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1. Business opportunities in the U.S. Medical Device industry Swedish Trade Council USAAugust2012 SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
2. THE SWEDISH TRADE COUNCIL - Makes it easier for Swedish companies to grow internationally … support Swedish companies STC resources dedicated to… 500 employees in over 60 countries Through partners and networks we cover more than 100 countries Headquarters in Stockholm, Sweden About 22 regional export advisers in Sweden The STC in the USA has been operational in its current form since 1972 STC USA has about 15 local employees STC USA aims to be the primary consulting partner for Swedish companies doing business in the U.S. SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
3. UNITED STATES IN BRIEF - Still the largest market in the world SWEDISH TRADE COUNCIL >> MEDICAL DEVICES Area: Almost 22 times the size of Sweden,9,826,630 sq km Inhabitants: Just over 308 million Constitution: Constitution-based federal republic; strong democratic tradition Head of government: President Barack H. Obama (since January 20, 2009) Languages: English 82.1%, Spanish 10.7%, other Indo-European 3.8%, Asian and Pacific island 2.7%, other 0.7% Currency: USD, $ GDP per capita 2010 (est.): $47,400 Inflation rate 2010 (est.): 1.4% Main exports: Agricultural products, industrial supplies, capital goods, consumer goods Main imports: Agricultural products, industrial supplies, capital goods, consumer goods Swedish exports to US 2010: 66 Billion SEK Swedish imports from US 2010: 35 Billion SEK
4. Agenda SWEDISH TRADE COUNCIL >> MEDICAL DEVICES Key Issues The U.S. Medical Device Market and its Challenges Sweden’s Medical Device Industry and Key Strengths Identified Business Opportunities and Conclusions
5. This reports describes the U.S. Medical device market and its business opportunities Key issues: What are the market characteristics of the U.S. and Swedish Medical Device industry? Who are the key players on the U.S. and Swedish market? What are the main challenges on the U.S. Medical Device market?  What are the main business opportunities for Swedish Medical Device companies on the U.S. market?  SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
6. Agenda SWEDISH TRADE COUNCIL >> MEDICAL DEVICES Key Issues The U.S. Medical Device Market and its Challenges Sweden’s Medical Device Industry and Key Strengths Identified Business Opportunities and Conclusions
7. THE U.S. SPENDS A GREATER SHARE THAN ANY OTHER DEVELOPED COUNTRY ON HEALTHCARE Source: Euromonitor In 2011, the U.S. spent almost 18% of GDP on health care – Sweden and UK spent 7 respectively 10% Health careindustry in the U.S. is ”big business” SWEDISH TRADE COUNCIL >> MEDICAL DEVICES Average per capita health expenditure USD, 2006-2011
8. Obesity trends and an aging population suggest continuing growth in the health care sector Source: CDC, National Health and Nutrition Examination Survey (NHANES), *BMI>30 or 30 lbs overweight for 5” 4’ person, **Persons 65 years or older 1990 1996 2002 2010 10-14% 20-24% No data <10% 15-19% 25-29% >30% More than one-third of U.S. adults are considered obese. In Sweden, one-in-ten. Approximately 17 percent of children and adolescents ages 2-19 years were considered obese in 2008. Another major factor driving the health care sector is the rise in the aging population** . In 1980 about 11% were of 65+ of age. in 2010, it had increased to 13% and estimated to reach 16.4% in 2020. Increasedobesity and an aging population will drive demand for moreefficienthealthcareproducts Obesity* trends among U.S. adults SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
9. IN medical devices, the U.S. market is larger than the rest of the top ten markets – together! Source: Euromonitor The size of the Swedish medical device market is not even 2% of the American If youconsider Sweden too small of a market – look at the U.S. SWEDISH TRADE COUNCIL >> MEDICAL DEVICES Medical device sales, top ten markets Billion USD, 2010
10. The U.S. Medical Device industry is the largest in the world U.S. Medical Industry by Category, 2011 Percentage The Medical Device Market Consumables 8% Diagnostic Imaging 29% 21% 61% 18% Dental Products 4% Patient Aids 5% Orthopedics & Prosthetic Devices 15% Source: EspiCom 2011 SWEDISH TRADE COUNCIL >> MEDICAL DEVICES The U.S. medical device market is the largest in the world, valued at nearly 106 BUSD Per capita, expenditure is globally the third highest, after Denmark and Switzerland at 339 USD per person. The U.S. is home to some of the largest medical device manufacturers in the world, with an import of only 30%. Due to the large market size, the US remains by far the largest importer. Due to an aging population, key important growth sectors include orthopedics/prosthetics, consumables, and dental products
11. Key segments of Medical devices are broad and cover many specialties Medical Devices by Key Segment Source: EspiCom 2011 SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
12. The u.s. medical Device industry has grown In last years – Primarily within orthopedics CAGR of US Medical Device Market by Area Percentage, 2006-2010 U.S. Medical Device Market, estimation 2012-2015 MUSD Value per Year CAGR 3% Orthopedics and Prosthetics present an enormous growth opportunity for medical device companies Source: EspiCom 2011 SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
13. Imports of medical devices are valued at more than 30 BUSD each year Source: EspiCom2011 U.S. Imports as percentage of market Percentage, 2005-2009 CAGR of US Medical Imports by Area Percentage, 2005-2009 Imports U.S. Made As the largest medical device market, the U.S. imports a large amount of devices each year, especially orthopedics SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
14. The U.S. Medical Device industry is concentrated in three main clusters Source: EspiCom2011 Midwest: Medtronic, Abbot Labs, Cook Medical, 3M, Proctor & Gamble, Baxter East Coast: Boston Scientific, Johnson & Johnson, Merck, Covidien California: Amgen, Genentech Many large medical device companies concentrate in large states with established economies and research areas SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
15. Large medical device manufacturers dominate the U.S. market landscape Source: Hoovers Medtronic Abbot Labs Turnover: 16 BUSD Number of Employees: 45,000 Key focus areas: defibrillators, pacemakers, catheters, stents, surgical instruments Headquarters: Minneapolis, MN Turnover: 35 BUSD Number of Employees: 12,284 Key focus areas: pharmaceuticals, diabetes devices, catheters, stents, surgical instruments Headquarters: Lake Forest, IL Boston Scientific Covidien Turnover: 7.8 BUSD Number of Employees: 12,284 Key focus areas: devices for gynecology, urology, endoscopy, cardiology, proctology, and basicequipmentsuch as needles Headquarters: Boston, MA Turnover: 12 BUSD Number of Employees: 41,300 Key focus areas: devices for urology, endoscopy, cardiology, gastroentonology, and pulmonaryuses Headquarters: Mansfield, MA SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
16. Medical Devices often require FDA approval - Having a European Union CE Mark can speed up the approval process Source: Food and Drug Administration; FDA, FD&C Act, sec. 201(g)(1), FD&C Act, sec. 201(i), *as well as time and cost consumption, Prescription Drug Medical Device Over the Counter Drug Cosmetic Natural / Herbal Formulas An FDA Agent is required for import to the U.S. When is approval necessary? “Foreign firms must also identify a United States agent and submit a list of every medical device in commercial distribution” Louise Slaughter, FDA Representative Level of Complexity* Classification Approaches Required FDA ! The Swedish Trade Council can be appointed as an FDA agent Non FDA FDA Approval can often be long and complicated. STC can aid in this process. SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
17. There are a variety of health facilities in the united states Source: EspiCom 2011, World Medical Fact Book, CDC, AHA *Based on normal 40 hour work week Medical facility refers to hospitals and clinics only Frequency of Hospitals in the U.S. Distribution of hospitals in the US Number of facilities There are approximately 5,800 hospitals in the United States, which include for-profit private hospitals The number of outpatient facilities are almost 25,000-which are small clinics that can focus on a specific specialty such as mental health or family planning, but also include community health clinics which serve low-income residents There are over 233 million individual visits to a medical/treatment facility (hospital, clinic) in the U.S. every year The average physician working in a medical facility in the United States treats 58 patients a week* 1106 SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
18. Hospital Purchasing can often be a challenge for foreign companies to understand Source: STC Interviews Sales channels for hospitals The evaluation committee is the key to success Within the hospital, the purchasing department decides which products to order, under influence of the evaluation committee Doctors and Nurses can request specific products through the purchasing department The capital committee decides on funding for medical devices through annual budgets GPOs (Group Purchasing Organization) are a popular way to buy large quantities of basic supplies (i.e. needles, electrodes) as it saves on costs for the hospital HOSPITAL Specialty Departments Evaluation Committees Capital Committee Purchasing Department Group Purchasing Org. Direct Sales & Independent reps - high tech capital devices Distributors - consumables, substitutable products For companies new to the U.S. market, often times working with an experienced distributor or partner is an easier route SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
19. Agenda SWEDISH TRADE COUNCIL >> MEDICAL DEVICES Key Issues The U.S. Medical Device Market and its Challenges Sweden’s Medical Device Industry and Key Strengths Identified Business Opportunities and Conclusions
20. The Swedish medical device market is primarily supplied by imported products Source: EspiCom 2011 Distribution between imports and domestic supply Percentage, 2010 Swedish Market for Medical Devices in 2010 Total Market Value, 2010: 1,86 USD Billions Consumables 20% Others 31% Diagnostic Imaging14% Patient Aids 9% Dental Products 13% Orthopedic Products 13% Sweden’s medical device industry is mainly focused on export * Estimated value based on total import supply average SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
21. Sweden’s export is however strong and has grown for all product segments CAGR for eachproduct segment Percentage, 2006-2009 Swedish Export between 2006-2009 BUSD Value per Year CAGR 7,1% *Prior to 2011, Pacemakers made up a large extent of Sweden’s export. However, in 2011 the major manufacturer, St. Jude Medical, moved its production outside of Sweden which will reduce export significantly. Export in Patient Aids will be strongly reduced from 2011 and hence not be of strong focus in the rest of the report Source: EspiCom 2011 SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
22. Almost 20% of exports go to the u.s. with positive growth for diagnostic and Orthopedic products Source: EspiCom 2011 * Estimated value for Patient Aids and Orthopedic products …and this is what was exported to the U.S. MUSD Value per Year Swedish export destinations… Percentage, 2009 USA 18% Others 10% Germany 18% Italy 5% Belgium 6% France 6% Netherlands 17% OrthopedicProducts is currently the smallest export segment and has a high potential for growth SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
23. Large companies dominate the swedish industry in a few key segments… Source: STC Analysis, Phone Interview, ‘Report Action MedTech – Key Measures for Growing the Medical Device Industry in Sweden, 2007’ Comments on the Swedish Medical Device industry Product segments identified as especially strong “…over 90% of the revenue of the Swedish Medical Device Industry originates from eight companies.” “…In most successful international cases, these companies act as engines for the local innovation clusters. In Sweden, companies like Gambro and Elekta have played this role to some extent” Report Action MedTech Sub segments “There are a large number of midsized companies with about 20-150 MSEKin turnover and a few really big ones with a revenue of several billions. These are active in the traditional Swedish medical device areas and include e.g. Getinge, Gambro, Elekta and Nobel Biocare.” BertilGuve, Director Centre for Technology, Medicine and Health, CTMH Major suppliers The large number of Swedish mid-sized companies indicate a high potential for export SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
24. …And There are four main companies that are especially dominant* Source: Alla bolag.se (Numbers regard business in Sweden), Report Action MedTech * In 2006, these companies had a joint market share of 65% Gambro Getinge Turnover: 2.3 BUSD Number of Employees: 9,898 Key focus areas: Healthcare, Renal and Dialysis products (kidney and liver), Blood collection, Cell therapy Turnover: 3.2 BUSD Number of Employees: 12,152 Key focus areas: Infection control, Surgical applications, Patient hygiene & mobility, Wound care Elekta Instruments Nobel Biocare Turnover: 1.1 BUSD Number of Employees: 2,621 Key focus areas: Invasive treatment of brain disorders, Cancer radiation therapy, Soft tissue visualization Turnover: 517 MUSD Number of Employees: 448 Key focus areas: Dental implants, Procera (CAD/CAM process for production of dental crowns) SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
25. Agenda SWEDISH TRADE COUNCIL >> MEDICAL DEVICES Key Issues The U.S. Medical Device Market and its Challenges Sweden’s Medical Device Industry and Key Strengths Identified Business Opportunities and Conclusions
26. Whiletherearesomekeychallenges, The U.S. Medical Device Market is highlyAttractive Source: STC Analysis Key Challenges FDA approval may be required for a specific medical device. This can often time consuming and complicated Hospital approval processes may be difficult to penetrate The U.S. Market is highly competitive with well established actors Attractive Characteristics The U.S. market for medical devices is still the largest in the world and growing Key sectors such as orthopedics and Dental are showing very strong growth Imports represent 30% of the market- a figure that continues to grow SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
27. …and there is still high potential for swedish technology In The U.S. Swedish Medical Device Industry The U.S. Medical Device Market Sweden’s Medical Device industry is highly export oriented and the export has grown by 7.1% (CAGR) in recent years The U.S. amounts for almost 20% of Sweden’s exports and continues to be an attractive market The industry is traditionally dominated by a few very large players as Gambro, Getinge, Elekta and Nobel Biocare. There is also high number of mid-sized companies with export potential. Sweden is especially strong in the Dental, Diagnostic and Orthopedic areas, where the U.S. has a strong demand With a size of 106 BUSD, the U.S. continues to be the largest Medical Device market in the world Diagnostic Imaging and Orthopedic products are the largest segments, however strongest growth has been in Dental and Orthopedic Products Understanding the purchasing process at hospitals has been identified as a key success factor. FDA approval might be a lengthy process but STC can facilitate the process The STC, has lengthy experience in working with Swedish Medical Device Manufacturers in the U.S. market High export potential Swedish technology has a good opportunity on the growing U.S. market Source: STC Analysis SWEDISH TRADE COUNCIL >> MEDICAL DEVICES
28. We make it easier for Swedish Companies To Grow Internationally For more information, contactDavid Kördel or Shaun Hundle Swedish Trade Council / Exportrådet USA +1 312 781 6222 www.swedishtrade.se/usa SWEDISH TRADE COUNCIL >> MEDICAL DEVICES