“Choice of Business Model – A Key Strategy in the Medical Displays Market in Europe”

Dr. Gideon Praveen Kumar , Industry Analyst

Healthcare

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Functional Expertise� Three years of research and consulting experience in the healthcare domain, over and above

• Helping with research production planning• Helping with recruiting new hires into the team• Mentoring new hires and junior analysts

Industry Expertise� Six-plus years in the healthcare sector, with focus on medical imaging, diagnostic monitoring and medical devices

• Medical imaging modalities MRI, CT, Interventional radiology, medical displays and PACS• Diagnostic monitoring equipment, cardiac monitors, high acuity monitors and CIS solutions markets• Extracorporeal and implantable devices • Design, analysis and prototype management in the medical devices space.

What I bring to the Team• Years of healthcare experience through working with hospital personnel, scientists and academic experts• Extensive client interaction and strategic project management• Collaborative alliance with a global team of analysts and consultants• Critical acclaim for having published several papers in international conferences and journals

Career Highlights� R & D expert prior to joining Frost and Sullivan� Published 32 articles in International journals and conferences on medical technology� Have 2 patents on design and analysis of percutaneous aortic valve stents� Completed one funded project on fabrication of aortic valve stent� Registered referee for 5 International journals on biomedical engineering � External guide for many graduate and post graduate students in the area of biomedical engineering � Guest lecturer at VIT University, Division of Biomedical Engineering� Invited/plenary speaker at many international conferences in biomedical engineering

Education� Bachelors in Physical Medicine and Rehabilitation Christian Medical College and Hospital, India, 2003� Masters in Biomedical Engineering, VIT University, India, 2007� PhD in Biomedical Engineering , VIT University, India, 2010

Dr Gideon Praveen Kumar

Dr. Gideon Praveen Kumar Industry AnalystHealthcare, EIA

Frost & SullivanChennai

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Agenda

Medical Displays – Market Segmentation

Market Facilitatory Factors

Focus Points

Market Drivers and Restraints

Business Model Analysis

Market Revenues and Forecasts

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Market Segmentation

Mammography Displays These monitors are used for mammography. These displays are again DICOM calibrated from 5MP to 10 MP for mammography applications and are at the high end of the cost spectrum.

Mammography Displays These monitors are used for mammography. These displays are again DICOM calibrated from 5MP to 10 MP for mammography applications and are at the high end of the cost spectrum.

PACS Displays

These monitors are used for radiology, in which high resolution and greyscale rendering are absolutely critical. These displays are DICOM calibrated from 2 to 3MP greyscale for radiology and are at the high end of the cost spectrum. This segment mostly comprises of the displays used for diagnostic viewing in PACS workstation.

PACS Displays

These monitors are used for radiology, in which high resolution and greyscale rendering are absolutely critical. These displays are DICOM calibrated from 2 to 3MP greyscale for radiology and are at the high end of the cost spectrum. This segment mostly comprises of the displays used for diagnostic viewing in PACS workstation.

Clinical Review DisplaysThese display monitors are designed for use in ICUs, ERs, small clinics and by private practitioners, where contrast is more important. The displays are typically 1-MP colour monitors and have DICOM calibration.

Clinical Review DisplaysThese display monitors are designed for use in ICUs, ERs, small clinics and by private practitioners, where contrast is more important. The displays are typically 1-MP colour monitors and have DICOM calibration.

Acquisition DisplaysThis segment refers to displays that are used by the medical imaging modalities such as computed tomography (CT), magnetic resonance imaging (MRI), interventional radiology (IR), digital radiography (DR), computed radiography (CR) and fluoroscopy for image acquisition and viewing. These displays are used only to view the image during the acquisition of the same.

Acquisition DisplaysThis segment refers to displays that are used by the medical imaging modalities such as computed tomography (CT), magnetic resonance imaging (MRI), interventional radiology (IR), digital radiography (DR), computed radiography (CR) and fluoroscopy for image acquisition and viewing. These displays are used only to view the image during the acquisition of the same.

Surgical Displays These display monitors are used specifically for surgery. These are mostly 1-MP colour displays and but can also have a maximum resolution of 2MP.

Surgical Displays These display monitors are used specifically for surgery. These are mostly 1-MP colour displays and but can also have a maximum resolution of 2MP.

Segmentation

Source: Frost & Sullivan

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MinimallyMinimallyInvasive Invasive

SurgeriesSurgeries

Increased Number ofIncreased Number ofPrivate PractitionersPrivate Practitioners

Advances in Image ProcessingAdvances in Image ProcessingSoftware Software

Increasing Demand for PACS InstallationsIncreasing Demand for PACS InstallationsBeyond Radiology DepartmentsBeyond Radiology Departments

Increased Demand for Colour Images amongstIncreased Demand for Colour Images amongstRadiologistsRadiologists

Low Impact

Market Facilitating Factors – Image Management Solutions and Medical Displays

MinimallyMinimally

Invasive Invasive

SurgeriesSurgeries

Role of Clinical Decision Making Role of Clinical Decision Making Processes Processes

Increasing Demand for PACS InstallationsIncreasing Demand for PACS InstallationsBeyond Radiology DepartmentsBeyond Radiology Departments

Increased Demand for Colour Images amongstIncreased Demand for Colour Images amongstRadiologistsRadiologists

Advances in ImageAdvances in ImageProcessing SoftwareProcessing Software

High Impact

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Market Drivers and Restraints

Driv

ers

Re

stra

ints

Driv

ers

Denotes Long term Impact

Denotes Current Impact

Demand for Colour Images

Digitisation Initiatives

Legislation for Use

Long-Term Relationship

Image Quality Image Processing IT

Advancements

Focus on TV and LCD Market

High Cost of Certain Segments

DICOM Compliance Regulations Fluctuating Exchange Rates

Re

stra

ints

Minimal Invasive

Surgeries Adoption of Clinical

Review Displays

Source: Frost & Sullivan

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Competitive Structure

TIER I>56 per cent market share

TIER II and IIILocal/niche participants

<44 per cent market share

Competitive Factors

-Image quality

-Workflow efficiency

-Contrast

- Luminance

-Price

-Business Model

- Vendor Relationship

NDS Surgical Imaging

Sony Corporation

Others

Totoku

NEC

Eizo

Barco

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Revenue Forecasts

11.4CAGR

YearRevenue (Million $)

Revenue Growth Rate (%)

2009 259.8 -

2010 268.6 12.4

2011 301.9 13.2

2012 341.8 13.8

2013 388.9 14.5

2014 445.3 15.2

2015 513.0 15.7

Frost & Sullivan estimates that the total European medical displays market was worth $268.6 million in 2010. The growth rate exhibited during the year

was 12.4 per cent. Few of the key drivers for this growth include use of displays in the cardiology PACS sector and increasing demand for displays

with better image quality and better features such as contrast and luminance. Another driver could be the increased adoption of clinical review

displays, which has a market share of about 42 per cent of the total units shipped in 2010. Market growth is expected to be augmented by the growing

sales of mammography displays, as well as clinical review display monitors. It is also expected that the sales of surgical display monitors will increase

in the coming years. However, the increased sales would be achieved through a decrease in the average selling prices of such display units.

0.0

100.0

200.0

300.0

400.0

500.0

600.0

2009 2010 2011 2012 2013 2014 2015

Revenues ($ Million)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Growth Rate (%)

$ Million %

Note: All figures are rounded. Source: Frost & Sullivan

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Business Model Analysis

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Existing Business Models

Source: Frost & Sullivan.

Displays Manufacturers

Distributors

Resellers

End users

OEM Manufacturer/System Integrators

B2C

B2B

B2B – Business-to-businessB2C – Business-to-consumer

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Advantages and Limitations of Business Models

Response ofMonitor

Manufacturer

Price RequirementIn a B2B strategy, monitor manufacturers sell the monitors to the systems integrators. The system integrators then sell the monitors along with the equipment as one package. The price of the total package is decided by the system integrators. In a B2C strategy, the monitor vendors have a chance to negotiate and sell directly to hospitals with varying profit margins

MaintenanceIn a B2B strategy, after-sales service and maintenance is done exclusively by systems integrators. The monitor manufacturers’ role becomes inconsequential. In a B2C strategy, after-sales and maintenance is managed by both systems integrators and monitors manufacturers. The former in the acquisition display segment and the latter during replacement of a display or upon the recommendation by the PACS vendor .

Customised SolutionsIn a B2B strategy, the systems integrators interact directly with the hospitals. This helps them to understand the changing demands of clients. The medical display vendors manufacture customised products based on feedback from systems integrators. In a B2C strategy, the medical display vendors interact directly with the hospitals, which help them to identify needs and act accordingly.

Source: Frost & Sullivan.

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Vendor Business Model Analysis

Barco

NEC

GE Healthcare , Siemens Healthcare , Philips

Healthcare, Hologic, Agfa, Fuji, Carestream,

McKesson

GE Healthcare , Siemens Healthcare , Philips

Healthcare Toshiba, Shimadzu, Carestream,

Sectra, Agfa, Hologic

End-user

End-user

Resellers

Distributors

Systems Integrators

Systems Integrators

Completely B2B

B2C and B2B

Predominantly B2C

NDSsiNDSsi

GE Healthcare , Siemens Healthcare , Karl

Storz, Pentax Imaging,Olympus, Macquet and

Drager Medical

EizoEizo

SonySony

Pentax Imaging,Olympus, Macquet and Drager

Medical

End-user

Source: Frost & Sullivan

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Display Selection Parameters

• There is a shift in legislation

and there would be different

types of displays within

departments in hospitals

PricePerformance

Ratio

Adherence to regulations

Ease of systems

integration

Product Range

End-userDemand

Imageconsistency

NEC and Eizo have beenaggressive with pricing in theirB2C sales strategy

Technology is selected on the basis of: • Lumination• Contrast

• Changing end user demand• Interacting with systems

integrators and hospitals• B2C approach had an edge over

getting end user demands

• Good product profile.• Direct impact on brand.• Positive impact on customer perception.

• Easily integrated to PACS systems• Displays should be be integrated to any

modality without much hardship. Such should be its ease

• Of integration

Strategic

Reasons

Source: Frost & Sullivan

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Success Factor Analysis

B2CLow Low Colour1 MPClinical review

B2CLow Low Colour1- 2MPSurgical

B2B and B2CMediumMedium Colour and grey scale

1 – 2 MPAcquisition

B2B and B2CHigh High grey scale 5 MPMammography

B2B and B2CHigh High Colour and grey scale

3 MPDiagnostic /PACS

Entry of New Player

Overall level of competition

Business ModelCriticality of After sales

service

Pricingcolour/greyscale

Mega-pixels DISPLAY

SEGMENT

ATTRIBUTES

Source: Frost & Sullivan

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

The number of stars represents the possible success rate of a new company’s entry.

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New entrant trying to venture into this market should concentrate on the point of care devices

[clinical review displays being one, which helps in making decisions at the point of patient care].

CONCLUDING

POINTS

Entering this market depends on the profile of the new entrant and its vision

Getting into the high end diagnostic display segment would be extremely difficult.

A combination of B2B and B2C would be an ideal option in the market today. A 60 : 40

approach would be profitable to establish brand equity in this market.

In the long run, switching to a 70:30 sales model in favor of B2C will improve market

share of a company, as a saturated PACS market will lead to replacement of displays

Key Take-Away’s

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For Additional Information

Dr Gideon Praveen Kumar Industry Analyst - Medical Technologies Healthcare+91 44 6160 6666Gideon.praveenkumar@frost.com

Katja Feick

Corporate Communications

Healthcare

0049 (0) 69 7703343

katja.feick@frost.com

Noel Anderson

European Vice President

New Business Development

+44 (0)207 343 8389

noel.anderson@frost.com