Medical device cm os merger and acquisition buyer's view and standpoint
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Transcript of Medical device cm os merger and acquisition buyer's view and standpoint
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Members for the Webinar
Chanderkanth Gautham Lead Analyst
Beroe-Inc. Dialing in from:
India
Speaker
Janani Narasimhan Engagement Manager
Beroe-Inc. Dialing in from:
India
Moderator
Agenda and need of the hour
5
What is triggering the M&A? 01
What are hidden patterns and how they can be put to use? 02
What are the services that are being included by leading CMOs in their product offerings 03
What are the major KPIs that need to be evaluated while partnering with leading
CMOs? 04
Mergers & Acquisitions – Worry points and beyond
6
Increase in
Supplier Power
Limited
Negotiation Power
Increased
Product Pricing
Over
Dependency on Vendor
Factors triggering M&As in Medical Devices CMO Market (1/2)
7
OEM Cost Structure Shift
0
25
50
COGS SG and A
Drift to core competency i.e., “R&D” and “Sales and Marketing”
CMOs scaling up to fill the manufacturing gap
Past Present Future
73
28
3
6
16
37
1
5
7
24
0 20 40 60 80 100 120
Medical Device CMO
Medical Device OEM
Percentage (%) Cost of Good Sold Research and Development
Sales, Marketing, General and Administrative Expenses Other Operating Expenses
Operating Margin
8
Cost Overview: OEM Vs. CMO
73
28 6 37 5 24
3 16 7 1
Drift to core competency i.e., “R&D” and “Sales and Marketing”
CMOs scaling up to fill the manufacturing gap
Factors triggering M&As in Medical Devices CMO Market (2/2)
0%
20%
40%
60%
80%
100%
120%
Medical Device OEM Revenue
Revenue fromproducts released
earlier
Revenue fromproducts introduced
in last 24 months
Need of the hour: Innovation for OEMs and manufacturing efficiency for CMOs
35%
65%
Need for product Innovation: OEM
Manufacturing growing in par with Innovation: CMO
Medical Device OEM Revenue
Acquisition Expansion Partnership Product launch
Activity Type of Medical Device CMOs – 2013 to 2014
Medical device CMOs activity meter – Focus on acquisition and expansion
10
Need of the Hour: Understand the key activities rational
25% 5% 40% 30%
Activity Type of Medical Device CMOs – 2013 to 2014
Activity focus of Medical Device
CMOs
What CMOs activities look like
Medical Device CMO – Shift from singular focus to multi-specialization
11
Key activity insight
Leverage it based on your operational overlap
Recent Past
Past
Component Manufacturing
Recent
Past
Component Manufacturing/
Design/Prototype
Current
Component Manufacturing/
Design/Prototype
Future
Component Manufacturing/Design/ Prototype/Packaging/
Other therapeutic Focus
Great Batch
Sierra KD GTM HMMC
Cardiac
Precimed
Orthopedic
Great Batch
Significant M&As of top 15 CMOs
12
25%
13%
10%
8%
8%
6%
6%
6%
4%
4%
2% 2%
2% 2% 2%
Accellent Symmetry Greatbatch
Heraeus Avail Medical Tech Group
Lake Region Medical Fortwayne Orchid
Doncasters Med Tech Synovis
Creganna Trivinix Memry
Source: Covington Associate Report, Medical Device
Percentage Breakup of Medical Device CMOs (% of 50%)
Significant M&As of top 15 CMOs
13 Source: Covington Associate Report, Medical Device
Beyond Great batch
Company's with Acquisition
Spree (Very High)
Accellent
Symmetry
Greatbatch
Company's with Acquisition
Spree (High)
Heraeus Medical
Flextronics
Company's with Acquisition
Spree (Medium)
Tech Group
Fort Wayne
Memry
Company's with Acquisition
Spree (Low)
Synovis
Trivinix
Note: Acquisition’s Count >8 or
deal size > 250 million
Note: Acquisition’s Count 5-8 or
deal size >100 million
Note: Acquisition’s Count <5 Note: Acquisition’s Count ~5
or deal size > 50 million
Significant M&As of top 15 CMOs
14
25%
13%
10%
8%
8%
6%
6%
6%
4%
4%
2% 2%
2% 2% 2%
Accellent Symmetry Greatbatch
Heraeus Avail Medical Tech Group
Lake Region Medical Fortwayne Orchid
Doncasters Med Tech Synovis
Creganna Trivinix Memry
Source: Covington Associate Report, Medical Device
Percentage Breakup of Medical Device CMOs (% of 50%)
Beyond Great batch
Company's with Acquisition
Spree (Very High)
Accellent
Symmetry
Greatbatch
Company's with Acquisition
Spree (High)
Heraeus Medical
Flextronics
Company's with Acquisition
Spree (Medium)
Tech Group
Fort Wayne
Memry
Company's with Acquisition
Spree (Low)
Synovis
Trivinix
Note: Acquisition’s Count >8 or
deal size > 250 million
Note: Acquisition’s Count 5-8 or
deal size >100 million
Note: Acquisition’s Count <5 Note: Acquisition’s Count ~5
or deal size > 50 million
All the top players are on board with the trend
Patterns to be leveraged
15
Acquisition amid Top 15 CMOs and
Identification of Avenues to be leveraged 1
Addition of services and therapeutic
areas resulting in One Stop Shop 2
Emerging Market penetration of
CMO 3
Leveraging New Entrants from Non-
core industry 4
16
Acquisition amid Top 15 CMOs: Opportunities 1
Top CMOs options
Rely on the best and get the best
Accellent and Lake Region: 12>>>18%
Heraeus and Synovis 4>>>>6%
Orchid and Doncasters 2>>>>4%
Can accommodate higher volume across therapeutic areas
Can accommodate Surgical Device Portfolio
Can accommodate higher volumes of Orthopedics
Merger
between 1 and 7
Merger
between 4 and 12
Merger
between 9 and 10
17
Addition of services resulting in One Stop solutions: Critical area
consolidation 2
Room for Therapeutic
Consolidation
Room for Service
Consolidation
25% 30%
Addition and enhancement: Segments and services
18
Therapeutic Trend M&A: Output
70%
Service Trend M&A: Output
75%
Surgical Designing
CMOs can an cater to increased volume
CMOs can cater to diversified products
Therapeutic and Service Enhancement
Therapeutic and Service Addition
CMOs foray into other areas
19
Services
Medical Device
Services
Design
Manufacturing
Assembly
Sterilization
Therapeutic Focus
Cardiac
Orthopedic
Surgical
Neuromodulation
Medical Device
Therapies
Other therapeutic
focus
Other services
20
Emerging Market penetration of CMOs 3
15
85
0 10 20 30 40 50 60 70 80 90
Emerging Market Facility Addition
Developed Market Facility Addition
All currently catering to developed markets, with close to 65% of production exported to
“Europe and US”.
Lake Region Medical
Flextronics Accellent Gerresheimer
85%
15%
21
New Entrants with lot to offer (1/2) 4
An new area that can be looked into for Vendor Scouting
Medical Non Core Vs. Core – M&A
5%
Medical Non Core Companies
Medical Core Companies
95%
Flextronics Acquisition
22
4
Riwisa Year of Acquisition: 2013
Therapeutic Focus: Drug Delivery Devices
Avail Medical Year of Acquisition: 2007
Therapeutic Focus: Catheters and Drug Delivery Devices
Stellar Microelectronics
Year of Acquisition: 2012
Therapeutic Focus: EMS for Healthcare and Others Industries
New Entrants with lot to offer (2/2)
M&As: Before and after
23
Buyers Service Criticality
Clinical Trial
Molding
Design
Testing
Manufacturing
Assembly
Sterilization
Packaging
Clinical Trial
Assembly and Testing
Sterilization
Packaging
Molding and Manufacturing
Design and Manufacturing
Present Past
24
Cardiac
Orthopedic
Surgical
Others
Cardiac and orthopedic
Orthopedic and surgical
Therapeutic Focus Criticality
Present Past
Others
Future generation
Current generation
Future & current generation
Device Phase Criticality
Present Past
Developed
Emerging
Emerging & Developed
Market Criticality
Present Past
M&As: Before and after
Quick snapshot
25
Service
Consolidation
Therapeutic
Consolidation
Emerging Market
Venture
Supplier Readiness
Cost Savings
Innovation Support
Supplier Readiness
Technology readiness
Capacity Addition
Supplier Readiness
Regulatory
Cost Savings
High High Medium
What to look for!
26
