Growth Opportunities in the

European Medical Devices Market and

Entry Modes in Medtech Manufacturing

18 March 2010

Agenda

� European Medical Device Market-Key Trends & Impact of Recession

� European Medical Device Market-Key Growth Opportunities

2

� Collaboration Opportunities for Asian/Singapore Companies

1. Key Trends & Impact of Recession

3

1. Key Trends & Impact of Recession

Shift in Focus for European Medical Devices: 2005-2015

Growing collaboration among the fields of information

technology, medical imaging, pharmaceuticals and

medical devices because such synergies could produce

therapies with unprecedented clinical benefits

4

Hospital basedHospital based

InterventionIntervention

Reduced Hospital Reduced Hospital

stay and increase stay and increase

in homecarein homecare

Holistic solutions: Holistic solutions:

Integrating pharma, diagnosticIntegrating pharma, diagnostic

& monitoring elements& monitoring elements

Was

2005Is

2010

Will be

2015

European Medical Device Market: Key Trends

Acute Care Vs. Planned Care: Fewer patients have been

scheduling screening and check-ups; less meetings with

dentists; preference for over the counter medication

compared to prescription medication

5

Lending crisis: There is a

significant rise in slowdown in

construction and cancelling of

orders that are not critically

required by hospitals. There is

also a trend of delaying

replacements of high-end

equipment due to budgetary

constraints

Pressure on Third-Party Payers: One of

the key sources of economic efficiency

within healthcare is that insurance

companies control the market pricing

and market access. Severe pressure on

firms that provide health insurance and

also reduces consumers' discretionary

spending for purely elective medical

care

Can the Market be Recession Proof in the Long-run?

Fears over the US slipping further

into recession with unpredictable

currency fluctuations could slow

down the European medical device

market

Impact of Recession on Impact of Recession on

European Medical European Medical

Tendency for capital expenditure

to be deferred. There is a trend of

delaying replacements due to

People are cutting back on care –

doctor’s visits, medications, elective

surgeries – amid the recession. 36%

of patients are postponing needed

care, while another 36% are skipping

tests, exams and other healthcare

services outright

6

There has been a 9% decline in the

total number of surgical& less

invasive cosmetic surgeries

performed in Europe compared to

2007

Devices MarketDevices Market

If the recession lasts more than a

year, there is the possibility of

governments, national and supra-

national, to take short-term cost

saving measures which will

actually cost patients and the

healthcare systems money in the

long run

delaying replacements due to

budgetary constraints

With the steady rise of unemployment and

with it their health insurance. This has and

will have a direct impact on medical device

companies, as non-emergent surgical

procedures and services are put off as long

as possible, thus limiting the usage of their

products.

2. Key Growth Opportunities

7

2. Key Growth Opportunities

Snapshot of Potential Opportunities – Europe, A Rapidly

Expanding Market

Dental Implants

Custom Procedure

TraysPain Management

DevicesProjected

Revenues In

High Revenues

8

Image Guided

Surgery

Advanced Wound

Management

Endoscopy

Obesity Surgery

Revenues In

2012

Low Revenues

Growth Rate (2008-2012)Low High

Expanding Cardiovascular and Orthopedics Applications

Change Market Status-Quo in 2012 (Europe)

Per Cent of Revenues by Segment, Europe (2008-2012)

15

20

25

30

35

2008 2012

9

Others: Neurology, Hearing Aids, Endoscopes, Durable Medical Equipment, Dialysis, Biomaterials &

Haemostats, Disposable Surgical Supplies, Fitness Equipment, Cosmetic & Aesthetics and Dental Equipment.

The segment also includes some components of imaging and monitoring devices that fall into the grey area

between medical devices, medical imaging and patient monitoring.

0

5

10

15

Cardiovascular Orthopedic Woundcare Surgical Infusion Systems Opthalmic

Equipment

Respiratory and

Anaesthesia

Disinfection and

Sterilisation

Others

Cardiovascular Market: Hot Segments and Key Trends

Implantable CardiovascularDevices

Atherectomy andThrombectomy

Cardiac AblationVascular ClosureDevices

CardiologyCardiology

Cardiac ResynchronizationTherapy

Ventricular AssistDevice

Stents

IntravascularUltrasound

Pacemakers

� A majority of the revenues generated in the

cardiovascular industry comes from the sale of

ICD or pacemakers, and percutanteous

interventional products (angioplasty, stenting)

� Manufacturers and venture capital funding haveshifted their research expenditure and market focus

to minimally invasive devices, given the higher

price point and market potential

� Price sensitivity to device sales has been moresignificant for pacemakers than CRT or ICD

10

Intra-aortic Balloon Pump

Angioplasty andAngiography

Device

InterventionalCardiology

devices, but will heighten in impact in other

segments as the industry continues to grow

� Stent technologies involve an infinite level of complexities; as a result the market is easier to penetrate for companies seekingmarket entry. Continuing controversy about increased rates of clotting over time with drug-eluting stents (DES) has led to greater

regulatory scrutiny and longer post marketing approval parameters. More cardiac surgeons are questioning the high use of DES

and are reverting to less-expensive bare-metal stents

� The other major segment, cardiac rhythm management systems, is growing as a result of positive clinical outcomes, improveddata management capabilities, and decreasing product failure rates

Cardiovascular Market: What to expect..

While the cardiovascular devices market

expects to be fairly stable and, for the most

part, unaffected by the recent economic crisis.

New technologies, and long-term gradual

expansion into under penetrated segments,

such as peripheral vascular disease, should

provide growth opportunities for product

developers

Decrease in

product sale

revenue

primarily due

Ageing populations

& higher

awareness of heart-

related health

conditions will

ensure market

growth

With more than

half a million

new CHF cases

being detected

every year, the

market is slated

to grow

11

Relatively Recession Proof

primarily due

to dip in

foreign

exchange rate

Next-generation

of hybrid devices

expected to

expand device

applicability and

treatment

Developments in

imaging

technology boost

efficiency of

angioplasty

procedure,

Orthopedic and Prosthetic Devices Market: Hot Sectors

and Key Trends

Spinal Fusion Shoulder Prostheses

Motion Preservation Technology

Ankle ProsthesesOrthopedicsOrthopedics

Spinal Fixation

VertebroplastyKnee Replacement

Elbow Prostheses

Joint Reconstruction

� Technology is capable of significantly altering

product acceptance, implant pricing, reimbursement

rates, inpatient orthopedic utilization, and several other

factors that can directly or indirectly affect the joint

reconstruction market.

� Motion preservation technologies are expected torevolutionize the spinal surgery market. Being an

emerging segment, the future of this technology largely

depends on the short and long-term clinical efficiency.

■ The market for the uncommon joint such as elbow,

12

Spinal OrthosesBone MorphogeneticProtiens

Orthopedic Bracesand Supports

■ The market for the uncommon joint such as elbow,

wrist, and digit replacement being younger than that

for hip and knee joint replacements presents

significant opportunity for growth within the joint

replacement market.

� Manufacturers are utilizing a major portion of their resources on developing better and cost-effective materials for implants.

� Treatment patterns are expected to be skewed toward minimally invasive procedures augmented by the use of enhancedfixation products, growth factor, and image guided surgery, all of which facilitated the treatment of complex fractures.

� Accelerated convergence between orthopedics and biology leads to advances in bioabsorbable structures. In addition, growthfactors routinely coat fixtures to help soft tissue and muscle healing. With advances in computing and data management, devices

entering the market can wirelessly transmit data on joint position and optimal functionality.

Orthopedic and Prosthetic Devices Market: What to

Expect..

The recession has caused many to think

twice about getting medical care, including

orthopedic surgery. Surgical volumes have

not change yet but the numbers are going to

be definitely down by the end of 2009

Benefits of hip and

knee surgery are

indisputable for

patients suffering

Demand for

procedures to slow

by about 3% due to

the general

economic

downturn

Sales reports in

recent quarters

show slowed

growth in large-

joint

reconstruction

13

Orthopedics feels the pinch

patients suffering

from osteoarthritis

Almost 6% of

Europeans prefer

deferring minor

surgery and 5

percent who put

off major surgeryWorld’s top hip

and knee implant

makers feel the

squeeze. Zimmer

reported a 5% and

9% drop in sales

respectively

Cosmetic Surgery and Lifestyle Products: Hot Sectors

and Key Trends

Aesthetic Hair Removal Lasers

Rhynoplasty

Cardiac AblationBotoxCosmeticCosmeticSurgery &Surgery &LifestyleLifestyleProductsProducts

Vascular and Pigmented Lesion Treatment Laser

Skin Resurfacing LasersLiposuction andBody Contouring

Obesity SurgeryDevices

Chemical Peeling

� HA-based dermal fillers are promising as they havegreater longevity of usually six to nine months, and

sometimes up to a year

� The aesthetic laser has increased awareness

among the people regarding the technology available

that can help them improve their appearance by taking

care of the unwanted hair, skin blemishes, and acne.

� Europe is currently the second largest market forcosmetic procedures after the United States

14

Hyaluronic Acid (HA)-Based Dermal Filler

Breast Enhancement

Body Contouring

Collagen-Based Dermal Fillers

� Spain leads the field within Europe and is rankednumber five in the world in terms of demand for

cosmetic procedures. The United Kingdom, though,

does not have many cosmetic procedures done.

However, as the cost of each procedure is high, it has

become a cash-rich market

� With increasing market demand, economies of scale have made surgery more affordable in certain parts of Europe, like Spain,Italy, and Germany. Cut price surgeries are more in common in these regions. Most private clinics have also come up with loan

and credit facilities which ease out the burden on the patient

� The development of the advanced visualization system allows practitioners to view the layers beneath the skin and provideeffective treatment solutions

Weakening Economy Take a Swipe at European Vanity

Although recession would have to be

severe before European would forgo

cosmetic procedures, especially the less

expensive ones, there are still some signs

of distress

2% drop in

Rhinoplasty

Plastic

surgery is

down by 9%Major cut

back breast

implants. 6%

drop in 2008

15

Vanity’s Downturn

Rhinoplasty

procedures

3% drop in

sales of botox in

2008

Dermal fillers

fell 4% compared

to 2007

Homecare and Non-Hospital Devices: Hot Sectors and

Key Trends

Mechanical Ventilation Devices

Under pads

NebulisersPenile DripCollectors

Homecare Homecare & &

NonNon--HospitalHospitalDevicesDevices

Oxygen Therapy Equipment

Continuous Positive Airway Presser

Nutrition Therapy

Disposable Pads

Adult Briefs � Across Europe, there is a move towards centralisedcare, as consolidation of hospitals is seen, reducing

the number of hospitals, beds, and facilities. There is

also unstable staffing levels and low retention rate for

nurses. These factors combined create the ideal

conditions for driving homecare and non-hospital care

� Patients are more receptive to using homecare andnon-hospital devices if they have built-in monitoring

capabilities. Acceptance is also increased by ensuring

that the devices do no impinge on normal day-to-day

life

16

Bi-level Positive Airway Pressure

Infusion Pumps

Airway Presser

IV Therapy

life

� With around 18.0 per cent of the population over theage of 65, Europe has the highest elderly population in

the world.

� Widespread introduction of Diagnostic Related Group (DRG) reimbursement system across Europe has resulted in reducedrevenues from in-patient treatment. Hospitals are no longer reimbursed, based on length of hospital stay, however, they are paid a

flat rate fee depending on the disease. This has encouraged hospitals to seek the most cost-effective, resource-efficient methods for

providing continued treatment and care for patients. Homecare and non-hospital managed therapies do not have the same

infrastructure and capital costs associated with in-patient treatments.

Homecare and Non-Hospital Devices Soar!

Homecare and non-hospital devices market

will continue to grow as patients’ will opt for

homecare over hospital visits

Smaller

companies may

have trouble

Increasing

demand for

personalized

care coupled

with cost

efficiency

Increased

possible patient

base with a rise

in the aging

population

17

Preference over traditional care

have trouble

surviving during

recession

DRG

Reimbursement

across Europe

causing

reduced revenues

from In-patient

treatments

Advances in

technology making

monitoring patients

remotely much

easier

3. Collaboration Opportunities

for Asian/Singapore Companies

18

for Asian/Singapore Companies

The European Market is Changing

Current Situation in U.K.

• Quality & service-related press focus

• PatientPatientPatientPatient “right to choose” in draft NHS

charter

19

charter

• NHS quality charter

• Quality accounts need to be published

� Quality Challenge

What do European Medical Device Manufacturers Look For?

OutsourcingOEMs are more focus on marketing and distribution functions, whereas

R&D and manufacturing activities are gradually outsourced to EMS

(Electronic Manufacturer Service) providers.

OEMs are looking to forge partnerships with small agile companies/

manufacturers who offer niche services. Total solution provider is

preferred only in cases of large scale green field ventures.

OEM Expectations

20

Advancement in technology will be surrounding 4 key areas:

specifications (better features), miniaturization (size reduction and

portability), reliability and power sources (for portable devices).

Manufacturers have more collaborations with various institutions to

leverage on their R&D capabilities and intelligence. Win-win situation can

be achieved as the institutions can gain financial supports.

Technology

Collaboration

Specific Opportunities in Technology Transfer

Transformation Transformation

Zero Defect Reliability

- Device failure � death to

patient

- Failure Mode and Effects

Analysis (FMEA)

- Flexible circuits > rigid

circuits

- Process validatio and

control

Enhanced Performance and Feature

- Better specifications

- Networking ability: LAN

- Wireless solution: Bluetooth, Wifi

21

Transformation Transformation of Medtech of Medtech DeviceDevice

Miniaturization

- Pacemaker: size of pack of

cards � size of stopwatch

- Printed circuits � denser

and thinner.

- Infusion pump: single chip,

micro-fluidic pumps?

Improved Power Sources

- Rechargeable battery in

neurostimulator extends its

lifespan by 10 years.

- Biothermal battery – using body

heat to create a low current

source of power.

- Nuclear microbatteries is in

development.

Long Term Collaboration Opportunities

Nanotechnology

Molecular and Gene-

based Diagnostics

Information

Technology

Diagnosis- Early detection

- Reduce false diagnosis

Treatment- Improved treatment:

�� AffordabilityAffordability

�� AIO device AIO device –– one device, one device,

multiple testsmultiple tests

�� Easy to useEasy to use

�� Long term monitoringLong term monitoring

�� Cater to specialized Cater to specialized

needsneeds

22

Artificial Organs

Tissue Engineering

Advancement in Advancement in

TechnologyTechnology

Translation Translation into Clinical into Clinical ApplicationsApplications

higher efficacy, target

specific.

- Non-invasive

- More treatment options

needsneeds

�� Self testingSelf testing

�� More options availableMore options available

Benefits to Benefits to

the Patientsthe Patients

Micro-array lab-on-a-chip

products are improving point-of-

care diagnostics. A micro-array

lab-on-a-chip is an array matrix

that lets doctors instantaneously

analyze fluids, cells, and even

DNA structure right in the office.

Pacemakers today take

advantage of sophisticated

microprocessor technology to

monitor, analyze and control

cardiac rhythm.

Some Success Stories: Products being Jointly Developed

23

Automatic External Defibrillator

is a small, portable device that

analyzes the heart's rhythm and

prompts the user to deliver a

defibrillation shock if it determines

one is needed.

State-of-the-art hearing aids

incorporate the latest in DSP

(digital signal processing)

technology together with low-

power analog amplification.

Your Contact For More Information

Nitin Naik

Vice President-Healthcare, APAC

Tel :68900978

Email : nnaik@frost.com

24

www.frost.com