market and the Contract Manufacturing April 3 rd 2013 Ali MADANI - PowerPoint PPT Presentation

Worldwide orthopaedic market and the Contract Manufacturing April 3 rd 2013 Ali MADANI Phone: + 33 1 47 78 46 00 a.madani@avicenne.com

Table of contents I Worldwide orthopaedic market: dynamics, competition, drivers… Worldwide orthopaedic markets in 2012: hip, knee, trauma, spine, others… The Worldwide Orthopaedic Market: growth Worldwide Orthopaedic Market in 2012: competition Worldwide Orthopaedic Market dynamics European Orthopaedic Market Drivers and limiters of the market Growth forecasts by 2017 II Worldwide Orthopaedic Contract Manufacturing II.1. The value chain II.2. Level of the Contract Manufacturing by type of OEM Worldwide II.3. Orthopaedic Contract Manufacturing market orthopaedic market and the II.4. Contract Manufacturing: competition contract II.5. Trends manufacturing III Take home messages Ali MADANI Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 2

Worldwide orthopaedic markets in 2012: ~34.5 B$ (+4.5%) KNEE 7.7 B$ OTHERS EXTREMITIES HIP 2% +4.5% 13% 18% Hip KNEE TRAUMA 6.2 B$ 17% +1.5% 22% SPINE 23% 4% Worldwide 8 B$ orthopaedic +4% market and the contract SPINE manufacturing ORTHOBIOLOGICS Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 3

The Worldwide orthopaedic market: growth 2000 - 2010 CAGR 2010 - 2011 Growth 2011 - 2012 Growth AVERAGE Total Ortho AVERAGE Total AVERAGE Total 11,4% 4,9% 4,5% Ortho Ortho SPINE SPINE SPINE 11,5% 4,0% 4,0% KNEE KNEE KNEE 13,3% 5,0% 4,5% HIP Worldwide orthopaedic HIP HIP 10,4% 3,0% 1,5% market and the contract manufacturing 0% 5% 10% 15% 0% 2% 4% 6% 0% 2% 4% 6% Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 4

Worldwide implants market in 2012 in value (B$) Market value (B$) % Growth 2011-2012 +4% 9 +4.5% 8 +1.5% 7 6 8,0 7,7 5 6,2 4 3 Knee Hip Spine Worldwide orthopaedic Row Row Row market and the USA USA 11% 22% 23% contract Europe 13% manufacturing 54% 55% 23% 76% 23% USA Europe Europe Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 5

Worldwide implants & Orthobiologic market in 2012 in value (B$) Market value (B$) % Growth 2011-2012 8 +6% +6% 6 4 6,2 +8% 4,5 2 1,5 0 Trauma & CMF Orthobiologics Extremities Worldwide orthopaedic Row Row Row market and the USA USA USA 9% 15% 15% contract Europe 21% manufacturing 29% 56% 24% 61% 70% Europe Europe Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 6

European implants market in 2012 in value (M € ) Market value (M € ) % Growth 2011-2012 +5.1% 1400 +2.7% 1200 1000 800 1 300 600 1 150 400 +8.3% 200 140 0 Hip Knee Shoulder Worldwide orthopaedic France France France Others Others Others market and the 11% 17% 18% contract 18% 19% Germany Germany 27% Spain 7% 24% manufacturing Spain 12% 24% 16% 6% 28% Spain 13% Germany 21% 11% 10% 18% Italy Italy Italy UK UK UK Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 7

Worldwide orthopaedic market in 2012: competition 2012 Worldwide Orthopaedic 2012 revenues of the Major Market Orthopaedic Companies (B$) Depuy-Synthes 7,4 Depuy- Synthes Others Stryker 4,7 21% 32% Medtronic 3,3 Smith & Neph Zimmer 3,9 6% Biomet 2,2 Zimmer Worldwide Biomet 11% orthopaedic 6% Smith & Nephew 2,0 market and the Stryker contract Medtronic 14% manufacturing 0 10 20 10% Orthopaedic products 2012 Other Medical devices 2012 Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 8

The challengers gained market shares 2011 2012 challengers challengers 14% 15% Hip 14% 16% Knee 23% Spine 31% Trauma Worldwide 21% 31% orthopaedic & CMF market and the contract manufacturing 25% 31% Total Ortho Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 9

Majors Vs Challengers: Majors save ranking & Challengers the growth! 18% Legende 16% 500 M $ WW Ortho 2011 market shares (%) 14% 12% 10% 8% 6% 4% Worldwide orthopaedic 2% market and the contract manufacturing 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% Revenues CAGR 2009-2011 (%) Ali MADANI Source: annual company reports May 2012 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 10

Challengers growing Vs majors Majors Challengers Product standardization Multiplication of customized Product range reduction Product range Extension Sale channels cost cutting Attracting new sale forces Worldwide orthopaedic market and the contract More centralized services Local and high level services manufacturing Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 11

European hip, knee & shoulder markets Europe HIP KNEE SHOULDER European Market 1 150 M € 1 300 M € 140 M € 2012 in M € - 14 23% of WW 23% of WW 20% of WW countries market market market +2.7% +5.1% +8.3% Growth per year Worldwide 2011/2012 orthopaedic market and the contract manufacturing Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 12

Market Drivers Impact 1: Population Impact 2: Inhabitants > 65 years Demographic & Economic Impact 3: Health expenses Impact 4: Obesity New products Worldwide orthopaedic & innovation Impact 1: Mix Product impact market and the and revision contract manufacturing Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 13

Drivers & limiters: Population ageing and product mix evolution have been the major historical drivers. Going forward, they should remain the major growth contributors Impact Driver Argument Past Future Reimbursement trends, Competition, clients pressure and public/private mix - - - Price lead to some price decrease Materials The increasing use of higher technology implants (ceramic combinations, cementless products) has a positive + + impact on the product mix Fixation Price Product mix New products, new New products, new surgical approaches, kinematics, new surgeries, new ancillaries and instruments Worldwide new materials & new increase the product mix ++ ++ orthopaedic instruments market and the contract manufacturing Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 14

Product Mix pulls the market Substitution of cemented by % of Mobile cup in partial hip implants cementless or hybrid products should in Italy: mobile cup price is more than continue with a positive mix impact: two times higher than the standard example of hip in Italy (% of THP partial hip in volume) 70% 100% 10% 65% 15% 90% 60% 80% 50% 70% 60% 40% 50% 35% 83% 74% 30% 40% 30% 20% Worldwide 20% orthopaedic 10% 10% market and the 11% 7% contract 0% 0% manufacturing 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004 2005 2006 2007 2008 2009 2010 2011 2012 Cemented Cementless Hybrid Ali MADANI Source: European Orthopaedic Market 2012-2017, Avicenne report Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 15

Hip erosion price and the growth factors: example of France The volume & mix impact balancing price erosion 0.3% Compound annual Value growth* 2012/2017 Volume growth is the main factor to balance the price erosion. The hip mix growth factor is no more a leading factor 1 Compound annual price erosion 2012/2017 -2,6% 2 Compound annual Mix product impact 2012/2017 0,4% Worldwide orthopaedic 3 Compound annual Volume growth 2012/2017 2,5% market and the contract manufacturing -3% -2% -1% 0% 1% 2% 3% Ali MADANI (*) Excluding currency growth impact Phone: + 33 1 47 78 46 00 Source: European Orthopaedic Market 2012-2017, Avicenne report a.madani@avicenne.com 16

The market limiters Impact 1: Price decrease Reimbursement Impact 2: Longer Time to market Impact 1: Price decrease Buying Groups Impact 2: More Low-end products demand Worldwide Impact 1: Time to market orthopaedic Certification market and the contract Impact 2: Higher development Cost manufacturing Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 17

The orthopaedic sale channels Three main sale channels co-existing, buying groups dominating in some countries Sales Agents Distributors representative « company » employees Commercial interface Buy stocks and with the surgeon instruments Less expensive than other channels Very strong relationship Discount on catalogue between agent & surgeon prices (-30% to -40%) Positive effect to push the « company» sales Do not buy stocks and Invoice the clinics and strategy instruments hospitals Negative impact for Do not invoice the clinics Positive impact for “company "working & hospitals “company” working Worldwide capital capital orthopaedic Gain commission (% of market and the sales) contract Negative impact for manufacturing “company” working capital Ali MADANI Source: Avicenne research & analysis 2013 Phone: + 33 1 47 78 46 00 a.madani@avicenne.com 18