNOWLEDGE ABOUT CTI/KTI INNOVATION

PROMOTION PROGRAMS1)

[% of respondents that know CTI/KTI, 2010]

USE OF KNOWLEDGE AND TECHNOLOGY

TRANSFER INSTITUTIONS1) [%, 2010]



83

50

Ø 23

> 50

12Ø 23

10-50n = 16

19

Ø 36

< 5

Companies of all sizes use CTI/KTI services and support

COMMENTS

• If analyzed by company turnover, the

distribution of CTI/KTI users roughly

represents the total survey sample

• One major exception are manufacturers,

where companies with more than CHF 50m in

turnover are overrepresented– 50% of manufacturers that use CTI/KTI

programs have more than CHF 50mturnover

– But only 23% of companies in the sample have a turnover of more than CHF 50m

• However, these findings should not be over-

interpreted, as– larger manufacturers usually have several

R&D projects running in parallel– one CTI/KTI supported project therefore

only represents a fraction of all R&D projects

– early CTI start-ups are not covered by this report

DISTRIBUTION OF CTI/KTI USERS ACCORDING TO

COMPANY TURNOVER [%, 2010]


CHF m

19Ø 18

5-10

6Ø 3

> 50

56Ø 56

< 5

32

Ø 24

10-50

6Ø 17

5-10CHF m

SUPPLIERS

MANUFACTURERS

n = 16

Distribution of total SMTI sample, n = 105


84

Distribution of CTI/KTI users according to company age shows little deviation

1) Suppliers and manufacturers, CTI/KTI start-up support is not represented

COMMENTS

• If analysed according to company age, the

distribution of CTI/KTI users shows little

deviation from the survey average

• Very young companies (< 5 years) account

for 15% of CTI/KTI users – slightly more

than their 12% share of the survey

• Young companies (5 to 10 years) make up

24% of CTI/KTI users – slightly less than

their 26% survey share

• Older companies (> 10 years) account for

61% of both CTI/KTI users and share of

overall survey participants

DISTRIBUTION OF CTI/KTI USERS ACCORDING TO

COMPANY AGE1) [%, 2010]


15

Very young

(< 5 years)

Ø 12

n = 41= Distribution of total sample n = 137

24

Young

(5 to 10 years)

Ø 26

61

Older

(> 10 years)

Ø 61


85

GROWTH EXPECTATIONS BY SEGMENT

[% of answers]

GROWTH EXPECTATIONS BY COMPANY SIZE

[% of answers]

Growth expectations by segment and company size

10

9

13

9

16

9

12

11

Manufacturers

Suppliers

Service Providers

Tracers and

distributors

20112010

8

8

9

13

7

11

11

14

Large

Medium

Small

Micro

n = 215

Source: SMTI 2010

5 GROWTH EXPECTATIONS

86

Results are based on 252 participating companies –A solid database

Manufacturers

Suppliers

Companies that produce

medical devices under

their own brand

Companies that supply

major components to the

medical technology

industry without having

their own brand

Usually these companies

also supply components

to other related industries

Services

providers

Traders and

distributors

Companies that

provide specialized

services to medical

technology companies

or for medical devices

3.9%

Companies that trade or

sell medical

devices, such as local

wholesalers and

affiliates of national or

international companies

n = 227, the other survey participants did not indicate their category

14%

24%

37%

25%

Source: SMTI 2010

Distribution of participating companies according to category

6 SMTI REPORT DATABASE

87

The SMTI 2010 survey sample represents the whole industry fairly well

24%

68%

> 50m

8%

11-50m

< 11m

Source: SMTI 2010

ACCORDING TO COMPANY TURNOVER

[CHF]

ACCORDING TO COMPANY SIZE

[number of employees]

7%

32%

40%

Large

(250 and more)

Medium

(50 to 249)21%

Small (10 to 49)

Micro

(< 10)

Distribution of participating companies according to turnover

6 SMTI REPORT DATABASE

88

Appendix 2: SMTI Knowledge Base

89

Three strong parties joined forces to examine the SMTI in 2010

• About Medical Cluster

Medical Cluster brings together manufacturers, suppliers, service

providers and research and development companies from all over

Switzerland. We offer platforms and assistance to ensure that

medical technology in Switzerland continues to enjoy the optimal

conditions for growth. The main focus is on supporting innovation,

knowledge exchange, technology transfer, and exports

• About Roland Berger Strategy Consultants

The Roland Berger Pharma & Healthcare Competence Center

supports life-science players in seizing opportunities and mastering

challenges. Besides traditional consulting areas such as marketing,

organization, cost-cutting and M&A, we also provide input from our

intensive analysis of current market trends and developments

• About Deloitte

Deloitte is one of Switzerland's leading professional services firms,

offering services in Audit, Tax, Consulting and Corporate Finance.

We are investing heavily and for the long term in Switzerland. We

currently have more than 1000 professionals operating out of 7

cities: Basel, Bern, Dübendorf, Geneva, Lausanne, Lugano and

Zurich

SHARING TOP EXPERTISE

Source: SMTI 2010

90

This is the fifth report on the SMTI

2005 2006 2008 2009 2010

Wissensbasierte Cluster

in der Schweiz: Realität

oder Fiktion? – Das

Beispiel der Medizinal-

technikbranche

Herausforderungen und

Chancen der Schweizer

MedTech Branche

SMTI 2008 Schweiz – weiterhin

führend in

Medizintechnik

Quick-Check on SMTI

2008

SMTI 2010

• MedTech Industry

• Innovation

• Knowledge based

actors

• Structure and cluster

of the SMTI


• Challenges and

opportunities


• Challenges and

strategic actions

• R&D


• Growth expectations

• Challenges and

strategic actions


• Challenges and

strategic actions

• Development of

healthcare market

• R&D

Dr. Patrick Dümmler Dr. Patrick Dümmler

Beatus Hofrichter

Dr. Patrick DümmlerBeatus HofrichterRené WillhalmPeter Biedermann

Beatus HofrichterRené Willhalm

Dr. Patrick DümmlerBeatus Hofrichter

ETH Zürich Helbling Medical Cluster

Helbling

Roland Berger

Helbling Medical Cluster

Roland Berger

Deloitte,

CTI/KTI

Source: SMTI 2010

DESCRIPTION

FOCUS

AUTHORS

JOINTED

PARTIES

REPORT

91

An in-depth survey, selected interviews and additional advisory board reviews form the basis of the SMTI 2010 Report

OBJECTIVE METHODOLOGY APPROACH

Source: SMTI 2010

• The SMTI 2010 Report

– Aims to embrace the widest

industry sample possible

– Provides an up-to-date micro-

and macro-economic overview

of this important industry

– Reflects on the trends,

challenges and priorities along

the SMTI value chain

– Highlights and interprets

changes in the industry

compared to the situation

reported in the "SMTI 2008

Report"

• A questionnaire-based approach

with six focal points was used

– General company data and

profile

– Business development

– Challenges along the MedTech

value chain

– Management response

– Developments in the

healthcare market

– Innovation, R&D and

collaboration

• Direct market insight and current

management thinking was

accessed through an Advisory

Board

• Additional subject matter

expertise interviews and desk

research helped to complete the

report

• Under the umbrella of the

Medical Cluster, three strong

parties joined forces to carry out

a sound industry analysis

• The results are comparable with

other studies on an international

level, as internationally

recognized definitions are used

• The intention is to update the

report every two years, allowing

tracking of SMTI trends and

issues

92

The publisher of the SMTI 2010 Report and your main contact

• Peter Biedermann is Managing Director of Medical Cluster in Berne

• He is author of various publications on the Swiss Medical Device Industry and co-author of the "Swiss MedTech Report 2008"

• Within the national Swiss Life Science Marketing Alliance, he is in charge of the Medical Device Industry

• Mr. Biedermann is involved in various innovation programs in Switzerland, such as ManuFuture-CH

• Prior to joining Medical Cluster he was Director of the innovation agency innoBE AG in Berne. Here, he was responsible for various

management consulting projects in different industries, including machining, micro-technology and microelectronics

• Peter Biedermann studied Chemistry and Environmental Sciences at the Universities of Applied Sciences in Berne and Basel

PETER BIEDERMANNMedical Cluster

Mail: [email protected]

Tel.: +41 76 324 31 15

The publisher and the authors would like to thank the following persons and organizations:

• The SMTI Advisory Board; the subject matter experts; René Willhalm; Celinda Hampe (Medical Cluster); Aleksandar Ruzicic, Roland Mathys, Georg Thomas, and Sara Schaufelberger (all Roland Berger); Andrin Waldburger, Robert Reppas, Lukas Lang (all Deloitte) for their input and support in preparing the SMTI 2010 Report

• CTI/KTI for their financial support in conducting and publishing this report

93

The authors of the 2010 SMTI Report

• Dr. Patrick Dümmler is Project Manager at Roland Berger

Strategy Consultants in Zurich and the designated Managing

Director of the Export Platform Medtech Switzerland (starting

on September 1st)

• He has published over 65 articles and books, including

numerous reports about the medical devices industry, e.g. the

2006 and 2008 SMTI Reports

• He has large experience from various consulting projects within

the medical devices industry

• Dr. Patrick Dümmler studied Economics at the University of

Zürich and completed his PhD at the ETH Zurich. His PhD

thesis was entitled "Knowledge-based clusters in Switzerland:

Reality or fiction? The example of the Medical Devices

Industry" (2005)

Source: SMTI 2010

DR. PATRICK DÜMMLERRoland Berger Strategy Consultants


Tel.: +41 76 532 53 16

• Beatus Hofrichter is a Senior Manager in Deloitte Consulting –

Life Science practice in Zurich

• He is co-author of the "Swiss MedTech Industry 2008 Report"

and the 2006 Helbling Report "Challenges & Opportunities of

the Swiss MedTech Industry"

• He has more than 10 years of consulting experience in a

variety of industries, predominately in the biotech, chemicals,

medical devices and pharma

• Beatus Hofrichter worked at Helbling Management Consulting

AG, KPMG/BearingPoint Consulting, and Cilag AG

International (a Johnson&Johnson Company)

• He is a specialist in strategy, business transformation and

operational excellence

BEATUS HOFRICHTERDeloitte Consulting AG


Tel.: +41 79 254 09 68

94

Renowned industry leaders and subject matter experts supported the SMTI 2010 Report

9

4

Gilbert Achermann

Chairman of the Board Straumann

Christoph Eigenmann

Business Unit Director - DePuy Spine DACH

Richard Fritschi

CEO Ypsomed

Roland MartiCEO B. Braun Medical Schweiz

Lutz-P. NolteHead of the CTI MedTech

Initiative

Eric Perucco

CEO Stryker Osteonics Switzerland

SMTI 2010 – ADVISORY BOARD SMTI 2010 – SUBJECT MATTER EXPERTS

Stefan BlumDirector BB MedTech Fund

Bellevue Asset Management AG

Martin BoppSection Start-up & Entrepreneurship CTI MedTech

Federal Department of Economic Affairs (DEA)

Sonja KepplerInvestment Manager EPS Value Plus AG

Pasqual KyburzMBA Graduate at ETH Zürich, MTEC

Erwin LocherDirector MedTech Switzerland

Patrick RothDirector Competence Center Medical Technology (CCMT)

Dr. Margit WidmannHead of Medical Device Division Swissmedic

http://images.google.ch/imgres?imgurl=http://www.rjb.ch/htdocs/images/Pictures/News/2008/RJB/Economie/Entreprises/straumann.jpg&imgrefurl=http://www.rjb.ch/rjb/Actualite/Regionale/7308Straumann_va_creer_plus_de_60_emplois_a_Villeret.html&usg=__0zRIXjUv6hG28cUEgM6RLp9euKg=&h=600&w=800&sz=19&hl=de&start=10&itbs=1&tbnid=Cw6b38sA32uFuM:&tbnh=107&tbnw=143&prev=/images?q=straumann&hl=de&gbv=2&tbs=isch:1

http://images.google.ch/imgres?imgurl=http://www.caos-international.org/2006/images/DePuyLogo.jpg&imgrefurl=http://www.caos-international.org/2006/exhibitors-current.html&usg=__LEsZquidZ8Qa0O2ZeEBlq4ZyY6U=&h=362&w=908&sz=33&hl=de&start=1&itbs=1&tbnid=TsTTyZrE7Bzq1M:&tbnh=59&tbnw=147&prev=/images?q=de+puy&hl=de&gbv=2&tbs=isch:1

http://images.google.ch/imgres?imgurl=http://www.cycling-solothurn.ch/Joomla/images/Ypsomed.jpg&imgrefurl=http://www.cycling-solothurn.ch/Joomla/index.php?option=com_content&view=article&id=55&Itemid=59&usg=__676ZjMalTFdPSFtv7bCFppb9dHI=&h=775&w=3079&sz=168&hl=de&start=6&itbs=1&tbnid=LoEUPOu5D6DfpM:&tbnh=38&tbnw=150&prev=/images?q=ypsomed&hl=de&gbv=2&tbs=isch:1

http://images.google.ch/imgres?imgurl=http://www.iceort.org/Pict/stryker only logo.jpg&imgrefurl=http://www.iceort.org/Nof2004/NOF2004right.htm&usg=__R27k0tiIHJt90UjhYLdI9LdZEnA=&h=116&w=422&sz=11&hl=de&start=11&itbs=1&tbnid=v822loLro70pDM:&tbnh=35&tbnw=126&prev=/images?q=logo+stryker&hl=de&gbv=2&tbs=isch:1

95

Input on thought leadership – Further reading1)

9

5

Trends in European

health care – How to

create value in a

dynamic environment

SwissDRG – Chancen

und Risiken für

Schweizer Spitäler

Strategische Möglichkeiten

dank eHealth – Neue

Angebote, neue

Wettbewerber

Pharma at the

crossroads – Choosing

directions in a trans-

forming healthcare world

DELOITTEMEDICAL CLUSTER ROLAND BERGER

The future of the Life

Science industries:

Transformation amid

rising risk

2010 Survey of Health

Care Consumers in

Switzerland:

Behaviors, attitudes

and unmet needs

Destination 2025 -

Future of the Medical

Device Industry

The future of the Life

Science industries:

Aftermath of the

global recession

1) These publications can be obtained upon request from the respective parties

Source: SMTI 2010

Medical Cluster

Booklet 2009

Umfrage über die

Bedürfnisse nach

Exportunterstützung

Exportplattform

Medtech Switzerland

Medical Cluster

Booklet 2011

96

How to order additional copies

An additional copy of this report can be ordered on

www.medical-cluster.ch

at the price of CHF 390.-

Please note that no part of this report may be reprinted, sold, redistributed, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher and the authors.

1

"A4rb

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–20100111

–do n

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DRAFT, AUGUST 17 –NOT to be published

The Swiss Medical Technology Industry 2010 Report – "MedTech at the Crossroads"

97

Disclaimer

No part of this publication may be reprinted, sold, redistributed, stored in a retrieval system or transmitted in any form by any means, electronic,

mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher and the authors.

This report was written in the summer of 2010 involving 252 companies in the field of medical devices in Switzerland. It makes use of the database of the

Medical Cluster, Advisory Board input, additional expert interviews and desk research. The statistical data presented reflects the opinion of the

participating companies at the time of the data gathering (April to May 2010) and may therefore not reflect the current market environment at the time of

reading.

The parties involved in the study confirm that the collection, analysis and interpretation of all data was carried out carefully and anonymously. This

publication contains information in summary form and is therefore intended for general guidance only. The publisher and the authors cannot accept any

responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication

© All rights relating to this publication are the exclusive property of the publisher, authors and their respective companies (Medical Cluster, Roland

Berger AG Strategy Consultants, Deloitte, Innovation Promotion Agency CTI)

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