Worldwide orthopaedic market and the Contract Manufacturing Madani - presentation Lyon... · For...

Ali MADANI

Phone: + 33 1 47 78 46 00

[email protected]

Worldwide orthopaedic

market and the Contract

Manufacturing

April 3rd 2013

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

2


market and the contract

manufacturing

Table of contents

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

Worldwide Orthopaedic Contract Manufacturing II.1. The value chain

II.2. Level of the Contract Manufacturing by type of OEM

II.3. Orthopaedic Contract Manufacturing market

II.4. Contract Manufacturing: competition

II.5. Trends

Take home messages

I

II

III

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

3



manufacturing

Worldwide orthopaedic markets in 2012:

~34.5 B$ (+4.5%)

Source: Avicenne research & analysis 2013

18%

22%

4% 23%

17%

13%

2% HIP

KNEE

EXTREMITIES

SPINE

TRAUMA

ORTHOBIOLOGICS

OTHERS

KNEE

7.7 B$ +4.5%

Hip

6.2 B$ +1.5%

SPINE

8 B$ +4%

Ali MADANI Phone: + 33 1 47 78 46 00

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4



manufacturing

The Worldwide orthopaedic market: growth


2000 - 2010 CAGR 2010 - 2011 Growth 2011 - 2012 Growth

10,4%

13,3%

11,5%

11,4%

0% 5% 10% 15%

HIP

KNEE

SPINE

AVERAGE TotalOrtho

3,0%

5,0%

4,0%

4,9%

0% 2% 4% 6%

HIP

KNEE

SPINE

AVERAGE TotalOrtho

1,5%

4,5%

4,0%

4,5%

0% 2% 4% 6%

HIP

KNEE

SPINE

AVERAGE TotalOrtho

Ali MADANI Phone: + 33 1 47 78 46 00

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5



manufacturing

Worldwide implants market in 2012

in value (B$)

Market value (B$)


7,7

6,2

8,0

3

4

5

6

7

8

9

Knee Hip Spine

55% 23%

22%

Row USA

Europe

54% 23%

23%

Row USA

Europe

76%

13% 11%

Row

USA

Europe

+4.5%

+1.5%

+4%

% Growth 2011-2012

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

6



manufacturing

Worldwide implants & Orthobiologic market

in 2012 in value (B$)

Market value (B$)


6,2 4,5

1,5 0

2

4

6

8

Trauma & CMF Orthobiologics Extremities

56% 29%

15% Row USA

Europe

70%

21%

9% Row USA

Europe

61% 24%

15%

Row USA

Europe

+6%

+6%

+8%

% Growth 2011-2012

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

7



manufacturing

European implants market in 2012

in value (M€)

Market value (M€)


1 150 1 300

140 0

200

400

600

800

1000

1200

1400

Hip Knee Shoulder

% Growth 2011-2012

11%

24%

21% 13%

12%

19% Germany

UK Italy

Spain

Others France

17%

24%

18%

16%

7% 18% Germany

UK

Italy

Spain

Others France

+2.7% +5.1%

+8.3%

18%

28% 10% 11%

6%

27%

Germany

UK Italy

Spain

Others France

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

8



manufacturing

Worldwide orthopaedic market in 2012:

competition

2012 Worldwide Orthopaedic

Market


2012 revenues of the Major

Orthopaedic Companies (B$)

Depuy-Synthes

21%

Zimmer 11%

Stryker 14%

Medtronic 10%

Biomet 6%

Smith & Neph

6%

Others 32%

2,0

2,2

3,9

3,3

4,7

7,4

0 10 20

Smith & Nephew

Biomet

Zimmer

Medtronic

Stryker

Depuy-Synthes

Orthopaedic products 2012

Other Medical devices 2012

Ali MADANI Phone: + 33 1 47 78 46 00

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9



manufacturing

The challengers gained market shares


2011 challengers

2012 challengers

Hip

Knee

Spine

Trauma & CMF

Total Ortho

14%

14%

23%

21%

25% 31%

15%

16%

31%

31%

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

10



manufacturing

Majors Vs Challengers: Majors save ranking

& Challengers the growth!

Source: annual company reports May 2012

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0% 5% 10% 15% 20% 25% 30% 35% 40%

WW

Ort

ho

20

11

mar

ket

shar

es

(%)

Revenues CAGR 2009-2011 (%)

Legende

500 M $

http://www.alphatecspine.com/

http://www.alphatecspine.com/

http://www.lima.it/homepage.html

http://www.amplitude-ortho.com/index.php

http://www.djoglobal.eu/fr_FR/

http://www.wmt.com/

http://www.biomet.com/

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

11



manufacturing

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

More centralized services Local and high level services

Ali MADANI Phone: + 33 1 47 78 46 00

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12



manufacturing

European hip, knee & shoulder markets


HIP KNEE SHOULDER

European Market 2012 in M€ - 14 countries

1 150 M€ 23% of WW

market

1 300 M€ 23% of WW

market

140 M€ 20% of WW

market

Growth per year 2011/2012

+2.7% +5.1% +8.3%

Europe

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

13



manufacturing

Market Drivers


Demographic & Economic

Impact 1: Population

Impact 2: Inhabitants > 65 years

Impact 3: Health expenses

Impact 4: Obesity

New products & innovation and revision

Impact 1: Mix Product impact

Ali MADANI Phone: + 33 1 47 78 46 00

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14



manufacturing

Drivers & limiters: Population ageing and product mix evolution have been the major

historical drivers. Going forward, they should remain the major

growth contributors


Driver Argument Impact

Past Future

Price

Price

Reimbursement trends, Competition, clients pressure and public/private mix lead to some price decrease

- - -

Product mix

Materials The increasing use of higher technology implants (ceramic combinations, cementless products) has a positive impact on the product mix + +

Fixation

New products, new kinematics, new surgeries, new materials & new instruments

New products, new surgical approaches, new ancillaries and instruments increase the product mix ++ ++

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

15



manufacturing

Product Mix pulls the market

Substitution of cemented by cementless or hybrid products should continue with a positive mix impact: example of hip in Italy (% of THP in volume)

Source: European Orthopaedic Market 2012-2017, Avicenne report

% of Mobile cup in partial hip implants in Italy: mobile cup price is more than two times higher than the standard partial hip

11% 7%

74% 83%

15% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%20

03

2004

2005

2006

2007

2008

2009

2010

2011

2012

Cemented Cementless Hybrid

35%

65%

0%

10%

20%

30%

40%

50%

60%

70%

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

16



manufacturing

Hip erosion price and the growth factors:

example of France

The volume & mix impact balancing price erosion

(*) Excluding currency growth impact

Source: European Orthopaedic Market 2012-2017, Avicenne report

2,5%

0,4%

-2,6%

0.3%

-3% -2% -1% 0% 1% 2% 3%

Compound annual Volume growth 2012/2017

Compound annual Mix product impact 2012/2017

Compound annual price erosion 2012/2017

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

2

3

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

17



manufacturing

The market limiters


Reimbursement Impact 1: Price decrease

Impact 2: Longer Time to market

Buying Groups

Impact 1: Price decrease

Impact 2: More Low-end products demand

Certification Impact 1: Time to market

Impact 2: Higher development Cost

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

18



manufacturing

The orthopaedic sale channels

Three main sale channels co-existing, buying groups dominating

in some countries


Sales representative

« company » employees

Less expensive than other channels

Positive effect to push the « company» sales strategy

Negative impact for “company "working capital

Agents

Commercial interface with the surgeon

Very strong relationship between agent & surgeon

Do not buy stocks and instruments

Do not invoice the clinics & hospitals

Gain commission (% of sales)

Negative impact for “company” working capital

Distributors

Buy stocks and instruments

Discount on catalogue prices (-30% to -40%)

Invoice the clinics and hospitals

Positive impact for “company” working capital

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

19



manufacturing

The market limiters

Group purchasing developments in Germany drove the implant

prices down… It now serves as a model in lot of other European

countries


Group purchasing was a success in

Germany…

For example the basic knee (fixed tibial plate - cemented) is priced at 1 350 €, for some tenders Depuy proposed 900 € for this basic product. Zimmer had in his customer portfolio the “Endoclinic and DAM Group” for 4 hospitals, with 10 000 knee and hip sales per year! Average price for the knee for this customer is much less than 1 000 €.

…it was much less successful in France and Italy

Some private hospital groups in France like “Vitalia or Générale de Santé” are trying to centralize their implant purchasing, but it is only the beginning. The discounted price was only a few % lower and those hospitals have to share these savings with the “French Caisse d’Assurance Maladie”. The surgeon name reputation is considered as product marketing showcase of the private hospitals, which are making what is necessary to keep their surgeons. Hence they are not focusing on implants price reduction. In Italy, purchasing groups make less than 10% of the total orthopaedic market value per year and growing slowly.

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

20



manufacturing

Worldwide Orthopaedic Contract

Manufacturing

Orthopaedic Contract Manufacturing market

Contract Manufacturing market value chain

Orthopaedic Contract Manufacturing rates

Contract Manufacturing market

Competition & Size

Heavy trends

II

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

21



manufacturing

Contract manufacturing market value chain

Hospitals &

Clinics

Orthopaedic companies

OEM

Revenues in 2012:

34.5 B$

6 majors Few 100 challengers

Implants

1.7 B$

Instruments

1.0 B$

Cases & Trays

0.4 B$

Co

ntr

act

M

anu

fact

ure

rs

http://www.intech-medical.com/

http://www.paragonmedical.com/main.html

http://www.orchid-orthopedics.com/index1.html

http://www.greatbatch.com/default.aspx?s=home

http://www.lima.it/homepage.html

http://www.amplitude-ortho.com/index.php

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

22



manufacturing

Orthopaedic Contract Manufacturing rates

Contract Manufacturing rate

for IMPLANTS

MPS: Marking-Packaging-Sterilization


Contract Manufacturing rate

for INSTRUMENTS

HIGH

HIGH

LOW

LOW

HIGH

ALMOST 100%

MEDIUM

0 2 4 6

Forging

Casting

Machining

Finishing

Coating

Sintering

MPS

Contract Manufacturing Rate

VERY HIGH

VERY HIGH

VERY HIGH

VERY HIGH

HIGH

2,2 2,4 2,6 2,8 3 3,2

Forging

Casting

Machining

Finishing

MPS

Contract Manufacturing Rate

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

23



manufacturing

Contract Manufacturing market:2005-2012

3 Billion US$ in 2012

Contract Manufacturing market showing a cycle (M$)


715 805 905 1005 880 930 1000 970

295 325

360 400

350 370 390 378

950 1065

1200 1345

1400 1480

1600 1664

0

500

1000

1500

2000

2500

3000

3500

2005 2006 2007 2008 2009 2010 2011 2012

Instruments Cases & trays Implants

CAGR : 6.3 %

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

24



manufacturing

The Orthopaedic suppliers are relatively small,

compared to OEM

Major OEM revenues: M US$


Contract manufacturers

revenues: M US$

0 100 200 300 400 500

2,0

2,2

3,9

3,3

4,7

7,4

0 5 10 15 20

Smith & Nephew

Biomet

Zimmer

Medtronic

Stryker

Depuy-Synthes X 10

X 100

http://www.intech-medical.com/

http://www.paragonmedical.com/main.html

http://www.orchid-orthopedics.com/index1.html

http://www.greatbatch.com/default.aspx?s=home

http://norwoodmedical.com/

http://www.tegramedical.com/index.html

http://www.orthoplastics.com/

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

25



manufacturing

How an OEM chooses its Contract

Manufacturers: what are the main criterias?

Majors: criterias to choose its

Contract Manufacturers in

instruments


Challengers: criterias to

choose its Contract

Manufacturers in instruments

0

5

10

15

20

Level ofquality

Design andconception

services

Co-industrializ

ation

Productioncapacity

Price

Delay &Services

Customizedinstrument

services

Specificskills &

know how

0

5

10

15

20

Level ofquality

Design andconception

services

Co-industrializ

ation

Productioncapacity

Price

Delay &Services

Customizedinstrument

services

Specificskills &

know how

Level of quality: 1- finishing & adjustment 2–esthetic 3- simplicity 4- hand held

Co-industrialization: re-thinking production process and functional sizing

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

26



manufacturing

Heavy trends: Majors OEM are waiting for strategic partnerships and long term

collaboration to outsource more and more

OEM are looking for Contract Manufacturers who recognizing

mutual interdependency and targeting common goals


Reliability

Robust supply Chain

Sharing risks

Long term Planning

Services

Common Improvements

Value added partnership

Strategic partnership

Long-term partnership

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

27



manufacturing

Forecasts for the worldwide orthopaedic

market

Worldwide orthopaedic market: CAGR 2012/2017 de +7 %


0

10

20

30

40

50

60

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

34.6

48.5 CAGR 2012-2017:

HIP: +4 %

KNEE: +7 %

EXTREMITIES: +14 %

SPINE: +8.0 %

TRAUMA: +6.0 %

ORTHOBIO.: +7.5 %

CAGR : 10.3%

CAGR : 7%

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

28



manufacturing

The life cycle of the orthopaedic products:

growth forecasts by 2017

Hip and knee are more mature than extremities and spine


1980 1990 2000

Mar

ket

Time

HIP CAGR 12-17: +4%

Mar

ket

Time

KNEE CAGR 12-17: +7%

Mar

ket

Time

SPINE CAGR 12-17: +8%

Entrance in the mass market M

arke

t

Time

EXTREMITIES CAGR 12-17: +14%

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

29



manufacturing

Take home messages (1/2)

1. Worldwide orthopaedic market continues its growth with a CAGR of 7% by 2012 to 2017.

2. Highest growth for orthopaedic implants would be on those following markets: shoulders, extremities… and in countries like Japan, China, India, Brazil,...

3. The Challengers Vs Majors: usually a double digits growth for the dynamic challengers… Majors are losing market shares but maintain margin.

4. Concentration in the orthopaedic market is continuing: we predict more acquisitions and mergers.

5. Concentration in the Contract Manufacturing market is continuing: the target is the critical size to be able to supply more services, more production capacity, more quality services and share more risks…

6. Today OEM do not find a large range of offers from their Contract Manufacturers. As soon as the OEM find the right supplier he starts to outsource.



manufacturing

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

30



manufacturing

Take home messages (2/2)

7. OEM and particularly Majors are waiting for extend partnerships with their suppliers: common product improvements, long term planning of developments and productions.

8. OEM looking for partners with robust supply chain.

9. Majors OEM sold their facilities to Contract Manufacturers, we are expecting this trend for the future.

10.If China is becoming the new investment place for manufacturing generic instruments in short and mid term, we do not think the main part of implants and customized instruments will switch from Europe or US to BRICS countries.

11.OEMs need structured suppliers ready to:

Deliver within shorter time frames and enable flexibility.

Be efficient in terms of less waste and thus reducing manufacturing costs.

Share with them more responsibility and risk concerning regulatory constraints.

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

31



manufacturing

THANK you!

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

32



manufacturing

Annexe: AVICENNE marketing reports

First publication in 1993

Yearly up-date

Hip, knee, shoulder

Based on +80 interviews

650 pages & 800 graphs detail the European Market in Germany, France, Italy, Spain, UK, and other countries

Available immediately

“European Orthopaedics Market”

April 2012 13rd edition

Première publication en 2000

Publication annuelle

Système universels, cages…

70 interviews d’acteurs dans le domaine du rachis

400 pages & 300 graphs détaillant le marché européen du rachis en Allemagne, UK, France, Italie, Espagne, Belgique et Suisse


Les 100 plus importants sous-traitants européens de l’orthopédie

Analyse détaillée par fiche individuelle

L’évolution des revenus sur plusieurs années, activités et savoir faire, principaux clients, principaux actionnaires, détails dans l’orthopédie…

Comparaison avec les sous-traitants majors américains


4 segments surveillés : hanche, genou, trauma et biomatériaux

Publication du bulletin de veille tous les 2 mois

50 brevets présentés par numéro de façon claire et avec schéma

Ces éléments permettent :

D’identifier les tendances en matière de R&D

De connaitre les choix technologiques du concurrent


“Trends, Developments & Dynamics of the European Spine Market”

Sept. 2011 6th edition

“European Orthopaedic Contract Manufacturing detailed analysis and Profiles”

Feb. 2012 edition

“Orthopaedic patent watch”

Yearly edition

Ali MADANI Phone: + 33 1 47 78 46 00

[email protected]

33



manufacturing

Orthopaedic Contract Manufacturing

competitor response: concentration by

acquisition

Greatbatch

1977 Unique Instruments

1992 Stealth Technologies

2001 HY-VAC

2003 Stro Met Inc

2004 Unique Design

2005 Bio-Vac

2005 Bio-Coat

2006 McDee

2007 Anzon

2007 Keller

2007 MPS

2008 Azary

1977 Wilson Greatbatch

1998 Hittman Materials

1998 Medical Components

2001 Sierra-KD

2002 Globe Tool

2002 Manufacturing

2004 NanoGram

2007 Biomec Inc

2007 Enpath Medical

2007 Intellisensing

2007 Ouan Emerteq

2007 EAC

2008 PRECIMED

2008 Depuy Facilities

Orchid

2006 Everest Metal

2007 Clamonta

2008 DePuy OEM Bedford

Facility

Symmetry

2007 TNCO

2003

Symmety

2003 Mettis Ortho

2006 Riley Medical

2007 SSI/UCA

Merger

Sandvik

2007 Doncasters

2007 JKB Medical Tech

2008 Medtronic Memphis

Facilities

2008 Eurocut

Lisi Medical

2007 Seignol

2007 Hugueny

2007 Jeropa USA

2010

Stryker Herouville Facilities

2008 INTERMED

2011 Surgical Instruments Codman & Shurtleff

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