Pulse of the industry Current Trends and Challenges in Life Sciences Ifit Quarterly Zurich, 16 March 2012
Thought ought leadership adership A long tradition of industry insights Medtech Biotech Pharma Current insights insights insights issues Pulse of the Beyond borders Progressions Life sciences industry insights Page 2 Pulse of the industry | Medical technology report 2011
The e Big Picture ure Page 3 Pulse of the industry | Medical technology report 2011
A unique innovation model for a unique industry Biotech/pharma IT Medtech Basic ► Human biology ► Electrical ► Electrical technical engineering engineering challenge Product ► 10+ years ► 18-24 months ► 18-24 months development cycles VC model ► Larger, longer ► Smaller, shorter ► Smaller, shorter investments investments investments ► High risk/high ► Low risk/low ► Low risk/low return return return Regulatory ► Market approval ► No marketing ► Varied approach framework requires clinical approval required based on risk trials class ► “Linear” ► “Cyclical” ► “Cyclical” Innovation Source: Ernst & Young Page 4 Pulse of the industry | Medical technology report 2011
Medtech’s long- standing “cycle of innovation” … Physicians Idea Coverage VCs Payors Funding Idea Commercialization Startup Big medtech R&D Acquisition Approved technology Source: Ernst & Young Page 5 Pulse of the industry | Medical technology report 2011
… now faces new challenges at every stage Physicians CER Idea VCs Payors Increased Capital crunch transparency Pricing pressures requirements Startup Big medtech Device tax, Buying later Regulatory hurdles Approved technology Source: Ernst & Young Page 6 Pulse of the industry | Medical technology report 2011
Gl Global obal medtech dtech headlines dlines ► Industry turned in solid financial performance – all major indicators outpaced growth rates from the year before ► Healthcare reforms, hospital consolidation, austerity measures & increased regulatory hurdles are increasing uncertainty and risk ► Fundraising up – propped up by a few large debt offerings ► VC funding model under strain – longer runways, higher bar for exits, diluted returns, more risk-averse investors and less capital available ► After bottoming out in 2009, market for M&As has rebounded ► Buyers continued to shy away from riskier, early-stage M&As in favor of later stage companies with revenue / profits ► Private equity returned to the scene Page 7 Pulse of the industry | Medical technology report 2011
The e new w normal mal Innovation at risk? Page 8 Pulse of the industry | Medical technology report 2011
A n new norma mal l for medtech tech Regulatory A new + + environment = Customer Innovation and pricing funding realignment at risk? pressures Page 9 Pulse of the industry | Medical technology report 2011
Innovation novation at risk sk? Regulatory A new + + Customer and pricing funding realignment pressures environment Page 10 10 Pulse of the industry | Medical technology report 2011
Regulatory and pricing pressures Fewer product approvals in the US… Number of premarket approvals (PMA) in 39 39 2006 the US 20 20 2010 Number of 510(k) 3,200 3,200 2006 approvals 2,778 2,778 2010 Page 11 11 Pulse of the industry | Medical technology report 2011
Regulatory and pricing pressures …approvals are taking longer to secure Average 510(k) 4.5 approval times 3.1 (months) May April April March March February February January January 2003-07 2010 Average PMA 15.5 27.1 approval times (months) December December December November November November October October October September September September August August August July July July June June June May May May April April April April April March March March March March February February February February February January January January January January 2003-07 2010
Regulatory and pricing pressures Nu Number mber of first st review iew IDE DEs has decrease reased Devices receiving FDA investigational 76% 2006 device exemptions (IDE) after first review 56% 2009 2010 32%
Regulatory and pricing pressures Post st-mark market et scrutiny utiny has increase reased Number of warning letters issued by the 154 2006 CDRH 204 2010 Number of Class I 65 2006 product recalls 426 426 2010
Innovation novation at risk sk? Regulatory A new + + Customer and pricing funding realignment pressures environment Page 15 15 Pulse of the industry | Medical technology report 2011
Customer realignment Ho Hospitals spitals conti ntinue ue to consolidate nsolidate Number of US hospital M&As 57 2006 announced 77 2010
Customer realignment Independent dependent phys ysicians icians are decreasing reasing Percentage of US 33 private practice 2005 physicians 30 2009 24 2013
A changing anging hospi spita tal l envi vironment ronment Implicati tions ons for medtech ech companies anies Compliance Governments pressures squeeze HC costs, ► Customer moves health care reform beyond the Technology physician assessment hospitals more committees prominent ► Realign Hospital face Group Pressure from sales/marketing tighter margins, purchasing payers approach organizations cost pressures ► Implications for Less physician what you sell, how choice you sell and how you develop new Global economic offerings downturn Fewer vendors Page 18 18 Pulse of the industry | Medical technology report 2011
Innovation novation at risk sk? + + Regulatory and Customer A new funding pricing pressures realignment environment Page 19 19 Pulse of the industry | Medical technology report 2011
A new funding ng environm ronment ent Funding is up…or is it? US and European Funding excluding debt Debt financing capital raised by year 25 20 15 US$b 10 5 0 2005 2006 2007 2008 2009 2010 Source: Ernst & Young, Capital IQ, Dow Jones VentureSource, BMO Capital Markets and Windhover Page 20 20 Pulse of the industry | Medical technology report 2011
A new funding environment The he ri rich get t ri richer er? ? Large companies’ share of total capital raised has grown dramatically However, venture capital has dropped for the third consecutive year Page 21 21 Pulse of the industry | Medical technology report 2011
Thank ank you Stay ay tune ned: d: ey.co .com/ m/medt medtec ech Heinrich Christen Partner, Industry Leader Medtech EMEIA Ernst & Young Ltd. Maagplatz 1 CH-8010 Zürich Phone +41 58 286 34 85 Mobile +41 58 289 34 85 Fax +41 58 286 30 00 eMail heinrich.christen@ch.ey.com Page 22 22 Pulse of the industry | Medical technology report 2011
Page 23 23 Pulse of the industry | Medical technology report 2011
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