In the environment of micro-, nano- and biotechnology, the high-tech area of the life sciences represents one of the main growth factors for industrialized nations, which are confronted with growing competition from emerging countries, and thus, with enormous cost and innovation pressure. This is why the term Life Sciences in the aforementioned constellation runs through national and European funding programs and networks.

The Boundaries between Areas are Becoming Blurred

The boundaries between the areas are becoming increasingly blurred. Nanotechnology provides the basic components for real-time magnetic particle imaging, which could revolutionize cancer diagnostics. Biomaterials are used in surgical wound care and in orthopedic implants, and therefore in the classic medical technology business – a global market worth 450 billion dollars. The Federal Ministry of Education and Research comments on this development: “Due to medical progress, demographic change and a globally difficult market environment the medical technology innovation system is facing a major upheaval”.

Reconnaissance that is not Shared is Useless in Combat

In an industry that is strongly export-oriented and used to double-digit growth rates even during a crisis, peo- ple are unwilling to watch this upheaval pass by without acting.

This is why the so-called “Competitive Intelligence” (CI), i.e. the systematic observation of competition and mar- ket, is becoming increasingly important. Technologies, applications, companies and markets are the coordi- nates in which competition and market mechanisms are meticulously analysed. CI is an analytical process that converts unstructured information into relevant and applicable strategic and operational knowledge. With this, the CI acts as an equal partner on the side of the classic “Business Intelligence”.

The industrial CI mainly uses public sources and puts incomplete, imprecise and sometimes even incorrect in- formation in the right perspective. CI is therefore fully in line with the growing availability of digital data. If you want to know what is going wrong in a company, take a look on Twitter to see what former employees think about the management and its decisions! It is not surprising that the language of the CI is that of armed con- flict, and the motto is: “Reconnaissance that is not shared is useless in combat!”

Competitive Intelligence is a Suitable Means Of keeping the Pulse of Innovation Strong

The main focus of the CI depends on its stage of development and the type and degree of its integration into a company. The growth phase of the core business areas also plays a major role. General priorities are the early warning of strategic challenges and the creation and defense of competitive advantages.

With their short product life cycles and low quantities, the Life Sciences and Medical Technology markets are necessarily global markets. At the same time, risks are increasing not only due to the increasingly rapid inno- vation process, but also due to regulatory entry barriers, the shortage of borrowed and risk capital and its con- centration on the market leaders.

“Competitive Intelligence” is a suitable means of minimizing these risks and keeping the pulse of innovation strong.

Der Beitrag Competitive Intelligence in Life Sciences erschien zuerst auf Hubert Baltes.

Much has already been written about the transition from the Medical Device Directive (MDD) to the Medical Device Regulation (MDR) in terms of market approval of medical products. Due to the headline, many articles deal with the regulatory implications. In this article we would like to focus on the implementation and financial consequences of the introduction of the MDR for companies.

The Introduction of the MDR — Where Does the Industry Stand?

According to a survey^*1 by May 2020, i.e. at the point of time of the original regulatory liability of the MDR, only 27% of the companies would have implemented the MDR in their operational practice. 66% of the companies stated that they still had to develop a strategy to ensure compliance with the MDR. In this, size plays a role: Only 24% of companies with sales of less than 85 million euros said they could achieve the target by the deadline, compared with 34% of larger companies – that is 50% more of large firms are successful than small ones in implementing the MDR guidelines.

This is a preview of what’s to come. It is obvious that larger companies can shoulder the MDR – i.e. the associ- ated workload and costs – more easily than small ones.

With the postponement of the obligation of the MDR by 1 year to May 26, 2021^*2, an enormous pressure was relieved from the market. But the silence is deceptive. The need to re-evaluate product portfolios and costs as- sociated with new product approval remains, and with it painful decisions about the profitability of upcoming investments in the product portfolio and its structure.

Outdated products – authorised at a time when the notified bodies were still relaxed about the matter – will pose problems with their documentation vis-à-vis notified bodies, of which only half is re-accredited at around 20 designations. This is one of the reasons for the introduction of the MDRs: to encourage notified bodies to apply the rules more rigidly and to monitor them.

The Introduction of the MDR — What Does it Cost us?

According to a report by Ernst & Young^*4, the costs for European industry for the implementation of the MDR amount to

• € 7.5 billion for compliance with the Unique Device Identifier System
• € 17.5 billion for a centralized pre-market authorization

These are €25 billion in costs across Europe, of which Germany’s per share of revenue will take €5.6 billion. This is 18.5% of annual sales and well above the average profitability of German companies, whose EBIT was 8.1% in 2019, according to a study by the Hans Böckler Foundation^*5, which represents two thirds of German medical technology companies.

These figures may be astonishing, but the same study^*4 finds costs of €17.5 million for the approval of a single Class III product via a clinical study, which, however, only make up 1.8% of the approvals^*6. 8% relate to class IIb and 20% to class IIa products. The latter two either require an elaborate analysis based on a clinical evaluation or based on existing clinical data. Of the 500,000 products^*3 currently manufactured in Ger- many, this affects almost 150,000.

This makes it clear that the costs for the transition to the MDR will have painful consequences for the result, even if the costs are spread over several years (a maximum of four years). In this best-case scenario, the cost is 57% of a company’s profits – over four years.

Act, do not React!

For the above reasons, the approval of old products is not open to discussion, so companies are faced with a choice:

1. To abandon old products and possibly entire product lines
2. To replace these with new, innovative products
3. To withdraw from business while gaining a profit

Point 2 makes it necessary to find the strategic value lever of innovation, to guarantee it with patents and to implement it. This can also be done with external support, i.e. by finding the right partner or by preparing to take on a business unit.

Point 3 requires finding a potential buyer and preparing to divest a business unit or the entire company.

The earlier this happens, the better, because the room for maneuver becomes narrower!

References:

1. Survey from the Regulatory Affairs Professionals Society (RAPS) and KPMG, Sept. 2019
2. Regulation (EU) 2020/561 of the European Parliament and of the Council of 23 April 2020
3. „BVMed Branchenbericht 2020“
4. EY, “How the new EU Medical Device Regulation will disrupt and transform the industry“, 2016
5. Hans Böckler Stiftung, „Branchenanalyse Medizintechnik“, Mai 2020
6. BVMed 42 / 2017

Der Beitrag The Economic Impact of the MDR erschien zuerst auf Hubert Baltes.

Despite the modest, general growth, there are always business areas that are growing at 45% p.a. One example is trans-catheter heart valves with a growth rate of 42% p.a. (Edwards LifeSciences, 2011-2016), another is infrared fluorescence imaging to display tissue perfusion with 49% p.a. (Novadaq, 2011-2016).

There is also a healthy basis for continued growth: The aging of the population, e.g. in the U.S 3.1% more citizens over 65 years of age per year. In addition, there are the Megatrends that are driving case numbers.

Market Segments*²

In-vitro diagnostics is the largest sector, followed by cardiology and diagnostic imaging. The graph implies a market growth of 5.6% p.a.

The economic burden of heart disease amounts to around 300 billion Dollars in the U.S.A. and 300 billion Euros in the EU. In the U.S., 60% of this is direct costs compared to  50% in Europe.

Growth Drivers: Megatrends

• Aging societies (U.S.: 3.1% more retirees 65y+ per year)
• Change in the spectrum of diseases
• Higher incidences
• More chronic diseases (Diabetes, Obesity, Coronary Heart Disease, COPD, Dementia)
• Limitation of the health budget (17.7% of the U.S. gross domestic product, 11.9% in Germany)
• Correlation of social status and life expectancy (in London 2015: 10 years)
• Mobility
• Independent living

and substantial profits

In the U.S.A., the EBIT of public MedTech companies is around 20%, in Germany that of electro-medical companies 16% and that of industry 8.1% *⁴

Global Transaktions^*5

With a total of 7,377 transactions in 2017/18, healthcare is at the top with 491 takeovers and 606 VC investments.

European MedTech Patents*⁶

MedTech is an extremely agile market, not just when it comes to acquisitions. In terms of patent approval, MedTech and Digital lead the way – in the previous year, the positions were reversed.

German MedTech*⁷

• 212,000 jobs
• 500.000 products
• Revenue: 30.3 Mrd€
• Export rate: 65%
• With 10%, Germany has the second largest global market share after the U.S.
• German expenditures for MedTech: 36 Mrd€
• Corporations and firms:
  • 90 MedTech firms with more than 250 employees
  • 13.000 small enterprises with 60.000 employees

To summarize: with its outstanding growth opportunities and enormous profitability, there are still treasures to be found in the medical technology market!

References:

1. Precedence Research «Medical Devices Market — Global Market Size, Trends Analysis, Segment Forecasts, Regional Outlook 2020 — 2027»
2. Evaluate MedTech, «World Preview 2018, Outlook to 2024»
3. Yahoo Finance 18.01.2021 / 21
4. Hans Böckler Stiftung, «Branchenanalyse Medizintechnik», Mai 2020
5. Deloitte 2019 «Small Gains, Big Wins»
6. «European MedTech Industry in Figures 2020»*6:
7. «BVMed Branchenbericht 2020»

Der Beitrag The Global MedTech Market – Facts – Opportunities – Market Shares erschien zuerst auf Hubert Baltes.