[LEK]china_medical_device_market

TheChinaMedicalDeviceMarket:Opportunities&ChallengesThematerialscontainedinthisdocumentareintendedtosupplementadiscussionwithL.E.K.Consulting.Theseperspectivesareconfidentialandwillonlybemeaningfultothoseinattendance.January14,2010AucklandBangkokBeijingBostonChicagoLondonLosAngelesMelbourneMilanMumbaiMunichNewDelhiNewYorkParisSanFranciscoShanghaiSingaporeSydneyTokyoWroclawiKbKhK=`çåëìäíáåÖ=ääÅI=OU=pí~íÉ=píêÉÉíI=NSíÜ=cäççêI=_çëíçåI=j^=MONMVI=rp^ChinaMedicalDeviceMarketOverview.CONFIDENTIAL1L.E.K.ConsultingisaleadingglobalstrategyfirmwithastrongfocusonlifesciencesGlobalCapabilityExperience&ExpertiseHistory:Foundedin1983asTheL.E.K.PartnershipinLondonProfessionals:1,000consultingprofessionalsdrawnfromtopschoolsandleadingcorporations;90+partnersLeadership:Highlydifferentiatedfrompeerstrategyconsultanciesin(1)analyticallydrivendecision-making,(2)operationalsupportLifeSciences:Dedicatedbusinessprofessionals,Ph.D.’s,andM.D.’ssupportingastrongglobalLifeSciencespracticeChinamedicaldevicemarketoverviewPresence:ChinaMedicalDeviceMarketOverview.CONFIDENTIAL2LikenearlyallmarketsinChina,medicaldeviceshaveseenexplosivegrowthoverthepastdecade;thistrajectoryisexpectedtocontinueCAGR%(2001-08)26.5Note:*Atpricetodealers,includingbothequipmentandconsumablesSource:GoldmanSachs,UBS,L.E.K.analysis8.87.15.44.12.92.42.01.70246810030220010806070504ChinamedicaldevicemarketHistoricalmarketvalue*(2001-08)BillionsofUSdollarsChinamedicaldevicemarketoverviewCAGR%(2008-12F)100150200250ChinamedicaldevicemarketProjectedmarketvalue*(2008-12F)Indexto100=$8.8B(2008)12F11F10F09F2008Case#125%Case#320%Case#224%AnalystreportsChinaMedicalDeviceMarketOverview.CONFIDENTIAL3Thediagnosticimagingsegmentremainsthelargest,withstronggrowthcomingfromimplantabledevicesSource:EspicomBusinessIntelligence,DeviceLink.comChinamedicaldevicemarketoverviewOther39%20%13%2%27%China’smedicaldevicemarket,byproductsegmentation(2009)Percent8070605090403020101000DiagnosticimagingConsumablesOrthopedicandimplantableproductsDentalproductsCardiovascular-ECG-HeartlungmachinesPulmonary-Incubators-VentilatorsDentalimplantsPacemakersStentsCathetersSyringesX-raymachinesMRIChinaMedicalDeviceMarketOverview.CONFIDENTIAL4DriverImpactongrowthCommentaryChangingpatientpopulationThepatientbaseisexpandingdueto:-anagingpopulation,asthepopulationaged50+isexpectedtoincreasefrom21%in2005to32%in2020-increasingincidence/prevalenceratesbroughtbychanginglifestyles,e.g.,prevalencerateofcancerinurbanChinaincreasedfrom25%to33%since2003AccesstocareAccesstocareinChinaisfueledby:-expandedinsurancecoverage-public&privatehealthcareinvestment-urbanpopulationgrowthEconomicgrowthChinaisoneoftheworld’sfastestgrowingmajoreconomies-ChinahasachievedGDPgrowthof~9%p.a.forthepast20+yearsSource:L.E.K.analysisChinamedicaldevicemarketoverviewUnderlyingmarketgrowthisattributabletoanagingpopulation,increasingratesofdiseaseincidenceandprevalence,andrapidincreasesinwealthChinaMedicalDeviceMarketOverview.CONFIDENTIAL5Manyoftheworld’slargestcompaniesarebuildingasubstantialpresence;therearealsosomeupandcomingChineseplayersRankCompany2008revenue(Worldwide)2008revenue(China)YearofChinaentry1J&JMedical$23.1B$500M19942GEHealthcare$17.4B$700M19915Medtronic$13.5B$300M19896BaxterInternational$12.3B$200M19887PhilipsHealthcare$10.7B$1.1B**Unclear^8Covidien$8.9B$65M*Unclear^10AbbottLaboratories$7.2BUnclear^1995RankCompany2008revenue(US$M)EmployeesLaunchYear1MindrayMedical5475,50019912ShandongWeigao2009,80019883Microport61*65019984YueyueMedical59120019995LepuMedical585001999Note:*2007revenue;**Includesotherkeyemergingmarkets;^Unreportedentrancedate/revenuefromChinaSource:MedicalProductOutsourcing,LEKinterviewsandanalysisSampleofforeign&domesticplayersChinamedicaldevicemarketoverviewChinaMedicalDeviceMarketOverview.CONFIDENTIAL6High-endequipmentismostlyimportedtoChina,whiledomesticmanufacturersproducemostmass-marketequipmentImportsaregrowingslowerthantheoverallmarketasforeignsuppliersareincreasinglyestablishingalocalChinesepresenceGoingforward,theseforeignsuppliersareexpectedtomeetuniquechallenges:-Pricecapsonimportedproducts-Processandtechnologyregulationsonsalesofhigh-endmedicaldevices-Healthcarereformslimitingexpenditureonforeign-produceddevicesHowever,themarketisexpectedtoseegrowingdemandsforhigh-endtechnology-Topqualitytechnologiestodealwith“developednationdiseases”likediabetesandheartdiseaseSource:GeneralAdministrationofCustoms,ChinaNow:MedicalProducts,LEKanalysisChinamedicaldevicemarketoverviewHighervaluedeviceshavehistoricallybeendominatedbyforeignimports,althoughnowthatischangingduetobothmarketandnon-marketforces4.33.83.73.12.54.301234560.20.6Chinamedicaldevicestrade(2003-2008)BillionsofUSdollars5.3MedicaltechnologyDentalsuppliesHealthcareproductsMedicaldressingConsumablesExports8.46.95.34.13.23.61.902468101205060.22.30811.13.107042003ImportsChinesemedicaldeviceimportsaremostlyhigh-valuemedicaltechnologyChinesemedicaldeviceexportsaremostlylow-valuedisposableproductsChinaMedicalDeviceMarketOverview.CONFIDENTIAL7