Pulse of the industry Current Trends and Challenges in Life - - PowerPoint PPT Presentation

Pulse of the industry

Current Trends and Challenges in Life Sciences

Ifit Quarterly Zurich, 16 March 2012

Pulse of the industry | Medical technology report 2011 Page 2

Thought

• ught leadership

adership

A long tradition of industry insights

Biotech insights

Beyond borders

Medtech insights

Pulse of the industry

Pharma insights

Progressions

Current issues

Life sciences insights

Pulse of the industry | Medical technology report 2011 Page 3

The e Big Picture ure

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A unique innovation model for a unique industry

Biotech/pharma IT Medtech

Basic technical challenge

►Human biology ►Electrical

engineering

►Electrical

engineering Product development cycles

►10+ years ►18-24 months ►18-24 months

VC model

►Larger, longer

investments

►High risk/high

return

►Smaller, shorter

investments

►Low risk/low

return

►Smaller, shorter

investments

►Low risk/low

return Regulatory framework

►Market approval

requires clinical trials

►No marketing

approval required

►Varied approach

based on risk class Innovation

►“Linear” ►“Cyclical” ►“Cyclical”

Source: Ernst & Young

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Idea

Physicians VCs Startup Approved technology Payors Big medtech

Idea Funding R&D Acquisition Coverage Commercialization

Medtech’s long-standing “cycle of innovation” …

Source: Ernst & Young

Pulse of the industry | Medical technology report 2011 Page 6

Physicians VCs Approved technology Payors Big medtech

Idea Increased transparency requirements Capital crunch Device tax, Regulatory hurdles Buying later CER Pricing pressures

Startup

… now faces new challenges at every stage

Source: Ernst & Young

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Gl Global

• bal medtech

dtech headlines dlines

► Industry turned in solid financial performance – all major indicators

• utpaced growth rates from the year before

► Healthcare reforms, hospital consolidation, austerity measures &

increased regulatory hurdles are increasing uncertainty and risk

► Fundraising up – propped up by a few large debt offerings ► VC funding model under strain – longer runways, higher bar for exits,

diluted returns, more risk-averse investors and less capital available

► After bottoming out in 2009, market for M&As has rebounded ► Buyers continued to shy away from riskier, early-stage M&As in favor

• f later stage companies with revenue / profits

► Private equity returned to the scene

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The e new w normal mal

Innovation at risk?

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A n new norma mal l for medtech tech

Regulatory and pricing pressures Customer realignment

+

A new funding environment = Innovation at risk?

+

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Regulatory and pricing pressures Customer realignment

+

A new funding environment

+

Innovation novation at risk sk?

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Regulatory and pricing pressures

Fewer product approvals in the US…

2006 2010

20 39 3,200 2,778

2006 2010

Number of premarket approvals (PMA) in the US Number of 510(k) approvals

39 20

2,778 3,200

January February March April January February March April May

2003-07 2010 2003-07 2010

January July February August March September April October May November June December January July February August March September April October May November June December January July February August March September April October May November June December January February March April January February March April

Regulatory and pricing pressures

…approvals are taking longer to secure

Average 510(k) approval times (months) Average PMA approval times (months)

3.1 4.5 15.5 27.1

2006 2009 2010

Regulatory and pricing pressures

Nu Number mber of first st review iew IDE DEs has decrease reased

76% 32%

Devices receiving FDA investigational device exemptions (IDE) after first review

56%

2006 2010 2006 2010

Regulatory and pricing pressures

Post st-mark market et scrutiny utiny has increase reased

Number of warning letters issued by the CDRH Number of Class I product recalls

65 426 426 154 204

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Regulatory and pricing pressures Customer realignment

+

A new funding environment

+

Innovation novation at risk sk?

2006 2010

Customer realignment

Ho Hospitals spitals conti ntinue ue to consolidate nsolidate

57 77

Number of US hospital M&As announced

Customer realignment

Independent dependent phys ysicians icians are decreasing reasing

Percentage of US private practice physicians

2005 2009 2013

33 30 24

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Compliance pressures

A changing anging hospi spita tal l envi vironment ronment

Implicati tions

• ns for medtech

ech companies anies

Technology assessment committees Group purchasing

• rganizations

Less physician choice Fewer vendors Hospital face tighter margins, cost pressures

►Customer moves

beyond the physician  hospitals more prominent

►Realign

sales/marketing approach

►Implications for

what you sell, how you sell and how you develop new

• fferings

Governments squeeze HC costs, health care reform Pressure from payers Global economic downturn

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Regulatory and pricing pressures Customer realignment

+

A new funding environment

+

Innovation novation at risk sk?

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A new funding ng environm ronment ent

Funding is up…or is it?

5 10 15 20 25 2005 2006 2007 2008 2009 2010

US$b

Funding excluding debt Debt financing Source: Ernst & Young, Capital IQ, Dow Jones VentureSource, BMO Capital Markets and Windhover

US and European capital raised by year

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A new funding environment

The he ri rich get t ri richer er? ?

Large companies’ share of total capital raised has grown dramatically However, venture capital has dropped for the third consecutive year

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Thank ank you

Stay ay tune ned: d:

ey.co .com/ m/medt medtec ech

Heinrich Christen Partner, Industry Leader Medtech EMEIA Ernst & Young Ltd. Maagplatz 1 CH-8010 Zürich Phone +41 58 286 34 85 Mobile +41 58 289 34 85 Fax +41 58 286 30 00 eMail heinrich.christen@ch.ey.com

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