Strong growth continues in the Swiss medtech industry – notwithstanding growing pressure on prices and costs
The Swiss medical technology industry is entering a new phase. It will remain a strong growth industry, with companies in the industry anticipating annual growth of 10 to 12 percent over the next two years. However, the conditions in which this growth will take place have changed due to the global economic crisis: increased pressure on prices and costs in the healthcare markets, coupled with tougher international competition, is forcing Swiss medtech companies to rearrange their strategic priorities. Whereas strengthening product innovation was the top priority two years ago, improving profitability now occupies the top spot. These are the findings of the Swiss Medical Technology Industry 2010 Survey, conducted in recent months by Medical Cluster in conjunction with Roland Berger Strategy Consultants and accounting and consulting firm Deloitte.
The medtech industry was long thought to be crisis-resistant. Fast growing healthcare markets where a major portion of the costs are covered by insurance companies made it largely independent of economic cycles, unlike other industries. But as the latest global economic crisis unfolded, the healthcare markets themselves saw a great deal of change. The question of how the rise in healthcare costs could be stemmed moved to the top of the agenda in all industrialized nations. Regardless of the answers to that question, there is no doubt that cost and price pressure in the medtech industry will rise, as will the competition between companies.
The study, conducted in early spring by Medical Cluster in cooperation with Roland Berger Strategy Consultants and Deloitte, explains how the Swiss medtech industry views these challenges and how it is responding to them. More than 250 firms from across the country took part in the Swiss Medical Technology Industry 2010 Survey, enabling a comprehensive assessment of the state of the industry today.
Improving profitability
Against the backdrop of the three-pronged challenge (price pressure, cost pressure and tougher competition), Swiss medtech companies have set new strategic emphases. In the last survey (conducted 2008), they cited strengthening product innovation as the most important area for strategic action. Accordingly, they viewed the availability of highly skilled personnel and access to specialized know-how and new technologies as the biggest challenges. This has changed radically in the meantime. The strategic priorities are now: improving profitability, optimizing marketing and refining corporate structures and processes. Another area of great importance is the ability to react appropriately to the ever more demanding regulatory conditions in the markets. Nevertheless, managers at Swiss medtech companies anticipate continued strong growth of 10 to 12 percent over the next two years. They see the biggest opportunities for growth in their home market of Switzerland and in the countries of the EU.
Innovation and renewal
The increased cost awareness among medtech managers also caused them to rethink investments in research & development. Overall, R&D spending declined only minimally in 2009 compared with 2007, falling from about 12 to 11 percent of manufacturers' sales. However, there was a reallocation of spending toward more investment in the renewal of existing products. Accordingly, the share of sales accounted for by new products was down, falling from about one third to less than 30 percent. But even though product innovation has recently lost some ground to improving profitability, it remains the most important success factor in the medtech industry over the long term. In this context it is no surprise to find that companies that continue to focus on innovation expect to see the highest growth rates.
Switzerland as a medtech location
Switzerland is one of the world's leading business locations for medical technology and has a very broad value chain. Highly innovative firms have specialized suppliers to draw upon, along with universities, research institutes and service providers for R&D and launching cutting-edge technologies on the market. Estimated total sales amount to CHF 22.9 billion. At around 2 percent, the industry's share of GDP is higher than in any other country. The backbone of the Swiss medtech industry is made up by more than 700 manufacturers and suppliers, which together employ a workforce of some 49,000. They generate almost 80 percent of their sales outside of Switzerland.
Contact for more information and copies of the study:
Roland Berger's international Pharma & Healthcare Competence Center supports life science companies that want to seize new opportunities and master the associated challenges. Besides the traditional consulting fields such as marketing, organizational development, cost cutting and M&A, we also deliver extensive market analyses of current trends and developments.
The medtech industry was long thought to be crisis-resistant. Fast growing healthcare markets where a major portion of the costs are covered by insurance companies made it largely independent of economic cycles, unlike other industries. But as the latest global economic crisis unfolded, the healthcare markets themselves saw a great deal of change. The question of how the rise in healthcare costs could be stemmed moved to the top of the agenda in all industrialized nations. Regardless of the answers to that question, there is no doubt that cost and price pressure in the medtech industry will rise, as will the competition between companies.
The study, conducted in early spring by Medical Cluster in cooperation with Roland Berger Strategy Consultants and Deloitte, explains how the Swiss medtech industry views these challenges and how it is responding to them. More than 250 firms from across the country took part in the Swiss Medical Technology Industry 2010 Survey, enabling a comprehensive assessment of the state of the industry today.
Improving profitability
Against the backdrop of the three-pronged challenge (price pressure, cost pressure and tougher competition), Swiss medtech companies have set new strategic emphases. In the last survey (conducted 2008), they cited strengthening product innovation as the most important area for strategic action. Accordingly, they viewed the availability of highly skilled personnel and access to specialized know-how and new technologies as the biggest challenges. This has changed radically in the meantime. The strategic priorities are now: improving profitability, optimizing marketing and refining corporate structures and processes. Another area of great importance is the ability to react appropriately to the ever more demanding regulatory conditions in the markets. Nevertheless, managers at Swiss medtech companies anticipate continued strong growth of 10 to 12 percent over the next two years. They see the biggest opportunities for growth in their home market of Switzerland and in the countries of the EU.
Innovation and renewal
The increased cost awareness among medtech managers also caused them to rethink investments in research & development. Overall, R&D spending declined only minimally in 2009 compared with 2007, falling from about 12 to 11 percent of manufacturers' sales. However, there was a reallocation of spending toward more investment in the renewal of existing products. Accordingly, the share of sales accounted for by new products was down, falling from about one third to less than 30 percent. But even though product innovation has recently lost some ground to improving profitability, it remains the most important success factor in the medtech industry over the long term. In this context it is no surprise to find that companies that continue to focus on innovation expect to see the highest growth rates.
Switzerland as a medtech location
Switzerland is one of the world's leading business locations for medical technology and has a very broad value chain. Highly innovative firms have specialized suppliers to draw upon, along with universities, research institutes and service providers for R&D and launching cutting-edge technologies on the market. Estimated total sales amount to CHF 22.9 billion. At around 2 percent, the industry's share of GDP is higher than in any other country. The backbone of the Swiss medtech industry is made up by more than 700 manufacturers and suppliers, which together employ a workforce of some 49,000. They generate almost 80 percent of their sales outside of Switzerland.
Contact for more information and copies of the study:
Peter Biedermann, Medical Cluster
Tel. +41 31 335 62 53
Mobile +41 76 324 31 15
Authors
Dr. Patrick Dümmler, Roland Berger AG Strategy Consultants
Mobile +41 76 532 53 16
Beatus Hofrichter, Deloitte Consulting AG
Mobile +41 79 254 09 68
Medical Cluster
Medical Cluster brings together manufacturers, suppliers, service providers and research and development institutes from throughout Switzerland. We offer services and platforms with the goal of keeping medical technology in Switzerland on the best footing for growth. Our activities focus on knowledge and experience exchange, technology transfer and export assistance.
www.medical-cluster.ch
Deloitte
Deloitte is one of Switzerland's leading consultancies and offers audit, tax advisory, consulting and corporate finance services. Our 1,000 employees are based at offices in Basel, Bern, Geneva, Lausanne, Lugano and Zurich.
www.deloitte.com
Roland Berger's international Pharma & Healthcare Competence Center supports life science companies that want to seize new opportunities and master the associated challenges. Besides the traditional consulting fields such as marketing, organizational development, cost cutting and M&A, we also deliver extensive market analyses of current trends and developments.
