Rethinking 2014: Planning 2015

When rethinking about 2014, some consulting companies already have stats that show how the medtech industry performed last year.

Source: mddionline.com

            The results show a solid industry, with more than $380 billion worldwide sales, 5% sales growth rate and almost 10% of return on investment.

            As for 2015, the industry in the United States is still adjusting from the new tax on their medical device sales and the European sector is suffering from its internal pressure (see our last blog entry). So it seems like emerging markets are still an attractive type of investment: Asia represents more than one-sixth of the world’s medical device market and one should expect a double-digit growth in markets such as Mexico, Brazil and Malaysia thanks to increasing healthcare spending. “Expect more device companies to focus on these import-heavy markets, with Latin America and the Middle East as the most important growth sources for medical device manufacturers.”

References: http://www.mddionline.com/article/how-did-medtech-stack-2014-12-19-2014

http://www.mddionline.com/article/state-global-medtech-markets-12-19-2014

Scenario of the Brazilian Medical Devices Market

MedTechWorld MD&M Brazil 2014, one of the main events of medical devices in Brazil, happened on August 26-27 at Transamérica Expo Center in Sao Paulo. This edition gathered together more than 3,000 professionals and 40 exhibitors.

One of the many interesting presentations was a study, conducted by Dr. Kleber Stelmasuk and Dr. Vitor Asseituno, both from Empreender Saúde, outlining the market scenario of research and development of medical devices in Brazil. The study revealed the strengths and weaknesses to enlarge the exports, increase the contact between university and industry for research and development, and identify what are the proposals to consolidate Brazil as a major global competitor of medical devices and nursing material. It also pointed out the concern about the deficit in the healthcare sector, since the industry doesn’t keep up with the patients’ demand.

References: http://www.empreendersaude.com.br/pesquisa-e-desenvolvimento-de-medical-devices-no-brasil-2014/

2014: A Good Year for the Medtech Sector

JPMorgan Chase Analyst Michael Weinstein believes that 2014 will be good to the medtech sector. This week, the JPMorgan analyst published a research where he says to expect the medtech sector to grow 4.2% this year, up 0.8% from 2013.

“We see growth broadly accelerating in 2014-2015 as an industry that bottomed in 2011-2012 sees the benefits of new products, new markets, and small to mid- sized M&A. This is particularly true in cardiovascular devices, where we see growth accelerating at all three large cap names and ample room for innovation in small-cap, emerging growth companies – both public and private.”

Michael Weinstein

References: http://www.mddionline.com/article/jpmorgan-chase-analyst-2014-will-be-strong-year-medtech

Brazilian Healthcare Industry: first semester of 2013

In the first semester of 2013, the Brazilian medical device sector increased 6,5% (compared to the same period of 2012). This is according to Abimed (Brazilian Association of High Technology Equipment, Products and Medical Supplies). This association represents 150 healthcare companies which are responsible for almost 60% of the Brazilian medical device sector.

According to the report, the sales were also increased by 8,6% and the sector was responsible for the creation of 3500 new jobs, both industrial and commercial sector. These numbers are way above national economy average.

The healthcare sector represents 0,6% of Brazil’s GDP, gathers 13 thousand companies responsible for 120 thousand jobs and its revenue was about US$ 9 billion in 2012.

References: http://www.abimed.org.br/notPadrao.aspx?idNoticia=110

Emerging Markets: Brazil and the Medical Device Industry

Since the 2008 crisis that took place mainly in the United States and Europe, it’s been said a lot about the opportunities in emerging countries. But one shall be careful when analyzing these markets and try to evaluate its potential as objectively as possible.

        When it comes about Brazil and the medical device industry, some challenges one may face when trying to approach this market. Some of them are the bureaucracy, strong regulatory system added to long timelines and delays, high taxes and a structure that varies according to the product which makes hard to know in advance how much the price will be for the final customer.

        However, when you overcome the language and the cultural barriers, it is all worthwhile because Brazil is a huge market, with more than 190 million people, a large public healthcare system which represents 4.1% of its GDP, a US$4 billion in imports and US$700 million in exports of medical devices.

References: http://www.emdt.co.uk/article/medical-devices-brazil-oportunity?cid=nl.emdt03

Global Cardiovascular Medical Devices Market by 2015

A report made by Research and Markets suggests that the global cardiovascular medical devices market will worth $65.6 billion by 2015. The report covers the years between 2009 and 2015 and it expects that the market of these devices will have grown at the compound annual growth rate of 9,8%.

When talking about regional markets, it indicates that North America will have the biggest share of the market at 40%, followed by Europe with a share at 30%. Asia-Pacific will be fastest growing region with a growth rate of 11,6% (comparing to the global growth rate of 9,8%), the market is expected to worth $17.9 billion by 2017.

Finally, Research and Markets divides the cardiovascular medical devices market in segments and for each one, the company indicates the CAGR (compound annual growth rate) and market values. For example, it expects that the Cardiac Rythm Management Devices will worth $22.3 billion at a rate of 9.9% by 2017, followed by Interventional Cardiac Devices that will worth $12.3 billion at a rate of 11.6%.

References: http://www.mddionline.com/article/global-cardiac-medical-devices-market-be-worth-656b-2015

Medical Device Firms and Its Challenges

As the medical device industry faces some significant market threats these days, like slow-growing market and strong regulatory system, it became necessary to be vigilant for signs and understand when changes are needed. Executives should pay attention to at least four signs that indicate that their companies need to adapt. Frost & Sullivan's Venkat Rajan, principal analyst, who leads the firm's analysis of the medical device sector, discusses what those are.

The first sign is “Utter Lack of Product Differentiation” which means that customers see medical device products as commodities and it leads to customers’ indifference to the product. The second sign is “Profit Model Under Pressure”, this means that the profit margin declines year by year and to assure its market presence companies are facing significant internal cost-cutting. The third sign is “Market Disruptors on the Horizon”, this sign has to do with fast technology development which means that a product becomes obsolete quickly and, sometimes, its substitute proves to be better, faster and cheaper. Finally, the fourth sign is “Internal Infrastructure Deteriorating”, this means that the company’s workforce usually is slow to adapt or innovate and its strategy normally is focused on maintaining its market presence instead of expansion.

References: http://www.mddionline.com/article/four-signs-medtech-firm-needs-reinvent-its-business-model

Healthcare Industry Continues to Impress

Startups of the healthcare sector in USA attracted $1.81 billion from venture capitalists in the second quarter of 2013. Medical device startups represented 38% of the deals and 35% of the dollars invested. This according to the Q2 Venture Capital Activity Report issued by CB Insights, a venture capital database.

Although money invested by venture capitalists into startups declined 14% when compared to the same period last year, the number of deals remained the same. Total investments represented 24% increase over the first quarter when the money invested reached $1.47 billion.

California was the investments main destination (43% of the $1.81 billion invested in the sector and 41% of the deals), followed by Massachusetts (20% of the money invested in the sector and 15% of the number of deals).

The healthcare IPO (Initial Public Offer) market also impressed: 11 of the 22 IPOs in the second quarter of 2013 were of healthcare companies.

References:http://www.mddionline.com/article/q2-venture-capital-investments-early-stage-healthcare-companies-reach-five-quarter-high

Brazilian Medical Device Sector: national supply, imports and investments

Since the domestic supply of medical devices in Brazil is not able to fulfill the Brazilian increasing demand, imports continue to be an important resource. In 2012, the country imported approximately $4 billion in medical equipment and it can hit $9 billion over the next 2 years.

To prevent Brazil from becoming too dependent on imported medical device products, the Brazilian government is trying to change this scenario. Public and private investment in healthcare research may reach $7 billion over the next four years (almost 0,30% of the GDP). These assets come from the National Bank of Economic Development (BNDES), Brazilian Innovation Agency (FINEP), National Health Ministry, Science and Technology Ministry and Pharmaceutics’ Labs. The research agenda is guided by the needs of the Brazilian Healthcare Public System (SUS).

References: http://www.qmed.com/news/brazilian-medical-device-imports-hit-9-billion-2018?cid=nl_qmed_daily

http://www.anpei.org.br/imprensa/noticias/pesquisa-em-saude-tera-investimento-de-r-13-bilhoes-em-quatro-anos/

Medical Device Industry Growth in Latin America and Brazil

Since every crisis might be seen as an opportunity, strategic measures must be taken in these days. Emerging markets can be considered as a strategic target market to escape from the international crisis. One region that is getting international medical device investors is Latin America.

Because of cost advantages, suppliers and medical OEMs are entering Latin America. The region expects a growth by double digits in the coming years. Today, the Latin America medical device market is worth U$10.5 billion and it is expected to reach US$20 billion by 2015. The exports of Costa Rica’s medical device represented 11.8% of its total exports of good. The government of Peru invested U$333 million to improve public healthcare. In 2011, Colombia imported U$799.3 million in medical equipment and supplies.

As for Brazil, the largest market in Latin America, the exports of medical device reached US$555.1 million in 2011. The growing of middle-income families and aging population makes Brazil a special target. Despite of the expected growth in the medical device industry, high import prices and a bifurcated public/private system could impede a higher expansion.

References: http://www.mddionline.com/article/latin-americas-medtech-market-growing-double-digits-infographic

http://www.mddionline.com/article/brazil%E2%80%99s-growing-economy-fuels-vascular-delivery-device-sales-despite-market-limiters

Obtaining Funds in the Medical Device Industry

           As the supply of venture dollars is rapidly shrinking, the task of seeking funds is becoming even more difficult. More importantly than seeking, is the effort of being able to obtain the fund. The annual IBF MedTech Investing Conference, that took place in Minneapolis last week, provided some tips on how to fulfill this task.

         These tips to obtain fund in the medical device industry can be simplified in three C’s: cost, clinical outcomes and CMS (Centers for Medicare and Medicaid Services - reimbursement). Cost is referred to if the new technology/product can remove expenses from the system. The second C, clinical outcomes, is referred to if patients are doing better with the new technology. Investors want to see clinical evidence and proof that the new product is superior than the treatments already available on the market. And finally, the third C, CMS, is about reimbursement. Investors want to know if the Centers of Medicaid and Medicare will cover the procedure. It is common sense that there is a special highlight for cost, though.

         Despite of being challenging, companies that can demonstrate their command of the three C’s are more likely to obtain funds.

References: http://www.mddionline.com/article/three-cs-can-get-your-next-venture-funded

Outsourcing as the key to Competitiveness

As the industry suffers from uncertainty pressures, the trend to remain competitive is turning to outsource. A Study surveyed MD+DI’s readership about outsourcing in the medical device sector ranked a list of concerning issues for the next 5 years. Regulatory hurdles, intellectual property, R&D and device tax were the most mentioned.  

The majority of the respondents agreed that outsourcing is an answer to save costs and time. For the next five years, most of them are looking for increasing the numbers of contract service. Besides manufacturing service, companies are interested in legal and regulatory services as well as R&D and design capabilities.

US-based service providers are the most common when outsourcing a project, however Russia and Latin America are the regions that the respondents most expect to expand outsourcing activity in the coming years.

Biokyra Pesquisa e Desenvolvimento is a Brazilian medical device company that may become one of the providers to the US industry when it decides to expand its contract service to Latin America.

References: http://www.mddionline.com/article/5-years-medtech-firms-will-outsource-design-legal-and-regulatory-services-over-manufacturing

Cardiovascular Diseases: a Global Concern

Although the world of the new millennium has seen many improvements in the health sector, the path of healing diseases is far to be overcome. Cardiovascular diseases (CVD) are still huge challenges for the medical society.  More people die annually from this kind of illness than from any other cause and that is the reason why it has been given an especial attention worldwide.

According to the World Health Organization (WTO), an estimated 17.3 million people died from cardiovascular diseases in 2008, representing 30% of global deaths. Coronary heart diseases and stroke are the main causes of these deaths (almost 80%). It is well known worldwide the main factors that increase the probability of getting a stroke: unhealthy diet, physical inactivity, overweight, high blood pressure, tobacco use and harmful use of alcohol.

Besides, low and middle-income countries are the most affected, about 80% of world’s death from CVD. As reported by the WHO, “people in low and middle-income countries are more exposed to risk factors such as tobacco (…). At the same time they often do not have the benefit of prevention programs compared to people in high-income countries.” Meanwhile, at a macro-economic level, it represents a heavy burden on the economies of low and middle-income countries. Non-communicable diseases – including cardiovascular and diabetes – are estimated to reduce GDP by 6,77% in low and middle-income countries facing rapid economic development.

The programs to fight against cardiovascular diseases are highly expensive. Integrated actions at country level, led by governments, are the means to maintain the people away from risk factors and, hence, not allowing it to become a burden on national economies.

There is no difference in Brazil. Around 300 thousands of people die from cardiovascular diseases each year, according to the Brazilian government. Nevertheless, by the public healthcare system (SUS), the government provides many preventive actions programs, diagnosis and free treatments for CVD.

References: http://www.who.int/en/

http://portalsaude.saude.gov.br/portalsaude/

Strategic Action in a Global Market

International market is an opportunity for business growth. Enterprises become more profitable and competitive once they have to face global market and foreign competitors.  In the 21^st century, companies can’t escape from internationalization or the effects that it causes in national economies. The health industry is no different. In 2009, the sales in this sector reached U$289 billion worldwide and it is expected to reach U$487 billion in 2016, with an annual growth of 7%; there are more than 27 thousands enterprises around the world, employing more than one million people.

Since it is an industry that requires new technologies, high investments in R&D and a highly qualified team, most of medical devices production concentrates in developed countries.

    

As shown in the graphic, the global top 5 exporters[1] of “Instruments, appliances for medical, etc science, nes” concentrate more than half of exports, which reached more than U$40 billion in 2011.

Once an enterprise decides to internationalize, it has to consider: if its country belongs to any free trade area or bilateral agreement (it is usually easier to export to these countries); size and growth rate of the market, national and international competitors in the destination country, as well as national taxes of imports, definition of a strategy, logistics of exports. One important detail one shall consider, when deciding to export, is the non-tariff barrier. Even when there is no significant tariff barrier or national taxes of imports, there might be a barrier like quotas, technical or sanitary standards, administrative and bureaucratic delays at the entrance. Due to a strong international regulatory system about tariff barriers, countries are adopting non-tariff barriers as a way to protect their national industry and, in the same time, not “disobey” standards and rules in international trade.

The strategy for enterprises in this sector has had to be reviewed after what happened to the global economy in 2008 and 2009. Big medical devices companies are now paying attention to China, India and Brazil. Looking at the size of the population and the way they are gaining higher buying power, companies are trying to learn and understand how to approach these markets.

But, like in any other sector, selling a medical device in a developed country is not the same as selling it in a developing country. The different scenarios and culture complicate the sale of a standard product. Therefore, products are been created specifically for these emerging markets. Instead of selling the same product to developing and developed countries, companies are creating products for emerging markets. We have to consider that not all the companies are taking this step. Most of them are wary and skeptical about the returns they will obtain taking this strategy. There are a few enterprises that are already doing business in these countries, especially the European ones.

Like in any other company that has to customize their product according to the different countries or areas, there has to be two (or more) strategies and two (or more) lifecycles working in the same organization. So, it is important to have a good marketing team that deeply studies and examines the target market.

References: http://comtrade.un.org/

                 http://brazilianhealthdevices.com.br/market 

         http://www.mddionline.com/article/domestic-medtech-industry-  emerging-markets-elicit-excitement-and-caution

---

[1] One shall consider that Mexico belongs to the North America Free Trade Agreement (NAFTA); the USA is the biggest importer in the world representing 20% of the world’s demand and Mexico is its biggest provider.

The Brazilian healthcare industry will grow more than the Brazilian GDP

In 2011, it’s expected that the Brazilian healthcare industry will grow 19%, achieving R$13.5 bi. This growth is much higher than the Brazilian GDP growth, which is expected to grow less than 4.5%. Throughout the year, 6.000 jobs were created in the healthcare industry. Some of the reasons for such a good performance are the strengthening of the Brazilian economy, the creation of new jobs, and the dollar price. 

To read more about it, please, visit:http://www.hospitalar.com/index.php