Post on 15-May-2015
description
Bangkok
Beijing
Boston
Chennai
Chicago
London
Los Angeles
Melbourne
Milan
Mumbai
Munich
New Delhi
New York
Paris
San Francisco
São Paulo
Seoul
Shanghai
Singapore
Sydney
Tokyo
Wroclaw
China: Opportunities and Hot-spots
L.E.K. Consulting Pty Ltd, Level 26, Aurora Place, 88 Phillip Street, Sydney NSW 2000, Australia
T: 61.2.9323.0700 F: 61.2.9323.0600 www.lek.com
19 February 2014
© L.E.K. Consulting Australia 2014
CONFIDENTIAL1
China means different things to different companies ...
... an “attractive” commercial market
... a source of capital and investment
... part of my supply chain solution
© L.E.K. Consulting Australia 2014
CONFIDENTIAL2
China is the world’s fourth largest medical device market
2.3
3.4
3.5
4.7
5.1
5.5
6.3
8.4
8.9
13.3
14.0
23.2
31.5
155 12525 1203020100 35
France
China
Germany
Japan
USA
Switzerland
Mexico
India
Billions of US$
Brazil
Spain
Russia
Canada
Italy
UK
120.4
Medical device market size by country (2012)
Note: * Forecasts assuming exchange rate at US$1=RMB5.5 by 2017, according to EIUSource: Espicom, EIU, L.E.K. analysis
China medical device market size* (2007-17F)
0
5
10
15
20
25
30
35
40
Billions of US$
CAGR=20.2%
CAGR=23.1%
17F16F15F14F13F12E111009082007
© L.E.K. Consulting Australia 2014
CONFIDENTIAL3
China is the third largest pharmaceutical market in the world and will account for a quarter of global value growth to 201 5
China
Russia
Japan
Canada
U.S.
UK
Asia Pacific
Spain
Germany
ItalyFrance
15-20%
10-15%
5-10%
0-5%
CAGR*2010-15F
Pharmaceutical market growth rate* by major market (2010-15F)
The worldwide contribution of the Chinese pharmaceutical market is expected to continue growing through 2015, eclipsing the growth contribution of the U.S., EU5, and Japan combined
Latin America
Africa
Note: * Constant USD exchange rate Source: IMS Health, L.E.K. analysis © L.E.K. Consulting Australia 2014
CONFIDENTIAL4
The different types of cities have different dynami cs and importance
Note: *Number of population in the province times disposable income per capita; **Number of population in the city times disposable income per capitaSource: L.E.K. interviews and analysis
GroupsCategorized cities
Sub-segmentation criteria
City tier segmen-tation
City tier sub-segmen-tation
# of cities
Example cities
National hubs Beijing, Shanghai and Guangzhou Tier 1 Tier 1 3 � Beijing� Shanghai� Guangzhou
Provincial hubs
Key provincial hubs
All provincial capitals excluding Guangzhou, such as Wuhan, Chengdu and Nanchang
Total provincial disposable income* > RMB100bn
Tier 2 Tier 2-A 16 � Wuhan� Nanjing� Chengdu
Non-key provincial hubs
Total provincial disposable income* < RMB100bn
Tier 2-B 12 � Taiyuan� Haikou� Nanchang
Non-hub cities
Wealthy city markets
Other cities, such as Jingzhou, Mianyang
Total city disposable income** > RMB 25bn
Tier 2-C 20 � Wuxi� Yantai� Xiamen
Other city markets
Total city disposable income** < RMB 25bn
Tier 3 Tier 3 236 � Jingzhou� Fushun� Zhanjiang
© L.E.K. Consulting Australia 2014
CONFIDENTIAL5
The healthcare landscape encompasses a range of “se gments”
T3, C3
c.13
c.20
Tier 1 City,
Class 3 Hospital
c.50
c.2
c.7
T1, C2 T2, C2
c.3
T2, C3
30
20
40
50
China hospital landscape by average annual inpatien ts surgeries and hospital segments (2012)Thousands of inpatients surgeries
10
0
Number of hospitals
9,0008,5008,0007,5007,0006,5006,0005,5005,0004,5004,0003,5003,0002,5002,0001,5001,0005000
County
c.3
T3, C2
Premium segment Value segment Un-addressable
Source: China hospital database, L.E.K. analysis © L.E.K. Consulting Australia 2014
CONFIDENTIAL6
Unlocking any commercial potential is dependent on a range of factors
Product range Sales and distribution strategy
Tendering and other areas
Premium or value segment
Pricing
Service requirements and
differentiation
Direct vs. dealers
Sales force roles and incentives
Dealers roles and incentives
Distributors and dealers consolidation
Tendering roles and responsibilities
Changes as a result of new regulations
Regionalization of sales force
Customer segmentation
Account potential
Current and future sales
© L.E.K. Consulting Australia 2014
CONFIDENTIAL7
Tendering and listing are becoming increasingly cha llenging
Province/City tendering
Hospital source list
Surgeon selection
Tendering and selectionprocess
Key outsiderinfluencer
• Manufacturer• Provincial
distributor
More than 20 domestic and imported brands
A list of 15-20 domesticand imported brands
c. 2~5 domesticbrands and 1~4 imported brands*
Preliminary selection criteria
• Brand awareness• Historical performance• Completed documentation
and support materials
Brand used
Description
• Relatively easy to get onto the list, especially for a well-known brand
• Sets the price ceiling for the brand’s products in the region
Note: *For mid and lower tier marketsSource: L.E.K. interviews and analysis
• Local distributor or provincial distributor (in target hospitals)
• Distributor relationship and access
• Product payment structure• Product price and quality
• Fierce competition• Many brands are
excluded at this stage • Prices are negotiated
• Level 2 Distributors • Product quality• Manufacturers’ pull from
marketing activities• Patient affordability• Distributor’s recommendation
and/or promotions
• Surgeons select from brands that are on the hospital list
© L.E.K. Consulting Australia 2014
CONFIDENTIAL8
Innovation
� Indigenous innovation in MedTech sector has been listed as a key initiative in the 12th Five-Year Plan (2011-2015) published in 2011
� Domestic firms are encouraged to enhance R&D efforts in order to develop indigenous technology and innovation, making them more competitive against foreign competitors
Source: L.E.K. research and analysis
Industry restructuring and upgrade
� A series of goals has been set for the development of MedTech sectors during the 12th Five-Year Plan. By 2015: 200 new patents of MedTech; 50-80 innovative medical devices; 40-50 innovative high-technology medical device companies
� c.RMB1.5billion special supporting fund from the government in 2013 and a total c.RMB10billion investment to support domestic MedTech innovations by 2020
Three key themes in healthcare initiatives in the 1 2th Five Year Plan
Developing innovation is featured prominently in Ch ina’s 12th Five Year Plan (2011-15)
Increase coverage and
quality of services
� Increase insurance coverage
� Improve public hospital services
� Improve services for family planning, women, children, elderly and disabled
� Guarantee product safety
© L.E.K. Consulting Australia 2014
CONFIDENTIAL9
More than 10 provinces have set up at least one Med Tech Science Park and the central government targets to build an other 8-10 by 2015
Chongqing
Jiangsu
Beijing
Guangdong
Hunan
ZhejiangHubei
Liaoning
Heilongjiang
Jiangxi
Shanghai
Henan
MedTech science park locations in China(2013) � By 2013, 12 provinces and
municipalities had set up at least one MedTech Science Park
� The central government plans to build another 8-10 MedTech Science Parks by 2015
� Beyond MedTech science parks, China established more life science parks across the country- there were already more than
120 life science parks in China in early 2010
Source: Local MedTech science park websites, Ministry of Health (MOH), 12th Five-Year Plan, L.E.K. research and analysis
Province with MedTech Science Park
Province without MedTech Science Park
© L.E.K. Consulting Australia 2014
CONFIDENTIAL10
Healthcare infrastructure is at the early stages of a long transition
Healthcare provider landscape (2009)
Level 3
(1,233)
Level 2
(6,533)
Level 1 & Community
Healthcare Center (CHC)
(10,825)
Community Healthcare
Station (CHS)
(22,092)
Township Healthcare Station
(THS)
(39,627)
Healthcare provider landscape (2020*)
Urban Rural
Ad-vanced
Hospitals(1,559)
CommunityHealthcare
Station(22,092)
Village Clinic(632,770)
CommunityHealthcare
Center(5,216)
TownshipHealthcare
Station(38,475)
County / DistrictHospital (6,056)
Primary healthcare
Initial diagnosis
Essential medicines prescription
Chronic disease management
Public hygiene services
Physicals
Vaccination
Healthcare education
Advanced healthcare
Care for severe or rare diseases
Advanced diagnosis and treatment
Scientific research
Advancedsecondaryhealthcareinstitution
Primaryhealthcareinstitution
(PHCI)
Services provided
© L.E.K. Consulting Australia 2014
CONFIDENTIAL11
Further information and insights
� Expanding in China MedTech Market: Where To Go From Here, In Vivo
� Pricing and reimbursement for high value therapies in China, BIO Buzz
� Tackling China’s EDL Challenge: Navigating the Changes and Planning for Success, PharmAsia Newsletter
� Investing in Health, EuroBiz
� Looking After China’s Elderly, China Business Review
� Hospitals Adopt New Strategies to Boost Profitability, but Still Face Deep Challenges: A New Imperative for MedTech
� Biopharma & Life Sciences Outlook 2013
Articles can be found on our website: http://www.lek.com/our-publications/articleswww.lek.com/medtechwww.lek.com/lifesciences
© L.E.K. Consulting Australia 2014
CONFIDENTIAL12
China means different things to different companies ...
... an “attractive” commercial market
... a source of capital and investment
... part of my global supply chain
solution
Assisting Australian Companies to Enter Chinaan AusBiotech/ Austrade initiative
© L.E.K. Consulting Australia 2014
CONFIDENTIAL13
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© L.E.K. Consulting Australia 2014