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European Biomaterials Markets B152-54
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2002 Frost & Sullivan
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Table of Contents
Introducing the Market Engineering Consulting Report
The Market Engineering System
2
Market Engineering Report Elements Identification of Industry Challenges Market Engineering Measurements Measurement Trends Market Engineering Forecasting Market Share Analysis Measurement-Driven Market Engineering Strategy Market Engineering Monitoring Recommendations for Further Research
3 3 3 3 3 4 4 4 4
Strategic Benefits of Market Engineering for Readers of This Report
Top Ten Benefits of a Market Engineering Consulting Report
A Word of Caution
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Chapter 1
Executive Summary
Introduction to the European Absorbable and Erodible Biomaterials Market Introduction to the European Absorbable and Erodible Biomaterials Market
1-1 1-1
Summary of Major Findings Total Forecast Market Growth and Opportunities

Total Forecast Market Trends Technological Trends End-user Trends Key Market Drivers Key Market Restraints
1-2 1-2 1-2 1-2 1-2 1-3 1-3 1-4 1-4 1-4 1-4 1-4 1-5 1-5 1-5 1-6
Analysis by Major Segment

Absorbable and Erodible Wound Closure Biomaterials Market Absorbable and Erodible Orthopaedic Biomaterials Market
Analysis by Geographic Region Competitive Analysis

The Competitive Environment Market Share Analysis
Conclusions
Chapter 2
Industry Challenges and Research Methodology
Identification of Challenges Facing the European Absorbable and Erodible Biomaterials Market Continued Healthcare Budgetary Restraints Pressurise Pricing Strategies Minimally Invasive Surgery: The Surgical Revolution Increased Competitive Nature of the European Absorbable and Erodible Biomaterials Market
2-5 2-1 2-3 2-4
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Requirement to Prove Clinical Efficacy through Technological Assessment and/or Economic Analysis Market Industry Structure Changes Result in Consolidation of Market Leaders Patents and Patent Protection: Scope; Validity and Enforceability Ability to Develop or License and Market New Products or Product Enhancements Increased Development Costs Associated with the Need to Provide Cost-Benefit Analysis Data and Proven Efficacy Organisational Changes Needed to Improve Manufacturing Efficiencies and Lower Costs e-Commerce: The New Business Model
2-7 2-8 2-7 2-5 2-6 2-6 2-6
Time Frame Analysis of Industry Challenges
2-12
Glossary of Terms Definitions

Glossary Abbreviations
2-12 2-12 2-12 2-13
Chapter 3
Absorbable and Erodible Biomaterials Market
Forecasts of the Total Market Market Overview and Definitions
Biomaterials Types of Biomaterials Definition of Absorbable and Erodible Biomaterials Background, Principles and Applications of Absorbable and Erodible Wound Closure Biomaterials Background, Principles and Applications of Absorbable and Erodible Orthopaedic Biomaterials Historical Developments 3-1 3-1 3-1 3-2 3-5 3-5 3-9 3-10 3-23 3-24 3-25 3-26 3-27
Presentation of Strategic Significance of Measurements

Market Size in Dollars Market Size in Units Annual Market Growth Market Growth by Compound Annual Growth Rate
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Average Price Price Range Price Sensitivity Market Saturation Market Age/Product Life Cycle Price-performance Ratio Replacement Rate Market Concentration Number of Competitors Number of Products Degree of Competitiveness Installed Base Number of Customer Sites Degree of Technical Change Market Forecast Market Share Customer Satisfaction Customer Loyalty
3-27 3-28 3-28 3-29 3-30 3-30 3-31 3-32 3-32 3-33 3-33 3-34 3-35 3-36 3-37 3-37 3-39 3-40 3-41 3-42 3-42 3-44 3-46 3-46 3-48 3-49 3-50 3-52
Market Engineering Research Measurement System Market Drivers and Restraints

Market Drivers
Market Forecasts Other Market Trends/Analyses

Trend by Geographic Region Trends by Product Type
Pricing Strategy and Trend Analysis Competitive Structure Market Share Analysis
Forecasts of the Absorbable and Erodible Wound Closure Biomaterials Market Market Overview and Definitions
Absorbable Sutures Tissue Sealants Haemostats Ligating Clips Skin Adhesives and Glues Adhesion Barriers
3-55 3-55 3-55 3-55 3-56 3-56 3-56 3-56
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Market Engineering Research Measurement System Market Drivers

New Targets for Waiting Times Increases Number of Surgical Procedures Performed and Increases Demand for Wound Closure Devices Catgut SuturesCessation of Supply and Consequent Increased Demand for Synthetic Absorbable Sutures New Applications for Absorbable Surgical Wound Closure Products Encourages Market Growth
3-57 3-58
3-58
3-60 3-60 3-64
Market Restraints
Healthcare Reforms and Budgetary Constraints Affect Operating Room Funding and Ration Resources Increased Popularity of Minimally Invasive Surgery Restricts Use of Absorbable and Erodible Wound Closure Biomaterials Competitive Pricing Pressures Restrain Market Growth and Development
3-64
3-65 3-66 3-67 3-69 3-69 3-71 3-71 3-71 3-73 3-73 3-75 3-75 3-75 3-76 3-77
Market Forecasts Other Market and Technology Trends/Analyses

Trends by Geographic Region Technology Trends
Pricing Strategy and Trend Analysis Competitive Structure

Absorbable Surgical Sutures Tissue Sealants Haemostats Ligating Clips Surgical Adhesives and Glues Adhesion Barriers
Market Share Analysis
Forecasts of the Absorbable and Erodible Orthopaedic Biomaterials Market Market Overview and Definitions
Absorbable Fracture Fixation Devices
3-78 3-78 3-78 3-80 3-81
Market Engineering Research Measurement System Market Engineering Revenue Forecasts (1999-2009)
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Market Drivers
Increased Participation in Sports Activities Amongst all Age Groups Provides Significant Growth Opportunities for the Orthopaedics Market Sensitivity Towards Allograft Provokes Interest in Synthetic Bone Graft Substitutes Advantages of Absorbable Products Encourage Rapid Uptake by Surgeons Helping to Develop Market
3-81
3-81 3-82
3-83 3-83
Market Restraints
Requirement to Provide Clinical Evidence to Prove Product Efficacy Restrains Development of the Absorbable and Erodible Orthopaedic Biomaterials Market Domination of Bone Banks Supplying Allograft Hinders Development of Synthetic Bone Graft Substitute Market Relatively High Cost of Orthopaedic Absorbables Compared with Traditional Materials Restrains Market Growth Technical/Medico Problems Associated with Absorbable Medical Devices Restrains Market Development
3-84
3-84
3-84
3-85 3-87 3-89 3-89 3-90 3-90 3-91 3-92 3-92 3-93 3-94 3-95 3-96 3-96 3-97 3-98
Market Forecasts Other Market and Technology Trends/Analyses

Trends by Geographic Region Technology Trends Hybridised polymers as Biobioactive Bone Substitutes Combinatorial and Supra Molecular Chemistry Intelligent Materials Biodegradeable Polymers as Scaffolds for Tissue Engineering

Sulzer Medica (Centerpulse) Smith and Nephew Ethicon, Inc., (Johnson & Johnson) Biomet Merck
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Chapter 4
Market Engineering Research for the German Absorbable and Erodible Biomaterials Market
Healthcare Finance and Expenditure Health Care Structure and Organisation Reimbursement of Hospital Services 4-1 4-1 4-1 4-2 4-4 4-7 4-8

Growth in Sports Injuries and Treatments Stimulates Development of Absorbable and Erodible Biomaterials in Germany New, Innovative Product Introductions and New Product Applications Stimulate Market Development Increased Reporting of Low Back Problems Stimulates Bone Graft Substitutes Market Increased Product Awareness through Company Originated Product Training and Education Stimulates Market Development
4-8
4-9 4-9
4-10 4-10 4-10 4-11 4-12 4-13 4-13 4-14 4-15 4-16 4-17 4-17 4-18
Market Restraints
Healthcare Reforms and Budgetary Restraints Market Development Minimally Invasive Surgery: "A Mixed Blessing" for Absorbable and Erodible Biomaterials
Market Forecasts Market Trends/Analyses

Trends by Product Type Pricing Strategy and Trend Analysis
Competitive Structure
Aesculap AG & CO.KG Smith and Nephew Linvatec
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Forecasts of the Absorbable and Erodible Wound Closure Biomaterials Market Market Drivers
Recent Ban on Catgut Sutures in Germany Stimulates Growth and Development of Synthetic Absorbable Surgical Sutures Dramatic Increase in Cosmetic and Reconstruction Plastic Surgery Stimulates Growth in Market Aesthetic (Cosmetic) Surgery Reconstruction Plastic Surgery The Paul-Ehrlich-Institut's Approval of 3 Tissue Sealants in Germany
4-20 4-20
4-20 4-20 4-21 4-21 4-21 4-22 4-23 4-23 4-24 4-25 4-25 4-26 4-27 4-30
Market Restraints
Increased Popularity of Minimally Invasive Surgery Restains Market Development Healthcare Reforms and Budgetary Restraints Affect Market Development Current Procedural Reimbursement Schemes Inhibit Introduction of New Technologies
Market Forecasts Pricing Strategy and Trend Analysis Competitive Structure

Absorbable Surgical Sutures
Forecasts of the Absorbable and Erodible Orthopaedic Biomaterials Market Market Engineering Revenue Forecasts (1999-2009) Market Drivers
Market Growth Due to Increase in Sports Injuries Bioabsorbable or Biodegradeable Fixation Systems in (CranioMaxilloFacial) CMF Surgery Market Development Stimulate
4-31 4-31 4-32 4-32
4-32 4-33
Market Restraints
Relatively High Cost of Absorbable Biomaterials Compared with Traditional Materials Restrains Market Development Conservative Attitude of Some Older Surgeons Limits Acceptance of Innovation Hospital Expenditure Capped as a Result of Healthcare Reforms Restraining Market Growth
4-33 4-33 4-34 4-34 4-35 4-35 4-37
Market Forecasts Pricing Strategy and Trend Analysis Competitive Structure Market Share Analysis
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Chapter 5
Market Engineering Research for the French Absorbable and Erodible Biomaterials Market
Forecasts of the Total Market Market Overview and Definitions Market Engineering Research Measurement System Market Engineering Revenue Forecasts (1999-2009) Market Drivers
Aging Population and Age Related Orthopaedic Problems Increases Demand for Absorbable and Erodible Biomaterials Role of L'ANAES (L'Agence Nationale d'Accrditation et d'valuation en Sant) Enhance Growth of Accredited Products 5-7 5-7 5-6 5-1 5-1 5-5 5-6 5-6
Market Restraints
Budgetary Restraints and Les Agencies Rgionales de Hospitalisation (ARH) Reduce Potential for Absorbable and Erodible Wound Closure Biomaterials Fixed Tarif System for Orthopaedic Products using T.I.P.S. (Tarif Interministriel des Prestations Sanitaires) Restrains Absorbable and Erodible Wound Closure Biomaterials Purchasing Agencies Restrain Product Pricing and Market Development for Absorbable and Erodible Wound Closure Biomaterials Hospital Closure Programme Causes Potential Reduction of Absorbable and Erodible Wound Closure Biomaterials Increased Competitive Activity Influences Market Value Growth
5-8
5-8
5-10
5-11 5-11 5-12 5-13 5-13 5-15 5-16 5-17
Market Forecasts Market and Technology Trends/Analyses

Trends by Product Type
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New Cosmetic and Plastic Reconstruction Surgical Applications for Absorbable Sutures Encourages Market Growth Market Developments Toward New and Innovative Skin Closure Products Stimulates Market
5-19 5-19
5-19 5-19 5-20
Market Restraints
Purchasing Agencies Restrain Product Pricing and Market Development for Absorbable and Erodible Wound Closure Biomaterials Increasingly Competitive Market Reduces Product Pricing
5-20 5-21 5-21 5-22 5-23 5-24 5-24 5-26 5-26 5-26 5-28 5-28

Forecasts of the Absorbable and Erodible Orthopaedic Biomaterials Market Market Drivers
Minimally Invasive Techniques used for Bone Graft Substitute Products Stimulates Market Development Use of Synthetic Bone Substitutes in Spinal Surgery Helps Develop Market Proliferation and Increase in Sports Injuries Helps Encourage Market Development Sensitivity Towards Allograft Provokes Interest in Synthetic Substitutes
5-30 5-30
5-30 5-31 5-31 5-31 5-31 5-32 5-32 5-33 5-33 5-34 5-35 5-37
Market Restraints
Technological Problems Associated with Absorption of Bioabsorbables Restrain Market Development Reimbursement Issues Influence Market Development Purchasing Agencies Restrain Product Pricing and Consequently Market Development
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Chapter 6
Market Engineering Research for the UK Absorbable and Erodible Biomaterials Market
The United Kingdom NHS Trusts Primary Care Hospital Services Public Sector (National Health Service) England Wales Scotland Northen Ireland Private Sector Healthcare Reforms and Developments in Healthcare New NHS Building Programme Capital Equipment Investment Programme Other Investment Programmes Creation of New Local Surgeries Purchases of New Equipment 6-1 6-1 6-1 6-2 6-2 6-3 6-3 6-3 6-4 6-4 6-4 6-4 6-5 6-5 6-6 6-6 6-7 6-7 6-8 6-9

Fast Track Surgery Centres to Open by End of 2002 Stimulates Growth in Absorbable and Erodible Biomaterials The "NHS Plan" and Improving Health Services: A Recipe for Stimulating the Use of Absorbable and Erodible Biomaterials Supplier Lead Education and Training Programs Help Stimulate Market for Absorbable and Erodible Biomaterials in the UK
6-9
6-10
6-10 6-11 6-11
Market Restraints
Effect of Financial Restraints and Cost Containment Initiatives and NHS Procurement UK Surgeons Traditionally Reluctant or Slow to Adopt New Technologies and/or New Techniques Affects Market Growth
6-12
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Market Forecasts Market Trends/Analyses

6-12 6-14 6-14 6-16 6-17 6-18
Coronary Heart Disease (CHD) and NHS Plans to Reduce Deaths Helps Increase Demand for Absorbable Wound Closure Devices Increased Demand for Cosmetic and Plastic Reconstructive Surgery in the UK Stimulates Biomaterials Market Catgut Sutures - Cessation of Supply
6-20 6-20
6-21
6-21 6-22 6-23 6-23
Market Restraints
Highest Prices for Absorbable Sutures in UK may Elicit Price Review by NHS Purchasing Agency Increased Popularity of Minimally Invasive Surgery Restricts Use of Absorbable and Erodible Wound Closure Biomaterials Market Forecasts
6-23 6-24 6-25 6-26 6-27 6-29 6-30 6-30 6-31 6-31 6-32

PPL Therapeutics

Absorbable Surgical Sutures Tissue Sealants Haemostats Surgical Adhesives and Glues Adhesion Barriers
Forecasts of the Absorbable and Erodible Orthopaedic Biomaterials Market Market Engineering Revenue Forecasts (1999-2009) Market Drivers
Growth in Sports Injuries Stimulates Market for Absorbable and Erodible Orthopaedic Biomaterials Technological Advances and Market Introduction of New and Innovative Stimulates Market Development Advantages of Synthetic Bone Substitutes Helps Stimulate Market Development
6-32 6-32 6-32
6-33
6-34 6-35
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Market Restraints
Cautious Nature of British Orthopaedics Surgeons Restrain Acceptance of Absorbable and Erodible Absorbables in Orthopaedics Financial Restraints Favour Continued use of Autologous Bone Grafting End-user Requirements Command Need for Long-term Evidence
6-35
6-36 6-36 6-36 6-37 6-38 6-38 6-38 6-38 6-40 6-40
Market Forecasts Pricing Strategy and Trend Analysis

Absorbable Fixation Devices Synthetic Bone Graft Substitutes
Medistox Surgical Limited
Chapter 7
Market Engineering Research for the Italian Absorbable and Erodible Biomaterials Market
National Level Regional Level Local Level 7-1 7-1 7-2 7-2 7-2 7-6 7-7

Growth in Sports Participation Resulting in Higher Number of Sports Related Injuries Helps Stimulates the Absorbable Biomaterials Market Increased Demand for Surgical Intervention for Low Back Problems Stimulates Development of Synthetic Bone Graft Substitute Market Integration of Private Beds into Public Hospitals Help Re-stimulate Orthopaedic Market
7-7
7-7 7-8 7-8 7-8 7-9
Market Restraints
Healthcare Reforms, the SSN and the Quest for Accountability Inhibits Market Growth Revenues Suffer as a Result of Late or Delayed Payments
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7-9 7-11 7-11 7-12 7-14 7-15
Progress Towards Reducing Waiting Times for Surgery Helps Stimulate Market Growth Continued Conversion of Catgut Suture Accounts to Synthetic Absorbable Sutures Stimulates Surgical Suture Market
7-18 7-18 7-18
7-19 7-19 7-19
Market Restraints
Hospital Budgetary Restraints and Cost Containment Measures Slow Market Development and Growth Increased Popularity of Minimally Invasive Surgery Restricts Use of Absorbable and Erodible Wound Closure Biomaterials
7-20 7-20 7-21 7-22 7-23 7-23 7-24 7-24 7-24 7-24 7-25

Growth in Sports Injuries and Treatments Major Driver for Shoulder and Knee Joint Surgey in Italy Helps Market Development Marked Increase in Orthopaedic Procedures Boosts Demand for Synthetic Bone Grafting Substitutes Recognition of Advantages of Bioabsorbable Materials for Internal Fracture Fixation Stimulates Market Development
7-27 7-27
7-27 7-28
7-28
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Market Restraints
Concerns Over Efficacy, Strength and Durability of Bioabsorbables Hinders Market Development Regional Variation in Healthcare Provision Limits Use in Some Areas Differential Product Pricing between Metallic Implants and Absorbables and Impact on Hospital Budgets
7-28 7-29 7-29
7-30 7-30 7-31 7-31 7-34
Chapter 8
Market Engineering Research for the Spanish Absorbable and Erodible Biomaterials Market
Political Structure Role of Government (The Ministry of Health) INSALUD Devolution of the Healthcare Services Designed to Help Eliminate Regional Discrepancies Private Health Insurance Hospital Services The Sistema Nacional de la Salud, (SNS) Inter-territorial Council 8-1 8-1 8-1 8-1 8-2 8-2 8-4 8-4 8-4 8-5 8-6

Elimination of discrepancies of Regional Funding Helps Stimulate Growth and Development of Absorbable and Erodible Biomaterials in Remote Regions Growth in Private Sector Helps Stimulate Market Development of Absorbable and Erodible Biomaterials Healthcare Expenditure to Meet the Growth in the Economy Stimulates Absorbable and Erodible Biomaterials Market Comprehensive Drive to Reduce National Health Waiting Lists in Spain Help Drive the Absorbable and Erodible Biomaterials Market Improved Hospital and Healthcare Infrastructure in Spain Helps Develop Absorbable and Erodible Biomaterials Market
8-6 8-7
8-7
8-7
8-8
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Market Restraints
Budgetary Constraints Restrain Development of Absorbable and Erodible Biomaterials Healthcare Reforms Influence Funding for Absorbable and Erodible Biomaterials Delayed or Late Payments Affect Absorbable and Erodible Biomaterial Suppliers
8-8 8-9 8-9 8-9 8-10 8-11 8-11 8-13 8-14 8-15 8-15 8-15 8-16 8-16


Linvatec Spain Sofamor Iberica SA Smith & Nephew S.A. STRATEC Medical S.A.
Conversion of Catgut Suture Accounts to Synthetic Absorbable Sutures Stimulates Surgical Suture Market Increased Demand for Cosmetic and Plastic Reconstructive Surgery in Spain Stimulates Biomaterials Market
8-18 8-18
8-18
8-18 8-19
Market Restraints
Increased Popularity of Minimally Invasive Surgery Restricts Use of Absorbable and Erodible Wound Closure Biomaterials Purchasing Agencies Restrain Product Pricing and Market Development for Absorbable and Erodible Wound Closure Biomaterials
8-19
8-19 8-20 8-20 8-21 8-22 8-22 8-22 8-23 8-23 8-23

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8-24
Growth in Sports Injuries and Treatments Help Increase Demand for Absorbable and Erodible Biomaterials Increasing Number of Orthopaedic Surgeons Boosts Potential for Synthetic Bone Graft Substitutes
8-25 8-25
8-26 8-26 8-26 8-27 8-27 8-27 8-28 8-29 8-30 8-30 8-30
Market Restraints
Disproportionate Provision of Health Care Limits Use in Some Regions High Donation Rates Favours Use of Allograft Tissue for Bone Grafting

Major International Suppliers International Suppliers
Chapter 9
Market Engineering Research for the Scandinavian Absorbable and Erodible Biomaterials Market
Forecasts of the Total Market Market Overview and Definitions Market Engineering Research Measurement System Market Drivers
Measures to Reduce Waiting Times for Elective Surgery throughout Scandinavia Helps Stimulate the Absorbable and Erodible Biomaterials Market Increased Participation in Winter Sports with a Corresponding Increase in Winter Sports Injuries 9-6 9-7 9-9 9-1 9-1 9-5 9-6
Market Restraints
Movement towards Minimal Access Reduces Potential for Absorbable and Erodible Wound Closure Products Requirement to Prove Clinical Efficacy through Technological Assessment and/or Economic Analysis Restrains Market Development in Scandinavia
9-9
9-10
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9-11 9-13 9-13 9-15 9-15 9-16
Forecasts of the Absorbable and Erodible Wound Closure Biomaterials Market Market Engineering Revenue Forecasts (1999-2009) Market Drivers
Initiatives to Reduce Waiting Lists Helps Stimulate Growth in Absorbable and Erodible Wound Closure Biomaterials Recognition of Adhesions as a Major Clinical Problem Helps Stimulate Interest in Adhesion Barriers
9-19 9-19 9-19
9-19
9-20 9-21
Market Restraints
Advent of Minimally Invasive Surgical Techniques Restrains Market Development of Absorbable and Erodible Wound Closure Biomaterials Increased Popularity of High-Tech Alternatives to Traditional Wound Closure Methods
9-22 9-22 9-23 9-24 9-24 9-25 9-26 9-26 9-26 9-27 9-27 9-27

Increased Participation in Sports Activity amongst the General Population Stimulates Growth of Absorbable and Erodible Orthopaedic Biomaterials Large Elderly Population Enhances Need for Bone Graft Substitutes
9-29 9-29
9-30 9-30
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Market Restraints
Requirement to Provide Clinical Evidence to Prove Product Efficacy Restrains Development of the Absorbable and Erodible Orthopaedic Biomaterials Market Relatively High Cost of Synthetic Bone Graft Substitutes Hinders Market Development The Need to Target Scandinavian Countries Separately Requires Larger Marketing Efforts Domination of Bone Banks Supplying Allograft Hinders Development of Synthetic Bone Graft Substitute Market
9-31
9-31 9-32 9-32
9-32 9-33 9-34 9-35 9-36 9-37 9-37 9-37 9-37 9-38 9-38 9-38 9-38 9-38 9-40 9-40 9-41

Bionx Implants, Inc Meniscus Arrows PLLA Tacks PLLA Bankart Tacks Contour Labral Nail SmartNail SmartScrew ACL Craniofacial Fixation Urology Stents BioCuff", Bioresorbable Screw and Spiked Washer Implant Inion Ltd Artimplant
Chapter 1 0
Market Engineering Research for the Benelux Absorbable and Erodible Biomaterials Market
Belgium The Netherlands Public and Private Health Insurance The First Compartment The Second Compartment Third Compartment Proposed Reforms to the Dutch Health Care System 10-1 10-1 10-1 10-2 10-2 10-3 10-4 10-5 10-6
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Direct Purchasing in The Netherlands Provides Better Market Access for Manufacturers of Absorbable and Erodible Biomaterials Growth in Sports Injuries Stimulates Market for Absorbable and Erodible Biomaterials Evidence Based Outcomes Key to Market Success Aging Population and Age Related Orthopaedic Back Problems Increase Demand for Absorbable and Erodible Biomaterials Applications of Absorbable and Erodible Biomaterials in Tissue Engineering Techniques
10-7 10-8
10-8 10-9 10-9
10-9 10-10 10-11
Market Restraints
Dutch Waiting Times for Surgical Procedures Increasing Reducing Market Potential for Absorbable and Erodible Biomaterials Financial Restraints Curb Expenditure on Absorbable and Erodible Biomaterials Reimbursement System In Belgium Restrains Product Pricing
10-11 10-12 10-12 10-13 10-15 10-15 10-17 10-17 10-17 10-18 10-19 10-19 10-19 10-19 10-20 10-20 10-20

Pricing Strategy and Trend Analysis

The Netherlands Belgium
B. Braun Sales Organisation Linvatec Sales Organisation Smith and Nephew Sales Organisation
Development of the Existing Absorbable Surgical Sutures Through Growth in Different Surgical Applications Growth in Absorbable and Erodible Wound Closure Biomaterials Market through Extended Applications of Tissue Sealants (Tissucol)
10-22 10-22
10-22
10-22
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Market Restraints
Advent of Minimally Invasive Surgical Techniques Restrains Market Development of Absorbable and Erodible Wound Closure Biomaterials Lack of Incentive or Initiatives in The Netherlands to Reduce Waiting Lists
10-23
10-23 10-24 10-24 10-25 10-26 10-27 10-27 10-27 10-27 10-27 10-28 10-28 10-29

Absorbable Surgical Sutures Tissue Sealants Haemostats Ligating Clips Surgical Adhesives and Glues Adhesion Barriers Seprafilm cardiovascular
Technological Advances and Market Introduction of New and Innovative Stimulates Market Development Advantages of Synthetic Bone Substitutes Helps Stimulate Market Development Technology-Driven Market Fosters Growth in Benelux
10-30 10-30
10-31 10-31 10-32 10-32
Market Restraints
Domination of Bone Banks Supplying Allograft Hinders Development of Synthetic Bone Graft Substitute Market Requirement to Provide Clinical Evidence to Prove Product Efficacy Restrains Development of the Absorbable and Erodible Orthopaedic Biomaterials Market
10-32
10-33 10-33 10-34 10-34 10-36
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Chapter 1 1
Market Engineering Strategy
What Is Market Engineering Strategy? How to Improve the Market Engineering Strategy Development Process
Measurements That Address Challenges to the Industry Goals Based on Market Measurements Strategy Segmentation System 11-1 11-1 11-1 11-2 11-2
Market Engineering Strategic Recommendations Strategies Based on Technology and Strategic Alternatives
Market Evaluation
11-3 11-3 11-3 11-4 11-5 11-6
Strategies Based on Mergers and Acquisitions Strategies Based on Alliances and Joint Ventures Strategies Based on Organisational Re-Engineering
Strategies Based on Competitive Advantage Service Differentiation Strategies Based on Product Development Product Feature Design strategies Conformity
Manufacturing
11-7 11-7 11-8 11-8 11-8 11-8 11-9 11-10 11-10 11-11 11-11 11-11 11-12 11-12 11-12 11-12
Market Strategies for Leading Suppliers Market Strategies for New Entrants Market Entry Timing Geographic Strategy Target Customers Frost & Sullivan's Strategic Recommendations for Further Research Recommendations for the Marketing Department
Market Engineering Creative Market Segmentation Analysis Market Analysis by Geographic Region
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Distribution Channel Analysis End-user Demand Analysis End-user Demographic Analysis Competitive End-user Analysis Analysis of Pricing Trends Departmental Budget Monitoring Marketing Audit
11-13 11-13 11-13 11-13 11-14 11-14 11-14 11-15 11-15 11-15 11-15 11-16 11-16 11-16 11-16 11-17 11-17 11-17 11-17 11-18 11-18 11-18 11-19 11-19 11-19 11-19 11-19
Recommendations for the Sales Department

Customer Surveys Competitive Sales Strategy Analysis Annual Competitive Training Seminars Major Account Development Analysis Measuring of Lead Generation Process Customer Database Audit Customer Database Enhancement Customer Database Development
Recommendations for the Product Development Department

New Technology Evaluation Analysis of New Product Potential Evaluation of New Product Launches Monitoring of Competitor Research and Development Monitoring of Industry Product Specifications Compilation and Analysis of Industry Product Literature
Recommendations for Corporate Management and Business Development

Competitive Benchmarking Acquisition Analysis Implementation of Continuous Improvement Programme
Chapter 1 2
Market Engineering Supplement
Frost & Sullivan's 12-Step Market Engineering Research Methodology
12-1
Market Engineering Forecasting Methodology Overview

Market Engineering Research Process Completed Measurements and Challenges Analysed over Time
12-11 12-11 12-12 12-12
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Identification of Market Drivers and Restraints Expert-Opinion Integration with Analyst Team Forecasts Calculated Delphi Technique Integration When Needed Quality Control Within Research Department
12-12 12-12 12-12 12-13 12-13 12-13 12-14 12-15
Strategic Significance of the Market Engineering Forecast Judging Credibility and Accuracy of Market Engineering Forecasts Forecast Assumptions
Strategic Significance of Market Engineering Measurements Presentation of Strategic Significance of Measurements

Market Size in Dollars Market Size in Units Annual Market Growth Market Growth by Compound Annual Growth Rate Average Price Price Range Price Sensitivity Market Saturation Market Age/Product Life Cycle Price-Performance Ratio Replacement Rate Market Concentration Number of Competitors Number of Products Degree of Competitiveness Installed Base Number of Customer Sites Degree of Technical Change Market Forecast Market Share Customer Satisfaction Customer Loyalty
12-16 12-16 12-16 12-17 12-18 12-19 12-19 12-20 12-20 12-21 12-22 12-22 12-23 12-24 12-24 12-25 12-25 12-26 12-27 12-27 12-28 12-29 12-31 12-31
Market Engineering Planning Integrating Market Engineering into the Business Planning Process Current Company Market Position
12-32 12-32 12-33
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Desired Market Position: Goal Setting Defining the Strategy Developing the Action Plan Using Market Engineering Planning to Support the Business Planning Process How to Improve the Market Engineering Strategy Development Process How to Improve the Market Engineering Strategy Development Process Measurements That Address Challenges to the Industry Measurements That Show Trends Goals Based on Market Measurements Strategy Segmentation System
12-33 12-33 12-33 12-33 12-34 12-35 12-35 12-35 12-35 12-36
Market Engineering Implementation Introduction and Summary How to Implement Market Engineering in a Company Committing Top Management to Plan Implementation Creating the Team Training the Team Keeping the Team Involved and Informed Team Agreement and Commitment Incentive Systems to Drive Progress Team-Building Skills Making Full Use of Communication Systems Using the Market Engineering Navigational System Creating and Using a Feedback Loop How to Make the Most of This Market Engineering Report Top Ten Ways To Maximise the Value of this Report Twelve Steps to SuccessThe Market Engineering Task Force
Market Engineering Task Force RetreatSelling the Market Engineering Concept
12-37 12-37 12-37 12-38 12-38 12-39 12-39 12-39 12-39 12-39 12-40 12-40 12-40 12-40 12-41 12-41 12-42
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Market Engineering Monitoring The Purpose of Market Engineering Monitoring How to Design a Successful Monitoring Programme Top Ten Critical Elements of a Market Engineering Programme
12-45 12-45 12-45 12-45
Frost & Sullivan's Strategic Recommendations for Further Research Recommendations for the Marketing Department Recommendations for the Sales Department Recommendations for the Product Development Department Recommendations for Corporate Management and Business Development
12-46 12-47 12-49 12-51 12-53
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List of Figures
Chapter 2
2-1 Absorbable and Erodible Biomaterials Market: Top Ten Industry Challenges Ranked by Priority (Europe), 2001 2-2 Absorbable and Erodible Biomaterials Market: Impact of Top Ten Industry Challenges (Europe), 2001 2-3 Absorbable and Erodible Biomaterials Market: Range of Product Areas (Europe), 2001 2-4 Absorbable and Erodible Biomaterials Market: Currency Exchange Rates (Europe), 2001
2-12 2-9 2-2 2-2
Chapter 3
3-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Europe), 2003-2009 3-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Europe), 2003-2009 3-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Europe), 1999-2009 3-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Geographic Region (Europe), 1999-2009
3-46 3-44 3-43 3-42
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3-5
Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Europe), 1999-2009
3-48
3-6
Absorbable and Erodible Biomaterials Market: Competitive Structure (Europe), 2002

3-50
3-7
Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Europe), 2002-2003
3-53
3-8
Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Europe), 2003-2009
3-58
3-9
Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Europe), 2003-2009
3-64
3-10 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Europe), 1999-2009 3-11 Absorbable and Erodible Wound Closure Biomaterials Market: Percent of Revenues by Geographic Region (Europe), 1999-2009 3-12 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Europe), 2002 3-13 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Europe), 2002-2003 3-14 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Europe), 2003-2009 3-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Europe), 2003-2009 3-16 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Europe), 1999-2009 3-17 Absorbable and Erodible Orthopaedic Biomaterials Market: Percent of Revenues by Geographic Region (Europe), 1999-2009 3-18 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (Europe), 2002 3-19 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Eurpoe), 2002
3-98 3-94 3-89 3-87 3-83 3-81 3-77 3-71 3-69 3-67
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Chapter 4
4-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Germany), 2003-2009 4-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Germany), 2003-2009 4-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Germany), 1999-2009 4-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Germany), 1999-2009 4-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (Germany), 2002 4-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Germany), 2002-2003 4-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Germany), 2003-2009 4-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Germany), 2003-2009 4-9 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Germany), 1999-2009 4-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Germany), 2002 4-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Germany), 2002-2003 4-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Germany), 2003-2009
4-32 4-30 4-26 4-25 4-22 4-20 4-18 4-15 4-13 4-12 4-10 4-8
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4-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Germany), 2003-2009 4-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Germany), 1999-2009 4-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (Germany), 2002 4-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Germany), 2002-2003
4-37 4-36 4-34 4-33
Chapter 5
5-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (France), 2003-2009 5-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (France), 2003-2009 5-3 Absorbable and Erodible Biomaterials Market: Market Revenue Forecasts (France), 1999-2009 5-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (France), 1999-2009 5-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (France), 2002 5-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (France), 2002-2003 5-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (France), 2003-2009 5-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (France), 2003-2009
5-20 5-19 5-17 5-16 5-14 5-12 5-7 5-6
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5-9
Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (France), 1999-2009
5-21
5-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (France), 2002 5-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (France), 2002-2003 5-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (France), 2003-2009 5-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (France), 2003-2009 5-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (France), 1999-2009 5-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (France), 2002 5-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (France), 2002-2003
5-37 5-35 5-34 5-31 5-30 5-28 5-23
Chapter 6
6-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (United Kingdom), 2003-2009 6-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (United Kingdom), 2003-2009 6-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (United Kingdom), 1999-2009 6-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (United Kingdom), 1999-2009
6-14 6-12 6-11 6-9
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6-5
Absorbable and Erodible Biomaterials Market: Competitive Structure (United Kingdom), 2002
6-17
6-6
Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (United Kingdom), 2002-2003
6-19
6-7
Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (United Kingdom), 2003-2009
6-20
6-8
Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (United Kingdom), 2003-2009
6-23
6-9
Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (United Kingdom), 1999-2009
6-24
6-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (United Kingdom), 2002 6-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (United Kingdom), 2002-2003 6-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (United Kingdom), 2003-2009 6-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (United Kingdom), 2003-2009 6-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (United Kingdom), 1999-2009 6-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (United Kingdom), 2002 6-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (United Kingdom), 2002-2003
6-41 6-39 6-37 6-35 6-32 6-29 6-26
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Chapter 7
7-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Italy), 2003-2009 7-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Italy), 2003-2009 7-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Italy), 1999-2009 7-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Italy), 1999-2009 7-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (Italy), 2002 7-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Italy), 2002-2003 7-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Italy), 2003-2009 7-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Italy), 2003-2009 7-9 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Italy), 1999-2009 7-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Italy), 2002 7-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Italy), 2002-2003 7-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Italy), 2003-2009
7-27 7-25 7-22 7-20 7-19 7-18 7-16 7-14 7-11 7-9 7-8 7-7
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7-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Italy), 2003-2009 7-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Italy), 1999-2009 7-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (Italy), 2002 7-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Italy), 2002-2003
7-34 7-32 7-30 7-28
Chapter 8
8-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Spain), 2003-2009 8-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Spain), 2003-2009 8-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Spain), 1999-2009 8-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Spain), 1999-2009 8-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (Spain), 2002 8-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Spain), 2002-2003 8-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Spain), 2003-2009 8-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Spain), 2003-2009
8-19 8-18 8-16 8-14 8-12 8-10 8-8 8-6
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8-9
Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Spain), 1999-2009
8-20
8-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Spain), 2002 8-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Spain), 2002-2003 8-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Spain), 2003-2009 8-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Spain), 2003-2009 8-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Spain), 1999-2009 8-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (Spain), 2002 8-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Spain), 2002-2003
8-31 8-29 8-28 8-26 8-25 8-24 8-21
Chapter 9
9-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Scandinavia), 2003-2009 9-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Scandinavia), 2003-2009 9-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Scandinavia), 1999-2009 9-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Scandinavia), 1999-2009
9-13 9-11 9-9 9-6
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9-5
Absorbable and Erodible Biomaterials Market: Competitive Structure (Scandinavia), 2002

9-16
9-6
Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Scandinavia), 2002-2003
9-17
9-7
Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Scandinavia), 2003-2009
9-19
9-8
Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Scandinavia), 2003-2009
9-21
9-9
Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Scandinavia), 1999-2009
9-23
9-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Scandinavia), 2002 9-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Scandinavia), 2002-2003 9-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Scandinavia), 2003-2009 9-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Scandinavia), 2003-2009 9-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Scandinavia), 1999-2009 9-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (Scandinavia), 2002 9-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Scandinavia), 2002-2003
9-41 9-35 9-34 9-31 9-29 9-28 9-25
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Chapter 1 0
10-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Benelux), 2003-2009 10-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Benelux), 2003-2009 10-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Benelux), 1999-2009 10-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Benelux), 1999-2009 10-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (Benelux), 2002 10-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Benelux), 2002-2003 10-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Benelux), 2003-2009 10-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Benelux), 2003-2009 10-9 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Benelux), 1999-2009 10-10Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Benelux), 2002 10-11Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Benelux), 2002-2003 10-12Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Benelux), 2003-2009
10-30 10-29 10-26 10-24 10-23 10-22 10-20 10-18 10-15 10-13 10-11 10-8
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10-13Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Benelux), 2003-2009 10-14Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Benelux), 1999-2009 10-15Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (Benelux), 2002 10-16Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Benelux), 2002-2003
10-36 10-35 10-33 10-32
Chapter 1 2
12-1 Market Engineering Supplement: Seven-Step Market Engineering Forecast Methodology, 2001 12-2 Market Engineering Supplement: Strategic Significance of Market Engineering Forecast, 2001 12-3 Market Engineering Supplement: Ten Most Important Market Elements to Integrate into Business Planning, 2001 12-4 Market Engineering Supplement: Ten-Point Checklist of Market Engineering Implementation, 2001 12-5 Market Engineering Supplement: Ten Ways to Maximise the Value of This Report, 2001 12-6 Market Engineering Supplement: Key Elements to include in the Market Monitoring Programme, 2001
12-46 12-41 12-38 12-34 12-13 12-12
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List of Charts
Chapter 3
3.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (Europe), 2002 3.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Europe), 1999-2009 3.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Geographic Region (Europe), 1999-2009 3.4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Europe), 1999-2009 3.5 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Europe), 2003 3.6 European Absorbable and Erodible Wound Closure Biomaterials Market: Market Engineering Measurements (Europe), 2002 3.7 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Europe), 1999-2009 3.8 Absorbable and Erodible Wound Closure Biomaterials Market: Percent of Revenues by Geographic Region (Europe), 1999-2009
3-70 3-68 3-57 3-54 3-49 3-47 3-45 3-41
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3.9
Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Europe), 2003
3-77
3.10 Absorbable and Erodible Orthopaedics Biomaterials Market: Market Engineering Measurements (Europe), 2002 3.11 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Europe), 1999-2009 3.12 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Eurpoe), 2003
3-98 3-88 3-80
Chapter 4
4.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (Germany), 2002 4.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Germany), 1999-2009 4.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Germany), 1999-2009 4.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Germany), 2003 4.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Germany), 2003 4.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (Germany), 2003
4-38 4-30 4-19 4-14 4-12 4-7
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Chapter 5
5.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (France), 2002 5.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (France), 1999-2009 5.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (France), 1999-2009 5.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (France), 2003 5.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (France), 2003 5.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (France), 2003
5-38 5-29 5-18 5-14 5-12 5-5
Chapter 6
6.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (United Kingdom), 2002 6.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (United Kingdom), 1999-2009
6-13 6-8
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6.3
Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (United Kingdom), 1999-2009
6-15
6.4
Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (United Kingdom), 2003
6-19
6.5
Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (United Kingdom), 2003
6-29
6.6
Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (United Kingdom), 2003
6-42
Chapter 7
7.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (Italy), 2002 7.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Italy), 1999-2009 7.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Italy), 1999-2009 7.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Italy), 2003 7.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Italy), 2003 7.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (Italy), 2003
7-35 7-26 7-17 7-12 7-10 7-6
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Chapter 8
8.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (Spain), 2002 8.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Spain), 1999-2009 8.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Spain), 1999-2009 8.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Spain), 2003 8.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Spain), 2003 8.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (Spain), 2003
8-31 8-24 8-17 8-13 8-10 8-5
Chapter 9
9.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (Scandinavia), 2002 9.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Scandinavia), 1999-2009
9-12 9-5
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9.3
Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Scandinavia), 1999-2009
9-14
9.4
Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Scandinavia), 2003
9-18
9.5
Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Scandinavia), 2003
9-28
9.6
Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (Scandinavia), 2003
9-42
Chapter 1 0
10.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (Benelux), 2002 10.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Benelux), 1999-2009 10.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Benelux), 1999-2009 10.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Benelux), 2003 10.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Benelux), 2003 10.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (Benelux), 2003
10-37 10-29 10-21 10-16 10-14 10-7
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Introducing the Market Engineering Consulting Report

Frost & Sullivan's Market Engineering Consulting Report takes a unique approach to market research. It is based on the Market Engineering systema market measurement system based on engineering principles, designed to lead to market success for the companies that use it. This system is a continuous-loop improvement programme developed through years of market research and consulting experience. It has solved business problems and created strategies for Frost & Sullivan clients worldwide. This system is based directly on the realities and challenges facing high-technology business rather than on theory derived at a university. Chart 1 illustrates the Market Engineering system. Chart 1 The Market Engineering System
Source: Frost & Sullivan
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Th e
Market
Engineering
System
Frost & Sullivan's unique and proprietary marketing consulting system is a six-phase research programme: 1. Identify specific challenges 2. Measure precisely the challenges 3. Create the strategies for reaching company goals 4. Create the market plan 5. Implement the market plan and strategies 6. Monitor the market, market challenges, and company status against company goals In Phase 1, the specific challenges to the industry are identified. These include opportunities, problems, and threats in the industry. Once the challenges are identified, they are used as the basis for designing the specific steps of the Market Engineering system and provide a common theme for the entire Market Engineering Consulting Report. In Phase 2, the specific attributes of the challenges are measured. This disciplined market research measurement programme precisely identifies the location of the market and the attributes of the challenges. During this phase, Frost & Sullivan:

Determines the measurements Selects the measurement instruments Designs the market research survey instruments
In Phase 3, this disciplined research process identifies, through precise market measurements, the exact market status, the market participants, and the challenges facing the market. The navigational information acquired in the market research phase is then used to identify company goals and develop strategies for attaining those goals. In Phase 4, the client implements the strategy. Doing so entails creating a market plan that specifies the tactical steps for implementing the strategy. The marketing plan must be based on measurements, because a company can manage only what it can measure. In Phase 5, the system is implemented. The plans and strategies are communicated to the staff and are put into practice throughout the company. In Phase 6a continuous improvement processthe market and its challenges are monitored, and the company's market position is observed and measured against the company's goals. Changes in status are monitored by frequent market measurements. This process
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checks the accuracy and efficiency of the previous phases and allows the company to improve the system based on its experience. Frost & Sullivan's publication entitled Market Engineeringa 500-page training manual based on actual case historiesprovides more information on the Market Engineering consulting philosophy.
Market
Engineering
Report
Elements
Identification of Industry Challenges

This section of the report illustrates the major challenges, opportunities, problems, and threats facing the industry. These challenges ultimately affect the choice of measurements, the market forecasts, the strategic recommendations, and the monitoring programme.
Market Engineering Measurements

These measurements are designed on the basis of the unique attributes of the market. Each market segment chapter of this report has a Market Engineering measurement chart summarising the measurements for that segment. The measurements are meant to significantly expand the client's understanding of the marketplace.
Measurement Trends
The identification of the trend for each measurement has tremendous strategic value. The data point on any measurement holds limited strategic value for a market participant. But when trends over time are determined, the measurement can be used to forecast threats and opportunities and drive strategic formulation. These trends are summarised for each market segment in the Market Engineering measurements charts.
Market Engineering Forecasting

Market Engineering is a measurement-based forecasting system that focuses on the challenges to the industry and draws on the expert opinion of analysts and on econometric variables. This unique system establishes solid credibility with industry participants. These forecasts are integrated into each market segment chapter and are supported, where appropriate, by two bullet-point tables of the market drivers and restraints.
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In this section, key companies are strategically analysed wherever possible to determine why they gained or lost market share over the preceding year. This analysis provides excellent support for competitive benchmarking programmes.
Measurement-Driven Market Engineering Strategy

Strategic recommendations, found in the Market Engineering strategy chapter, are formulated from the Market Engineering measurements using Frost & Sullivan's unique system of generating strategic recommendations. This system is an effective tool for designing strategy because market participants understand how and why the recommendations were created.
Market Engineering Monitoring

Market participants should frequently monitor the markets in which they compete. In this report, Frost & Sullivan incorporates several key elements to help each company monitor its market position more accurately.
Recommendations for Further Research

These recommendations are based on the Market Engineering system. They help customers understand other research options that might significantly improve their market understanding and position. This section is integrated into the Market Engineering monitoring chapter.
Strategic for
Benefits of
of
Market
Engineering
Readers
Th i s
Report
This Market Engineering report provides significant strategic benefits not available from a standard market research report that merely describes the industry. This report provides companies with a foundation for improving their position in the marketplace. This foundation is the measurement-based marketing and sales system, from which strategies and plans for action can be developed. Integrating the Market Engineering system into this report has another major benefitthe training of the entire management team on the elements of strategic business marketing and decision making.
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Frost & Sullivan has conducted management training worldwide for more than 25 years. Frost & Sullivan has seen a great need for more advanced sales and marketing training within virtually all companies. Training is necessary for many reasons:
Markets are constantly changing, which tends to make experience and previous training obsolete.
Key executives are being promoted into positions for which they were not trained. The university educational system focuses on theory, which may not be directly applicable to high-technology or industrial markets.
Market success depends on unified teamwork. Without a thorough understanding of industry challenges, measurements, and strategy, teamwork is not possible.
To p
Te n
Benefits
of
Market
Engineering
Consulting
Report
This section describes the ten key benefits that Market Engineering brings to this strategic marketing consulting report (Figure 1). Figure 1 Market Engineering Consulting Report: Top Ten Benefits (Europe), 2001
Rank 1 2 3 4 5 6 7 8 9 10 Benefits Integrates all departments around market dynamics Helps companies be market-oriented Is a practical, reality-based system Provides a navigational tool for goal attainment Integrates competitive benchmarking improvement benefits Stimulates ideas and action Provides a foundation for strategy brainstorming sessions Develops a more competitively aggressive team Serves as an excellent training tool to build teamwork Drives market- and customer-oriented business plans
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Wo r d
of
Caution
Readers of this Market Engineering report, particularly marketing managers with years of marketing experience, may at first think that the information is not new. The difference in this report lies in the strategic significance and benefits it offers. Companies should focus on the following points to derive maximum benefit:
Information that may seem obvious to many may not be so to all, particularly those new to market research.
Information in this report should be used to make the entire company aware of the market dynamics.
Though some strategic recommendations may seem obvious, a closer look may suggest specific actions for the company to take to succeed in the market.
All companies in the market have the same information. The winners in the market are those that interpret the information and translate it into action.
Using the strategic recommendations in off-site strategic brainstorming sessions among management team members may lead to a unique and effective strategy for success.
This Market Engineering report does not in itself map out the most effective strategy. Rather, it is a tool to help companies create and reach their goals.
Frost & Sullivan hopes that this report helps drive change and improvement. Readers should feel free to contact Frost & Sullivan with feedback or arrange a strategic discussion session with the analyst team.
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Executive Summary
Introduction and Erodible to the European Absorbable Biomaterials Market
Introduction to the European Absorbable and Erodible Biomaterials Market

This Frost & Sullivan report analyses the European absorbable and erodible biomaterials market in terms of revenues by geographic region and by market segment. The report also provides an analysis of the principal drivers and restraints for each geographic region and examines the major technological advances that are predicted to have an impact on the market. For simplicity and clarity the report has divided the European absorbable and erodible biomaterials market into two distinct market segments. These are:

Absorbable and erodible wound closure biomaterials Absorbable and erodible orthopaedic biomaterials
Biomaterials which are included within the segments analysed may be defined as substances which are compatible with the physiology of the body and which are broken down in vivo and removed from the implantation site. The report covers 7 major geographic regions i.e. Germany, France, the UK, Italy, Spain, Scandinavia (Denmark, Finland, Norway and Sweden) and the Benelux (Belgium, the Netherlands and Luxembourg).
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Summary
of
Major
Findings
Total Forecast Market Growth and Opportunities

To t a l F o r e c a s t This market provides an analysis of the size and growth of the European absorbable and erodible biomaterials market over a ten-year period between 1999 and the year 2009. This provides the reader with a comprehensive review of the changes taking place and the dynamics influencing the growth of the market. Market intelligence has determined that in 1999 the total value of the European absorbable and erodible biomaterials market was estimated at $470.0 million, which by the year 2002 had increased in value to $539.3 million. A number of factors have emerged during the market research process which are anticipated to have a positive influence on the growth and development of both segments reviewed in this report. As a consequence of the influences Frost & Sullivan predict that by the end of the forecast period the total market will have grown in value to $794.1 million (CAGR 5.7 percent). M a r k e t Tr e n d s Te c h n o l o g i c a l Tr e n d s There have been a number of significant technological advances, which have been identified and will influence the development and design of new innovative products. These include:
Technological advances and developments into the control of absorption or degradation rates for absorbable sutures.
Research and development of product referred to as Second-Generation fibrin sealants. Emergence of biodegradable products for the reduction of post-operative adhesions. Research and product development into new and novel surgical adhesives and glues. Innovative developments into the synthesis and characterisation of absorbable and erodible orthopaedic biomaterials.
Advances in the mechanical properties including tensile modulus and flexural strength of orthopaedic synthetic absorbable and erodible biomaterials.
Research and development into bone morphogenetic proteins (BMPs), particularly BMP2 and rhOP-1.
Technological and conceptual advances in tissue engineering, the integration of the biological, physical and engineering sciences, as a method developing new constructs that will help the regeneration of restoration of tissue into its functional state.
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E n d - u s e r Tr e n d s These include the following developments:
Continued Expansion of Minimally Invasive Techniques and Surgical Procedures
The impact of minimally invasive surgery on the entire medical profession has been substantial. Beginning with arthroscopy in gynaecology, in orthopaedics and laparoscopic cholecystotomy in general surgery, the use of minimal invasion and video-assisted surgery has flourished to other fields and procedures improving patient care and recovery. Minimally invasive surgery is now being accepted as an innovative development in cardiovascular surgery including coronary artery bypass surgery (CABG) as well as being more widely used in more common procedures e.g. laparoscopic cholecystectomy as a means of treating gall bladder disease. This popularity vividly demonstrates the inexorable advancement and acceptance of the endoscopic surgical art.
Growth in the Number of Sports Injury Specialists and Sports Related Medical Centres
With the boom in sports and leisure activities so there has been a corresponding increase in the number of sports injury specialists and the establishment of an increasing number of sports related medical centres. As a consequence the market for absorbable and erodible orthopaedic biomaterials used in sports injuries has grown and developed in parallel with the increase in sports activity especially for suture anchors, interference screws and meniscal repair systems.
Expansion of Surgical Procedures in Cosmetic, Plastic and Reconstruction Surgery
There has been an explosion in the growth and number of plastic surgeries and cosmetic procedures, which have been carried out over the last decade. It is anticipated that this trend will continue as surgeons recognise the opportunities that exist for them and as a reflection of the increased awareness of cosmetic surgery and a growth in decision making by both men and women in health care issues. Key Market Drivers A number of critical market drivers for absorbable and erodible biomaterial products have been identified. These include the:

Search for New Products and Applications for Absorbable and Erodible Biomaterials. Growth in Sports Injuries and Treatments Encourage the Absorbable and Erodible Biomaterials Market.
Emergence of Synthetic Bone Graft Substitutes Market and Growth in Potential Target Procedures.
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Key Market Restraints In contrast the major market restraints contributing to a decline in the market value include the:

Healthcare Reforms, Cost Containment Initiatives and Reimbursement Issues. Requirement to Provide Clinical Evidence to Prove Product Efficacy Restrains Development of the Absorbable and Erodible Orthopaedic Biomaterials Market.
Domination of Bone Banks Supplying Allograft Hinders Development of Synthetic Bone Graft Substitute Market.
Analysis by Major Segment

A bs o rba b l e a n d E ro d i bl e Wo u n d C l o s u r e B i o m at e r i a l s Market By the year 2002 total revenues for absorbable and erodible wound closure biomaterials amounted to $436.4 million. It is predicted that by the end of the forecast period the value of the market will have increased to $522.3 million (CAGR 2.6 percent). Absorbable and Erodible Orthopaedic Biomaterials Market By the year 2002 total revenues for absorbable and erodible orthopaedic biomaterials amounted to $102.9 million. It is predicted that by the end of the forecast period the value of the market will have increased to $271.8 million (CAGR 14.9 percent).
Analysis by Geographic Region

Germany is the largest single market in Europe for both segments examined in this report whilst the market analysis has determined that France is the second largest market. Italy is the third largest market being marginally ahead of the UK. As a percentage of the total European market the UK is in fourth position in the year 2002 whilst Spain represents the fifth largest geographic region followed by Scandinavia and Benelux. The report analyses and reviews the anticipated changes to percent of revenues by geographic region over the forecast period and the implications this has to the market dynamics and opportunities they present.
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Competitive Analysis
Th e Co m p e t i t i v e E n v i ro n m e n t The European market for absorbable and erodible biomaterials is dominated by four companies i.e. Ethicon (J&J), B. Braun, Tyco Healthcare and Baxter International Inc. These four companies account for 75.4 percent of the overall market. The remainder of the market comprises a number of major multinational companies operating in niche markets and a large number of small and medium sized who have either established direct subsidiaries or who have entered into joint venture and/or partnerships agreements with local suppliers or major multinationals. This synergistic type of relationship helps the sales and marketing activity and provide for centralised distribution whilst providing for the smaller partner. As already stated Ethicon (J&J) dominates the overall absorbable and erodible biomaterials market but has come under increasing competitive pressure particularly from B. Braun who have recently introduced their absorbable surgical suture range and from Tyco Healthcare who have increased their promotional activity. Market Share Analysi s Although the market for absorbable and erodible biomaterials is dominated by four company's changes to the market dynamics, new technologies including product innovations and competitive structures are anticipated to result in changes to the market shares discussed in the report. The report reviews these anticipated changes and the consequences they are expected on market share movements. Currently the undoubted overall market leader is Ethicon (J&J). Ethicons (J&J) domination of the market is attributed to their presence in the absorbable surgical suture market. In addition the Mitek division of Ethicon (J&J) contributes to this companies presence in the market as a result of its major presence in the absorbable and erodible orthopaedic biomaterials market. The market analysis reveals that Tyco Healthcare is the second largest market shareholder. Tyco Healthcare through its US Surgical division has a significant share of the absorbable surgical suture market whilst expanding its presence and inclusion into other sub-segments including surgical adhesives and glues. B. Braun is in third position of the overall market. B. Braun has gained market share through the relatively recent emphasis on their range of absorbable surgical sutures and the continued promotional activity in the haemostat and surgical adhesives and glues market. Baxter International Inc is in fourth position of the overall market. Baxter International Inc presence in this market is attributed to their major share of the tissue sealants market with Tisseel or Tissucol.
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Biomet Merck is in fifth position of the overall market. Biomet Merck is the leading supplier of absorbable and erodible orthopaedic biomaterials in Europe as a result of its presence in both the synthetic bone graft substitute and absorbable fracture fixation device subsegments. The top five market shareholders account for 78.5 percent of the market value. The remaining 21.5 percent of the market is made up of a large number (76) of niche suppliers either by geographic regions or by product specialisation.
Conclusions
The period during the mid to late 1990s has see an unprecedented period of activity throughout Europe to improve the efficiency of healthcare delivery whilst obtaining value for money from vendors. During the research process Frost & Sullivan have identified that these environmental changes have forced suppliers to make a series of fundamental strategic changes to meet their financial and marketing objectives. In order to maintain viability it is expected that the industry will experience further acquisitions/mergers to gain and consolidate market share whilst acquiring new products to exploit new niche and emerging markets. In addition it is predicted that further joint venture and co-marketing agreements will be created to exploit new technologies, enter new geographic markets and to take advantage of additional distribution networks. All the segments analysed in this report are expected to increase in value over the forecast period with the absorbable and erodible orthopaedic biomaterial markets exhibiting the highest growth rates. The mature markets i.e. absorbable surgical sutures markets are predicted to continue to grow slowly throughout the forecast period through small annual price increase rather than from any major increase in sales volume.
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2
Identification European
of
Challenges and
Facing
the
Absorbable Market
Erodible
Biomaterials
The first phase of the Market Engineering system is to identify the key challenges facing the industry. These challenges have an impact on and are integrated into every phase of the Market Engineering system. An industry challenge is any issue that can affect the development of the market or the competitors in the marketplace. Challenges include customer issues, regulatory programmes, economic trends, market measurement trends, competitive strategies, new technologies, sales and marketing strategies, new market opportunities, and market threats. Figure 2-1 lists the ten most challenging issues facing the European absorbable and erodible biomaterials market. These challenges have been identified and ranked on the basis of the research carried out for this report.
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Figure 2-1 Absorbable and Erodible Biomaterials Market: Top Ten Industry Challenges Ranked by Priority (Europe), 2001
Item 1 2 3 4 5 6 7 8 9 10 Challenge Continued Healthcare Budgetary Restraints Pressurise Pricing Strategies Minimally Invasive Surgery: The Surgical Revolution Increased Competitive Nature of the European Absorbable and Erodible Biomaterials Market Requirement to Prove Clinical Efficacy through Technological Assessment and/or Economic Analysis Industry Structure Changes Result in Consolidation of Market Leaders Patents and Patent Protection: Scope, Validity and Enforceability Ability to Develop or License and Market New Products or Product Enhancements Increased Development Costs Associated with the Need to Provide Cost-Benefit Analysis Data and Proven Efficacy Organisational changes needed to improve manufacturing efficiencies and lower costs e-Commerce: The New Business Model
Figure 2-2 section provides a time frame for assessing when each challenge is likely to have the greatest impact on the market over the next six years. Figure 2-2 Absorbable and Erodible Biomaterials Market: Impact of Top Ten Industry Challenges (Europe), 2001
Challenge Continued Healthcare Budgetary Restraints Pressurise Pricing Strategies Minimally Invasive Surgery: The Surgical Revolution Increased Competitive Nature of the European Absorbable and Erodible Biomaterials Market Requirement to Prove Clinical Efficacy through Technological Assessment and/or Economic Analysis Market Industry Structure Changes Result in Consolidation of Market Leaders Patents and Patent Protection: Scope, Validity and Enforceability Ability to Develop or License and Market New Products or Product Enhancements Increased Development Costs Associated with the Need to Provide CostBenefit Analysis Data and Proven Efficacy Organisational Changes Needed to Improve Manufacturing Efficiencies and Lower Costs e-Commerce: The New Business Model 1-2 Years 3-4 Years 5-6 Years High High High High Medium Medium Medium Low Low Low High High High High Medium Medium Medium Medium Medium Medium High High High High High Medium Medium High High Medium
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Continued Healthcare Budgetary Restraints Pressurise Pricing Strategies

Healthcare costs throughout the developed world have been rising steadily as a proportion of national gross domestic product. This trend is likely to continue in the future, and the factors responsible for this include: aging populations, an increasing number of breakthroughs in medical technology, a rise in expectations of the general public towards better medical care and state-run inefficiencies. The one immutable factor in this list is the aging population. The cost of providing healthcare has risen considerably in the past thirty years and this trend is likely to continue in the future. All European governments are increasingly concerned about containing the cost of such provision. There are variations in the structure and management of the national healthcare systems among the different countries. But analysis of recent reforms throughout Europe indicates that there are similarities in many of the measures and reforms adopted by the governments of different countries in order to control costs and maximise value for money. There is overwhelming evidence in all the leading European countries that the level of hospital inpatient care has decreased in the last ten years, and funding has been shifted to the primary healthcare sector. This is illustrated by:

a reduction in the average length of stay in hospitals; a reduction in the number of hospital beds per capita; a general reduction in the proportion of total healthcare expenditure associated with inpatient care;
an emphasis on treating patients in hospital on an outpatient or day care basis; an increase in primary care facilities; additional medical responsibilities given to general practitioners.
European healthcare systems are undergoing major reforms and structural changes in order to reduce the high rate of increase in expenditure. Hospitals are experiencing decentralisation of management from central healthcare authorities with the operational management devolved to a local level. Hospital managers and senior physicians are being given more financial responsibility and are being made accountable for their expenditures. The enevitable consequence of this decentralisation process and individual budgetary responsibility is to force healthcare purchasers to gain value for money by:

a) issuing competitive tenders for commodity items b) negotiate favourable terms and conditions for non-commodity items amongst competitive companies
Senior marketing management is frequently forced to make drastic price reductions and/or provide added service value in order to meet their financial and marketing objectives.
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Minimally Invasive Surgery: The Surgical Revolution

Minimally Invasive Surgery represents nothing less than a revolution in surgical practice and technology. Compared with traditional opensurgery, minimally invasive procedures result in less tissue trauma, less scarring, and faster postoperative recovery time. The principle advantage of minimally invasive surgery is the reduction in the size of the incision site and consequent reduced trauma to surrounding tissue. A open (conventional) surgery incision for laparoscopic colorectal surgery for example could typically be 12-13 centimetres in length, which would be brought down to 3-4 centimetres. The hope is that the recovery is quicker, so patients can get back to their normal activity faster. Although the techniques vary from procedure to procedure and among different surgical subspecialities, all minimally invasive surgical procedures employ video cameras and lens systems to provide anatomic visualization within a region of the body. More recently cardiovascular surgeons have begun using new, patient-friendly techniques that reduce the pain, recovery time and perhaps the cost of bypass surgery, one of medicine's most common and most invasive procedures. The conventional method requires doctors to make a neck-to-navel incision in a patient's chest, sawing through the breast bone and cracking open the rib cage to reach the heart to replace clogged arteries or repair faulty valves. The new approach uses newly designed instruments to operate through just a three-inch opening in the chest. A growing number of heart experts are convinced that these minimally invasive techniques will fundamentally alter the clinical and economic landscape of open-heart surgery. Some enthusiasts say the new technology could explode in the next three or four years to be used in more than half of the one million procedures performed worldwide each year. In addition recent developments has seen the emergence of robotics and computers providing assistance to the surgeon and expanding the role of minimally invasive surgery into new applications. The advent of minimally invasive surgery for manufacturers and suppliers of absorbable and erodible biomaterials have not only created market opportunities it has also created a major threat. For manufacturers of absorbable surgical sutures minimally invasive surgery for example any reduction in the size and extent of the surgical incision site as a result of the introduction of minimally invasive techniques will invariably reduce the need for wound closure devices. Manufacturers are required to seek alternative strategies to compensate for the anticipated reduction in demand. This include:
Exploiting new opportunities in the emerging markets of cosmetic and plastic reconstruction surgery.
Focus on developing markets in other surgical and clinical specialties such as oncology. Develop and extent product ranges in response to the emergence of new surgical specialties.
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Seek alternative wound closure markets and direct research and development resources to the development of new and innovative wound closure devices.
Exploit new opportunities with absorbable and erodible biomaterials into new niche market areas such as adhesion barriers, soft tissue reattachments and tissue engineering.
Increased Competitive Nature of the European Absorbable and Erodible Biomaterials Market
The changing health-care environment in recent years has led to increasingly intense competition amongst United States and certain European health-care suppliers. Competition is focused on price, service and product performance. Pressure in these areas is predicted to continue as companies seek to maintain the competitive position and develop market opportunities in emerging segments. Companies are expected to continue with efforts to minimise costs and meet price competition. It is generally believed improved cost positions will continue to benefit from improvements in manufacturing technology and increased economies of scale. The competitive nature of the market will ensure that companies will continue to develop new products and services, invest in capital and human resources to upgrade and expand facilities, leverage its cost structure and make selected acquisitions.
Requirement to Prove Clinical Efficacy through Technological Assessment and/or Economic Analysis Market
Growing pressure on cost containment and the requirement to provide proof of efficacy means that developers of new medical technology have to consider more than just the regulatory and legislative requirements to bring their devices to market. Cost-effectiveness data are taking on a greater significance in gaining market acceptance for healthcare purchasers whilst proven efficacy through clinical trials are being required to supports the promotional claims made by the manufacturers. Without having proven clinical efficacy it is becoming increasingly difficult to gain market access and acceptance for new technologies throughout Europe. Sales and marketing teams who are unable to provide evidence that a particular product does not do what the promotional message says it will do will suffer from loss of credibility not only for that product but may risk the confidence level that surgeon has for other products. The challenge is to ensure that companies provide evidence that the product has a proven ability.
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Industry Structure Changes Result in Consolidation of Market Leaders

The medical device industry has already undergone a number of major changes as a result of a series of mergers, joint ventures, acquisitions and distributor agreements amongst the market leaders. The challenge to the industry will be to ensure the:
Smooth transition of the acquired company into the organisational structure, the reorganisation of manufacturing, sales and marketing, logistics and distribution. The leading manufacturers retain their brand image, identity and to ensure that the distributor maintains promotional priorities on the target product ranges Smooth implementation of any cost efficiency improvements and the logistics of any personnel changes.
The changes in the industry have involved the acquisition of major brand names with recognised brand images. The acquiring companies will need to maintain and retain customer loyalty whilst using the brand image of the acquired company to launch new and innovative products onto the market.
Patents and Patent Protection: Scope; Validity and Enforceability

Patent protection related to the development of products in medical biomaterials, tissue engineering, gene therapy and other major medical advances is a means on ensuring proprietary protection. One of the major challenges to the industry is the ability of individual companies to obtain suitable patent protection for the products they develop and to successfully enforce the patent rights they have obtained. In addition to the issues concerning patent protection from the developing company issues arise concerning the scope, validity and enforceability of patents and other proprietary rights held by third parties and their impact on a companies ability to commercialise their products and services.
Ability to Develop or License and Market New Products or Product Enhancements

The future success and the ability to grow revenues and earnings require the continued development or licensing of new products and the enhancement of our existing products. Failure to develop or license and timely introduce and market new products and product enhancements could have a material adverse effect on a companies business, financial condition and results of operations. In addition, if any of a company's new or enhanced products contain undetected errors or design defects, especially when first introduced, the ability to market these products could be substantially delayed, resulting in lost revenue, potential damage to a company's reputation and/or delays in obtaining acceptance of the product by orthopaedic sports medicine surgeons and other professionals.
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Increased Development Costs Associated with the Need to Provide Cost-Benefit Analysis Data and Proven Efficacy
Despite the effects of the cost containment measures that are being introduced by national governments there is growing evidence that quality-of-care initiatives are receiving a higher priority. Payers not only want to slow the rate of growth of healthcare costs but are also demanding more value for their healthcare dollars. The correlation however between rising costs, quality of care and positive health outcomes is not as strong as payers would like. Until recently, the device industry has responded to the radical changes in the healthcare environment and to purchasers' demands mainly by negotiating discounts with purchasers and providers. However, this process of discounting tends to focus on price rather than value, and places manufacturers at enormous disadvantage. To level the negotiating playing field, manufacturers need to examine the relative value of a device and its cost offsets. Without these kinds of information, decision-makers focus on price rather than value, and decisions about use and coverage are often made with incomplete knowledge of the facts, which can be detrimental to patients, physicians, and manufacturers. For their part, manufacturers are responding to the increasing power of healthcare purchasers by investing in health and economic outcomes assessment studies to gather evidence of product benefits. Manufacturers will thus have at their disposal during negotiations not only price information but also data on cost offsets and health benefits, including improvements in quality of life. The provision of evidence gathered from outcomes research conducted from the beginning of product development can help convince purchasers and endusers of a device's economic value, regardless of its cost, and give manufacturers a competitive edge.
Organisational Changes Needed to Improve Manufacturing Efficiencies and Lower Costs

Companies have had to introduce a wide range of cost saving measures in manufacturing in an attempt to help maintain profitability after the effects of the cost-cutting measures in the health services throughout Europe. This has involved the:
Closure of manufacturing facilities particularly in Europe and a relocation of manufacturing to a centralised site. Since most of the dominant suppliers are US based multinationals the industry has seen the progressive move of manufacturing sites back to the US.
Rationalisation of the purchase of individual components for the manufacture of medical devices and related equipment.
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Rationalisation of the other equipment manufacturers and on-site assembly of finished product.
Rationalisation of the location of the manufacturing sites so that they are better able to meet the demands of local markets.
Introduction of efficiencies programs in manufacturing such as better management of batch processing and production scheduling.
Improvements to the level of product inventory held in warehousing to help reduce the level of obsolete product.
Improvements in the logistics and operations procedures including warehousing, order processing, dispatch, distribution and monitoring of customer services.
e-Commerce: The New Business Model

Electronic business is making a rapid entrance into healthcare! The archaic system hospitals use to order their supplies has the potential for large e-commerce applications. Add to this the urgent need hospitals have to cut costs, and a huge business opportunity presents itself. Major healthcare organisations are now forming coalitions and developing e-commerce marketplaces for placing orders online and to make the supply chain leaner. Electronic Commerce is a business methodology that addresses the needs of organisations and healthcare purchasers and providers to cut costs while improving the quality of goods and services and increases the speed of service delivery. The traditional business and purchasing rules are crumbling, but the new ones have yet to be defined. Primed by consumer expectations, the healthcare industry is set to reap the benefits of the explosive influx of new ways to use the Internet. In this emerging market, footholds are tenuous and operative strategies are measured in minutes, not months. Even categorising market sectors is tricky, since products and services increasingly overlap. An e-venture can be as simple as a static Web site or as sophisticated as an interactive patient data management system. The market has established only one expectation: the use of Web technology. A close look at healthcare e-business reveals that companies planning to capture business share the same objectives and obstacles: infrastructure, speed and access. By using components from various software and hardware suppliers healthcare companies are able to create integrated commerce systems that enables its Internet medical-supplies shoppers, such as clinicians, physicians, purchasing agents and biomedical engineers, to gain knowledge instantly concerning product availability, order status, order history and product changes.
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Key opportunities for healthcare purchasers who carry out online ordering includes:
Product-availability feature that gives customers real-time stock status, including expected ship date for a product that is not available immediately;
Individualised order-history feature that promotes easier management of purchasing expenses and trends by showing customers all products ordered and prices paid for the last several months;
Order-status feature showing detailed shipping status, carrier and arrival information; and
Real-time order confirmation, which assures customers that their orders have been received.
The interactive and personalised nature of an e-commerce Internet shopping program for supplies helps healthcare purchasers make better and faster purchasing decisions, and increases the accuracy and efficiency of the ordering process. Integrated e-commerce ordering systems are able to perform seamless business processing from order placement to fulfillment. This includes entry of the order into the e-commerce system, order shipment, credit checks and security measures, invoicing and payment recording. When it is launched, the exchange will offer on-line ordering with customer-directed distribution; on-line inquiry of order status; on-line order confirmation; product catalogues and access to correct contract terms. Soon after, the exchange will feature value-added services such as clinical information on a broad-range of products. Figure 2-3 provides an X-chart illustrating the range of product areas within each company, which is active in the European absorbable and erodible biomaterials market. Figure 2-3 Absorbable and Erodible Biomaterials Market: Range of Product Areas (Europe), 2001
Market Segment Wound Closure Company B.Braun Baxter International Inc Tyco Healthcare Ethicon (J&J) PPL Therapeutics plc C. R. Bard, Inc Datascope Corporation Anika Therapeutics, Inc

Orthopaedic Others Orthopaedic Synthetic Bone Absorbable Graft Substitutes
Absorbable Sutures
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Figure 2-3 (Continued) Absorbable and Erodible Biomaterials Market: Range of Product Areas (Europe), 2001
Market Segment Wound Closure Company Omrix Biopharmaceuticals Aventis Pharma (Centeon) Pharming Group N.V Cohesion Technologies Peters S.A CryoLife MedLogic C.R. Bard's MedChem Cura Cell Will Pharma Integra Corporation Gliatech Inc Confluent Surgical Inc Shire Pharmaceuticals Genzyme Corporation Alcon Laboratories WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH Dr Hammer (sutures) Resorba Wundversorgung FSSB Chirurgische Nadeln Serafit (Sutures) Haemacure Corporation Tissuemed Nycomed Assut Medical Company Fidia Advanced Biopolymers Dynek Pty Ltd Goretex Tornier (Phusis) Atlantech Bionx Smith and Nephew Ethicon (Mitek Division)

Orthopaedic Others

Absorbable Sutures
Orthopaedic Synthetic Bone Absorbable Graft Substitutes
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Figure 2-3 (Continued) Absorbable and Erodible Biomaterials Market: Range of Product Areas (Europe), 2001
Market Segment Wound Closure Company Arthrex Biomet (Arthrotek and Walter Lorenz Surgical) Zimmer Linvatec Stryker Inion Ltd Artimplant Sofamor Danek (Medtronic) NeuColl Mathys Synthes-Stratec Biocomposites Ceraver Osteal Corin Group Dynagen ETEX Corporation Geistlich Shne AG Inoteb Interpore Cross International Isotis B.V Orthovita Orquest Teknimed Tutogen Medical Waldemar Link Wright Medical Technology (OsteoTec Ltd) Zimmer Bioland biomateriaux Unilab Surgibone Inc. (Canada) MCP Absorbable Sutures Others Orthopaedic Orthopaedic Synthetic Bone Absorbable Graft Substitutes

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Ti m e
Frame
Analysis
of
Industry
Challenges
In the analysis of challenges to the industry, the time frame is important. Each challenge varies depending on the time frame that is likely to see the highest impact on the market. This time frame analysis directly affects the market forecasts and the development of market strategies and investment timing by industry participants (see Figure 2-3). Figure 2-4 provides the exchange rates used in the report. The only currencies applicable to the review carried out is the Pound Sterling and the European currency the Euro compared with the US Dollar. Figure 2-4 Absorbable and Erodible Biomaterials Market: Currency Exchange Rates (Europe), 2001
Currency Unit USD GBP Euro United States Dollars United Kingdom Pounds Euro USD/Unit 1 1.5689 0.9821 Units/USD 1 0.6374 1.0209
Note: Rates as of 2002.10.7 18: 00: 00 GMT. Base currency is USD United States Dollars
Source: Financial Times 7 th October 2002
Glossary
of
Te r m s
Definitions
Glossary ACL: Anterior Cruciate Ligament. The anterior part of the two cruciate ligaments that stabilise the knee; the ligament extends from the anterior intercondylar area of the tibia to the posterior part of the medial surface of the lateral condyle of the femur. Arthritis: Chronic deterioration of the joint cartilage; inflammation of a joint. Autograft: Tissue taken from a healthy site on a patient to be implanted at a site where similar tissue is needed. Biocompatible: The characteristic of being acceptable by the body, thus not causing inflammation or symptoms of rejection. Biomaterial: Substitute material that is employed in a biological context.
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Cartilage: Connective tissue surrounding and protecting bone-joint surfaces, functioning as a gliding surface that dissipates pressure. Certification: Approval by authorities of a specific product that permits marketing of the product. Clinical trial: Test of medical products on humans according to a specific plan (protocol) that has been approved by relevant independent ethics committee and the national regulatory agency in the country where the tests are performed. EEC: European Economic Cooperation Area, consisting of Norway, Iceland, Switzerland, Liechtenstein, and all countries in the European Union. Growth factor: Protein involved in cell differentiation and growth. Implant: Foreign material surgically inserted into the body to support or replace a body part. Life Science: Science relating to biological life and its conditions. Multi-centre study: A clinical trial involving healthcare institutions in more than one geographic location. Orthopaedics: Specialised field of medicine that deals with the diseases and injuries of the muscoloskeletal system. Polymer: Chain of molecules with high molecular weight. Polyurethane: An organic polymer containing groups of urethane. Polyurethaneurea: An organic polymer containing groups of urethane and urea. Tissue: Group of cells with similar functions in an organism. Abbreviations AAOS: American Academy of Orthopaedic Surgeons ABHI: Association of British Healthcare Industries ACL: Anterior Cruciate Ligament A&E: Accident and Emergency Department L'AFSSAPSl': Agence Franaise de Scurit Sanitaire des Produits de Sant ASL: Azienda Sanitario Locale ARH: Les Agences Rgionales de Hospitalisation AWBZ: Exceptional Medical Expenses Act (Health Insurance), The Netherlands.
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BFD: Bioresorbable Fixation Device BOA: British Orthopaedic Association BOSS: British Orthopaedic Scoliosis Society BSS: British Scoliosis Society BTB: Bone-patella tendon-bone BRM: Bone Replacement Materials CAGR: Compounded Annual Growth Rate CAHP: Centrale d'Achats de L'Hospitalisation Privee CAOS: Computer Assisted Orthopaedic Surgery CEDM: Commission de l'Evaluation des Dispositifs Mdicaux CCPS: Commission Consultative des Prestation Sanitaries CEPS: Comit Economique des Produits de Sant CHD: Coronary Heart Disease CNAMTS: Caisse Nationale de l' Assurance des Travailleurs Salaris DoH: Department of Health DRASS: Direction Rgional des Affaires Sanitaires et Sociale DPEF: Documento di Programmazione Economico Finanzaria DRG: Diagnostic Related Groups EMEA: European Medical Evaluation Agency GEDIM: Groupe d'Evaluation des Dispositifs Mdicaux GP: General Practioner IAPM: The International Association of Medical Prosthesis Manufacturers JOCE: Journal Officiel des Communautes Europennes LPLAl: -lactide Polylactide MDA: Medical Device Agency MDD: Medical Device Directive OA: Osteoarthritis OECD: Organisation of Economic Co-operation and Development
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OJEC: Official Journal of the European Communities NHS: National Health Service NHS PASA: National Health Service Purchasing and Supply Agency PDLLA: Poly-D, L-lactic acid PHB: Polyhydroxybutyrate PHV: Polyhydroxyvalerate PGA: PolyGlyconate Acid PLA: Polylactic Acid PLLA: Poly-L-lactide Acid SR-PGA: Self-Reinforced PolyGlyconate Acid SR-PLLA: Self-Reinforced Poly-L-lactide Acid TIPS: Tarif Interministeriel des Prestations Sanitaires UGAP: Union Generale d'Achats Publics WHO: World Health Organisation
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3
Forecasts of the To t a l Market
Market Overview and Definitions

The introduction to this chapter is to clearly distinguish between the variety of different biomaterials, which are available for medical applications, and those biomaterials, which are classified as either absorbable or erodible. Biomaterials The definition of a biomaterial covers a broad area. In fact, any natural or synthetic material that interfaces with living tissue and/or biological fluids may be classified as a biomaterial. Even common materials such as polyester have shown usefulness in some biomedical applications. However, certain physical, chemical, and mechanical characteristics render some materials more desirable than others for biological application. To complicate things further, the determination of these desirable traits depends on the material's intended use in the body. For example, the material for a bone implant must exhibit great compressive strength, while the material for a ligament replacement must display far more flexibility and tensile strength. In all cases, however, a biomaterial must perform compatibly with the body. In other words, the biocompatibility and in some cases, bioactivity, of the material comprise key factors in determining whether a new graft or implant succeeds in the body. In order to define biocompatibility, it may be easier to define what it is not, rather than what it is. A biocompatible material disrupts normal body functions as little as possible. Therefore, the material causes no thrombogenic, toxic, or allergic inflammatory response when the material is placed in vivo. The material must not stimulate changes in plasma proteins and enzymes or cause an immunologic reaction, nor can it instigate carcinogenic, mutagenic, or teratogenic (gross tissue change) effects.
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Bioactive materials play a more aggressive role in the body. While a biocompatible material should affect the equilibrium of the body as little as possible, a bioactive material recruits specific interactions between the material and surrounding tissue. For example, a bioactive material can encourage tissue integration to aid in the fixation of an implant in the body. Many total hip implants operations today rely partially on a porous coating of Hydroxyapatite (HA), a normal component of bone, to help permanently stabilise the stem of the implant in the bone. The coating encourages ingrowth from the surrounding tissue that interlocks within the pores much like the pieces of a puzzle lock together. Although many current medical procedures call for inert biocompatible materials, the increasing understanding of tissue interaction promises many more applications for aggressive bioactive materials. Ty p e s o f B i o m a t e r i a l s Here are a few types of materials that have potential use in biomedical applications. Polymers Polymers consist of small repeating units, or isomers, strung together in long chains. The flexible structure of polymers has enabled this group of materials to be useful in applications from plastic garbage bags to rubber tires. Even DNA has found this structure useful, storing genetic information in thousands upon thousands of repeating sequences of polymers. In many materials, processing conditions can induce the polymer chains to link with each other along the length of the chain to produce a wide variety of mechanical properties. This is known as cross-linking. Cross-linking can increase the density of materials to improve their strength and hardness; however, cross-linked materials often lose their flexibility and become more brittle. These parameters are easily varied in order to suit current biomedical applications. The wide use of polyethylene (PE) in medicine illustrates the versatility typical of a polymer. Depending on the processing of the material, PE can be elastic and flexible, or hard and smooth. Low-density polyethylene serves as tubing in catheters, while ultra-high-molecularweight (UHMW) polyethylene is one of the major articulating surfaces used in total hip or knee replacements. The smooth surface of UHMW creates extremely low friction with other materials and increases the durability of the artificial joint exponentially. Hydrogels comprise another subdivision of this unique group of materials. These polymer structures form a hydrophilic cross-linked network that swells in water until an equilibrium is reached between the retractive force of the network and the thermodynamic swelling force. They can exist as homopolymers, copolymers, or multipolymers that are ionically neutral, anionic, cationic or ampholytic. In general, hydrogels exhibit good biocompatibility, low degradation, and processing ease. Hydrogels can be produced with a wide range of swelling characteristics, which play a major role in determining solute diffusion rates, surface properties, refractive indexes, and mechanical characteristics. Cellulose derivatives such as poly(vinyl alcohol) (PVA), poly(ethylene glycol) (PEG), and poly(N-vinyl 2-pyrrolidone) (PNVP) swell to a higher degree than poly(hydroxyethyl methacrylate) (PHEMA) and its derivatives.
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The applications of hydrogels cover a range just as broad as their physical properties. The ability of hydrogels to swell and dehydrate depending on composition and environment can be exploited to facilitate the controlled release of drugs. Soft contact lenses also rely on their hydrogel content to induce an equilibrium between the lens and the surface of the eye, at the same time allowing gas exchange and visibility without distortion. These polymers show promise in blood contact applications as well as wound-healing and artificial cartilage and skin. Biodegradable Polymers Natural and synthetic biodegradable polymers have emerged in the field as reliable and effective materials for purposes that require only temporary stability in order to support tissue ingrowth. Biodegradable polymers degrade when placed in the body while allowing functional tissue to grow in its place. The mechanism of degradation for these types of polymers includes hydrolytic instability, hydration, molecular backbone cleavage, loss of molecular weight, and solubilisation. Typical applications of these polymers include their use in absorbable sutures. These sutures degrade slowly into by-products that the body can remove itself through natural functions such as phagocytosis, thus affording time for the wounded tissue to complete its own healing process. The sutures eliminate the need for a second operation to remove them. Biodegradable polymers show promise in many tissue engineering applications due to their ability to degrade while encouraging functional tissue from the body to take its place. Biodegradable polymers can be natural or synthetic. Some natural polymers include collagen, which already comprises about 30 percent of the protein in the body, chitosan, which is derived from a polysaccharide called chitin found in crustacean exoskeletons, and polyhydroxyalkanoates (PHA), which are secreted by certain species of microorganisms. Synthetic polymers include poly(glycolic acid) (PGA), which has been used in absorbable sutures, poly(lactic acid) (PLA), copolymers of PGA and PLA, and polydioxananone (PDS). Ceramics This category consists of inorganic, non-metallic compounds that exhibit a variety of combinations of ionic and covalent bonding. They have been widely used in biomedical applications for load bearing implants and the dental industry. Most members of this group are characterised by a high Young's modulus, very low elasticity, and a hard, brittle surface. They can be used for load bearing applications, such as total hip replacements. Alumina, for example, is often used as a pair in a ball and socket hip implant. Porous ceramic materials exhibit much lower strengths but have been found extremely useful as coatings for metallic implants. The coating aids in tissue fixation of the implant by providing a porous surface for the surrounding tissue to grow into and mechanically interlock. Certain ceramics are considered bioactive ceramics if they establish bonds with bone tissue. This bonding activity increases the interfacial strength of adhesion greatly. Hydroxyapatite is a natural mineral component of bone tissue that can be added to implants to encourage bone ingrowth that can reinforce implants as they begin to age.
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Metals The closely packed crystal structure and metallic bonding in metals or metal alloys render them valuable as load bearing implants as well as internal fixation devices in large part for orthopaedic applications as well as dental implants. 316 L stainless steel, titanium alloys, and cobalt alloys when processed suitably contribute high tensile, fatigue and yield strengths; low reactivity and good ductility to the stems of hip implant devices. Their properties depend on the processing method and purity of the metal, however, and the selection of the material must be made appropriate to its intended use. One complication that can occur from the use of metals in orthopaedic applications is the phenomenon of stress shielding. In some situations, such as hip implantation, the high strength of the metal in the implant induces it to assume more than its share of responsibility for the load in that region. This decreases the load born by the surrounding tissue and therefore shields it from experiencing stress. Lack of stress causes bone density to decrease as bone tissue resorbs, eventually baring the location and causing complications in the implant/tissue interface. This is known as the "use it or lose it" phenomenon and it applies to more than just bone tissue, including the brain! Composites The individual strengths and weaknesses of polymers, ceramics, and metals benefit different applications. The porosity and hardness of ceramics support tissue integration into the tissue/ implants interface, but these properties could hardly suit a ligament replacement. A composite material or structure that incorporates the desired characteristics of each of these materials must often be designed in order to meet the stringent demands of living tissue. For example, a porous coating of hydroxyapatite (HA), the major component of bone mineral, over the stem of a metal hip implant will interlock mechanically with the surrounding tissue and aid in implant fixation. The smooth metal stem can serve the load bearing capacity but lacks the ability to interact with the surrounding tissue. Conversely, the bioactive ceramic HA is too brittle to handle the different stresses experienced by the metal stem, but is capable of actively recruiting a secure tissue/implant interface. Most composite designs combine strength and flexibility by reinforcing a relatively flexible material with a harder, stronger one. In some cases, one or more of these materials may be degradable in order to encourage tissue integration.
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Definition of Absorbable and Erodible Biomaterials Absorbable biomaterials are synthetic or natural substances that treat, augment, temporarily replace tissue or act as scaffolds for tissue regeneration/tissue engineering. Background, Principles and Applications of Absorbable a n d E ro d i bl e Wo u n d C l o s u r e B i o m at e r i a l s Background
Absorbable Sutures
Absorbable sutures are capable of being broken down by the body's inflammatory response and are used internally to close organs, fascial planes, and subcutaneous tissues. Absorbable sutures can also be used to close skin but only in a subcuticular or completely buried pattern. Absorbable sutures should not be exteriorised. All of the absorbable sutures absorb fluid and might wick external fluids with bacteria into a surgery site.
"Cat- Gut" Collagen based Absorbable Sutures
The original absorbable suture materials were plain and chromic "cat gut," which actually consisted of processed collagen derived from the submucosal fibrous tissue of sheep intestine or the serosal connective tissue layer of bovine intestine. The tissue is mechanically separated and cleaned, chemically treated to cross-link the collagen, typically with formaldehyde or chromium salts, and the resulting fibres are stretched and formed into a monofilament suture. Plain gut is broken down enzymatically after about 7 days. Chromic gut is collagen treated with chromium salts to delay break down. Chromic gut typically loses its strength after 2-3 weeks and is completely digested after about 3 months.
Synthetically Deri ved Absorbable Sutures
Synthetic alternatives to catgut have been available for over 20 years. There are several forms, all of the major varieties being made from aliphatic polyesters, principally polyglycolic acid, co-polymers of glycolic and lactic acid and polydioxanone. These may be either monofilament or multifilament and between them provide a range of characteristics that cover all functional requirements for absorbable sutures. Most synthetic absorbable sutures degrade slightly slower than catgut, although some, for example those based on polydioxanone, have significantly slower degradation profiles. Synthetic absorbable materials made from polymers (e.g., Vicryl and Monocryl) are broken down non-enzymatically by hydrolysis; water penetrates the suture filaments and causes breakdown of the polymer chain. As a result, synthetic absorbables tend to evoke less tissue reaction than plain or chromic gut.
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As a result of a combination of the BSE crisis and the view that "cat-gut" sutures represented an outmoded technology sutures derived from natural sources declined in popularity dramatically throughout the 1990s allowing the more modern absorbable polymer sutures to gain a larger percentage of the market. In addition as a result of the issues raised by the BSE crisis concern was growing about the efficacy of using absorbable sutures from natural products. For example a report prepared by the European Commission on the 16th September 1998 concluded that: "The Committee considers that there are sufficient alternative products to catgut sutures, i.e. synthetic absorbable sutures made from polymers such as polyglycolic acid, that provide equal, or even better, clinical performance than the catgut. Apart from considerations of Transmissible Spongiform Encephalopathies (TSE), there is no difference between these two types of sutures with respect to matters of safety." However and subsequently to this and other reports France, Germany, Spain and Austria banned the use of absorbable sutures derived from natural sources during 1999 and the year 2000. In addition a notification on the 22nd October 2001 by The Medical Device Agency (MDA) informed the NHS in the UK that a decision had been made by the manufacturers of catgut sutures to stop supplying them for human use in the UK. This followed the previous action taken by the European countries already identified. The Chief Executive of MDA, Mr David Jefferies said: "The MDA sought opinions of relevant Royal Colleges and Professional Bodies and was informed that there is no clinical reason for continuing the use of surgical catgut sutures, as synthetic alternatives have equal or even better clinical performance. This was also the conclusion of a European Scientific Committee of Experts that compared the performance of catgut against synthetic sutures."
Tissue Sealants
Tissue or surgical sealants (also known as Fibrin Sealants) are absorbable materials used primarily to control internal bleeding and to seal tissue. They may also be classified as surgical haemostatic and adhesive agents derived mainly from plasma products. They contain fibrinogen, thrombin, factor XIII, an anti-fibrinolyticagent (such as aprotinin), and calcium chloride. They reproduce the final steps in the coagulation cascade, forming a stable fibrin clot, arresting blood loss and assisting the normal healing process. They form blood clots that are similar to normal clots and which, like normal clots, are degraded naturally by the body's enzymes.
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Aprotinin is a protease inhibitor isolated from bovine lung tissue. It inhibits trypsin, chymotrypsin, plasmin, tissue plasminogen activator, kallikrein, elastase, urokinase and thrombin. The drug was first used in cardiac surgery in the early 1960s when it was thought that excessive post-operative bleeding was due to increased fibrinolysis. It was not until the late 1980s that prophylactic use was reported. Multiple studies support aprotinin's efficacy to decrease blood loss and transfusion requirements in cardiac surgery and in other types of major surgery (e.g., liver transplantation). This haemostatic action of aprotinin is related to its effects on fibrinolysis and on platelet dysfunction. Fibrin sealants are used mainly for haemostasis, suture support or adhesion of tissues. For example they are used:
to assist in achieving haemostasis in a bleeding fieldparticularly in situations where sutures or clips are not appropriate
to reduce the blood flow from solid organs to help seal anastomoses or leaks from hollow organs to assist or replace sutures in surgical procedures, particularly where suturing is difficult or impossible
They are used in a variety of different surgical procedures including cardiovascular procedures, thoracic surgery, vascular surgery, abdominal surgery and neurosurgery. Fibrin sealants can reduce complications in surgery, such as haemorrhage and dehiscence, reduce operating times and reduce the need for further operations resulting from post-operative bleeding complications. The length of hospital stays can be significantly reduced as a result. Fibrin sealants also:

aid wound closure in parenchymal tissue (lungs, liver,pancreas and spleen) reduce fluid secretions and the need for chest drain, and the incidence of complications such as pneumothorax in thoracic surgery
result in haemostasis in patients with bleeding ulcers result in rapid haemostasis, fewer sutures and shorter operating times in vascular and microvascular surgery
reduce the incidence of infection, cerebrospinal fluid leakage and fistulae in neurosurgical procedures.
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Haemostats The termination of bleeding is one of the earliest and most important life-saving medical techniques. Bleeding can occur externally from the body, or internally within the body. Haemostats are very common medical products, which are used routinely for external wound or cut damage. They are topically applied and stop bleeding either passively or by encouraging the clotting mechanism. Haemostats are made from collagen, gelatine (which is treated collagen) and oxidative regenerative cellulose. One of the oldest uses of collagen is for haemostasis. Collagen haemostats contain purified and lyophilised bovine dermal collagen. Contact of blood and collagen produces the aggregation of platelets on the collagen and initiates the clotting process. Oxidised regenerated cellulose is another topical haemostat. This synthetic material absorbs blood and swells into a brownish gelatinous mass. The formation of the gelatinous mass aids the formation of clots. Oxidised regenerated cellulose is a knitted fabric produced by the controlled oxidation of regenerated cellulose. An added advantage of oxidised regenerated cellulose is that it is bactericidal against negative and gram-positive organisms. This absorbable material is effective against bacteria such as Staphylococcus epidermis, Streptococcus salivarious, Serratia marcesens, Mycobacterium phylei, Entercoccus, and Proteus mirabilis. Gelatine is another commercial topical haemostat. Like oxidised regenerated cellulose, gelatine is a passive topical haemostat in which bleeding is controlled mechanically through pressure and absorption. Passive haemostats are used primarily for routine bleeding which requires only sponge-like products to soak up the blood. Gelatine-based products are sponges made of specially treated, purified gelatine solutions. These sponges, when placed on bleeding surfaces, are capable of absorbing and holding many times their weight in whole blood. Absorbable collagen haemostats are particularly effective when localised oozing from bleeding surfaces is present.
Li gating Clips
A method of inhibiting bleeding is to tie or ligate the actual vessel itself. Non-absorbable titanium/stainless steel clips have been the traditional methods of ligating vessels. However, new absorbable devices have now come onto the market. They perform exactly the same function as titanium/stainless steel clips but are left in the body, where they are absorbed. Absorbable ligating clips have the advantage that they prevent interference with computerised tomography scans. Clips made of both poly(lactide-co-30 percent-glycolide) (Lactomer, US Surgical, USA) and poly dioxanone (PDS Absolok, Ethicon, UK).
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Surgical
Adhesi ves
and
Glues
Surgical glues are normally described as being erodible rather than absorbable and are often used for closure of small wounds or surgical sites and have been used to augment the placement of catheters or transducers within blood vessels. They are made from cyanoacrylates, a strong adhesive found in commercially available super glues. Please refer to the historical development of surgical glues for further information.
Adhesi on Barri ers
Adhesions are scar tissues caused by trauma or surgery, which connect organs or tissue surfaces that are normally separate. Adhesions can be life threatening by making surgical reentry hazardous, impeding orientation and visibility. Dissecting adhesions may cause injury to surrounding organs or blood vessels, increase blood loss and prolong operating time. Adhesions often cause severe pain, discomfort, limited range of motion and organ dysfunction. In an effort to relieve pain or free an obstruction caused by adhesions, additional surgeries may be required to dissect the adhesions. As an example, adhesions are a leading cause of infertility in women following gynecological surgery. This sub-segment refers to those absorbable membranes, which are used for the reduction of the incidence, extent and severity of postoperative adhesions after abdominal/pelvic surgery. They are usually made from modified hyaluronan that is used to separate tissues while the normal tissue repair process takes place. Background, Principles and Applications of Absorbable and Erodible Orthopaedic Biomaterials Background In recent years there has been a considerable increase in the understanding into the body's mechanisms for repairing bone, cartilage and soft tissue structures which has lead to the development of a host of new technologies and methods for treating musculoskeletal problems. Although metallic implants are likely to remain the standard of care for fixation of long bone fractures and replacement of the hip and knee joints for at least the next two decades, new biomaterials and energy-based modalities that are aimed at earlier intervention and toward more physiological methods for managing musculoskeletal trauma have captured the attention of Orthopaedic surgeons and manufacturers alike. The bioabsorbable fracture management device segment has been sub-divided into two principle sub-segments i.e. bone replacement or bone substitute materials (BRMs), bioresorbable fixation devices (BFDs).
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Market Segmentation For the purposes of this report the European absorbable and erodible biomaterials market has been divided into 2 distinct market segments. The segments are distinguished according to the clinical need.
1. Absorbable and Erodible Wo u n d Closure
Bi omaterials
Sub-segments:

Absorbable sutures Tissue sealants Haemostats Ligating clips Skin adhesives Anti-adhesionsd products
Absorbable and Erodible Orthopaedic Bi omateri als
2.
Sub-segments:

Absorbable fixation devices Synthetic bone substitute materials
Historical Developments History and Development of Absorbable and Erodible Wound Closure Biomaterials
Sutures
The history of sutures begins more than 2,000 years ago with the first records of eyed needles. The Indian plastic surgeon, Susruta (AD c380-c450), described suture material made from flax, hemp, and hair before the birth of Christ. At that time, the jaws of the black ant were used as surgical clips in bowel surgery. The Roman, Celsus, again described the use of sutures and clips in AD 30, and Galen further described the use of silk and catgut in AD 150. Before the end of the first millennium, Avicenna described monofilament with his use of pig bristles in infected wounds.
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The first suture material specifically for surgical use was brought in by Lord Joseph Lister's catgut which he introduced in 1860, and similarly disinfected chromic catgut in 1881. The development of modern suture material began in 1931 with production of an absorbable synthetic fibre. The 'Polyenterephthalate ester' called 'Polyester' in 1950 led to the general introduction of this high-grade material into surgical practice. At the same time sterilisation of surgical suture material by irradiation was developed. In 1970-71, the first absorbable suture material from polyglycolic acid (PGA) was introduced into clinical practice. This product is registered under the tradename of Dexon and is marketed by Ethicon. The second generation of absorbable sutures appeared on the market in 1974 under the trade name Vicryl. Polyglycolic acid (PGA) with a low molecular weight was synthesised by Bischoff and Walden in 1893 whereas high molecular weight PGA with plastic properties itself had been known since at least 1950, when Norton Higgins of DuPont patented a three-step process for making it from glycolic acid by carefully manipulating temperature and pressure. The patent Higgins filed did not mention medical applications, but in 1963 Edward Schmitt and Rocco Polistina of American Cyanamid Company filed a patent for the formation of sutures from PGA. When the sutures reached the market seven years later, they were rapidly adopted as a strong, reliable, and workable replacement for the traditional collagen-based absorbable sutures that surgeons had used until then.
Surgical Glues
In 1959, a variety of cyanoacrylate adhesives were developed, some types of which are now used for surgical purposes in Canada and Europe. These glues polymerise on contact with basic substances such as water or blood to form a strong bond. The first glue developed was methyl cyanoacrylate, which was studied extensively for its potential medical applications and was rejected due to its potential tissue toxicity such as inflammation or local foreign body reactions. Methyl alcohol has a short molecular chain, which contributes to these complications. Further research revealed that by changing the type of alcohol in the compound to one with a longer molecular chain, the tissue toxicity was much reduced. All the medical grade tissue adhesives currently available for human use contain butyl-esters, which are costlier to produce. In 1964, the Tennessee Eastman lab submitted its first application for new drug approval to the FDA. The military learned of this new glue and became extremely interested in its potential for use in field hospitals. MASH units in Vietnam were overloaded. Many solders were dying from chest and abdominal wounds, despite the best efforts of medical specialists. In 1966 a special surgical team was flown to Vietnam, trained and equipped to use cyanoacrylate adhesive. A quick spray over the wounds stopped bleeding and bought time until conventional surgery could be performed. The possibilities were immediately seized by the medical communities of Europe and the Far East. Meanwhile the FDA changed standards and kept requesting additional data until Eastman was reluctantly forced to withdraw his application.
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Histoacryl Blue (n-butyl cyanoacrylate) has been used extensively in Europe since the 1970s for a variety of surgical applications including middle ear surgery, bone and cartilage grafts, repair of cerebrospinal fluid leaks, and skin closure. It has been available in Canada through Davis & Geck Canada, with no adverse effects reported to date. Further, laboratory studies have been done which concluded that it has no carcinogenic potential. Tissue toxicity has only been noted when the adhesive is introduced deep in highly vascular areas (the perineum qualifies). When used for repair, ideally the wound to be closed is fresh, clean, fairly shallow, with straight edges that lie together on there own. The glue is applied to bridge over the closed edges; it should not be used within the wound (on raw surfaces), where it will impair epithelisation. The only currently FDA approved adhesives suitable for use as suture alternatives are veterinary products; n-butyl- cyanoacrylate tissue adhesives Vetbond (3M) and Nexaband liquid and octyl-based Nexaband S/C (intended for topical skin closure when deep sutures have been placed). Histoacryl Blue (butyl based) (Davis & Geck) and Tissu-Glu (isobutyl based) (Medi-West Pharmaceuticals) are sold in Canada for human use. DMSO (dimethyl sulfoxide) or acetone serve as removers. History and Development of Absorbable and Erodible Orthopaedic Biomaterials Since the late 1700s, surgeons have been experimenting with different materials to stabilise fracture fragments during healing. Initially the major problem was biocompatibility, as the saline environment in which the implants were placed tended to corrode most known materials. It has been a universal assumption that a relatively "strong" material was required and most materials tested have been metals or metal based. Improvements in metallurgy in the first half of the 20th century allowed the development of non-corroding materials, which form the core of the implants used today. The previously mentioned assumption of "necessary strength" led to the development of implants that were significant for being rigid. Long-term follow-up has demonstrated that while fractures fixed with rigid implants heal, the chronic presence of the implant alters bone physiology and does not appear to allow normal remodelling. There are two solutions to this problem - implant removal or initial fracture fixation with a material that is less "rigid" and also removes itself over time. The polyglycolic/polylactic acid derivatives have been used successfully as suture material for the past decade, establishing their biocompatibility and their consistent resorption and have now been used successfully in a range of different orthopaedic fixation products. Polylactic acid (PLA) was first made in 1932 by Carothers, who developed a process involving the direct condensation polymerisation of lactic acid in solvents under high vacuum. He abandoned the polymer as too low in melting point for fibres and textiles and went on to develop nylon. A high molecular weight Polylactic acid with plastic properties was introduced by Schneider in 1955.
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PGA itself had been known since at least 1950, when Norton Higgins of DuPont patented a three-step process for making it from glycolic acid by carefully manipulating temperature and pressure. The patent Higgins filed did not mention medical applications, but in 1963 Edward Schmitt and Rocco Polistina of American Cyanamid Company filed a patent for the formation of sutures from PGA. When the sutures reached the market seven years later, they were rapidly adopted as a strong, reliable, and workable replacement for the traditional collagenbased absorbable sutures that surgeons had used until then. Using PGA and similar polymers, Langer crafted degradable and nondegradable polymer pellets into an intricate porous structure that allowed the slow diffusion of large molecuoles. (This finding is the foundation of much of today's controlled drug delivery technology.) Loaded with chemical messengers, the pellets played a key role in Langer and Folkman's 1975 discovery in cartilage of the first compound that blocks the formation of new blood vessels, thereby halting tumour growth. In 1984, at about the same time he was approached by Joseph Vacanti, Langer teamed up with Henry Brem, a brain cancer surgeon at Johns Hopkins Medical Institutions, to test his new techniques using polymers against brain cancer. Although there were new tools for finding tumours, including computed tomography and magnetic resonance imaging scanners, the most malignant brain cancers remained largely untreatable. Cancer cells remaining after the tumour's removal were protected from chemotherapy drugs by the so-called blood-brain barrier, which prevents a variety of bloodborne chemicals from penetrating the brain. Brem wondered if polymers could slowly release cancer-killing drugs right where they were neededin the brain itself. Langer responded by designing surface-degrading polymers that released medicines at a controlled rate. In 1992, Brem and Michael Colvin, now director of the Duke Cancer Center, implanted drug-bearing polymer wafers after brain surgery. The wafers prolonged the lives of both experimental animals and human patients. Since the chemicals were released locally, they did not result in the systemic toxicity typical of anticancer drugs. With FDA approval in 1996, the wafers represent the first new treatment for brain cancer in 25 years. Similar slowdelivery systems are now being used to treat prostate cancer, endometriosis, and severe bone infections. All these efforts laid the groundwork for researchers' continuing search for a framework for growing replacement body parts and organs, such as livers. By then scientists had learned that human cells grown on flat plates did not produce the normal array of proteins, while cells grown on three-dimensional scaffolds had relatively normal biochemistry. At first the best results were obtained from PGA, but since the best source of fibrous PGA in 1984 was degradable sutures, hours were spent unwinding sutures to transform the fibers into meshlike plastic scaffolds to support liver cells. Still, by 1986, liver cells on plastic frameworks were surviving and functioning after transplantation into animals, laying the groundwork for using polymer scaffolds to create a variety of tissues, from bone to cartilage to skin.
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Since that time, diverse products based on lactic and glycolic acidand on other materials, including poly(dioxanone), poly(trimethylene carbonate) copolymers, and poly (-caprolactone) homopolymers and copolymershave been accepted for use as medical devices. In the area of fracture healing, for example, these materials have just sufficient strength to stabilise the bone during healing, degrade quickly enough to prevent stress shielding, and eventually completely disappear without unwanted effects. In addition to these approved devices, a great deal of research continues on polyanhydrides, polyorthoesters, polyphosphazenes, and other biodegradable polymers. Many proposed applications for these polymers have been explored including their use as carriers of antibiotics and growth factors for controlled localised release, bone defect fillers, and materials that can provide a scaffold for tissue growth/replacement. Recent Developments and Technological Advances in Absorbable and Erodible Biomaterials There have been a number of new and innovative developments and advances in absorbable and erodible biomaterials during the last two decades. The discussion below describes a number of arguably the more important areas of technological development, which have occurred Absorbable and Erodible Wound Closure Biomaterials
Developments Degradati on i nto Rates Control for of Absorpti on Suture s or
Absorbable
Absorbable sutures are all sutures which lose the majority of their breaking strength within 60 days of implantation. They may be of monofilament, braided, or twisted construction and composed of natural or synthetic material. Although absorption is a "yes or no" classification, the rate of absorption can vary greatly depending on the suture chemistry and the factors inhibiting normal healing are not always apparent at the time of closure. Absorption occurs by the processes of enzymatic proteolysis in the case of chromic gut, and synthetic sutures are absorbed by hydrolysis. Synthetics are preferred because hydrolysis is a more stable mechanism. The rapidity of absorption is commonly rated as a percentage of remaining breaking strength (BSR). BSR varies substantially with 50 percent breaking strength remaining for 1 day for plain surgical gut and as long as 35 days for polydioxanone. Manufacturing modifications can triple the absorption rate of the same material as with Vicryl and Vicryl Rapide. Polyglactin (coated vicryl) is braided. It is commonly used for bowel anastomosis, as a general tie for vessels and as a subcuticular suture for skin. It has 75 percent of its strength at 2 weeks and 50 percent at three weeks. It causes a minimal tissue reaction and is very close to being the ideal suture for almost all purposes. The more rapidly absorbing version (Vicryl Rapide) is now produced which loses all strength within 14 days.
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Polydioxanone (PDS) is monofilament. It absorbs slowly and there is minimal absorption until about 90 days. However, its in vivo tensile strength reduces more quickly to 70 percent at 2 weeks, 50 percent at four weeks and 25 percent at six weeks. It is widely used for abdominal wall muscle closure where is has replaced nylon/prolene as it does not cause chronic suture sinuses which occur with non-absorbable materials. Researchers and manufacturers alike are constantly searching to improve the degradation characteristics of absorbable sutures whilst retaining the desirable properties of:

High tensile stength Excellent handling Low tissue reaction Predictable absorption rate Firm and safe Knotting
of "Second- Generati on" Fibrin Sealants
Development
Conventional fibrin sealants are prepared from pools of plasma purchased from more than 10,000 individuals. The risk of viral or prion transmission by blood products continues to increase each year as new infectious or other pathogens are discovered. The risk rises dramatically when the source plasma is a pool of 10,000 units rather than a single unit. For example, TransfusionTransmitted Virus ("TTV"), thought to be a form of hepatitis yetto be characterised, and Parvovirus B19 are resistant to the most commonly used solvent detergent ("SD") viral inactivation technology. Prions, infectious protein particles which cause spongiform encephalopathies in cows (Mad Cow Disease) and humans (new variant Creutzfeldt-JakobDisease or nvCJD), are 100 percent lethal to infected patients, resistant to all known forms of viral inactivation technology, elude all forms of rapid detection, and cannot be diagnosed in patients except through a biopsyof the dead victim's brain. Blood products sourced from pools of human plasma often contain additional proteins derived from animals such as cows (bovine lung aprotinin and bovine thrombin are ingredients of currently available commercial surgical sealants) or snakes (batroxobin, derived from snake venomis used as a substitute for human thrombin by one sealant currently being marketed in Europe). Animal proteins may provide a vehicle for the contamination of pooled plasma products by viruses or prions (several cases have been documented where victims contracted nvCJD as a result of taking growth hormones containing bovine substances). In addition, it has been reported that animal proteins have triggered allergic reactions leading to anaphylactic shock in exposed patients. Also, Factor V-based bleeding disorders have occurred in patients exposed to bovine Factor V present in commercial preparations of bovine thrombin. Second-generation" surgical sealant are described as being produced from a single unit of human plasma in about an hour. This second-generation sealant is more advanced than conventional fibrin sealants becauseit augments fibrinogen with the additional wound healing and adhesive proteins, fibronectin, Factor VIII, von Willebrands Factor and Factor XIII.
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Research Reducti on
i nto of
and
Development
of
Bioabsorbables
for
Post- Operati ve
Adhesions
Adhesions are a serious and frequent complication following abdominal surgery where tissues which have been scarred through operation bind to adjacent tissues. This can result in serious consequences such as bowel obstruction, infertility and chronic pain. There is no treatment for adhesions other than further surgery. Recent studies have identified the magnitude of the problem, suggesting that a third of all abdominal surgery patients are readmitted to hospital for further surgery at least twice because of adhesions. A number of absorbable products have been and are currently being researched and which are able to demonstrate potential for the prevention of post-surgical adhesions. INCERT for example from Anika Therapeutics, Inc. is a patented, thin, bioabsorbable, implantable "sponge" derived from cross-linked hyaluronic acid and designed as a barrier to prevent the high incidence of scarring and internal adhesions after pelvic or abdominal surgery. It is placed over the surgical site and surrounding organs and tissues before a surgical incision is closed, and functions as a physical barrier to prevent internal tissue surfaces from adhering and forming scar tissue. Others workers from the Chu/Hsiao laboratory in Department of Chemistry at Stony Brook, USA have developed a unique electrospinning technique to produce bioabsorbable polymer membranes (polylactide (PLA), polyglycolide (PGA) and copolymers). The membranes are designed for uses in prevention of post-operative adhesions but are yet to be commercialised.
Study New Of Aquati c Mussels I ndi cates They May Yi e l d
Anti fouli ng
Materi als,
Surgi cal
Adhesi ves
At a recent meeting of the Great Lakes Regional meeting of the American Chemical Society, the world's largest scientific society, Jonathan Wilker, assistant professor of chemistry at Purdue University presented research on the mechanisms behind how ocean mussels bind so tightly to rocks and ship hulls. It is thought that these new insights could lead to surgical applications with the development of surgical adhesives that could replace the tissuedamaging sutures currently used in surgery. The mussels' adhesives are made up of soluble proteins that cross-link to form a hardened matrix. His team has preliminary results indicating that metals such as iron are vital to this matrix, representing the first time transition metals have been shown to be essential for the synthesis of a biological material.
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Absorbable and Erodible Orthopaedic Biomaterials

Research and Development i nto Recombi nant Human
0steogeni c
Protein -1
(rhOP -1 )
Recently, considerable attention has been directed toward biologic considerations and, in particular, novel growth factors that regulate and promote these biologic processes. This renewed focus has been a consequence of the successful isolation, purification, and characterization of an entire family of bone morphogenetic proteins (BMPs), and the demonstration that a singular molecular species of recombinant human BMP (rhBMP) could induce the entire cascade of endochondral osteogenesis. The bone morphogenic proteins constitute a novel subfamily of the transforming growth factor type beta (TGF-beta) supergene family and play a critical role in modulating mesenchymal differentiation and inducing the processes of cartilage and bone formation. Optimism for using such growth factors as effective bonegraft substitutes increased following a series of valuable pre-clinical animal experiments. The concept of osteogenic bone proteins was introduced by Urist in 1965. His pioneering work demonstrated the osteogenic potential of demineralized bone segments after implantation at intramuscular sites in animals. Urist postulated that bone matrix must contain a substance of substances that induce the differentiation of pluripotential precursor cells along an osteogenic line. Numerous bone-inducting proteins have been isolated from bone using a variety of purification procedures. As many as 14 different BMPs have been isolated. With the purification of these proteins in sufficient quantity and purity to provide amino acid sequence data, human complementary cDNAs were isolated and cloned. Two bone morphogenic proteins have proven particularly capable of bone induction. These have experimentally been tested in spinal and long bone applications with dramatic success.
Advances in Bi odegradable I mplants
Biodegradable implants are increasingly used in the field of operative sports medicine. Today, a tremendous variety of implants such as interference screws, tacks, suture anchors, and devices for meniscal repair are available. These implants consist of different biodegradable polymers that have substantially different raw material characteristics such as in vivo degradation, host-tissue response, and osseous replacement. Erodible implant incorporation of polyactides (PLAs) and polyglycolides (PGAs) have been used in orthopedic surgery for ten years. Erosion of the threads implanted required 9-10 weeks. Bioabsorbable interference screws of different polymer composition have been used for repeat arthroscopy after anterior cruciate ligament (ACL) reconstruction. Bioabsorbable interference screws were used for bone plug fixation of bonepatellar tendonbone (BPTB) autografts. Most of the commercially available biodegradable devices are polyesters composed of homopolymers or copolymers of glycolide and lactide. There are also devices made from copolymers of trimethylene carbonate and -caprolactone, and a suture product made from polydioxanone. Examples of the materials from which implants have been developed include:
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Polyglycolide (PGA): Polyglycolide is the simplest linear aliphatic polyester. PGA was used to develop the first totally synthetic absorbable suture, marketed as Dexon in the 1960s by the then Davis and Geck, Inc. Polylactide (PLA): Lactide is the cyclic dimer of lactic acid that exists as two optical isomers, d and l. l-lactide is the naturally occurring isomer, and dl-lactide is the synthetic blend of dlactide and l-lactide. The homopolymer of l-lactide (LPLA) is a semicrystalline polymer. These types of materials exhibit high tensile strength and low elongation, and consequently have a high modulus that makes them more suitable for load-bearing applications such as in orthopaedic fixation and sutures. Poly(dl-lactide) (DLPLA) is an amorphous polymer exhibiting a random distribution of both isomeric forms of lactic acid, and accordingly is unable to arrange into an organized crystalline structure. Poly(-caprolactone): This polymer has been regarded as tissue compatible and used as a biodegradable suture in Europe. Because the homopolymer has a degradation time on the order of 2 years, copolymers have been synthesized to accelerate the rate of bioabsorption. For example, copolymers of -caprolactone with dl-lactide have yielded materials with morerapid degradation rates. A block copolymer of -caprolactone with glycolide, offering reduced stiffness compared with pure PGA, is being sold as a monofilament suture by Ethicon, Inc. under the trade name Monacryl. Poly(dioxanone) (a polyether-ester): The ring-opening polymerization of p-dioxanone resulted in the first clinically tested monofilament synthetic suture, known as PDS (marketed by Ethicon). Poly(lactide-co-glycolide): Copolymers of glycolide with trimethylene carbonate (TMC), called polyglyconate have been prepared as both sutures (Maxon, by Davis and Geck) and as tacks and screws (Acufex Microsurgical, Inc., Mansfield, MA). Other Polymers under Development: Currently, only devices made from homopolymers or copolymers of glycolide, lactide, caprolactone, p-dioxanone, and trimethylene carbonate have been cleared for marketing by FDA. A number of other polymers, however, are being investigated for use as materials for biodegradable devices. Two examples of these materialspolyhydroxybutyrate (PHB) and polyhydroxyvalerate (PHV)are commercially available as copolymers under the trade name Biopol (Monsanto Co., St. Louis) and have been studied for use in medical devices. The use of synthetic poly(amino acids) as polymers for biomedical devices would seem a logical choice, given their wide occurrence in nature. In practice, however, pure insoluble poly(amino acids) have found little utility because of their high crystallinity, which makes them difficult to process and results in relatively slow degradation. The antigenicity of polymers with more than three amino acids in the chain also makes them inappropriate for use in vivo. To circumvent these problems, modified "pseudo" poly (amino acids) have been synthesized by using a tyrosine derivative. Tyrosine-derived polycarbonates, for example, are high-strength materials that may be useful as orthopedic implants. It is also possible to copolymerize poly(amino acids) to modify their properties.
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Advances in Allograft Bone Substitutes Conservative estimates have determined that up to 35 percent of bone graft procedures in Europe will use synthetic bone substitutes by the year 2003 and as high as 45 percent by the end of the forecast period. Coral derivatives, ceramics and orthopaedic research at the cellular level may soon relegate casts, external and internal fixation techniques, and bone grafts to the medical archives. Biomaterial research is currently being conducted into a variety of different allograft bone substitutes. The most important developments that have been identified include bone graft substitutesCoralline Hydroxyapatite. Autograft, specifically that taken from the iliac crest, has become the gold standard for bone grafting in orthopaedic surgery and in particular spinal surgery. While the fusion rates have been shown to be quite high (>90 percent in most reports), there are still significant complications and morbidity associated with bone graft harvesting. Some investigators have reported graft site morbidity to be as high as 25 percent. Patients frequently complain of graft site pain as much as 5 years after their surgery. Allograft has been widely used in a variety of orthopaedic application including spinal surgery in an attempt to eliminate the need for autograft harvesting. However, allograft has specific limitations and liabilities. The fusion rate with allograft has been reported to be significantly lower than that of autograft. Research has indentified that the ideal bone graft substitute for widespread use in orthopaedics requires the following characteristics:

Rapid biologic incorporation Appropriate structural integrity to load share Uniformity Predictable structural elements Ability to be machined into different sizes and shapes Ease in storage and handling A reasonably low cost International availability Osteoinductive activity
Bone has three-dimensional interconnections between the lacunae that provide intercellular communication. This three-dimensional construct is important in the biology of bony ingrowth. The structure of sea coral is three-dimensionally identical to bone. Coral is a life form that has a great deal of protein and its crystalline structure is primarily Calcium Carbonate. Because of its three-dimensional likeness to bone, it has excellent potential as a bone substitute. A patented process converts Calcium Carbonate into hydroxyapatite while maintaining the three-dimensional integrity of the coral yielding Coralline Hydroxyapatite (CH). All the proteins are removed through depyrogenation. This renders the structure totally non-immunogenic so it becomes a nearly perfect bone lattice.
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Different genera of coral yield different pore sizes for CH. How CH is used in the spine is species-dependent. CH 200 with a pore size of about 200 microns from the genera porites is similar to cortical bone. It can be used for anterior interbody fusion of the cervical and lumbar spine. Since it loads in shear however, it cannot be used as a posterior onlay graft. CH 500 with a pore size of about 500 microns from the genera goniopora can be used in granule form in combination with autograft for posterolateral fusion. Or, in granule or block form within a cage on its own for anterior interbody fusion of the cervical and lumbar spine. CH can be machined to a variety of sizes and shapes to fit different structural needs. It does not require refrigeration and is easily transported. CH fits all the characteristics of an ideal bone graft substitute with the exception of one. The biology of CH is that of osteoconduction in primary bone healing with no osteoinductive properties. Therefore, a large, stable interface between the viable bone and CH is necessary. The addition of rigid internal fixation favors the osteoconduction integration of the CH implant.
Bi odegradeable Polymers for Ti s s u e Engineeri ng
One area of intense research activity is the use of biodegradable polymers for tissue engineering, which can be defined as the application of engineering principles to create devices for the study, restoration, modification, and assembly of functional tissues from native or synthetic sources. Candidate materials include natural polymers (fibrin, collagen, gelatin, hyaluronan), synthetic polymers (e.g., PLA, PGA, PLGA, ethylene oxide block copolymers), and inorganic materials (tricalcium phosphate, calcium carbonate, nonsintered hydroxyapatite). A recent project investigated the possibility of manufacturing biodegradable composites for use as bioactive matrices to guide and support tissue ingrowth. Composites were prepared using polyhydroxybutyrate (PHB), a naturally occurring -hydroxyacid linear polyester, and as much as 30% by volume of either hydroxyapatite (HA) or tricalcium phosphate (TCP). One of the goals was to achieve a reasonably homogeneous distribution of the HA/TCP particles in the PHB matrix, as this uniformity would provide an anchoring mechanism when the materials would be employed as part of an implant. The composites were successfully manufactured through a compounding and compression molding process. It was observed that microhardness increased with an increase in bioceramic content for both the HA ad TCP compounds.
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New Material Technologies Collaborative efforts with industrial and academic scientists at a variety of institutions are currently underway and include fabrication and testing of new polymeric and composite materials and cell culture and implantation studies. One of the areas of particular interest is in tissue engineering where several application in orthopaedics have been identified. These include:

Cell and Molecular Engineering of Bone Regeneration Bone and Cartilage Reconstruction Development of Bioengineered Tendons and Ligaments
The 'tissue engineering' approach to ACL reconstruction uses resorbable scaffolds consisting of tissue-derived and/or synthetic materials to induce neoligament formation. This concept was originally developed for repair of other connective tissues including skin, bone, and cartilage. In contrast to permanent synthetic prostheses that lose strength with time, the mechanical behavior of these implants should improve with time due to neoligament tissue development and remodeling. Currently research is being carried out for example at the Chelsea and Westminister Hospital in London to create new specialised tissues grown from banks of undifferentiated pluripotent stem cells which can be genetically customised to individual recipients. The long term plan of this research project is to create customised replacements for bone, cartilage, ligaments and muscle destroyed by illness or accident or weakened by old age. The same laboratory is conducting research into the development of a spinal implant to replace degenerative discs which have become hopelessly abnormal due to inflammation. The replacement disc, which has a ceramic framework containing living bone and cartilage cells is, at the time of writing, being tested in the laboratory. Geographic Markets This report provides a market profile and forecast for eight European markets. These are:

Germany France Italy United Kingdom Spain Scandinavia (Sweden, Finland, Denmark and Norway) Benelux (Belgium, Luxembourg and the Netherlands)
Further details of the individual market profiles are provided in each of the respective country profile chapters.
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Societies and Associations The main organisations serving to supporting the development of biomaterial technologies and provide assistance to the industry include:

Syndicate Nationale de I'Orthopedie Francaise (SNOF) International Society of Arthroscopy, Knee Surgery and Orthopaedic Sports Medicine (ISAKOM)
National Association of Orthopaedic Nurses (NAON) Advanced Medical Technology Association (formerly HIMA) (AdvaMed) American Academy of Orthopaedic Surgeons (AAOS) British Orthopaedic Association (BOA) Centre de Recerca en Enginyeria Biomedica (CREB) The Board for Certification (BOC) The European Society of Biomaterials La Socit Europenne de Traumatologie du Sport La Socit Franaise de Traumatologie du Sport Deutsche Gesellschaft fr Biomaterialien e.V. The Society of Biomaterials Federaci"n Nacional de Empresas de Instrumentaci"n Cientfica, Mdica, Tchnica y Dental: The Spanish Medical Association (FENIN) Nederlandse Orthopaedisch Vereniging (NOV)
Trade Organisations The International Association of Medical Prosthesis Manufacturers (IAPM) is a society of manufacturers of active and non-active implantable medical devices including orthopaedic implants. The IAPM represented the implant industry in the drafting and implementation of the two European Medical Device Directives etc.
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From November 1999 this association became incorporated into EUCOMED. The national trade organisations are as follows:

ABHI-Association of British Healthcare Industries AdvaMed-Advanced Medical Technology Association (formerly HIMA) APORMED-The Portugese Medical Association APPAMED-Le Syndicat de l'industrie des Dispositifs de Soins Mdicaux ASSOBIOMEDICA-Associazione nazionale per le tecnologie biomediche e diagnostiche: The Italian Association for biomedical and diagnostic technology.
BHTA-British Healthcare Trades Association BVMed-Bundesverband Medizintechnologie e.V:. The German Medical Technology Association
ESTA-European Surgical Trades Association FENIN-Federaci"n Nacional de Empresas de Instrumentaci"n Cientfica, Mdica, Tchnica y Dental: The Spanish Medical Association.
LFN-Leverandorforeningen for Helsesektoren: The Norwegian Medical Association MDA-Medical Device Agency NEFEMED-Nederlandse federatie van producenten, importeurs en handelaren van medische producten: The Netherlands Medical Association
SLF-Sjukvrdens Leverantors Forening: The Swedish Medical Association SNITEM-Syndicate National de l'Industrie des Technologies Medicales: The French National Association for Medical Technology Industries
UNAMEC-The Belgium Medical Association

This part of the chapter explains why a particular measurement has been included in the study and highlights the strategic significance of that measurement. Frost & Sullivan clarifies the meaning of the measurement and shows how to use it. Clients also learn how to do their own Market Engineering.
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Each section that follows includes a brief tutorial to define the measurement used, present the research methodology applied, and highlight the significance of the measurement to the client's strategy. Frost & Sullivan's ultimate goal is to assist clients in developing highly effective and successful business strategies. For clarity and ease of reference, the strategic significance of each measurement is itemised in a bulleted list. Each measurement section has the following subsections:

Definition of measurement Research methodology Strategic significance of measurement Market measurement analysis
The market analysis subsection is unique to each section. It is prepared by the analyst and pertains specifically to the research performed for each individual report. Market Size in Dollar s Definition of Measurement Market size in dollars is calculated by measuring the total market of consumed (not produced) products or services for the current year. Market size is measured in US dollars unless otherwise indicated. Research Methodology Market size in dollars is measured by calculating the total sales of all products included in the market by all manufacturers or suppliers in all regions covered by this report. A bottomup approach is used, which means that the market total is calculated by adding all individual companies' sales to arrive at a total market figure. Data on individual product and company sales are gathered through extensive interviews with manufacturers, end users, suppliers, distributors, and other relevant sources. These interviews typically include marketing managers, sales managers, owners, salespeople, presidents, former employees, and research and development (R&D) managers. This measurement methodology is typically referred to as "competitive interviewing". Data derived from competitive interviews are cross-verified by other interviews and by secondary sources such as articles in the trade press, press releases, annual reports, online databases and government reports.
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Strategic Significance of Market Size in Dollars Measurement

This measurement provides a gauge for how to allocate resources for all departments It helps plan the amount of R&D capital that can be invested in new product development
A positive trend in this measurement would justify continued investment A negative trend in this measurement would imply the need for a retraction or cautious market strategy
Market Size in Unit s Definition of Measurement The market size in units is the total of all units sold in a given period by all competitors in the market. Research Methodology Market size in units is calculated by totalling the sales of all products included in the market by all manufacturers from all countries. A bottom-up approach is used, which means that the world market total is calculated by adding all individual companies' sales to derive a total market figure. This methodology differs from the so-called top-down approach of measuring market size, which consists of taking the average of many expert guesses to arrive at total market size. Information on individual products and company sales is obtained through extensive interviews with manufacturers. These interviews are typically with marketing managers, sales managers, owners, salespeople, presidents, former employees, and R&D managers. This measurement methodology is typically referred to as "competitive interviewing". Data derived from competitive interviews are cross-verified by other interviews and by secondary sources such as articles in the trade press, press releases, annual reports, online databases, and government reports.
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Strategic Significance of Market Size in Units Measurement
This measurement helps determine the amount of time and resources to devote to marketing and sales efforts Measuring market size in units helps gauge the amount of R&D capital that can be invested in new product development The measurement can often reveal a different growth trend in the market, which because of price variationsmay not be revealed in measurements of market size in revenues Knowing the rate of growth in units is an important aid to determining market age and subsequent strategies
Annual Mark et Growt h Definition of Measurement Measuring annual market growth entails measuring market growth percentage changes from the previous year. This growth can be measured in either revenues or units. In this report, the annual market growth rate is based on revenues. Research Methodology Annual market growth is calculated by dividing the market size of the current year by that of the previous year. Market size is derived primarily from competitive interviews. In the absence of an accurate measurement of market size for previous years, the analyst interviews competitors and manufacturers to obtain their sales growth rates from the previous year. These rates are weighted on the basis of sales volume, and a calculation of market growth is obtained. Strategic Significance of Annual Market Growth Measurement
This measurement indicates the speed at which a market is changing. Knowing this speed should influence the timing of all investment decisions, whether they are in sales and marketing or in R&D
Measuring annual market growth gives insight into the age of a market. Faster growth typically implies a younger market and should serve as a warning to companies to focus on aggressive R&D and marketing efforts to capture market share This measurement can help a company select the appropriate competitive strategy on the basis of product life cycle theory Higher growth rates typically indicate more new competitive entrants to the field Lower growth rates typically signify that growth could come from the acquisition of existing market participants
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Marke t Growth by Compo und Annual Growth Rate Definition of Measurement The measurement of the compound annual growth rate (CAGR) over the forecast period reflects the general projected growth rate of the industry. Research Methodology The CAGR is derived from a calculation of actual forecast years. The forecast is based on the analyst's expert opinion, which has been developed through monitoring the market and through interviews with a significant number of industry participants. Strategic Significance of Market Growth by CAGR Measurement

The CAGR measurement provides insight into the age of the market It helps gauge R&D and marketing investment It influences business planning, which must reflect the projected market growth It serves as a gauge to rank the attractiveness of markets for investment and strategy
Ave rage Pr ic e Definition of Measurement Average price is obtained by calculating the total market size divided by number of units sold. It is not a simple average of all the product prices on the market. Research Methodology Average price information is gathered primarily through competitor interviews and from published price lists and trade press sources. Street prices are also verified to check for any variance between list price and actual price. Strategic Significance of Average Price Measurement

This measurement aids determination of the overall market position of a product It helps in calculating return on investment of new R&D projects It is a key element in the development of competitive strategies
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Price Range Definition of Measurement Price range is calculated on the basis of the lowest-priced product in the market and the highest-priced product in the market. Research Methodology Price information is gathered primarily from competitor and end-user interviews. Price data are also gathered from published price lists and trade press sources. Strategic Significance of Price Range Measurement

This measurement aids in determination of a product's overall market position It helps in calculating return on investment of new R&D projects Knowing the accurate price range is key to developing competitive strategies This measurement provides the outside parameters on the range of products in the market
Price Sensitivit y Definition of Measurement This measurement determines how sensitive sales are to changes in price. A highly pricesensitive market will see large drops in consumption with small increases in price. A less price-sensitive market will not see significant changes in consumption as a result of price changes. Research Methodology Price sensitivity can be measured by studying the history of the market or by interviewing customers. Customer interviews may reveal how many customers are willing to buy at given price points. Another method is to interview experienced market competitors that have experimented with pricing strategy.
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Strategic Significance of Price Sensitivity Measurement
This measurement serves to alert makers of highly price-sensitive products to price reductions among competitors that could significantly harm sales
Highly price-sensitive markets drive competition to be very efficient in production, sales and marketing
Indications that price sensitivity is increasing each year could mean that the market is maturing or that the products are becoming commodities
Indications that the market is not price-sensitive might mean that price increases would not have a great impact on sales
Market Saturatio n Definition of Measurement Measuring market saturation helps determine the degree to which the product is accepted and used by the market. In new and developing markets, the saturation rate is very low. Mature markets, in contrast, typically have high rates of saturation. Research Methodology Customer interviews by mail or telephone are the primary research measurement instrument used to determine market saturation. Estimates from manufacturers or other sources, such as trade associations, tend to be biased. In high-technology markets, typically 100 to 1,000 customers are interviewed to determine the market saturation rate Another method sometimes used is to calculate the installed base of products in the market divided by the total number of potential customers for that product in the market Strategic Significance of Market Saturation Measurement
An accurate measure of market saturation greatly influences the types of marketing tool required to attract customers
Indications of low market saturation convey the message that more education and support is needed
Entering heavily saturated markets requires a significant contribution to the market and larger investments in marketing because taking market share from existing competitors will be difficult
This measurement is related to the market age measurement and will influence all R&D investment strategies, pricing, and timing of marketing strategies
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M a r k e t A g e / P r o d u c t L i f e Cy c l e Definition of Measurement The measurement of market age is typically broken down into four phases of the product life cycle:

Market development Market growth Market maturity Market decline
Research Methodology Market age measurements are based primarily on other measurements, such as market growth, market saturation, degree of competitiveness, pricing trends, and degree of technical change. Once all these variants have been considered, the analyst is qualified to use the expert-opinion method of measurement. This measurement is based on the combination of all market data obtained from customers and competitors, including both quantitative and qualitative data. Strategic Significance of Market Age Measurement
Knowing the market age through market measurement influences the size of investment made by both R&D and marketing
The measurement influences the role of timing and time pressure It influences pricing strategy It may influence the profit expectations of the product line
Price-performance Ratio Definition of Measurement A measurement of price-performance ratio helps determine how the price of technology is changing in the market. A descending price-performance ratio trend indicates that customers receive more product for their money each year. An ascending price-performance ratio trend means that the price is increasing for the same amount of technology received.
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Research Methodology The price-performance ratio is obtained by measuring prices and specifications of products currently on the market. Information is gathered primarily from competitive telephone interviews and is supplemented by price lists and secondary data. The information on product specifications is gathered mainly through product literature reviews and is supplemented by competitive interviews. Strategic Significance of Price-Performance Ratio Measurement
This measurement assists in establishing the return on investment calculation for new product development by helping to estimate future price levels
It helps keep management aware of the demand for future price changes It influences the speed of, investment in and organisation of the R&D effort It has an impact on the marketing strategy
Replacement Rate Definition of Measurement This measurement of the replacement rate gauges how often the average product is replaced by the average customer. Research Methodology The primary way to measure the replacement rate is through customer interviews by mail or telephone surveys. Telephone surveys are used more frequently because of their speed, low cost, and high response rates. Another way to measure replacement rate is to base the calculation on other measurements, such as annual unit sales, size of the potential customer base, market saturation, the number of customer sites, and the installed base. This method is not considered accurate enough, however, because of the possible compounding of measurement error. The method is often used to verify the realism of the primary methodology. Strategic Significance of Replacement Rate Measurement
The replacement rate significantly affects the amount of customer monitoring required on the part of the marketing department to maximise market share
If the replacement rate is decreasing, the sales and marketing department will need to monitor the customers more closely
The replacement rate indicates the size of the replacement segment of the market versus the new user segment
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Market Concentration Definition of Measurement Market concentration is a measure of how much of the market is dominated by key suppliers. The measurement is based on the percentage market share in dollars that the top three suppliers are capturing each year. Research Methodology Market concentration is measured by adding together the market shares of the top three suppliers. The information used to obtain this measurement is derived primarily from interviews with manufacturers and the determination of market share. A rough verification of this measurement can be taken by interviewing customers to determine which products they are using and buying. Strategic Significance of Market Concentration Measurement

The measurement of market concentration has an impact on acquisition strategies. It targets companies for competitive benchmarking. This measurement indicates trends toward industry consolidation or fragmentation.
Number of Competitors Definition of Measurement Knowing how many competitors are already in the market helps determine the competitiveness of the market. The measurement takes into account the total number of manufacturers currently in the market. It does not consider companies that are engaged in R&D but have not yet introduced products into the market. Research Methodology The number of competitors in the market is the sum of all the companies currently in the market. To find all the current market competitors, the analyst studies the world trade press, interviews competitors, searches online databases and directories, and visits trade shows.
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Strategic Significance of Measurement of Number of Competitors
The number and type of competitors revealed by this measurement may help a company decide whether to enter the marketplace
This measurement reveals the degree of competitiveness in the market, which influences pricing, marketing and sales strategy decisions
If plotted over time, this measurement can be a key indicator of market age, which helps create market strategies that optimise market share and profitability
This measurement is a key to determining competitive strategy
Number of Products Definition of Measurement The number of products considered in this measurement is the sum total of all the products on the market. It is yet another way to gauge the competitiveness of the market. Research Methodology The number of products is calculated by summing all the products currently on the market. To find all the current products in a market, the analyst studies the trade press, interviews competitors, searches online databases and directories, and visits trade shows. Strategic Significance of Measurement of Number of Products

The number and type of products influence a company's decision to enter the market The degree of competitiveness in the market revealed by this measurement influences pricing, marketing, and sales strategy decisions
If plotted over time, this measurement provides a clue to the age of the market, making it possible to create market strategies that optimise market share and profitability
It should be key to determining competitive strategy
Degree of Competitiveness Definition of Measurement Competitiveness is a relative measurement that gauges the level of competition in the market. It is ranked on a 1 to 10 scale, where 1 means no competition and 10 indicates fierce competition.
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Research Methodology This measurement combines several other competitive measurements and non-quantitative information gathered in the research process. An expert-opinion methodology is used to form the final quantitative measurement. Once the analyst has interviewed the industry participants, reviewed all the secondary literature available, and taken the market measurements, the analyst is qualified to make this measurement. Strategic Significance of Competitiveness Measurement

The competitiveness measurement aids the decision to enter or leave a market It is an indicator of expected profitability This measurement influences the pricing strategy used It has a large influence on the degree to which the marketing strategy is competitively oriented
It may have an influence on the type of R&D projects that are accepted. Highly competitive environments typically require faster, smaller product development projects
Installed Base Definition of Measurement The installed base measurement is a gauge of how many products are currently in use in the market. It excludes products that are not in use or are sitting on shelves. Measurement of the installed base provides insight into the actual size of a market. The standard market size measurement differs from the installed base measurement: It measures the size of the market only in terms of what was sold in a given period. The installed base measurement results in a more accurate assessment of the market size in that there are typically many more users than purchasers of a product each year. Research Methodology The installed base measurement is taken primarily from competitor interviews. Each manufacturer is interviewed for each product to determine the total number of products shipped over the product's lifetime. This is done for all products on the market, and the sum of all products minus those replaced determines the installed base. The measurement can also be taken by customer interviews on how many products a sample size is using. These data can then be extrapolated to the entire population of customer sites. The number of customer sites can be calculated by secondary research on the customer base.
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Strategic Significance of Installed Base Measurement
The installed base helps gauge the total potential revenues to be generated by a product, thus providing an indication of how much to invest in R&D and marketing
The installed base can be a vital measurement for developing new product accessories or products designed to replace those that are technically inferior
A positive or negative trend in the installed base should make a significant impact on sales and marketing strategy
Number of Customer Sites Definition of Measurement The number of customer sites is a measure of the total number of potential sites where a product could be used. Several sites may exist within the customer location. Research Methodology This measurement is taken mainly through the use of secondary research (already published data). Typically, once the customer has been identified, secondary sources of information can provide the statistics on the number of customer sites available. In cases where it is difficult to identify actual customers for a given product or service, customer interviews can be carried out to define more precisely the actual customer base. This is typically done for new products and technology. In some cases, customers for existing products can be quantified and defined by an in-depth analysis of historic sales. To define the number of potential customer sites, several parameters can be used, such as location, size, application, and industry. These parameters can help make a more accurate determination of the actual customer base. Strategic Significance of Measurement of Number of Customer Sites
This measurement provides a clear understanding of how much should be budgeted for various marketing tools such as the direct sales force, direct mail and telemarketing, to fully penetrate the market
It helps market managers make more accurate forecasts for existing products and new product launches
It provides knowledge of who the customers are and where to find them
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D e g r e e o f Te c h n i ca l C h a n g e Definition of Measurement The degree of technical change is a measurement that estimates the amount of new technology introduced into the market each year. Markets with a high rate of technical change move much faster and are more difficult to monitor than those with low rates of change. Research Methodology This measurement is based on several important factors that the analyst uses to make the final measurement. They include:

Number of new products introduced each year Number of technical specifications used to describe a product Number of companies exiting or entering the market Customer understanding of the new products Amount of patent activity in the market Length of time a product stays on the market Speed of product development time Number of product improvements over time Price-performance ratio
Once the research on the market has been carried out, these factors are combined to give the analyst the expert opinion needed to make this measurement. The measurement is relative to all the other markets included in the market. Strategic Significance of Measurement of Degree of Technical Change
This measurement helps a company determine the type and style of R&D to pursue. A high rate of technology change should stimulate a strategy of rapid product introduction designed for short payback periods, with planning for constant product improvements and updating
It helps stimulate marketing managers and technical managers to monitor competitive technology more closely in markets with a high degree of change
High rates of technology change should encourage companies to become involved in more strategic relationships, such as with original equipment manufacturers (OEMs), licensing, and joint ventures
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Market Forecast Definition of Measurement The market forecast is a measurement of the future market based on expert opinion. In this study, a seven-year forecast has been made of annual sales. The measurement should be used only as a rough indicator of the general trend of the market. Research Methodology The market forecast takes into account all the quantitative and qualitative data gathered during the market research phase. These data are combined with external data, including political and economic data, and the analyst begins to gain a general understanding of where a market is going in the future. Key to this forecast is the information collected from customers on their use of the product, the benefits they derive, and their future intention to purchase. The specific data playing a major role in the forecast include market saturation, market age, replacement rate, the number of customer sites, and the installed base. Strategic Significance of Market Forecast Measurement

This measurement provides a guide to product forecasts and pricing points It helps create budgets for marketing expenses based on the direction of the market growth
It helps determine correct levels of R&D spending to maximise profitability
Market Shar e Definition of Measurement The market share is the measurement of the portion of the annual market the company is able to capture in terms of revenues during the current year of measurement. It is the basic measurement of market health and should be monitored annually for changes. A decreasing share of the market implies that competitors are pushing that company out of the market. Sales levels and sales growth or decline do not necessarily indicate equivalent changes in market share. It should not be assumed that increasing sales are an indication that market share is doing well.
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Market share is an important strategic measurement, yet many companies do not have much interest in or knowledge of their actual market share. They do not track it or use it to measure their performance. Companies that do not accurately measure and monitor their market share over time can be making a significant and costly strategic mistake. Market share is the foremost indicator of a company's health. When market share is not monitored regularly, a company is left unaware of its status in the market, which can lead to disaster. A market share measurement typically does not in itself offer much strategic insight. When measurements are taken over time, however, they serve as a major indicator of a company's market performance. This section provides a competitive analysis based on market share and market share trends over the past year. The Frost & Sullivan Market Engineering research methodology strives to provide data on market share trends that are as accurate as possible. To do so, the research team verifies and cross-verifies the data during the interview process. Some companies are slow to reveal their sales statistics, and others do not know them exactly, so the market share statistics are not always 100 percent accurate. It is more important to rank companies accurately and arrive at a solid understanding of which companies gained and which companies lost market share. Gain and loss in market share drive Frost & Sullivan's analysis in this section. The analysis provides valuable insight into the competitors in the market. It indicates the companies against which competitive benchmarking should be carried out to find process improvements. Also, the analysis reveals mistakes that companies may have made, from which lessons can be learned. This section almost always evokes a strong reaction from market participants in regard to both analysis and measurement accuracy. Companies that would like to comment on this section with Frost & Sullivan should feel free to call and arrange a discussion. Feedback is always appreciated and used. Frost & Sullivan strives to make the entire report as accurate as possible and to provide the maximum value possible to its clients. If readers find errors or omissions, they are encouraged to fax or e-mail them to Frost & Sullivan.
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Research Methodology The measurement of market share is gained primarily through interviews with the competitors in the market. Great care is taken to avoid bias and untruths through developing a good relationship on the telephone and by using carefully worded questions that cross-verify themselves. The answers from the respondents are cross-verified with answers from other employees and owners of the same company as well as from other manufacturers. Annual reports and the trade press can also confirm that the data collected are in the correct range. Sales data are sometimes obtained in a format that is not directly applicable to the measurement. In such cases, the data are manipulated and extrapolated to fit the measurement format. Examples include sales data for a fiscal year that does not run from December to December, sales data by month or quarter, and sales data by geographic region. Strategic Significance of Market Share Measurement

Market share provides a critical measurement of the product's health in the market It can be a valuable indicator of approaching problems It can provide feedback on the success of marketing programmes In some cases, it can be used in promotional campaigns to improve relationships with customers
It has a great impact on the type of competitive strategy implemented It can influence the choice of customer marketing strategy
Customer Satisfaction Definition of Measurement Customer satisfaction measurements provide information about the degree of customer satisfaction with a product or service. These measurements are typically used to rank competitors on how well they meet their customers' needs. Research Methodology Customer satisfaction is typically measured by performing customer interviews.
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Strategic Significance of Customer Satisfaction Measurement

This measurement can be used in sales strategies with customers It can support a competitive benchmarking project by identifying the world-class performers
It highlights key areas for improvement It is an excellent measure of the performance of customer service staff A negative trend in this measurement should be taken seriously
C usto mer Loya lty Definition of Measurement This measurement reveals the role played by loyalty in the purchasing pattern of customers. Customer loyalty is difficult to measure because it is determined by the amount of resistance that must be overcome before the customer changes brands. Research Methodology Customer loyalty is typically measured by performing customer interviews, using a series of questions about brand loyalty and about how much effort is needed to get the customer group to change brands. A fairly accurate estimate of this measurement can be made based on the expert opinion of the analyst after interviewing a significant number of industry participants. Strategic Significance of Customer Loyalty Measurement

A highly loyal customer group allows for higher prices This measurement provides insight into the degree to which the competition must be monitored
It measures the effectiveness of marketing, sales and product development effort Customer loyalty enjoyed by competitors makes the capture of market share from them more difficult
Competitive pricing strategy is less effective in markets with high customer loyalty
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Market Engineering Research Measurement System

Market engineering measurements for the total European market for absorbable and erodible biomaterials is illustrated in Chart 3.1 Chart 3.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (Europe), 2002
Challenge Identification
Market Engineering Drives Market Strategy and Planning
Market Engineering System
Market Research
Market Engineer
Market Strategy
Implementation
Market Planning
Measurement Name Market size in dollars Market size in units Annual market growth rate (2002) Compound annual growth rate (2002-2009) Average price Price range Market saturation (current/potential users) Market age/Product life cycle
Measurement $539.3 million Not applicable 4.7% 5.7% Not applicable Not applicable 70.0%
Trend Up Up Up Up Up Up Up
Mature and static in absorbable sutures but significant growth in other sub-segments, emerging and niche markets. $794.1 million Single use 66.4% 68 Up --Down ---
Potential revenues (maximum future market size) Replacement rate (average period of unit replacement) Market concentration (percent of 2002 market controlled by top three competitors) Number of competitors (active market competitors in 2002)
* Not possible to obtain accurate average selling prices due to wide variation from one company to another and from one individual product line to another.
Note: All figures are rounded. Source: Frost & Sullivan
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Market Drivers and Restraints

Figure 3-1 and Figure 3-2 review the specific drivers and restraints for the total European market for absorbable and erodible biomaterials. Market Drivers Figure 3-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Europe), 2003-2009
Rank Driver 1 Increased participation in sports activities amongst all age groups provides significant growth opportunities for the orthopaedics market New applications for absorbable surgical wound closure products encourages market growth Advances in tissue adhesives will have a growing impact on cosmetic surgery and plastic reconstruction surgery New targets for waiting times increases number of surgical procedures performed and increases demand for wound closure devices New technologies and market introductions of new innovative products stimulates growth in niche markets Advantages of absorbable products encourage rapid uptake by surgeons helping to develop market Sensitivity towards allograft provokes interest in synthetic bone graft substitutes Catgut sutures-cessation of supply and consequent increased demand for synthetic absorbable surgical sutures 1-2 Years 3-4 Years 5-6 Years Medium High High
2 3 4
Medium Medium Medium
High High Medium
High High Medium
5 6 7 8
Medium Medium Medium Low
A summary of the market drivers for absorbable and erodible biomaterials is provided below. A full description is provided under the individual market segments. Market drivers include: Absorbable and Erodible Wound Closure Biomaterials
New targets for waiting times increases number of surgical procedures performed and increases demand for wound closure devices
Catgut suturescessation of supply and consequent increased demand for synthetic absorbable surgical sutures
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New applications for absorbable surgical wound closure products encourages market growth
Advances in tissue adhesives will have a growing impact on cosmetic surgery and plastic reconstruction surgery
New technologies and market introductions of new innovative products stimulates growth in niche markets e.g. adhesion barriers
Absorbable and Erodible Orthopaedic Biomaterials
Increased participation in sports activities amongst all age groups provides significant growth opportunities for the orthopaedics market
Advantages of absorbable products encourage rapid uptake by surgeons helping to develop market
Sensitivity towards allograft provokes interest in synthetic bone graft substitutes
Figure 3-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Europe), 2003-2009
Rank Restraint 1 2 3 Healthcare reforms and budgetary constraints affect operating room funding and ration resources Domination of bone banks supplying allograft hinders development of synthetic bone graft substitute market Requirement to provide clinical evidence to prove product efficacy restrains development of the absorbable and erodible orthopaedic biomaterials market 1-2 Years 3-4 Years 5-6 Years High High Medium High High Medium Medium Medium Medium
4 5 6 7
Increased popularity of minimally invasive surgery restricts use of Medium absorbable and erodible wound closure biomaterials Competitive pricing pressures restrain market growth and development Technical/Medico problems associated with absorbable medical devices restrains market development Relatively high cost of orthopaedic absorbables compared with traditional materials restrains market growth Medium Medium Medium
Medium Medium Medium Medium
Medium Medium Medium Medium
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Market Restraints
Healthcare reforms and budgetary constraints affect operating room funding and ration resources Domination of bone banks supplying allograft hinders development of synthetic bone graft substitute market Requirement to provide clinical evidence to prove product efficacy restrains development of the absorbable and erodible orthopaedic biomaterials market Technical/Medico problems associated with absorbable medical devices restrains market development Relatively high cost of orthopaedic absorbables compared with traditional materials restrains market growth Increased popularity of minimally invasive surgery restricts use of absorbable and erodible wound closure biomaterials Competitive pricing pressures restrain market growth and development
Market Forecasts
Figure 3-3 and Chart 3.2 provides a summary analysis of the revenue forecasts for the total European absorbable and erodible biomaterials market. Figure 3-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Europe), 1999-2009
Revenue Revenues Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Compound Annual Growth Rate (2002-2009): 5.7%
Growth Rate (%) --3.4 3.9 4.7 4.8 5.1 5.5 5.9 6.1 6.2 6.1
($ Million) 479.0 495.5 515.0 539.3 565.5 594.5 627.4 664.5 704.9 748.3 794.1
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Chart 3.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Europe), 1999-2009
900 800 700 Revenues ($ Million) 600 500 400 300 200 100 0 1999 2000 2001 2002
Revenues ($ Million)
2003
2004 Year
2005
2006
2007
2008
2009
It has been estimated that the total European market value for absorbable and erodible biomaterials in 1999 was valued at $479.0 million. By the year 2002 the value of the market had increased to an estimated $539.3 million. It is predicted that the market will continue to grow steadily over the forecast period so that by the year 2009 the European absorbable and erodible biomaterials market is expected to be worth $794.1 million (CAGR 5.7 percent). The absorbable and erodible orthopaedic biomaterials market is the fastest growing segment reviewed in this report with a compounded annual growth rate of 14.9 percent. The absorbable and erodible wound closure biomaterials segment is predicted to have an annual growth rate of 2.6 percent. This segment is dominated by the largest single sub-segment absorbable surgical sutures which is considered to be stable and mature and growing at not more than between 1 to 1.5 percent per annum.
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Other Market Trends/Analyses

Tr e n d b y G e o g r a p h i c R e g i o n Figure 3-4 and Chart 3.3 illustrates the market trends by revenue for the total European absorbable and erodible biomaterials market by geographic region over the forecast period. Figure 3-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Geographic Region (Europe), 1999-2009
Germany Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Key: (%) 37.8 37.3 36.8 36.5 36.1 35.7 35.2 34.6 33.9 33.2 32.3 France United Kingdom (%) 16.5 16.6 16.6 16.6 16.7 16.8 16.9 17.2 17.4 17.7 17.9 (%) 12.7 12.9 13.1 13.5 13.8 14.2 14.7 15.2 15.7 16.3 16.8 Italy (%) 14.9 15.0 15.0 14.9 14.9 14.8 14.6 14.4 14.3 14.2 14.2 Spain Scandinavia (%) 7.0 7.0 7.1 7.1 7.0 6.9 6.8 6.6 6.5 6.4 6.3 (%) 5.1 5.2 5.3 5.3 5.4 5.4 5.5 5.6 5.7 5.8 5.9 Benelux (%) 5.9 6.0 6.0 6.1 6.1 6.2 6.3 6.3 6.4 6.5 6.5
Scandinavia = Denmark, Finland, Norway and Sweden Benelux = Belgium, Luxembourg and the Netherlands
In the year 2002 Germany accounted for the largest share of the absorbable and erodible biomaterials market with an estimated 36.5 percent of the European market. Frost & Sullivan predict that by the end of the forecast period Germanys share of the European market will have decreased to 32.3 percent of the market. The French market is the second largest geographic region in the year 2002 and represents an estimated 16.6 percent of the overall European absorbable and erodible biomaterials market. By the end of the forecast period period it is predicted that the French share of the European market will have increased slightly to 17.9 percent.
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Chart 3.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Geographic Region (Europe), 1999-2009
100%
80%
60%
40%
Benelux Scandinavia Spain Italy United Kingdom France Germany
20%
0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Key:
The third largest geographic region in the year 2002 was Italy with an estimated 14.9 percent share of the absorbable and erodible biomaterials market. However as a result of the containment of hospital budgets in Italy its share of the European market is predicted to decline to 14.2 percent. Conversely the United Kingdom is expected to increase its share of the European market from 13.5 percent in the year 2002 to an estimated 16.8 percent by the end of the forecast period. Spain is the fifth largest geographic region representing an estimated 7.1 percent of the European absorbable and erodible biomaterials market in 2002. By the end of the forecast period it is predicted that Spain will still remain in fifth position but with a slightly reduced share of the market i.e. 6.3 percent. Benelux and Scandinavia are in sixth and seventh positions respectively in the year 2002. By the end of the forecast period it is anticipated that they will remain in sixth and seventh positions but with a slightly increased share of the European market.
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T r e n d s b y P r o d u c t Ty p e Figure 3-5 and Chart 3.4 provides a summary review of the revenue forecasts for the total European absorbable and erodible biomaterials market by market segment over the forecast period. Figure 3-5 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Europe), 1999-2009
Absorbable and Erodible Wound Adsorbable and Erodible Orthopaedic Closure Biomaterials Biomaterials Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 (%) 84.9 83.6 82.3 80.9 79.2 77.2 75.0 72.6 70.2 67.9 65.8 (%) 15.1 16.4 17.7 19.1 20.8 22.8 25.0 27.4 29.8 32.1 34.2
The absorbable and erodible wound closure biomaterials segment is by far the largest segment representing an estimated 80.9 percent of the market in the year 2002. By the end of the forecast period however it is predicted that the absorbable and erodible wound closure biomaterials markets will have declined and is expected to represent 65.8 percent of the market. The decline in the share of the absorbable and erodible wound closure biomaterials segment over the forecast period being attributed to:
The mature and stable nature of the largest segment in the absorbable and erodible wound closure biomaterials market i.e. the absorbable surgical sutures sub-segment.
The relatively rapid growth rates anticipated for the absorbable and erodible orthopaedic biomaterials segment.
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Chart 3.4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Europe), 1999-2009
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Adsorbable and Erodible Orthopaedic Biomaterials (%) Absorbable and Erodible Wound Closure Biomaterials (%)
01
02
06
99
00
03
04
05
07
08 20
20
20
20
20
19
20
20
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20

The majority of hospital purchasing authorities throughout Europe either have to submit product prices in response to public tenders or provide product pricing directly through the appointed distributors or through the customer services department of country subsidiaries. For public tenders the suppliers have to determine a price which is competitive whilst ensuring that the product remains profitable where they are confident that they will win the tender. Under circumstance where the company is determined the gain market share or in the case of a new market entry establish a presence they may be tempted to submit a price below the cost price. A loss leader approach is based on the assumption that once they have gained a presence or market share in that market they will be able to increase prices at a later date. For direct purchasing the purchasing authorities order as and when the products are required or as a means of replenishing consignment stocks held in the operating theatres. Hospitals would have either established a price/volume discount structure or would negotiate favourable terms and conditions with the supplier based on the volume of previous orders or through a usage agreement based on anticpated usage.
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Marketing management having established the cost prices would then determine the profit margins which meet their financial objectives and then establish a price/volume discount structure which meets their marketing objectives. It is anticipated that this process will continue throughout the forecast period. For the mature, established products such as the absorbable surgical sutures prices are expected to increase as a result of small incremental price increases each year. Prices for products which are gaining market acceptance and moving towards the rapid growth phase of their life cycle are expected to decline. Annual revenues for these products are expected to increase as a result of a dramatic increase in volume. One of the principle issues concerning price discounting is whether the discount structure supports the brand position. The report survey revealed that between 90 and 95 percent of the suppliers offer some form of discount to their customers and or prompt payment terms. Unfortunately, most companies have become so focused on short-term sales objectives and comptitor activity that they have not paid sufficent attention to the long term impact that these price/volume discount programs have on the value of their brand.
Figure 3-6, illustrates the competitive structure of the European absorbable and erodible biomaterials market. Figure 3-6 Absorbable and Erodible Biomaterials Market: Competitive Structure (Europe), 2002
Number of Companies in Market 81 Types of Competitors Major multinationals including Ethicon (J&J), Tyco Healthcare, B. Braun and Baxter International Medium/large-sized companies such as Genzyme Biosciences Individual small indigenous manufacturers including suppliers of absorbable surgical sutures for example Assut Medical Company Independent research-based organisations including for example PPL Therapeutics Distribution Structure Direct subsidiaries throughout Europe for major multinational suppliers Complex network of distributor agreements for overseas suppliers throughout Europe Tiers of Competition 1st Tier includes: Ethicon (J&J), Tyco Healthcare, B. Braun, Baxter International Inc. 2nd Tier includes: Biomet Merck, Sofamor Danek (Medtronic), Smith and Nephew, Ethicon (J&J) (Mitek), Arthrex
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Figure 3-6 Absorbable and Erodible Biomaterials Market: Competitive Structure (Europe), 2002
3rd Tier includes: Genzyme BioSurgery, Tornier, Atlantech, Zimmer, Inion Ltd, Artimplant, Biocomposites, Ceraver Osteal, Corin Group, Dynagen, Etex Corporation, Geistlich Shne AG, Inoteb, Interpore Cross International, Isotis B.V., Orthovita, Orquest, Teknimed, Tutogen Medical, Waldemar Link , Bioland biomateriaux, Unilab Surgibone Inc., MCP, Nycomed, PPL Therapeutics plc, Haemacure Corporation, Tissuemed, C. R. Bard, Inc., Datascope Corporation, Anika Therapeutics, Inc., Omrix Biopharmaceuticals, Aventis Pharma (Centeon), Pharming Group N.V., Cohesion Technologies, Peters S.A., CryoLife, MedLogic, Cura Cell, Will Pharma, Integra Corporation, Gliatech Inc., Confluent Surgical Inc., Shire Pharmaceuticals, Alcon Laboratories, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH, Dr Hammer, Resorba Wundversorgung, FSSB Chirurgische Nadeln , Serafit, Assut Medical Company, Fidia Advanced Biopolymers, Dynek Pty Ltd, Goretex, Wright Medical Technology, Linvatec (Conmed), Bionx Implants, Neucoll, Interpore Cross International, Stryker, SulzerMedica (CentrePulse), Depuy (J&J) and Mathys Synthes-Stratec Notable Mergers/Acquisitions and Agreements Incorporation of Hyland Immuno into Baxter International The U.S. Surgical Corporation (Tyco Healthcare) acquired Innerdyne, Inc. in December 2000 Angiotech Pharmaceuticals, Inc. acquisition of Cohesi Technologies, Inc. Smith and Nephews acquisition of Instrument Makar and Orthopaedic Biosystems Ltd, Inc. Biomet joint venture agreement with Merck KgaA Key End-user Groups All senior surgeons including cardiovascular, gastroenterologists, cosmetic and plastic reconstruction surgery, neurologists, orthopaedic surgeons, sports injury specialists and spinal surgeons General and acute hospitals, university hospitals, spinal centres, sports injury clinics Senior OR nursing staff, OR directors and departmental managers Hospital purchasing authorities and administrators Competitive Factors Product pricing: Mature markets i.e. absorbable surgical sutures are highly price sensitive Complimentary Product Grouping: Individual companies are able to gain competitive advantage by "product bundling" with other complimentary products Clinical Efficacy: Companies are increasingly required to prove clinical efficacy Product and Service Differentiation: Companies need to either focus on niche areas or provide comprehensive product ranges
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Four companies occupy a significant share of the European absorbable and erodible biomaterials market. These are Ethicon (J&J), Tyco Healthcare, Baxter International and B. Braun. These four companies account for an estimated 75.5 percent of the overall market. The overall market for absorbable and erodible biomaterials is dominated by Ethicon (J&J) with an estimated 44.4 percent of the overall market. Its high market share is as a result of its domination of the absorbable surgical sutures market together with its presence in the absorbable and erodible orthopaedics market through its Mitek division. These four suppliers operate through direct subsidiaries and have sophisticated sales and marketing operations in all of the principal European countries. As a result of their wide and comprehensive product ranges these companies are able to support the end-users by offering product bundling and one stop shop solutions together with price/volume agreements. The remaining 24.5 percent of the market comprises a mixture of other large multinational suppliers, acting as distributors for products developed by smaller specialised research and development based companies, and smaller essentially indigenous manufacturers e.g. Resorba Wundversorgung in Germany, Bionx Inc orginating in Finland and Ceraver Osteal in France. These typically seek to obtain distribution agreements with major suppliers in order to maximise their potential through another organisations sales and marketing network. Frost & Sullivan predict that there will the appearance of new market entrants especially in the synthetic bone graft substitutes segment whilst there will be a consolidation amongst existing suppliers as the market experiences acquisitions and mergers amongst existing partners and joint venture agreements.

Figure 3-7 and Chart 3.5 illustrates and lists the market share of the major market participants and the percent change from year to year for absorbable and erodible biomaterials in Europe. The overall leader of absorbable and erodible biomaterials throughout Europe is Ethicon (J&J) with an estimated 44.4 percent of the market. Ethicon have established this domination of the market through its presence in the largest sub-segment i.e. absorbable surgical sutures. Although it is confidently predicted that Ethicon (J&J) will remain the dominate force in this market its share of the market is expected to decline slowly but progressively over the forecast period. This is due to the following principle reasons:
The erosion of its market share by its main rivals i.e. Tyco Heathcare together with the recent market entry by B. Braun.
The increasing importance of market segments outwith the absorbable surgical sutures e.g. synthetic bone graft substitutes.
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Figure 3-7 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Europe), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare B. Braun Baxter International Inc. Biomet Merck Sofamor Danek (Medtronic) Smith and Nephew Ethicon (J&J) (Mitek) Arthrex Others Market Share % 44.4 11.7 10.3 9.1 3.1 2.1 2.0 1.9 1.8 13.6 2002/03 Trend Down Up Up Down No Change No Change No Change Up No Change ---
Note: Others include: Genzyme BioSurgery, Tornier, Atlantech, Zimmer, Inion Ltd, Artimplant, Biocomposites, Ceraver Osteal, Corin Group, Dynagen, Etex Corporation, Geistlich Shne AG, Inoteb, Interpore Cross Haemacure Corporation, Tissuemed International, Isotis B.V., Orthovita, Orquest, Teknimed, Tutogen Medical, Waldemar Link , Bioland biomateriaux, Unilab Surgibone Inc., MCP, Nycomed, PPL Therapeutics plc, C. R. Bard, Inc., Datascope Corporation, Anika Therapeutics, Inc., Omrix Biopharmaceuticals, Aventis Pharma (Centeon), Pharming Group N.V., Cohesion Technologies, Peters S.A., CryoLife, MedLogic, Cura Cell, Will Pharma, Integra Corporation, Gliatech Inc., Confluent Surgical Inc., Shire Pharmaceuticals, Alcon Laboratories, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH, Dr Hammer, Resorba Wundversorgung, FSSB Chirurgische Nadeln , Serafit, Assut Medical Company, Fidia Advanced Biopolymers, Dynek Pty Ltd, Goretex, Wright Medical Technology, Linvatec (Conmed), Bionx Implants, Neucoll, Interpore Cross International, Stryker, SulzerMedica (CentrePulse), Depuy (J&J) and Mathys Synthes-Stratec
Frost & Sullivan have determined that Tyco Healthcare is the second largest market shareholder with an estimated Tyco Healthcare 11.7 percent of the market. Tyco Healthcare have established a major presence in the absorbable surgical sutures market sub-segment through its US Surgical division. It has also established a number of distribution agreements for products in growth sub-segments including surgical adhesives and glues whilst retaining a major presence in the absorbable and erodible ligation clips market.
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Chart 3.5 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Europe), 2003
Sofamor Danek (Medtronic) 2.1% Baxter International Smith and Nephew Biomet Merck Inc 2.0% 3.1% 9.1% Ethicon (J&J) (Mitek) B. Braun 1.9% 10.3% Arthrex 1.8% Tyco Healthcare Others 11.7% 13.6%
Ethicon (J&J) 44.4%
B. Braun is in third position with an estimated 10.3 percent of the market. B. Braun have become increasing active in the absorbable surgical sutures market whilst having a historically strong presence in the surgical adhesives and glues market. Baxter International Inc. are in fourth position with an estimated 9.1 percent of the market. Baxter International Inc. presence in this market is attributed to its tissue sealant Tisseel or otherwise known as Tissucol. With the introduction of products in certain markets e.g. Quixil from Omrix Biopharmaceuticals and the imminient introduction of the same product in other geographic regions Baxter International can expected increased competitor activity over the forecast period with a result that they will loose market share. Biomet Merck is in fifth position with an estimated 3.1 percent of the overall market. Frost & Sullivan predict that Biomet Merck will take an increasing share of the market, particularly in the absorbable and erodible orthopaedics biomaterials market as it exploits the opportunities present in the synthetic bone graft substitute and absorbable fracture management device sub-segments.
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Forecasts Wo u n d
of
the
Absorbable
and
Erodible
Closure
Biomaterials
Market

This market segment encompasses a range of absorbable and erodible biomaterials which have been identified and developed for use in wound closure. This report focuses on 5 principle sub-segments. Absorbable Sutures The word "suture" describes any strand of material used to ligate (tie) blood vessels or approximate (bring close together) tissues. The evolution of suturing materials has brought us to the point of refinment that includes sutures designed for specific surgical procedures. They not only eliminate some of the difficulties that surgeons may have previously encountered during closure but decrease the potential for infection post-operatively. Surgical sutures may be manufactured from either absorbable or non-absorbable materials. This report describes the market value, market forecasts, market shares and market dynamics for absorbable sutures. Absorbable sutures may be either:

Surgical gut (plain or chromic) Synthetic Absorbable Sutures
Absorbable sutures are capable of being broken down by the body's inflammatory response and are used internally to close organs, fascial planes, and subcutaneous tissues. Absorbable sutures can also be used to close skin but only in a subcuticular or completely buried pattern. Absorbable sutures should not be exteriorised. All of the absorbable sutures absorb fluid and might wick external fluids with bacteria into a surgery site. Catgut is a material derived from the intestines of either sheep or cows and has been used as an absorbable suture material for over a century. As a result of these concerns a number of European countries have banned the use of absorbable sutures derived from natural sources and consequently the use of catgut for use with humans has almost entirely disapeared. Ti s s u e S e a l a n t s This sub-segment includes a variety of materials included within the generic description of fibrin sealants. A fibrin sealant is a biologic product consisting of the final components of the clotting cascade, that can be applied locally to help stop bleeding. Fibrin sealant is usually applied in two components, one containing thrombin and one containing fibrinogen, that are applied simultaneously to form a clot.
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Haemostats Haemostats are used to stop bleeding and as such are one of the oldest surgical devices used. Haemostats can be divided into two types. Those products which are passive, absorb large amounts of blood and allow the blood to clot. The other type promote the blood clotting mechanism of the body and are defined as active haemostats. Ligating Clips One of the most common occurrences during surgery is the cut and bleeding blood vessel. One way of overcoming this problem is to suture the vessel. However, this can take time and it is easier to ligate the vessel with a clip. The majority of such clips are composed of the nonabsorbable titanium of stainless steel. These clips are removed after the operation has been completed. However, there are now absorbable ligating clips on the market which can be left inside the body after the operation has been performed. However, non-absorbable clips are the much preferred choice. They are used almost 99 percent of the time, largely because of cost. Skin Adhesives and Glues Skin adhesives are used externally on the body for small cuts and wounds. For larger wounds sutures are used. The skin adhesives are simply glues based on the molecule cyanoacrylate, the basic component of super glue. They are applied directly to the wound site, the adhesive causes the two edges of the wound to be bound together. Healing of the wound can then occur. The skin adhesive is not absorbed as such but is eroded over time and is gradually lost from the wound site. Histoacryl Blue (n-butyl cyanoacrylate) has been used extensively in Europe since the 1970s for a variety of surgical applications including middle ear surgery, bone and cartilage grafts, repair of cerebrospinal fluid leaks, and skin closure. Adhesion Barriers These are absorbable membranes which are used for the reduction of the incidence, extent and severity of postoperative adhesions after abdominal/pelvic surgery. They are usually made from modified hyaluronan that is used to separate tissues while the normal tissue repair process takes place.
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Market engineering measurements for the total European market for absorbable and erodible wound closure biomaterials is illustrated in Chart 3.6 Chart 3.6 European Absorbable and Erodible Wound Closure Biomaterials Market: Market
Engineering Measurements (Europe), 2002
Market Research
Market Engineer
Market Strategy
Implementation
Market Planning
Measurement $436.4 million Not applicable 2.9% 2.6% Not applicable * Not applicable * 90.0%
Trend Up Up Down Up Up Up Up
Mature and static in absorbable sutures but significant growth in other subsegments, emerging and niche markets. $522.3 million Single use 82.0% 34 Up --Down ---
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Market Drivers
Figure 3-8 shows the drivers for absorbable and erodible wound closure biomaterials in the European market. Figure 3-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Europe), 2003-2009
Rank Driver 1 2 3 4 Competitive pricing pressures restrain market growth and development New applications for absorbable surgical wound closure products encourages market growth Advances in tissue adhesives will have a growing impact on cosmetic surgery and plastic reconstruction surgery New technologies and market introductions of new innovative products stimulates growth in niche markets e.g. adhesion barriers Catgut sutures-cessation of supply and consequent increased demand for synthetic absorbable surgical sutures 1-2 Years Medium Medium Medium Medium 3-4 Years High Medium Medium Medium 5-6 Years High High High Medium
Low
Low
Low
N e w Ta r g e t s f o r Wa i t i n g Ti m e s I n c r e a s e s N u m b e r o f Surgical Procedures Performed and Increases Demand f o r Wo u n d C l o s u r e D e v i c e s Whilst long waiting times for hospital treatment are minimal in France and virtually unheard of in Germany considerable resources have been targeted at reducing the waiting times or access to surgery in some European Member States. While access to surgery is regulated to a large extent by workloads in operating theatres and surgical wards, it is also influenced by activity in emergency departments, outpatient clinics and the availability of qualified staff to carry out the operations. A number of European Member States have introduced a variety of methods to monitor and regulate the length of waiting lists, establish goals and objectives and to instigate administrative procedures and performance criteria to ensure that established targets are being met.
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Some of the techniques, identified by the European Commision of the Quality of Life and a report on the criteria for the management of waiting lists and waiting times in health care, used to reduce waiting include:
Establishing waiting times policy as part of quality management and the normal planning process, with targets set annually for improvement; Identifying procedures for which a number of specialists can agree to pool capacity so that patients with the longest waits can be admitted as admission dates become available; Not to lose sight of the "tail" of long waiters. Identify them and ensure that admission dates are offered; The setting aside of an agreed proportion of operating theatre time to admit long waiting patients; Increasing the provision of ambulatory care thereby releasing beds for long waiting cases; Offer long waiters the chance to transfer to another provider; Develop models of bed state availability within hospitals and plan elective admissions during times of lower emergency admissions; Develop incentives for primary care teams and hospital departments which reward improved management of waiting lists; Look at elective services as part of a whole systems approach, not as stand alone waiting list initiatives, e.g. by developing rehabilitation services to free up acute beds; Evidence is available to suggest that the current levels of some operations could be reduced in number (e.g. grommet insertion, D & C for women under 40, tonsillectomy). Waiting list plans should include protocols to improve the appropriateness of these interventions; Look to increase the scope for managing non-urgent cases in primary care, e.g. by holding non-urgent waiting lists by GPs; Based on agreed protocols, direct access to inpatient waiting lists can be developed for some procedures (e.g. for hernias, endoscopic examinations and diagnostic investigations), thereby avoiding waiting times for an outpatient consultation. Admission in these cases should normally be preceded by attendance at a pre-operative assessment clinic; Separating elective admission beds from emergency admissions beds can reduce the possibility that elective patients will have to have their admission cancelled; Joint reviews of cases between physicians and surgeons can eliminate periods of specialist to specialist waiting time, for example between angiography and assessment for cardiac surgery.
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Frost & Sullivan predict that as a consequence of the need to reduce waiting lists the number of surgical procedures carried out will increase. Since demand for wound closure devices is directly related to the number of surgical procedures carried out any increase in the number of surgical procedures will result in an increased demand for wound closure products. Catgut SuturesCessation of Supply and Consequent I ncreased Demand for Synthetic Absorbable Suture s There are a wide variety of surgical sutures is currently available, including examples of both absorbable and non-absorbable materials, either of natural or synthetic origin, all of which have given perfectly acceptable performance for many years in surgical practice. Sutures themselves are not normally considered to be a risk factor in surgery and although there are differences between them in characteristics, they are all considered to be intrinsically safe. Catgut is a material derived from the intestines of either sheep or cows and has been used as an absorbable suture material for over a century. Until the questions over transmissible infective agents related to the use of animal tissues in medical devices were raised in recent years, there have been no concerns over the biological safety of catgut. As a result of these concerns a number of European countries have banned the use of absorbable sutures derived from natural sources. Germany, Austria and Spain have recently banned the use of catgut sutures. Catgut sutures were previously banned in France. Luxembourg has written to surgeons advising of the different risks and benefits resulting in an effective cessation of use. As a result of these actions and discussions held with the MDA, the catgut suture suppliers to the UK agreed to cease supply in the UK. This action took effect during the middle of 2001. N e w A p p l i cat i o n s f o r A b s o r ba b l e S u rg i ca l Wo u n d Closure Products Encourages Marke t Growth Researchers, clinical professionals and manufacturers have identified a huge variety of new applications for the existing and emerging range of new and novel wound closure products. For example fibrin or tissue sealants have been used to reduce blood loss and aid wound closure of parenchymal tissue such as lung, liver and spleen following surgical section/intervention.
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Postoperative air leak is a frequent complication after pulmonary resection for lung cancer. It may cause serious complications, such as empyema, or prolong the need for chest tube and hospitalisation. Surgical sealants of different types have been developed to prevent or to reduce postoperative air leaks. Other applications for surgical sealants include: Vascular Surgery
Seali ng of vascular anastomoses w ith f ibr in sealant
For example fibrin sealant is applied to the anastomosis to seal the suture lines when femoropopliteal bypass surgery is carried out. Femoropopliteal bypass surgery occurs in which a superlong Impra spiral prosthesis is passed from the left femoral artery through the right femur and anastomosed with the right popliteal artery above the glenoid fossa.
Preclotti ng sealant of a vascular prosthesi s wi th fi bri n
In this procedure typically a two component fibrin sealant, i.e. Tisseel Solution and Thrombin Solution are applied consecutively or simultaneously to the external wall of the vascular prosthesis and massaged into the stretched texture. After about 10 minutes setting of the sealant is largely completed and the prosthesis can be rinsed with physiological saline to remove any excess of thrombin. After implantation and restoration of the blood circulation the prosthesis is instantly impervious
Fibri n sealant and oozing hemorrhages
This is the use of the spraying technique to control diffuse, epimyocardial hemorrhage after rethoracotomy for replacement of the mitral valve
Peri pheral vascular surgery
Vascular and microvascular surgery can be complicated, lengthy procedures which may result in prolonged bleeding. In vascular surgery, the bleeding usually occurs at the anastomotic suture line which is not easily treated by further suturing. Microvascular surgery has additional complications associated with prolonged periods of ischaemia of the amputated digits, which can result in replant failure. Conventional techniques requiring multiple microsutures are time-consuming and surgeon fatigue may contribute to replant failure along with ischaemia. Thus techniques which assist in rapid haemostasis and anastomotic closure including the use of fibrin selants would enhance the overall outcome of surgery.
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Obstetrics and Gynaecology Tissue sealants can be used and are gaining increased popularity in obstetric and gynecological procedures. These include the use of sealants in:

Lymphatic fistulae Uterotomy Vaginoplasty Premature rupture of the amniotic sac Fibrin pleurodesis in malignant pleural effusion Prophylaxis of hematomas and lymphoceles in radical surgery Advances in tissue adhesives will have a growing impact on cosmetic surgery There has been a dramatic increase in the number of individuals who are having cosmetic and reconstructive plastic surgery in Europe. Some of the facts provided below indicate the dramatic increase.
The number of people having cosmetic plastic surgery in Europe has nearly tripled since 1992.
Liposuction procedures have more than quadrupled between 1992 and 2001. Forehead lifts have increased by more than 200 percent between 1992 and 2001 whilst eyelid surgery has increased by more than 130 percent between 1992 and 2001.
In the past 10 years the number of reconstructive plastic surgery patients have increased by over 30 percent.
Breast reduction surgery has increased by more than 140 percent over the last 10 years
The dramatic increases in cosmetic and reconstructive plastic surgery illustrates the growing awareness of the many physical and psychological benefits this type of surgery provides. In addition the improved topical anaesthetics and skin closure adhesives, coupled with the growing use of lasers in pediatric skin surgery, are allowing dermatologic surgeons to initiate treatment in children at an earlier age, with less pain and psychological trauma. From malignant moles to congenital skin lesions and vascular birthmarks, many conditions that previously required complicated and laborious non-surgical approaches can now be treated with minimally invasive, more convenient and effective surgical methodseven in infants.
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These dramatic increases in number of cosmetic and reconstructive plastic surgery carried out together with significant technological improvements in surgical adhesives allows surgeons to close patients' skin without using sutures, the removal of which can be painful and traumatic. This is especially useful in the case of children, or when small-calibre sutures must be removed from sensitive areas of the face (such as the nose, eyelids or lips). These developments have provided manufacturers of skin adhesives and glues with major market opportunities throughout Europe and one which is expected to grow throughout the forecast period. New Technologies and Market Introductions of New Innovative Products Stimulates Growth in Niche Markets As already describe earlier in this chapter there has been an upsurge of interest in biomaterials and absorbable biomaterials with medical applications over the last decade. As a result of this interest and the research that has been carried out a number of new and innovative absorbable biomaterials have been developed and introduced into the market. These include the development of:
Absorbable Bi - Di recti onal Barbed Sutures
In 1992, Dr Gregory Ruff of Duke University Medical Centre started working on an idea on a barbed suture for cosmetic applications. Dr Ruff took the idea of a barbed suture and applied it to an absorbable suture material made of polydioxanone. The barbed configuation anchors the suture into the tissue and provide adequate tissue adhesion while the wound heals under minimal residual tension and pressure. The monofilament suture, currently produced by Quill Medical, Inc., contains up to 78 barbs manufactured in a spiral pattern around the curcumference of the suture. The barbs are divided into two groups facing each other in opposing directions around the mid-point. The two sets of barbs divide the suture into two sections, right and left. These bi-directional barbed absorbable sutures can be used in a range of different surgical procedures. The suture can be used in dermal tissue approximation, internal wound closure and tendon repair.
Development Devi ce of Bi odendri mers as a Wou nd Closure
The Duke University Chemistry Department researchers are creating unique polymers out of naturally occurring building blocks that don't provoke immune reactions and in some cases also biodegrade in the body. Called Biodendrimers, they are branching molecular chains with finger-like ends that can form sticky and tenacious links with other substances.
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One potential application that has been identified is as a glue that could close a corneal wound and then be dissolved as new tissue grows in to repair the wound site. Currently, physicians may use tight-bonding cyanoacrylate glue to seal small perforations, which then heal on their own. But when that glue dries it gets very hard and can be very difficult to apply on corneal wounds. Another application that has been identified is to use biodendrimers as scaffolding to help induce cells to repair damaged human joints.
Market Restraints
Figure 3-9 shows the restraints for absorbable and erodible wound closure biomaterials in the European market. Figure 3-9 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Europe), 2003-2009
Rank Restraint 1 2 3 Healthcare reforms and budgetary constraints affect operating room funding and ration resources Increased Popularity of Minimally Invasive Surgery Restricts Use of Absorbable and Erodible Wound Closure Biomaterials Competitive pricing pressures restrain market growth and development 1-2 Years High High High 3-4 Years High High High 5-6 Years Medium Medium Medium
Healthcare Reforms and Budgetary Constraints Affect Operating Room Funding and Ration Resources Due to healthcare reforms and budgetary restraints, hospitals across Europe are increasingly concerned with controlling and cutting costs. This includes streamlining procurement procedures in order to cut down on administrative efforts and costs. As a result, there is an increasing trend for hospitals to form purchasing co-operations to co-ordinate and centralise buying processes allowing for a greater amount of power over manufacturers of medical devices, pharmaceuticals etc as well as for absorbable and erodible wound closure biomaterials.
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In addition although budgetary control and the implementation of service restraints ensure that individual hospitals meet their budgets they may be a tendency to rationalise and even ration the number of procedures carried out. This would invaribly result in a reducton in the number of certain types of procedure carried out once a particular departmental budget has been used up. Service provision could be increased however by say encouraging patients within the UK NHS to use private facilities rather than NHS providers. The consequence of budgetary control is that it will invaribly result in a reduction in the number of surgical procedures carried out and in the case of the UK increase waiting lists and in countries like Germany where waiting lists are currently non-existant may actually create waiting lists. Increased Popularity of Minimally Invasive Surgery R e s t r i c t s Us e o f A bs o rba bl e a n d E ro d i bl e Wo u n d Closure Biomaterials Minimally invasive surgery uses techniques of surgical access and exposure that significantly reduce trauma to the body compared to traditional incisions. Traditional surgical approaches have utilised incisions designed to provide the maximum exposure of the operative site. Minimally invasive surgical approaches, on the other hand, utilise small incisions through which cameras and instruments are passed to accomplish the operation from within a body cavity. The minimally invasive surgical approach offers several advantages over traditional open surgery. First of all, the cosmetic result is almost always superior to that achieved with an open operation. Minimally invasive surgery also reduces blood lose, reduces the need for transfusions and there is a considerable lower risk of infections. For many operations, postoperative pain is significantly reduced. Earlier return to eating, faster discharge from the hospital, and a more rapid return to full activities are additional benefits. Surgeons skilled in minimally invasive surgical procedures regularly perform them as rapidly as they perform the equivalent open operations. Furthermore, the reduction in inpatient hospital stays results in an actual lowering of total hospital costs for many of the procedures performed. Examples of recent advances and developments in minimally invasive surgery include its sue in spinal surgery. New advances in spinal surgery have made it possible to accomplish goals with small incisions that previously required large open incision and extensive muscle dissection. These procedures can be divided into the following groups: 1) Surgery for decompression of nerves, indirect decompression; 2) Surgery for decompression of nerves, direct decompression; 3) Surgery for instability or disc related back pain, fusion.
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Similarly minimally invasive techniques have been introduced in coronary artery bypass surgery. Although traditional methods of performing myocardial revascularization, including full sternotomy, the use of cardiopulmonary bypass, and cardioplegic solution to still the heart for construction and complex anastomoses remains the most popular means of operative conduct, minimally invasive cardiac surgery is undergoing a rapid growth phase. Technologic advances and the introduction of new surgical techniques have allowed the definition of four areas of minimally invasive coronary revascularization:

Minimally invasive direct coronary artery bypass grafting (MIDCAB). Off-pump full sternotomy coronary revascularisation (OPCAB). Port-access small-incision, multi-vessel coronary bypass with peripheral cannulation (PCAB).
Endoscopic computer-assisted (Robotic) coronary grafting (E-CAB).
The introduction of these and other minimally invasive techniques have a number of significant advantages including:

Shorter length of stay Faster recovery Less bleeding and blood trauma Lower infection rate Available to more patients Less cost
The disadvantage manufacturers of sutures in particular have is that with smaller incision sites there is a reduced requirement for sutures and wound closure devices. Compe tit ive Pricing Pressure s Re strain Marke t Growth and Development Competitor activity amongst the leading suppliers has resulted in a progressive erosion of the selling prices. The erosion of the average selling prices has lead to a reduction in turnover for the leading suppliers which in turn has encouraged other suppliers to enter the market and capture some of the market share from the traditional market leaders. In addition there has been a continuous introduction of new and innovative products into the segments examined. This has threatened the traditionally strong market position of a number of companies including Ethicon (J&J) and Baxter as the end-users seek alternative solutions to existing clinical needs.
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Market Forecasts
Figure 3-10 and Chart 3.7 provides a summary analysis of the revenue forecasts for the total European absorbable and erodible wound closure biomaterials market. Figure 3-10 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Europe), 1999-2009
Growth Rate (%) --1.9 2.3 2.9 2.6 2.5 2.5 2.5 2.6 2.7 2.8
($ Million) 406.7 414.4 424.0 436.4 448.0 459.2 470.5 482.3 494.6 507.9 522.3
It has been estimated that the total European market value for absorbable and erodible wound closure biomaterials in 1999 was valued at $406.7 million. By the year 2002 the value of the market had increased to an estimated $436.4 million. It is predicted that the market will continue to grow steadily over the forecast period so that by the year 2009 the European absorbable and erodible wound closure biomaterials market is expected to be worth $522.3 million (CAGR 2.6 percent).
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Chart 3.7 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Europe), 1999-2009
600 Revenues ($ Million) Growth Rate (%) 3.5 3 2.5 Revenues ($ Million) 400 2 300 1.5 200 1 100 0.5 0 1999 2000 2001 2002 2003 2004 Year 2005 2006 2007 2008 2009 Units (Million)
500
The absorbable surgical sutures market is by far the largest individual sub-segment and in the year 2002 was estimated to be valued at approximately $307.9 million. Since the value of this market sub-segment is dependent on the number of open surgical procedures carried out the market is considered in volume terms to be static. Frost & Sullivan predict that this subsegment will grow slowly in value throughout the forecast period as a result of small incremental price increases made on an annual basis. The tissue sealants market sub-segment is estimated to be valued at approximately $64.9 million in the year 2002. This market sub-segment is anticipated to grow throughout the forecast period as these products are promoted by the leading suppliers as alternatives to surgical sutures. The principle suppliers of tissue sealants i.e. Baxter International Inc., Aventis Pharma and Nycomed are not suppliers of surgical sutures and consequently there is no danger from their point of view that they are sacrificing any absorbable surgical suture sales. The haemostats market sub-segment is estimated to be valued at approximately $42.9 million in the year 2002. This market sub-segment is anticipated to grow throughout the forecast period as these products as surgeons seek to reduce bleeding during surgical procedures to help reduce the risk of adhesion formation and as new and innovative products reach the market. The surgical adhesives and glues market sub-segment is estimated to be valued at approximately $13.4 million in the year 2002. Frost & Sullivan predict that this sub-segment is grow significantly over the forecast period as a result of the trend for these products to be used in preference to surface suturing and as a result of increased promotional activity amongst existing suppliers i.e. B. Braun, Ethicon (J&J) and Tyco Healthcare and from new market entrants e.g Omrix Biopharmaceuticals and CryoLife.
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The ligation clip market sub-segment is estimated to be valued at approximately $6.08 million in the year 2002. This market is not expected or anticipated to grow substantially over the forecast period but will continue to meet niche market expectations. Although the adhesion barrier market sub-segment is estimated to be valued at approximately $1.22 million in the year 2002 it is expected to grow significantly over the forecast peirod. As already discussed this clinical areas is recognised by healthcare professionals as a major issue and a problem which needs addressing.
Other Market and Technology Trends/Analyses

Tr e n d s b y G e o g r a p h i c R e g i o n Figure 3-11 and Chart 3.8 illustrates the market trends by revenue for the total European absorbable and erodible wound closure biomaterials by geographic region over the forecast period. Figure 3-11 Absorbable and Erodible Wound Closure Biomaterials Market: Percent of Revenues by Geographic Region (Europe), 1999-2009
Germany Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Key: (%) 39.07 38.58 37.97 37.62 37.17 36.59 35.92 35.18 34.44 33.74 33.11 France (%) 15.02 15.03 15.02 14.94 14.95 15.01 15.10 15.20 15.31 15.40 15.47 United Kingdom (%) 12.34 12.47 12.65 12.96 13.17 13.46 13.80 14.20 14.60 14.95 15.26 Italy (%) 14.36 14.47 14.51 14.44 14.50 14.51 14.49 14.45 14.40 14.36 14.32 Spain Scandinavia (%) 7.20 7.23 7.45 7.52 7.51 7.49 7.46 7.44 7.42 7.41 7.40 (%) 5.54 5.65 5.74 5.81 5.91 6.04 6.18 6.34 6.50 6.67 6.84 Benelux (%) 6.47 6.57 6.66 6.71 6.79 6.91 7.04 7.19 7.33 7.47 7.60
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Chart 3.8 Absorbable and Erodible Wound Closure Biomaterials Market: Percent of Revenues by Geographic Region (Europe), 1999-2009
100%
80%
60%
40%
Benelux (%) Scandinavia (%) Spain (%) Italy (%) United Kingdom (%) France (%) Germany (%)
20%
0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Key:
In the year 2002 Germany accounted for the largest share of the absorbable and erodible wound closure biomaterials market with an estimated 37.6 percent of the European market. Frost & Sullivan predict that by the end of the forecast period Germanys share of the European market will have decreased to 33.1 percent of the market. The French market is the second largest geographic region and is represents an estimated 14.9 percent of the overall European absorbable and erodible wound closure biomaterials market. By the end of the forecast period period it is predicted that the French share of the European market will have increased slightly to 15.5 percent. The third largest geographic region in the year 2002 was Italy with an estimated 14.4 percent share of the absorbable and erodible wound closure biomaterials market. However as a result of the containment of hospital budgets and the increased use of minimally invasive surgery in Italy its share of the European market is predicted to decline to 14.3 percent. Conversely the United Kingdom is expected to increase its share of the European market from 12.9 percent in the year 2002 to 15.3 percent by the end of the forecast period. The expected increase being attributed to the increased funding of the NHS and concerted efforts to reduce long standing waiting lists. Spain is the fifth largest geographic region with an estimated 7.5 percent of the European market in the year 2002 and an estimated 7.4 percent of the market by the end of the forecast period. Market intelligence has determined that the Benelux is a marginally larger market than Scandinavia and will have a slightly larger share of the European market by the end of the forecast period.
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Te c h n o l o g y Tr e n d s Considerable research and development resources are being directed to create both new innovative wound closure devices incorporating absorbable and erodible biomaterials and product extensions and modifications to existing products. For example research has been directed at being able to control precisely the absorption or degradation rates of absorbable surgical sutures. By being able to alter absorption rates tissue specific absorbable surgical sutures can be manufacturered which can provide optimal conditions for tissue healing. It is predicted that throughout the forecast period a series of new products will be launched which incorporate small incremental improvements to the suture degradation characteristics and providing increased product flexibility. Other technological advances include the development of the development of "second-generation" fibrin sealants", the research into the development of barriers to the development of post-operative adhesions and new and innovative surgical adhesives and glues.

List prices for the largest sub-segment, absorbable surgical sutures increase marginally each years as a result of small incremental price rises. As a result of improved and more efficient purchasing methods togther with increased professionalism amongst purchasing authorities price discounting is the norm and may vary from 5 percent up to 25 percent depending on price/volume agreements made between the purchasing authorities and the sales managers. As the major market shareholder the current pricing stratgey by Ethicon (J&J) is to maintain and consolidate their market share from their main rival Tyco Healthcare and in response to increasing market activity from B. Braun. This market share maintenance may also involve considerable discounting and "bundling" of other products under a "one stop shop" strategy.
Figure 3-12 illustrates the competitive structure of the European absorbable and erodible wound closure biomaterials market. Figure 3-12 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Europe), 2002
Number of Companies in Market 39 Types of Competitors Major multinationals including Ethicon (J&J), Tyco Healthcare, B. Braun and Baxter International Medium/large-sized companies such as Genzyme Biosciences Individual small indigenous manufacturers including suppliers of absorbable surgical sutures for example Assut Medical Company
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Figure 3-12 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Europe), 2002
Independent research-based organisations including for example PPL Therapeutics Distribution Structure Direct subsidiaries throughout Europe for major multinational suppliers Complex network of distributor agreements for overseas suppliers throughout Europe Tiers of Competition 1st Tier includes: Ethicon (J&J) 2nd Tier includes: Tyco Healthcare, Baxter International Inc., B. Braun 3rd Tier includes: Nycomed, PPL Therapeutics plc, C. R. Bard, Inc., Datascope Corporation, Anika Therapeutics, Inc., Omrix Biopharmaceuticals, Aventis Pharma (Centeon), Pharming Group N.V., Pharming Group N.V., Cohesion Technologies, Peters S.A., Haemacure Corporation, Tissuemed, CryoLife, MedLogic, Cura Cell, Will Pharma, Integra Corporation, Gliatech Inc., Confluent Surgical Inc., Shire Pharmaceuticals, Genzyme Corporation, Alcon Laboratories, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH, Dr Hammer, Resorba Wundversorgung, FSSB Chirurgische Nadeln FSSB Chirurgische Nadeln , Serafit, Assut Medical Company, Fidia Advanced Biopolymers, Dynek Pty Ltd and Goretex Notable Mergers/Acquisitions and Agreements Incorporation of Hyland Immuno into Baxter International The U.S. Surgical Corporation (Tyco Healthcare) acquired Innerdyne, Inc. in December 2000 Angiotech Pharmaceuticals, Inc acquisition of Cohesion Technologies, Inc Key End-user Groups All senior surgeons including cardiovascular, gastroenterologists, cosmetic and plastic reconstruction surgery, neurologists Senior OR nursing staff, OR directors and departmental managers Hospital purchasing authorities and administrators Competitive Factors Product pricing: Mature markets i.e. absorbable surgical sutures are highly price sensitive Complimentary product grouping: Individual companies are able to gain competitive advantage by "product bundling" with other complimentary products Clinical efficacy: Companies are increasingly required to prove clinical efficacy Product and service differentiation: Companies need to either focus on niche areas or provide comprehensive product ranges
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Absorbable Surgical Sutures The leading suppliers of absorbable surgical sutures i.e. Ethicon (J&J) and Tyco Healthcare are amongst the largest corporations in the world. They operate through direct subsidiaries and have large sophisticated sales and marketing operations in each of the European countries examined in this report. The undisputed market leader Ethicon (J&J) have a long and distinquished history in the surgical suture market place and have pioneered the development of many absorbable surgical sutures including non-boilable catgut in 1928. By the late 1930s, J&J had established a dedicated salesforce to call on hospitals exclusively to sell dressings and sutures. It was about this time that sutures were included in the US Pharmacopeia. Several leading suture manufactuers lost their market position because their products didn't meet the USP requirements giving J&J an opportunity to play a dominant role in the industry. Since these early developments Ethicon (J&J) has continued to expand and has included the acquisition of Mitek in 1994 and more recently the acquisition of Innovasive Devices in the year 2000. The Tyco Healthcare Group consists of five primary business units including Kendall Healthcare, Tyco Healthcare International, U.S. Surgical Corporation, ValleyLab and Mallinckrodt. U.S. Surgical markets wound closure products and laparoscopic instrumentation and develops, manufactures and markets its products to hospitals throughout the world. Its products include surgical staplers, sutures and disposable laparoscopic instrumentation, in addition to numerous other products used in surgical and medical specialties including spine surgery, cardiovascular surgery, cancer biopsies and orthopedic surgery. The U.S. Surgical Corporation acquired Innerdyne, Inc. in December 2000 expanding the groups product line and complemented existing products and services. Innerdyne manufactures and distributes patented radial dilating access devices used in minimally invasive medical surgical procedures. Ti s s u e S e a l a n t s The leading tissue sealant throughout Europe is Tisseel and Tissucol. Tisseel and Tissucol are trademarks for the same fibrin sealant in different countries. The use of the trademarks Tisseel and Tissucol in different countries solely reflects linguistic preferences and does not constitute a difference in product composition. Tisseel and/or Tissucol is sold throughout Europe by Baxter International.
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Baxter operates as a global leader in critical therapies for life-threatening conditions. Their continuing operations are comprised of three segments: Medication Delivery, which provides a range of intravenous solutions and specialty products that are used in combination for fluid replenishment, nutrition therapy, pain management, antibiotic therapy and chemotherapy; BioScience, which develops biopharmaceuticals, biosurgery products, vaccines and blood collection, processing and storage products and technologies; and Renal, which develops products and provides services to treat end-stage kidney diseases. Baxter Bioscience is sub-divided into a number of different divisions which includes:

Haemophilia therapies Surgical haemostatis and tissue sealing Immune support Blood volume replacement Albumin therapy Prescribing information
Baxter International interest in the product Tisseel or Tissucol originates from its acquisition of Hyland Immuno. Hyland Laboratories was founded in the mid 1930s to process and distribute plasma. Baxter Healthcare Corporation acquired Hyland Laboratories in the year 2000. Immuno's manufacturing division, Osterreichisches Institut fr Haemoderivate, was founded in 1953. Hyland Immuno was formed in 1997 through the union of the Baxter Hyland Divisionwith Immuno. Hylands Immuno's headquarters are located in Glendale, California and Vienna, Austria, with major manufacturing facilities in the US, Austria, Belgium and Italy. Hyland Immuno is a wholly owned subsidiary of Baxter International Inc. The other major suppliers of tissue sealants Nycomed and Aventis Pharma have had a series of interesting changes. Nycomed was part of the formation of Amersham plc when the businesses of Amersham International (UK), Pharmacia Biotech (Sweden) and Nycomed (Norway) merged in 1997. In 2001 the businesses within Amersham plc became known as Amersham Biosciences and Amersham Health. In addition Amersham plc announced on the 1st October that they had completed the sale of Nycomed Pharma to Nordic Capital A/S, the holding company of Nycomed Pharma. Nordic Capital is one of the leading private equity investment firms in the Nordic region. Nycomed Pharma is described as being a leading pharmaecutical company in Northern Europe, active in the development, manufacturing, marketing and sale of both patented and branded generic prescription medicine, over-the-counter (OTC) pharmaceuticals and consumer health care products. The company is headquatered in Roskilde, Denmark, and currently employs approximately 2,500 persons.
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Aventis Pharmaecuticals is comprised of the combined U.S. commercial operations of predecessor companies Rh'ne-Poulenc Rorer and Hoechst Marion Roussel. Included within this group of amalgamated companies is Aventis Behring. Aventis Behring was formerly known as Centeon. Haemostats The major suppliers of haemostats are B. Braun and Ethicon. Both these companies operate through their direct subsidiaries. One of the most recent developments in this sub-segment has been the press release on the 30th September 2002 that Angiotech Pharmaceuticals, Inc. and Cohesion Technologies, Inc. jointly announced that they have signed a definitive agreement for Angiotech to acquire Cohesion in an all stock merger transaction. The purchase price is approximately US$42 million (including in the money options and warrants), or US$4.05 per common share of Cohesion, subject to adjustment by a "collar" provision with respect to the trading price of Angiotech's shares. Cohesion's product portfolio includes four biomaterials and three approved products involving proprietary-based composites, sealants and adhesives. The three approved products are:
CoSeal surgical sealant: Cohesion's core products that address the biosurgical materials market include CoSeal surgical sealant, the first and only completely synthetic vascular sealant to be approved by the U.S. Food and Drug Administration ("FDA"). It is also approved in Europe, Australia and Canada.
CoStasis surgical hemostat: Cohesion's CoStasis surgical hemostat is a liquid sprayable hydrogel approved by the FDA and in Europe, Australia and Canada for use as an adjunct to haemostasis in all surgical procedures except neurological and ophthalmalogical.
Adhibit adhesion prevention gel: Adhibit adhesion prevention gel is approved in Europe to prevent or reduce the incidence, severity and extent of post-surgical adhesion formation in patients undergoing cardiac surgery.
Ligating Clips The principle suppliers of absorbable and erodible ligating clips are Ethicon and Tyco Healthcare both companies operating from direct subsidiaries. Surgical Adhesives and Glues The market for surgical adhesives and glues has been dominated by B. Braun with their product Histacryl up until 1998 when 2 products from competiting companies were launched. These were Dermabond and Indermil.
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In 1998 octyl-2-cyanoacrylate known as Dermabond which originated by Raleigh, NC-based Closure Medical and marketed by Ethicon was approved for use in the closure of lacerations and surgical incisions in Europe. Similarly another surgical adhesive known as Indermil, a glue from Hartford, CT-based Loctite Corp and marketed by the US Surgical Division of Tyco Healthcare was approved and launched onto the European market in 1998. These 2 products have not only successfully taken market share from B. Braun but have helped to develop and expand the range of applications for surgical adhesives and glues and have helped raise the profile of these products in general. In addition other products have entered the market including Bioglue from Cryolife. In 1998, CryoLife received European approval for commercial distribution of BioGlue Surgical Adhesive for use in all vascular repair. In 1999, BioGlue was awarded a second CE mark extending application of BioGlue to pulmonary repair. In 2002 BioGlue recieved its third CE mark. Adhesion Barriers There has been considerable commercial activity amongst the leading biotechnology based companies in Europe. Products which have been recently introduced into Europe include: Adept: Adept is an anti adhesion product which contain icodextrin. Shire Pharmaceuticals acquired the exclusive pan-European rights to market Adept for 5.0 million (approximately $7.3 million) in October 2001, from the developers ML Laboratories plc, which retains all rights to Adept for the rest of the world. Seprafilm: There are three forms of Seprafilm relevent to this report and sold in France directly through the Genzyme Biosurgery subsidiary in France. These are:
Seprafilm Adhesion Barrier. Seprafilm Adhesion Barrier has had European approval since 1996. Seprafilm II Adhesion Barrier. Seprafilm II Adhesion Barrier has had European approval since 1999. CV Seprafilm II has been approved since the year 2000.
ADCON: There are two products available. These are ADCON-L and ADCON-T/N. ADCON-L an approved product for the inhibition of postsurgical scarring and adhesions following laminectomy surgery. ADCON has been developed and manufactured by Gliatech Inc. and is expanding its line of ADCON products to address other surgical applications. These include pelvic and gynecological surgeries (ADCON-P), abdominal surgery (ADCON-A), implant and prosthetic surgery (ADCON-I), and cardiac surgery (ADCON-C). Adhibit: The other known adhesion barrier is Adhibit adhesion prevention gel. Adhibit adhesion prevention gel is approved in Europe to prevent or reduce the incidence, severity and extent of post-surgical adhesion formation in patients undergoing cardiac surgery. Adhibit is a product developed by Cohesion Technologies, Inc. (now Angiotech Pharmaceuticals, Inc.) and distributed by Tyco Healthcare.
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Figure 3-13 and Chart 3.9 lists and illustrates the market share of the major market participants and the percent change from year to year for absorbable and erodible wound closure biomaterials market in Europe. Figure 3-13 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Europe), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare B. Braun Baxter International Inc. Nycomed Others Market Share % 54.9 14.4 12.7 11.3 2.0 4.7 2002/03 Trend Down Up Up Down No Change ---
Note: Others include: PPL Therapeutics plc, C. R. Bard, Inc., Datascope Corporation, Anika Therapeutics, Inc., Omrix Biopharmaceuticals, Aventis Pharma (Centeon), Pharming Group N.V., Pharming Group N.V., Cohesion Technologies, Haemacure Corporation, Tissuemed Peters S.A., CryoLife, MedLogic, Cura Cell, Will Pharma, Integra Corporation, Gliatech Inc., Confluent Surgical Inc., Shire Pharmaceuticals, Genzyme Corporation, Alcon Laboratories, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH, Dr Hammer, Resorba Wundversorgung, FSSB Chirurgische Nadeln , Serafit, Assut Medical Company, Fidia Advanced Biopolymers, Dynek Pty Ltd and Goretex
Chart 3.9 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Europe), 2003
B. Braun 12.7% Baxter International Inc 11.3% Nycomed 2.0% Others 4.7%
Tyco Healthcare 14.4%
Ethicon (J&J) 54.9%
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The European market for absorbable and erodible wound closure biomaterials is dominated by Ethicon (J&J) with an estimated overall market share of 54.9 percent. Their domination of this segment is attributed to their absorbable surgical sutures where they are estimated to have 67.2 percent of this sub-segment. Ethicon (J&J) are however coming under increasing pressure from their main rival and second largest market share holder Tyco Healthcare. Tyco Healthcare are estimated to have 14.4 percent of the overall European market for absorbable and erodible biomaterials and an estimated 18.5 percent of the European market for absorbable surgical sutures. Tyco Healthcare have been gaining market share from Ethicon as they have embarked on an aggressive sales and marketing campaign. B. Braun are in third position with an overall market share of 12.7 percent of the overall European absorbable and erodible wound closure biomaterials market. Their presence in this market is attributed to their high market share in the surgical adhesives and glues subsegment with an estimated 61.1 percent. It not anticipated that their market share of this sub-segment will grow but B. Braun are expected to gain market share in the absorbable surgical sutures market. Baxter International Inc. is in fourth position with an estimated 11.3 percent of the overall market for absorbable and erodible wound closure biomaterials. Their presence in this market is attributed principally to their tissue sealant product Tisseel and Tissucol. Baxter International Inc. are estimated to have 74.6 percent of the tissue sealant sub-segment. The only other two companies who are of note are Nycomed with sales of Tachocomb with an estimated 2.0 percent of the overall market for absorbable and erodible wound closure biomaterials and Aventis Pharma with an estimated 1.3 percent.
Forecasts of the Absorbable and Erodible Orthopaedic Biomaterials Market

This market segment encompasses a range of absorbable and erodible biomaterials which have been identified and developed for use in orthopaedics. This report focuses on 2 principle sub-segments. Absorbable Fracture Fixation Devices These are polyglycolide/polylactide polymers based devices designed to naturally degrade over time and minimise the problems of stress-shielding, corrosion and migration associated with metal devices. The products are used in the following applications:
Fracture Fixation e.g. for example the Biomet, Reunite Orthopedic Screw
Interference Screws (for example the Mitek Phantom Interference Screw). Whether playing soccer in summertime or skiing in wintertime, the knee is the joint most subject to sports injuries. One of the possible injuries to the knee is a torn of the anterior cruciate ligament. As generally is the case with sports injuries, most patients with torn anterior cruciate ligaments are active young persons.
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A complete reconstruction of the ligament is very important for them, so that they can participate as unhindered as possible in every athletic as well as professional activity. Removing a tendon surgically from the patient's own body and implanting it in place of the injured ligament is becoming the treatment of choice. Either the middle third of the patellar tendon or tendons taken from the inner thigh (semitendinosus and gracilis) can be used. The so-called interference screws are normally used to secure the "new" cruciate ligament into place in the bone. These screws settle the graft in the immediate vicinity of the articulation, in the holes previously drilled into the femur and into the tibia . In highly industrialised countries like the UK and Franc this operation is carried out annually about 800 times per million residents.
Suture Anchors for example the Bionx Bankart Tack
Other Devices including rotatory cuff fixation for example the Biomet Inc., (Arthrotek) RCB Rotary Cuff Buttress, meniscal repair devices for example the Mitek Meniscal Repair System and craniomaxillofacial fixation devices fo example the Biomet, Inc. (Walter Lorenz Surgical) Lactosorb Craniomaxillofacial Fixation System.
Synthetic Bone-graft Substitutes
Treatment of a variety of traumatic injuries and chronic disorders often requires the need for an autologous bone graft or autograft. Instance often arise however where sub-optimal volumes of autograft can be harvested from the patient. In these circumastance allografts have been used. Although autologous bone is the "gold standard" graft material, donor-site morbidity (pain, infection), limited supply, and inconsistent osteogenic activity continue to be associated problems. Allogenic bone grafts are significantly less osteogenic than autologous bone, mainly because allogenic bone typically acts only as a passive scaffold for vascular ingrowth and bone deposition. Because of these limitations, basic science and clinical researchers are aggressively developing biosynthetic bone grafts as an alternative to autologous and allogenic bone grafts. The products included within this sub-segment and within the report are those which are used to create 3D biodegradeable scaffolds for use as artifical substitutes for the extracellular matrix (ECM). This includes the following range of product areas: Synthetic Polymers: These include polyhydroxy esters, polydioxanone, propylene fumarate, poly-ethylene glycol, poly-erthoesters, polyanhydrides and polyurethanes, poly-L-lactic acid, poly-glycolic acid, and poly-lactic-co-glycolic acid. Inorganic Composite Ceramics: This includes the following Hydroxyapatite and Tri Calcium Phosphate (TCP). Extracellular Matrix Scaffolds: This includes various ECM proteins, including collagen, laminin, fibronectin, and glycosami- noglycans (that is, hyaluronic acid, heparin sulfate, chondroitin sulfate A, and dermatan sulfate).
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Market engineering measurements for the total European market for absorbable and erodible orthopaedic biomaterials is illustrated in Chart 3.10 Chart 3.10 Absorbable and Erodible Orthopaedics Biomaterials Market: Market Engineering
Measurements (Europe), 2002
Market Research
Market Engineer
Market Strategy
Implementation
Market Planning
Measurement Name Market size in dollars Market size in units Annual market growth rate (2002) Compound annual growth rate (2002-2009) Average price Price range Market saturation (current/potential users) Market age/Product life cycle Potential revenues (maximum future market size) Replacement rate (average period of unit replacement) Market concentration (percent of 2002 market controlled by top three competitors) Number of competitors (active market competitors in 2002)
Measurement $102.9 million Not applicable 13.1% 14.9% Not applicable * Not applicable * 45.0% Rapid growth phase $271.8 million Single use 37.9% 34**
Trend Up Up Up Up Up Up Up --Up --Up Up
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Market Engineering Revenue Forecasts (1999-2009)

Figure 3-14 and Figure 3-15 show the drivers and restraints for absorbable and erodible orthopaedic biomaterials in the European market.
Market Drivers
Figure 3-14 shows the drivers for absorbable and erodible orthopaedic biomaterials in the European market. Figure 3-14 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Europe), 2003-2009
Rank Driver 1 Increased Participation in Sports Activities Amongst all Age Groups Provides Significant Growth Opportunities for the Orthopaedics Market Sensitivity Towards Allograft Provokes Interest in Synthetic Bone Graft Substitutes Advantages of Absorbable Products Encourage Rapid Uptake by Surgeons Helping to Develop Market 1-2 Years Medium 3-4 Years Medium 5-6 Years Medium
2 3
Medium Medium
Medium Medium
Medium Medium
I n c r e a s e d Pa r t i c i pat i o n i n S p o r t s Ac t i v i t i e s A m o n g s t a ll Age Group s Provi des S ignifi ca nt Growt h Opportuniti es for the O rthopaedics Market There has been a considerable increase in the level and frequency of individuals of all ages who are participating in some form of sports activity. This has lead to an increase in a variety of soft tissue sports related injuries such as meniscal tears in athletes, rotatory cuff injuries, etc. All ages are at risk but some specific at risk groups include: Baby Boomers Generation and Increased Susceptibility to Sports Injuries Those individuals, who according to Webster's dictionary were born from 1946 to 1964, are typically known as the "baby boomer generation" are slowly realising that they cannot always "turn back the clock" and avoid injury. Although exercise is essential for healthy ageing, engaging in certain exercise and fitness programs can bring its own set of problems especially if age-related changes have occurred in baby boomers' joints and tendons. It is anticipated that in the years to come the that the incidence of sports-related injuries including tendonitis, bursitis and arthritis will increase dramatically amongst people whose age's range from 25 to 64. In addition since these individuals are desperate to resume normal activity and sports participation as soon as possible after being injured and as a result they put pressure on healthcare providers to solve their sports related injuries.
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Growth in Popularity of Winter Sports Since the late 1980s, the popularity of snowboarding has increased dramatically. One of the fastest growing sports, snowboarding was added to the 1998 Winter Olympics in Nagano, Japan. By the year 2000, snowboarders may constitute an estimated 20% to 30% of all slope users, and some alpine resorts are already reporting 50% snowboard use. The typical snowboarder is a man in his early 20s. Consequently, snowboarding injuries are reported more frequently in males by a ratio of 3:1 and as high as 7:1. The average age at injury in males is 21 years (range, 17.6 to 26.4 years). Injured female snowboarders tend to be 1 to 4 years older than their male counterparts. As the age range of snowboarders broadens to include children as young as 4 years and adults in their late 60s, such injuries as growth-plate injuries in young snowboarders and scapholunate dissociation in older adults are becoming a greater concern. Falls are the most common cause of snowboarding injuries, followed by collisions with stationary objects and other snowboarders or skiers. The overall injury rate is estimated to be 4 per 1,000 snowboarding days, similar to that in alpine skiing. However, snowboarding injuries tend to be less severe and involve double the rate of fractures seen in skiers. Increased Participation amongst the Ageing Population There has been a significant increase in the number of sports related injuries to person over 65 of age and older throughout the 1990s. It is anticipated that this trend will continue throughout the forecast period and at least until the end of the decade. The increased incidence of injury occurred not only among the youngest of the 65 and over population, but also among those 75 years and older. In addition sports related injuries increased much more to those over 65 than any other age group. The increase in sportsrelated injuries is greater than the increase in the population 65 and over, so that it cannot be explained solely by the increase in population of this age group. Injuries to older persons have increased the most in connection with more active sports such a cycling, exercise activity, weight training and skiing. Statistically, older athletes are much more likely to injure themselves than younger athletes who are doing the same sport. On the positive side, however, it has been found that even accounting for their increased likelihood of injury, older runners tend to be physically better off than the average person of their age. S e n s i t i v i t y To w a r d s A l l o g r a f t P r o v o k e s I n t e r e s t i n Synthetic Bone Graft Substitutes Since health scares surrounding HIV-infected blood and the BSE crisis, healthcare providers throughout Europe have been particularly sensitive to the issue of possible disease transmission, through the use of either human or animal-derived products in medical applications. There has been public outcry in some countries, notably France and despite recent efforts to restore the public's confidence in allograft tissue, with the introduction of enhanced sterilisation treatments, most people would prefer to receive a bone graft substitute instead of allograft tissue. This is having a positive impact on the European bone graft substitute market, and will continue to do so throughout the forecast period.
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Advantages of Abso rbable Products Encourage Rap id Uptake by Surgeons Helping to Develop Marke t A great advantage of bioresorbable implants, as opposed to metal implants, is the fact that a second surgery to remove the screws is no longer necessary. The whole procedure is therefore a lesser strain for the patient, and costs are lower. In addition, postoperative radiologic examinations such as MRI (magnetic resonance imaging) or CT (computer tomography) can be carried out without artefacts. Metal parts, on the other hand, distort the pictures created by MRI or CT, making their interpretation more difficult. These advantages have encouraged surgeons to accept absorbable products for a wide range of applications. These are principally for the reconstruction of the Anterior an Posterior Cruciate Ligaments (ACL and PCL) using interference screws and for meniscal repair and repair of rotatory cuff injuries of the shoulder.
Market Restraints
Figure 3-15 show s the restraints for absorbable and erodible orthopaedic biomaterials in the European market. Figure 3-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Europe), 2003-2009
Rank Restraint 1 1-2 Years 3-4 Years 5-6 Years High High
Requirement to Provide Clinical Evidence to Prove Product Efficacy High Restrains Development of the Absorbable and Erodible Orthopaedic Biomaterials Market Domination of Bone Banks Supplying Allograft Hinders Development of Synthetic Bone Graft Substitute Market Relatively High Cost of Orthopaedic Absorbables Compared with Traditional Materials Restrains Market Growth Technical/Medico Problems Associated with Absorbable Medical Devices Restrains Market Development High High Medium
2 3 4
High High Medium
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R e q u i r e m e n t t o P r o v i d e C l i n i c a l E v i d e n c e t o P r o ve Product Efficacy Restrains Development of the Absorbable and Erodible Orthopaedic Biomaterials Market Throuhgout the European market clinicians and healthcare professionals are increasingly demanding evidence supporting the claims made by the company about a particular products and which supports the clinical efficacy of the product. It has become increasingly difficult to launch and support the market introduction of a new product without proven clinical efficacy. Suppliers need to ensure that clinical trials are conducted throughout the development stage before the planned market introduction of the market. Without this evidence there is string possibility that the product will fail. Domi nation of Bone Banks Supplying Allograft Hi nders Development of Synthetic Bone Graft Substitute Market A considerable proportion of bone graft material originates from either bone banks supplying allograft or from autograft i.e., bone transplanted from one part of a person's body to another part. This has been the traditional method of replacing extensive bone loss throughout Europe and there are many who are reluctant to change. Those who prefer to continue using traditional methods state that they have do not have problems using these materials and it is considerably cheaper than using synthetic bone graft substitutes. Frost & Sullivan anticipate that attitudes will change over time as a result of the gradual recognition by traditionalists of the benefits. Relatively Hi gh Cost of Orthopaedi c Absorbables C o m p a r e d w i t h Tr a d i t i o n a l M a t e r i a l s R e s t r a i n s M a r k e t Growth As a result of the market intelligence gathered during the prepartion of this report Frost & Sullivan has determined that during the initial introductory phase of these products life cycle absorbable fixation devices were priced from 10 percent to 400 percent more than metal fixation devices. In addition operating room managers, on whose shoulders the duty of purchasing absorbable fixation devices most often falls, have found it difficult to compare the ultimate costs of absorbable and metal fixation devices and consequently assummed that these new technologies were more expensive. Recently however volume discounts have helped ameliorate this problem as a result of what healthcare purchasers refer to as productive bidding war by simultaneously bringing several bioabsorbable implant makers into the purchasing process. With this strategy, healthcare purchasers stated that "you can rapidly get the price down to something reasonable," and "our ACL screws now cost the same as the metal ACL screws we used to use."
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In addition market intelligence has also revealed that insurance companies will almost certainly eventually demand the use of absorbable fixation devices in order to avoid the cost of metal removal. It is anticipated that the first thing that will happen is that insurance companies will no longer reimburse for metal removal, and that will spur the use of absorbable fixation devices. Te c h n i c a l / M e d i c o Pro b l e ms As s o c i at e d w i t h Ab s o r ba bl e Medical Devices Restrains Market Development Theoretically, absorbable materials are the best alternative for internal fixation of fractures because during the healing of bone lesions the absorbable device maintains the required fixation, decomposes gradually and the stresses are transferred gradually at the same time to the healing bone so that no stress shielding will occur. After healing the device can also be utilised in energy and protein metabolism. Absorbable surgical devices do not require a removal operation, which is of financial and psychological benefit and do not obscure the fracture site when taking X-rays. Despite these theoretical benefits associated with absorbable fixation devices there are a number of technical/medical problems which have been identified. These include: Technical Issues Technical problems associated with product performance. These include the inability of bioabsorbables used in fracture repair to have sufficient mechanical strength to be load bearing. The consequence of this is that for the foreseeable future metal fixation devices will continue to be used for the fixation of complex fractures, long-bone fractures or fractures of stress bearing bone. Technical problems relating to packaging: Because biodegradable polymers are hydrolytically unstable, the presence of moisture can degrade them in storage, during processing, and after device fabrication. In theory, the solution for hydrolysis instability is simple: eliminate the moisture and thus eliminate the degradation. However, because the materials are naturally hygroscopic, eliminating water and then keeping the polymer free of water are difficult to accomplish. The as-synthesised polymers have relatively low water contents, since any residual water in the monomer is used up in the polymerization reaction. The polymers are quickly packaged after manufacturegenerally double-bagged under an inert atmosphere or vacuum. The bag material may be polymeric or foil, but it must be highly resistant to water permeability. To minimise the effects of any moisture present, the polymers are typically stored in a freezer. Packaged polymers should always be at room temperature when opened to minimise condensation, and should be handled as little as possible at ambient atmospheric conditions. As expected, there is a relationship among biodegradation rate, shelf stability, and polymer properties. For instance, the more hydrophilic glycolide polymers are much more sensitive to hydrolytic degradation than are polymers prepared from the more hydrophobic lactide. Final packaging consists of placing the device in an airtight, moistureproof container. A desiccant is sometimes added to further reduce the effects of moisture.
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Technical problems relating to sterilisation: Devices incorporating biodegradable polymers cannot be subjected to autoclaving, and must be sterilised by gamma or E-beam irradiation or by exposure to ethylene oxide (EtO) gas. There are certain disadvantages, however, to both irradiation and EtO sterilization. Irradiation, particularly at doses above 2 Mrd, can induce significant degradation of the polymer chain, resulting in reduced molecular weight as well as influencing final mechanical properties and degradation times. Polyglycolide, poly(lactide), and poly(dioxanone) are especially sensitive to ionizing radiation, and these materials are usually sterilised by EtO for device applications. Because the highly toxic EtO can present a safety hazard, great care is required to ensure that all the gas is removed from the device before final packaging. The temperature and humidity conditions should also be considered when submitting devices for sterilization. Temperatures must be kept below the glass-transition temperature of the polymer to prevent the part geometry from changing during sterilisation. If necessary, parts can be kept at 0C or lower during the irradiation process. Medical Issues Resistance to change amongst clinical professionals: Not all orthopedic surgeons favour the new absorbable-fixation-device technology. Many are waiting until scientific data accumulate to prove that the absorbable fixation devices do disappear, to the benefit of the patient, and that money is saved through their use. One of the most compelling arguments used for the employment of absorbable fixation devices is that if a soft tissue attachment must be redone, metal fixation devices need to be removed. Howover many orthopaedic surgeons feel that the frequency with which that problem occurs, however, is too low to justify switching to a new technology that is more expensive. Rapid learning curve associated with surgical technique: There are number of important pratical considerations and dificulties outwith the traditional fracture fixation surgical techniques. These include: Absorbable fixation devices require their own types of drivers for insertion, and if plates are being formed, the polymer material must be heated; it cannot be bent when cold. Attachment-site tunnels must be drilled (tapped) into the bone to the full length of the absorbable anchors and screws because, unlike metal, they cannot cut bone. In addition some surgeons have reported that they have difficulties inserting bioabsorbables and once inserted, they are not always secure. For example absorbable screws frequently break on insertion or as a result of the lower mechanical strength of absorbable screws compared with metallic screws the screw head frequency bur and the surgeon losses purchase between the screwdriver resulting in the screwdriver tip spinning should the surgeon over tighten the screw. In addition many surgeons contend that certain brands and designs of bioabsorbable meniscal arrow for example provide better fixation than others.
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Market Forecasts
Figure 3-16 and Chart 3.11 provides a summary analysis of the revenue forecasts for the total European absorbable and erodible orthopaedic biomaterials market. Figure 3-16 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Europe), 1999-2009
Growth Rate (%) --12.1 12.2 13.1 14.2 15.2 15.9 16.1 15.4 14.3 13.1
($ Million) 72.3 81.1 91.0 102.9 117.5 135.4 156.9 182.2 210.3 240.4 271.8
It has been estimated that the total European market value for absorbable and erodible orthopaedic biomaterials in 1999 was valued at $72.3 million. By the year 2002 the value of the market had increased to an estimated $102.9 million. It is predicted that the market will continue to grow steadily over the forecast period so that by the year 2009 the European absorbable and erodible orthopaedic biomaterials market is expected to be worth $271.8 million (CAGR 14.9 percent).
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Chart 3.11 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Europe), 1999-2009
300
Growth Rate (%)
18 16
250 14 Revenues ($ Million) 200 12 10 150 8 100 6 4 50 2 0 1999 2000 2001 2002 2003 2004 Year 2005 2006 2007 2008 2009 0 Units (Million)
It is anticipated that there will be significant growth for both absorbable fracture fixation devices and synthetic bone graft substitutes over the forecast period. Within the absorbable fracture fixation device sub-segment greatest growth is anticipated to stem from sales of absorbable plates and screws for use in traumatology and cranio maxillo facial surgery. The market for these products in sports medicine is continuing to grow between 5-10 percent throughout Europe depending on the geographic region but is regarded as the most mature sub-segment and the most recognisable use for these products. The fastest growing sub-segment is the application of absorbable and erodible biomaterials as synthetic bone graft substitutes. There has been a progressive conversion of orthopaedic surgeons from using allograft and autograft bone grafts to synthetics as surgeons accept and recognise the benefits associated with synthetic bone graft substitutes.
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Other Market and Technology Trends/Analyses

Tr e n d s b y G e o g r a p h i c R e g i o n Figure 3-17 illustrates the market trends by revenue for the total European absorbable and erodible orthopaedic biomaterials market by geographic region over the forecast period. Figure 3-17 Absorbable and Erodible Orthopaedic Biomaterials Market: Percent of Revenues by Geographic Region (Europe), 1999-2009
Germany Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Key: (%) 30.84 31.07 31.33 31.58 32.06 32.61 33.06 33.13 32.71 31.93 30.78 France (%) 24.76 24.39 24.05 23.71 23.30 22.87 22.50 22.35 22.41 22.51 22.57 United Kingdom (%) 14.85 15.10 15.48 15.94 16.40 16.90 17.38 17.86 18.42 19.05 19.81 Italy (%) 17.90 17.83 17.47 17.01 16.35 15.63 14.95 14.42 14.08 13.92 13.92 Spain (%) 5.94 5.73 5.54 5.34 5.13 4.90 4.68 4.50 4.37 4.29 4.23 Scandinavia (%) 2.80 2.87 2.98 3.11 3.25 3.41 3.56 3.70 3.82 3.97 4.16 Benelux (%) 2.91 3.01 3.15 3.30 3.50 3.70 3.88 4.04 4.18 4.33 4.52
In the year 2002 Germany accounted for the largest share of the absorbable and erodible orthopaedic biomaterials market with an estimated 31.6 percent of the European market. Frost & Sullivan predict that by the end of the forecast period Germanys share of the European market will have decreased to 30.8 percent of the market. The French market is the second largest geographic region and is represents an estimated 23.7 percent of the overall European absorbable and erodible orthopaedics biomaterials market. By the end of the forecast period period it is predicted that the French share of the European market will have increased slightly to 22.6 percent. The third largest geographic region in the year 2002 was Italy with an estimated 17.1 percent share of the absorbable and erodible orthopaedic biomaterials market. However as a result of the containment of hospital budgets in Italy its share of the European market is predicted to decline to 13.9 percent.
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The fourth largest geograhic region in the year 2002 was the United Kingdom with an estimated 15.9 percent of the absorbable and erodible orthopaedics biomaterials market. However as a result of the recent increased level of funding within the NHS the United Kingdom is predicted to represent 19.8 percent of the market by the end of the forecast period. The fifth largest geographic region in the year 2002 was Spain with an estimated 5.3 percent of the overall market. Although this market is growing in value by the end of the forecast period it is expected that it will represent 4.2 percent of the market. This is a consequence of the more rapid conversion of tradtional methods in the UK, Scandinavia and the Benelux. Te c h n o l o g y Tr e n d s There are a number of recent developments into the research and development of bioabsorbable materials for medical use with applications in orthopaedics. These include: Hybri dised polymers as Biobioactive Bone Substitutes The current gold standard for bone reconstruction, the autogenous bone graft, works well in many circumstances. However, autograft reconstruction, along with the available alternatives, do not solve all instances of bone deficiency. Recently, novel materials, cellular transplantation and bioactive molecules delivery are being explored alone and in various combinations to address the problem of bone deficiency. Development of hybrid polymer systems (copolymers, complexes, hydrogels, blends, etc.) based on natural and synthetic macromolecules and their open wide spectrum of applications in the biomaterials science has received tremendous attention. A variety of implantable devices have been studied for the sustained release of biologically active compounds, and recently tissue engineering has shown great promise for creating biological alternatives for implants using hybridized polymers. Calcium phosphates are generally considered materials of choice as bone substitutes. While calcium phosphate ceramics meet some of the needs for bone replacement they are limited by their inherent stiffness, brittleness and low fatigue properties relative to bone and are generally not resorbed during bone remodelling. Despite these problems, macroporous calcium phosphates have been adopted as scaffolds for the restoration of bone through bone tissue engineering strategies. So low-density hydroxyapatite with highly interconnected porosity has also been advocated as a viable alternative to bone grafts without the complications of sterilisation, infection, rejection and inadequate supply. Furthermore, porous structures invite ingrows of bone into implant, leading to a more securely fixed and integrated repair, particularly in cancellous bone where the structure closely mirrors that of the host.
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Some bioresorbable polymer mixtures with hydroxyapatite have been proposed for use in bone repair, because they include bioactive osteogenesis. The production of a very biocompatible composite material, constituted with a biointegrable polymeric matrix and a ceramic, has been considered to be useful for applications in which an initial shape is easily obtained through typical plastics processing. The moulding technology should allow reproduction of a part of bone with standard devices at low or higher temperatures, cheaply and with no host's need of close tolerances, because the final remodelling is left to the tissue itself, which guests the implantation. Bone reconstruction should follow resorption of the polymer and should nucleate all around each grain of ceramics, in particular if the latter is bioactive. Osteoconduction appears to be optimised in biomaterials that mimic not only bone structure, but also bone chemistry. The osteoconductive matrices in which hydroxyapatite grains are anchored can be synthesized by crosslinking collagen conjugated with hyaluronan i.e., polyL-lactide (PLLA). The resulting three-dimensional scaffold which adheres to both hard and soft tissues has sufficient wet cohesion in body liquids. This patented hybrid type HA-COLHYA (or PLLA) composite with designed macrostructure provides programmable and more complete bone proliferation and vascularization. In order to reach this target, the crosslinking agent and optimum composition need to be carefully selected. The biological properties of these hybrid composites were confirmed in preclinical testing. C omb inato ri al and Supr a Mole cul ar C hemist ry A product of revolutionary advances in molecular biology, microfabrication, and information technology, combinatorial chemistry is an emerging discipline of tremendous potential for pharmacological design, biomaterials development, and the entire realm of polymer science. This new approach to the synthesis of materials and characterization of their properties uses multicomponent screening, high-throughput chemical synthesis, and advanced computational techniques to produce and analyse a large number of novel monomeric and polymeric entities. Another intriguing new field of great promise is supramolecular chemistry, which is concerned with developing molecular assemblies for biological applications based on macromolecular architectures that mimic nanoscale systems or mechanisms in nature. Novel synthesis methods based on supramolecular chemistry have been used to create branched or graft, cyclic, cross-linked, star, and dendritic polymer structures.
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An excellent example of the ability of supramolecular polymer systems to meet complex performance requirements and function like natural chemomechanical materials can be seen in two recent studies using polyrotaxanespolymers comprising cyclic compounds that are threaded onto linear polymeric chains capped with bulky end groups. Intelligent Materials The polyrotaxane polymers described above can be considered intelligent biomaterials insofar as they can function in a manner similar to molecular structures in the body. Other intelligent materials currently under development include hydrogels exhibiting critical behavior, anionic and cationic hydrogels, controlled porous structures, ultrapure biomaterials, tailored copolymers with desirable functional groups, biomimetic hydrogels, biodegradable polymers responding to specific biological conditions, and polymers precisely replicating selected properties. B i o d e g r a d e a b l e P o l y m e r s a s S c a f f o l d s f o r Ti s s u e Engineering Tissue Engineering has been defined as "The use of naturally occurring and/or synthetic materials in conjunction with cells to create biologic substitutes to serve as functional tissue replacements." In the late 1980s researchers developed porous PGA polymer scaffolds that enabled scientists to grow thick (1 mm and greater) layers of tissue. Since then, a number of functional tissue equivalents have been grown in the laboratory including skin, cartilage, tendon, bone, blood vessels, bowel, bladder and liver. Synthetic polymers commonly utilised for tissue engineering applications include poly(hydroxy acids) [e.g., polylactic acid (PLA), polyglycolic acid (PGA)], poly(ortho esters, polyurethanes and hydrogels. PLA and PGA are among the few synthetic degradable polymers that have been approved for human clinical use. Scaffolds fabricated from PGA have proven useful for growing three-dimensional tissue equivalents in vitro. PGA scaffolds are fabricated from spun fibers using a non-woven textile process. Small-diameter fibers of uniform length are randomly entangled to form a strong, flexible and porous three dimensional matrix. The scaffold allows cells to attach and grow in a three dimensional space while nutrient flow is maintained throughout the matrix.
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Currently, tissue engineering is used in a limited number of clinical applications for tissue replacement. For example, bioengineered skin is being used for the treatment of burns and diabetic ulcers. Tissue engineering has also been used to generate tendons for the treatment of musculoskeletal disease. In addition to scaffold-based therapies, a key focus area in tissue engineering is the development of cell-based therapies. Bone marrow transplantation is perhaps the oldest example of a cell-based therapy. Other examples include the use of ex vivo expanded chondrocytes to enhance the repair of articular cartilage and the use of cadaveric islet cells for the treatment of diabetes. Additionally, dendritic cells expressing tumor-specific markers are currently being evaluated as a potential therapeutic option for certain types of cancer. Tissue engineering principles may also facilitate the development of novel cell-based approaches. For example, cell- based technologies may provide therapeutic vaccines and vehicles for the production of certain therapeutic macro-molecules. Although a number of tissue engineering based therapies have been developed, a major obstacle in this field is the availability of suitable cells. There is an inadequate supply of donor organs and discarded tissues. While undifferentiated cells are a promising source for key differentiated cell types, methods are currently unavailable for expanding many undifferentiated cell populations. Ultimately, tissue engineers will have to learn how to modulate the proliferation and differentiation of cells appropriately in vitro and in vivo by controlling their microenvironment. This knowledge will enable tissue engineering to emerge as a viable therapeutic option for the treatment of many diseases. The solutions to the challenging problems in this rapidly evolving field will undoubtedly result from a convergence of engineering, large-scale biology, cell biology, bio-material sciences and bioinformatics.

One of the initial restraints slowing the development of this segment was and continues to be the relatively high cost of absorbable and erodible biomaterials compared with tradational products i.e. metallic implants and autologous/allograft bone grafting. The relatively high costs are associated principally with the:
Recovery of the expenses associated with the research and development activity and patenting of and litigations associated with proprietary technologies Complicated manufacturing procedures and processes Benefits associated with absorbability, biocompatibility and product performance comparable with metallic implants
With the progressive conversion of surgeons from traditional methods and the increasing professionalism of purchasing authorities the premium pricing policies of suppliers of absorbable and erodible has gradually eroded and fallen. Despite these market pressures however product pricing still remains higher than traditional materials. Nevertheless manufacturers have been aware of the changes taking place in the market and have been endeavouring to reduce costs by new manufacturing processes and by introducing improvements in manufacturing efficiencies. It is anticipated that product prices will continue to fall as demand increases and as the products become more readily acceptable in the market place.
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Figure 3-18 illustrates the competitive structure of the European absorbable and erodible orthopaedic biomaterials market. Figure 3-18 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (Europe), 2002
Number of Companies in Market Types of Competitors 34 Major multinationals including Ethicon (J&) Mitek, Smith and Nephew, Biomet Merack, Sofamor Danek (Medtronic) Medium/large-sized companies such as Arthrex Individual small indigenous manufacturers including suppliers of orthopaedic absorbables including Bionx Inc. and Inion Ltd Distribution Structure Direct subsidiaries throughout Europe for major multinational suppliers Complex network of distributor agreements for overseas suppliers throughout Europe Tiers of Competition 1st Tier includes: Biomet Merck, Sofamor Danek (Medtronic), Smith & Nephew, Ethicon (J&J) (Mitek) and Arthrex 2nd Tier includes: Wright Medical Technology, Linvatec (Conmed), Bionx Implants Inc., Neucoll, Depuy (J&J), Bionx Implants Inc., SulzerMedica (CentrePulse), Stryker and Mathys Synthes-Stratec 3rd Tier includes: Genzyme BioSurgery, Tornier, Atlantech, Zimmer, Inion Ltd, Artimplant, Biocomposites, Ceraver Osteal, Corin Group, Dynagen, Etex Corporation, Geistlich Shne AG Geistlich Shne AG, Inoteb, Interpore Cross International, Isotis B.V., Orthovita, Orquest, Teknimed, Tutogen Medical, Waldemar Link , Bioland biomateriaux, Unilab Surgibone Inc., MCP Notable Mergers/Acquisitions and Agreements Smith and Nephews acquisition of Instrument Makar and Orthopaedic Biosystems Ltd, Inc. Biomet joint venture agreement with Merck KGaA Key End-user Groups All senior orthopaedic surgeons especially spinal surgeons and those involved in treatment of major traumas with bone loss and long standing non-unions, sports injury specialists and sports injury centres OR directors and departmental heads Hospital purchasing authorities and hospital administrators Competitive Factors Product pricing: Mature markets i.e. absorbable surgical sutures are highly price sensitive Complimentary Product Grouping: Individual companies are able to gain competitive advantage by "product bundling" with other complimentary products Clinical Efficacy: Companies are increasingly required to prove clinical efficacy Product and Service Differentiation: Companies need to either focus on niche areas or provide comprehensive product ranges
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The market for absorbable and erodible fracture management devices is concentrated into 6 or 7 principle suppliers. The major multinational suppliers such as Ethicon (J&J) (Mitek), Biomet (Arthrotek and Walter Lorenz) and Smith and Nephew tend to operate through their divisional subsidiaries whilst the smaller companies (in terms of overall size) operate through distributors e.g. Bionx and Inion Ltd. Manufacturers of synthetic bone graft substitutes tend to be specialised small to medium sized companies. They have relied on creating joint ventures, partnerships and/or distributor agreements with major multinational orthopaedic companies as a method of ensuring the widest sales and marketing coverage. Frost & Sullivan wish to highligh the following companies who have a significant presence in these markets. Sulzer Medica (Centerpulse) The medical technology company Sulzer Medica has adopted a new name. From the 1st June, 2002, Sulzer Medica will operate under the 'Centerpulse' brand. The name change is a legal consequence of last year's spin-off from Swiss parent company, Sulzer AG, and now signifies the independence of the global active medical technology company in its communications. The company is sub-divided into the following divisions:

Orthopaedics Division Spine-Tech Division Vascular Division Cardiac Division Dental Division Special Products
The new name was presented to shareholders in May at the Annual General Meeting in Zurich and adopted by them. From June 1, 2002, Centerpulse became the official company name, replacing Sulzer Medica. To visualise the transformation process, a new logo and a new corporate design was launched concurrent with the name change. The company recently introduced the product known as Sysorb. Sysorb is a bioresorbable interference screw that fixes the "new" cruciate ligament in the knee.
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Smith and Nephew
On the 27th February 2002 Smith & Nephew, Inc., Endoscopy Division, a subsidiary of Smith & Nephew plc announced that the company had finalised an asset purchase agreement with Instrument Makar, Inc., a specialty arthroscopic company. As part of the agreement, Smith & Nephew Endoscopy will integrate Instrument Makar's suite of medical products, including its range of absorbable products into its current portfolio to further strengthen the company's position in the arthroscopic marketplace.
On the 20th November 2000 Smith and Nephew announced that they had acquired Orthopaedic Biosystems Ltd, Inc., This acquisition strengthened Smith and Nephews position in the shoulder-repair market as Orthopaedic Biosystems Ltd, Inc. have a range of proprietary soft-tissue suture anchors for shoulder surgery
In 1995 Smith & Nephew acquired Acufex, a subsidiary of American Home Products Corporation. Acufex is one of the world's leading designers and manufacturers of handheld surgical instruments, soft tissue fixation devices, drill guide systems and related instruments and accessories used in minimally invasive surgery procedures.
Smith & Nephew, Inc., Endoscopy Division, a subsidiary of Smith & Nephew plc recently announced the introduction of the TwinFix AB 5.0 Suture Anchor, a bioabsorbable suture anchor specifically designed to address the wide variations in bone density and tissue quality for patients requiring surgical intervention for rotator cuff injuries. The TwinFix AB Suture Anchor was described as being uniquely designed, using a patented double-helix Hi-Lo thread pattern to ensure that the anchor deploys into and is retained across the wide variations in patient bone densities and tissue quality.
Ethicon, Inc., (Johnson & Johnson) In April 1994 Ethicon, Inc., acquired Mitek Products. Mitek Products develops, manufacturers and markets of innovative medical devices for surgery, with focus on sports medicine and reconstruction. In 1985, Mitek was the first company to develop and market implantable orthopaedic devices built on new technology employing a nickel-titanium alloy known as Nitinol. Today the company's main products, suture-anchoring implants, are recognised throughout the world as methods for tissue reattachment in a wide range of clinical indications. Mitek's anchors are primarily used to reattach damaged ligaments and tendons in the shoulder, rotator cuff, wrist, thumb and ankle. Increasingly, Mitek's very small Micro Anchors are used for precise repair and reconstruction by hand, plastic and craniofacial surgeons.
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Biomet Merck Biomet augmented its international presence in May 1984 with the acquisition of Orthopedic Equipment Company ("OEC"). OEC provided Biomet with manufacturing operations in Swindon, England and Bridgend, South Wales. The OEC acquisition bolstered Biomet's distribution network both in the United States and in key international markets. OEC also offered the Company a broad line of internal fixation devices and operating room supplies. In January 1988, Biomet acquired Electro-Biology, Inc. ("EBI"), a pioneer and market leader in both the electrical stimulation and external fixation markets in the United States. EBI has an assembly facility in Guaynabo, Puerto Rico, headquarters in Parsippany, New Jersey, and a direct sales-force in the United States. Walter Lorenz Surgical, Inc. ("Lorenz Surgical"), a leading market participant in the craniomaxillofacial market segment, was acquired by Biomet in July 1992. Walter Lorenz founded this craniomaxillofacial company based upon the principles of quality, integrity and service to its customers. Lorenz Surgical is headquartered in Jacksonville, Florida and has a dedicated sales-force. Lorenz Surgical manufactures and markets resorbable plate and screw systems for craniomaxillofacial surgery in the United States, the European community, the Pacific Rim, Canada, South America and South Africa. The LactoSorb(R) Craniomaxillofacial Fixation System is a copolymer of poly-L-lactic acid and polyglycolic acid. As a result of its innovative design, the LactoSorb(R) System is comparable in strength to titanium plating systems at its initial placement and is completely resorbed within 9 to 15 months after implantation. Market response for the LactoSorb(R) System has been positive, especially in pediatric reconstruction cases by eliminating the need for a second surgery to remove the plates and screws. Lorenz Surgical intends to continue to expand and enhance its line of LactoSorb(R) Resorbable Implants. Biomet is also developing a resorbable calcium-deficient hydroxyapatite bone substitute material, currently referred to as Biocement D(TM). This material exhibits a slower resorption profile and offers higher strength in comparison to other resorbable compounds. In addition, Biomet is developing novel bone graft substitute materials, including Calcigen(TM) S (calcium sulfate) bone substitute and Calcigen(TM) NaP (calcium sodium phosphate) bone substitute. Both products are involved in ongoing pre-clinical studies for orthopedic indications and are not yet approved in the United States. During the third quarter of fiscal year 2001, these bone substitute materials were introduced in Europe and Canada. The joint venture formed in January 1998 with Merck KGaA, Darmstadt, Germany, significantly expanded Biomet's presence in the European marketplace and provided access to key biomaterials technologies. The sales-force contributed by Merck KGaA, with a particularly strong presence in France and Germany, complemented Biomet's sales-force, which has market-leading positions in other parts of Europe.
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Under the terms of the agreement, Biomet and Merck KGaA each contributed its European orthopaedic and biomaterials business operations to a new partnership entity and its whollyowned holding company. Both the partnership and holding company, known as BioMer are organised under the laws of The Netherlands. Biomet is the general partner with a 50 percent interest and Merck KGaA is a limited partner with a 50 percent interest. Biomet has control of BioMer through its voting control of the board of directors and, accordingly, the Company has consolidated the financial statements of BioMer for financial reporting beginning 1st January 1998 and has shown a minority interest for Merck KGaA's 50 percent interest.

Figure 3-19 and Chart 3.12 lists and illustrates the market share of the major market participants and the percent change from year to year for absorbable and erodible orthopaedic biomaterials in Europe. Figure 3-19 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Eurpoe), 2002
2002 Company Biomet Merck Sofamor Danek (Medtronic) Smith & Nephew Ethicon (J&J) (Mitek) Arthrex Wright Medical Technology (Osteoset) Linvatec (Conmed) Bionx Implants Inc. NeuColl (Collagraft) Depuy J&J Interpore Cross International SulzerMedica (CentrePulse) Stryker Mathys Synthes-Stratec Others Market Share % 16.1 11.5 10.6 9.8 9.5 5.6 4.8 4.3 4.0 3.3 3.2 3.1 2.7 2.4 9.1 2002/03 Trend Up Up Up Down Down (slightly) No Change No Change Down (slightly Down Up No Change No Change Up No Change ---
Note: Others include: Genzyme BioSurgery, Tornier, Atlantech, Zimmer, Inion Ltd, Artimplant, Biocomposites, Ceraver Osteal, Corin Group, Dynagen, Etex Corporation, Geistlich Shne AG, Inoteb, Interpore Cross International, Isotis B.V., Orthovita, Orquest, Teknimed, Tutogen Medical, Waldemar Link , Bioland biomateriaux, Unilab Surgibone Inc., MCP,
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Chart 3.12 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Eurpoe), 2003
NeuColl (Collagraft) 4.0% Bionx Implants Inc 4.3% Linvatec (Conmed) 4.8% Wright Medical Technology (Osteoset) 5.6% Arthrex 9.5% Ethicon (J&J) (Mitek) 9.8% Smith & Nephew 10.6% Sofamor Danek (Medtronic) 11.5% Depuy J&J 3.3% Interpore Cross International 3.2%
SulzerMedica (CentrePulse) 3.1% Stryker 2.7%
Mathys Synthes-Stratec 2.4% Others 9.1%
Biomet Merck 16.1%
As a result of the data and information gathered during the preparation of this report Biomet Merck is the largest market shareholder with an estimated 16.1 percent of the market. Their strength lies in the comprehensive product range covering both fracture management absorbables and synthetic bone graft substitutes. Biomet Merck has also been progressive in its market positioning and marketing stance and as a result has not only increased sales significantly but has also gained market share. Sofamor Danek (Medtronic) is in second position with an estimated 11.5 percent of the market. Sofamor Danek (Medtronic) strength lies in their spinal implant business and the synthetic bone graft substitutes, which are used for these procedures. Frost & Sullivan have determined that Smith and Nephew is the third largest market shareholder with an estimated 10.6 percent of the market. They too have gained market share through the recent acquisitions of Orthopaedic Biosystems Ltd, Inc. and Instrument Makar. It is predicted that they continue to gain market share as the products from the acquired companies are incorporated into the endoscopy division. Ethicon (J&J) through their Mitek and endoscopy business have been determined to be in fourth position with an estimated 9.8 percent of the market. They have traditionally had a strong position in this market but have come under increasing market pressure from other suppliers of absorbable and erodible biomaterials used in orthopaedics. Arthrex is in fifth position with an estimated 9.5 percent of the market whilst Wright Medical Technology with their Osteoset synthetic bone graft substitute is in sixth position with an estimated 5.6 percent of the market.
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4

Healthcare Finance and Expenditure The Office of Health Economics and the OECD estimates that total healthcare spending in German accounts for 10.4 percent of GDP or approximately $227 billion in 2000. Private healthcare in German accounts for 23 percent of the total healthcare expenditure in German. The Gesetzliche Krankenversicherung (GKV) or statutory health insurance is at the centre of the German healthcare system. The budget, which is used to support the GKV is funded principally from a number of sources including general taxation, statutory social security and insurance contributions and employer contributions. In addition to these sources of funding private insurance contributions and patient co-payments are beginning to make a higher proportion of the total expenditure of healthcare in German. The major changes in healthcare expenditure in German include annual increases in remedies and devices (41 percent), sickness benefits (35 percent), pregnancy, maternity (25 percent) and hospital spending (20 percent). The increased spending by the sickness funds has been the result of increases in the traditional areas of benefits but also of the continuing extension in the range of benefits which the sickness funds are required to cover i.e. social services, health promotion and sickness prevention.
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Health Care Structure and Organisatio n The German healthcare system is decentralised, with central government having little executive responsibility for the provision of healthcare. The federal government's main role is the provision of the regulatory framework within which the individual Lender have to operate. As a response to the spiralling cost of health provision and in order to ensure a standard quality of service throughout German, the federal government has enacted a number of federal laws covering the health system; the Hospitals Financing Act, the Federal Code of Practice for Medical Practitioners, the Dentistry Act and the reforming legislationthe Health Care Reform Act which came into force on 1st January, 1989, the Health Care Structural Reform Act which came into force on 1st January, 1993, the 1st and 2nd GVK Restructuring Acts, which came into force on 1st July, 1997, and most recently the GKV-Solidarity Strengthening Act, which came into force on 1st January 1999. This federal legislation is supplemented by legislation enacted by the individual Lender, such as legislation governing the medical professions or medical boards and legislation relating to the Public Health Service. Further reform of the healthcare system is planned for 2000 and 2001, in the shape of the government's Healthcare Reform 2000 legislation. Administration and the implementation of Federal laws are the responsibility of the Lender, which own hospitals, undertake hospital construction and provide medical education. The lack of centralised intervention in the administration of the German healthcare system leaves considerable room for diversity and fragmentation within the various Lender. Responsibility for preventive care, health education and environmental health is held at municipal level by state health authorities. Federal Ministeries At a federal level, responsibility for healthcare matters falls largely within the remit of four ministries. First and foremost is the Federal Ministry for Health, which is responsible for all health-related issues. The Federal Ministry for Health is composed of five Directorates General:
Directorate General for Preventive Health Care and Disease Control
The directorate is responsible for the training of the medical professions, the prevention and control of disease, drug addiction and gene technology.
Directorate General of Consumer Protection and Veterinary Medicine
The directorate is responsible for ensuring that the public is informed about nutritional issues and protected from being misled about items which can affect health, notably foodstuffs.
Directorate General of Public Health Care and Health Insurance
The directorate's main responsibility is the continued development and securing of financial resources for funding the statutory health insurance system. Other responsibilities also include pharmacy and pharmaceuticals.
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Directorate General for Basic Issues, Planning and International Relations
The directorate is responsible for examining the wide-reaching effects of health policy and ensuring full consideration of these effects is taken into account by co-ordinating all important measures adopted by the ministry as a whole. The directorate's tasks include cooperating with the individual Lender, fostering international relations, co-ordinating research activities, informing the public about health policy issues and keeping statistics.
Directorate General Zentrale Verwaltung (central administration)
The central administration is responsible for personnel, construction, budgetary and legal matters, internal service, organisation and security. As well as the five Directorates General, the Federal Ministry for Health is assisted by a further four subordinate authorities:
Institutions of the former Federal Health Office (Berlin)
These institutions conduct research into the safety of pharmaceuticals, into the protection of consumers from health risks, into the monitoring of environmental and radiological pollution levels and into prevention and intervention in the fields of human and veterinary medicine.
Federal Centre for Health Education (Cologne)
The centre is responsible for promoting and maintaining the quality of public health by providing practical health education and informing the public on health matters including family planning.
Paul Ehrlich Institute (Langen)
The Paul Ehrlich Institute is the Federal Agency for Sera and Vaccines and is responsible for the testing, authorising and monitoring of the use and application of sera and vaccines.
The German Institute for Medical Documentation and Information (Cologne)
The institute is responsible for collecting, evaluating and disseminating information on topics related to medicine and the life sciences. In addition to the Federal Ministry for Health and its associated institutions, the three other federal ministries with responsibility over health matters are:
The Federal Ministry of Labour and Social Affairs, which is responsible for social insurance including occupational and veterans' healthcare and rehabilitation services. The Federal Ministry for Research and Technology, which promotes subjects relevant to health research programmes which aren't restricted to a particular field of responsibility. The Federal Ministry for the Environment, Nature Conservation and Nuclear Safety which is responsible for issues concerning health protection in connection with environmental pollution.
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The country is divided into 14 regions known as Lender. Each Lender has a separate government who are responsible for designing and implementing health policies based on the priorities issued by the Federal Ministry of Health. The Lender or state authorities own & run public hospitals, organise the funding and development of the regional infrastructure. Some Lender are grouped into regional districts for the purposes of administration. In those Lender which are grouped into administrative districts, a regional commissioner acts as an intermediate government authority. Responsibilities falling to this regional commissioner are discharged by a Higher Lender Health Authority and include the supervision of the activities of healthcare institutions, supervising the use and application of pharmaceuticals and the prevention and control of epidemics. Those Lender which are not grouped into administrative districts, such as Schleswig-Holstein, Saarland and the city states of Bremen and Hamburg, have these responsibilities discharged directly by the health departments at the relevant federal ministries. At a local level, the practical supervisory and administrative work of the public health service is carried out by a total of 524 health offices across German. Autonomous corporatist parties e.g. physician and insurance associations have a significant role in the development of health care policy and implementation. Reimbursement of Hospital Service s The current system for the remuneration of hospital services is based on DRG-like system which is known as the Hospital Rate Ordinance (BPflV 95), which has been in force since 1995/94. It is likely that this system will remain in effect until introduction of the new remuneration system that is planned for 2003. In the context of the "dual" system of hospital finance, the Hospital Rate Ordinance is related only to the operating costs and not the capital costs of acute care hospitals. The current system for the remuneration of hospital services in German is a hybrid that combines per diem payments with lump-sum prospective rates. These are also the basic units that are used for the calculation and negotiation of each hospital's budget. The budget of a hospital is determined each year in negotiations between the regional health insurance funds and each hospital. The base line for the negotiations is the hospital's budget from the previous year. In addition, planned changes in the structure and volume of services or expected changes in hospital revenues are taken into account. Strictly speaking, the budget agreed upon in the negotiations is fixed only if the hospital actually provides the type and volume of services that are specified in the budget. Deviations of a hospital's actual proceeds from its budget are partially compensated through budget adjustments ("flexible" budgeting). Such adjustment reflects only variable costs. Hospital services in excess of the agreed upon volume and structure are paid for at only 10 to 15 percent of the normal rate. If a hospital provides fewer services than specified in the budget, the difference between the negotiated budget and actual services provided is covered only to 40 percent. These regulations make it unattractive for hospitals to provide more or less than is specified in their annual budgets.
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In addition to the level of a hospital's budget, the scheduling of payments to the hospital over the budget period is subject to negotiation. The basic per diem for all non-medical services (e.g. administration, accommodation, and meals) is negotiated separately. The basic per diem is paid to a hospital for each day of in-patient stay and is the same for all departments in a hospital. Each department in the hospital is also paid a separate "departmental" per diem (Abteilungspflegesatz) for each day of patient stay in the respective department. The per diem rates (the departmental per diems and the basic per diem) are determined in annual budget negotiations and are based on the expected type and volume of the each department's services. The per diem rates must be medically justified and enable a prudent hospital administration to meet the contractual obligations of the hospital in the provision of health care. Hospitals are not entitled to have their costs reflected in the negotiated budgets. However, a hospital is entitled to a negotiated budget that reflects differences in the type and volume of its services vis--vis other hospitals. The Hospital Rate Ordinance (BPflV) defines lump-sum payments (Fallpauschalen) and procedural rates (Sonderentgelte) for certain types of treatment. The procedures and services covered by these forms of payment may not be paid on the basis of per diems. The relative values of the per-case payments and procedural rates are determined at national level and are based on an empirical study of the average costs in selected hospitals. The value of the lump-sum-payments and procedural rates in monetary terms is negotiated each year at state level. The amount of payment for a given type of treatment is therefore the same for all hospitals within a state. Per-case payments are defined according to diagnosis and cover all medical and non-medical hospital services associated with the care of a patient. If a lump-sum per-case payment exists for a diagnosis, other forms of payment cannot be used for billing purposes. Only when the length of inpatient stay exceeds the maximum length of stay that is defined for each per-case payment is a case regarded as an "outlier". Inpatient days in excess of the maximum length of stay are paid for on the basis of per diem rates (i.e. basic and departmental per diems). Procedural rates are designed to cover the costs of specific procedures, including the costs of implants and transplants as well as laboratory and surgical services that are utilised during a procedure. The remaining costs related to the hospital stay are paid with per diem rates. Non-medical services of the hospital are covered by the basic per diem, which is paid in full. In order to avoid a "double counting" of the costs associated with medical treatment, which are also covered by the departmental per diem, only 80 per cent of the departmental per diem is paid to the hospital.
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On average, per diem rates cover about 7580 percent of hospitals' budgets for inpatient care. However, this rate varies widely across hospitals. Lump-sum payments and procedural rates are very important for the remuneration in some medical specialities, in particular in heart surgery, transplantation medicine and in orthopaedic surgery. Thus, prospective hospital rates make up much more than 20 to 25 per cent of the budget in hospitals that are specialised in these areas. All operating costs of a hospital during a budget period are charged to individual patients or their health insurers on the basis of per diem rates, lump sum payments and procedural rates. The payments therefore do not function as prices for hospital services, but as instalments towards payment of the negotiated hospital budget. The present reimbursement system fulfils its function of financing the services provided by hospitals. In addition to the finance function, a rational reimbursement system must also fulfil the function of allocating resources. This includes ensuring that scarce resources are allocated to the more efficient health care providers. However, due to the state subsidisation of hospitals' capital costs (system of the dual finance) and the characteristics of the current reimbursement system, the present system of hospital finance is much less successful in fulfilling the allocation function than it is in fulfilling the finance function. In addition to inpatient treatment, hospitals can provide "pre- and post-stationary" services, semi-stationary and short-term inpatient treatment as well as ambulatory surgery. Special per diem rates for semi-stationary services are determined in the annual budget negotiations. The other forms for the provision of hospital services are usually reimbursed on the basis of lump sum payments. The following figure provides an overview of the different types of hospital rates. Since 1997, the statutory health insurance funds and the German Hospital Association have also had the task to further develop the existing DRG system. The public health insurance funds prefered an all-inclusive case payment system like the APDRG system in the USA with 440 case payments for all of the hospital sector. The German Hospital Association wanted to extend the existing case payments to other areas. In addition, there is supposed to be an individual budget for each hospital. This budget is supposed to cover the costs of the hospital, which are independent of which health care services the hospital renders or not. Towards the end of June 2000, both partners, the German Hospitals' Association (DKG) and the Health Insurance Schemes, finally agreed to use the Australian AR-DRG System (Australian Refined Diagnosis Related Groups). AR-DRG consists of 441 categories, each of five grades of severity. The new German system will contain between 400 and 800 diagnostic groups and should be introduced in 2003, initially with a budget-neutral effect. From 2004 onwards, it should be in full operation.
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Chart 4.1 shows the market engineering research measurements for the German absorbable and erodible biomaterials market as it appeared in 2002. Chart 4.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements
(Germany), 2002
Market Research
Market Engineer
Market Strategy
Implementation
Market Planning
Measurement $196.7 million Not applicable 3.8% 3.9% Not applicable Not applicable 75.0%
Mature and Static in absorbable sutures but significant growth in other subsegments, emerging and niche markets $256.6 million Single use 69.4% 42 Up --Down Up
*Not possible to obtain accurate average selling prices due to wide variation from one company to another and from one individual product line to another.
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Market Drivers
Figure 4-1 reviews the specific drivers for the absorbable and erodible biomaterials market in Germany respectively. Figure 4-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Germany), 2003-2009
Rank Drivers 1 2 3 4 Growth in Sports Injuries and Treatments Stimulates Development of Absorbable and Erodible Biomaterials in Germany New, Innovative Product Introductions and New Product Applications Stimulate Market Development Increased Reporting of Low Back Problems Stimulates Bone Graft Substitutes Market 1-2 Years 3-4 Years 5-6 Years High High Medium High High Medium Medium High Medium Medium Medium
Increased Product Awareness through Company Originated Product Medium Training and Education Stimulates Market Development
G r ow t h i n S p o r t s I n j u r i e s a n d Tr e a t m e n t s S t i m u l a t e s Development of Absorbable and Erodible Biomaterials in Germany There are a number of factors contributing to the growth in sports related injuries. These include:

Increased participation amongst the ageing population. Increased participation in winter sports. Increase in the number of women participating in sports. The general increase in the number of individuals who are actively participating in contact sports such as soccer and rugby.
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N e w, I n n o va t i v e P r o d u c t I n t r o d u c t i o n s a n d N e w Product Applications Stimulate Market Development There has been a considerable amount of commercial and clinical activity concerning the use of absorbable and erodible biomaterials in Germany in recent years. This has included:
The introduction of a range of new and innovative products for a wide variety of both wound closure and orthopaedic applications. The emergence of cosmetic and plastic reconstruction surgery, the increased emphasis on treatments for coronary heart disease and different forms of cancer for example has resulted in the increased popularity of different wound closure products including tissue sealants. The appearance of anti-adhesion products and the ability of potentially resolving the problems associated with adhesions caused by trauma or surgery is seen as a major clinical breakthrough and one which should help develop this emerging sub-segment. Improvements to the clinical efficacy, product specifications and range of indications for orthopaedic absorbables including suture anchors, interference screws and fracture management devices. The acceptance by healthcare professionals of the recognisable benefits associated the synthetic bone graft substitutes as an alternative to autologous bone grafts.
I ncreased Re port ing of Low Back Pr ob lems S timulat es Bone Graft Substitutes Market Back pain is the most prevalent and increasing medical disorder in industrialised societies and unfortunately is rarely a once-in-a-lifetime event. In Germany alone an estimated 22 million people suffer from it in the course of a year and four out of five adults will experience significant low back pain (lumbago) at some stage during their lives. There are a vast range of causes of low back pain including posture, injury, degenerative, birth abnormalities (spondylolysis), inflammation (ankylosing spondylitis), infection, prolapsed intervertebral disc etc. Lumbar arthritic changes begin in early adulthood but take decades on average before clinical symptoms arise. However, the lumbar spine is subject to such injurious forces with many of our common activities, especially sports, that early injuries to the discs and ligament will accelerate the degenerative processes causing symptoms at an earlier age. Patients may typically develop symptoms in the mid 40s to early 50s with progression of symptoms as a person ages. Men are more likely to develop symptoms earlier however postmenopausal women with stiffening spines rapidly approach men in incidence and severity of the disease. Certain degenerative disease predispose patients to lumbar arthritis. Arthritic processes affecting the body such as rheumatoid arthritis and ankylosing spondylitis commonly cause severe arthritis in the lumbar spine.
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I n c r e a s e d P r o d u c t Awa r e n e s s t h ro u g h C o m pa n y Originated Product Training and Education Stimulates Market Development The leading suppliers of absorbable and erodible biomaterials in Germany have embarked on a variety of different education and product training programs as a means of not only introducing the healthcare professionals to proprietary products but also to help stimuate the growth and development of this market in general. The accumulative effect of each companies product training, provision of product information and the promotional activity by the sales and marketing department have contributed to raising the profile of these products to clinicians.
Market Restraints
Figure 4-2 reviews the specific restraints for the absorbable and erodible biomaterials market in Germany respectively. Figure 4-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Germany), 2003-2009
Rank Restraints 1 2 1-2 Years 3-4 Years 5-6 Years High High High High
Healthcare Reforms and Budgetary Restraints Market Development High Minimally Invasive Surgery: "A Mixed Blessing" for Absorbable and Medium Erodible Biomaterials
Healthcare Reforms and Budgetary Restraints Market Development The succesive series of health care reforms that have been introduced into the German healthcare system i.e. the Hospital Reform Law (KHNG) in 1984 and an amended version of the Hospital Rate Ordinance (BPflV) in 1985, The Health Care Reform Act (GRG) of 1989, Health Care Structure Act (GSG) in January 1993, the First and Second Laws for the Reform of the SHI System (1. and 2. GKV-NOG) in 1997, the Law for Reinforcing Solidarity in the SHI System (GKV SolG) in January 1999 and the most recent "the Health Care Reform 2000" in November 1999 have been introduced as a means of ontrolling and restraining the level of funding throughout the entire healthcare system. This in turn had been in response to rising expenditures as a result of more treatment possibilities and more complex treatment options in the hospital sector.
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In order to avoid increases in the average SHI contribution rate to pay for this rising expenditure lawmakers wrote the principle of stable contribution rates into social security law (SGB V) in 1988. According to the law, the per capita expenditures of the SHI funds generated through the Sickness Insurance Funds (SIFs). i.e. autonomous, not-for- profit, nongovernmental bodies (although regulated by the government) may rise only to the extent that the assessable income of the paying members also rises. Thus the level of funding as a result of contributions by the SHI were limited prompting the introduction of the healthcare reforms as a means of controlling expenditure. The introduction of these reforms is resulted in a general reduction in hospital budgets, which are currently negotiated with the sickness funds and are based on historical costs and linked to the growth of the income of the insured and organised as a mixture of per diem-payments as well as prospective case fees and procedure fees. This has resulted in an overall reduction in demand for medical devices. As already described this current system is being progressively replaced by the introduction of the AR-DRG System (Australian Refined Diagnosis Related Groups). The payment system using the AR-DRG System will be manditory by the year 2005. Mi nima lly Invasi ve Sur gery: " A Mix ed Bl essing" for Absorbable and Erodible Biomaterials Whilst the continued development of minimally invasive techniques and surgery acts as a stimulus for the development of the absorbable and erodible orthopaedic biomaterials it has been described as a restraint by the suppliers of absorbable and erodible wound closure products. With the advent of minimally invasive surgery particularly for coronary heart disease and more recently the development of minimally invasive coronary artery bypass surgery there are significant advantages. These include "closed" surgical procedures, which can be performed using smaller incisions which significantly help reduce the recovery period for the patient, reduces post-operative scarring and reduce blood loss. As a result the "closed" technique obviates the need to close the wound at all levels reducing the need for suturing, haemostats, ligation clips, tissue sealants etc reducing the market potential for these products. Conversely many absorbable and erodible biomaterials for use in orthopaedic surgery have been developed as a consequence of the advent of minimally invasive surgery. For example suture anchors, meniscal repair systems and the endoscopic posterior and anterior cruciate ligament (PCL and ACL) reconstruction technique with bioabsorbable interference screws. It is anticipated that the market for absorbable and erodible orthopaedic biomaterials will continue to develop as minimally invasive surgery expands and the principles and techniques extended to different applications.
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Market Forecasts
Figure 4-3 and Chart 4.2 provides a summary review of the analysis of the revenue forecasts for the German absorbable and erodible biomaterials market. Figure 4-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Germany), 1999-2009
Growth Rate (%) --2.1 2.4 3.8 3.8 3.9 4.1 4.2 3.9 3.8 3.4
($ Million) 181.2 185.0 189.5 196.7 204.2 212.1 220.9 230.1 239.1 248.1 256.6
Chart 4.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Germany), 1999-2009
300 250 Revenues ($ Million) 200 150 100 50 0 1999 2000 2001 2002
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It has been estimated that the market for absorbable and erodible biomaterials products in Germany was valued at $181.2 million in 1999. This had increased slightly to an estimated $196.7 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $256.6 million (CAGR 3.9 percent). Growth in this market is largely attributed to the development of absorbable and erodible biomaterials for use in orthopaedic surgery. This market has been supported by the market introduction of new and innovative products and the increasing acceptance of these new technologies amongst the healthcare professionals. Conversely the absorbable and erodible wound closure segment is relatively static in Germany although there is evidence for growth in the tissue sealant, haemostats, adhesive/surgical glues and anti-adhesion sub-segments. Growth in the market however is influenced by the size and value of the absorbable sutures market. Although there was a small but significant increase in synthetic absorbable sutures following the ban on catgut absorbable sutures this market sub-segment is static despite growth in certain applications (e.g. cosmetic and plastic reconstruction surgery).
Market Trends/Analyses
T r e n d s b y P r o d u c t Ty p e Figure 4-4 and Chart 4.3 provides a summary review of the analysis of the percent of revenue forecasts by product type for the German absorbable and erodible biomaterials market over the forecast period. Figure 4-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Germany), 1999-2009
European Absorbable and Erodible Biomaterials Market Absorbable and Erodible Wound Closure Biomaterials Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 (%) 87.7 86.4 85.0 83.5 81.6 79.2 76.5 73.8 71.2 69.1 67.4 Adsorbable and Erodible Orthopaedic Biomaterials (%) 12.3 13.6 15.0 16.5 18.4 20.8 23.5 26.2 28.8 30.9 32.6
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Chart 4.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Germany), 1999-2009
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Adsorbable and Erodible Orthopaedic Biomaterials Absorbable and Erodible Wound Closure Biomaterials
99
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In 1999 the absorbable and erodible wound closure biomaterials market segment represented 87.7 percent of the total German absorbable and erodible biomaterials market. By the year 2002 the absorbable and erodible wound closure biomaterials market segment had declined and represented 83.5 percent of the total market i.e. Frost & Sullivan have determined that in 4 years this segment had lost 4.2 percentage points to the absorbable and erodible orthopaedic biomaterials market. From the market intelligence gathered during the preparation of this report Frost & Sulivan predict that by the year 2009 the absorbable and erodible wound closure biomaterials market segment will have declined further and will represent 67.4 percent of the overall market. This represents a 20.3 percent increase in the percent of revenues for the absorbable and erodible orthopaedic biomaterials market between 1999 and 2009 and reflects the anticipated compounded annual growth rates expected for this segment. P r i c i n g S t r a t e g y a n d Tr e n d A n a l y s i s The inherent instability of materials which are used to manufacture absorbable and erodible biomaterials creates a specific logistically problem for hospitals. As a result of the instability most hospitals only hold a relatively small inventory of these products in order to ensure that products in stock are used before the expiry date on the packaging. As a result hospitals would normally purchase product as and when it was needed to replace the used product. The hospital would then contact the suppliers directly through the purchasing authorities or through the operating theatre managers and purchase directly. Normally hospitals purchase at product list prices but occasionally discounts are provided to accounts which are high volume users, are centres of excellence or are prospective large accounts. Products are normally premium priced as suppliers highlight the advantages of these products over nonabsorbable products and recover the cost of on-going research and development.
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Figure 4-5 illustrates the competitive structure of the German absorbable and erodible biomaterials market. Figure 4-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (Germany), 2002
Number of Companies in Market 42 Types of Competitors With the exception of Resorba Wundversorgung the market suppliers in the 1st and 2 nd tiers are subsidiaries or principle offices of major multinational companies Companies included in the 3rd tier are a mixture of small indigenous suppliers, small and medium-sized companies from other European countries and the US and major principally US based corporations operating in niche markets Distribution Structure Tiers of Competition The leading suppliers operate directly through subsidiaries 1st Tier includes: Ethicon (J&J), B. Braun 2nd Tier includes: Baxter International Inc, Tyco Healthcare, Nycomed, Biomet Merck, Sofamor Danek (Medtronic), Arthrex, Resorba Wundversorgung and Aventis Pharma 3rd Tier includes: Tornier (Phusis), Atlantech, OsteoTech, Orthovita, Aesculap (B. Braun), Tutogen Medical, Teknimed, Regeneration Technologies, Biocomposites, Ceraver Osteal, Corin Group. Inion Ltd, Storz, Inoteb, Confluent Surgical Inc, Alcon Laboratories, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH, FSSB Chirurgische Nadeln , Goretex, Genzyme Corporation, Gliatech Inc, Will Pharma, Peters S.A., Smith & Nephew (Acufex), Ethicon (J&J) (Mitek), Depuy (J&J), NeuColl, Linvatec (Conmed), Mathys Synthes-Stratec, Stryker, Interpore Cross International and SulzerMedica (Centerpulse) Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity is forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Manufacturers seeking competitive advantage need to secure a distributor agreement with a major distributor in Germany Efficacy Studies: Suppliers are increasing being requested to provide proof of clinical efficacy as a means of proving the products ability
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The structure of the German market is highly complex with a large number of companies operating as both distributors and manufacturers, distributors alone and suppliers. To complicate this some companies focus on specific geographic regions or Lender where they have been historically located. Frost & Sullivan wish to highlight the indigenous company B. Braun and its presence in the absorbable and erodible biomaterials in Europe and in particular its presence in the German market. B. Braun originated in 1839 when on the 23rd June 1839, Julius Wilhelm Braun acquired the Rosen-Apotheke, a pharmacy in Melsungen, and expanded it to include a mail-order business for local herbs. The company continued to develop and 1998 incorporated Aesculap AG & CO.KG. In addition a logistic alliance between B. Braun and Paul Hartmann AG and a relocation of B. Braun Dexon GmbH to Tuttlingen took place in the year 2000. Currently B. Braun is sub-divided into four principle operating divisions. These are the Hospital Care Division, the Out Patient Market Division (OPM), the Medtech Division and Aesculap AG & CO.KG. A e s c u l a p AG & C O. K G Aesculap AG & CO.KG is a large organisation with its sale force organised around the 6 distinct divisions. In total there are 100 sales representatives in Germany with approximately 3 sales representatives per region. The majority of sales representatives are involved in and responsible for neurosurgery, followed by orthopaedics. The spinal/ENT division accounts for the smallest proportion of the sales force. The marketing department is responsible for co-ordinating the strategies and marketing priorities in order that the company meets its marketing and financial objectives. The entire sales force does not have secondary academic qualifications but have a medico/clinical training. The sales force also undergoes regular sales and product related training Aesculap AG & CO.KG provide a wide range of seminars and conferences for all hospital employees in various clinical and non-clinical positions. The majority of workshops/seminars etc is conducted at The Aesculap Academy.
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Based in Tuttlingen The Aesculap Academy was established in 1995 as a forum to offer employees in hospitals and doctors practices the opportunity to exchange ideas concerning medical issues and the latest techniques in theory and practice. Courses, seminars and symposia on current topics in medicine or in health management are held in the Aesculapium. The Aesculapium is an architecually interesting building which includes lecture rooms, conference rooms, workshops and meeting rooms. Events at the Aesculap Academy are recognised and are described as being extremely popular among specialists. Aesculap AG & CO.KG have a Technical Service Department with 60 employees. They are based in Service Centres at Tuttlingen, Sheffield (UK) and Lytre (France). In addition there is the external service agent known as Fleximed. Smith and Nephew The structure of the endoscopy sales force for Smith and Nephew in Germany is based around 8 managers. These include a business manager Endoscopy, Marketing Manager Endoscopy, 3 Product Managers for Arthroscopy and General Surgery and 3 Sales Managers for Endoscopy, Arthroscopy and General Surgery. The sales force is divided into Arthroscopy and General Surgery. There is also 1 Head of Customer Service and 6 staff who are responsible for telephone and fax order taking from the logistics centre in Lohfelden. Linvatec Linvatec is been operating in the German market for just over 3 years. Sales management is organised so that Germany is divided into the North and Southern regions each having a sales manager. The company currently has 10 sales representatives who cover 10 geographic regions throughout Germany. The majority have secondary academic qualifications or have a clinical medical background. A considerable amount of sales time is taken up by responding to leads, follow-up detailing and cold calling. The sales representatives are also required to attend conferences, exhibitions and seminars at a regional and national level. Sales and product training is provided usually between 2-3 times a year or to accompany a new product launch.
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Figure 4-6 and Chart 4.4 illustrates and lists the market share of the major market participants and the percent change from year to year for the German absorbable and erodible biomaterials market. Figure 4-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Germany), 2002-2003
2002 Company Ethicon (J&J) B. Braun Baxter International Inc Tyco Healthcare Nycomed Biomet Merck Sofamor Danek (Medtronic) Arthrex Resorba Wundversorgung Aventis Pharma Others Total Market Share (%) 43.5 19.7 6.2 4.4 4.4 2.6 2.5 2.3 2.2 1.9 10.3 100 2002/03 Trend No Change Up Up No Change No Change No Change Up No Change No Change No Change -----
Note: Others include: Tornier (Phusis), Atlantech, OsteoTech, Orthovita, Aesculap (B. Braun), Tutogen Medical, Teknimed, Regeneration Technologies, Biocomposites, Ceraver Osteal, Corin Group. Inion Ltd, Storz, Inoteb, Confluent Surgical Inc, Alcon Laboratories, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH, FSSB Chirurgische Nadeln , Goretex, Genzyme Corporation, Gliatech Inc, Will Pharma, Peters S.A., Smith & Nephew (Acufex), Ethicon (J&J) (Mitek), Depuy (J&J), NeuColl, Linvatec (Conmed), Mathys Synthes-Stratec, Stryker, Interpore Cross International and SulzerMedica (Centerpulse)
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Chart 4.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Germany), 2003
Biomet Merck 2.6% Sofamor Danek (Medtronic) Nycomed 2.5% 4.4% Resorba Arthrex 2.3% Wundversorgung 2.2% Aventis Pharma 1.9% Others 10.3%
Tyco Healthcare 4.4% Baxter International Inc 6.2% B. Braun 19.7%
Ethicon (J&J) 43.5%
The overall market leader for absorbable and erodible biomaterials in Germany is Ethicon (J&J) with an estimated 43.5 percent of the market. Ethicon (J&J) have a particulary strong presence in the absorbables sutures market with an estimated 67.0 percent of the subsegment which represents over 58 percent of the total market. B. Braun through its Aesculap Division is the second largest supplier in Germany with an estimated 19.7 percent of the total market. The strength of B. Braun is derived from its indigenous position and its strong presence in the absorbable sutures, haemostat and adhesive/surgical glue sub-segments market. Baxter International Inc is in third position with an estimated 6.2 percent of the market. Baxter International Inc strengths lie in its presence in the tissue sealant market. Frost & Sullivan have determined that Nycomed and Tyco Healthcare are in fourth and fifth equal positions with an estimated 4.4 percent of the market each. Tyco Healthcare strength lies in its presence in the absorbable sutures, adhesives and surgical glues and ligation clips sub-segments. Nycomed's strength lies in its presence in the tissue sealants market with TachoComb. The value of the absorbable and erodible wound closure biomaterials overshadows the absorbable and erodible orthopaedic biomaterials. The three major companies operating in this segment are Arthrex, Smith and Nephew and Ethicon (Mitek). Smith and Nephew is anticipated to grow throughout the forecast period principally as a result of its recent acquisition of Instrument Makar and Orthopaedic Biosystems Ltd, Inc.
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Forecasts Wo u n d
of
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Absorbable
and
Erodible
Closure
Biomaterials
Market
Market Drivers
Figure 4-7 shows the drivers for absorbable and erodible wound closure biomaterials in the German market. Figure 4-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Germany), 2003-2009
Rank Driver 1 2 3 Recent Ban on Catgut Sutures in Germany Stimulates Growth and Development of Synthetic Absorbable Surgical Sutures Dramatic Increase in Cosmetic and Reconstruction Plastic Surgery Stimulates Growth in Market The Paul-Ehrlich-Institut's Approval of 3 Tissue Sealants in Germany 1-2 Years 3-4 Years 5-6 Years High High Medium Medium Medium Medium Medium Medium Medium
Recent Ban on Catgut Sutures in Germany Stimulates Growth and Develo pment o f Synthe tic Abso rbabl e Surgical Suture s Like many of the other European Member States such as France and the UK Catgut suture have been banned in Germany and Austria. Although the volume of catgut sutures was relatively low in comparison to synthetic abaorbable surgical sutures the banning increased sales by about 5 percent immediately after the ban took effect. Dramatic Increase in Cosmetic and Reconstruction P lasti c Surge ry Stimulat es Growth in Ma rk et There has been a dramatic increase in the number of cosmetic and plastic reconstruction surgery precedures in Germany as a result of the generally higher quality of life expectations amongst the general population.
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This includes: A esth eti c ( Co smetic ) Sur ge ry Aesthetic (cosmetic) surgery is an integral part of the specialty plastic surgery. This kind of surgery is frequently performed for (endoscopic) forehead lift, face lift, neck lift, eyelid lift (blepharoplasty), ear surgery (otoplasty), nose surgery (rhinoplasty), ultrasound-assisted liposuction, female breast lift, breast enlargement (augmentation mammaplasty), male breast reduction (gynecomastia), tummy tuck (abdominoplasty) andthigh lift. Aesthetic (cosmetic) surgery is usually not covered by health insurance. Reconstruction Plastic Surgery Dramatic advances have been made in recent years in the field of reconstructive surgery which have help victims of accidents, congenital conditions, burns and/or cancers lead normal lives. A soft tissue reconstruction at the leg for example, carried out in cooperation with the department for trauma surgery, may potentially prevent amputation. The field of work also includes reconstruction of the female breast after tumor surgery, which would be carried out in tandem with the gynecological university hospital, often even synchronously. A wide range of reconstructive possibilities are also available for the facial area. In the case of acquired cranio-facial deformities resulting from tumour surgery or accidents, special implants are manufactured assisted by computer technology, in order to restore the normal face contours. When excising skin tumors (in particular in the face) and soft tissue ulcers plastic surgery techniques customised to the special case may help to prevent or reduce functional and cosmetic consequences. Th e Pa u l - E h r l i c h - I n s t i t u t ' s A p p r ov a l o f 3 Ti s s u e Sealants in Germany The Paul-Ehrlich-Institut's has examined and evaluated the different forms of tissue sealants which are available in relationship to the background of the BSE issue. As a result of this assessment the Paul-Ehrlich-Institut has determined that the following fibrin/tissue sealants are approved in Germany:

Tissucol Fibrin Sealant from Baxter Deutschland GmbH Beriplast P from Aventis Behring GmbH TachoComb from Nycomed Pharma GmbH
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Considering the situation concerning the issues relating to BSE, the Paul-Ehrlich-Institut has once again assessed with great care the safety of TachoComb, and has come to the conclusion that the product is safe. The evaluation is based on the following considerations: 1. The use of Tachocomb as determined by the Paul-Ehrlich-Institut does not bear a real risk of BSE transmission conforming to state-of-the-art knowledge because
Thrombin is produced from the blood of <6 month old calves undergoing controlled raising, and after slaughtering and blood extraction, contamination with other materials can therefore be ruled out:
in blood in naturally and experimentally infected animals, no infectiousness was established, and blood is therefore categorised as belonging to Category IV (no detectable infectiousness) in the classification of tissues;
The origin of the animals and the line of origin must be traced back. This shows that exclusively animals were used from herds inspected by a veterinary specialist, in which no cases of BSE occurred.
2. The production of blood for the manufacture of thrombin was last carried out in May 2000. After cases of BSE became known in Germany, no additional batches of cow thrombin were used for the manufacture of TachoComb. TachoComb is the only product containing a collagen sponge coated with a component of fibrin sealant. It may not be possible to replace operation techniques geared to the use of such a fibrin/tissue sealant by other techniques without a risk for the patient.
Market Restraints
Figure 4-8 shows the restraints for absorbable and erodible wound closure biomaterials in the German market. Figure 4-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Germany), 2003-2009
Rank 1 2 3 Restraint Increased Popularity of Minimally Invasive Surgery Restraints Market Development Healthcare Reforms and Budgetary Restraints Affect Market Development Current Procedural Reimbursement Schemes Inhibit Introduction of New Technologies 1-2 Years 3-4 Years 5-6 Years High High Medium High High Medium Medium Medium Medium
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Increased Popularity of Minimally Invasive Surgery Restains Market Development Over the last ten years, the field of surgery has evolved dramatically thanks to advances in what's known as minimally invasive surgery (MIS). As a result of the increased use of minimally invasive surgery, surgical trauma is decreased, which in turn significantly improves patient recovery. This in turn has led to heightened awareness amongst patients and that there is an expectation and demand for minimally invasive coronary surgical procedures since it will reduce the risks associated with many forms of open procedure. One such procedure, called minimally invasive direct coronary artery bypass grafting (MIDCABG), is intended to reduce risks such as stroke and post-operative bleeding. Since haemostat and tissue sealants are used to control and prevent post-operative bleeding any advances or increase in the use of minimally invasive surgery will reduce the market potential for these products. Similarly the principle advantage of minimally invasive surgery is that it obviates the need to make a large open incision and eliminates the need for traditional wound closure techniques. This result in a corresponding decrease in demand for both absorbable and non-absorbable surgical sutures. Healthcare Reforms and Budgetary Restraints Affect Market Development Germany has introduced a variety of different healthcare refoms which has successively controlled and restrained the level of funding throughout the entire healthcare system. One of the most significant developments has been the reform of the hospital sector where operating costs i.e. the reimbursement of operating costs for patient treatments are financed by the health insurance funds. The first in a series of cost-containment laws was the Hospital Reform Law (KHNG) in 1984 and an amended version of the Hospital Rate Ordinance (BPflV ) in 1985. Since then there has been the introduction of the The Health Care Reform Act (GRG) of 1989, Health Care Structure Act (GSG) in January 1993, the First and Second Laws for the Reform of the SHI System (1. and 2. GKV-NOG) in 1997, , the Law for Reinforcing Solidarity in the SHI System (GKV SolG) in January 1999. The GKV SolG removed all measures of the previous government that increased patient cost sharing in the SHI system and reintroduced strict budget limits for each hospital. The German government introduced a revised version of legislation for the "Health Care Reform 2000" in November 1999.
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A central item of the health reform 2000 for the hospital sector is the introduction of a universal prospective payment system for hospitals beginning in the year 2003. Until implementation of the prospective payment system, provisional measures will apply. The "global budget" approach, which would have placed a limit on healthcare expenditures as a whole, was replaced by single budgets for each sector. For the hospital sector, this does not represent a substantial change. However, the new law links spending developments in the hospital sector more rigidly to revenue trends of the SHI system. The aim of this measure is to maintain the stability of contribution rates in the SHI system. The Health Care Reform 2000 extends the limit on spending in the hospital sectora measure that was introduced under an interim law at the beginning of 1999to the year 2003. Annual budget negotiations will continue to take place between each hospital and the health insurance funds. However, the basis for budget agreements is the budget of the previous year, adjusted to reflect changes in the revenue base of the SHI system. This is provided opportunities for administrators to introduce budgets which in reality constain the development of the market. In addition and already described above there is the planned introduction of a DRG based reimbursement system. It is planned that the self-management authorities in the Social Healthcare Insurance (SHI) system will be responsible for determining the details of the reimbursement system. Current Procedural Reimbursement Schemes Inhibit I n t ro du c t i o n o f N e w Te c h n o l o g i e s Frost & Sullivan have determined that the introduction of innovative products is often hampered by financial problems of the health insurance system. The social security institutions, in particular the social health insurance system (SHI), are not able to or refuse to fund procedures that do not yet correspond to the "generally recognised state of medical knowledge". Existing reimbursement rules and regulations governing the coverage of innovative medical devices in Germany make it increasingly difficult, and in some cases impossible, for patients to benefit from these advances. In addition the absence of specific reimbursement for new technologies (e.g. for stenting) provides a disincentive for physicians to treat patients with these innovative products, which have been shown to be cost effective and improve clinical outcomes.
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Market Forecasts
Figure 4-9 provides a summary review of the analysis of the revenue forecasts for the German absorbable and erodible wound closure biomaterials market. Figure 4-9 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Germany), 1999-2009
Growth Rate (%) --0.6 0.7 2.0 1.4 0.9 0.6 0.4 0.4 0.6 0.9
($ Million) 158.9 159.9 161.0 164.2 166.5 168.0 169.0 169.7 170.4 171.4 172.9
It has been estimated that the market for absorbable and erodible wound closure biomaterials products was valued at $158.9 million in 1999. This had increased slightly to an estimated $164.2 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $172.9 million (CAGR 0.7 percent). The established and mature markets of absorbable surgical sutures and haemostats are expected to decline slightly in value over the forecast period as a direct result of the budgetary restraints being imposed on the market. This is despite the increase in demand for surgical interventions for cosmetic and reconstructive, cardiac and cancers over the forecast period. Conversely the emerging markets for surgical adhesives/glues and anti-adhesives are expected to grow substantially over the forecast period albeit from a low base.

Although some hospital are beginning to collate their requirement the majority of sales are through direct negociation between an individual hospital and the supplier. Normally the supplier would provide a discount based on an assessment of the usage for that hospital and the financial and marketing objectives of that company.
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For established companies such as B. Braun, Ethicon, Baxter International Inc and Tyco Heathcare the fundamental strategy would be to ensure that they maintain and secure their competitive advantage in key accounts whilst attempting to gain market share in competitive accounts through price and service value added strategies. The smaller new market entrants are seeking to gain sales not necessarily by competing directly with the major supplies but converting new accounts and establishing a presence in the market.
Figure 4-10 illustrates the competitive structure of the German absorbable and erodible wound closure biomaterials market. Figure 4-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Germany), 2002
Number of Companies in Market 16 Types of Competitors This market is highly concentrated with the top 3 suppliers having an estimated 83.3 percent of the market The major suppliers are major multinational companies There are a number of local indigenous companies supplying absorbable surgical sutures. These are relatively small companies and tend to operate in specific geographic regions Distribution Structure Tiers of Competition The main suppliers operate through direct subsidiaries 1st Tier includes: Ethicon (J&J), B. Braun 2nd Tier includes: Baxter International Inc, Tyco Healthcare, Nycomed, Resorba Wundversorgung, Aventis Pharma 3rd Tier includes: Confluent Surgical Inc, Alcon Laboratories, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH, FSSB Chirurgische Nadeln , Goretex, Genzyme Corporation, Gliatech Inc, Will Pharma Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity is forcing a decline in product pricing and as a result increasing competitor activity Efficacy Studies: Suppliers are increasing being requested to provide proof of clinical efficacy as a means of proving the products ability
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The competitive structure of the German absorbable and erodible wound closure biomaterials market is described below by each of the sub-segments reviewed in this report. Absorbable Surgical Sutures Germany argueably has more companies supplying absorbable surgical sutures than any other European country. Frost & Sullivan have identifed a total of 3 major suppliers i.e. Ethicon (J&J), Tyco Healthcare and B. Braun. Frost & Sullivan have also identified a number of small indigenous suppliers who tend to concentrate in specific geographic regions. These include Resorba Wundversorgung, FSSB Chirurgische Nadeln GmbH and WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH (Serafit). The Resorba company was founded in September 1931 as a "factory for medical products" and the company has undergone constant development. The new headquarters is on the outskirts of Nuremberg an has now established the basic facilities and manufacturing resources that will be needed to meet the anticipated future product demands. The company has two main products these are: 1. Caprolon - violet or uncoloured Caprolactone is manufactured by copolymerisation of lactide and E-caprolactone in proportions such that the absorption by the tissues of the resulting monofilaments is considerably prolonged. The surface is coated with a Resolactone layer derived from the absorbable substances calcium stearate and P(LA/CL) helps the handling of the product. This helps to reduce the friction when pulling the suture through the tissues. Caprolon is available uncoloured for skin sutures or dyed violet (with the physiologically harmless dye D+C No. 2). 2. PGA Resorba - violet or uncoloured PGA Resorba is a polymer of glycolic acid. The linear, high molecular weight polyglycolic acid is synthesised with the aid of a catalyst via the intermediate product glycolide, a cyclic ester. FSSB Surgical Needles GmBH was founded in 1995 by the owners: Helmut Sigg, Joachim Brohammer, Henry Frenzel and by the former key colleagues of S+T and USSC Deutschland. Based in Jestatten they have been producing surgical needles with non-absorbable and absorbable sutures for over forty years. WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH is based near Munich is southern Germany and has a small range of absorbable surgical sutures under the tradename of Serafit. In addition the market is also supplied by small international companies including Peters S.A. from France and Alcon Pharma GmbH.
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Alcon Pharma GmbH has a small range of absorbable surgcial sutures used specifically for eye surgery whilst Peters S.A. also has a small range of absorbable surgical sutures but is currently having financial problems and it is unclear how long this company may continue operating. Tissue Sealants As already described there are only three approved suppliers of fibrin tissue sealants in Germany. These are:

Tissucol Fibrin Sealant from Baxter Deutschland GmbH Beriplast P from Aventis Behring GmbH TachoComb from Nycomed Pharma GmbH
Haemostats B. Braun: B. Braun through its surgical division Aesculap sells two products into the German market. These are: Lyostypt Lyostypt is a native, absorbable collagen fleece. The fleece structure provides a framework for the adherence of platelets and, thus, provides an additional impetus to clotting. Lyostypt collagen haemostatic fleece is indicated for all branches of surgery including:

Capillary bleedings Parenchymal haemorrhages Oozing wound haemorrhages For the local haemostasis in haemodialysis As a supportive measure for other techniques of haemostasis
Gelita Tampon Gelita Tampon is made of gelatine and is completely absorbed. The haemostatic effect results from the fast adherence of the blood platelets to the surface of the tampon. Within a short period of time natural blood clotting takes place. Gelita Tampon is indicated as a tamponade for venous-capillary or parenchymatous bleeding when a suture or ligature is not possible and to fill up dead spaces in dental surgery. Ethicon (J&J): Markets two products in Germany. These are Spongostan a biodegradeable gelatin sponge and Surgicell a surgical cellulose.
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Baxter Deutschland GmbH: Following the completion of the acquisition of Fusion Medical Technologies, Inc. on May 5th 2002 Baxter Deutschland GmbH launched the product FloSeal matrix hemostatic sealant Baxter in August 2002. FloSeal is indicated in surgical procedures (other than in ophthalmic) as an adjunct to haemostasis when control of bleeding by ligature or conventional procedures is ineffective or impractical such as in cardiac, vascular and spinal surgery. Ligating Clips There are two suppliers in this market sub-segment. These are Ethicon with its product the Absolok and the product called Laproclip from Tyco Healthcare. Surgical Adhesives and Glues The principle surgical adhesives and glues on the market in Germany include Dermabond (Ethicon), Indermil (Tyco Healthcare) and Histacryl (B. Braun). In addition to the big three there are further developments which has seen the recent introduction of BioGlue from CryoLife and FocalSeal-L Sealant for use in preventing air leaks in pulmonary surgery entered the market in March 2002. FocalSeal-L Sealant is sold directly into the German market through Genzyme Biosurgery. In addition to these companies there is the anticipated introduction of Quixil from Omrix Biopharmaceuticals S.A. by January 2003 once it has completed the final administrative stages and financing of a distributor. Adhesion Barriers There are only two companies operating in Germany for anti-adhesion products. These are Shire Deutschland GmbH & Co KG and Genzyme GmbH. These companies have just entered this market and as such the market is in the introductory stage and currently sales are limited. Market intelligence has determined that although post-operative adhesion are a major problem surgeons require clinical evidence of the efficacy of these products before they are willing to use them. On the 21st August Cohesion Technologies announced that they had received CE Mark approval for Adhibit(TM) adhesion prevention gel. It is anticipated that this product will become available in Germany through the distributors of Cohesion Technologies in Germany Tyco Healthcare.
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Figure 4-11 and Chart 4.5 lists and illustrates the market share of the major market participants and the percent change from year to year for absorbable and erodible wound closure biomaterials in Germany. Figure 4-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Germany), 2002-2003
2002 Company Ethicon (J&J) B. Braun Baxter International Inc Tyco Healthcare Nycomed Resorba Wundversorgung Aventis Pharma Others Total Market Share (%) 52.2 23.6 7.5 5.3 5.2 2.7 2.2 1.3 100 2002/03 Trend Down Up No Change No Change No Change No Change No Change -----
Note: Others include: Confluent Surgical Inc, Alcon Laboratories, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH, FSSB Chirurgische Nadeln , Goretex, Genzyme Corporation, Gliatech Inc, Will Pharma and Peters S.A
Chart 4.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Germany), 2003
Baxter International Inc 7.5% Tyco Healthcare 5.3% Nycomed 5.2% Resorba Wundversorgung 2.7% Aventis Pharma 2.2% Others 1.3%
B. Braun 23.6%
Ethicon (J&J) 52.2%
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The overall market leader is Ethicon (J&) with an estimated 52.2 percent of the absorbable and erodible wound closure biomaterials market. This high market share is principally attributed to the high market share in the absorbable surgical suture (estimated 67 percent), hemostats and ligation clip subsegments. B. Braun is in second place through its surgical division Aesculap with an estimated 23.6 percent of the absorbable and erodible wound closure biomaterials market. B. Braun with sales through Aesculap are in second position in the absorbable surgical suture subsegment (estimated 21.0 percent) , leaders in the haemostat market (estimated 58.0 percent) and leaders in the surgical adhesives and glues market (estimated 85 percent). Baxter International Inc are in third position with an estimated 7.5 percent of the absorbable and erodible wound closure biomaterials market. They are leaders in the tissue sealant market (estimated 50.0 percent) but are coming uder increasing pressure from Nycomed who are in fifth position overall with an estimated 5.2 percent of the absorbable and erodible wound closure biomaterials market and an estimated 35.0 of the tissue sealant market. Tyco Healthcare are in fourth position overall with an estimated 5.3 percent of the market and are particularly strong in the ligation clips market and have an estimated 6.0 percent of the absorbable sutures market. There are a number of other market participants in the German market. They include Absorba, Alcon Pharma Gmbh, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH and FSSB Surgical Needles GmBH in the absorbable surgical sutures market. Genzyme GmbH and Shire Deutschland GmbH & Co KG in the anti-adhesions market and CryoLife in surgical adhesives and glues. The traditinal market leaders i.e. Braun and Ethicon are however coming under increasing competitive pressures from a new market entrants and amongst themselves as they challenge each other for market share and competitive advantage.
Forecasts
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Orthopaedic
Biomaterials
Market

Figure 4-12 and Figure 4-13 show the drivers and restraints for the absorbable and erodible orthopaedic biomaterials market in Germany.
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Market Drivers
Figure 4-12 shows the drivers for the absorbable and erodible orthopaedic biomaterials market in Germany. Figure 4-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Germany), 2003-2009
Rank Drivers 1 2 Market Growth Due to Increase in Sports Injuries Bioabsorbable or Biodegradeable Fixation Systems in (CranioMaxilloFacial) CMF Surgery Stimulate Market Development 1-2 Years 3-4 Years 5-6 Years High High High Medium Medium Medium
Marke t Growth Due to Incre ase in S port s Injuri es There is an increase in the number of soft tissue injuries as a result of a significant increase in the number of individuals taking part in sports activities, which could potentially result in ligament and soft tissue damage. The sports which have been cited as causing the largest number of injuries which cause significant soft tissue injuries include soccer, skiing and a variety of new leisure and sports activities including injuries associated with skateboarding, roller blading etc. Bi oabsorbable o r Bi ode gradeable Fixatio n Syst ems in ( Cr a ni oMa x illo Fac ia l) C MF Sur gery M ar k et Development Stimulate Titanium plates, screws and metallic wire are commonly used as fixation material in craniomaxillofacial surgery. However, they interfere with modern radioimaging, and in the growing child they might migrate into or beyond the bone. Biodegradable self-reinforced polylactic acid (SR-PLLA) has now been widely studied and accepted as an alternative to the traditional screw and plates systems for craniofacial surgery. This has become a growing niche for bioabsorbable implants in Germany and is expected to continue to grow throughout the forecast period. One of the newest procedures that has great advantages for plastic and reconstructive surgery is bone distraction, Although the procedure has been done by orthopaedic surgeons to lengthen leg and arm bones, it hasn't been until recently the procedure has been used to lengthen jawbones in children with facial anomalies caused by birth defects, trauma or radiation. Surgeons can cut the jawbone apart, leaving the blood supply intact. By turning absorbable screws, parents can painlessly extend their child's jawbone one millimeter a day, allowing time for new bone to fill the gap. In many cases, this procedure replaces the need for bone grafts, which are more extensive surgical methods.
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Market Restraints
Figure 4-13 shows the restraints for the absorbable and erodible orthopaedic biomaterials market in Germany. Figure 4-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Germany), 2003-2009
Rank Restraints 1 2 3 Relatively High Cost of Absorbable Biomaterials Compared with Traditional Materials Restrains Market Development Conservative Attitude of Some Older Surgeons Limits Acceptance of Innovation Hospital Expenditure Capped as a Result of Healthcare Reforms Restraining Market Growth 1-2 Years 3-4 Years 5-6 Years High Medium Medium High Medium Medium High Medium Medium
Relatively Hi gh Cost of Absorbable Biomaterials C o m p a r e d w i t h Tr a d i t i o n a l M a t e r i a l s R e s t r a i n s M a r k e t Development The cost of bioabsorbable implants can be 25 to 400 percent greater than that of their metal counterparts. Volume discounts have helped ameliorate this problem as a result of what healthcare purchasers refer to as productive bidding war by simultaneously bringing several bioabsorbable implant makers into the purchasing process. With this strategy, healthcare purchasers stated that "you can rapidly get the price down to something reasonable," and "our ACL screws now cost the same as the metal ACL screws we used to use." Conservative Attitude of Some Older Surgeons Limits Acce ptance of Innovat ion For the majority of surgeons the clinical effectiveness of a new product is the most important factor when considering whether to adopt it for use. However, even in those cases in which manufacturers can provide sufficient supporting data for their innovative technology, some surgeons are not persuaded by this. In Germany, it tends to be the older surgeons with more conservative attitudes who are less willing to substitute the use of autologous bone with synthetic alternatives. Until manufacturers raise awareness amongst these surgeons, of the effectiveness of bone graft substitutes versus the "gold standard" autograft, growth in this market will be limited.
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Hospital Expenditure Capped as a Result of Healthcare Refo rms Rest raining M arket Growth Although Germany has a strong economy, legislation was passed early in 1999 aimed at capping expenditure on drugs and hospital services. This Solidarity Strengthening Act was shortly followed by the proposal of further reform, in the shape of the government's healthcare reform 2000 legislation. This is still being debated, but is expected to during 2001. This new legislation may have an impact on the bone graft substitutes market, as surgeons may continue to use autograft and allograft, because these materials can be obtained free of charge, rather than switch to using more expensive substitutes. Therefore, manufacturers need to make sure that surgeons and purchasing bodies are aware that despite the initial high cost, bone graft substitutes work out to be less expensive in the long term, as they reduce operating time and patient morbidity.
Market Forecasts
Figure 4-14 provides a summary review of the analysis of the revenue forecasts for the absorbable and erodible orthopaedic biomaterials market in Germany. Figure 4-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Germany), 1999-2009
Growth Rate (%) --12.9 13.2 14.0 15.9 17.2 17.5 16.4 13.9 11.6 9.0
($ Million) 22.3 25.2 28.5 32.5 37.7 44.1 51.9 60.4 68.8 76.7 83.7
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It has been estimated that the market for the absorbable and erodible orthopaedic biomaterial products in Germany was valued at $22.3 million in 1999. This had increased to an estimated $32.5 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $83.7 million (CAGR 14.5 percent). Despite the well-publicised market developments concerning the healthcare reforms and the budgetary restraints it is anticipated that this market segment will exhibit significant market growth over the forecast period. This has been the consequence of the general acceptance of the product technologies amongst the leading surgeons, new applications for absorbable products and the continuing development of minimally invasive techniques to reduce trauma and return patient to full activity as quickly as possible.

Frost & Sullivan hve determined that hospitals would not tender for absorbable and erodible orthopaedic biomaterials as these products have a limited shelf life. They would typically purchase a small inventory which they would replenish as and when product was used and needed to be replaced. Although the majority of sales are made by selling to the individual hospital purchasing authority the hospital would buy directly through the customer services department at list price unless some special price has been agreed upon by either the marketing department or the area sales manager. Frost & Sullivan have been advised that at the time of writing it was unknown what effect the introduction of the AR-DRG system will have on pricing but it may result in hospitals being more price conscious and routinely ask fo further price discounts.
Figure 4-15 illustrates the competitive structure for the absorbable and erodible orthopaedic biomaterials market in Germany. This market is highly fragmented with the leading suppliers of orthopaedic implants maintaining a major presence in the market whilst a considerable amount of research and development is conducted by either relatively small biotech based companies or start-up organisations which are frequently based in University research departments. Products from Biomet Merck for example are derived from their subsidiary Arthrotek. Rather than supplying the market directly Arthrotek have their products distributed by Arthrovision based in Wiesbaden. Similarly products derived from Bionx are distributed in Germany by DePuy Orthopedie GmbH whilst Ethicon (Mitek) and Arthrex based in Karlsfeld/Mnchen supply the market directly.
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Figure 4-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure
(Germany), 2002
Number of Companies in Market 26 Types of Competitors This is a highly fragmented market with suppliers of bioabsorbable materials for fracture fixation and bone graft substitutes used for fracture fixation and none or delayed unions The major suppliers are subsidiaries of large multinational medical device companies The majority of minor suppliers are distributors for relatively small companies specialising in these niche markets Tiers of Competition 1st Tier includes: Biomet Merck, Sofamor Danek (Medtronic), Arthrex 2nd Tier includes: Smith & Nephew (Acufex), Ethicon (J&J) (Mitek), Depuy J&J, NeuColl (Collagraft), Linvatec (Conmed), Mathys SynthesStratec, Stryker, Interpore Cross International, SulzerMedica (Centerpulse) 3rd Tier includes: Tornier (Phusis), Atlantech, OsteoTech, Orthovita, Aesculap (B. Braun), Tutogen Medical, Teknimed, Regeneration Technologies, Biocomposites, Ceraver Osteal, Corin Group. Inion Ltd, Storz and Inoteb Notable Acquisitions, Mergers This market segment is notable for the number of joint ventures or collaborations, which provide small specialised companies with improved marketing outlets Orthopaedic Surgeons, Spinal Specialists, Trauma Specialists, Senior Operating Theatre Nursing Staff, Operating Rooms, Accident & Emergency Departments Spinal Centres Hospital Administrators and Key Purchasing Personnel Competitive Factors Pricing Issues: The leading suppliers routinely use price-cutting tactics to maintain market share and competitive advantage Technological Advances: This is a highly technologically driven market segment and competitors advantage is gained through technological advances
Distribution Structure
Key End-user Groups
Mathys Synthes-Stratec who supply absorbable fracture management bone plates and screws have a somewhat complicated organisation structure with Mathys being responsible for the sales of traumatology in the North and Eastern regions of Germany whilst Synthes-Stratec being responsible for sales in the South and Western regions. Frost & Sullivan wish to highlight the indigenous company aap Implantate. aap Implantate is a leading German provider of biomedical implants for the muscular and skeletal system. The headoffice is in Berlin and the company is represented in Germany by their Dieburg-based subsidiaries Mebio and Coripharm. aap Implantate also has a U.S. subsidiary, aap Implants Inc.
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Their core competences are development, production and marketing of implants for healing bone fractures (osteosynthesis), for joint replacement (endoprosthetics) and for biological bone substitute (orthobiology). They sell their products in more than 40 countries and have a customer base, consisting of over 2,000 hospitals. In May 1999, aap was the first company in the field of biomedical engineering to be listed on the Frankfurter Neuer Markt.

Figure 4-16 and Chart 4.6 lists and illustrates the market share of the major market participants and the percent change from year to year for the absorbable and erodible orthopaedic biomaterials market in Germany. Figure 4-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Germany), 2002-2003
2002 Company Biomet Merck Sofamor Danek (Medtronic) Arthrex Smith & Nephew (Acufex) Ethicon (J&J) (Mitek) Depuy J&J Linvatec (Conmed) Mathys Synthes-Stratec Stryker Interpore Cross International SulzerMedica (Centerpulse) Others Total Market Share (%) 15.5 15.0 14.0 10.5 10.0 8.0 3.5 3.0 3.0 3.0 2.0 12.5 100 2002/03 Trend Up Up Down Down Down (slightly) Up Up No Change Up No Change No Change -----
Note: Others include: Tornier (Phusis), Atlantech, OsteoTech, Orthovita, Aesculap (B. Braun), Tutogen Medical, Teknimed, Regeneration Technologies, Biocomposites, Ceraver Osteal, Corin Group. Inion Ltd, Storz and Inoteb
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Chart 4.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (Germany), 2003
Linvatec (Conmed) 3.5% Mathys Synthes-Stratec 3.0% Interpore Cross Depuy J&J Stryker International 8.0% 3.0% 3.0% Ethicon (J&J) (Mitek) SulzerMedica 10.0% (Centerpulse) 2.0% Smith & Nephew (Acufex) 10.5% Others 12.5%
Arthrex 14.0%
Biomet Merck 15.5% Sofamor Danek (Medtronic) 15.0%
Market intelligence has determined that the overall market leader is Biomet Merck with an estimated 15.5 percent of the market. Biomet Merck have been in the ascendency in the German market having taken an aggressive sales and marketing strategy whilst having a full and wide range of products in their product portfolio. Once again the exclusive distributor agreement with the ETEX Corporation has been successful with Biobon, also known as Alpha-BSM, being a market success in Germany. Biomet Merck (through their Arthrotek subsidiary) have also been successful with their absorbable and erodible suture anchors, interference screws and fracture management devices. Sofamor Danek (Medtronic) with their synthetic bone graft substitute is the second largest supplier with an estimated 15.0 percent of the market whilst Arthrex with their absorbable interference screws are in third position with an estimated 14.0 percent of the market. Smith and Nephew is in fourth position overall with an estimated 10.5 percent of the market. Smith and Nephew has gained market share both organically and as a direct result of acquiring market share through the acquisitions of Instrument Makar and Orthopaedic Biosystems Ltd, Inc. The acquisitions of these companies has strengthened Smith and Nephews Endoscopy Division position in the niche markets of interference screws and shoulder suture anchors. Ethicon (J&J) (Mitek) are in fifth position with an estimated 10.0 percent of the market whilst DePuy Orthopedie GmbH (distributors of Bionx) are in fifth position with an estimated 8.0 percent of the market. There are a number of other suppliers including Linvatec, SulzerMedica (CentrePulse), Synthes-Stratec, Atlantech and Tornier (Phusis).
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Although the overall market shares are outlined above market intelligence has determined that Ethicon (Mitek) is the market leader for absorbables used for the shoulder whilst Arthrex is the clear market leader for absorbables used in the knee. Synthes-Stratec are suppliers of absorbable maxillofacial absorbable plates and screws and currently do not market other products such as suture anchors, interference screws etc. In addition Atlantech (based in Harrogate, England) is present in the German market. Atlantech are distributors of Bionx in the UK but are present in the German market in their own right and are distributing the Bilok PLLA/Calcium Phosphate composite screw range, manufactured by Biocomposites Ltd.
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5

The French government regulates and controls the healthcare system through the offices of the Ministre de l'Emploi et de la Solidarit. The Ministre de l'Emploi et de la Solidarit is divided into two separate sectors i.e. Employment (Emploi) and Solidarity (Solidarit). The ministry is further sub-divided into 32 separate departments. 4 of these departments transcend the employment and solidarity sectors whilst the remaining 28 departments report and are responsible to one or the other sector of either employment or solidarity. The government controls the relationships between financing sectors, healthcare professionals and the patients via a number of departments with specific responsibilities. The Ministry of Social Affairs and the Ministry of Health control, at a national level, the Divisions of Social Security, Hospitals and Health, together with other more specialised agencies (such as the French Drug Agency). Each geographic region such as Alsace has a regional central office, which is responsible for the administration and organisation of the healthcare services in that region and implementing the directives issued by the department of state for health. This department is known as the Direction Rgional des Affaires Sanitaires et Sociale (DRASS). Publicly funded hospital services are organised on a regional basis and each region has a separate agency. These are known as Les agences rgionales de hospitalisation (ARH). The ARH is responsible for ensuring that the hospitals meet their budgetary obligation imposed upon them by the DRASS and ultimately central government.
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A new and important development has been the creation of the AFSSAPS. As from the 1st July 1998 this new public department was established which is now responsible for the control of medicinal products in France. This department the L'AFSSAPS (l'Agence Franaise de Scurit Sanitaire des Produits de Sant) was created by a law passed by the state under decree No 98-535 on the 1st July 1998 and replaces the French Medicines Agency (l'Agence du Mdicament. With the European Medical Evaluation Agency (EMEA) this new authority is responsible for evaluating medicines and controlling all medicinal products used either for health or for use in cosmetics and for providing marketing authorisation in France. The French Social Security finances by far the largest part of healthcare expenditure representing nearly 74 percent of the total financing. The Social Security system (Scurit Sociale) is financed by contributions made by employers and employees and is calculated as a percentage of the total income. The percentage contributions vary according to the individual regimes for particular occupational groups and are negotiated between representatives of employers and employees. Patient contributions for all forms of medical treatment in France is high but the majority of the population have complementary insurance, either from Mutuelles (mutual benefit insurance societies) or private insurance companies to cover the full cost of the treatment. Household contributions or non-reimbursable contributions account for an increasing share of the cost of health care (14 percent). The standard of healthcare is high despite the chronic deficits in the health insurance system of Scurit Sociale which had to be funded by increases in social security contributions. The critical elements of the French health care system are as follows: 1. Virtually the entire population of France is covered by the Social Security System (National Health Program). The government has created a framework for healthcare in which public and private hospitals co-exist to provide the population with easy access to the required treatments. 2. Within this framework, both public and private hospitals are subject to government approval for their location, their development and major medical equipment investments. 3. For each medical speciality, there are bed/population ratios which have a direct impact on these approvals. 4. The individual patient is free to choose treatment in either a public or private hospital. 5. The French government, like other governments of developed countries, has imposed controls on health expenditures. In 1995, radical measures (the Juppe reform) were introduced. France is reforming Social security management, health expenditure's, and hospitals and clinic structures. Parliament sets annual spending targets that must not be exceeded. The new healthcare management structure has established 24 regional hospital authorities for planning healthcare needs and setting hospitals annual budgets. These authorities are contracting with individual hospitals to define objectives and requirements with the aim of creating pools of excellence by merging hospitalspublic and private alikeand closing if necessary those establishments whose occupancy rate is lower than 60 percent. To allocate funding, a system of accreditation is used to identify efficient hospitals.
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6. Within hospitals, reform is underway for the number of beds available for short-and longstays. The tendency is toward a decline in the number and duration of short-stays and an increase in number and duration of long-stays. Due to technological advances, patients who would have previously had treatment requiring a few days stay at the hospital can now return home earlier, decreasing the length of short-stays. Furthermore, emergence of alternatives to the traditional short-stays in hospitals such as ambulatory medicine, autodiagnostics, and home-care has also contributed to the decreasing need for short-stay beds. The number of short-stays decreases, as these patients do not even spend one night at the hospital. Although the development of such alternatives has caused a decline in the market for hospital-care equipment, it has created a demand for a whole new range of medical equipment. 7. To better track healthcare spending, and ultimately to be able to take appropriate sanctions against hospitals and doctors who do not succeed in controlling expenditures, all Social Security affiliates (95 percent of the population) will soon be given a smart card. This card, named "Sesame-Vitale," will enable to transfer electronically medical records and prescriptions to healthcare funds, responsible for reimbursement. The Sesame-Vitale card is the heart of the health network (Reseau Sante-Social RSS) that should link through a secured computer network each individual patient with all kinds of healthcare providers: public hospitals, private clinics, general practitioners, specialised doctors, nurses, etc. 8. France also introduced a new system of Universal Health Insurance (CMU) which came into effect in January 2000. This system provides totally free healthcare to those with incomes of not more than FRF 3,500 (533 Euros) a month. Over and above the 6 million people directly affected by the new scheme, the CMU will have an impact on the way the whole French health system operates. Industrial relations implications include a new obligation on employers with a workforce of over 50 to negotiate on top-up health insurance cover with their employees." The CMU provides basic health insurance for 150,000 individuals not covered by existing schemes, either because they are not eligible or more often because they are unable to assert their eligibility. 9. The pratical application in France of the new decrees governing the reimbursement of medical devices is now in full progress. The new Article 165-1 of the Social Security Code deals with the new registration procedure for healthcare products other than drugs, and was first introduced by law 99-1140 dating back to the 29th December 1999. It specifies that medical devices can only be reimbursed by health insurance if registered on a certified list. This new procedure parallels the one already applicable to the registration of drugs. Two application decrees from March 26th, 2001 describe the 2-phased reimbursement scheme for medical devices. The first of these phases involves the L'AFSSAPS (l'Agence Franaise de Scurit Sanitaire des Produits de Sant). Within AFSSAPS, there is a transparency commission, the Commission de l'Evaluation des Dispositifs Mdicaux (CEDM), which evaluates medical devices based on both clinical and economic data.
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This committee is in charge of the evaluation of the medical-technical file and the "added benefit" attributed to that medical device, in comparison to other already approved devices. The CEDM makes a recommendation to the economic committee, which then sets a maximum level of reimbursement to be applied to the device. The second decree describes the composition and functioning of the Inter-Ministerial Economic Committee (CEPS, Comit Economique des Produits de Sant or Committee for Health Economics) responsible for evaluating the medical economics file and establishing tariffs. The new procedure requires submission of a reimbursement file in French that consists of three parts: a formal letter explaining the reimbursement request, a medial-technical file, and a medical-economics file. The turnaround time for getting a medical device registered is set at 180 days, counting the date of submission to the CEPS. The fixing of a reimbursement rate by the Economic Commission for Health Products (CEPS), which may involve negotiation with companies in terms of quantity, price and turnover. After a positive assessment, a product will be registered as a generic product, or as a branded product if it is judged to be innovative. Registration may be refused if the product is too expensive or if it has no additional benefits in comparison with similar products. Registration as a branded product has to be renewed after five years, and the Evaluation Commission may at any time replace a brand registration with a generic registration. Acknowledging the importance of these changes, in 2000 SNITEM (le Syndicat National de l'Industrie des Technologies Mdicales) created a strategic steering committee (GEDIM: Groupe d'Evaluation des Dispositifs Mdicaux) to focus on the evaluation of medical devices, and four top-level experts were asked to formulate proposals to put to the authorities. The Evaluation Commission's members have just been appointed; SNITEM is represented by Dr Avouac. SNITEM will carefully monitor the initial steps taken under this new system; the first cases were dealt with in July 2001. It is hoped that the new procedures will introduce more objective, scientific methods and criteria into reimbursement that will facilitate product innovation. Until now, there has been reluctance by the authorities to reimburse new products and technologies because of their supposed or unknown cost. Consequently, innovations already reimbursed in other countries have often had to wait a long time before being accepted in France.
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Chart 5.1 shows the market engineering research measurements for the French absorbable and erodible biomaterials market as it appeared in 2002. Chart 5.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (France), 2002
Market Research
Market Engineer
Market Strategy
Implementation
Market Planning
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Figure 5-1 and Figure 5-2 show the market drivers and restraints for the French absorbable and erodible biomaterials market.
Market Drivers
Figure 5-1 shows the market drivers for the French absorbable and erodible biomaterials market. Figure 5-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (France), 2003-2009
Rank 1 2 Restraint Aging Population and Age Related Orthopaedic Problems Increases Demand for Absorbable and Erodible Biomaterials Role of L'ANAES (L'Agence Nationale d'Accrditation et d'valuation en Sant) Enhance Growth of Accredited Products 1-2 Years 3-4 Years 5-6 Years High Medium High Medium Medium Medium
Aging Population and Age Related Orthopaedic Problems Increases Demand for Absorbable and Erodible Biomaterials Like the rest of Europe the population in France is getting older. Unfortunately old age brings with it a number of serious metabolic diseases. One of the most significant diseases relevant to this report is osteoporosis. The costs to national healthcare systems from osteoporosisrelated hospitalisation are staggering. For example, in several European countries, osteoporosis is responsible for more hospital days for women over 45 than any other disease. In the next 50 years, the number of hip fractures for both men and women is predicted too more than double. Osteoporosis is a common public health problem, which results in approximately 1 in 8 European citizens over the age of 50 having a fracture of the spine. Additionally 1 in 3 women and 1 in 9 men over the age of 80 will have a hip fracture (a break at the head of the femur) as a result of osteoporosis.
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Role of L'ANAES (L'Agence Nationale d'Accrditation e t d'valuatio n en Sant ) Enhance Growth of Accredited Products An accreditation system was introduced as a law No 96-346 on the 24th April 1996 as part of a series of reform programmes to reorganise the funding and administration functions for both public and private hospitals in France. The accreditation system is controlled and operated by the agency known as L'ANAES (L'Agence Nationale d'Accrditation et d'valuation en Sant). The principle objectives of the agency are to evaluate the diagnostic and therapeutic strategies carried out and to contribute to the continuing improvement in the quality and standards of healthcare provided by the hospital system in France (both private and public).
Market Restraints
Figure 5-2 shows the restraints for the French absorbable and erodible biomaterials market. Figure 5-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (France), 2003-2009
Rank Driver 1 Budgetary Restraints and Les Agencies Rgionales de Hospitalisation (ARH) Reduce Potential for Absorbable and Erodible Wound Closure Biomaterials Fixed Tarif System for Orthopaedic Products using T.I.P.S. (Tarif Interministriel des Prestations Sanitaires) Restrains Absorbable and Erodible Wound Closure Biomaterials Purchasing Agencies Restrain Product Pricing and Market Development for Absorbable and Erodible Wound Closure Biomaterials Hospital Closure Programme Causes Potential Reduction of Absorbable and Erodible Wound Closure Biomaterials Increased Competitive Activity Influences Market Value Growth 1-2 Years 3-4 Years 5-6 Years High High High
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Budgetary Restraints and Les Agencies Rgionales de Hospitalisation (ARH) Reduce Potential for A bs o rba b l e a n d E ro d i bl e Wo u n d C l o s u r e B i o m at e r i a l s The Jupp Plan introduced in November 1995 established the principles to optimise health care expenditure whilst seeking not to increase taxes and Social Security contributions. The 24 regional hospital agencies (ARH) created as part of the Jupp Plan established fixed budgets for public hospitals, which are re-negotiated, every 3-5 years. The consequence of the fixation of hospital budgets is to place greater emphasis of companies to demonstrate the cost-effectiveness of their products through the use of cost-benefit studies. Even though France now has a socialist government headed by M Lionel Jospin the principles established in the Jupp Plan are being followed as the socialists recognise that France is one of the highest healthcare spenders in the world and that some form of spending rationalisation needed to be introduced F i x e d Ta r i f S y s t e m f o r O r t h o p a e d i c P r o d u c t s u s i n g T . I . P. S . ( Ta r i f I n t e r m i n i s t r i e l d e s P r e s t a t i o n s S an i ta i r e s ) Re s t r ai n s A b s o r bab l e an d E ro d i b l e Wo u n d Closure Biomaterials To be commercially successful in the French market, medical devices need to be accepted for social security reimbursement. In addition, to qualify for social security reimbursement, an increasing number of products are required to be listed on the TIPS schedule (Tarif interministeriel des prestations sanitaires). This system was introduced in response to a price fixing scandal involving hip joints which erupted in 1992. A panel of experts known as the advisory committee for healthcare benefits meets each month to evaluate applications from companies to have their products listed. Reimbursement levels are set according to the perceived economic and medical benefits of the device, and whether similar devices already exist on the list. Additional safety checks may be required for high-tech and high-risk devices. Additions or changes to the list are published in the official journal. The TIPS now covers most implantable products, and an increasing range of other high volume products including bandages and respiratory supplies. The TIPS system has been severely criticised for its complexity and lack of flexibility, which has resulted in lengthy delays, particularly for innovative technology. Despite this, there have been calls for the TIPS system to be extended to cover all single use products. In September 1999, the former Social Affairs Minister, Martine Aubry, announced that medical products listed on the TIPS schedule would in future be subject to a much tighter system of evaluation, similar to that already introduced for drugs. The new procedures came into force in April 2001. Companies are now required to submit a product dossier to a new "Evaluation Commission" whose role is to assess the efficacy of the product and whether it provides "added value" or other health benefits in comparison to other available treatments. Products endorsed by the commission will be registered on an approved list.
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In the case of products requiring a particular follow-up, registration will last for five years, after which time the benefit provided by the product must be reassessed. Those devices which are endorsed by the commission in terms of their "medical usefulness" must also be reviewed by the healthcare products economic committee (Comit conomique des produits de sant CEPS), which is charged with setting official prices and reimbursement levels. Companies are required to submit a dossier to the committee with product information, including benefits provided, conditions of use and sales volume forecasts. The price of similar products already on the list is taken into account when calculating tariffs. The medical device industry association, SNITEM, has welcomed the new procedure in so far as it should make the system of product pricing and reimbursement more transparent, but has warned against draconian measures which could have devastating consequences for single-product manufacturers. Under the new system, the healthcare products economic committee is required to monitor spending levels within the TIPS sector, in the same way that it already monitors spending on drugs, and any un expected rise in expenditure on certain devices could trigger financial penalties similar to those already imposed on pharmaceutical manufacturers. This T.I.P.S listing is used by the Union des Caisses Nationales de Scurit Sociale (UCANSS) as a basis for the level of reimbursement for patients who have been treated. Revisions to the published tariffs are issued in the Journal Officiel de la Rpublique Francaise on a regular basis but typically revisions to the tariffs for orthopaedic bracing and supports are made very two years. T.I.P.S. may be viewed as a market driver or as a barrier depending on the products, which, are planned to be sold. Some tariffs such as ythose for low back supports are sufficiently high that it allows companies to sell their products at or near list prices. Medical equipment purchased by private clinics is also regulated under the Tarif Interminist riel des Prestations Sanitaires (T.I.P.S.). In order for patients to be reimbursed by the Social Security, medical devices used by private clinics must be listed on the T.I.P.S., which consists of a list of product description (no brand names) and the respective price. Applications from medical devices suppliers are evaluated by the CCPS Commission Consultative des Prestations Sanitaires (Advisory Commission for Heathlcare Procedures). Reimbursement prices are set according to medical and economic benefits of each device. When possible, the price is determined in comparison to already available equipment.
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Public hospitals are free to make medical equipment purchase decisions within the confines of their overall budgets. The budget determines their spending limits but does not restrict their purchase decisions. Public hospitals issue tenders to purchase their equipment. In theory, prices are not controlled since a public tender is to be won by the most competitive supplier. Nevertheless, if a medical device about to be purchased by a public entity is also sold to private clinics (and so listed on the T.I.P.S.), public purchasers will use the T.I.P.S. price as a reference. They will then do their best to obtain a price lower than the one listed by T.I.P.S. De facto, the T.I.P.S. published price becomes the maximum price for a given device, as no public hospital will accept to be charged more than private clinics. P urchasi ng Age ncie s Re str ai n Product P ri cing a nd Market Development for Absorbable and Erodible Wo u n d C l o s ur e Bi o m at e ri a l s Although for regional bodies and their public establishments (hospitals), the relevant purchasing manager is the legal representative of that particular administrative body hospitals frequency collate their medical equipment and device needs with other hospitals as a means of negotiating better terms and conditions and in particular product prices. In addition there are national purchasing agencies including the Centrale d'Achats de L'Hospitalisation Privee (CAHP) and the Union Generale d'Achats PublicsU.G.A.P. (Public Hospitals Purchasing Agency) who organise and collate the medical equipment requirements for a large number of private hospitals and public hospitals respectively. They negotiate the terms and conditions of equipment and accessory medical sundries contracts on behalf of the private and public hospitals each purchasing agencies represents. There are two categories of public procurement:
Purchases on an invoice basisthese cannot exceed an amount of Ecu47,600 (excluding VAT) per supplier per year. They can be hired according to any criteria and their payment is based upon receipt of an invoice or price proposal.
Public markets requiring written contracts for the purchase of goods and services and for the carrying out of works. They must comply with the conditions laid down in the "Code des Marchs Publics" according to one of the following three procedures:
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Absorbable and erodible wound closure biomaterials typcially fall into the negotiated contracts category. Negotiated contracts are awarded following some form of competitive process. There are a number of exceptions to this which are listed in article 104 of the "Code des Marchs Publics" for example:

If the product or service is subject to a patent/exclusive licensing agreement. If the product or service in question can only be satisfied by a particular supplier due to technical aspects, heavy investment requirements and/or specific know-how. If the need for the product or service is of such an urgent nature that there is no time to comply with the set procedure. If the need for secrecy is paramount and therefore only one supplier should be consulted.
This has resulted in major discounts from the list prices and consequently a lowering on average selling prices. Hospital Closure Programme Causes Potential R e d u c t i o n o f A b s o r b a b l e a n d E r o d i b l e Wo u n d C l o s u r e Biomaterials It is predicted that French spending on hospitals will decline in real terms between 2000 and 2007. Nevertheless, the rate of decline of the hospital market is expected to decrease during the forecast period. Similarly, after a significant decline of 3 percent in 2000, the number of hospitals in France is forecast to decline at more moderate rates during the remainder of the forecast period. The number of hospitals in France is expected to amount to 3300 hospitals in 2007. Frost & Sullivan believe that the number of private hospitals will decline more rapidly than the number of public hospitals between 2000 and 2007. Indeed, the combination of government reforms with increasingly competitive pressures within the private sector is expected to continue stimulating the number of acquisitions, leading to the emergence of larger private hospital groups and closures of small private hospitals Increased Competitive Activity Influences Market Va l u e G r o w t h Competitor activity amongst the leading suppliers has resulted in a progressive erosion of the selling prices. The erosion of the average selling prices has lead to a reduction in turnover for the leading suppliers which in turn has encouraged other suppliers to enter the market and capture some of the market share from the traditional market leaders. In addition there has been a continuous introduction of new and innovative products into the segments examined. This has threatened the traditionally strong market position of a number of companies including Ethicon (J&J) and Baxter as the end-users seek alternative solutions to existing clinical needs.
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Market Forecasts
Figure 5-3 and Chart 5.2 provides a summary review of the analysis of the revenue forecasts for the French absorbable and erodible biomaterials market. Figure 5-3 Absorbable and Erodible Biomaterials Market: Market Revenue Forecasts (France), 19992009
Growth Rate (%) --3.9 4.2 4.7 5.3 5.9 6.5 7.2 7.7 7.7 7.4
($ Million) 79.0 82.1 85.6 89.6 94.3 99.9 106.3 114.0 122.9 132.3 142.2
Chart 5.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (France), 1999-2009
Revenues ($ Million) 160 140 120 Revenues ($ Million) 100 80 60 40 20 0 1999 2000 2001 2002 2003 2004 Year 2005 2006 2007 2008 2009
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It has been estimated that the total market was valued at $79.0 million in 1999. This had increased to an estimated $89.6 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $142.2 million (CAGR 6.8 percent). Market development in the absorbable and erodible wound closure biomaterials market has in the past centred on the largest market segment i.e. absorbable sutures. Although this segment grew after the cessation of surgical catgut sutures market growth has slowed. Frost & Sullivan estimate the absorbable suture market is growing at between 2-2.5 percent per annum whilst tissue sealants, adhesives/glues and haemostats etc are growing at between 10-15 percent per annum. Since absorbable suture represents nearly 70 percent of the absorbable and erodible wound closure biomaterials market this sub-segment has a significant influence on the overall market growth of this segment and the French absorbable and erodible biomaterials market as a whole. The absorbable and erodible orthopaedic biomaterials market has also had a significant effect on the annual growth rates of the overall market. The market for absorbable synthetic bone graft substitutes have been growing signifcantly over the last five years as healthcare professionals accept the advantages these products provide compared with harvesting autologous bone grafts.
Market and Technology Trends/Analyses

T r e n d s b y P r o d u c t Ty p e Figure 5-4 and Chart 5.3 provides a summary review of the analysis of the percent of revenue forecasts by product type for the French absorbable and erodible biomaterials market over the forecast period. In 1999 the absorbable and erodible wound closure biomaterials market segment represented 77.3 percent of the total French absorbable and erodible biomaterials market. By the year 2002 the absorbable and erodible wound closure biomaterials market segment had declined and represented 72.8 percent of the total market i.e. Frost & Sullivan have determined that in 4 years this segment had lost 4.5 percentage points to the absorbable and erodible orthopaedic biomaterials market.
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Figure 5-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (France), 1999-2009
European Absorbable and Erodible Biomaterials Market Absorbable and Erodible Wound Closure Biomaterials Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 (%) 77.3 75.9 74.4 72.8 71.0 69.0 66.8 64.3 61.6 59.1 56.8 Adsorbable and Erodible (%) 22.7 24.1 25.6 27.2 29.0 31.0 33.2 35.7 38.4 40.9 43.2
Chart 5.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (France), 1999-2009
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From the market intelligence gathered Frost & Sulivan predict that by the year 2009 the absorbable and erodible wound closure biomaterials market segment will have declined further and will represent 56.8 percent of the overall market. This represents a 20.5 percent increase in the percent of revenues for the absorbable and erodible orthopaedic biomaterials market between 1999 and 2009 and reflects the anticipated compounded annual growth rates expected for this segment. The reason for the progress change and the increasing importance of the absorbable and erodible biomaterials used in orthopaedics is that this market segment is growing at a more rapid rate that the wound closure market. The wound closure market being dominated by the static absorbable surgical suture sub-segment.

The pricing structure for absorbable and erodible biomaterials in France in dominated by the reimbursement structure and the methods which are used to ensure that products obtain approval for inclusion onto the approved list and the reimbursement rates established by T.I.P.S. Companies do seek to obtain higher selling prices than that reimbursed by T.I.P.S. and the difference is paid for by the individual or claimed back through a Mutelle. The Ministry of Employment and Social Security has edited a practical guide to assist manufacturers when filing an application for reimbursement and collating together the required reimbursement dossiers as described in two application decrees from March 26th, 2001. Essentially the Evaluation Committee within the AFSSAPS examines or evaluates the medical/ technical file and the "added benefit" provided by that medical device in comparison to other already registered devices. The second decree describes the composition and functioning of the Inter-Ministerial Economic Committee (CEPS, Comit Economique des Produits de Sant) responsible for evaluating the medical economics file and establishing tariffs. In essence the dossier to be submitted for any new product where reimbursement is being requested must include:

A formal letter explaining the reimbursement request A medical/technical file A medical/economics file
The turnaround time for getting a medical device is set at 180 days, counting the date of submission to the CEPS. This represents 90 days for the evaluation committeee and an additional 90 days for the review by CEPS.
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Figure 5-5 illustrates the competitive structure of the French absorbable and erodible biomaterials market. Figure 5-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (France), 2002
Number of Companies in Market Types of Competitors 46 Overall the market in France is highly focused with the first three leading suppliers having an estimated 63.0 percent of the market. There are in addition to these suppliers a large number of companies operating in niche market segments The leading suppliers operate directly through subsidiaries whilst other small and medium-sized companies operate through appointed distributors and or joint ventures with the leading suppliers 1st Tier includes: Ethicon (J&J), Tyco Healthcare and Baxter International Inc 2nd Tier includes: B.Braun, Biomet Merck, Nycomed, Arthrex and Resorba Wundversorgung 3rd Tier includes: Peters S.A., Aventis Pharma, MedLogic, C.R. Bard's MedChem, Shire Pharmaceuticals, Genzyme Corporation, CryoLife, Resorba Wundversorgung, Cohesion Technologies Inc (now AngioTech Pharmaceuticals Inc and distributed by Tyco Healthcare), Smith & Nephew (Acufex), Sofamor Danek (Medtronic), Ethicon (J&J) (Mitek), Wright Medical Technology, Neucoll, Linvatec (Conmed), Bionx Implants Inc, Mathys Synthes-Stratec, Corifix, Stryker (Pyrost), Depuy J&J, SulzerMedica (Centerpulse), Aesculap (B. Braun) (Biosorb), Tornier (Phusis), Atlantech, OsteoTech, Orthovita, Craver Ostal (CERAPATITE), SBM S.A. Interpore International, Zimmer S.A.S, Bioland biomateriaux, Teknimed SA, Ost Dveloppement (distributed by Stryker), Unilab Surgibone Inc., Geistlich Shne AG, MCP, Inoteb, Inion Ltd Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior or nursing personnel and head of the or department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Inclusion within the reimbursement structure and competitor activity forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Manufacturers seeking competitive advantage need to secure a distributor agreement with a major distributor in France Proven Efficacy: Manufacturers and distributors require to submit proof of efficacy to the healthcare professionals
Tiers of Competition
The market comprises a highly complex mix of a multinational manufacturers who supply the market directly through subsidiaries and those who choose to establish distributors and a number of small indigenous suppliers.
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The market has also experienced a unprecedented level of merger and acquisition activity with all the major companies gaining market share through the acquisition of products from the acquired companies. The merger and acquisition activity has however resulted in a considerable amount of upheaval and disruption to the organisation and functioning of the companies as the acquiring company assimilates the assets it has purchased.

Figure 5-6 and chart 5.4 illustrates and lists the market share of the major market participants and the percent change from year to year for absorbable and erodible wound closure biomaterials in France. Figure 5-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (France), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare Baxter International Inc B.Braun Biomet Merck Nycomed Arthrex Resorba Wundversorgung Others Total Market Share (%) 35.7 15.6 11.7 4.6 4.5 4.4 2.3 2.2 19.0 100 2002/03 Trend No Change Up Up No Change No Change --Up No Change -----
Note: Others include: Peters S.A., Aventis Pharma, MedLogic, C.R. Bard's MedChem, Shire Pharmaceuticals, Genzyme Corporation, CryoLife, Resorba Wundversorgung, Cohesion Technologies Inc (now AngioTech Pharmaceuticals Inc and distributed by Tyco Healthcare), Smith & Nephew (Acufex), Sofamor Danek (Medtronic), Ethicon (J&J) (Mitek), Wright Medical Technology, Neucoll, Linvatec (Conmed), Bionx Implants Inc, Mathys Synthes-Stratec, Corifix, Stryker (Pyrost), Depuy J&J, SulzerMedica (Centerpulse), Aesculap (B. Braun) (Biosorb), Tornier (Phusis), Atlantech, OsteoTech, Orthovita, Craver Ostal (CERAPATITE), SBM S.A. Interpore International, Zimmer S.A.S, Bioland biomateriaux, Teknimed SA, Ost Dveloppement (distributed by Stryker), Unilab Surgibone Inc., Geistlich Shne AG, MCP, Inoteb, Inion Ltd
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Chart 5.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (France), 2003
Resorba Biomet Merck Nycomed 4.4% Wundversorgung 4.5% Arthrex 2.2% B.Braun 2.3% 4.6% Baxter International Inc 11.7% Others 19.0%
Ethicon (J&J) 35.7%
The overall market leader for absorbable and erodible biomaterials in France is Ethicon (J&J) with an estimated 35.7 percent of the market. This excludes Ethicon (Mitek) the suppliers of absorbable and erodible orthopaedic biomaterials which would provide an additional 2.3 percent of the overall market. Ethicons (J&J) market leadership position is principally attributed to its very high market share of absorbable sutures. The second largest supplier is Tyco Healthcare with an estimated 15.6 percent of the overall market. Tyco Healthcare has been attacking the market aggressively in an attempt to win market share and gain competitive advantage over Ethicon. Ethicon in turn have been vulnerable to attack as a result of their long standing market leadership position and the introduction of new and innovative products from their competitors. Baxter International Inc is in third place with an estimated 11.7 percent of the market. Baxter International Inc can attribute most of this market share to its very high share of the tissue sealants market with their branded product Tisseel or Tissucol. They too however are coming under increasing pressure from Aventis Pharma from their product Beriplast. Once again this has been a result of the traditionally high market share Baxter International Inc have enjoyed with Tisseel. B. Braun is in fourth position with an estimated 4.6 percent of the market and as a direct result of its presence in the absorbable sutures, haemostats and in particular the adhesives and glues market sub-segments.
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Forecasts of the Absorbable and Erodible Wo u n d C l o s u r e B i o m at e r i a l s M a r k e t
Market Drivers
Figure 5-7 shows the drivers for absorbable and erodible wound closure biomaterials in the French market. Figure 5-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (France), 2003-2009
Rank 1 2 Driver 1-2 Years 3-4 Years 5-6 Years Medium Medium Medium Medium
New Cosmetic and Plastic Reconstruction Surgical Applications High for Absorbable Sutures Encourages Market Growth Market Developments Toward New and Innovative Skin Closure Medium Products Stimulates Market
New Cosmetic and Plastic Reconstruction Surgical Applications for Absorbable Sutures Encourages Marke t Growth Absorbable sutures are becoming increasingly popular for specific cosmetic and plastic reconstruction surgery. For example absorbable sutures are being used routinely for a variety of cosmetic and plastic reconstruction procedures including eyelid, liposuction, forehead lifts and various rhinoplasty procedures etc. Market intelligence has determined that this clinical specialility is seen by the market as the fastest growing clinical application of absorbable sutures in France. It is anticipated that this growth will continue throughout the forecast period as individuals seek to improve their appearance for either cosmetic/aesthetic or for clinical reasons. M a r k e t D e v e l o p m e n t s To w a r d N e w a n d I n n o v a t i v e S k i n Closure Products Stimulates Market Skin closure after a surgical procedure has been carried out has traditionally been carried out using non-absorbable sutures which are then removed after adequate healing has taken place. New and innovative alternatives have emerged which avoid the patient having to return to the physician to have sutures or staples removed.
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These products i.e. absorbable and/or erodible tissue sealants/adhesives and glues have not only been proven to provide a superior cosmetic appearance whilst having a similar strength to that of closure with sutures but are also popular amongst patients. The emergence of these technologically advanced products has stimulated considerable interest amongst healthcare professionals and patients alike. Frost & Sullivan predict that the market for these products wil grow rapidly over the forecast period as they become more widely accepted and adopted as standard practise.
Market Restraints
Figure 5-8 shows the restraints for absorbable and erodible wound closure biomaterials in the French market.. Figure 5-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (France), 2003-2009
Rank Restraint 1 Purchasing Agencies Restrain Product Pricing and Market Development for Absorbable and Erodible Wound Closure Biomaterials Increasingly Competitive Market Reduces Product Pricing 1-2 Years 3-4 Years 5-6 Years High High Medium
Medium
Medium
Medium
P urchasi ng Age ncie s Re str ai n Product P ri cing a nd Market Development for Absorbable and Erodible Wo u n d C l o s ur e Bi o m at e ri a l s The national purchasing agencies including the Centrale d'Achats de L'Hospitalisation Privee (CAHP) and the Union Generale d'Achats PublicsU.G.A.P. (Public Hospitals Purchasing Agency) are able to negotiate specific contractural terms and conditions and special pricing agreements on behalf of the hospitals they represent. This has resulted in considerable pricing pressures on the leading suppliers and frequently account for discount of between 18-15 percent from the product list price. Discounts within the public sector tend to be higher than those for the private sector.
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Increasingly Competitive Market Reduces Product Pricing The market is becoming increasingly competitive as a result of two principle factors i.e.
The increase in the number of companies who are supplying for absorbable and erodible wound closure biomaterials in the French market.
The increasingly aggressive stance taken by the existing leading suppliers.
The leading suppliers are having to defend their market position and market share by improving their marketing and promotional message whilst combining improved product features with competitive pricing strategies.
Market Forecasts
Figure 5-9 provides a summary review of the analysis of the revenue forecasts for the French absorbable and erodible wound closure biomaterials market. Figure 5-9 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (France), 1999-2009
Growth Rate (%) --2.0 2.2 2.4 2.7 2.9 3.1 3.2 3.3 3.3 3.3
($ Million) 61.1 62.3 63.7 65.2 67.0 68.9 71.0 73.3 75.7 78.2 80.8
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It has been estimated that the total market was valued at $61.1 million in 1999. This had increased to an estimated $65.2 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $80.8 million (CAGR 3.1 percent). The market for absorbable sutures estimated to be worth $43.1 million in the year 2002 is expected to continue to grow progressively throughout the forecast period. Frost & Sullivan predict that certain clinical applications particularly absorbable sutures for use for cosmetic and plastic reconstruction surgery will be the fastest growing area and will outgrow the other clinical uses. The growth in the overall market is principally attributed to the emergence and development in the surgical sealants/adhesives and glues market as new and innovative products reach the market. The size of this market sub-segment is relatively small in comparison to absorbable surgical sutures but market intelligences has determined that these sub-segments will grow by between 10-15 percent throughout the forecast period.

As already described individual hospital purchasing authorities are responsible for obtaining best value for money. This is achieved through negotiating directly with the suppliers or by obtaining a collective bargaining position through the major purchasing agencies e.g. the Centrale d'Achats de L'Hospitalisation Privee (CAHP) and the Union Generale d'Achats PublicsU.G.A.P. (Public Hospitals Purchasing Agency) or by collating the needs of hospitals in the same regional body or Agences Rgionales de Hospitalisation (ARH). Market intelligence has determined that suppliers rarely sell products at list price and instead typically provide significant discounts of between 18-25 percent for products based on long term price/volume agreements with public hospitals. Discount levels offered by suppliers to private hospitals have been detemined to be significantly less as the volumes of product used is significantly less than those used from the larger public hospitals i.e. the Centre Hospitalier Universitaire (C.H.U.), Centre Hospitalier Rgional (C.H.R.) and the Centre Hospitalier (C.H.). Ethicon in particular have come under increasing pressure to reduce prices as a means of maintaining market share as Tyco Healthcare have become significantly more aggressive as they seek to gain competitive advantage through gaining market share.
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Figure 5-10 illustrates the competitive structure of the French absorbable and erodible wound closure biomaterials market. Figure 5-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (France), 2002
Number of Companies in Market 13 Types of Competitors The French market for absorbable and erodible wound closure biomaterials is highly concentrated with the first three largest suppliers having an estimated 86.6 percent of the market Major suppliers of wound closure biomaterials for example Ethicon (J&J) and Tyco Healthcare act as distributors for small to medium-sized companies with proprietary technologies 1st Tier includes: Ethicon (J&J) and Tyco Healthcare 2nd Tier includes: Baxter International Inc, B. Braun, Aventis Pharma and Peters S.A 3rd Tier includes: MedLogic, C.R. Bard's MedChem, Shire Pharmaceuticals, Genzyme Corporation, CryoLife, Resorba Wundversorgung, Cohesion Technologies Inc (now AngioTech Pharmaceuticals Inc and distributed by Tyco Healthcare) Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Inclusion within the reimbursement structure and competitor activity forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Manufacturers seeking competitive advantage need to secure a distributor agreement with a major distributor in France Proven Efficacy: It is almost mandatory to provide clinical evidence proving the efficacy of the product
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The competitive structure of the French absorbable and erodible wound closure biomaterials market is described below by each of the sub-segments reviewed in this report. Absorbable Surgical Sutures The original absorbable suture materials manufactured from processed collagen derived from the submucosa of animal intestines and classifed as either plain and chromic "cat gut," sutures have been banned in France. This is as a direct consequence that since catgut is derived from bovine or ovine intestinal tissue, there is a possibility that patients may be at risk from Transmissible Spongiform Encephalopathies (TSE) and other transmissible infections as a result of the identification and the emergence of Bovine Spongiform Encephalopathy (BSE) and its variant Creutzfeldt-Jakob Disease (vCJD) during the 1980s.As a result all absorbable sutures in France are manufactuered from synthetic materials to avoid the problems associated with the BSE problem. There are two main suppliers in France. These are Ethicon and the US Surgical Division of Tyco Healthcare. In addition to these two major suppliers there are two other companies. These are B. Braun (Aesculap) who manufacture their own absorbable sutures and who target the use of absorbable sutures for use in orthopaedic surgery, neurology, general surgery and the growing market of cosmetic and reconstructive plastic surgery. The other is the indigenous supplier Peters S.A. who are reported to have only one product line. According to market intelligence Peters S.A. is currently having financial problems and consequently their promotional activity has been limited Ti s s u e S e a l a n t s This is a product niche which is gaining significant sales in France and is in the rapid growth phase of its life cycle. This is evident from the level of new product entrants and the level of competitive activity amongst the leading suppliers and prospective suppliers. There are only two principle competitors in France for tissue sealants. These are Baxter International and Aventis Pharma (formerly known as Centeon. Until recently the product Biocol was present on the market and was sold by the French government through the agency LFB (Laboratoire Franais du Fractionnement). This product has recently been withdrawn from the market.
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The market leader Baxter International markets the longest standing product and argueably the best known fibrin sealant product known as Tisseel or more frequently refered to as Tissucol. Tissucol has been on the market for over 20 years whilst the only other product known as Beriplast and marketed Aventis Pharma entered the market during the late 1990s. There are two other products on the market which as yet have not taken a major share of the market. These are:
Advaseal: Advaseal is the tradename for a product known as FocalSeal-S. This product was originally developed by Focal which was in turn acquired by Genzyme Corporation in June 2001 and incorporated into the Genzyme Corporation Division known as Genzyme Biosurgery. Advaseal is currently marketed by Ethicon after a distribution agreement had been established and agreed upon between Ethicon and Genzyme Corporation (Genzyme Biosurgical) following the acquisition of Focal.
CoSeal: CoSeal (manufacturered by Cohesion Technologies Inc,. received the CE Mark in February 2000, allowing product sales to commence in Europe and is currently being introduced into France and is expected to gain some market share over the forecast period. CoSeal is currently being sold outside of the U.S. through distributors, including Tyco Healthcare Group and other specialty distributors. In France CoSeal is represented by the Tyco Healthcare Group.
In addition to these products which have already reached the market in France there are products which are anticipated to make a market entry within the forecast period. These include:
TachoComb: TachoComb manufactured by Nycomed although registered for sale in Germany and other selected European countries (Austria) is not yet registered for sale in France but is expected to reach the market by the year 2004.
CryoSeal Fibrin Sealant: CryoSeal Fibrin Sealant is manufactured by Thermogenesis Corporation. The Company received CE Mark approval for the CryoSeal FS System in late March of 2001 and Canadian government approval in May 2001. The Company has begun finalising logistical relationships with key distributors, initiating clinical studies needed to support both the marketing of CryoSeal Fibrin Sealant and, in certain cases such as Germany, additional country specific registration of the CryoSeal FS System.
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Haemostats The product known as Surgicell and marketed by Ethicon is the dominant product in the French haemostat market. The product known as Gelata from B. Braun has recently been deleted and consequently B. Braun now have no market presence in the absorbable haemostat market. There are however two other products which have entered the market and known as:
FloSeal matrix hemostatic sealant: FloSeal matrix hemostatic sealant has been derived from a company known as Fusion Medical Technologies, Inc. Fusion Medical Technologies, Inc announced on the 20th April 1999 that they had received CE Mark Certification for the FloSeal Matrix Hemostatic Sealant (FloSeal). This regulatory clearance allowed surgeons in the European community, in all specialties, to use FloSeal for the control of surgical bleeding. At that time Fusion Medical Technologies had signed agreements with several distributors and was under discussions with a number of additional European distributors to market the FloSeal product line in their respective countries. However on the 3rd May 2002, Baxter International Inc announced that they had acquired Fusion Medical Technologies for approximately $157 million of Baxter common stock in a stock-for-stock merger.
CoStasis Surgical Haemostat: CoStasis Surgical Haemostat is a sprayable liquid haemostat for use as an adjunct to haemostasis in all surgical procedures, with the exception of neuro, ophthalmic and urological surgeries. Cohesion launched CoStasis in Europe in 1999 and in France in late 1999. Cohesion's marketing partner, U.S. Surgical, (Tyco Healthcare) launched CoStasis in the U.S. in July 2000.
Ligating Clips The market for ligation clips is divided between absorbable and non-absorbable clips. The non-absorbable clips are made from titanium or steel and the principle supplier of these clips is Ethicon (J&J). Ethicon (J&J) markets its own brand of absorbable clip, Absolok, which has been on the market for 8 years. Laproclip from Tyco Healthcare has only been on sale since 1994. The total market for ligation clips, which includes both absorbable and nonabsorbable clips is now a mature and a stable market. Any expansion in non-absorbable clips will occur at a cost to the market share of titanium clips. Surgical Adhesives and Glues Histoacryl from B. Braun has been on the market for over 28 years and for the majority of that time it has been the only skin adhesive on the market. In the absence of other skin adhesives, the main competitor to Histoacryl have been sutures. However during the late 1990s there was a considerable amount of commercial activity concerning surgical adhesives and glues in France.
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In 1998 octyl-2-cyanoacrylate known as Dermabond which originated by Raleigh, NC-based Closure Medical and marketed by Ethicon was approved for use in the closure of lacerations and surgical incisions in Europe. Since then as a result of the promotional activity of the sales and marketing departments at Ethicon and the acceptance of use in a wider range of applications this product as helped to develop the market and has at the same time captured market share from the Histoacryl dominated market. Similarly another surgical adhesive known as Indermil, a glue from Hartford, CT-based Loctite Corp and marketed by the US Surgical Division of Tyco Healthcare was approved and launched onto the French market in 1998. This appearance of this product onto the market has also helped stimulate interest for this product group in the French market. Another product known as LiquiBand manufactured by MedLogic Global obtained a Class 2A device CE mark in the European Union in June 1998 and MedLogic began commercialisation of the product in France in 1999. Todate it has not taken as large a share of the market as the products from Tyco Healthcare or Ethicon. In 1998, CryoLife received European approval for commercial distribution of BioGlue Surgical Adhesive for use in all vascular repair. In 1999, BioGlue was awarded a second CE mark extending application of BioGlue to pulmonary repair. In 2002 BioGlue recieved its third CE mark. This latest product certification in the European Union extends application of BioGlue for soft tissue repair including cardiac, genitourinary, dural, alimentary tract (which includes esophageal, gastrointestinal, and colorectal tissues) and other abdominal soft tissues, such as pancreatic, splenic, hepatic, and biliary. BioGlue may also be used in the fixation of surgical meshes in hernia repair. C.R. Bard's MedChem division (which is currently the subject of a acquisition proposal by Tyco Healthcare) has been marketing a surgical adhesive in France called GRF. GRF is a combination of collagen (proteins which form fibers to support body tissues), formalin (a form of formaldehyde), resorcinol and glutaraldehyde. At the time of writing Frost & Sullivan have established that Omrix Biopharmaceuticals S.A.based in Brussels have a product known as Quixil. This product is currently being reviewed for pricing and reimbursement in France and it is anticipated the product will be launched by the end of the first quarter 2003.
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Adhesion Barriers There has been considerable commercial activity amongst the leading biotechnology based companies in France. Products which have been recently introduced into France include:
Adept: Adept is an anti adhesion product which contain icodextrin. Shire Pharmaceuticals acquired the exclusive pan-European rights to market Adept for 5.0 million (approximately $7.3 million) in October 2001, from the developers ML Laboratories plc, which retains all rights to Adept for the rest of the world
Seprafilm: There are three forms of Seprafilm relevent to this report and sold in France directly through the Genzyme Biosurgery subsidiary in France. These are: Seprafilm Adhesion Barrier. Seprafilm Adhesion Barrier has had European approval since 1996. Seprafilm II Adhesion Barrier. Seprafilm II Adhesion Barrier has had European approval since 1999. CV Seprafilm II has been approved since the yaer 2000.

Figure 5-11 and Chart 5.5 illustrates and lists the market share of the major market participants and the percent change from year to year for absorbable and erodible wound closure biomaterials in France. Figure 5-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (France), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare Baxter International Inc B. Braun Aventis Pharma Peters S.A Others Total Market Share % 49.1 21.5 16.0 6.3 2.9 1.3 2.9 100 2002/03 Trend Down Up Up No Change No Change Up -----
Note: Others include: MedLogic, C.R. Bard's MedChem, Shire Pharmaceuticals, Genzyme Corporation, CryoLife, Resorba Wundversorgung, Cohesion Technologies Inc (now AngioTech Pharmaceuticals Inc and distributed by Tyco Healthcare)
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Chart 5.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (France), 2003
Baxter International Inc 16.0% B. Braun 6.3% Aventis Pharma 2.9% Peters S.A 1.3% Others 2.9%
Ethicon (J&J) 49.1%
Frost & Sullivan have determined that the overall market leader in this market segment is Ethicon (J&J) with an estimated overall market share of 49.1 percent. Ethicon (J&J) has a very high market share (over 60 percent) of the absorbables suture and haemostat market sub-segments in France but is not represented in the emerging anti-adhesion sub-segemnt. Ethicon (J&J) is coming under considerable competitive pressure from US Surgical (subsidiary of Tyco Healthcare) since the assets of Sherwood and Geck and Autosuture have been merged and consolidated. Frost & Sullivan have determined that Tyco Healthcare now represents 31.0 percent of the absorbable surgical suture market after consistently taking market share from Ethicon (J&J) over the last 5 years. The only other companies selling absorbable sutures in France are B. Braun (Aesculap) and Peters S.A. As a result of its success in the absorbable suture market Frost & Sullivan have determined that Tyco Healthcare is in second position with an estimated 21.5 percent of this market segment. As already discussed Tyco Healthcare has gained market share in the absorbable sutures market and has recently entered the developing tissue sealants market in France. As a result of its agreement with Cohesion Technologies Tyco Healthcare is expected to gain market share in this sub-segment. Baxter International Inc is in third position with an estimated 16.0 percent of this segment. Baxter International Inc strengths are their established presence in the developing fibrin sealants market with its product Tissucol. Baxter International Inc are also expected to benefit from the launch of the new haemostat known as FloSeal matrix hemostatic sealant orginally derived from Fusion Medical Technologies, Inc.
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B. Braun is in fourth position with an estimated 6.3 percent of the market. The strength of B. Braun is its presence in the absorbable sutures and adhesives/glue sub-segments. The adhesive/glue known as Histoacryl has helped B. Braun establish a major presence in this market but is expected to come under increasing competitive pressure throughout the forecast period from the market entry of new and innovative products.
Forecasts of the Absorbable and Erodible Orthopaedic Biomaterials Market
Market Drivers
Figure 5-12 provides a review of the additional or specific drivers for the absorbable and erodible orthopaedic biomaterials market in France. Figure 5-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (France), 2003-2009
Rank Driver 1 2 3 4 Minimally Invasive Techniques used for Bone Graft Substitute Products Stimulates Market Development 1-2 Years 3-4 Years 5-6 Years High High High Medium Medium Medium High Medium Medium
Use of Synthetic Bone Substitutes in Spinal Surgery Helps Develop Medium Market Proliferation and Increase in Sports Injuries Helps Encourage Market Development Sensitivity Towards Allograft Provokes Interest in Synthetic Substitutes High High
M i n i m a l ly I n v a s i v e Te c h n i q u e s u s e d f o r B o n e G r a f t Substitute Products Stimulates Market Development Although the use of autologous bone graft is still considered to be the "gold standard" for bone grafting there are a number of inherent disadvantages to this technique. These include:
The requirement for an additional operative site for the patient in order to harvest the bone graft. This in itself has considerable disadvantages. E.g. morbidity, pain and delayed healing associated with the second operative site. There are limited amounts of available bone from an autologous sites. There is an additional operative time required for harvest from the autologous site. For these reasons, intensive efforts have been directed toward developing alternative substances to either augment or substitute for autologous bone in spinal surgery.
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Use of Synthetic Bone Substitutes in Spinal Surgery Helps Develop Market The leading suppliers of bone substitutes have targeted major spinal surgery and particularly corrections for scoliosis where the amount of autologous bone graft is limited. This area is seen as the single most important growth opportunity in France. Proliferation and Increase in Sports Injuries Helps Encourage Market Developmen t The increased participation in sports activities and particularly contact sports and winter sports has caused a significant increase in sports related injuries. This represents a large growth area for bioabsorbables for the fixation or reattachment of soft tissues. It is envisaged that part of the growth in this sector will be as a result of cannibalisation of the metal soft tissue reattachment devices. S e n s i t i v i t y To w a r d s A l l o g r a f t P r o v o k e s I n t e r e s t i n Synthetic Substi tutes Since health scares surrounding HIV-infected blood and the BSE crisis, the French people have been particularly sensitive to the issue of possible disease transmission, through the use of either human or animal-derived products in medical applications. There has been public outcry in France and despite recent efforts to restore the public's confidence in allograft tissue, with the introduction of enhanced sterilisation treatments, most people would prefer to receive a bone graft substitute instead of allograft tissue. This is having a positive impact on the French bone graft substitute market, and will continue to do so throughout the forecast period.
Market Restraints
Figure 5-13 provides a review of the additional or specific restraints for the absorbable and erodible orthopaedic biomaterials market in France. Figure 5-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (France), 2003-2009
Rank Restraint 1 2 3 Technological Problems Associated with Absorption of Bioabsorbables Restrain Market Development Reimbursement Issues Influence Market Development Purchasing Agencies Restrain Product Pricing and Consequently Market Development 1-2 Years 3-4 Years 5-6Years High Medium Medium High Medium Medium High Medium Medium
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Te c h n o l o g i c a l P ro b l e m s As s o c i at e d w i t h Ab s o r p t i o n o f Bi oabsorbables Rest rain Marke t Devel opment Several problems have been identified which have hampered the widespread use of bioresorbable fixation in modern traumatology. Many devices made of polyglycolic acid (PGA) homopolymers demonstrate rapid loss of in vivo strength and refractures have been common. At the other extreme, remnants of pure polylactic acid (PLA) implants have been identified up to eight years after implantation, raising the question as to whether PLA is too "biostable" to be used as a bioresorbable material. Furthermore, degradation of bioresorbable implants can cause a non-infectious inflammatory tissue response (so-called sterile abscess) requiring operative drainage in up to 26 percent of patients, most commonly when PGA or its copolymers are used. Several theories have been proposed regarding the aetiology of this inflammatory reaction. Many investigators feel that this reaction represents an inability of the local tissues to rapidly clear the breakdown products of PGA. This theory is supported by the fact that glycolic acid has been isolated from inflammatory tissue, and these reactions are distinctly less common with implants derived primarily from the more slowly degrading PLA polymers. However a number of implants made of a copolymer of 70 percent PLA and 30 percent PGA have been developed which has a more desirable rate of degradation that allows the plate to share the load until the fracture has healed, without the risk of sterile abscess formation seen with pure PGA homopolymers. Reimbursement Issues Influence Market Developmen t A number of issues concerning the reimbursement of bioabsorbables exist in the French market. These are principally historical problems in that technology has outpaced the reimbursement legislation. Currently reimbursement is provided for the initial operation for the implantation of a metal or bioabsorbable implant. A second reimbursement is available for the removal of a metal implant. Clearly a bioabsorbable implant will not require a second procedure. The reimbursement values with T.I.P.S. reflect the lower price of the metallic implants but there are no higher reimbursement values for bioabsorbable products. The TIPS system was set up in order to simplify the purchasing process, but reimbursement and funding continue to be a major issue, as the system has been severely criticised for its complexity and lack of flexibility, which can cause lengthy delays to the acceptance of innovative technology. However, the TIPS list is due to be completely overhauled by the year 2003, in order to make savings of $115.0 million for the French healthcare system. Anticipated changes are likely to include transfer of responsibility to Agence Franaise de Scurit Sanitaire des Produits de la Sant (AFSSaPS), which will collaborate with the Health Technology Assessment group (Agence Nationale d'Accrditation et d'Evaluation de la Sant) for clinical evaluation. New additions to the TIPS schedule will be evaluated using the Service Mdical Rendu approach, which is based on clinical effectiveness and economic feasibility, and reimbursement of some devices will be subject to certain physician/hospital certifications.
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In some product areas, prices are restricted to such a degree that companies find it impossible to enter the French market, because the reimbursement value on TIPS is below their cost price. The TIPS tariff has not prevented companies from selling their bone graft substitute products so far, but it may deter new companies. Sales in France are high in terms of units, but the TIPS tariff means that this does not equate to high revenues. TIPS may be viewed as a market driver by companies who have lower priced products, as the tariffs are sufficiently high for them to sell their products at or near list prices. In some product areas, prices are restricted to such a degree that companies find it impossible to enter the French market, because the reimbursement value on TIPS is below their cost price. The TIPS tariff has not prevented companies from selling their bone graft substitute products so far, but it may deter new companies. Sales in France are high in terms of units, but the TIPS tariff means that this does not equate to high revenues. TIPS may be viewed as a market driver by companies who have lower priced products, as the tariffs are sufficiently high for them to sell their products at or near list prices. P urchasi ng Age ncie s Re str ai n Product P ri cing a nd Consequently Market Development The purchasing agencies e.g. the Centrale d'Achats de L'Hospitalisation Privee (CAHP) have organised and collated the medical equipment, medical devices and related product requirements for a large number of private hospitals. They negotiate the terms and conditions of equipment and accessory medical sundries on behalf of the private hospitals they represent. This has resulted in major discounts from the list prices and consequently a lowering on average selling prices.
Market Forecasts
Figure 5-14 provides a summary review of the analysis of the revenue forecasts for the absorbable and erodible orthopaedic biomaterials market in France. It has been estimated that the total market was valued at $17.9 million in 1999. This had increased to an estimated $24.4 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $61.4 million (CAGR 14.1 percent). Although the compounded annual growth rate for this segment has been predicted to be 14.1 percent over the forecast period Frost & Sullivan have determined that certain niche markets will grow at a faster rate. It is expected for example that the market for bioabsorbables used in sports medicine will grow at between 20-25 percent per annum over the forecast period. Among orthopedic surgeons, the most popular use for absorbable fixation devices is probably attaching ligaments and tendons to bone, particularly in anterior and posterior cruciate ligament (ACL-PCL) grafting. These products can be used using minimally invasive surgery for example through the arthroscopic reconstruction of the ACL (anterior cruciate ligament) of the knee.
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Figure 5-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (France), 1999-2009
Growth Rate (%) --10.4 10.7 11.5 12.2 13.1 14.0 15.4 15.7 14.8 13.4
($ Million) 17.9 19.8 21.9 24.4 27.4 31.0 35.3 40.7 47.1 54.1 61.4
Many surgeons and particularly sports specialists are concerned about the rigid attachment of soft tissues to bone using metallic implants. With an absorbable fixation device, you have a theoretical advantage in that the interference screw will be absorbed and will be replaced by bone. This should allow healing around the entire periphery of the graft. In some of the that is what has happened. Examples of products used in France include the Absolute absorbable cannulated interference screw produced by Ethicon (Mitek). Another clinical area is the use of absorbable anchors for rotatory cuff injuries of the shoulders. These are injuries to those who participate in sports that require repetitive overhead arm movement. Such athletes include: swimming; baseball; tennis; softball; gymnastics; football; weightlifting; basketball. It is anticipated that growth in absorbables used in trauma will grow between 12-15 percent per annum. Although there is a trend towards the use of bioabsorbables for non-load bearing fractures there is concern amongst many orthopaedic surgeons in France that the bioabsorbable materials do not have the mechanical strength required in load bearing areas In addition Many physician are waiting for more studies on bioabsorbables where they would like more evidence that fixation devices really are absorbed, and they await cost-benefit evaluations.

Bioabsorbable fracture support systems and soft tissue reattachment devices are typically premium priced by manufacturers as surgeons are able to highlight the benefits attributed to using absorbable products to patients and highlight that its will be unnecessity of carrying out another operative procedure. In addition suppliers are able to highlight the benefits that are attributed to these products and the advantages they have for the surgeons using them.
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However the final pricing is dependent on the fixed reimbursement values which are established by the French Government through the TIPS reimbursement system as described earlier. In order to be eligible to be reimbursed the product has to be registered on the approved product list. The reimbursement value if different for different product groups i.e. interference screws are different from suture anchors which are different from fracture fixation products.
Figure 5-15 illustrates the competitive structure for the absorbable and erodible orthopaedic biomaterials market in France. Figure 5-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (France), 2002
Number of Companies in Market 31 Types of Competitors Suppliers of absorbable suture anchors, trauma plates and screws etc are subsidiaries of the parent company Suppliers of synthetic bone graft substitutes are typically distributors of medium-sized overseas corporations specialising in this niche market Local indigenous manufacturers e.g. Craver Ostal supplying either directly or through distributors Distribution Structure The market is a highly complex mixture of direct subsidiaries, local suppliers and a variety of distribution agreements both nationally and on a local basis 1st Tier includes: Biomet Merck, Smith & Nephew (Acufex), Sofamor Danek (Medtronic), Ethicon (J&J) (Mitek) and Arthrex 2nd Tier includes: Wright Medical Technology, NeuColl, Linvatec (Conmed) and Bionx Implants Inc 3rd Tier includes: Mathys Synthes-Stratec, Corifix, Stryker (Pyrost), Depuy J&J, SulzerMedica (Centerpulse), Aesculap (B. Braun) (Biosorb), Tornier (Phusis), Atlantech, OsteoTech, Orthovita, Craver Ostal (Cerapatite), SBM S.A. Interpore International, Zimmer S.A.S, Bioland biomateriaux, Teknimed SA, Ost Dveloppement (distributed by Stryker), Unilab Surgibone Inc., Geistlich Shne AG, MCP, Inoteb, Inion Ltd Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All senior orthopaedic surgeons, sports medicine specialists, spinal surgeons and centres of excellence, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities, hospital purchasing groups, private hospitals and Key Purchasing Personnel Competitive Factors Product Pricing: Inclusion within the reimbursement structure and competitor activity forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Manufacturers seeking competitive advantage need to secure a distributor agreement with a major distributor in France Proven Efficacy: It is almost mandatory to provide clinical evidence proving the efficacy of the product
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The French market is a highly complicated mix of principally overseas suppliers operating in the country through direct subsidiaries e.g. Ethicon (Mitek), Smith & Nephew S.A. (Acufex), Arthrex and Linvatec or through distributors for example Bionx's orthopaedic products are distributed in France by Biotech International S.A.R.L. based in Salon de Provence. The only indigenous supplier absorbable and erodible orthopaedic biomaterials in France is Tornier throught their subsidiary Phusis. Tornier is based in Montbonnot (near Grenoble) and specialises in manufacturing surgical implants, mainly replacement hips, knees, shoulders and elbows. The implants are made of alloys: stainless steel, chrome-cobalt, titanium and/or polyethylene. Tornier is involved in a partnership with researchers in Saint-Etienne to develop new carbon and diamond coatings.Tornier employs 110 people and has established an enviable reputation in its field,selling surgical implants to hospitals and clinics all over the world. Phusis is a subsidiary of Tornier. It is based in Saint-Ismier and employs about 30 people. It manufactures bioresorbable implants, made of polymer materials, for use in orthopaedic surgery. The main applications for these implants are ligamentoplasty, the treatment of certain fractures, surgery of the foot and spinal column (pin, screws, etc.). One of the principle products is the Phusis Interference Screw. Both Tornier and Phusis are members of the Laboratoire de Biomcanique (LBM) and the CNRS Centre National de la Recherche Scientifique with the following companies for the research into and development of biomaterials in France: Aesculap, Benoist Girard (Groupe Stryker), Biospace, Biomicron, Cedior (Groupe
SulzerMedica (Centerpulse), Ceraver Osteal, Eurosurgical, GIE Guerbet Medical, Landanger (Depuy), Mdinov, Orthotechnique (Groupe Wright), Sofamor Danek, Stryker, Tornier, Zimmer (Groupe Bristol - Myers Squibb). OsteoTech based in Eatontown, New Jersey announced on the 2nd February 2000 that they had acquired a 90 percent interest in OST Developpment SA of Clermont-Ferrand, France. The acquisition of OST Developpment SA has been estimated to contribute $4 million in revenues to Osteotech in the year 2000. The acquisition has been described by Mr Russo (Osteotech's Executive Vice President for Strategic Planning and Business Development) as providing a lead and logistical support to expand their operations into other European countries. Mr Russo stated in a forward looking statement that "France will be the initial marketing focus and hub of our overall operations in Europe," and that "We will use a country-by-country approach and are already moving forward to address opportunities in Germany, Switzerland, The Netherlands and Italy."
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The only other indigenous supplier of note in France is Teknimed. Based in Vic-en-Bigorre Teknimed is a manufacturer of synthetic bone substitutes and a range of other biomaterials used in orthopaedics.

Figure 5-16 and Chart 5.6 lists and illustrates the market share of the major market participants and the percent change from year to year for the absorbable and erodible orthopaedic biomaterials market in France. Figure 5-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (France), 2002-2003
Company 2002 Market Share (%) Biomet Merck Smith & Nephew (Acufex) Sofamor Danek (Medtronic) Ethicon (J&J) (Mitek) Arthrex Wright Medical Technology (Osteoset) NeuColl (Collagraft) Linvatec (Conmed) Bionx Implants Inc Others Total 16.5 10.5 9.5 8.5 7.5 7.0 6.5 5.5 5.0 23.5 100 2002/03 Trend Up Up No Change Down Down Down Up (slightly) Up (slighly) Down -----
Note: Others include: Mathys Synthes-Stratec, Corifix, Stryker (Pyrost), Depuy J&J, SulzerMedica (Centerpulse), Aesculap (B. Braun) (Biosorb), Tornier (Phusis), Atlantech, OsteoTech, Orthovita, Craver Ostal (CERAPATITE), SBM S.A. Interpore International, Zimmer S.A.S, Bioland biomateriaux, Teknimed SA, Ost Dveloppement (distributed by Stryker), Unilab Surgibone Inc., Geistlich Shne AG, MCP, Inoteb, Inion Ltd
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Chart 5.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (France), 2003
Bionx Implants Inc 5.0%
Linvatec (Conmed) 5.5% NeuColl (Collagraft) 6.5% Wright Medical Technology (Osteoset) 7.0% Arthrex 7.5%
Others 23.5%
Ethicon (J&J) (Mitek) 8.5% Biomet Merck 16.5% Smith & Nephew (Acufex) 10.5%
Sofamor Danek (Medtronic) 9.5%
Frost & Sullivan have determined that the overall leader is Biomet Merck with an estimated 16.5 percent of the absorbable and erodible orthopaedic biomaterials market in France. Biomet Merck strength lies in its agreement with the ETEX Corporation for the exclusive distribution of Endobon, Bone Substitute Material through the Merck Biomaterials division in France and the rest of Europe. This distribution agreement was announced on the 1st November 2000 and since then Biomet Merck has used its sales and marketing promotional activities to grow this product. Biomet Merck also have a combination of products in France including the synthetic bone graft substitutes. Absorbable ReUnite Orthopaedic Screws, ReUnite Orthopaedic Pins, and ReUnite Orthopaedic Plates and the LactoSorb Craniomaxillofacial Fixation product from their subsidiary (Walter Lorenz Surgical). Smith & Nephew is in second place with an estimated 10.5 percent of the market. Smith and Nephew have been attacking the market in France aggressively in the endoscopy market following their acquisition of Acufex in 1995, the acquisition of Orthopaedic Biosystems Ltd. Inc., in November 2000 and the acquisition of Instrument Makar, Inc., at the beginning of the year 2002. Frost & Sullivan have established that Smith and Nephew are anticipated to gain market share throughout the forecast period, particularly in the interference screw market as they further consolidate the sales and marketing activities of the acquired companies and focus the promtional efforts into the developing endoscopy market.
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Sofamor Danek (Medtronic) is in third position with an estimated 9.5 percent of this market segment. Sofamor Danek (Medtronic) strength lies in its original indigenous position within the French market and its development of a wide range of spinal implants with more recent emphasis on the emerging market for the treatment of low back pain. They are the distributors in France of the product known as BCP which is manufactured by Bioland Biomateriaux. Ethicon (J&J) (Mitek) is in fourth position with an estimated 8.5 percent of the market. Ethicon (J&J) (Mitek) owes its position in the market to the wide range of absorbable and erodible interference screws, meniscal repair devices and suture anchors. Arthrex is in fifth position with an estimated 7.5 percent of the market. Arthrex's strength lies in the interference screw market. Other products and companies included within the bone graft substitute market in France include: Biosorb and Synatite (manufactured by SBM S.A distributed by Aesculap, Calciresorb and Cerapatite manufactured and distributed by Craver Ostal, Ossatite Pure manufactured and distributed by MCP, InterporePro Osteon manufactured by Interpore and distributed by Biotech international, Triosite manufactured and distributed by Zimmer, Biocer-Biocel 2 manufactured by Bioland biomateriaux and distributed by DePuy France, Calciresorb 35Cerapatite 65 manufactured and distributed by Craver Ostal, Eurocer 200, 400 manufactured by Bioland Biomateriaux and distributed by Groupe Fournitures Hospitalires, Orthoss or Bio-Oss manufactured by Geistlich and distributed by SulzerMedica (Centerpulse), Ossatite Composite manufactured by MCP and distributed by ART'OS, BIOTECHNI, C.A.L., C.H.O.C., Cedex Implants Industrie and TranSystme.
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6

Th e Un i t e d K i n g d o m The National Health Service (NHS) was set up after the Second World War with the aim of unifying services provided by voluntary and local authority hospitals. The NHS offers free health services to all UK inhabitants, funded in the main through general taxation as opposed to health insurance. Separate services exist for England, Wales, Scotland and Northern Ireland. In the past, the Secretary of State for Health in England and the Secretaries of State for Scotland, Wales and Northern Ireland were responsible for all aspects of the health services in their respective countries. Since the process of devolution, however, responsibility has passed to the separate executive assemblies in Wales, Scotland and Northern Ireland. The respective health departments of the National Assembly for Wales, the Scottish Executive and the Northern Ireland Executive are responsible for policy direction and the allocation of funds to the NHS. In 1996, NHS Executive Regional Offices took over the role of the Regional Health Authorities. In addition, following the merger of the 110 District Health Authorities (DHAs) and the 90 Family Health Services Authorities (FHSAs), 100 new unitary Health Authorities (HAs) became operational in England in April 1996. The new authorities were created in an effort to streamline central management in the NHS and reduce administrative costs. The geographic boundaries of the HAs roughly reflect those of the former DHA's, with populations ranging from around 125,000 to over one million, according to local circumstances. The HAs have inherited statutory functions previously undertaken by DHAs and FHSAs.
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They have overall responsibility for 'providing and securing the provision of services', as well as administering arrangements with medical and dental practitioners, pharmacists and opticians. In effect, HAs are both healthcare providers and purchasers, responsible for maintaining their own, directly managed units, and securing the services of NHS Trusts and Primary Care Groups/Trusts. The new HAs have taken over the provision of NHS hospital and community health services. Hospital services are organised into a broad four-tiered structure: N H S Tr u s t s NHS Trusts are hospitals, or groups of hospitals, which are self-governing and earn revenue from the services they provide. These services can be to both the local population, typically around 300,000 in the south of England, and to a wider population for specialist services. The first wave of NHS Trusts and GP fundholders became operational in April 1991. By April 1996, there were around 500 NHS Trusts in the UK, providing almost 100 percent of hospital and community health services. P r imary Ca r e Through the introduction of GP fund-holders, the Conservative government attempted to alter the relationship between GPs and hospital services. The principle of fund-holding was that GPs managed their own budgets to obtain a defined range of services directly from hospitals, thereby promoting competition between hospitals for the GPs' custom. In 1997, the new Labour government promised to end the 'internal market' created by this system in its White Paper, The New NHS: modern, dependable, and replace it with a system of integrated care, based on partnership and drive by performance'. The 1999 Health Act provided for the abolition of GP fund-holding with effect from September 1999, its replacement by Primary Care Groups, and the establishment of Primary Care Trusts. Primary Care Groups (PCGs) build on the system of Commissioning Groups introduced in 1998, which involved GPs working closely together with the relevant health authority to plan and commission services. Around 145 PCGs are expected to be granted trust status by 2001. Primary Care Trusts (PCTs) are similar to NHS Trusts in that they are self-governing bodies accountable to Health Authorities. They are responsible for providing primary care services and for commissioning hospital and community health services.
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Other new initiatives in primary care include the introduction of NHS Direct, a 24-hour helpline led by nurses, giving patients healthcare advice and information over the telephone. At the end of last year, a complementary Internet service was introduced, NHS On-line, with links to other health related Web sites. A number of NHS Walk-in Centres have also been approved, the first opening in London in January 2000. These centres will be located in places such as supermarkets and A&E departments. They are staffed bynurses and able to offer treatment for minor conditions. A recent development has been a debate amongst politicians, healthcare providers and all other interested parties about the future funding and development of the NHS following decades of under-funding and the lack of development of the services provided. This resulted in reaffirmation of the principles that originally established the NHS and a commitment by the existing Labour government to provide additional funding to the NHS over the long term to bring the level of financial support to that of the European average. The budget by the Chancellor (Mr Gordon Brown MP) given on Wednesday 18th April outlined the additional funding at the source of funding ie a 1% increase on National Insurance contributions by both employees and employers. Hospital Service s Public Sector (National Health Service) There were around 267,000 hospitals beds in the UK at the end of 1999, equivalent to 4.3 per thousand population overall, although there are regional variations. Around 96 percent of hospital beds are in the public sector. In 1998, there were around 255,743 beds available in NHS hospitals. The highest bed to population ratio was in Scotland, at 7.4 beds per thousand, while there were 3.9 beds per thousand in England. England The average number of available beds in NHS hospitals in England has been reduced from around 325,000 in 1985 to 194,000 in 1997/98, an overall decrease of 40 percent. In percentage terms, the largest cuts over this period have been in beds for learning disabilities (81%), mental illness (51%) and geriatrics (45%). Beds for acute illnesses have been cut by 20.6 percent to 108,000.
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Wal e s In fiscal 1998, there were 135 NHS hospitals and 14,926 beds in Wales, the majority of which were in the acute sector. There were 14 major acute hospitals with over 300 beds and one psychiatric hospital of comparable size. The remainder were smaller community or specialist hospitals. Total bed capacity was equivalent to 5.0 per thousand population. Between 1994 and 1998, bed numbers in Welsh NHS hospitals were reduced by 13.8 percent, most of the reduction being in the acute sector which lost ten hospitals. Scotland In 1997/98, Scotland had 37,998 available beds, 36,784 in NHS hospitals and 1,214 in joint user and contractual hospitals. The overall number of beds in Scottish hospitals declined by one third between 1985/86 and 1997/98, the greatest decrease being in psychiatric beds , which were reduced by 44 percent over the period. Northen Ireland In 1998/99, the health service had an average of 8,819 beds available in Northern Ireland, just under half of which were allocated to acute services. Private Sector There are currently 343 independent acute surgical/medical hospitals in the UK providing around 10,852 beds. The UK profit-making sector is responsible for around half of the available beds, while around 34 percent are provided by charitable and religious groups. The remainder are non-affiliated and American joint venture beds run for profit. Other facilities available in the private sector include 77 independent acute psychiatric hospitals, 96 private patient units in NHS trusts, 164 independent out-patient clinics and day care hospitals, 162 independent screening centres, 110 commercial pathology laboratories and seven diagnostic imaging centres. In 1998, revenue in the independent sector increased by around 10 percent over the previous year to 1,573 million.
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The private sector accounts for around 20 percent of all acute elective surgery in the UK, according to the Independent Healthcare Association (IHA), equivalent to around 800,000 surgical procedures each year. In 1999, around 90,000 operations undertaken in the private sector were on patients funded by the NHS according to IHA estimates, almost three times as many as the 31,000 recorded in 1993. The Association estimates that around 6 percent of its patients are NHS funded. Healthcare Reforms and Developments in Healthcare The current labour government is committed to the re-development of the National Health Service in the UK through the NHS Plan. The NHS Planwhich was published in July 2000 has been described as a radical action plan for the next 10 years setting out measures to put patients and people at the heart of the health service and promising a 6.3 per cent increase in funding over five years to 2004. As a result of this Plan it has been planned that there will be:
7,000 extra NHS beds by 2004: of these around 2,100 extra beds will be in general and acute wards. This will be the first increase of its kind in 30 years.
5,000 extra intermediate care beds, some in community or cottage hospitals, others in specially designated wards in acute hospitals. Some will be in purpose built new facilities or in redesigned private nursing homes
1,700 extra non-residential intermediate care places. A 30% increase in adult critical care beds over the next 3 years as a result of resources allocated this year and to follow over the next three years.
New NHS Building Programme It is also planned that there will be a major investment in new NHS buildings. This has been described as the biggest ever hospital building programme in the history of the NHS. Approval has already been given the go ahead to 38 major developments. Over half of these will be open to the public by 2003/04 and the remainder will be under construction. In addition, approval has been given for a further 31 medium size schemes of which 27 will be open.
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As a result of this NHS Plan there will now be a further major expansion in new hospital building:
9 new hospital schemes given the go ahead in 2001worth 1.3 billion. 9 new hospital schemes given the go ahead in 2002worth 1billion
According to the NHS this will mean that over 100 new hospital schemes in total will be implemented between 2000 and 2010. Capital Equipment Investment Programme It is planned that in partnership with the private sector the NHS will develop a new generation of Diagnostic and Treatment Centres to increase the number of elective operations which can be treated in a single day or with a short stay. These Centres will separate routine hospital surgery from hospital emergency work so they can concentrate on getting waiting times down. As a result of this NHS Plan there will be 20 Diagnostic and Treatment Centres developed by 2004. By then, 8 will be fully operational treating approximately 200,000 patients a year. Other Investment Programmes As well as new hospitals there will be a range of other new buildings developed between 2000 and 2010. As a result of the NHS Plan there will be:
7 billion of new capital investment through an extended role for Private Finance Initiative (PFI) by 2010
40% of the total value of the NHS estate will be less than fifteen years old by 2010 The NHS will have cleared at least a quarter of its 3.1 billion maintenance backlog, accumulated through two decades of under-investment, by 2004
Up to 600 million realised through a one-off auction of empty and surplus NHS property to reinvest in new NHS premises.
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The new buildings will be provided through a mixture of public capital and an extended role for the Private Finance Initiative. Where there is a major PFI deal to build a new hospital taking place, the NHS will, when appropriate, include local NHS primary and intermediate redevelopment too. Creation of New Local Surgeries The NHS will enter into a new public private partnership within a new equity stake company the NHS Local Improvement Finance Trust (NHS Lift)to improve primary care premises in England. The priority will be investment in those parts of the countrysuch as the inner cities where primary care services are in most need of expansion. As a result of this NHS Plan:

up to 1 billion will be invested in the creation of new one stop primary care facilities up to 3,000 family doctors' premises will be substantially refurbished or replaced by 2004.
New one-stop primary care centres will include GPs, dentists, opticians, health visitors, pharmacists and social workers. As a result of this NHS Plan there will be 500 one-stop primary care centres by 2004. Purchases of New Equipment It is planned that 300 million will be used to invest in equipment to improve cancer, renal and heart disease services by 2004. This will include:
50 new Magnetic Resonance Imaging (MRI) cancer scanners to increase procedures by 190,000
200 new CT cancer scanners150 replacement plus 50 additionalto increase procedures by 240,000
80 new liquid cytology units to improve cervical cancer screening for 4 million patients every year
45 new linear accelerators20 replaced plus 25 additionalto treat an extra 12,000 cancer patients
3,000 new automated defibrillators in public places to help save the lives of the one in five people whose heart attacks happen in a public place
450 new and replacement haemodialysis stations to treat another 1,850 kidney patients and provide better treatment for a further 1,200 existing patients
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Chart 6.1 shows the market engineering research measurements for the UK absorbable and erodible biomaterials market as it appeared in 2002. Chart 6.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements
(United Kingdom), 2002
Market Research
Market Engineer
Market Strategy
Implementation
Market Planning
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Market Drivers
Figure 6-1 reviews the specific drivers for the absorbable and erodible biomaterials market in the UK respectively. Figure 6-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (United Kingdom), 2003-2009
Rank Restraint 1 2 3 Fast Track Surgery Centres to Open by End of 2002 Stimulates Growth in Absorbable and Erodible Biomaterials The "NHS Plan" and Improving Health Services: A recipe for Stimulating the Use of Absorbable and Erodible Biomaterials Supplier Lead Education and Training Programs Help Stimulate Market for Absorbable and Erodible Biomaterials in the UK 1-2 Years 3-4 Years 5-6 Years High High Medium High High Medium Medium Medium Medium
F a s t Tr a c k S u r g e r y C e n t r e s t o O p e n b y E n d o f 2 0 0 2 Stimul ates Growth in Abso rbabl e and Erodi bl e Biomaterials As a method of increasing the number of operations carried out by the NHS the British Government has stated that it is committed to opening a number of fast track Diagnostic and Treatment Centres (DTCs) by the end of 2002. It is predicted that these new DTCs will carry out up to 20,000 extra operation per year. To confirm this the Health Secretary Colin Milburn stated on the 21st February 2002 that: "The NHS is investing 15m to get this first wave of DTCs (Diagnostic and Treatment Centres) going. They will give us a range of innovative approaches to providing fast and convenient care, in partnership with different public and private organisations, in primary care and in hospitals. And where they go we intend that many more will follow. The reduction in waiting times we want to achieve will require a major expansion in this sort of innovative surgery centre. This is what we mean when we say investment and reform go together. Investment plus reform. Not just more money but modern means of using it. Not more of the same but change and renewal. This is at the heart of the 10 year programme set out in the NHS Plan." The advent of these DTCs will help stimulate the growth in absorbable and erodible biomaterials since more absorbable sutures, tissue sealants and orthopaedic soft tissue reattachment devices are anticipated to be used.
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Th e "N H S P l a n " a n d I m p rov i n g H e a l t h S e rvi ce s : A Recipe for Stimulating the Use of Absorbable and Erodible Biomaterials The Department of Health (DoH) published the NHS Plan" in January 2001. This document has established a program for improving the health services and health outcomes in the NHS. Some of the major objectives of the "NHS" include:
by 2005 a reduction in waiting times for an outpatient appointment to a maximum of 3 months; by 2005 a reduction in the maximum wait for a hospital operation to 6 months, then falling to a maximum of 3 months by 2008 (with an average wait of half this time); a reduction in maximum waiting times in A&E departments to 4 hours by 2004 with average waits reduced to 75 minutes. There will be further progressive reductions in this maximum waiting time; a reduction in waiting to see a GP so that by 2004 patients are seen within 48 hours or seen by another primary care professional within 24 hours; Reducing deaths from cancer by implementing the Cancer Plan's improvements to prevention and treatment services. By 2008 it is predicted that thousands of lives each year will be saved as a consequence of extra investment and reforms in those services; Reducing deaths from coronary heart disease by implementing the national service framework's improvement to prevention and treatment services. By 2008 it is estimated that 25,000 lives will be saved each year as a consequence of extra investment and reform in those services.
The planned reduction in overall waiting times and targeting of specific clinical areas will increase the number of procedures carried out over the forecast period. Frost & Sullivan predict this will have a major impact on the development and growth of absorbable and erodible biomaterials in the UK over the forecast period. S u p p l i e r L e a d E d u c a t i o n a n d Tr a i n i n g P r o g r a m s H e l p S t i m u l a t e M a r k e t f o r A b s o r b a b l e a n d E r o d i bl e Biomaterials in the UK The leading suppliers have instigated service value-added educational and training programs for surgeons, operating room nurses, and other health care professionals on the latest surgical procedures, and have offered education on issues in health care delivery and administration. This is seen as a method of introducing and promoting the features and benefits of new products, provide proprietary training on surgical techniques and establish relationships with centres of excellence and the principle reference centres. Ethicon for example have a European Surgical Institute located in Norderstedt (Hamburg), Germany. The European Surgical Institute provides surgeons and other health care professionals with an array of courses, symposia, workshops, and seminars. The leading suppliers advocate this promotional tactic as a principle means of introducing new products to healthcare professionals through their peers and senior healthcare professionals.
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Market Restraints
Figure 6-2 reviews the specific restraints for the absorbable and erodible biomaterials market in the UK respectively. Figure 6-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (United Kingdom), 2003-2009
Rank Drivers 1 2 Effect of Financial Restraints and Cost Containment Initiatives and NHS Procurement UK Surgeons Traditionally Reluctant or Slow to Adopt New Technologies and/or New Techniques Affects Market Growth 1-2 Years 3-4 Years 5-6 Years High Medium High Medium High Medium
Effect of Financial Restraints and Cost Containment Initiatives and NHS Procurement Despite the well-publicised release of 'new money' for specific targeted projects the NHS is generally underfunded in comparison to the other leading industrialised nations of the world. The NHS has also embarked on a programme of obtaining value for money and where appropriate any new equipment needs to be supported with cost benefit data. In 1998 a White Paper was published which outlined a ten-year program to reduce variations in performance and raise the quality of service throughout the NHS. It is planned to achieve this by publishing and comparing unit cost information and it is planned to publish this information as a National Schedule of Reference Costs. The identification of these unit costs will be to help NHS trusts identify best practice, reduce costs and free resources for reinvestment. It is envisaged that one of the effects of register of reference costs will be to improve the bargaining power of the hospital authorities when they have had an opportunity to compare costs of medical device equipment including orthopaedic implants and related equipment. This may have the effect of reducing and standardising average selling prices across the NHS. In addiiton the NHS Procurement Review in 1998 identified that currently the NHS does not have a strong central focus on its purchasing process and does not have any overall authority to either committ on behalf of Trusts or direct where appropriate in the best interests of the NHS as a whole. Best practise organisations invariably have a central co-ordinating body that is able to address those sectors of supply that are critical or of strategic importance. Less critical or strategic sectors are usually devolved to local purchasing groups.
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Examples of supplies which are judged as being of critical strategic importance include medical supplies from monopoly or near monopoly suppliers, eg sutures (either absorbable or non-absorbable). Since the NHS Procurement recognise this situation then suppliers need to be aware that a central co-ordinating body is expected to be established which will implement a procurement practise which will deliver better value and secure a more productive procurement in the National Health Service. U K S u r g e o n s Tr a d i t i o n a l ly R e l u c t a n t o r S l o w t o A d o p t N e w Te c h n o l o g i e s a n d / o r N e w Te c h n i q u e s A f f e c t s Marke t Growth As a result of the survey carried out during the preparation of this report Frost & Sullivan have determined that British surgeons are generally conservative in nature and consequently are cautious towards the introduction of new technologies and surgical techniques. Typically British surgeons require substantial and verifiable evidence which proves the efficacy of a product together with clincial studies which demonstrate the long-term outcomes of the new product or surgical technique. They are also swayed or converted following meetings and discussions with their peers who have had clinical experience with the new products.
Market Forecasts
Figure 6-3 and Chart 6.2 provides a summary review of the analysis of the revenue forecasts for the UK absorbable and erodible biomaterials market. Figure 6-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (United Kingdom), 1999-2009
Growth Rate (%) --4.9 6.0 7.8 7.3 8.1 8.9 9.6 9.8 9.7 9.7
($ Million) 60.9 63.9 67.7 73.0 78.3 84.7 92.2 101.1 110.9 121.7 133.5
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Chart 6.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (United Kingdom), 1999-2009
160 140 120 Revenues ($ Million) 100 80 60 40 20 0 1999 2000 2001 2002
2003
2004 Year
2005
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It has been estimated that the market for absorbable and erodible biomaterials products was valued at $60.9 million in 1999. This had increased to an estimated $73.0 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $133.5 million (CAGR 9.0 percent). The absorbable and erodible orthopaedic biomaterials market is the smallest but the fastest growing segment with the synthetic bone graft substitute sub-segment growing at an estimated 20-25 percent per anum. The absorbable and erodible wound closure biomaterials which includes the largest and most mature single sub-segment i.e. absorbable surgical sutures is exhibiting the slowest growth patterns with the absrobable surgical suture subsegment having the slowest growth rate. It is anticipated however that both the major segments will continue to grow throughout the forecast period and it is expected that the segments will continue to fragment into further smaller niche sub-segments where manufacturers have developed specific products for specific clinical conditions.
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Market Trends/Analyses
T r e n d s b y P r o d u c t Ty p e Figure 6-4 and Chart 6.3 provides a summary review of the analysis of the percent of revenue forecasts by product type for the UK absorbable and erodible biomaterials market over the forecast period. Figure 6-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (United Kingdom), 1999-2009
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Chart 6.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (United Kingdom), 1999-2009
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Absorbable and Erodible Wound Closure Biomaterials Adsorbable and Erodible Orthopaedic Biomaterials
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In 1999 the absorbable and erodible wound closure biomaterials market segment represented 82.4 percent of the total UK absorbable and erodible biomaterials market. By the year 2002 the absorbable and erodible wound closure biomaterials market segment had declined and represented 77.5 percent of the total market i.e. Frost & Sullivan have determined that in 4 years this segment had lost 4.9 percentage points to the absorbable and erodible orthopaedic biomaterials market. From the market intelligence gathered Frost & Sulivan predict that by the year 2009 the absorbable and erodible wound closure biomaterials market segment will have declined further and will represent 59.7 percent of the overall market. This represents a 22.7 percent increase in the percent of revenues for the absorbable and erodible orthopaedic biomaterials market between 1999 and 2009 and reflects the anticipated compounded annual growth rates expected for this segment.
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The UK market is dominated by the NHS and consequently the suppliers adopt strategies to comply with the purchasing process within the NHS. For the absorbable and erodible wound closure biomaterials market this involves negotiating and/or submitting prices in response to national contracts issued by the NHS Purchasing and Supply Agency (NHS PASA). In addition individual hospital Trusts have the flexibility to negotiate separate contracts with suppliers if they feel that they are able to obtain better terms and conditions as determined in the national contract. The NHS Purchasing and Supply Agency however recommend that the hospital Trusts use the national contract. The author recommends that suppliers to the NHS examine the document "Selling to the NHS" which is available on the website www.pasa.doh.gov.uk/supplies/selling. This website provides detailed information about the purchasing process and offers advice about the best methods of approaching the market. This website also describes the process for inclusion into the national contracts catalogue. i.e. "The NHS, in common with other public sector organisations and government departments, must meet the requirements of EU public procurement directives, which ensure open and fair competition. Under these directives, the NHS Purchasing and Supply Agency must advertise all contracts over a certain value in the Supplement to the Official Journal of the European Communities (OJEC). These adverts enable you (the supplier) to express an interest in the majority of our national contracts. The OJEC is issued daily. To subscribe, contact the Stationery Office on 0870 6005 522 or visit the online version at http://ted.eur-op.eu.int." The private sector normally negotiates and arranges 1 or 2 year contracts with the supplier through the purchasing departments. The approach adopted by the marketing department when submitting prices in response to national or hospital Trusts have been to determine through various means and methods to prices which are likely to be submitted by their competitors, the anticipated value of the contract and the length of the contract. In response to this information the companies will submit a competitive price whilst ensuring that their financial and marketing objectives are met.
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Figure 6-5 illustrates the competitive structure of the UK absorbable and erodible biomaterials market. Figure 6-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (United Kingdom), 2002
Number of Companies in Market 37 Types of Competitors The leading suppliers operate through direct subsidiaries and act as distributors for small and medium-sized companies who have proprietary technologies Direct subsidiaries and distributors for smaller overseas manufacturers 1st Tier includes: Ethicon (J&J), Tyco Healthcare and Baxter International Inc 2nd Tier includes: B. Braun, Biomet Merck and Smith & Nephew (Acufex) 3rd Tier includes: CryoLife, Omrix Biopharmaceuticals, Genzyme Corporation, Haemacure Corporation, Tissuemed, Shire Pharmaceuticals, Alcon Laboratories, Goretex and WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH (distributed by Rocket Medical and Nikomed Ltd), Ethicon (J&J) (Mitek), Sofamor Danek (Medtronic), Wright Medical Technology, Arthrex, Bionx Implants Ltd, SulzerMedica (Centerpulse), Interpore Cross International, NeuColl, Stryker, Mathys Synthes-Stratec, Linvatec (Conmed), Corifix, Orthovita, Zimmer, Atlantech, Inion Ltd, OsteoTech, Depuy (J&J), OsteoTech, Medistox Surgical Limited, Forth Medical Limited, and Geistlich Notable Acquisitions, Mergers Key End-user Groups Smith & Nephew has recently acquired Instrument Makar and Orthopaedic Biosystems Ltd, Inc All senior orthopaedic surgeons, sports medicine specialists, spinal surgeons and centres of excellence, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities, hospital purchasing groups, private hospitals and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Joint venture and/or distributor agreements for small and medium-sized manufacturers having proprietary technologies with major suppliers of orthopaedic products Proven Efficacy: It is almost mandatory to provide clinical evidence proving the efficacy of the product
Distribution Structure Tiers of Competition
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The market is a homogeneous mix of some of the worlds largest healthcare corporations to the smallest individual companies. The sales and marketing structure of the industry is highly complex with a number of the larger companies operating directly through subsidiaries whilst others operate through various distribution channels. Some of the product developers/ manufacturers e.g. Cohesion Technologies use the larger corporations i.e. Tyco Healthcare to distribute their products. They anticipate that they will benefit from the sophisticated and comprehensive sales and marketing coverage to gain sales and market share for their products. Like the French market the British market has also experienced a unprecedented level of merger and acquisition activity with all the major companies gaining market share through the acquisition of products from the acquired companies. The merger and acquisition activity has however resulted in a considerable amount of upheaval and disruption to the organisation and functioning of the companies as the acquiring company assimilates the assets it has purchased. One of the leading suppliers who have been involved in the acquisition process is Smith and Nephew. Smith and Nephew have recently acquired Instrument Makar and Orthopaedic Biosystems Ltd, Inc. The acquisitions of these companies have strengthened Smith and Nephews Endoscopy Division in the niche markets of interference screws and shoulder suture anchors. Smith and Nephew is also the largest by far of the indigenous suppliers in the UK. Smith and Nephew is divided into global business units of orthopaedics, endoscopy and wound management. Each business unit is responsible for researching, developing, manufacturing, marketing, selling and distributing their products globally. They have direct sales responsibility for ten key country markets including the UK and work through centrally managed Smith & Nephew companies in more than 20 other countries. Smith and Nephew is quoted on the London Stock Exchange and is included within the FTSE 100.

Figure 6-6 and Chart 6.4 illustrates and lists the market share of the major market participants and the percent change from year to year for the UK absorbable and erodible biomaterials market. The overall market leader for absorbable and erodible biomaterials in the UK is Ethicon (J&J) with an estimated 47.0 percent of the market. Ethicon (J&J) have come under increasing pressure both from existing competitors and from new companies making a market entry with new and innovative products. The market share of Ethicon (J&J) In 1997 had been estimated to be over 65 percent. As a result of introducing new products and pursuing aggressive marketing strategies companies such as Tyco Healthcare, Baxter International Inc, B. Braun and Smith and Nephew have eroded the high market share enjoyed by Ethicon (J&J) since 1997.
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Figure 6-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (United Kingdom), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare Baxter International Inc B.Braun Biomet Merck Smith & Nephew (Acufex) Others Total Market Share % 47.0 14.2 9.3 5.5 3.3 2.6 18.1 100 2002/03 Trend No Change Up Up No Change No Change Up -----
Note: Others include: CryoLife, Omrix Biopharmaceuticals, Genzyme Corporation, Haemacure Corporation, Tissuemed, Shire Pharmaceuticals, Alcon Laboratories, Goretex and WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH (distributed by Rocket Medical and Nikomed Ltd), Ethicon (J&J) (Mitek), Sofamor Danek (Medtronic), Wright Medical Technology, Arthrex, Bionx Implants Ltd, SulzerMedica (Centerpulse), Interpore Cross International, NeuColl, Stryker, Mathys Synthes-Stratec, Linvatec (Conmed), Corifix, Orthovita, Zimmer, Atlantech, Inion Ltd, OsteoTech, Depuy (J&J), OsteoTech, Medistox Surgical Limited, Forth Medical Limited, and Geistlich
Chart 6.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (United Kingdom), 2003
Biomet Merck Baxter International 3.3% B.Braun Inc Smith & Nephew 5.5% 9.3% (Acufex) 2.6% Tyco Healthcare 14.2% Others 18.1%
Ethicon (J&J) 47.0%
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Tyco Healthcare is the second positioned company with an estimated 14.2 percent of the overall market. They have gained market share both in the stable and relatively mature absorbable surgical suture market as well as gaining and retaining market share in the emerging markets of tissue sealants, adhesives/glues and haemostats. Baxter International Inc is in third position with an estimated 9.3 percent of the overall market. Baxter International Inc has been able to consolidate its high market share and market leadership position in the tissue sealants market whilst exploiting opportunities in the haemostat market. B. Braun is the fourth positioned company with an estimated 5.5 percent of the overall market. Its strength lies in its presence within the absorbable and erodible wound closure biomaterials. It recently entered the absorbable surgical sutures market through its Aesculap division and has a major share of the market for absorbable and erodible adhesives and glues whilst having a significant share of the growing haemostat market. Biomet Merck is in fifth position overall position with an estimated 3.3 percent of the overall market share principally as a result of its synthetic bone graft substitute Biobon. Smith & Nephew through its endoscopy division is in sixth position with an estimated 2.6 percent of the overall market share. Although this share of the market at first sight is low for such a large company Smith and Nephew is active principally in the absorbable and erodible orthopaedics market. This segment is significantly smaller than the absorbable and erodible wound closure products.
Market Drivers
Figure 6-7 shows the drivers for absorbable and erodible wound closure biomaterials in the UK market. Figure 6-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (United Kingdom), 2003-2009
Rank Driver 1 2 3 Coronary Heart Disease (CHD) and NHS Plans to Reduce Deaths Helps Increase Demand for Absorbable Wound Closure Devices 1-2 Years 3-4 Years 5-6 Years High Medium Medium Low Medium Medium Low
Increased Demand for Cosmetic and Plastic Reconstructive Surgery High in the UK Stimulates Biomaterials Market Catgut SuturesCessation of Supply Medium
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C orona ry He art Dise ase (C HD) and NHS P lans to Re duc e D e at h s H e l p s I n cr e as e De m an d f o r A b s o r ba bl e Wo u n d Closure Devices The Department of Health (DoH) announced that as part of the NHS Plan the NHS will see the biggest ever investment in improving coronary heart disease (CHD) in the history of the NHS. An extra 230 million a year will be invested in CHD services by 2003/4, backed up by 120 million from the Treasury Capital Modernisation Fund. As part of this 10 year program to transform the prevention, diagnosis, treatment and care of patients with heart disease the NHS plan to:

Carry out 6,000 extra heart operations by 2003. Ensure that waiting times for routine cardiac surgery are no longer than 15 months by March 2002, with a maximum six month wait by 2005, going down to three months by 2008.
Increase the number of cardiologists by 47 percent by 2003/4. Increase number of cardiothoracic surgeons by 19 percent by 2003/4.
These factors are expected to increase demand for absorbable wound closure products in the immediate futute and throughout the forecast period. Increased Demand for Cosmetic and Plastic R ec onstruc ti ve Surge ry in t he U K St imulate s Biomaterials Market Plastic reconstructive surgery covers a very large field and can be considered under the following clinical areas (This is not an exhaustive list):
Congenital: conditions present from birth including breast and chest wall defects, cleft lip and palate and other facial defomities, craniofacial defects, hand defects, skin defects and urogenital defects.
Trauma and Burns: conditions caused by accidents. Which may either be blunt (e.g. car/ motorcycle crash injuries), or penetrating (stabbings, gunshots), or burns.
Neoplams: Neoplasms: conditions that are "new growths"; and are either: benigni.e. "not cancerous", or malignanti.e. "cancerous".
Other Areas: Pressure sores, reconstruction of large defects, venous ulcers.
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Specifically there have been major advances in the management of patients with major head and neck cancer in the last 20 years as a result of the development of reconstructive techniques by plastic surgeons, allowing immediate reconstruction and providing optimal function and appearance for the patient. One particular area receiving more attention is the increasing incidence of skin cancer is due primarily to excessive sun exposure and an ageing population. Plastic surgeons are involved in making the public aware of the dangers of excessive exposures to sunlight and combine with dermatologists to service pigmented skin lesion clinics. They recognise that over the next five to ten years there will be a large increase in the amount of time they spend treating skin cancer with malignant melanoma being the most rapidly increasing cancer in the U.K. Malignant melanoma frequently requires that many patients require skin grafts and skin flaps. Skin cancer is one of the four cancers cited by the government white paper on "The Health of the Nation" for special attention. Plastic surgeons are part of a combined working party on skin cancer established by the British Association of Dermatologists which reports to the Health of the Nation representatives, on the increasing incidence of malignant melanoma and the ways of educating the population in the hope of reducing the risk. Catgut Sutures - Cessation of Supply As a result of a comprehensive review concerning the use of catgut sutures in March 2001 several several European Member States discouraged or banned their use. At the same time suture manufacturers took a commercial decision to cease supply of catgut sutures to the UK Health Service. At the same time the Medical Devices Agency (MDA) wrote to NHS Trusts advising them of this. The MDA has recently been advised by the Purchasing and Supply Agency (PASA), that no catgut sutures are held by them. These have been replaced by synthetic sutures. This has resulted in a significant increase (approximately 10 percent) in the volume of synthetically derived absorbable sutures being used in the UK. Since prices of synthetically derived absorbable sutures are approximately 10-20 percent higher than catgut sutures this resulted in a one-off increase in sales value in 2001 compared with previous years.
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Market Restraints
Figure 6-8 shows the restraints for absorbable and erodible wound closure biomaterials in the UK market. Figure 6-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (United Kingdom), 2003-2009
Rank Restraint 1 2 Highest Prices for Absorbable Sutures in UK may Elicit Price Review by NHS Purchasing Agency Increased Popularity of Minimally Invasive Surgery Restricts Use of Absorbable and Erodible Wound Closure Biomaterials 1-2 Years 3-4 Years 5-6 Years High High High High Medium Medium
Highest Prices for Absorbable Sutures in UK may Elicit Price Review by NHS Purchasing Agency A recent survey carried out analysing and comparing the pricing of wound closure devices concluded that the UK had the highest selling prices compared with the other major European Member States. Market intelligence gathered during the preparation of this report suggests that the relatively small number of major suppliers of absorbable sutures (i.e. Ethicon and Tyco Healthcare (US Surgical) in the UK reduces the competitive influences that encourage price competition. As a result of this there is the potential that this could elicit a response from the NHS Purchasing Agencies which would significantly reduce product pricing over the forecast period. This could be instigated by increasing the competitiveness of the market (encouraging an increase in the number of competitors) and/or introducing measures to reduce pricing through improving the efficiency of the purchasing process and seek higher discounts through public tenders and reduce or eliminate the ability of individual Trusts from purchasing sutures and other wound closure products directly with the supplier have have the purchasing arrangements organised through a a central purchasing agency. Increased Popularity of Minimally Invasive Surgery R e s t r i c t s Us e o f A bs o rba bl e a n d E ro d i bl e Wo u n d Closure Biomaterials As already described in Chapter 3 minimally invasive surgery uses techniques of surgical access and exposure that significantly reduce trauma to the body compared to traditional incisions. Traditional surgical approaches have utilised incisions designed to provide the maximum exposure of the operative site. Minimally invasive surgical approaches, on the other hand, utilise small incisions through which cameras and instruments are passed to accomplish the operation from within a body cavity. The minimally invasive surgical approach offers several advantages over traditional open surgery least of which is the avoidance of a large incision which requires tissue closure at different levels and which would lead to significant scarring.
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In January 2002 The Health Secretary Alan Milburn stated that "Day surgery holds the key to faster, more convenient treatment for patients. More day surgery means less waiting for patients." He added that "One of our aims is to increase the volume of patients being treated as day cases. We also aim to achieve greater consistency in day-surgery rates nation-wide. Currently there is enormous variation between trusts, within trusts and within surgical specialties. At present there is no good explanation for this. We believe it is possible to bring all hospitals up to the levels of the best performing units. The summit offers us an ideal opportunity to discuss this and develop a way of taking it forward." This endorsement of day surgery cases with the corresponding increase in the use of minimally invasive surgery reduces the necessity of large open incisions and conseqently the need for suture both absorbable and non-absorbable. Market Forecasts Figure 6-9 provides a summary review of the analysis of the revenue forecasts for the UK absorbable and erodible wound closure biomaterials market. Figure 6-9 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (United Kingdom), 1999-2009
Growth Rate (%) --2.9 3.8 5.5 4.3 4.7 5.1 5.5 5.4 5.2 4.9
($ Million) 50.2 51.7 53.6 56.6 59.0 61.8 64.9 68.5 72.2 76.0 79.7
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It has been estimated that the market for absorbable and erodible wound closure biomaterials products was valued at $50.2 million in 1999. This had increased slightly to an estimated $56.6 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $79.7 million (CAGR 5.0 percent). In the year 2002 the value of the absorbable sutures market in the UK has been estimated to be $38.5 million. The relatively high value of this segment in comparison with other European countries has been attributed to the relatively high selling prices in the UK compared with the other European Member States. In addition the relatively high growth rates over the forecast period compared with the other Member States is attributed to the additional funding that the British Government have prioritised for the NHS and the need to reduce waiting lists and the targeting of specific clinical areas i.e. Cancer and Coronary Heart Disease (CHD).

The 1998 NHS Procurement Review described that supplies of certain critical medical supplies such as sutures were from suppliers who held a "near monopoly" position. The principle suppliers being Ethicon and US Surgical (Tyco Healthcare) currently negotiate long term contracts with Trusts and for Regional Contracts. Traditionally they have managed to maintain a policy of offering a variety of different discount structures based on anticipated estimates for the number of sutures to be used over for example 1 year. The suppliers have however managed to retain their planned profit margin expectations through the maintenance of relatively high list prices and by fragmenting the procurement process by negotiating with individual Trusts. The Audit Commission identified from the same NHS Procurement Review that:
81 percent of the Trusts do not have a supplies strategy. 72 percent of Trust Boards do not receive an annual report on supplies. 81 percent of Trusts do not set annual savings targets for supplies.
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Figure 6-10 illustrates the competitive structure of the UK absorbable and erodible wound closure biomaterials market. Figure 6-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (United Kingdom), 2002
Number of Companies in Market 13 Types of Competitors The leading suppliers operate through direct subsidiaries and act as distributors for small and medium-sized companies who have proprietary technologies Direct subsidiaries and distributors for smaller overseas manufacturers 1st Tier includes: Ethicon (J&J) 2nd Tier includes: Tyco Healthcare, Baxter International Inc and B. Braun 3rd Tier includes: CryoLife, Omrix Biopharmaceuticals Genzyme Corporation, Haemacure Corporation, Tissuemed, Shire Pharmaceuticals, Alcon Laboratories, Goretex and WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH (distributed by Rocket Medical and Nikomed Ltd) Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Joint venture and/or distributor agreements for small and medium-sized manufacturers having proprietary technologies with major suppliers of orthopaedic products Proven Efficacy: It is almost mandatory to provide clinical evidence proving the efficacy of the product
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The market comprises of a total of 7 suppliers. All these suppliers, supply the market directly through subsidiaries. The dominant company Ethicon is based in Livingstone, near Edinburgh, Scotland. They supply the market directly but their customer services however is based at the centralised Johnson and Johnson customer services department in Bracknell in Berkshire. Critics have expressed reservations about the efficiency of this service and some feel that Ethicon have lost business as a result of long waiting times for responses to product enquires. The US Surgical Division of Tyco Healthcare has been created principally as a result of the merger of two companies i.e. Sherwood-Davis and Geck and US Surgical. Tyco Healthcare acquired Sherwood-Davis and Geck during March 1998 when a press release issued on the 3rd of March 1998 announced that Tyco Healthcare had they had completed the acquisition of the Sherwood - Davis & Geck division from American Home Products Corporation. United States Surgical Corporation was also acquired by Tyco Healthcare in 1998. Auto Suture was a division of the United States Surgical Corporation, prior to Tyco Healthcare's acquisition in 1998. The only indigenous company in the UK. Although currently PPL Therapeutics does not market a product in this market segment Frost & Sullivan wishes to highlight this company as it is anticipated that they will emerge as a supplier at some time during the forecast period. P P L Th e r a p e u t i c s Based in Edinburgh, Scotland PPL Therapeutics is one of the world's leading companies in the application of transgenic technology for the production of human proteins for therapeutic use. PPL began operations in 1987 in order to commercialise the production of proteins using transgenic technology which had been developed at the Animal Breeding Research Organisation, now the Roslin Institute, in Scotland. By 1991, with the birth of its first transgenic sheep, Tracy, producing human protein at approximately 40g/l, PPL was clearly established as a leader in the transgenic production of human proteins. Having established its headquarters in Scotland PPL Therapeutics extended its facilities through a strategic merger in 1993 with TransPharm Inc, USA, to create the first multinational corporation producing recombinant proteins using transgenic technology.
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In June 1996 PPL Therapeutics became a public company listed on the London Stock Exchange. In the same year the company completed its unique 7.2 million (US$11 million) pilot production facility specifically built to collect and purify recombinant pharmaceuticals from the milk of transgenic animals. Its facilities and geographical base was further extended with the opening of a second transgenic sheep facility in New Zealand. PPL Therapeutics currently employs a workforce of approximately 200. PPL Therapeutics was developing recombinant fibrinogen from the milk of transgenic sheep, initially as part of a fully recombinant fibrin sealant made from the three components. However, in December 2000 PPL Therapeutics improved its fibrinogen programme by obtaining a more simple, single active component, product with a potentially improved clinical profile, based on Bristol-Myers Squibb's patented technology for which PPL Therapeutics has been granted a sole licence. The licensed technology enables fibrinogen to be converted into Fibrin 1 during manufacture (without the use of the minor components) resulting in a product which is more simple to manufacture and easier to use in surgery. Pre-clinical and clinical work undertaken by Bristol-Myers Squibb on a plasma derived version of this product indicates that the product performs in a similar manner to the three component products on the market in terms of haemostasis and sealing, and may offer advantages over existing products in terms of preventing unwanted adhesions between the treated site and body cavity walls, which is a significant problems frequently requiring secondary surgery. PPL Therapeutics intends to first launch a fibrin sealant produced from plasma derived fibrinogen, to take advantage of the development already undertaken by Bristol-Myers Squibb, as this provides the fastest route to market. Thereafter the intention is to supplement this with a recombinant version based on transgenically produced fibrinogen. Currently PPL Therapeutics is seeking marketing partners for its fibrin sealant product. A collaboration with Smith & Nephew was announced in March 1999. As a result of this Smith & Nephew began to develop novel orthopaedic and wound care products using transgenic fibrinogen supplied by PPL Therapeutics. The use of Fibrin 1 is now being investigated in the applications licensed to Smith & Nephew.
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Figure 6-11 and Chart 6.5 lists and illustrates the market share of the major market participants and the percent change from year to year for absorbable and erodible wound closure biomaterials in the UK. Figure 6-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (United Kingdom), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare Baxter International Inc B. Braun Others Total Market Share (%) 60.6 18.3 12.0 7.1 2.0 100 2002/03 Trend Down Up No Change No Change -----
Note: Others include: CryoLife, Genzyme Corporation, Omrix Biopharmaceuticals, Haemacure Corporation, Tissuemed, Shire Pharmaceuticals, Alcon Laboratories, Goretex and WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH (distributed by Rocket Medical and Nikomed Ltd)
Chart 6.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (United Kingdom), 2003
Baxter International Inc 12.0% B. Braun 7.1% Others 2.0%
Ethicon (J&J) 60.6%
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There are a total of 7 active companies present in this segment. Despite the best efforts from other competitors the overall market leader is Ethicon with an estimated market share of 60.6 percent of the market. The second largest market shareholder is Tyco Healthcare with an estimated 18.3 percent of the market. The third largest market shareholder is Baxter International Inc with an estimated 12.0 percent of the market. B. Braun is the fourth largest market shareholder with an estimated 7.1 percent. The others i.e. Shire Pharmaceuticals, Genzyme Corporation and CryoLife account for a total of about 0.5 percent. Absorbable Surgical Sutures There are three recognised suppliers of absorbable surgical sutures in the UK. These are Ethicon, US Surgical (Tyco Healthcare) and B. Braun. Ethicon is by far the largest supplier of absorbable surgical sutures to the UK market. They are however coming under increasing competitive pressure from Tyco Healthcare as they seek to gain competitive advantage by targeting Ethicon accounts. B. Braun through their Aesculap division tend to specialise in selling their absorbable sutures for use in orthopaedic surgery and related clincial areas. They have however established a foothold into the UK market and have gained market share from Ethicon. In addition to the three principle supplers Alcon Laboratories (U.K.) Ltd. who specialise in products for eye surgery market a range of absorbable sutures known as BioSorb..BioSorb is a line of absorbable sutures used by paediatric, plastic and glaucoma surgeons to close the wound. It was designed specifically for these ophthalmic specialties and is available with a variety of needle and suture sizes. Since BioSorb is targeted for a specialised niche market sector it does not represent a significant share of the market but nevertheless they are available on the British market. In addition to the presence of Alcon Laboratories (U.K.) the German company WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH also have their absorbable surgical sutures distributed in the UK by Rocket Medical and Nikomed Ltd. They only have a very small share of the absorbable suture market in the UK. Similarly the German company Absorba also sell absorbable sutures in the UK but have only a very limited presence. Ti s s u e S e a l a n t s Baxter International is the dominate and market leader of tissue sealants in the UK with their product Tisseel or more frequently refered to as Tissucol. The only other significant supplier of tissue sealants in the UK is Omrix Biopharmaceuticals with their product known as Quixil,. This particular product has an estimated 10.0 percent of the tissue sealant market in the UK whilst Baxter International has an estimated 83.0 percent of the market. The target markets for Tisseel and Tissucol includes liver resections, plastic and cosmetic surgery and cardiovascular surgery.
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Advaseal is the tradename for a product known as FocalSeal-S. is marketed in the UK by Ethicon on behalf of the BioSurgical Division of the Genzyme Corporation. Currently is has failed to capture a major market share from Baxter International. Currently Beriplast marketed Aventis Pharma is not available in the UK and to date the company is waiting approval for the launch into the UK. TachoComb from Nycomed or more recently from Amersham international has not yet become available in the UK. The only indigenous company PPL Therapeutics currently have not launched a product in the UK. Haemostats The product known as Surgicell and marketed by Ethicon is the dominant product in the British haemostat market. There are essentially three diffferent forms of the Surgicell. These are:

Surgicell Fibrillar Surgicell Nu-Knit High Density Surgicell
There are different sizes for each product area. The product known as Gelate and marketed by B Braun has recently been removed from the UK market and deleted from the product portfolio. Two other products namely the FloSeal matrix hemostatic sealant (marketed by Baxter International Inc) and CoStasis Surgical Haemostat (marketed by the US Surgical (Tyco Healthcare)) have recently entered the market and are gaining market share from Ethicon. Surgical Adhesives and Glues The market leader in this market sub-segment is Histoacryl from B. Braun. Despite is leadership position it has come under increasing competitive pressure from US Surgical (Tyco Healthcare) who have been marketing their product Indermil aggressively in the UK. CoSeal (manufacturered by Cohesion Technologies Inc,. and distributed by the US Surgical Division of Tyco Healthcare Group) was also launched in the UK in late 2001 and so far has only made limited gain into the market share that B. Braun enjoys. In addition further competitive pressures are present as a result of the market introduction of Dermabond marketed by Ethicon. This and Indermil from Tyco Healthcare have taken a significant share of the traditionally high market share that B. Braun has enjoyed for nearly 20 years.
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In addition the product BioGlue Surgical Adhesive from CryoLife Europa Ltd based in Hampshire recently entered the UK market. Although included within this market subsegment a spokesperson from the company highlighted that BioGlue was a unique product in that it was used internally as it had approval for use in a variety of soft tissue repair during surgery including cardiac, genitourinary, dural, alimentary tract (which includes esophageal, gastrointestinal, and colorectal tissues) and other abdominal soft tissues and could not be compared with surgical glues but would be classified as a surgical adhesive. Adhesion Barriers There are two products which are currently being marketed in the UK. These are Adept from Shire Pharmaceuticals and the three forms of Seprafilm sold directly into the UK market through Genzyme Biosurgery.
Forecasts
of
the
Absorbable
and
Erodible
Orthopaedic
Biomaterials
Market

Figure 6-12 and Figure 6-13 show the drivers and restraints for the absorbable and erodible orthopaedic biomaterials market in the UK.
Market Drivers
Figure 6-12 shows the drivers for the absorbable and erodible orthopaedic biomaterials market in the UK. Figure 6-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (United Kingdom), 2003-2009
Rank Driver 1 2 3 Growth in Sports Injuries Stimulates Market for Absorbable and Erodible Orthopaedic Biomaterials Technological Advances and Market Introduction of New and Innovative Stimulates Market Development Advantages of Synthetic Bone Substitutes Helps Stimulate Market Development 1-2 Years 3-4 Years 5-6 Years High High High High Medium Medium Medium Medium Medium
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Growth in Sp ort s Injuri es St imulat es Market for Absorbable and Erodible Orthopaedic Biomaterials General Increased Incidence of Sports Injuries Sports injuries are extremely common and the incidence of sports injuries is increasing as a large portion of the population takes up some form of active participation. In studies on sports injuries the risk of injury is normally expressed as the number of injuries per 10,000 hours of participation. In the UK this is 422 injuries per 10,000 hours for soccer and 636 injuries per 10,000 hours for rugby. Another study carried out in the UK found that 45 percent of individuals aged between 16-45 years who had participated in physical activity over the previous month (a total of 8897 participants) had sustained a total of 2120 sports injuries. Increased Participation amongst the Aging Population While exercise continues to be a big part of their lives as they progress through middle age, baby boomers have been experiencing a dramatic increase in the number of sports-related injuries in the last decade due to the effects of aging, overuse of soft tissue and poor conditioning. Physiological changes in the body due to aging include muscle loss, less elasticity in the tendons and muscles, joint stiffening, limited range of motion and increased reaction time. Aging muscles also lose their endurance, are more susceptible to injuries and take longer to heal from injuries. While exercise is the best remedy to reduce muscle loss, the natural aging process will cause your middle-aged members to lose some strength and endurance. Baby boomers often participate in sports activities and expect to perform at the level at which they performed in their 20s. This usually leads to injury from overuse. Also, boomers are often unaware of weak spotsold injuries, genetic predisposition or the effects of the aging process on overused soft tissueon their bodies that make them prone to injury. Cumulative trauma in a weak spot may cause a prolonged recovery period. Yet many baby boomers are too impatient to wait for injuries to fully heal, and they resume activity, causing further damage. While the aging process and stress from overuse may hinder active baby boomers, other boomers have a particularly high risk of injury due to poor conditioning. Some middle-aged adults are "weekend warriors," participating in sports activity only on the weekends instead of throughout the week. These boomers are especially prone to injury because poor conditioning, in addition to the natural stiffening of soft tissue from aging, significantly increases the risk of injury.
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Growth in Winter Holidays and Winter Sports Injuries Since the late 1980s, the popularity of snowboarding has increased dramatically. One of the fastest growing sports, snowboarding was added to the 1998 Winter Olympics in Nagano, Japan. By the year 2000, snowboarders may constitute an estimated 20 percent to 30 percent of all slope users, and some alpine resorts are already reporting 50 percent snowboard use. The typical snowboarder is a man in his early 20s. Consequently, snowboarding injuries are reported more frequently in males by a ratio of 3:1 and as high as 7:1. The average age at injury in males is 21 years (range, 17.6 to 26.4 years). Injured female snowboarders tend to be 1 to 4 years older than their male counterparts. As the age range of snowboarders broadens to include children as young as 4 years and adults in their late 60s, such injuries as growth-plate injuries in young snowboarders and scapholunate dissociation in older adults are becoming a greater concern. Falls are the most common cause of snowboarding injuries, followed by collisions with stationary objects and other snowboarders or skiers. The overall injury rate is estimated to be 4 per 1,000 snowboarding days, similar to that in alpine skiing. However, snowboarding injuries tend to be less severe and involve double the rate of fractures seen in skiers. Te c h n o l o g i c a l A dvan c e s a n d M ar k e t I n t ro du c t i o n o f Ne w and Innovat ive Stimula tes Mark et Developmen t Most implants currently used in trauma surgery are manufactured from stainless steel alloys or Titanium alloys. Significant problems such as stress shielding, allergic reactions, and corrosion are associated with the use of metallic fracture fixation devices. These hazards and the accompanying patient discomfort in most cases have led to the necessity of an additional operation to remove the metal implant after fracture healing. The use of biodegradable fracture fixation devices obviates the need for a removal operation, saving the patient from considerable psychological, physical and economical discomfort. During the controlled degradation the implant will gradually lose its strength, and the load on the fractured bone will shift from the implant to the bone therefore stress shielding and osteopnia will diminish encouraging a more rapid remodeling of the regenerating bone. Research is conducted at a number of key academic sites in the UK into a number of novel biocomposite materials consisting of a copolymer of polyglycolide and polylactide mixed with a bioceramic. The components are various polymers such as polymer, 85/15 polyglycolide-co-lactide which is used as the matrix, embedded with particles of Bioglass 45S5. These technological developments and the market introduction of absorbable biomaterials has helped surgeons perform procedures routinely which would have been impossible 20 years ago.
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Advantages of Synthe tic Bone Substit utes He lps Stimulate Market Developmen t There are a number of distinct advantages attributed to synthetic bone substitutes. The principal advantages are:

Completely syntheticno animal or human derived components. No chance of disease transmission. Completely absorbed in a relatively short time (<6 months). Biocompatibleno immunogenic response. No need to carry out a separate operative procedure to harvest autologous bone graft, which can cause a serious amount of discomfort, increased morbidity and which is recognised as being inadvisable for elderly or at-risk patients.
These factors contribute to reducing costs by:

Reduce operating time Increase the use of minimal invasive surgery Reduce the length of stay for patients in hospital Reduce post-operative rehabilitation time
Market Restraints
Figure 6-13 shows the restraints for the absorbable and erodible orthopaedic biomaterials market in the UK. Figure 6-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (United Kingdom), 2003-2009
Rank 1 Restraint Cautious Nature of British Orthopaedics Surgeons Restrain Acceptance of Absorbable and Erodible Absorbables in Orthopaedics 1-2 Years High 3-4 Years High 5-6 Years High
2 3
Financial Restraints Favour Continued use of Autologous Bone Medium Grafting End-user Requirements Command Need for Long-term Evidence Medium
Medium Medium
Medium Medium
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Cautious Nature of British Orthopaedics Surgeons Restrain Acceptance of Absorbable and Erodible Absorbables in Orthopaedics Respondents to the market survey highlighted the naturally cautious nature of British othopaedic surgeons and there reluctance to accept new technologies without having the ability to examine long-term follow-up clinical reviews/studies and discuss the acceptability of new techniques with their peers. The strategy employed by the leading suppliers has been to educate and provide product information whilst maintaining a presence in operating theatres to ensure that the surgical procedures are adhered too correctly and resolve any problems before they occur. Fi nanc ia l R est ra ints Favour C onti nue d use o f Autologous Bone Grafting The "free" autologous bone graft from the patient's own donor site is still regarded as the gold standard. Autologous bone provide the graft with living, bone-producing cells for osteogenesis. The autograft allows for osteoconduction, the process in which bone becomes a scaffold for new bone. Grafting also results in osteoinduction when mesenchymal cells around the graft are signaled to differentiate into osteoblasts, the cells responsible for new bone. Despite the current government's best efforts to increase funding to the NHS the individual hospital trusts have financial restraints which discourage the use oif synthetic bone graft substitutes in favour of the continued use of autologous grafting. The use of autologous grafting is anticipated to remain the prefered option for many procedures including spinal fusions and treatment of non-unions over the forecast period. End-user Requirements Command Need for Long-term Evidence Orthopaedic and trauma surgeons in the UK are increasingly seeking proof or evidence of the long-term success rates for new products. Nevertheless, the very nature of innovative products means that companies can often only produce two or three years worth of follow-up studies to back the claims of their products. Also, the present litigious environment may deter surgeons from adopting experimental or new procedures without several years of clinical experience. Holding workshops with surgeons to demonstrate the correct usage of innovative technologies should help build up their confidence in using new products.
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Market Forecasts
Figure 6-14 provides a summary review of the analysis of the revenue forecasts for the absorbable and erodible orthopaedic biomaterials market in the UK. Figure 6-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts
(United Kingdom), 1999-2009

Growth Rate (%) --14.0 15.1 16.4 17.5 18.7 19.2 19.4 19.0 18.2 17.6
($ Million) 10.7 12.2 14.1 16.4 19.3 22.9 27.3 32.6 38.7 45.8 53.8
It has been estimated that the market for the absorbable and erodible orthopaedic biomaterial products in the UK was valued at $10.7 million in 1999. This had increased to an estimated $16.4 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $53.8 million (CAGR 18.5 percent).
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The market is experiencing the rapid growth phase of its life cycle. It is anticipated that with the conversion of conservative surgeons to absorbable materials, the market entry of a number of new and innovative products, the increasing popularity of absorbable synthetic bone graft substitutes and the continuing advances and developments in minimally invasive techniques the market will continue to grow throughout the forecast period.

Absorbable Fixation Devices Suppliers have focused on developing the market by highlighting the features and benefits of absorbable fixation devices and focusing on educational promotional tactics in the conversion from metallic fixation devices. As a result of these tactics supplers have been premium pricing their products. The products are fully reimbursed through the NHS and typically the individual customer service departments would sell at list price to individual Trusts. If discount is demanded the Product Manager would normally have a price/volume discount structure allowing some flexibility for the purchasing agencies. Synthetic Bone Graft Substitutes Conscious of the current preference by surgeons to use autologous bone grafting suppliers of bone substitutes have priced their products competitively. This trend is expected to continue throughout the forecast period whilst bone graft substitutes is established as the material of choice.
Figure 6-15 illustrates the competitive structure for the absorbable and erodible orthopaedic biomaterials market in the UK. The competitor structure for absorbable and erodible orthopaedic biomaterials market in the UK is highly complex with a range of companies who supply the market directly through subsidiaries and otherseas suppliers through distribution agreements.
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(United Kingdom), 2002

Number of Companies in Market 24 Types of Competitors The market comprises a number of orthopaedic companies whose core business is joint replacement, fracture management or spinal implants. They have added the range of absorbable and erodible orthopaedic biomaterials to compliment existing products ranges and to establish a presence in emerging niche markets The principle suppliers operate through subsidiaries whilst other small and medium-sized companies from overseas have forged alliances, joint venture or distributor agreements with the major suppliers of orthopaedic products 1st Tier includes: Biomet Merck, Smith & Nephew (Acufex), Ethicon (J&J) (Mitek) and Sofamor Danek (Medtronic) 2nd Tier includes: Wright Medical Technology, Arthrex, Bionx Implants Inc, SulzerMedica (Centerpulse), Interpore Cross International, NeuColl, Stryker, Mathys Synthes-Stratec, Linvatec (Conmed) and Corifix 3rd Tier includes: Orthovita, Zimmer, Atlantech, Inion Ltd, OsteoTech, Depuy (J&J), OsteoTech, Medistox Surgical Limited,, Forth Medical Limited, and Geistlich Notable Acquisitions, Mergers Key End-user Groups Smith & Nephew has recently acquired Instrument Makar and Orthopaedic Biosystems Ltd, Inc All senior orthopaedic surgeons, sports medicine specialists, spinal surgeons and centres of excellence, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities, hospital purchasing groups, private hospitals and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Joint venture and/or distributor agreements for small and medium-sized manufacturers having proprietary technologies with major suppliers of orthopaedic products Proven Efficacy: It is almost mandatory to provide clinical evidence proving the efficacy of the product
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Medistox Surgical Limited This company has developed the Innovasive ClearfixTM Screw. This is an arthroscopically delivered resorbable PLA implant designed to fixate torn meniscal tissue in apposition during healing. The device is intended for arthroscopic meniscal repair of longitudinal circumferential (bucket handle) tears in vascularised, red-red and red-white meniscus tissue. The screws are easily and accurately delivered using a needle-tipped nitinol driver through appropriately selected cannulae. As the screw is rotated, its variable pitch threads draw the tear together and maintain 0.3mm linear compression. Tactile feedback is maintained throughout the insertion, keeping control in the surgeons' hands. If the screw position or purchase is considered sub-optimal, it can be reversed and re-inserted in a new location. When screw placement is satisfactory, the driver is removed and the screw is left to bridge the tear. Screws retain 100 percent strength during the healing process, then are gradually absorbed during the subsequent 12 to 18 month period In addtion the structure of the market is highly complex with a range of major suppliers supporting the market through direct subsidiaries e.g. Ethicon (Mitek) and Smith and Nephew Endoscopy Division. Each of these companies havea specialised sales force supported by a marketing department and focusing on their respective absorbable and erodible biomaterial products.

Figure 6-16 and Chart 6.6 lists and illustrates the market share of the major market participants and the percent change from year to year for the absorbable and erodible orthopaedic biomaterials market in the UK. The overall market leader is Biomet Merck with an estimated 14.5 percent of the absorbable and erodible orthopaedic biomaterials market in the UK. Biomet Merck attributes its market leadship position as a result the bone graft substitute Biobon(R). Merck Biomaterials developed a material known as BSM. This a material which is a synthetic nano-crystalline calcium phosphate that mimics the composition and structure of the mineral content of natural bone. The product known as Biobon(R) is the first commercialised product developed from Etex's proprietary technologies.
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Figure 6-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (United Kingdom), 2002-2003
2002 Company Biomet Merck Smith & Nephew (Acufex) Ethicon (J&J) (Mitek) Sofamor Danek (Medtronic) Wright Medical Technology Arthrex Bionx Implants Inc SulzerMedica (Centerpulse) Interpore Cross International NeuColl (Collagraft) Stryker Mathys Synthes-Stratec Linvatec (Conmed) Corifix Others Total Market Share (%) 14.5 11.5 10.5 10.0 8.0 6.0 5.2 5.0 5.0 4.5 4.5 3.5 3.0 3.0 5.8 100 2002/03 Trend No Change Up (slightly) No Change No Change No Change No Change Down Up No Change No Change Up No Change No Change No Change -----
Others include: Orthovita, Zimmer, Atlantech, Inion Ltd, OsteoTech, Depuy (J&J), OsteoTech, Medistox Surgical Limited, Forth Medical Limited, and Geistlich
Biomet through its joint-venture with Merck has also developed a resorbable calcium-deficient hydroxyapatite bone substitute material, currently referred to as Biocement D(TM). This material exhibits a slower resorption profile and offers higher strength incomparison to the faster-resorbing Biobon(R) compound. In addition, the Company is developing a series of calcium-based bone substitute materials, more specifically calcium sulfate and calcium sodium phosphate. These materials offer different physical and resorption properties to accommodate a variety of indications. The Company is conducting pre-clinical studies in Europe and the United States to evaluate these materials in both paste and granular forms.
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Chart 6.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (United Kingdom), 2003
SulzerMedica (Centerpulse) 5.0% Bionx Implants Inc 5.2% Arthrex 6.0% Wright Medical Technology 8.0% Sofamor Danek (Medtronic) 10.0% Ethicon (J&J) (Mitek) 10.5% Smith & Nephew (Acufex) 11.5%
Interpore Cross NeuColl (Collagraft) International 4.5% 5.0% Mathys SynthesStryker Stratec 4.5% 3.5% Linvatec (Conmed) 3.0% Corifix 3.0% Others 5.8%
Biomet Merck 14.5%
Smith and Nephew is in second position with an estimated 11.5 percent of the market place. Smith and Nephew is the overall market leader for absorbable and erodible orthopaedic biomaterials used in endoscopy. Smith and Nephew has gained market share both organically and as a direct result of acquiring market share through the acquisitions of Instrument Makar and Orthopaedic Biosystems Ltd, Inc. The acquisitions of these companies have strengthened Smith and Nephews Endoscopy Division in the niche markets of interference screws and shoulder suture anchors. Ethicon (J&J) (Mitek) is the third largest market shareholder with an estimated 10.5 percent of the market. Ethicon has its principal strengths in meniscal repair biomaterials, interference screws and suture anchors. Sofamor Danek (Medtronic) is in fourth postion with an estimated 10.0 percent of the market attributed to sales of its synthetic bone graft substitute materials and its research and development program with Intra Life Sciences. Wright Medical Technology is in fifth position with an estimated 8.0 percent of the overall absorbable and erodible orthopaedic materials as a result of its presence in the synthetic bone graft substitute material and its Osteoset resorbable bead kit and Osteoset resorbable minibead kit.
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Bionx Implants Inc through their distributors Altantech based in Harrogate are in sixth position with an estimated 5.2 percent of the market. Bionx Implants Inc have gained market share organically as a result of the market entry of new and innovative products including:
Duet Suture Anchor", a bioresorbable suture anchor system used for soft tissue reattachment to bone
Contour Meniscus Arrow, a bioresorbable meniscus repair system used to repair a torn meniscus.
BioCuff C", a bioresorbable cannulated screw and spiked washer implant used to secure torn rotator cuff tissue back to bone
Contour Labral Nail is a cannulated bioresorbable device used to reattach soft tissue to bone resulting from traumatic shoulder injuries
4.5mm Cannulated SmartScrew is a bioresorbable implant indicated for the maintenance of alignment of cancellous bone fractures of the malleolus of the ankle
Atlantech also distribute the Bilok PLLA/Calcium Phosphate composite screw range, manufactured by Biocomposites Ltd in the UK. Based in Stoke on Trent Biocomposites Ltd develops, manufactures and markets synthetic calcium composite devices for tissue regeneration. Biocomposites received CE mark clearance for the Bilok ST screwdescribed as a unique absorbable device designed for transverse fixation of hamstring grafts in the femur during ACL reconstruction in early 2002. Biocomposites and international distributors, Alantech Medical Devices LTD developed the Bilok ST screw in conjunction with Dr Agostino Tucciarone, ICOT, Latina, Italy and it was officially launched at ESSKA in Rome in April 2002. A further development has been the announcement by Biocomposites Ltd that in February 2002 they appointed Stryker Endoscopy as exclusive distributors of the Biocomposites' Biosteon composite Interference screw. Biosteon is manufactured from a composite of synthetic calcium hydroxyapatite and PLLA and has been described by Biocomposites Ltd as being designed to confer patient benefits not offered by PLLA devices.
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7

Founded in 1979, the National Health Service (Servizio Sanitario Nazionale SSN) has been responsible for the provision of health care in Italy for the majority of the population. The aim of the Servizio Sanitario Nazionale is to provide a freely accessible service to everyone regardless of means. The planning and organisation of the SSN is the responsibility of the Consiglio Superiore di Sanit. This is a consultative department, which works closely with senior officials of the Ministry of Health to advise on future development programs and a national plan (Piano Sanitario Nazionale PSN) for the provision of healthcare in Italy and to help develop the political agenda with central government. Public hospital services in Italy are divided into two types. These are:

Public hospitals (pubblici). Private hospitals (privati convenzionati).
The privati convenzionati are hospitals, which are open to the public. Patients can then pay for the treatment they have received by the following methods:

Directly as cash payments or through private insurance schemes. Patients pay the hospital the cost of the treatment using a standard price determined by the social security, which in turn is then reimbursed through the social security system.
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Reimbursements to public (pubblici) and private hospitals (privati convenzionati) hospitals for services provided is essentially in two forms. Reimbursement for hospital inpatients is carried out by the recently introduced DRG system (Diagnostic Related Groups). Reimbursement for outpatient services is carried out through a reimbursement system based on the International Classification of Disease 9-Classifcation Modified (ICD9-CM). The Italian National Health Service is organised into a three-tier system as described below:
National Level The Ministry of Health (Ministero della Sanit) is responsible for the legislative framework and administration of health care in Italy. The Ministry is organised into a number of separate departments whose main activities are to co-ordinate the provision of healthcare and to participate in the Council of Ministers. Regional Level Italy is divided into 21 regions (including 2 independent autonomous regions: Trento & Bolzano) which serve populations ranging from 100,000 to 9 million. They are organised under the administration of the Regional Departments of Health (Assessorati). According to the Ministry of Health there has been a significant reduction in the number of both public and private hospitals since the beginning of 1995 as a result of the rationalisation process of the healthcare system. The number has declined from over 1150 hospitals in 1995 to 990 in 1999. The number of available beds has however remained remarkably stable during the same period. Local Level The structure and organisation of the SSN at the local level has changed radically over the last 2 years. In 1994 the regions were sub-divided into 227 local health areas (a province or part of a metropolitan area) under health authorities called Unita Sanitaria Locales (USLs) which were responsible for the provision of hospital and family practitioner services. Managed as 'healthcare business' they owned and ran the public hospitals. The control and monitoring of public healthcare expenditure in Italy is progressively becoming a highly structured and organised centralised system of reimbursement tariffs. The new system is based on a series of successive ministerial decrees (the most important of which is legislative decree No 502 dated 30th December 1992) putting into law modifications to the healthcare system which are deliberately designed to improve the efficiency and cost-effectiveness of providing healthcare in Italy. Cynics would also highlight the necessity to introduce these changes and reforms to curb the level of corruption that is unfortunately rife in Italy and a way of life to many.
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At the core of the reforms has been the national introduction of the DRG (Diagnostic Related Groups) reimbursement system as a replacement for the per capita payments for hospital inpatients. The DRGs are national all-inclusive predetermined procedural payments with related procedures grouped within the same DRG and replaced a system that provided a healthcare budget to each region allocated on a per capita basis. The DRG reimbursement system schedule covers the following:
Surgical and medical treatments for patients who are classified as in-hospital patients in general, university and specialised public and private hospitals.
Surgical and medical treatments carried out in hospitals designated as Day-Hospitals. Patients who receive treatment in rehabilitation hospitals. Rehabilitation hospitals includes the treatment for the following patient groups:
a) Residential psychiatric. b) Residential recovery for drug addicts and alcoholics. c) Residential geriatrics. d) Socio-rehabilitation. e) Residential stay for rehabilitation following major therapeutic treatments. f) Long-stay residential rehabilitation. According to the legislative decree No 724 and No 725 dated 23rd December 1994 (and reported in the Supplemento ordinario alla "Gazzetta Ufficiale" on the 30th December 1994) the implementation of this system of predetermined average tariff payments must be incorporated within the organisation of the hospital network throughout the entire national health service system (SSN). This system of predetermined tariffs became effective from the 1st January 1995 and all regions must, by law, operate the system. The latest developments have been the introduciton of 2 healthcare reform decrees passed in 1999 and 2000 which due to a strong policy of devolution the Italian health care system is currently undergoing two parallel reforms which will eventually devolve organisational, political and fiscal powers to the regions. Total administrative and organisational responsibility for health care delivery will be transferred to the regions along with significant autonomy on the revenue side of the regional budget, and complete freedom over allocation of funds. In addition, the health care reform introduces a new source of funding, the complementary mutual funds (Fondi Integrativi del SSN), financing services delisted from SSN coverage.Overall, regional funding will substantially rely on regional taxes which will make up for the abolition of national transfers.
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The new basket of taxes, which will accrue directly tothe regions, is set to include a tax (ImpostaRegionale sulle Attivit ProduttiveIRAP) applied on businesses' added value and on the salaries paid to workers of the public sector. This is combined with: The reform will give regions both the freedom to raise their own resources by vary-ing the rate of Addizionale IRPEF, within anationally set interval, and the freedom toallocate funds among the regional functions (viring power). It follows that each region willbe free to determine, within the overall budget, the amount of resources to devote to health care provision, representing, in 1997, 73 percent of the total regional budget. Health care funding will therefore become a regional responsibility and the National Health Fund (Fondo Sanitario NazionaleFSN), the mainsource of financing since the establishment ofthe NHS, will be abolished in 2004. Health care provision will also rely on two additional sources of revenue: discretionary mutual funds and co-payments: The mutual funds (FISsn) will cover user fees, services provided privately within public facilities and the costs of complementary services not included in the benefit package funded by the NHS (Livelli Essenziali di Assistenza-Essential Levels of Care), which will be defined based on the criteria of necessity, appropriateness, effectiveness and efficiency. Mutual funds enjoy fiscal incentives (higher than those already granted to private insurances), and are expected to open up new opportunities for private markets and promote the operation of private practice within public health facilities, outside normal working hours. The second source of revenue comes from user fees, currently under revision. According to the new system, people with rare and chronic disorders will be exempted from co-payments of services required by these disorders and a new measure of aggregate household income (adjusted for home ownership) will beused for means testing. Patients will be completely exempt, partially exempt or non exempt from the payment, depend-ing on the value of the indicator. What problems can be expected with the new fundingsystem? The 'work in progress' nature of theItalian health care system reform calls for caution in assessing the early stages of the process. This is especially so when one considers that Italy is a country where marked interregional differences in terms of demography, income, public health, public-private mix and per capita health care expenditure exist and persist: regional populations range from 330,000 to 9,000,000; infant mortality rate can be as high as 8.5 percent and as low as 3.1 percent; the percentage of private beds varies between 7.2 and 38.3 percent, while regional per capita health care expenditure goes from a maximum of 2.5 million lira to a minimum of 1.6 million lira (ISTAT, 1999). In addition, the proportion of private expenditure is one of the highest in the European Union: in 1997, 30 percent of the total health care bill, with drugs and physician services playing a leading role, was private, as compared to a EU average of 24 percent (OECD Health Data, 1999). Nevertheless, the system does mark a step forward in the revenue raising mechanism of the Italian health care system both in terms of equity and fund availability, but several challenges are foreseeable. First, fiscal and political devolution in a country characterised by marked economic and social interregional diversities, is both the answer to people's expectations and a source of concern about the integrity of the egalitarian nature of the SSN.
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It might, indeed, lead to widely different regional health care systems in terms of both quality and quantity of care provided, and in terms of availability of resources. In theory, the freedom to vire resources within the regional functions can produce a country where each region supplies its residents with levels of health care drastically different from those of neighbouring regions. While the risk of inadequate levels of care has been addressed by defining an essential benefit package (LEA), a fiscal equalisation mechanism (National Solidarity Fund) has been developed to transfer funds to those regions unable to raise sufficient resources to finance all functions. The Fund is modelled along the lines ofthe vertical equalisation principle, and the 12,700 billion Italian lire it carries (10 percent of the overall regional funding) will give the central government a substantial degree of control over the regions. The amount of funds transferred to, or received from, the Solidarity Fund is determined by the difference between two estimates of the VAT revenue quota:the first based on the yearly share of household final consumption expenditure and the second on population size.The latter is adjusted for interregional differentials in: (i) fiscal capability; (ii) costs associated to regional functions other than health care; and (iii) healthcare financing needs. Regional healthcare financing needs are estimated yearly by the Ministry of Health by multiplying the capitation fee, defined by theNational Health Plan, by the regional population, adjusted for age and sex specific indicators of health care consumption and for mortality rates. Current estimates predict that, initially, only seven regions will be able toautonomously raise sufficient resources,and hence contribute to the Fund, while the others will have to rely on transfers from the Fund which will represent, in some cases, over 40 percent of the regional revenues. The outcome of the fiscal reform will be judged by the validity of the fiscal equalisation mechanism as a tool for shifting funds from wealthier regions towards less wealthy ones and its effectiveness in providing strong incentives for revenue raising and against opportunistic behaviour. Second, the management of a multiple-source funding requires efficient information gathering systemswhich in many regions still need to be developedand the ability to swiftly adjust the fiscal rates in response to different economic scenarios, without altering the accept-ability of the overall fiscal structure and without imposing excessive administrative costs on the community. It is therefore necessary to carefully balance the increased revenues against the likely increased administrative and political costs, for which the final bill is yet unknown. Third, the impact, in terms of equity and solidarity, of the combined effect of the three sources of funding (taxation, mutual funds and co-payments) on the revenue raising mechanism needs to be considered: taxation tends to be progressiveand bears more heavily on high income citizens, while both co-payments and mutual funds tend to bear more heavilyon lower-income citizens. If, on the one hand, the regressive nature of co-pay-ments might be reduced by reform, on the other hand, premiums paid for mutual funds do not take into account wealthor incomebut are instead simply basedon future expected levels of useand are, therefore, much more affordable to high earners. The joint effects of the SSN reform and fiscal devolution, moving from a centrally-funded, tax-based system to one relying on regional funding, needs to be carefully monitored. The creation of an efficient and equitable financing system, which preserves the egalitarian nature ofthe SSN and reduces the gap between regions, is the great challenge of the new Italian health care system.
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Chart 7.1 shows the market engineering research measurements for the Italian absorbable and erodible biomaterials market as it appeared in 2002. Chart 7.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (Italy), 2002
Market Research
Market Engineer
Market Strategy
Implementation
Market Planning
Mature and Static in absorbable sutures but significant growth in other subsegments, emerging and niche markets. $112.7 million Single use 68.8% 32 Up --Down Up
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Market Drivers
Figure 7-1 reviews the specific drivers for the absorbable and erodible biomaterials market in Italy respectively. Figure 7-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Italy), 2003-2009
Rank Restraint 1 Growth in Sports Participation Resulting in Higher Number of Sports Related Injuries Helps Stimulates the Absorbable Biomaterials Market 1-2 Years 3-4 Years 5-6 Years High High Medium
2 3
Increased Demand for Surgical Intervention for Low Back Problems High Stimulates Development of Synthetic Bone Graft Substitute Market Integration of Private Beds into Public Hospitals Help Re-stimulate Orthopaedic Market Medium
High Medium
Medium Medium
G r ow t h i n S p o r t s Pa r t i c i pa t i o n R e s u l t i n g i n H i g h e r Number of Sports Related Injuries Helps Stimulates the Absorbable Biomaterials Market There has been a considerable increase in sports participation amongst all age groups in Italy. This has resulted in a considerable increase in the number of individuals who have been and will continue to suffer for sports related injuries. Although sports related injuries are common, treatment and rehabilitation of these injuries have been difficult because of limited knowledge of the physiology, biomechanics and how soft tissues such as how ligaments and tendons interact. As a result of considerable research into sports injuries a more complete picture of way ligaments and tendon functions has been realised. This is allowing physicians to provide better treatment for patients with sports injuries and to predict activities that might lead to injury in the future. I ncreased Demand for Surgical Int ervent ion f or Low Back Problems Stimulates Development of Synthetic Bone Graft Substitute Marke t There is a reported increase in the incidence of low back pain and demand for the surgical intervention where persistent low back pain is a problem. The recognition that a market opportunity existed for specially designed devices in this market niche has resulted in a plethora of new products.
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The presence of these new products in itself has helped stimulate this segment as surgeons now have devices, which fulfill their previously unmet needs. To facilitate the increased demand for surgical interventions of the low back surgeons are recognising the benefits of synthetic bone graft substitutes resulting in the recognised growth and development of this market sub-segment. Integration of Private Beds into Public Hospitals Help Re-stimulate Orthopaedic Market The Italian government has recently passed a decree, which proposed that between 5-10 percent of the public hospital beds would be designated as private beds and 10-20 percent of the services would be dedicated to private patients. It is envisaged that introducing private beds into the public sector will help fund certain services and could help fund replacement and upgrading of essential medical equipment in the public sector.
Market Restraints
Figure 7-2 reviews the specific restraints for the absorbable and erodible biomaterials market in Italy respectively. Figure 7-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Italy), 2003-2009
Rank 1 2 Driver Healthcare Reforms, the SSN and the Quest for Accountability Inhibits Market Growth Revenues Suffer as a Result of Late or Delayed Payments 1-2 Years 3-4 Years 5-6 Years Medium Medium High Medium High Medium
Healthcare Reforms, the SSN and the Quest for Acco untabi lit y I nhibits Market Growt h As a result of the recent decrees outlining the reforms of the Italian healthcare system the system is currently undergoing two parallel reforms which will eventually devolve organisational, political and fiscal powers to the regions. The on-going devolution process has spurred the introduction of a number of cost containment initiatives as a result of increased control and reduced hospital budgets. With the continuing budget deficit issues within the Italian healthcare system it is anticipated that the budgetary issues will continue to be a major restraint to the growth and development of absorbable and erodible biomaterials throughout the forecast period.
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Revenues Suffer as a Result of Late or Delayed Pay ments Italy is infamous for late or delayed payments for medical equipment. According to a survey carried out by the Associazione Nazionale Industrie Electtrotechnicche (ANIE) the national average for delayed payments is 205 days. Despite the introduction of legislation which requires that payment of medical equipment must be paid within 90 days there is no evidence that any of the regions are complying with this law. Habitually the regions do not pay before 150 days at the earliest. The southern regions such as Sicilia and Sardegna are notoriously late when making payments and it may take up to 450 days to make payments. The regions with the best payment records are Lombardia, Piemonte and Liguria.
Market Forecasts
Figure 7-3 and Chart 7.2 provides a summary review of the analysis of the revenue forecasts for the Italian absorbable and erodible biomaterials market. Figure 7-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Italy), 1999-2009
Revenue Revenues Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Compound Annual Growth Rate (2002-2009) : 4.9%
Growth Rate (%) --4.3 4.0 4.0 4.6 4.3 4.4 4.7 5.1 5.5 5.9
($ Million) 71.3 74.4 77.4 80.5 84.2 87.8 91.6 96.0 100.8 106.4 112.7
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Chart 7.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Italy), 1999-2009
2003
2004 Year
2005
2006
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It has been estimated that the total market was valued at $71.3 million in 1999. This had increased to an estimated $80.5 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $112.7 million (CAGR 4.9 percent). The fastest growing segment is the absorbable and erodible biomaterials that are being used for orthopaedic surgery. Argueably the fastest growing sub-segment is the absorbable and erodible biomaterials that are used as synthetic bone graft substitutes. These particular products have significant and recognisable clinical advantages which are helping to stimulate the growth and development of this market. In contrast to some other European Member States the absorbable surgical suture market in Italy also grew significantly in the year 2002 as a result of the legal requirement to ban the use of catgut sutures and the requirement to convert to higher priced synthetic absorbable sutures.
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T r e n d s b y P r o d u c t Ty p e Figure 7-4 and Chart 7.3 provides a summary review of the analysis of the percent of revenue forecasts by product type for the Italian absorbable and erodible biomaterials market over the forecast period. Figure 7-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Italy), 1999-2009
In 1999 the absorbable and erodible wound closure biomaterials market segment represented 81.8 percent of the total Italian absorbable and erodible biomaterials market. By the year 2002 the absorbable and erodible wound closure biomaterials market segment had declined and represented 78.3 percent of the total market i.e. Frost & Sullivan have determined that in 4 years this segment had lost 3.5 percentage points to the absorbable and erodible orthopaedic biomaterials market.
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Chart 7.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Italy), 1999-2009
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Adsorbable and Erodible Orthopaedic Absorbable and Erodible Wound Closure Biomaterials
99
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From the market intelligence gathered Frost & Sullivan predict that by the year 2009 the absorbable and erodible wound closure biomaterials market segment will have declined further and will represent 66.4 percent of the overall market. This represents a 15.4 percent increase in the percent of revenues for the absorbable and erodible orthopaedic biomaterials market between 1999 and 2009 and reflects the anticipated compounded annual growth rates expected for this segment.

Most purchases are made by public tenders, which are open to both domestic and foreign companies. In general, the bidding procedure starts with a detailed request from the head of the hospital ward or division. The request must be substantiated by ample and exhaustive evidence that the product or service will strongly benefit the overall performance of the ward or division. The request is then evaluated by the financial manager and the hospital's board of directors. After the request has been approved, the procurement office of the hospital will launch a tender. The choice of the type of tender is usually determined by the amount of money involved.
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There are three types of bidding procedures most widely used:
"asta pubblica" (public tender). This is required when the amount involved is more than ECU 200,000. This is the most commonly utilised procedure. The invitation to bid is open to all providers which qualify, according to the requirements outlined in the bid specifications. "licitazione privata" (private bidding). This is reserved for providers which have been pre-screened according to the specific requirements outlined in the bid specifications. "appalto concorso" (competitive turn-key contract). This is used when the procurement office has drawn up a very detailed description of the contract, indicating the conditions with which qualified participating companies must be willing to comply.
In addition, there is the "trattativa privata" (private contract) procedure, by which the hospital consults with suppliers of its own choice and negotiates the terms of the contract directly with one or more of them. This procedure, which is less cumbersome, applies only to certain situations. Finally, there is a purchasing formula, "in economia", which is applicable only to sporadic purchases, such as those of absorbable and erodible biomaterials, for less than $6.000 and does not require a bidding procedure. Bidding specifications normally include a detailed technical description of the product to be purchased, as well as other requirements, such as CE marking, safety standards, testing procedures, operation manuals and quality assurance. Award criteria are normally based either on the lowest price or the economically most advantageous quotation. The lowest price criterion is used when the product to be purchased is very clearly outlined in the bidding specifications and does not require any additional evaluation. This typically applies to disposables and products which have been previously tested and found satisfactory. The economically most advantageous criterion considers various factors in addition to price, such as operational costs, delivery and performance time, quality, functional and design considerations, technical evaluation, pre-and after-sale service. In this case, bids are evaluated by a point-system. It should be noted that the law does not impose any rules as to the allocation of points, which is left to the discretion of the hospital. The evaluation and awarding processes involve all the decision-makers in the administration of the hospital. It is common practice, when evaluating medical equipment, to allocate more points to the quality aspect, instead of to the price factor. Companies which want to participate in public tenders have to first qualify by submitting to the hospital management adequate evidence of their business experience and professional expertise. To that purpose, they must provide financial statements, bank credit reports, lists of customers, qualifications of the company's top management, and other documents. Companies which have bad business records will not be allowed to take part in the tenders. A record of the companies which qualify as "suppliers for the health care sector" is kept and updated regularly by the regional administrations. While public tenders are open to both Italian and foreign companies, it is usually unrealistic for a foreign firm to believe that it can successfully cope with the cumbersome bureaucratic procedures of public procurement without a base in Italy. It is important that companies participating in public tenders be known by hospital management. U.S. companies wishing to penetrate the Italian healthcare market should seriously consider working through a well established, aggressive Italian representative.
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Figure 7-5 illustrates the competitive structure of the Italian absorbable and erodible biomaterials market. Figure 7-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (Italy), 2002
Number of Companies in Market 32 Types of Competitors Distribution Structure Mixture of major overseas multinational corporations and smaller indigenous suppliers and smaller overseas suppliers Leading suppliers operating directly through subsidiaries whilst smaller overseas suppliers operate through distributors e.g. FSSB Chirurgische Nadeln who operate through their distributors Espansione Marketing and Resorba Wundversorgung who operate through their distributors Antaris 1st Tier includes: Ethicon (J&J) and Tyco Healthcare 2nd Tier includes: Baxter International Inc, B. Braun, Biomet Merck, Smith & Nephew (Acufex), Ethicon (J&J) (Mitek), Sofamor Danek (Medtronic) and NeuColl 3rd Tier includes: Genzyme Corporation, Dynek Pty Ltd, Fidia Advanced Biopolymers, Assut Medical Company, Serafit, Alcon Italia S.P.A., Resorba Wundversorgung, FSSB Chirurgische Nadeln , Shire Pharmaceuticals, Confluent Surgical Inc, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH and Gortex, Arthrex, Aesculap (B. Braun), Bionx Implants Inc, Interpore Cross International, Orthovita, Depuy J&J, OsteoTech, Linvatec (Conmed), Mathys Synthes-Stratec, Stryker, Wright Medical Technology Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Joint venture and/or distributor agreements for small and medium-sized manufacturers having proprietary technologies with major suppliers of orthopaedic products Proven Efficacy: It is almost mandatory to provide clinical evidence proving the efficacy of the product
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The market comprises a complex mixture of direct subsidaries, distributors for major overseas manufacturers and co-marketing partnerships between companies with overlapping interests. Within B. Braun for example there is a small separate department specialising in minimally invasive surgery. There is one Product Manager who is responsible for monitoring and analysing their market position whilst developing sales and marketing strategies for new and existing products. Aesculap operate a mixed system of direct selling through the subsidiary sales force and through distributors. There are a total of 55 sales representatives worked for Aesculap. There remit is to sell a wide range of different products including endoscopy so that at any one time about 20 of the sales forces time is selling endoscopic equipment to one form of clinical discipline or another. The sales force is made up principally of individuals who have been healthcare professionals. There are 2 product specialists concentrating on endoscopic products. The product specialists help the sales representatives when carrying out product training for the end-user after purchase. There is a distributor network throughout Italy in the North, South and Central regions. There is a deliberate policy to use the distributors to market test the various regions within Italy without Aesculap having to commit to the recruiting and maintaining of a larger salesforce. The only indigenous company Frost & Sullivan have identifed Fidia Advanced Biopolymers. Fidia Advanced Biopolymers is conducting research into a range of polymer based products which have been designated primarily for cutaneous wound healing.

Figure 7-6 and Chart 7.4 illustrates and lists the market share of the major market participants and the percent change from year to year for the Italian absorbable and erodible biomaterials market. The overall market leader is Ethicon (J&J) with an estimated 43.9 percent of the market. Ethicons (J&J) leadership position is attributed to its high share of the absorbable surgical sutures market where it has an estimated 62.0 percent of the market.
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Ethicon (J&J) is however coming under increasing pressure from its major competitors i.e. Tyco Healthcare and B. Braun and a number of smaller companies who have recently entered the market and are seeking to gain market share principally from Ethicon (J&J). Figure 7-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Italy), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare Baxter International Inc B.Braun Biomet Merck Smith & Nephew (Acufex) Ethicon (J&J) (Mitek) Sofamor Danek (Medtronic) NeuColl Others Total Market Share (%) 35.4 14.6 5.5 3.6 3.2 2.4 1.9 1.6 1.6 30.2 100 2002/03 Trend No Change Up Up No Change No Change Up No Change No Change No Change -----
Note: Others include: Genzyme Corporation, Dynek Pty Ltd, Fidia Advanced Biopolymers, Assut Medical Company, Serafit, Alcon Italia S.P.A., Resorba Wundversorgung, FSSB Chirurgische Nadeln, Shire Pharmaceuticals, Confluent Surgical Inc, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH, Gortex, Arthrex, Aesculap (B. Braun), Bionx Implants Inc, Interpore Cross International, Orthovita, Depuy J&J, OsteoTech, Linvatec (Conmed), Mathys Synthes-Stratec, Stryker, Wright Medical Technology
Tyco Healthcare is in second position with an estimated 18.1 percent of the overall market again principally as a result of its strong presence in the absorbabl surgical suture market i.e. 25.0 percent including an estimated 42.0 percent of the surgical adhesives and glues segment and an estimated 40.0 percent of the absorbable ligation clip market.
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Chart 7.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Italy), 2003
Ethicon (J&J) (Mitek) 1.9% Sofamor Danek (Medtronic) Smith & Nephew 1.6% NeuColl (Acufex) 1.6% 2.4% Biomet Merck 3.2% B.Braun 3.6% Baxter International Inc 5.5%
Others 30.2%
Tyco Healthcare 14.6% Ethicon (J&J) 35.4%
Baxter International Inc is in third postion with an estimated 6.8 percent of the overall market. Baxter International Inc has an almost monopolistic position in the tissue sealant sub-segment but is likely to come under increasing competitive pressure from new market entrants throughout the forecast period. B. Braun is in fourth postion with an estimated 4.5 percent of the overall market principally as a result of its presence in the absorbable surgical sutures market sub-segment where it has been estimated it represents about 6.0 percent of the market. Biomet Merck is in fifth postion with an estimated 3.9 percent of the overall market principally as a result of its synthetic bone graft substitute product Biobon(R). Smith & Nephew is in sixth postion with an estimated 2.9 percent of the overall market. Although Smith & Nephew has a relatively small market share but Frost & Sullivan confidently expect that as a result of the acquisition of Instrument Makar and Orthopaedic Biosystems Ltd, Inc will grow significantly throughout the forecast period.
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Forecasts Wo u n d
of
the
Absorbable
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Erodible
Closure
Biomaterials
Market
Market Drivers
Figure 7-7 shows the drivers for absorbable and erodible wound closure biomaterials in the Italian market. Figure 7-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Italy), 2003-2009
Rank Driver 1 2 Progress Towards Reducing Waiting Times for Surgery Helps Stimulate Market Growth Continued Conversion of Catgut Suture Accounts to Synthetic Absorbable Sutures Stimulates Surgical Suture Market 1-2 Years 3-4 Years 5-6 Years High High High Medium High Medium
P r o g r e s s To w a r d s R e d u c i n g Wa i t i n g Ti m e s f o r S u r g e r y Helps Sti mulate Market Growt h People today tend to be more demanding in their expectations for healthcare. In a context where public resources are likely to remain stable, meeting the demand for shorter waiting times (for medical tests and surgery) and better treatment will require increased efficiency of the SSN and increased cooperation with the private sector. Although the current Minister of Health and the centre-left governing coalition do not seem to be particularly anxious to promote it, it is likely that public-private cooperation, as with the British PFI (Private Finance Initiative), will increase over time. This appears to be the only way to address such issues as the modernisation of large hospitals in large cities and as a method of relieving pressure and as a method of reducing waiting times for patient particularly in elective general, orthopaedic, oncology and cadiovascular surgery. The major issue over this approach is that the provision of private hospitals varies between regions. Lazio, for example, has a much higher proportion of private beds (approximately 16,700 while Umbria and Liguria seems to have very few (approximately 370 and 590 respectively. This could conceivably result in an inequality of healthcare provision across Italy.
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C onti nued C onv ersion o f Catgut S ut ure Ac c ounts to Synthetic Absorbable Sutures Stimulates Surgical Suture Market As a result of market research carried out by Frost & Sullivan it is clear that despite the banning of catgut sutures in the Italian market and made illegal from August 2002 some hospitals and in particular some urologists and gynaecologists continue to use catgut sutures. The three leading supplies Ethicon (J&J), Tyco Healthcare and B. Braun voluntarily stopped selling catgut sutures in June/July 2001 and have been in the process of converting catgut users to synthetic surgical sutures. This has helped grow the value of the market as synthetics are significantly more expensive than catgut. It is not clear what the legal outcome will be over the continued selling of catgut sutures by for example Assut Medical and Dynek Pty Ltd but ultimately these companies will have to delete these products and focus on selling synthetic absorbable sutures or other products in order to remain financially viable.
Market Restraints
Figure 7-8 shows the restraints for absorbable and erodible wound closure biomaterials in the Italian market. Figure 7-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Italy), 2003-2009
Rank Restraint 1 2 Hospital Budgetary Restraints and Cost Containment Measures Slow Market Development and Growth Increased Popularity of Minimally Invasive Surgery Restricts Use of Absorbable and Erodible Wound Closure Biomaterials 1-2 Years 3-4 Years 5-6 Years High High High High Medium Medium
Hospital Budgetary Restraints and Cost Containment Me asure s Slow Market De ve lop ment and Growth As already discussed the Italian healthcare system consistently operates under the shadow of a budget deficit. In response to this the government issued a stability agreement in August 2001 which introduced cost-containment measures in the healthcare field before complete decentralisation of the healthcare system took place in June 2002. Many voices have been raised regarding the devolution of healthcare to the Regions. Some specialists believe that the decentralisation will give way to 21 different healthcare systems and clear inequity regarding access to healthcare. Others feel that decentralisation may precipitate partnership between the different Regions, and the regional healthcare coverage will be improved since the decision-makers will be closer to the citizen.
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Increased Popularity of Minimally Invasive Surgery R e s t r i c t s Us e o f A bs o rba bl e a n d E ro d i bl e Wo u n d Closure Biomaterials The advent and increased popularity of minimally invasive surgery significantly reduces the size of the incision sites required during open procedures. This has reduced the necessity to close large incision sites with absorbable surgical sutures at the diferent tissue levels. Similarly with the reduced level of bleeding as a result of minimally invasive techniques there is a reduced requirement for haemostat, ligation clips, tissue sealant and surgical adhesives and glues. In adition there is a reduced risk of post operative complications as a result of the formation of adhesions using minimally invasive surgery. All the factors contribute to reducing the potential for these products.
Market Forecasts
Figure 7-9 provides a summary review of the analysis of the revenue forecasts for the Italian absorbable and erodible wound closure biomaterials market. Figure 7-9 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Italy), 1999-2009
Growth Rate (%) --2.7 2.6 2.4 3.1 2.6 2.3 2.2 2.2 2.4 2.6
($ Million) 58.4 60.0 61.5 63.0 65.0 66.6 68.2 69.7 71.2 72.9 74.8
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It has been estimated that the market for absorbable and erodible wound closure biomaterials in Italy was valued at $58.4 million in 1999. This had increased to an estimated $63.0 million in the year 2002 By the end of the forecast period it is predicted that the market will have increased in value to $74.8 million (CAGR 2.5 percent). The largest sub-segment in this market is the absorbable surgical sutures with a market value in 2002 estimated to be $51.5 percent. This particular sub-segment is expected to grow on average at about 2.5 percent per annum although there was significant growth in 2002 as a result of the ban on catgut sutures and the need for conversion to synthetic absorbable surgical sutures. The leading suppliers in this sub-segment have had a major promotional campaign since April 2001 to ensure that the then users of catgut were converted to that particular supplier of synthetic absorbables. The other major sub-segment in this market is tissue sealants. The major player in this subsegment is Baxter International with their product Tissucol or sometimes refered to as Tisseel. It is not expected that there will be any significant growth in this sub-segment as the healthcare authorities are unconvinced about the efficacy of the product and consequently can only be used on a named patient basis.

The product pricing strategy for absorbable and erodible wound closure biomaterials is organised and structured around the necessity for companies to respond to public procurement tenders issued by hospitals. Market intelligence has determined that hospitals are required to issue tenders even though the value of the purchase to be made is very low. However the usual practise is for the hospital administrators to raise a tender for a generic product such as an absorbable suture and at the same time include a range of specifications for that absorbable suture e.g. degradation rates. This practise by default tends to identify a particular supplier and these specifications have either been selected from products already in use or alternatively as a result of product detailing by company representatives. In addition to the obligatory use of procurement tenders the system uses a scoring system by which each product is assessed according to two criteria i.e. product quality and product pricing. When determining which product to choose the purchasing authorities and the surgeons balance their requirements against the scoring system for each individual criteria and the products they are examining. Should the surgeons decide that there is little difference in quality then the companies would tend to offer a higher discount in order to sway the decision in favour of that companies product. Discount from cateloque list prices of 5-10 percent are normal and discount of up to 50 percent are provided but ultimately the discount has to be limited in order to ensure that the company meets its financial objectives. Products deemed to be an essential surgical procedural requirement including absorbable surgical sutures are fully reimbursed through the DRG system. For the other products including the anti-adhesion products the cost of the product is not reimbursed and covered by the DRG system.
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Figure 7-10 illustrates the competitive structure of the Italian absorbable and erodible wound closure biomaterials market. Figure 7-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Italy), 2002
Number of Companies in Market 16 Types of Competitors Distribution Structure Mixture of major overseas multinational corporations and smaller indigenous suppliers and smaller overseas suppliers Leading suppliers operating directly through subsidiaries whilst smaller overseas suppliers operate through distributors e.g. FSSB Chirurgische Nadeln who operate through their distributors Espansione Marketing and Resorba Wundversorgung who operate through their distributors Antaris 1st Tier includes: Ethicon (J&J) and Tyco Healthcare 2nd Tier includes: Baxter International Inc and B. Braun 3rd Tier includes: Genzyme Corporation, Dynek Pty Ltd, Fidia Advanced Biopolymers, Assut Medical Company, Serafit, Alcon Italia S.P.A., Resorba Wundversorgung, FSSB Chirurgische Nadeln , Shire Pharmaceuticals, Confluent Surgical Inc, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH and Gortex Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity is forcing a decline in product pricing and as a result increasing competitor activity Efficacy Studies: Suppliers are increasing being requested to provide proof of clinical efficacy as a means of proving the products ability
The competitive structure of the Italian absorbable and erodible wound closure biomaterials market is described below by each of the sub-segments reviewed in this report.
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Absorbable Surgical Sutures The three leading suppliers i.e. Ethicon (J&J), Tyco Healthcare and B. Braun supply the market directly through their subsidiary companies. The suppliers dominate the market place but market intelligence has revealed that despite banning catgut sutures in Italy a number of small suppliers continue to sell catgut sutures to the Italian market. These include an Australian company called Dynek Pty Ltd and a Swiss based company Assut Medical. Dynek Pty Ltd absorbable suture product range is only manufactured from catgut and they do not have synthetic absorbable sutures. Assut Medical however has a range of synthetic absorbable sutures manufactured under the tradename AssuCryl . From June/July 2001 the leading supplier's i.e. Ethicon (J&J), Tyco Healthcare and B. Braun voluntarily stopped selling catgut sutures and have been in the process of converting accounts who continue to use catgut sutures to synthetic catgut sutures. In addition to these companies there are a number of small German companies operating in the Italian market and taking advantage of the near monopoly position of the major suppliers. These include:
Resorba Wundversorgung who operate through their distributors Antaris who are based in Bari on the Southern Easterly tip of Italy.
FSSB Chirurgische Nadeln GmbH who operate through their distributors Espansione Marketing SpA.
WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH who operate through their distributors S.C.S. International Srl.
FSSB Chirurgische Nadeln GmbH have just entered the Italian market and currently do not have a market share. It is worthy that note is taken of their presence as they are keen to capture market share from the leading suppliers. In addition to these companies supplying absorbable suirgical sutures for general surgical purposes Alcon Italia S.P.A. are recognised suppliers of absorbable sutures for eye surgery. Although this is a small niche they are however recognised suppliers of absorbable sutures. Ti s s u e S e a l a n t s There is essentially only one product present in the Italian market. This is Tissucol or sometimes refered to as Tisseel in Italy. Beriplast from Aventis and TachoComb from Nycomed is not present in the Italian market as they are regarded as having priced themselves out of the market and that particularly in the case of TachoComb there are concerns arising from the BSE issue and that there is a lack of clinical evidence proving the efficacy of the product. The only other product which is currently marketed in Italy is CoSeal from Cohesion Technologies Inc and distributed by Tyco Healthcare.
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Haemostats Ethicon (J&J) sell two haemostat products in Italy. These are Spongostan a biodegradeable gelatin sponge and Tabotamp an oxidised surgical cellulose. CoStasis Surgical Haemostat is currently present in the market and is distributed in Italy by Tyco Healthcare on behalf of Cohesion Technologies Inc. Laborat"rios Baldacci S.A. based in Pisa used to sell two haemostat products known as Zymotrombina and Zymospuma. These products were made from porcine thrombin and fibrinogen and were oral haemostats used in gastric and oesophageal bleeding. These products were discontinued at the beginning of 1998 and Laborat"rios Baldacci S.A. no longer operates in this market. Ligating Clips There are two principle suppliers of absorbable ligating clips in Italy. These are Ethicon (J&J) with its own brand of absorbable clip, Absolok, and the Laproclip from Tyco Healthcare. Surgical Adhesives and Glues The market is totally dominated by the traditional leading suppliers i.e. Ethicon (J&J) (Dermabond and more recently FocalSeal-L Sealant), Tyco Healthcare (Indermil) and B Braun with Histoacryl. Although LiquiBand manufactured by MedLogic Global and BioGlue Surgical Adhesive from CryoLife obtained their CE mark certification in 1998 todate it has not made a major impact on the Italian market. In addition Omrix Biopharmaceuticals S.A.based in Brussels with their product Quixil is currently going through the administrative process of obtaining approval in the Italian market and establishing a distributor network. Omrix Biopharmaceuticals S.A. do not anticipate that their product will be launched onto the Italian market before the end of 2003. Adhesion Barriers There are a number of companies currently marketed anti-adhesion biomaterials in Italy. These include:

Adept from Shire Pharmaceuticals Seprafilm sold directly into the Italian market through Genzyme Biosurgery. Genzyme Biosurgery began selling their Seprafilm product range at the beginning of 1999 Intergel (previously known as Lubricoat) manufactured by Lifecore Biomedical Inc and marketed by Ethicon Spray Gel marketed by Confluent Surgical Inc
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In addition another company known as Fidia Advanced Biopolymers is conducting research into a range of polymer based products which have been designated primarily for cutaneous wound healing. This research is carried out in collaboration with the following "partners."

Centro Nazionale per la Ricerca e lo Sviluppo dei Materiali Sepa (PASTIS), Brindisi, Italy Rheinisch-Westf_lische Technische Hochshule (RWTH), Aix-la-Chapelle, Germany Deutsches Krebsforschungszentrum (DKFZ), Heidelberg, Germany Queen Mary & Westfield College, London, United Kingdom Houget Duesberg Bosson (HDB), Ensival (Verviersl), Belgium

Figure 7-11 and Chart 7.5 lists and illustrates the market share of the major market participants and the percent change from year to year for absorbable and erodible wound closure biomaterials in Italy. Figure 7-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Italy), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare Baxter International Inc B. Braun Others Total Market Share (%) 56.1 23.1 8.7 5.7 6.4 100 2002/03 Trend Down Up Up No Change -----
Note: Others include: Genzyme Corporation, Dynek Pty Ltd, Fidia Advanced Biopolymers, Assut Medical Company, Serafit, Alcon Italia S.P.A., Resorba Wundversorgung, FSSB Chirurgische Nadeln , Shire Pharmaceuticals, Confluent Surgical Inc, WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH and Gortex
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Chart 7.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Italy), 2003
Baxter International Inc 8.7% B. Braun 5.7% Others 6.4%
Ethicon (J&J) 56.1%
The overall market leader for absorbable and erodible wound closure biomaterials in Italy is Ethicon (J&J) with an estimated 56.1 percent of the market. Its major share of the market is attributed to its market leadership position in the absorbable surgical suture market. This this sub-segment it is estimated that Ethicon have 62.0 percent of the market whilst it also accounts for an estimated 91.5 percent of the haemostat market and a 75.0 percent share of the absorbable ligation clip market. Tyco Healthcare is in second position with an estimated 23.1 percent of the overall absorbable and erodible wound closure biomaterials market in Italy. The strength of Tyco Healthcare is in the absorbable surgical suture market with an estimated 25.0 percent of this sub-segment. Baxter International Inc is in third position with an estimated 8.7 percent of the overall market but having a major presence in the tissue sealant market (estimated at 95.0 percent). B. Braun is in fourth position with an estimated 5.7 percent of the overall absorbable and erodible wound closure biomaterials market in Italy. It is a significant presence in the absorbable surgical sutures market (estimated at 6.0 percent) and in the surgical adhesives and glues sub-segment (estimated at 20.0 percent). Other suppliers including Alcon Italia S.P.A., S.C.S. International srl (Distributors of WISP), Antaris (Distributors of the German Company Resorba Wundversorgung), Espansione Marketing SpA (Distributors for FSSB GMBH), Genzyme Corporation and Shire Pharmaceuticals total approximately 4.0 percent of the market.
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Forecasts
of
the
Absorbable
and
Erodible
Orthopaedic
Biomaterials
Market
Market Drivers
Figure 7-12 shows the drivers for the absorbable and erodible orthopaedic biomaterials market in Italy. Figure 7-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Italy), 2003-2009
Rank Driver 1 2 3 1-2 Years 3-4 Years 5-6 Years High Medium Medium Medium Medium Medium
Growth in Sports Injuries and Treatments Major Driver for High Shoulder and Knee Joint Surgey in Italy Helps Market Development Marked Increase in Orthopaedic Procedures Boosts Demand for Synthetic Bone Grafting Substitutes High
Recognition of Advantages of Bioabsorbable Materials for Internal Medium Fracture Fixation Stimulates Market Development
G r ow t h i n S p o r t s I n j u r i e s a n d Tr e a t m e n t s M a j o r D r i v e r f o r S h o u l d e r a n d K n e e J o i n t S u r g e y i n I t a l y H e l ps Market Development Although sports related injuries are common, treatment and rehabilitation of these injuries have been difficult because of limited knowledge of the physiology, biomechanics and how soft tissues such as ligaments and tendons interact. As a result of considerable research into sports injuries a more complete picture of our ligaments and tendon functions has been realised. This will allow physicians to provide better treatment for patients with sports injuries and to predict activities that might lead to injury in the future. In combination with the greater understanding of sports injuries and as a direct result of more leisure time, a generally more affluent and active society more people are participating in sports activities. There is clearly a direct correlation between the increase in the number of people taking part in sports (particularly contact sports) and the increase in the number suffering from sports injuries.
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Marked Increase in Orthopaedic Procedures Boosts Demand for Synthetic Bone Grafting Substitutes The orthopaedic market in Italy is split between orthopaedic surgery and trauma surgery. Orthopaedic surgery accounts for approximately 70.0 percent of the market, and trauma for the remaining 30.0 percent. Due to a successful government-led campaign to reduce traffic accidents there has been a small reduction in the number of trauma surgeries performed each year. However, as the result of a steadily ageing population, there is currently an annual increase of approximately 20.0 percent in the volume of orthopaedic surgery, including hip and spinal repair procedures. This trend is expected to continue, due to the increasing number of osteoporotic fractures amongst elderly Italians. Recognit ion of Advantage s o f Bioabso rbabl e Mate ri al s for Internal Fracture Fixation Stimulates Market Development Orthopaedic surgeons in Italy have recognised the advantages of using bioabsorbable materials for internal fixation and use these products whenever the indication dictates. They are keen to extend the use of bioabsorbables in weight bearing situations and intra-articularly. An additional factor cited by surgeons is the ability to view the surgical repair on X-ray, MRI, or a CT-scan without any metal obstruction or scatter. This is useful for standard postop evaluations and is especially important when the patient becomes symptomatic after surgery or returns with a related injury.
Market Restraints
Figure 7-13 shows the restraints for the absorbable and erodible orthopaedic biomaterials market in Italy. Figure 7-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Italy), 2003-2009
Rank Restraint 1 2 3 1-2 Years 3-4 Years 5-6 Years High Medium Medium High Medium Medium
Concerns Over Efficacy, Strength and Durability of Bioabsorbables High Hinders Market Development Regional Variation in Healthcare Provision Limits Use in Some Areas Differential Product Pricing between Metallic Implants and Absorbables and Impact on Hospital Budgets Medium Medium
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C o n c e r n s Ov e r E f f i c a c y, St r e n g t h a n d D u r a b i l i t y o f Bi oabsorbables Hinde rs Marke t Devel opment Although there are recognised advantages using bioabsorbable materials and many surgeons particularly sports surgeons use them for the treatment of fractures the durability of the implant is a major issue. For bioabsorbable screws the orthopaedic surgeons needs confidence in the strength of the screw at the point of insertion. Any burring or damage incurred on the screw head ultimately makes it almost impossible for the screw to be inserted fully. This causes immense frustration for the surgeon who may resort to traditional metallic implants. In addition several problems have been identified which have hampered the widespread use of bioresorbable fixation in modern traumatology in Italy. Many devices made of polyglycolic acid (PGA) homopolymers demonstrate rapid loss of in vivo strength and refractures have been common. At the other extreme, remnants of pure polylactic acid (PLA) implants have been identified up to eight years after implantation, raising the question as to whether PLA is too "biostable" to be used as a bioresorbable material. Furthermore, degradation of bioresorbable implants can cause a non-infectious inflammatory tissue response (so-called sterile abscess) requiring operative drainage in up to 26 percemt of patients, most commonly when PGA or its copolymers are used. Several theories have been proposed regarding the etiology of this inflammatory reaction. Many investigators in Italy feel that this reaction represents an inability of the local tissues to rapidly clear the breakdown products of PGA. This theory is supported by the fact that glycolic acid has been isolated from inflammatory tissue, and these reactions are distinctly less common with implants derived primarily from the more slowly degrading PLA polymers. Implants made of a copolymer of 70 percent PLA and 30 percent PGA has a more desirable rate of degradation that allows the plate to share the load until the fracture has healed, without the risk of sterile abscess formation seen with pure PGA homopolymers. Because of these issue many orthopaedic surgeons in Italy require proof of product efficacy by being provided with clinical evidence to prove that the products provide substantial improved benefits for patients compared with traditional methods. R e g i o n a l Va r i a t i o n i n H e a l t h c a r e P r o v i s i o n L i m i t s U s e in Some Areas The significant difference between the standards of living in the industrialised north of Italy and the less developed south is illustrated by the regional variation in the level of healthcare, as funding is controlled at a regional level. For instance, 80.0 percent of orthopaedic surgery is performed in the north of Italy, and therefore the demand for bone graft substitutes is much higher there. Lower demand for bone graft substitute materials, as well as the higher distribution costs, means that bone graft substitute materials are more highly priced in the south of Italy.
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Differential Product Pricing between Metallic Implants and Absorbables and Impact on Hospital Budgets The cost of bioabsorbable implants are typically 25 to 50 percent greater than that of their metal counterparts. The Italians however are adept at negotiating discounts with suppliers and are able to reduce this differential to help ameliorate this problem. Ince the Italian government introduced the DRG reimbursement system the hospital shoulders responsibility for the cost of the operation above that of the reimbursement value. The administrators "juggle" the hospital budgets so that any over spend in one area is offset by underspending in another area. Nevertheless any product which results in the cost of the procedure exceeding the DRG reimbursement value is carefully assessed before used.
Market Forecasts
Figure 7-14 provides a summary review of the analysis of the revenue forecasts for the absorbable and erodible orthopaedic biomaterials market in Italy. Figure 7-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Italy), 19992009
Revenue Revenues Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Compound Annual Growth Rate (2002-2009) : 11.6%
Growth Rate (%) --11.6 10.0 10.1 9.8 10.1 10.9 12.0 12.7 13.0 13.1
($ Million) 12.9 14.4 15.9 17.5 19.2 21.2 23.5 26.3 29.6 33.5 37.8
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It has been estimated that the absorbable and erodible orthopaedic biomaterials market in Italy was valued at $12.9 million in 1999. This had increased to an estimated $17.5 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $37.8 million (CAGR 11.6 percent). Frost & Sullivan have determined that the absorbable fracture fixation device market is growing at an estimated 5-7 percent per annum whilst the Interference Screws, suture anchors and other devices such as meniscal repair products are growing at between 8-12 percent per annum. Synthetic bone grafting substitutes are estimated to be growing at about 12 percent per annum. The value of the absorbable synthetic bone graft substitute market is estimated to be worth $7.5 million whilst the absorbable and erodible biomaterials used for fracture management, ligament and tendon repairs, meniscal repairs etc is estimated to be worth $10.0 million.

Products in this market segment, particularly the absorbable polymers, have a limited shelf life. Consequently product is normally purchased as and when it was required or to replace product used from a small holding stock or inventory in the hospital. Typcially products are purchased as a result of surgeons having identified the product specifications as a result of products which have undergone a clinical trial in that hospital or as a consequence or published data about the efficiacy of the product. Normally products are sold at discounted prices from company list prices according to the annual volume usage and/or as a result of individual negotiations.
Figure 7-15 illustrates the competitive structure for the absorbable and erodible orthopaedic biomaterials market in Italy.
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Figure 7-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (Italy), 2002
Number of Companies in Market 16 Types of Competitors The Italian market is supplied by a mixture of different types of competitors including specialist orthopaedic suppliers using biomaterials as complimentary products to their existing product ranges and smaller companies with proprietary technologies focusing on niche market The leading suppliers operate through direct subsidiaries whilst the smaller companies operate through distributors 1st Tier includes: Biomet Merck, Smith & Nephew (Acufex), Ethicon (J&J) (Mitek) 2nd Tier includes: Sofamor Danek (Medtronic), NeuColl, Arthrex, Interpore Cross International, Wright Medical Technology, Linvatec (Conmed), Bionx Implants Inc and Stryker 3rd Tier includes: Aesculap (B. Braun), Orthovita, Depuy J&J, OsteoTech and Mathys Synthes-Stratec Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All senior orthopaedic surgeons, sports medicine specialists, spinal surgeons and centres of excellence, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities, hospital purchasing groups, private hospitals and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Joint venture and/or distributor agreements for small and medium-sized manufacturers having proprietary technologies with major suppliers of orthopaedic products Proven Efficacy: It is almost mandatory to provide clinical evidence proving the efficacy of the product
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The market is a highly complex web of direct subsidiaries, distribution agreements by major principally US based corporations and alliances with partner companies. The companies Frost & Sulivan wish to highlight are: Smith and Nephew Smith & Nephew S.r.l. use a total of 20 agent sales representatives one for each of the geographic regions in Italy i.e. Lombardia etc. Each sales representative is responsible for selling the entire product range or portfolio and does not concentrate on product area. The sales force is suported by a Marketing Manager and a Product Manager. In addition the sales force is supported by a total of 6 product specialists who assist the sales representatives in product demonstrations, product detailing and product training. Linvatec Celbio is a distributor for Linvatec throughout the whole of Italy. Celbio also distributes in Italy for electrobiomedical equipment manufacturers. They have in total a sales force of 30 representatives each allocated by product division in the company. There are 6 representatives specialising in products from Linvatec. For Linvatec products there is one product manager/sales manager and a product specialist. Celbio distribute a wide range of other equipment from companies including Henkel, Oratec, Select-Shutter, Micromedics, Gore SAM, Dycem, Pilling-Weck and Access Medical. Mathys Italia S.r.l. Mathys is responsible for sales of orthopaedic trauma, fracture fixation products, spinal equipment and power tools. Stratec is responsible for selling only joint replacements principally hip and knee joints. Sales of absorbable plates and screws are limited to screws and plates for use in craniomaxillofacial procedures. Sales of Mathys in Italy is sub-divided into two regions, The North and Central region covered by Mathys Italia S.r.l. based in Milan and a the Southern region covered by the distributor known as Syrm S.r.l. Mathys Italia S.r.l. in the North of Italy has a total of 30 sales representatives covering the North and Central regions of Italy down as far as Rome. These representatives are supported by four Product Managers, customers service centres and the Sales Manager and Marketing Manager. The sales and marketing of Mathys products in the southern regions of Italy south of Rome covered by Syrm S.r.l. have I product specialist, 1 sales manager and 3 sales representatives.
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Figure 7-16 and Chart 7.6 lists and illustrates the market share of the major market participants and the percent change from year to year for the absorbable and erodible orthopaedic biomaterials market in Italy. Figure 7-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Italy), 2002-2003
2002 Company Biomet Merck Smith & Nephew (Acufex) Ethicon (J&J) (Mitek) Sofamor Danek (Medtronic) NeuColl Arthrex Interpore Cross International Wright Medical Technology Linvatec (Conmed) Bionx Implants Inc Stryker Others Total Market Share (%) 18.0 13.5 11.0 9.0 9.0 7.0 6.5 6.0 6.0 5.0 3.0 6.0 100 2002/03 Trend Down Up Up No Change No Change -----------------
Note: Others include: Aesculap (B. Braun), Orthovita, Depuy J&J, OsteoTech and Mathys SynthesStratec,
The overall market leader for the absorbable and erodible orthopaedic biomaterials market in Italy is Biomet Merck with an estimated 18.0 percent of the market. Their strength lies in their sales of Biobon(R) and their range of absorbable fracture management and interference screw devices.
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Chart 7.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (Italy), 2003
Interpore Cross Wright Medical International Technology Linvatec (Conmed) 6.5% 6.0% 6.0% Arthrex 7.0% Bionx Implants Inc NeuColl 9.0% 5.0% Stryker 3.0% Sofamor Danek (Medtronic) 9.0% Others 6.0%
Ethicon (J&J) (Mitek) 11.0% Smith & Nephew (Acufex) 13.5%
Biomet Merck 18.0%
The endoscopy division of Smith & Nephew is in second place with an estimated 13.5 percent of the market. Smith and Nephew have been gaining market share at the expense of Ethicon (J&J) (Mitek) as a result of the acquisitions of of Instrument Makar and Orthopaedic Biosystems Ltd, Inc. Despite the competitive acitivty Ethicon (J&J) (Mitek) is in third position of the absorbable and erodible orthopaedic biomaterials market in Italy with an estimated 11. 0 percent of the market. They have and it is predicted will continue to have a strong presence in the Italian market as a result of the historical presence in the market and the wide range of products which are available. Sofamor Danek (Medtronic) are in fourth position with an estimated 9.0 percent of the market attributed to the sale of InFUSE. This is a product which is derviced from Intra Life Sciences and has specific indications for spinal lumbar fusions. Arthrex is in fifth position with an estimated 7.0 percent of the absorbable and erodible orthopaedic biomaterials. Arthrex sells a range of interference screws into the Italian market and has benefited from an aggressive marketing campaign and the general recognition of these products by orthopaedic surgeons.
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8

Political Structur e Ro l e o f G ove rn m e n t ( Th e M i n i s t ry o f H e a lt h ) The Health Ministry has been slimmed down with the number of departments reduced from 11 to just three. These are the:

Technical Secretary General Public Health Directorate Pharmacy and Health Products Directorate
The Health Ministry is:

Responsible for formulating and introducing basic health legislation. Responsible for the financing of the healthcare & economic system of the Social Security. Defines benefits package for National Health Service (Sistema Nacional de la Salud, SNS).
Associated with and supervises the National Institute of Health (Instituto Nacional de la Salud, (INSALUD), the body which manages the social security health services in 10 of the 17 autonomous regions or communities and 2 independent cities Ceuta and Meilla located in North Africa.
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INSALUD Responsible for the provision, planning & regulation of healthcare to about 38% of the Spanish population in 10 autonomous regions.

Involved in the planning and regulatory functions with the MoH. Works alongside the other autonomous regions but not integrated with them. Beginning to introduce separation of provider and purchase functions. Purchasers beginning to contract services from public and private hospitals and some health centres.
Devolution of the Healthcare Services Designed to Help Eliminate Regional Discrepancies There have been considerable improvements to the organisation and structure of the Spanish healthcare system over the last 15 years. In 1986 the General Health Service Act established a national health system with 17 autonomous health services. The main principles of the system were universal coverage, public financing through taxation (and, until recently, through social security funds to some extent), integration of existing health service networks, political devolution to the autonomous health services, and a new model of primary care with multidisciplinary teams based in health centres. The pace of this devolution process has been more rapid in some regions than others, partly because the regional governments also had to take on social security functions. Only seven of the 17 autonomous regions (Catalonia, Andalusia, the Basque country, Valencia, Galicia, Navarre, and the Canary Islands have taken over responsibility for administering health care in those regions from the central body, the Institute Nacional de la Salud (INSALUD). The remaining 10 autonomous regions, covering about 40 percent of the Spanish population, have little or no control over their health services and remained within the INSALUD until the 31st December 2001. Whilst within INSALUD they could however make some health laws and can plan services, but lack of real power and of local money prevent them from implementing these plans. Within and among these 10 regions there had been considerable variation and inequality in health and healthcare provision. The complete transfer of power from INSALUD finally took place as of the 1st January 2002 and is part of an on-going process to bring Spain's citizens closer to decision making on health and reduce or eliminate these inequalities. But there is still a long way to go, even amongst the original seven regions where health care devolved to the regional governments. The health councils that were intended to control the system locally have not got going yet, and decentralisation has not reached the level of health areas and towns. Spain spends 6-7 percent of national income on health services. Distribution to the autonomous regions depends on population size but barely takes into account demography, population density, or morbidity and mortality. In 1998 the Consejo de Poltica Fiscal y Financiera, the national council for finance and taxes, decided that three other factors should determine the distribution of health funding: declining economic status of some communities, health service referrals from other regions, and the presence of "centres of excellence", teaching institutions and inter-regional reference centres which are designed to provide services to patients from more than one region.
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These factors have not helped to make the system fairer. The last factor simply reinforces inequity and inequality: better hospitals get more money and areas lacking good hospitals have no chance of establishing new ones. Similarly, even though Catalonia is not the region that receives most patients from elsewhere, it receives 10 percent more money per person each year for health than the mean funding for the other areas, mainly for political reasons. The Catalan Nationalist party has 20 deputies in the Spanish parliament, on whose votes the central government depends for its parliamentary majority. Devolved health care has led to the growth of regional bureaucracies; it is hard to show the need for these. In the absence of good coordination between the autonomous regions, there is duplication: for instance, there are four schools of public health and three agencies for technological evaluation. Contractual conditions and salaries of healthcare staff vary widely. Lack of coordination and cooperation seems to have reinforced the existing inequalities in health in Spain. Market intelligence suggests that the latest changes to affect the structure and devolution of the 10 regions which were previously part of INSULUD and now are included within the transfer of the healthcare services to Madrid and Aragon. There are a number of major concerns about the devolution process particularly those concerning the systems financing and the conditions for the transfer of INSALUD debt. There is widespread concern within the medical industry as a whole about the so-called "hidden debt" and the need for the new healthcare system to continue to invest, particularly in new technology. Regional Government Organisation and administration of healthcare is decentralised to 17 autonomous regions (communities).
There are 7 devolved regions. Catalonia (1981), Andalucia (1984), Valencia (1987), Basque country (Pais Vasco) (1987), Galicia (1990), Navarra (1990) and the Canary Islands (1994). Regional government each has a department of health (Consejeria de Sanidad). Consejeria de Sanidad responsible for formulation & implementation of health policy in the regions. Each region no less than 200,000 and no more than 250,000 inhabitants. Each region divided into health areas and sub-divided further into health zones. Each health zone covers 5,000-25,000 inhabitants. There are 2,448 health zones. Health zones organise resources for primary care and provide health care at the local level.
The management and organisation of primary healthcare is the responsibility of specific primary health centre management bodies based on the health areas and organised within the smallest geographic unit in the health system, the health zones.
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Primary health care is delivered by two methods:
The primary health care team system (EAP). This is essentially a group practice, which has a managed by a director who also has clinic responsibilities. Patients are registered on a list with the EAP. This list is used to ensure that each patient is seen by the same individual doctor and helps ensure continuity of service to the patient. Public hospitals and the outpatient centres provide secondary and tertiary health care services. The health centres are linked to general hospitals to provide specialised services for acute cases. The larger hospitals, which are normally centrally located in provincial capitals, provide highly specialised services for a number of health areas. Normally the GPs are responsible for providing referrals for patients to attend these specialises centres. Normally each autonomous community also has a general hospital which has the latest equipment and equipment representing the most recent advances in all specialty areas.
Private Health Insurance Around 15 percent of the Spanish population, or six million inhabitants, subscribe to private health insurance plans. There are more than 100 companies active in the health insurance market, but just threeAsisa, Adeslas, Sanitascover over 60 percent of subscribers. Asisa and Adeslas each have just over 1.5 million members, whilst Sanitas, which forms part of the UK-based BUPA group, has over 1 million members. In 1999, Adeslas had a turnover of Ptas 62,248 million (US$398 million), compared with Ptas 38,832 million (US$312 million) in 1995, and Sanitas had a turnover of Ptas 58,000 million (US$371 million). Hospital Service s In 1999, Spain had a total of 798 hospitals, 196 of which were run by the national health service (SNS), and 130 by other public institutions, while 472 were private facilities. The total bed complement was 162,608 in 1999, equating to 4.1 per thousand population. Around 68 percent of beds are in the public sector, 51 percent being in the National Health Service. During the second half of the 1990s, there was a steady fall in the number of beds in both the public and private sector. Acute beds account for 75 percent of operational bed capacity, giving a ratio of 3 acute beds per thousand population in 1995. Of the 116,000 acute beds operational in 1995, 62 percent participated in the National Health Service. Around 23 percent of hospitals and 19 percent of hospital beds are in Catalonia. Andalusia and Madrid each have around 14 percent of the total bed complement. The bed to population ratio varies between 3.1 beds per thousand inhabitants in Valencia, to 5.2 beds per thousand population in Catalonia. Th e S i s t e m a Naci o n al d e l a Sa l u d , ( S N S ) I nt e rterritorial Council

Co-ordinating body for the State and autonomous communities. Comprises councillor for health in autonomous communities and equal number of members of the state administration. Presided over by the Ministry of Health.
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Chart 8.1 shows the market engineering research measurements for the Spanish absorbable and erodible biomaterials market as it appeared in 2002. Chart 8.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (Spain), 2002
Market Research
Market Engineer
Market Strategy
Implementation
Market Planning
Trend Up Up Down Up Up Up Up
Mature and Static in absorbable sutures but significant growth in other subsegments, emerging and niche markets. $50.2 million Single use 81.7% 33 Down Up Up
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Market Drivers
Figure 8-1 reviews the specific drivers for the absorbable and erodible biomaterials market in Spain respectively. Figure 8-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Spain), 2003-2009
Rank 1 Restraint 1-2 Years 3-4 Years 5-6 Years High Medium
Elimination of discrepancies of Regional Funding Helps Stimulate High Growth and Development of Absorbable and Erodible Biomaterials in Remote Regions Growth in Private Sector Helps Stimulate Market Development of High Absorbable and Erodible Biomaterials Healthcare Expenditure to Meet the Growth in the Economy Stimulates Absorbable and Erodible Biomaterials Market Medium
2 3 4
High Medium Medium
Comprehensive Drive to Reduce National Health Waiting Lists in Medium Spain Help Drive the Absorbable and Erodible Biomaterials Market Improved Hospital and Healthcare Infrastructure in Spain Helps Develop Absorbable and Erodible Biomaterials Market Medium
Medium
Medium
Elimination of discrepancies of Regional Funding Helps Stimulate Growth and Development of Absorbable and Erodible Biomaterials in Remote Regions The central autonomous regions including Madrid have traditionally received a disproportionate allocation of healthcare resources. It is the government's objective to reduce this discrepancy and improve the level of funding and services to those regions who have been under-funded. The recent healthcare reforms affecting the re-structuring and devolution of the 10 regions which were previously part of INSULUD for example are planned to help reduce the regional discrepancies and generally improve the quality and provision of healthcare across Spain. It is anticipated that this will help rasie the quality of healthcare provision and provide additional operating facilities in regions whose patients would hav had to be referred to the urban centres.
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Growth in Pri vate Secto r Help s St imulate Market Development of Absorbable and Erodible Biomaterials Despite the public system's efficiency, it's not highly regarded by patients, especially those facing surgery and hospitalisation. Lengthy waiting lists for non-emergency procedures, limited choice of physicians and bureaucratic barriers are the most frequently cited patient complaints. In addition a high proportion of the Spanish population have either a private healthcare insurance or supplementary coverage from private carriers. Frost & Sullivan have determined that in fact, more than eight of 10 public-sector workers are privately insured, allowing them wider options and quicker access than those covered by the public system. This trend has also seen the emergence and development of the private hospital sector. Private hospitals have capitalised on the general low patient-satisfaction scores of government facilities with the result that private-sector hospitals also are becoming increasingly popular, with the American chain Tenet Healthcare Corp. being a major player in Barcelona. Since there are a total of approximately 142 privately owned hospitals operating in Spain the private sector is viewed as a area of significant growth as a result of the high proportion of procedures carried out there and the potential for increasing the number of procedures carried out and a method of reducing waiting lists for elective surgery. Healt hcare Expe nd iture to Meet the Grow th in the Economy Stimulates Absorbable and Erodible Biomaterials Market The government has pledged that funding for the National Health Services will increase with the increase in the growth in the Spanish economy. It has been forecasted (Barclay Economics Unit) that Spanish economy will grow by 4 percent in the year 2000 and is expected to continue at this level until the end of the forecast period. Comprehensive Drive to Reduce National Health Wai t i n g L i s t s i n Spa in H e l p Driv e t h e A b s o r b a b l e a n d Erodible Biomaterials Market In response to public outcry over the reported deaths of some patients waiting for surgery, Spanish Prime Minister Jose Maria Aznar recently announced a comprehensive drive to cut waiting lists for surgery in Spain's national health system. Some of the measures which have been cited include extra evening surgery sessions will be added at a number of public hospitals, and in cases where waiting lists are especially long, patients will receive their operations in the private sector, paid for by the state.
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According to recent data from about half the country's population, waiting lists for surgical procedures were reduced by an average of 20 percent (from 190,000 to 151,000 patients). The number of patients waiting more than six months for an operation decreased by 96 percent over the same period (from 53,822 to 1,908 patients). And the average waiting time fell from 210 days to 61 days, with an overall reduction of 70 percent. The anticipated continued drive to reduce waiting lists in Spain are expected to help stimulate the Spanish market for absorbable and erodible biomaterials in Spain throughout the forecast period. Improved Hospital and Healthcare Infrastructure in Spain Helps Develop Absorbable and Erodible Biomaterials Market The Spanish authorities have invested considerable resources to improve the infrastructure of the healthcare services since 1994. This has resulted in a hospital construction program, which has and is to provide a comprehensive healthcare service to the whole population. This hospital construction program is continuing with the opening of new orthopaedic departments in both the urban and rural communities. This has been a major factor in driving the orthopaedic market in Spain.
Market Restraints
Figure 8-2 reviews the specific restraints for the absorbable and erodible biomaterials market in Spain respectively. Figure 8-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Spain), 2003-2009
Rank 1 2 3 Driver Budgetary Constraints Restrain Development of Absorbable and Erodible Biomaterials Healthcare Reforms Influence Funding for Absorbable and Erodible Biomaterials Delayed or Late Payments Affect Absorbable and Erodible Biomaterial Suppliers 1-2 Years 3-4 Years 5-6 Years High Medium Medium High High Medium High High Medium
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Budgetary Constraints Restrain Development of Absorbable and Erodible Biomaterials To help reduce the level of expenditure and improve efficiencies within the Spanish healthcare system the devolved INSALUD and the autonomous regions have a global healthcare budget. Individual hospitals have budgets, which they are required to remain within. Individual hospital budgets (the Service Contract (Contrato Programa)) are negotiated with Insalud each year. These result in restrictive hospital budgets where products are purchased in order of priority. Healthcare Reforms Influence Funding for Absorbable and Erodible Biomaterials The discrepancies in the allocation of resources and funding of the SNS lead to the establishment of a parliamentary commission known as the Comisi"n de Anlisis y Evaluaci"n del Sistema Sanitario to examine the state of the SNS. The commission made several conclusions and identified that there were considerable inefficiencies concerning the procurement of medical equipment. They made the recommendation that financing of the healthcare system should be separated from healthcare delivery. In an attempt to strengthen the purchasing position INSALUD published a reform which centralised purchasing of medical equipment and pharmaceuticals in the ten regions which it has direct responsibility. This will result in greater uniformity of prices throughout the ten regions and intensify pricing competition amongst the leading companies. A further consequence of this reform will be the "knock-on" effect to the autonomous regions who will quickly recognise the advantages of the increased purchasing power of Insalud and demand the same pricing structure as that negotiated between Insalud and the manufacturers. D e l ay e d o r L a t e Pa y m e n t s A f f e c t A b s o r b a b l e a n d Erodible Biomaterial Supplier s The Spanish authorities are notoriously poor at making on time payments for products they have purchased. Although this problem has been partially resolved in some regions delays of up to 12 or in some cases 18 months have been recorded. Unfortunately this problem is unlikely to be fully or even partially resolved by the end of the forecast period. Companies who operate in Spain need to take into account these late payments when preparing their P/L accounts and cash flow statements.
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Market Forecasts
Figure 8-3 and Chart 8.2 provides a summary review of the analysis of the revenue forecasts for the Spanish absorbable and erodible biomaterials market. Figure 8-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Spain), 1999-2009
Growth Rate (%) --3.1 5.9 4.5 3.5 3.5 3.5 3.8 4.1 4.4 4.6
($ Million) 33.6 34.6 36.6 38.3 39.6 41.0 42.5 44.1 45.9 47.9 50.2
Chart 8.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Spain), 1999-2009
2003
2004 Year
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It has been estimated that the total market was valued at $33.6 million in 1999. This had increased to an estimated $38.3 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $50.2 million (CAGR 3.9 percent). Frost & Sullivan predict that the market for absorbable and erodible biomaterials used for wound closure applications will grow with a compounded annual growth rate of 2.4 percent over the forecast period. The slow growth rate is for this segment is largely due to the static nature of the large absorbable surgical suture sub-segment. The other sub-segments in this segment are however predicted to grow at a higher rate compensating for the absorbable surgical sutures market. The market for absorbable and erodible biomaterials for orthopaedic applications however is predicted to grow with a compounded annual growth rate of 11.1 percent over the forecast period.

T r e n d s b y P r o d u c t Ty p e Figure 8-4 and Chart 8.3 provides a summary review of the analysis of the percent of revenue forecasts by product type for the Spanish absorbable and erodible biomaterials market over the forecast period.
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Figure 8-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Spain), 1999-2009
Absorbable and Erodible Wound Closure Biomaterials Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 (%) 87.2 86.6 86.2 85.6 84.8 83.8 82.7 81.4 80.0 78.5 77.1 Adsorbable and Erodible Orthopaedic Biomaterials (%) 12.8 13.4 13.8 14.4 15.2 16.2 17.3 18.6 20.0 21.5 22.9
In 1999 the absorbable and erodible wound closure biomaterials market segment represented 87.2 percent of the total Spanish absorbable and erodible biomaterials market. By the year 2002 the absorbable and erodible wound closure biomaterials market segment had declined and represented 85.6 percent of the total market i.e. Frost & Sullivan have determined that in 4 years this segment had lost 1.6 percentage points to the absorbable and erodible orthopaedic biomaterials market. From the market intelligence gathered Frost & Sullivan predict that by the year 2009 the absorbable and erodible wound closure biomaterials market segment will have declined further and will represent 77.1 percent of the overall market. This represents a 10.1 percent increase in the percent of revenues for the absorbable and erodible orthopaedic biomaterials market between 1999 and 2009 and reflects the anticipated compounded annual growth rates expected for this segment.
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Chart 8.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Spain), 1999-2009
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In the past, public sector purchases under $100,000 in value were generally handled by hospital administrators without recourse to tendering. However, this process contravenes EU regulations and the government recently published a new tenders law which stipulates that all public purchases of medical equipment valued at more than Ptas 2 million ($16,000) must now be made by invitations to tender published in the official government journal, the Boletin Oficial del Estado, and two high-circulation national newspapers. Tenders for contracts valued at more than Ptas 102.25 million ($815,000) must also be published in the EU Official Journal. In order to bid for tenders, foreign companies must have a Spanish subsidiary or appoint a recognised representative. Selective tendering is often used by the private sector. The public sector purchasing system is set to undergo considerable upheaval over the next few years as the remaining ten regions take responsibility for their own health services. This will create 17 separate purchasing systems. In addition, there are moves to give hospitals greater autonomy in the field of purchasing. It is anticipated that this will result in an increase in competitor activity as the leading suppliers seek to maintain market share by offering competitive pricing structures and additional discount arrangements. This process is expected to accelerate as the individual autonomous regions establish greater autonomy and seek better value for money.
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Figure 8-5 illustrates the competitive structure of the Spanish absorbable and erodible biomaterials market Figure 8-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (Spain), 2002
Number of Companies in Market 33 Types of Competitors The major multinationals dominate the Spanish market whilst the smaller indigenous companies tend to operate in small, specialised niche markets The leading suppliers operate directly with subsidiaries whilst the smaller companies use distributors 1st Tier includes: Ethicon (J&J), Tyco Healthcare and Baxter International Inc 2nd Tier includes: Biomet Merck, Orthovita and B. Braun 3rd Tier includes: Shire Pharmaceuticals, Genzyme Corporation, Alcon Cus, S.A., CMQ Comercial Medico Quirurgica, S.A. (distributors of WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH), Assut Medical Company and MBA Incorporado S.A., Arthrex, Sofamor Danek (Medtronic), Ethicon (J&J) (Mitek), Stryker, Linvatec (Conmed), Interpore Cross International, Smith & Nephew (Acufex), OsteoTech, Depuy J&J, Mathys Synthes-Stratec, Bionx Implants Inc, Wright Medical Technology, Tutogen Medical, Regeneration Technologies, Teknimed, Biocomposites, Ceraver Osteal, Orquest, Dynagen, Inoteb and Corin Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Joint venture and/or distributor agreements for small and medium-sized manufacturers having proprietary technologies with major suppliers of orthopaedic products Proven Efficacy: It is almost mandatory to provide clinical evidence proving the efficacy of the product
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The market is supplied through a complex mixture of direct subsidiaries and a range of different distribution networks structures. The distribution networks are usually based on the individual geographic regions with head offices based in the major urban centres i.e. Madrid or Barcelona. There are a large number of family owned regional distributors, each with revenues of under $10 million. These are estimated to account for around 75 percent of the total market. The remaining 25 percent is covered by six larger distribution companies (Grupo Taper, Prim, Cormedica, Palex, MAB, Izasa), which operate on a national scale. There are signs that the larger distribution companies irrespective of the range of products they distribute are gaining market share as lengthy delays in payment by public health service operators force out smaller companies. The companies Frost & Sullivan wishes to highlight include: Linvatec Spain Linvatec Spain operates through distributors and does not operate with a direct saleforce. The country manager operating from an office based in Barcelona is responsible for co-ordinating the sales activities of 16 distributors. There is essentially 1 distributor in every geographic region in Spain. Sofamor Iberica SA Sofamor Iberica SA operate a mixed sales force system of direct representatives (known as delegates) and distributors. There is a direct sales force of 10 who are supported by 2 area sales managers. The distributor network is made up of 9 distinct distributors who operate in separate provinces throughout Spain. Smith & Nephew S.A. Smith & Nephew S.A. operates through a Business Manager who in turn is responsible for 4 product specialists and 25 distributors. 18 of these distributors are large usually covering 1 region each and the remaining 7 distributors are small zonal distributors. For management purposes the country is divided into 4 zones. There is one product manager in each zone. The distributors are spread evenly throughout the different regions and autonomous communities e.g. there are 2 in Catalonia, 1 in Canarias Island, 1 in the South, 1 in Cantabria, 1 in Basque Country, 2 in Galicia, 1 in Mallorca, 1 in Zaragoza, etc.
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S TRATEC Medi ca l S .A. STRATEC Medical S.A. is responsible for all orthopaedic products derived from the AO/ASIF techniques and technologies. Mathys does not exist in Spain. They hve a total of about 30 sales representatives. Spain isn't divided into regions. Instead the company is divided into 3 sales divisions so there are some regions that have 3-4 sales representatives and other regions just one.

Figure 8-6 and Chart 8.4 illustrates and lists the market share of the major market participants and the percent change from year to year for the Spanish absorbable and erodible biomaterials market. Figure 8-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Spain), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare Baxter International Inc Biomet Merck Orthovita B. Braun Others Total Market Share (%) 49.3 20.1 12.3 2.9 2.2 2.1 11.1 100 2002/03 Trend No Change Up Up No Change --No Change -----
Note: Others include: Shire Pharmaceuticals, Genzyme Corporation, Alcon Cus, S.A., CMQ Comercial Medico Quirurgica, S.A. (distributors of WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH), Assut Medical Company, MBA Incorporado S.A., Arthrex, Sofamor Danek (Medtronic), Ethicon (J&J) (Mitek), Stryker, Linvatec (Conmed), Interpore Cross International, Smith & Nephew (Acufex), OsteoTech, Depuy J&J, Mathys Synthes-Stratec, Bionx Implants Inc, Wright Medical Technology, Tutogen Medical, Regeneration Technologies, Teknimed, Biocomposites, Ceraver Osteal, Orquest, Dynagen, Inoteb and Corin
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Chart 8.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Spain), 2003
Baxter International Inc Biomet Merck 12.3% 2.9% Orthovita 2.2% B. Braun 2.1% Others 11.1%
Ethicon (J&J) 49.3%
The overall market leader for absorbable and erodible biomaterials in Spain is Ethicon (J&J) with an estimated 49.3 percent of the market. This excludes Ethicon (Mitek) the suppliers of absorbable and erodible orthopaedic biomaterials which would provide an additional 1.2 percent of the overall market. Ethicons (J&J) market leadership position is principally attributed to its very high market share of absorbable sutures. The second largest supplier is Tyco Healthcare with an estimated 20.1 percent of the overall market. Tyco Healthcare through its joint venture with B. Braun i.e. B. Braun Dexon has been attacking the market aggressively in an attempt to win market share and gain competitive advantage over Ethicon. Ethicon in turn have been vulnerable to attack as a result of their long standing market leadership position and the introduction of new and innovative products from their competitors. Baxter International Inc is in third place with an estimated 12.3 percent of the market. Baxter International Inc can attribute most of this market share to its very high share of the tissue sealants market with their branded product Tisseel or Tissucol. Currently they have avery high market share in this market sub-segment but are expected to come under increasing pressure from competitors such as Ethicon who launched a product known as Advaseal in the year 2001 and Tyco Healthcare with a product known as CoSeal (manufacturered by Cohesion Technologies Inc,.) and is distributed by the Tyco Healthcare Group. Biomet Merck is in fourth position with an estimated 2.9 percent of the market as a result of its broad product offering in the absorbable and erodible orthopaedics biomaterials market.
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Market Drivers
Figure 8-7 shows the drivers for absorbable and erodible wound closure biomaterials in the Spanish market. Figure 8-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Spain), 2003-2009
Rank 1 2 Drivers Conversion of Catgut Suture Accounts to Synthetic Absorbable Sutures Stimulates Surgical Suture Market Increased Demand for Cosmetic and Plastic Reconstructive Surgery in Spain Stimulates Biomaterials Market 1-2 Years 3-4 Years 5-6 Years High High Medium Medium Medium Medium
C onv ersion o f Catgut S ut ure Ac c ounts to Sy nthe tic Absorbable Sutures Stimulates Surgical Suture Market Frost & Sullivan have determined that Catgut sutures were banned in Spain at the beginning of 2001 as a result of the the risks related to TSE and the need to source alternative products to intestines of animal origin. This resulted in an increase in demand for absorbable surgical sutures in Spain as a result of the conversion of hospitals from Catgut. The increase in demand continued in the year 2002 but had slower from the initial conversion during 2001. Any increase in demand after 2002 is not expected to be derived from the conversion from Catgut to synthetic absorbable surgical sutures. Biomet Merck is in fourth position with an estimated 2.9 percent of the market as a result of its broad product offering in the absorbable and erodible orthopaedics biomaterials market. Increased Demand for Cosmetic and Plastic R ec onstruc ti ve Surge ry in S pain Sti mulates Biomaterials Market Demand for absorbable surgical sutures is increasing as a result of the increased demand for cosmetic and plastic reconstruction surgery. This demand is being generated both by advances in technological development but also in the introduction of surgical procedures which would have otherwise been impossible a few years ago. In addition through education individuals are being made more aware of the improvements in their quality of life expectations as a result of improvements in healthcare. This has resulted in a general increase in the number of procedures dedicated to cosmetic and plastic reconstructive surgery.
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Market Restraints
Figure 8-8 shows the restraints for absorbable and erodible wound closure biomaterials in the Spanish market. Figure 8-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Spain), 2003-2009
Rank Restraints 1 2 Increased Popularity of Minimally Invasive Surgery Restricts Use of Absorbable and Erodible Wound Closure Biomaterials Purchasing Agencies Restrain Product Pricing and Market Development for Absorbable and Erodible Wound Closure Biomaterials 1-2 Years 3-4 Years 5-6 Years High High High High Medium Medium
Increased Popularity of Minimally Invasive Surgery R e s t r i c t s Us e o f A bs o rba bl e a n d E ro d i bl e Wo u n d Closure Biomaterials Minimally invasive surgery is becoming increasingly popular throughout Spain as a means of reducing patient trauma, reducing blood loss and surgical morbidity. As a result of this increased popularity for many surgical procedures in orthopaedics, cardiology, general surgery and obstretrics and gynaecology the need to make large incision sites which use large umber of absorbable surgical sutures is reduced. It is anticipated that this will have a marked impact on the growth and development of this the largest of the sub-segments over the forecast period. P urchasi ng Age ncie s Re str ai n Product P ri cing a nd Market Development for Absorbable and Erodible Wo u n d C l o s ur e Bi o m at e ri a l s As already discussed the 17 autonomous regions are expected to create individual purchasing agencies each having autonomy to establish best purchasing practises. By law they are required to issue public tenders which are expected to be selective giving rise to a much more competitive purchasing environment adding more pressure on suppliers to reduce prices. This will add to the problems associated with the late payment problems and as a result it is anticipated that there will be a consolidation of the number of smaller distirbutors operating in Spain. Frost & Sullivan predict that this will result in a series of distributor mergers and the formation of larger distributors who will be in a better financial position to manage the changes in the structure of the healthcare system.
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Market Forecasts
Figure 8-9 provides a summary review of the analysis of the revenue forecasts for the Spanish absorbable and erodible wound closure biomaterials market. Figure 8-9 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Spain), 1999-2009
Growth Rate (%) --2.3 5.5 3.8 2.5 2.3 2.1 2.2 2.3 2.5 2.7
($ Million) 29.3 30.0 31.6 32.8 33.6 34.4 35.1 35.9 36.7 37.6 38.6
It has been estimated that the total market was valued at $29.3 million in 1999. This had increased to an estimated $32.8 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $38.6 million (CAGR 2.4 percent). As a result of the banning of absorbable Catgut sutures in the year 2001 the market experienced a one-off increase in sales of the largest sub-segment the synthetic absorbable surgical sutures. This continued in 2002 but at a markedly lower rate. In the year 2002 the absorbable surgical sutures market was estimated the be valued at $24.95 million. The majority of the growth in the market for the rest of the forecast period being attributed to sales of the other smaller market sub-segments i.e. Tissue sealants, surgical adhesives and glues, haemostats and ligating clips.

Although absorbable surgical sutures are fully reimbursed by the Spanish Ministry of Health it is not anticipated that there wil be any major or dramatic prices changes throughout the forecast period for this sub-segment.
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Since most orders received are below the $16,000 threshold after which tenders are required to be issued a significant number of orders are negotiated individually between the hospital purchasing authorities and the supplier. Since the product specifications are known for the replacement of existing products most discussions centre on the level of discount which is requested and which is agreed upon by the negotiating parties. The level of discount provided is normally determined by volume agreements over specified time periods.
Figure 8-10 illustrates the competitive structure of the Spanish absorbable and erodible wound closure biomaterials market. Figure 8-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Spain), 2002
Number of Companies in Market 10 Types of Competitors The leading suppliers operate through direct subsidiaries and act as distributors for small and medium-sized companies who have proprietary technologies Direct subsidiaries and distributors for smaller overseas manufacturers 1st Tier includes: Ethicon (J&J) and Tyco Healthcare 2nd Tier includes: Baxter International Inc and B. Braun 3rd Tier includes: Shire Pharmaceuticals, Genzyme Corporation, Alcon Cus, S.A., CMQ Comercial Medico Quirurgica, S.A. (distributors of WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH), Assut Medical Company and MBA Incorporado S.A Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Joint venture and/or distributor agreements for small and medium-sized manufacturers having proprietary technologies with major suppliers of orthopaedic products Proven Efficacy: It is almost mandatory to provide clinical evidence proving the efficacy of the product
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The market is supplied through a mixture of direct subsidiaries, distributors networks of major overseas manufacturers, local manufacturers and joint venture agreements e.g. B. Braun Dexon S.A. and Tyco Healthcare. The structure of the individual market sub-segments is provided below: Absorbable Surgical Sutures There are only two main companies operating in Spain. These are Ethicon (J&J) and B. Braun-Dexon S.A. B. Braun-Dexon S.A. is a 50-50 joint venture between B. Braun and the American company Tyco Health Care. Consequently sales of absorbable surgical sutures that in other countries would have been divided between B. Braun and Tyco Healthcare in Spain are combined. There are a small number of other smaller suppliers including the Italian based company Assut Medical Company, Alcon Cus, S.A., and CMQ Comercial Medico Quirurgica, S.A. (distributors for WISP). Ti s s u e S e a l a n t s Baxter S.A. in Spain operate directly through their subsidiary and dominate this market subsegment through their product known as Tissucol in Spain. Although Aventis Pharma (formerly known as Centeon) have a license to sell the product known as Beriplast but the company doesn't currently sell this product in the Spanish market. Ethicon launched a product known as Advaseal in the year 2001. This product is primarily for use in sealing pulmonary air leaks after pulmonary surgery. Another product which has recently entered the market is CoSeal (manufacturered by Cohesion Technologies Inc.) and is distributed by the Tyco Healthcare Group. Omrix Biopharmaceuticals, Inc. have have not yet received licensed approval to sell their new fibrin based surgical sealant Quixil(TM), in Spain and have not yet identifed a distributor to sell the product once licensing has been granted. Haemostats There are two main competitors selling haemostats in Spain. These are Ethicon with their product Surgicell and B. Braun with their product Lysostypt. In addition to the principle suppliers FloSeal Matrix Hemostatic Sealant (FloSeal) developed by Fusion Medical Technologies, Inc. having received its CE Mark Certification in April 1999 has been marketed by Baxter International Inc has entered the market and are gaining market share from Ethicon.
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In addition to the internationally recognised haemostasis products the distributor MBA Incorporado S.A. distributes a product known as Avitene. Avitene is a microfibrillar collagen haemostat (MCH) which is used in surgical procedures as an adjunct to haemostasis when control of bleeding by ligature or conventional procedures is ineffective or impractical. This product however is removed and is not classified as an absorbable product. Ligating Clips There are currently 2 competitors in this market. These are Ethicon (J&J) with their product Absolok and Tyco Healthcare with their Laproclip. Surgical Adhesives and Glues The market leader in this market sub-segment is Histoacryl from B. Braun. Despite is leadership position it has come under increasing competitive pressure from US Surgical (Tyco Healthcare), who have been marketing their product Indermil aggressively in Spain, and Dermabond marketed by Ethicon. Adhesion Barriers There are a number of companies currently marketed anti-adhesion biomaterials in Italy. These include:
Adept from Shire Pharmaceuticals (Launched April 2002). Seprafilm sold directly into the Spanish market through Genzyme Biosurgery. Genzyme Biosurgery began selling their Seprafilm product range at the beginning of 1999.
Intergel (previously known as Lubricoat) manufactured by Lifecore Biomedical Inc and marketed by Ethicon
This is a small but growing market and currently about 20 hospitals in total are using these products.
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Figure 8-11 and Chart 8.5 lists and illustrates the market share of the major market participants and the percent change from year to year for absorbable and erodible wound closure biomaterials in Spain. Figure 8-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Spain), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare Baxter International Inc B. Braun Others Total Market Share % 57.5 23.5 14.4 2.5 2.1 100 2002/03 Trend Down Up Up No Change -----
Note: Others include: Shire Pharmaceuticals, Genzyme Corporation, Alcon Cus, S.A., CMQ Comercial Medico Quirurgica, S.A. (distributors of WISP Gesellschaft fur Wissenschaftlichen Apparatebau mbH), Assut Medical Company and MBA Incorporado S.A
Chart 8.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Spain), 2003
Tyco Healthcare 23.5% Baxter International Inc 14.4% B. Braun 2.5% Others 2.1%
Ethicon (J&J) 57.5%
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As a result of the market intelligence gathered during the preparation of this report Frost & Sullivan have determined that the overall market leader for this segment is Ethicon (J&) with an estimated 57.5 percent of the market. Although this is the dominant market position Ethicon (J&J) is coming under increasing competitive pressure from the other major suppliers i.e. B. Braun, Tyco Healthcare, and Baxter International. As already described B. Braun and Tyco Healthcare together are a joint venture under the name of B. Braun Dexon. It is this combined strength that has helped them gain market share from Ethicon especially in the absorbable surgical suture market. As individual components of the joint venture known as B. Braun Tyco Healthcare is considered to be the second largest market shareholder with an estimated 23.5 percent of the market. In combination with B. Braun as B. Braun Dexon this group is estimated to account for a total of 26.0 percent of the market. Baxter International is the third largest supplier with an estimated 14.4 percent of the market whilst individually B.Braun is the fourth largest supplier with an estimated 2.5 percent of the market.
Forecasts
of
the
Absorbable
and
Erodible
Orthopaedic
Biomaterials
Market
Market Drivers
Figure 8-12 shows the drivers for the absorbable and erodible orthopaedic biomaterials market in Spain. Figure 8-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Spain), 2003-2009
Rank Driver 1 2 Growth in Sports Injuries and Treatments Help Increase Demand for Absorbable and Erodible Biomaterials Increasing Number of Orthopaedic Surgeons Boosts Potential for Synthetic Bone Graft Substitutes 1-2 Years 3-4 Years 5-6 Years High High High Medium Medium Medium
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G r ow t h i n S p o r t s I n j u r i e s a n d Tr e a t m e n t s H e l p I n c r e a s e Demand for Absorbable and Erodible Biomaterials The dramatic increase in general sports participation throughout Spain as resulted in a corresponding increase in the number of sports related injuries. There are a number of factors contributing to the growth in sports related injuries. These include:

Increased participation amongst the ageing population. Increased participation in winter sports. Increase in the number of women participating in sports. The general increase in the number of individuals who are actively participating in contact sports such as soccer and rugby.
Increasing Number of Orthopaedic Surgeons Boosts Potential for Synthetic Bone Graft Substitutes As a result of the improved healthcare structure in Spain, an increasing number of surgeons are being trained in surgical specialities, such as orthopaedics. Being new to the field, these surgeons are likely to have less conservative attitudes towards innovative technology. Without the benefit of long experience in using autologous or allograft bone, they are expected to be more open to adopting new substitute materials. Currently, most specialist centres are found in urban areas, but as infrastructure develops further, the demand for improved orthopaedic treatment will also spread to the rural areas.
Market Restraints
Figure 8-13 shows the restraints for the absorbable and erodible orthopaedic biomaterials market in Spain. Figure 8-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Spain), 2003-2009
Rank Restraints 1 2 Disproportionate Provision of Health Care Limits Use in Some Regions High Donation Rates Favours Use of Allograft Tissue for Bone Grafting 1-2 Years 3-4 Years 5-6 Years High Medium High Medium High Medium
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Disp ro port ionat e P rovi sion o f He alth Ca r e Limi ts U se in Some Regions Healthcare budgets are variable in each region, and despite the fact that the government is aiming to reduce this discrepancy, the use of synthetic bone graft substitutes varies very much from region to region. In regions with a smaller budget, the surgeons are likely to use autologous bone as there is no initial outlay cost, whilst in regions with a higher budget, they are more likely to consider the use of synthetic substitutes. H i g h D o n at i o n R at e s Favo u rs Us e o f Al l o g r af t Ti s s u e for Bone Grafting Spain currently has the highest organ donation rate in Europe, with 32 donors per 1 million population. However, only a decade ago, this rate was only three donors per million of the population. The increase in donors has been attributed to the incorporation of transplant coordinators into hospitals. Local co-ordinators can be found virtually everywhere, from the bigger city hospitals to the smaller peripheral hospitals. With the sole responsibility of administering organ donation, these individuals have provided Spain with an effective and efficient organ transplantation system. This includes the donation and transplantation of bone, from both living and cadaveric donors. Consequently, the use of allograft in Spain is stable, as there is not the severe shortage of tissue as seen in some other European countries.
Market Forecasts
Figure 8-14 provides a summary review of the analysis of the revenue forecasts for the absorbable and erodible orthopaedic biomaterials market in Spain. It has been estimated that the total market was valued at $4.3 million in 1999. This had increased to an estimated $5.5 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $11.5 million (CAGR 11.1 percent). Frost & Sullivan predict that significant growth rates in this market segment will occur between 2004 and 2008 when orthopaedic surgeons will have realised the full features and benefits associated with the use of synthetic bone graft substitutes and will have accepted the benefits of absorbable suture anchors, interference screws etc in preference for the cheaper metallic products. The market for absorbable suture anchors, interference screws etc is valued at approximately $1.75 million in the year 2002 whilst the synthetic bone graft substitutes market has been estimated to be worth $3.75 million.
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Figure 8-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Spain), 1999-2009
Growth Rate (%) --8.2 8.5 9.1 9.6 10.0 10.7 11.6 12.1 12.2 11.7
($ Million) 4.3 4.6 5.0 5.5 6.0 6.6 7.3 8.2 9.2 10.3 11.5

This segment is dominated by the requirement that: Bioabsorbable Trauma Products: Product prices in this sector are listed significantly higher than traditional materials. However some surgeons have begun to seeking and winning substantial prices cuts which are beginning to reduce prices to those approaching those of metallic implants. Ultimately it is anticipated that bioabsorbable product prices will match those of metallic implants. Provided that there is sufficient market penetration manufacturers will gradually be forced to reduce prices as demand and competition increases. Currently product prices are on an individual patient basis as the products used may be either reimbursed by the state (through the social security system) or through private healthcare insurance policies. This and volume/discount agreements, competitive factors and issues such as late payments causes a significant variation in product prices throughout Spain. In addition hospitals in some regions purchase directly with the supplier e.g. Catalonia whilst in other regions hospitals are required to issue tenders and the suppliers submit competitive product prices. Bone Graft Substitutes: Companies in the bone graft substitutes market are currently not under significant pressure to reduce prices, as demand is still increasing. Once the market becomes more established, increased competition is likely to force companies to reduce their prices. There will be a slight increase in prices, related to the introduction of new, more advanced and hence more expensive products.
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In 2001-2002, the average price of synthetic bone graft substitutes in Spain was estimated to be $290, this is on a par with the European average. Price is not a particularly sensitive factor in this market, especially considering the costs involved in harvest bone from either the patient or donor.
Figure 8-15 illustrates the competitive structure for the absorbable and erodible orthopaedic biomaterials market in Spain. Figure 8-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure (Spain), 2002
Number of Companies in Market 23 Types of Competitors Distribution Structure Tiers of Competition A wide variety of competitors ranging from multinationals and smaller specialised companies Direct subsidiaries for the leading suppliers and distributors for the smaller more market focused manufacturers 1st Tier includes: Biomet Merck, Orthovita and Arthrex 2nd Tier includes: Sofamor Danek (Medtronic), Ethicon (J&J) (Mitek), Stryker, Linvatec (Conmed), Interpore Cross International and Smith & Nephew (Acufex) 3rd Tier includes: OsteoTech, Depuy J&J, Mathys Synthes-Stratec, Bionx Implants Inc, Wright Medical Technology, Tutogen Medical, Regeneration Technologies, Teknimed, Biocomposites, Ceraver Osteal, Orquest, Dynagen, Inoteb and Corin Notable Acquisitions, Mergers Key End-User Groups No major acquisition or mergers noted Operating Rooms, Spinal Centres cranio-facio-maxillo departments, sports injury clinics and centres of excellence, all public and private hospitals with orthopaedic operating rooms Orthopaedic Consultants and Senior Registrar Orthopaedic Surgeons, Trauma Specialists, Operating Theatre Sisters and Senior Nursing Staff, Accident & Emergency Room Consultants, Hospital Administrators and Key Purchasing Personnel Competitive Factors Technology: This is a rapidly evolving market segment with a considerable amount of research into the osteoconductive properties of a wide range of biocompatible materials. The market has become increasingly competitive as companies seek to develop and market materials, which have distinct and demonstrable advantages over autologous techniques and other synthetically, derived bone substitutes There is also a considerable amount of research being conducted into absorbable materials such as polylactic acids for fracture fixation
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The competitive structure is a highly complex and is made up of the following componenets. Major International Suppliers The leading suppliers typically have a direct subsidiary located in the major urban centres such as Madrid and Barcelona. Examples of leading suppliers would be Ethicon (J&J) (Mitek) and Smith and Nephew. The leading suppliers then supply the market directly through the head office in Spain and or operate at a regional level through distributors. Smith and Nephew for example operates principally through approved distributors. These distributors are spread evenly throughout the different regions and autonomous communities e.g. there are 2 in Catalonia, 1 in Canarias Island, 1 in the South, 1 in Cantabria, 1 in Basque Country, 2 in Galicia, 1 in Mallorca, 1 in Zaragoza, etc. Other suppliers such as Linvatec for example also operate from a centralised head office which co-ordinates the activities of its 16 distributors, essentially one per region. International Suppliers The smaller companies such as Bionx (MBA Incorporado S.A.) Orthovita (PRIM S.A.) and Arthrex (Polymedic) operate through appointed major distributors who have a regional offices throuhgout Spain and then control their activities from outside of Spain normally from the operating headquarters for the company.

Figure 8-16 and Chart 8.6 lists and illustrates the market share of the major market participants and the percent change from year to year for the absorbable and erodible orthopaedic biomaterials market in Spain. The overall market leader is Biomet Merck through its verious outlets i.e. Industrias Quirrgicas de Levante, s.a., Arthrotek, Walter Lorenz Surgical and their distributors for example Acuna & Fombona with an estimated 20.0 percent of the market value. Frost & Sullivan have determined that OrthoVita through the nationwide distributor PRIM S.A. are the market leaders of the bone graft substitute market with the product Vitoss and have an estimated 15.0 percent of the overall market. Arthrex through sales of interference screws by their distributors Polymedic are in third position with an estimated 10.2 percent of the overall market.
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Figure 8-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Spain), 2002-2003
2002 Company Biomet Merck Orthovita Arthrex Sofamor Danek (Medtronic) Ethicon (J&J) (Mitek) Stryker Linvatec (Conmed) Interpore Cross International Smith & Nephew (Acufex) Others Total Market Share (%) 20.0 15.0 10.2 9.5 8.5 7.5 5.5 4.5 4.5 14.8 100 2002/03 Trend Down --Up Up No Change No Change -----------
Note: Others include: OsteoTech, Depuy J&J, Mathys Synthes-Stratec, Bionx Implants Inc, Wright Medical Technology, Tutogen Medical, Regeneration Technologies, Teknimed, Biocomposites, Ceraver Osteal, Orquest, Dynagen, Inoteb and Corin
Chart 8.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (Spain), 2003
Linvatec (Conmed) Interpore Cross 5.5% International Stryker 4.5% 7.5% Smith & Nephew Ethicon (J&J) (Mitek) (Acufex) 8.5% 4.5% Sofamor Danek (Medtronic) 9.5% Others 14.8%
Arthrex 10.2% Biomet Merck 20.0% Orthovita 15.0%
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Sofamor Danek (Medtronic) are in fourth position as a result of sales of the synthetic bone graft substitute BCP, which is manufactured by Bioland Biomateriaux and distributed on their behalf in Spain by Sofamor Danek (Medtronic), with an estimated 9.5 percent of the market. Ethicon (J&J) (Mitek) are in fifth position with an estimated 8.5 percent of the overall market whilst Stryker is in sixth overall position with an estimated 7.5 percent of the market and who are generally regarded as the market leader in endoscopic application of absorbable biomaterials and bone graft substitutes.
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9

The Scandinavian market includes Denmark, Finland, Norway and Sweden. These countries are culturally and geographically related and can be considered as one region. Although the market for each of the countries, which constitute the Scandinavian market, is relatively small they each have their own distinctive social security system, which provide their respective populations with a high standard of healthcare. In essence the health care systems for each of the four countries are as follows: Sweden: The Swedish health care system is a regionally based, publicly operated health service, which operates at three levels. These are national, regional, and local. At the regional level there are 23 County Councils. These are independent regional government bodies, which like the 3 municipalities of Gotland, Gothenburg and Malmo levy proportional income tax on its residents. These taxes are used to finance health care and other services such as social welfare, culture and public transport. Healthcare accounts for 77 percent of the taxes levied. The populations of the County Councils vary considerably ranging from 250,000 to 1.7 million. Sweden provides health care at a local level through the 288 municipalities. These municipalities are not accountable to the County Councils and are organised through the Municipal Executive Board, a Municipal Council and several local government committees. Co-ordination of the activities of the municipalities is the responsibility of the Municipal Executive Board.
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The provision of primary health care is the responsibility of the family physician and is normally delivered through public primary care centres. These health centres are administered by the County Councils and include clinics for children, vaccinations, maternity checkups, general health reviews for individuals and consultations for problems, which may be referred for further investigation in a more specialised unit. There are currently about 950 health centres, each of which provides service to 20,000 to 50,000 inhabitants. Individuals are normally required to make appointments with their family doctors but are able to attend the health centres at certain times of the day without making a prior appointment. The health centres also act as the focal point for community nursing services, which include midwives, physiotherapists etc. Secondary and tertiary services are provided by the 90 hospitals in Sweden. This comprises of regional hospitals, central county hospitals and district county hospitals. Highly specialised treatment is provided through regional medical care system, which comprises six large medical care regions. There are nine regional hospitals of which eight are affiliated to either medical schools or research centres. Norway: The organisational structure of the Norwegian healthcare system is similar to the Swedish system of municipalities and County Councils. Financing of healthcare in Norway is derived from the fiscal budget whose revenues are obtained from general taxation. About 8.6 percent of the tax revenues obtained from employees (as income tax) and employers are used to fund the healthcare system. The contribution made in the taxation of the selfemployed is slightly higher at about 11 percent. The control and monitoring of expenditure, particularly pharmaceutical products, is the responsibility of The National Insurance Administration. The municipal health service includes assistance within the fields of general medical service, outpatients service, physiotherapy, nursing homes, nursing service, health visitor service, midwife service and community nursing. The intention is first and foremost to offer sufficient health service to the local population. Every municipality has one or more council medical practitioner. Furthermore, each municipality may have made agreements with other general practitioners. The organising of the medical service at place of work is common. The municipal health service must also run preventative health services and moreover, provide payments and relief measures for persons doing considerable care work for family members in need of nursing.
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The county health service has different tasks of specialised medical services in and outside hospitals. In need of such service, one must get a referral from the municipal health service. The county health service shall cover most of the population's need for medical diagnosis and treatment, rehabilitation when congenital conditions, births, damage and diseases, which demand, specialised medical care. The county hospitals are divided into central hospitals and local hospitals. Furthermore, the county municipality disposes a certain number of medical specialists in and outside institutions, clinical psychology service, medical laboratories and x-ray institutes. The county municipality must also plan and run the public dental service as well as co-ordinating the public and private dental health services. The regional health service provides highly specialised medical services, which are not offered within each of the county municipalities. The aforementioned is due to rational and professional justification. The country is divided into five health regions, each with its own regional hospital. Private health services comprise private practising health personnel as for example medical doctors, physiotherapists and chiropractors. One also finds approved private hospitals and medical services at place of work within this group. The municipality is responsible for drawing up a plan for the municipal health and social service. Schemes within the health services for firms and for the primary sector should be integrated as part of the plan. The municipality must cooperate with the county municipality and the state in order for the health service in the country to function coherently. The county municipality is responsible for the planning, development and the running of hospitals, hospital wards, maternity wards, patient hostels, specialist services, clinical psychology services, medical laboratories, x-ray institutes and public dental service. All county municipalities shall develop a health plan in order to deal with these tasks. Most of the county municipalities have a health plan, which is approved by the Ministry of Health and Social Affairs. The institutional health services are administered and served by the county municipality through the Chief County Health office. Denmark: Denmark has a well-established national public health care system, which is coordinated by national government who establishes the legal framework and prioritises health care issues. At regional level the 16 counties are responsible for organising and implementing health care policy whilst the municipalities are responsible for organising home care services at a local level. The counties own and manage the hospitals within the county boundaries. Approximately 85 percent of the total funding for the Danish national health care service is provided by general taxation, which is applied at national and county level. The majority of general taxation is derived from income tax levied at county level. The counties are supported financially by central government who provide lump sums based on the population sizes of each county and specific capital equipment requests.
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Finland: Structurally Finland is divided into 12 provinces, which are divided into a total of 455 municipalities. These municipalities have responsibility for arranging basic services such as schooling and healthcare. The populations for each municipality range from between 1,000 to about 500,000 with an average of about 11,000. For specialist medical treatments the country is divided into 21 hospital districts. Each municipality is required to belong to a hospital district, which is responsible for organising specialised medical services and co-ordinating hospital treatment in its own district. The health care system in Finland is mainly taxfinanced. Both the state and the municipalities have the right to levy taxes. About 33 percent of total health care costs are financed by municipal income tax, about 29 percent by the state, 13 percent by the compulsory National State Sickness Insurance (NSSI) Scheme and about 25 percent by private sources. Primary health care is provided mainly in health centres. The health centres are owned by one or several municipalities together and are non-profit-making organisations. There are about 250 health centres in Finland at present. Secondary and tertiary care is provided in hospitals, through inpatient and outpatient departments. There are 5 university hospitals, 17 central hospitals and over 30 less specialised hospitals in Finland. The hospitals are nonprofit making organisations owned by federations of municipalities. In order to get access to a specialist, i.e. to outpatient or inpatient care in a hospital, patients need a referral from their General Practitioner. However, in emergency cases patients can go directly to a hospital emergency unit without referral from their General Practitioner. In the private sector, there is direct access to private specialists. Private doctors can refer patients to public hospitals. The patients cannot choose the hospital where they will be treated. Hospitals try to allow patients to choose their hospital doctor. Those who use their services, i.e. the services provided by the municipalities finance hospitals. Hospital revenues depend on how much and what kind of services the municipalities purchase from them. The most common method of pricing hospital services is pricing by bed day. Bed day prices are often divided into categories or groups according to the range and level of care needed by a patient. The number of patients and the number of episodes treated in hospitals have increased in recent years, alongside a decline in the mean length of stay. The different Scandinavian regions differ in importance for the total Scandinavian market. Sweden is the most important Scandinavian country in terms of population and wealth, followed by Denmark and Norway. Finland is the smallest market, but reflects similar patterns to its larger neighbours.
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Chart 9.1 shows the market engineering research measurements for the Scandinavian absorbable and erodible biomaterials market as it appeared in 2002. Chart 9.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements
(Scandinavia), 2002
Market Research
Market Engineer
Market Strategy
Implementation
Market Planning
Potential revenues (maximum future market size) Replacement rate (average period of unit replacement) Market concentration (percent of 2002 market controlled by top three competitors) Number of competitors (active market competitors in 2002) Key: Scandinavia = Denmark, Finland, Norway and Sweden
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Market Drivers
Figure 9-1 review the specific drivers for the absorbable and erodible biomaterials market in Scandinavia respectively. Figure 9-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Scandinavia), 2003-2009
Rank 1 Drivers Measures to Reduce Waiting Times for Elective Surgery throughout Scandinavia Helps Stimulate the Absorbable and Erodible Biomaterials Market Increased Participation in Winter Sports with a Corresponding Increase in Winter Sports Injuries Scandinavia = Denmark, Finland, Norway and Sweden
1-2 Years 3-4 Years 5-6 Years High High High
High
High
Medium
Key:
M e a s u r e s t o R e d u c e Wa i t i n g Ti m e s f o r E l e c t i v e S u r g e r y t hroughout Sc andi nav ia He lps Stimul ate t he Absorbable and Erodible Biomaterials Market In addition to Ireland and the UK, where the problems of waiting lists are most acute, the Netherlands, Spain, Sweden, Finland and Denmark have each endured differing degree of waiting list difficulties. Often, it is a regional and/or sectional problemas opposed to a national problem. There are however a number of national and regional initiatives that have been or are in the process of being introduced which are anticipated to alleviate or reduce waiting times. These include the listing of waiting lists on Internet sites in Sweden. This allows every resident has access to all healthcare providers regardless of where he or she lives in the region. In Stockholm the city's large concentration of health services gives them a unique freedom of choice within the tax-financed system. No payment is required to get access to specialists. Many other regions have reduced the public's range of options with the use of gatekeepers and other restrictions like waiting lists. Compared to almost every other large city in Sweden, waiting lists for examination and treatment are short. A consumer guarantee states that you must get your operation within three months time. If you don't, you are entitled to treatment anywhere with quicker access, in Sweden or abroad. For example a primary hip replacement. In Stockholm and a couple of other cities you can be treated within a maximum of six weeks. Four out of five of the most available clinics are found in the Stockholm area. But if you insist on going to the nearest hospital and live in Gothenburg, Ume or Arvika, you can count on waiting at least 104 weeks. For ordinary prostate surgery, you wait four weeks in Stockholm and between 90 and 156 weeks in most parts of Sweden. (Details for a variety of services are posted in Swedish at http://sas.lf.se/appl/html/rapport/ start_behandling).
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I n c r e a s e d Pa r t i c i pat i o n i n Wi n t e r S p o r t s w i t h a Corresponding Increase in Winter Sports Injuries Winter sports is a way of life throughout Scandinavia and consequently the number of winter sports related injuries is high in Scandinavia compared to other European countries. Crosscountry skiing is thought to cause fewer acute injuries than running or downhill (Alpine) skiing. However, the sport's true injury incidence is difficult to establish because recreational skiers ski wherever snow is available and not necessarily at ski areas that provide immediate medical assistance and recording of injury data. Smith and associates recently reviewed existing injury statistics and estimated that 0.49 to 5.63 injuries occur per 1,000 skier days. Boyle and colleagues reported that the majority of acute injuries occur on downhill runs. Lightweight fiberglass and graphite skis became available in the mid-1970s, and additional improvements in trail grooming and equipment technology have allowed speeds on some downhill terrain to approach 80 km/hr (50 mph). Skiing styles and injury patterns Cross-country skiers use two techniques: the classical, or diagonal stride, technique and the skating, or freestyle, technique. The two styles involve slightly different equipment and result in somewhat different stresses to muscles and joints. Historically, classical skiing was the predominant technique, and it is still practiced today by all levels of skiers. In this technique, the skier keeps both skis pointed straight ahead and obtains forward thrust by pushing off from the "kick zone" in the middle of one ski while the other glides forward. The pushing ski is aligned flat on the snow. Pushing with the poles provides additional thrust. Since the mid-1980s, the skating technique has become increasingly popular. With this method, the legs are alternately pushed outward to each side as in speed skating, rather than directly backward as in the classical stride. The skating technique has led to new equipment design, such as shorter skis with an altered flexibility pattern, longer poles, and higher boots on a more stable binding. Traditional boots used in classical skiing lack a heel fixation device, which has been thought to result in fewer lower extremity injuries than in Alpine skiing. The newer boots and bindings, however, offer more rigidity and stability and may shift injury patterns over time toward those of Alpine skiing. Recent improvements in trail grooming, such as wider paths of packed snow, have allowed classical and freestyle skiers to ski at higher speeds, but also to avoid hazards and ski with greater control.
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Lower extremity The lower extremity is at greatest risk for injury in cross-country skiing and is affected in just over half of skiing injuries. Medial collateral ligament sprain: The most common lower extremity injury noted by Smith and associates was medial collateral ligament sprain of the knee. Anterior cruciate ligament and meniscus injuries: High-speed falls and falls involving twisting of the knee may signal injury to the anterior cruciate ligament or meniscus. Ankle injuries: Ankle injuries are also common, particularly the acute inversion ankle sprain. Upper extremity About one third of traumatic cross-country skiing injuries involve the upper limb. "Skier's thumb": Smith and associates found ulnar collateral ligament injury to the thumb metacarpophalangeal joint, or skier's thumb, to be the most common upper limb injury. Proper poling necessitates passing the hand through the loop of the pole strap and then grasping both the strap and pole in the palm. If the skier falls, the pole may lever the thumb into abduction and extension, thereby stressing the ulnar collateral ligament. Acromioclavicular joint separation: Acromioclavicular joint separation is a common injury among cross-country skiers. This injury can occur when the skier falls directly on the shoulder. Head, Neck, and Trunk Only about 10 percent of injuries in cross-country skiing involve the head, neck, and trunk. Such injuries can include compression fractures of the body of the lumbar vertebrae or fracture of the coccyx resulting from falls. Overuse injuries Various overuse injuries--injuries not related to a single traumatic incident--can occur with both the classical and skating styles of skiing. The increasing popularity of skate skiing may increase the rate of such injuries. The Swedish national team reported that 75 percent of its injuries from the 1983 and 1984 seasons, when skate-skiing predominated, were from overuse; the most common of these were medial tibial stress syndrome, Achilles tendon problems, and low back pain. Patellofemoral syndrome is also common.
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Market Restraints
Figure 9-2 reviews the specific restraints for the absorbable and erodible biomaterials market
in Scandinavia respectively. Figure 9-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Scandinavia), 2003-2009
Rank Restraints 1 2 Movement towards Minimal Access Reduces Potential for Absorbable and Erodible Wound Closure Products Requirement to Prove Clinical Efficacy through Technological Assessment and/or Economic Analysis Restrains Market Development in Scandinavia Scandinavia = Denmark, Finland, Norway and Sweden
1-2 Years 3-4 Years 5-6 Years High High High High High High
Key:
Move ment towar ds Min imal Acc ess R educes Po tential f o r Ab s o r bab l e an d E ro d i b l e Wo u n d Cl o s u re Pro d u ct s One of the major changes in surgery over the past decade has been the movement toward less-invasive access to the human body by minimisation of incision length. The advent of minimally invasive surgery has dramatically reduced the size of incisions used to gain access to the operative site. Cardiac surgery for acquired heart disease for example can involve significant surgical insult in order to effect the required structural repairs. The physiological and psychological stresses surrounding cardiac surgery are primarily related to how much invasion is necessary to enter and leave the chest, plus the trauma from ancillary support techniques such as cardiopulmonary bypass (CPB) and cardioplegia. The minimally invasive surgical strategies that have been developed over the past several years have focused on reducing or eliminating surgical trauma while making effective and lasting surgical repairs. Coronary revascularisation has been the main beneficiary of these new techniques, although significant strides have also been made in cardiac valvular surgery, arrhythmia surgery, and congenital cardiac surgery.
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There are several new directions being pursued in minimally invasive cardiac surgery, including using smaller or more directed "limited incisions" to access and repair only the area of interest on the heart. Coronary grafting is also now being done off-pump without the haemodynamic support of CPB or the "still heart" achieved by using cardioplegia. Conduits for bypass grafting are being harvested in a less invasive fashion, and robotic technology is now allowing some cardiac surgery to be done solely through intercostal trocar ports. An array of other enabling techniques are also being developed. Any technological advances which reduce the incision site results in a corresponding reduction in demand for wound closure devices. Since the absorbable and erodible wound closure market is directly linked to the number of open procedures carried out then any method used to reduce incision sites will result in a reduction in demand for these products. Requirement to Prove Clinical Efficacy through Te c h n o l o g i c a l As s e s s me n t a n d / o r E c o n o m i c A n alys i s Restrains Market Development in Scandinavia Growing pressure on cost containment and the requirement to provide proof of efficacy means that developers of new medical technology have to consider more than just the regulatory and legislative requirements to bring their devices to market. Cost-effectiveness data are taking on a greater significance in gaining market acceptance for healthcare purchasers whilst proven efficacy through clinical trials are being required to supports the promotional claims made by the manufacturers. Although devices, which are purely line extensions do not require outcomes data, new proposed introduction of new technologies increasingly needs to be supported with evidence from cost studies. The end-points of these studies should be to provide the result of clinical effectiveness and health-related quality of life studies as well as being able to demonstrate resource utilisation and on-going costs. There are no specific procedural or health economic methodology requirements when carrying out health economic studies. The type and structure of the study carried out should be customised to the needs of a particular institution or should be structured to clearly demonstrate the differences between existing technologies or techniques.
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Without proven clinical efficacy and the ability to provide cost-studies it is becoming increasingly difficult to gain market access and acceptance for new technologies throughout Scandinavia.
Market Forecasts
Figure 9-3 and Chart 9.2 provides a summary review of the analysis of the revenue forecasts for the Scandinavian absorbable and erodible biomaterials market. Figure 9-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Scandinavia), 1999-2009
Revenue Revenues Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Compound Annual Growth Rate (2002-2009): 7.4% Key: Scandinavia = Denmark, Finland, Norway and Sweden
Growth Rate (%) --4.8 5.1 5.6 6.1 6.7 7.2 7.6 7.7 8.0 8.3
($ Million) 24.6 25.7 27.1 28.6 30.3 32.3 34.7 37.3 40.2 43.4 47.0
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Chart 9.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Scandinavia), 1999-2009
Revenues ($ Million) 50 45 40 Revenues ($ Million) 35 30 25 20 15 10 5 0 1999 2000 2001 2002 2003 2004 Year 2005 2006 2007 2008 2009
Key:
Scandinavia = Denmark, Finland, Norway and Sweden

It has been estimated that the total market was valued at $24.6 million in 1999. This had increased to an estimated $28.6 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $47.0 million (CAGR 7.4 percent). The highest growth rates are anticipated to be derived from the growth in the absorbable and erodible orthopaedic biomaterials market. The growth in this segment being due to the increase in sports injuries and as a result of the acceptance by clinicians of synthetic bone graft substitutes. The market for absorbable and erodible wound closure biomaterials is anticipated to exhibit the lowest growth rates. This is due principally to the relatively static and mature nature of the largest sub-segment the absorbable surgical sutures.
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T r e n d s b y P r o d u c t Ty p e Figure 9-4 and Chart 9.3 provides a summary review of the analysis of the percent of revenue forecasts by product type for the Scandinavian absorbable and erodible biomaterials market over the forecast period. Figure 9-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Scandinavia), 1999-2009
European Absorbable and Erodible Biomaterials Market Absorbable and Erodible Wound Closure Biomaterials Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Key: Scandinavia = Denmark, Finland, Norway and Sweden
Adsorbable and Erodible Orthopaedic Biomaterials (%) 8.2 9.0 10.0 11.2 12.6 14.3 16.1 18.1 20.0 22.0 24.1
(%) 91.8 91.0 90.0 88.8 87.4 85.7 83.9 81.9 80.0 78.0 75.9
In 1999 the absorbable and erodible wound closure biomaterials market segment represented 91.8 percent of the total Scandinavian absorbable and erodible biomaterials market. By the year 2002 the absorbable and erodible wound closure biomaterials market segment had declined and represented 88.8 percent of the total market.
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Chart 9.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Scandinavia), 1999-2009
99
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From the market intelligence gathered Frost & Sullivan predict that by the year 2009 the absorbable and erodible wound closure biomaterials market segment will have declined further and will represent 75.9 percent of the overall market. This represents a 15.9 percent increase in the percent of revenues for the absorbable and erodible orthopaedic biomaterials market between 1999 and 2009 and reflects the anticipated compounded annual growth rates expected for this segment. This increase in the share or proportion of the overall market attributed to absorbable and erodible orthopaedic biomaterials is due to the acceptance of these products by clinicians and the greater sales and marketing promotional activity being conducted by the leading suppliers. This segment is beginning its rapid growth phase of its product life cycle whereas the dominate and largest sub-segment of the absorbable and erodible wound closure biomaterials i.e. absorbable surgical sutures is in mature and static stage of its life cycle with growth occurring only as a result of an increase in the total number of surgical procedures carried out.
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The majority of hospital purchasing authorities in Scandinavia with exceptions, tend to purchase the products covered in this report directly with appointed distributors or through the customer services department of country subsidiaries. This process occurs as and when the products are required or as a means of replenishing consignment stocks held in the operating theatres. Hospitals would have either established a price/volume discount structure or would negotiate favourable terms and conditions with the supplier based on the volume of previous orders or through a usage agreement based on anticipated usage. Marketing management having established the cost prices would then determine the profit margins, which meet their financial objectives and then establish a price/volume discount structure, which meets their marketing objectives. It is anticipated that this process will continue throughout the forecast period. For the mature, established products such as the absorbable surgical sutures prices are expected to increase as a result of small incremental price increases each year. Prices for products, which are gaining market acceptance and moving towards the rapid growth phase of their life cycle, are expected to decline. Annual revenues for these products are expected to increase as a result of a dramatic increase in volume.
Figure 9-5 illustrates the competitive structure of the Scandinavian absorbable and erodible biomaterials market. The Scandinavian market comprises a complex mixture of local indigenous distributors, direct subsidiaries of the major overseas suppliers and local manufacturers. Details of the individual indigenous suppliers are provided in each of the market segment reviews. Typically the distributors are small and may range from as few as 3 individuals up to about 15 individuals for example the distributors for Arthrex in Sweden (Artroline) comprises two individuals who are the owners and a secretary. The major suppliers such as Ethicon (J&J), Smith and Nephew, Tyco Healthcare, Baxter and B. Braun have large subsidiaries in each country. The subsidiaries based in Sweden tend to be the centre of management operations for Scandinavia with the marketing management teams based in these subsidiaries.
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Figure 9-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (Scandinavia), 2002
Number of Companies in Market 26 Types of Competitors The market is dominated by the multinational manufacturers of absorbable sutures i.e. Ethicon (J&J) and Tyco Healthcare. There are however other major multinational manufacturers and suppliers who are entering this market. In addition there are a number of smaller companies present in the market specialising in niche markets The market comprises a complex mix of direct subsidiaries for the major multinational manufacturers and distributors within each Scandinavian country for other manufacturers 1st Tier includes: Ethicon (J&J) and Tyco Healthcare 2nd Tier includes: Baxter International Inc and B. Braun, Bionx Implants Ltd 3rd Tier includes: Biomet Merck, Arthrex, Smith & Nephew (Acufex), Ethicon (J&J) (Mitek), Linvatec (Conmed), Sofamor Danek (Medtronic), Depuy J&J (Bioland), Stryker, Aesculap (B. Braun), Shire Pharmaceuticals, Genzyme Biosurgery, Alcon Laboratories, Goretex, Assut Medical Company, Confluent Surgical Inc, Artimplant, Inion Ltd, Orthovita, SulzerMedica (Centerpulse), Atlantech and Resorba Wundversorgung Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity is forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Manufacturers seeking competitive advantage need to secure a distributor agreement with a major distributor in each individual Scandinavian country Key: Scandinavia = Denmark, Finland, Norway and Sweden

Figure 9-6 and Chart 9.4 illustrates and lists the market share of the major market participants and the percent change from year to year for the Scandinavian absorbable and erodible biomaterials market.
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Figure 9-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Scandinavia), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare Baxter International Inc B. Braun Bionx Implants Inc Biomet Merck Others Total Key: Scandinavia = Denmark, Finland, Norway and Sweden Market Share (%) 50.8 17.4 12.5 6.6 4.0 1.6 7.1 100 2002/03 Trend Down (slightly) Up No Change Up (slightly) No Change Up -----
Note: Others include: Arthrex, Smith & Nephew (Acufex), Ethicon (J&J) (Mitek), Linvatec (Conmed), Sofamor Danek (Medtronic), Depuy J&J (Bioland), Stryker, Aesculap (B. Braun), Shire Pharmaceuticals, Genzyme Biosurgery, Alcon Laboratories, Goretex, Assut Medical Company, Confluent Surgical Inc, Artimplant, Inion Ltd, Orthovita, SulzerMedica (Centerpulse), Atlantech and Resorba Wundversorgung
The overall market leader for the Scandinavian absorbable and erodible biomaterials market is Ethicon (J&J) with a total estimated market share of 50.8 percent. This is a combination of its share of the absorbable and erodible wound closure biomaterials market and their share of the absorbable and erodible orthopaedic biomaterials. Tyco Healthcare is the second largest market shareholder with an estimated 17.4 percent of the overall market. Tyco Healthcare have taken or gained market share from Ethicon (J&J) as a result of their aggressive marketing policy and increasingly higher profile amongst their customers throughout Scandinavia.
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Chart 9.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Scandinavia), 2003
Baxter International Inc 12.5% B. Braun 6.6% Bionx Implants Inc 4.0% Biomet Merck 1.6% Others 7.1%
Ethicon (J&J) 50.8%
Key:

Baxter International Inc is in third position with an estimated 12.5 percent of the total Scandinavian absorbable and erodible biomaterials market. Baxter International Inc owes its market share to its high market share of the tissue sealants market. Baxter International Inc may however expect increased competitive activity from new market entrants with the result that its market domination of this sub-segment is expected to be challenged over the forecast period. B. Braun is in fourth position with an estimated 6.6 percent of the total Scandinavian absorbable and erodible biomaterials market. B. Braun owes its market share to its presence in the absorbable surgical suture market and as a result of its high market share in the surgical adhesives and glues market. Once again it is expected that B. Braun will come under increasing pressure from their competitors in this sub-segment throughout the forecast period. Conversely B. Braun has only recently entered the absorbable surgical sutures market and has successfully established a presence in this market and is expected to gain market share from Ethicon (J&J) over the forecast period.
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Forecasts Wo u n d
of
the
Absorbable
and
Erodible
Closure
Biomaterials
Market

Figure 9-7 and Figure 9-8 show the drivers and restraints for absorbable and erodible wound closure biomaterials in the Scandinavian market.
Market Drivers
Figure 9-7 shows the drivers restraints for absorbable and erodible wound closure biomaterials in the Scandinavian market. Figure 9-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Scandinavia), 2003-2009
Rank 1 2 Drivers Initiatives to Reduce Waiting Lists Helps Stimulate Growth in Absorbable and Erodible Wound Closure Biomaterials Recognition of Adhesions as a Major Clinical Problem Helps Stimulate Interest in Adhesion Barriers Scandinavia = Denmark, Finland, Norway and Sweden
1-2 Years 3-4 Years 5-6 Years High High High Medium High Medium
Key:
I n i t i at i v e s t o R e du c e Wa i t i n g L i s t s H e l p s S t i m u l a t e G row t h i n A bs o rba bl e a n d E ro d i bl e Wo u n d C l o s u r e Biomaterials The Scandinavian countries have a recognisable problem relating to hospital waiting times. For example since the late 1980s waiting times for treatment in hospitals have been considered the main political problem in the Danish health care sector. The proportion of patients waiting over three months has been relatively stable at about 7 percent during the last ten years. To increase activity and reduce waiting times successive governments have tried several instruments, primarily allocating more resources to the hospitals. There has actually been an increase in activity at the somatic hospitals; between 1990 and 2000, the number of discharges increased by more than 63,000.
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In principle, the county councils' double responsibility for taxes and services is the basic costcontaining mechanism and efficiency driver in the system. However, due to central government responsibility for overall economic policy and national health care priorities, the government and the counties negotiate general guidelines for each year's budget. Traditionally the state has distributed resources to the counties by giving them block grants based on objective needs criteria, such as age and social and structural needs. But this way of financing is under pressure these days due to the political priority given to the reduction of waitingtimes in hospitals. Both the state and the counties are trying different activity-based models to give the hospitals incentives to increase activity. The liberal government, which came to power in November 2001, has introduced an activity-based system of payment, and earmarked 1.5 billion DKK to the project of reducing waiting times. At the regional level the counties have traditionally only financed their hospitals by using global budgets, but they have also introduced different models of fee-for-services themselves. But there are certain limits as to how more resources can be used effectively to increase activity and reduce waiting times. In some parts of the country there is a staff shortage among doctors and nurses. Another solution has been to reorganise the structures of the hospitals. In 1999, the government made a comprehensive agreement with the counties concerning a three-year plan for the future development and structure of the hospital system in Denmark. The plan covers a number of initiatives e.g. reduction of waiting lists, publication of quality indicators of each ward or hospital, targets for productivity, schemes for further planning and information during treatment in hospital, arrangements of partial activity-based financing, implementation of a new medical post-graduate education, further extension of electronic case records and other sorts of information technology and an increased quality and activity in cancer treatment. Furthermore, the agreement introduces a new hospital structure in Denmark, the so-called functional units, in which the activities in each county are to be merged into larger physical or organisational units across the existing hospitals in order to obtain better quality and efficiency in treatment. It is anticipated that these initiatives will reduce waiting lists with the consequences that more elective surgery will be carried increasing demand for absorbable and erodible wound closure biomaterials. Recognition of Adhesions as a Major Clinical Problem Helps Stimulate Interest in Adhesion Barriers Surgeons throughout Scandinavia are acutely aware of the problems associated with the formation of post-operative adhesions. Adhesions are bands of tissue that connect anatomic sites at locations where there should not be connections. Adhesions can have a significant impact on an individual's health and well being; problems that they cause represent a major component to the health care costs.
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The incidence of adhesions following abdominal and pelvic surgical procedures is reported to range from 5594 percent with adhesions forming in an average of 8085 percent of all patients undergoing these surgical procedures. Certain surgical procedures have a higher incidence of adhesion formation.

Cholecystectomy Appendectomy Clonic surgery (large colon and small bowel) Pevic surgery (surgery on uterus, fallopian tubes, ovaries)
Traditionally, major clinical concerns associated with post-operative adhesion formation are infertility, abdominal pelvic pain, and small obstruction. Therefore, it is increasingly being recognisd that adhesions to the abdominal incisions are of major significance because they may prolong and complicate re-entry into the abdominal cavity at the time of a subsequent surgical procedure. If these injuries are unrecognised at the time of surgery, bowel injury can lead to generalised peritonitis, requiring additional surgical procedures to correct the injuries, and can be life threatening leading to prolonged hospitalisation. Since surgeons recognise the problems associated with the formation of post-operative surgical adhesions products which can be proven to reduce the formation of adhesions are seen as having a major market opportunity.
Market Restraints
Figure 9-8 shows the restraints for absorbable and erodible wound closure biomaterials in the Scandinavian market. Figure 9-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Scandinavia), 2003-2009
Rank Restraint 1 1-2 Years 3-4 Years 5-6 Years High Medium
Advent of Minimally Invasive Surgical Techniques Restrains High Market Development of Absorbable and Erodible Wound Closure Biomaterials Increased Popularity of High-Tech Alternatives to Traditional Wound Closure Methods Scandinavia = Denmark, Finland, Norway and Sweden Medium
Medium
Medium
Key:
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Advent o f Min ima lly Invasive Surg ical Techn iques Restrains Market Development of Absorbable and E ro d i bl e Wo u n d C l o s u r e B i o m at e r i a l s The advent and development of minimally invasive technologies into a variety of different surgical disciplines has had a dramatic effect on the way surgery is carried out. For example, in the past decade, the face of cardiac surgery has been changed by a number of technologic advances, most notably the development of less invasive techniques, including minimally invasive direct coronary artery bypass (MIDCAB), off-pump coronary artery bypass (OPCAB), and minimal access valve surgery. Initial attempts to perform cardiac operations through small incisions were hindered by the absence of appropriate accessory technology, such as visualisation systems, retractors, stabilisers, and alternate methods of vascular cannulation and cardiopulmonary bypass. With the development of these technologies, surgeons have been increasingly able to perform complex cardiac procedures, including coronary artery bypass, mitral and aortic valve replacement, and atrial septal defect (ASD) closure, through smaller -than-traditional incisions. Nonetheless, in many cases, the extent to which incision size has been reduced by these minimally invasive approaches has been matched by a corresponding increase in technical difficulty and operative time, due to the constraints imposed by limited or incomplete cardiac exposure. For example, MIDCAB, in which a single vessel bypass to the anterolateral surface of the heart is achieved through a small anterior mini-thoracotomy, requires internal mammary artery graft harvesting by thoracoscopy, which even in the most experienced hands, is time consuming and technically challenging. Furthermore, the decreased visualisation through small thoracotomy incisions has led to a significant incidence of complications with this procedure. However despite this with the development of new technologies, surgeons have been increasingly able to perform complex cardiac procedures through smaller-than-traditional incisions. This in turn has reduced the requirement for wound closure at different tissue levels with the corresponding decrease in demand for the total number of sutures which would otherwise have been required. I n c r e a s e d P o p u l a r i t y o f H i g h - Te c h A l t e r n a t i v e s t o Tr a d i t i o n a l Wo u n d C l o s u r e M e t h o d s Haemostasis is fundamental in most forms of surgery. There are several methods of achieving haemostasis, including clips, sutures and haemostatis products such Surgicell from Ethicon (J&J) and Lyostypt marketed by B. Braun. In addition to these products the introduction of energy based thermal coagulation devices such as laser coagulation using Nd:YAG laser, ultrasonic coagulation and monopolar and bipolar electrosurgical coagulation have reduced the potential for absorbable biomaterials.
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New alternative methods of achieving haemostasis have also been developed for use in place of clips, sutures and energy-based ligation methods. This includes products like the LigaSure Vessel Sealing System developed by ValleyLab. This product has been designed to seals vessels 1 mm to 7 mm in diameter with minimal sticking, charring or thermal spread. Tissues can be sealed without dissection or vessel isolation, which can cause unnecessary bleeding. Use of the LigaSure Vessel Sealing System for urologic surgery has shown a significant reduction in blood loss, which may decrease the need for blood transfusions.
Market Forecasts
Figure 9-9 provides a summary review of the analysis of the revenue forecasts for the Scandinavian absorbable and erodible wound closure biomaterials market. Figure 9-9 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Scandinavia), 1999-2009
Growth Rate (%) --3.9 4.0 4.2 4.4 4.7 4.9 5.1 5.2 5.3 5.4
($ Million) 22.5 23.4 24.4 25.4 26.5 27.7 29.1 30.6 32.2 33.9 35.7
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It has been estimated that the market for neck bracing and supports equipment was valued at $22.5 million in 1999. This had increased slightly to an estimated $25.4 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $35.7 million (CAGR 5.0 percent). The value of the absorbable surgical sutures market is the largest single sub-segment and has been estimated to be valued at approximately $19.5 million in 2002. Revenue annual growth rates are expected to increase by between 3-4 percent whilst volume usage at best is expected at best to remain static and at worst decline slightly. The value of the tissue sealants market has been estimated to be valued at approximately $3.6 million with annual growth rates estimated to be between 10-12 percent per annum. The value of the haemostat market in Scandinavia has been estimated to be valued at $1.75 million and the adhesives and glues market has been estimated to be valued at $0.45 million. The ligation clip market has been valued at $75,000 whilst at the time of writing the adhesive barriers market is probably only worth about $20,000. It is however that the haemostat, tissue sealant market and the adhesion barrier sub-segments will grow at an estimated 12-15 percent per annum over the forecast period.

The cost of all the products included within this market segment are covered by the hospital and consequently reimbursement issues are not a problem throughout Scandinavia. Products would normally be purchased via distributors, wholesalers or alternatively directly from the manufacturers customer services department if the company operates through direct subsidiaries. The pricing strategy is based on volume and discounts particularly for absorbable surgical sutures vary accoridng to volume and may be as high as 25 percent off the list price.
Figure 9-10 illustrates the competitive structure of the Scandinavian absorbable and erodible wound closure biomaterials market. The market is supplied through a mixture of direct subsidiaries and a network of distributors from major overseas manufacturers in each of the individual countries that constitute Scandinavia.
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Figure 9-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Scandinavia), 2002
Number of Companies in Market 11 Types of Competitors The market is dominated by the multinational manufacturers of absorbable sutures i.e. Ethicon (J&J) and Tyco Healthcare. There are however other major multinational manufacturers and suppliers who are entering this market. In addition there are a number of smaller companies present in the market specialising in niche markets The market comprises a complex mix of direct subsidiaries for the major multinational manufacturers and distributors within each Scandinavian country for other manufacturers 1st Tier includes: Ethicon (J&J) and Tyco Healthcare 2nd Tier includes: Baxter International Inc and B. Braun 3rd Tier includes: Shire Pharmaceuticals, Genzyme Biosurgery, Alcon Laboratories, Goretex, Resorba Wundversorgung, Confluent Surgical Inc and Assut Medical Company Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity is forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Manufacturers seeking competitive advantage need to secure a distributor agreement with a major distributor in each individual Scandinavian country Key: Scandinavia = Denmark, Finland, Norway and Sweden
Absorbable Surgical Sutures The original absorbable suture materials manufactured from processed collagen derived from the submucosa of animal intestines and classified as either plain and chromic "cat gut," sutures have been banned in Norway but has not been banned as such in Denmark, Sweden and Finland. In Denmark, Sweden and Finland however there is a recommendation by the health authorities that synthetic absorbable surgical sutures are used in preference to cat gut," sutures.
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This has been as a direct response to the consequence that there is a possibility that patients may be at risk from Transmissible Spongiform Encephalopathies (TSE) and other transmissible infections as a result of the identification and the emergence of Bovine Spongiform Encephalopathy (BSE) and its variant Creutzfeldt-Jakob Disease (vCJD) during the 1980s. As a result all absorbable sutures in Scandinavia are manufactured from synthetic materials to avoid the problems associated with the BSE problem. There are two main suppliers in Scandinavia. These are Ethicon (J&J) and Tyco Healthcare. In addition to these two major suppliers B. Braun is the only other recognised major supplier of absorbable surgical sutures in Scandinavia. The three main suppliers operate through direct subsidiaries rather than through distributors. In addition to these, the major suppliers there are a number of smaller niche suppliers i.e. Alcon laboratories, suppliers of absorbable sutures for ophthalmic surgery, through their subsidiaries, Alcon L_kemedel Nordiska Ab, Alcon Finland Oy, Alcon Denmark, Aps and Alcon Norge As. In addition Gore Tex supplies absorbable surgical sutures specifically for cardiovascular surgery. Ti s s u e S e a l a n t s The market for tissue sealants in Scandinavia is dominated by Baxter International with Tissucol. Neither Aventis with Beriplast or Nycomed with their product Tachocomb are currently present in Scandinavia. Nycomed are planning on introducing Tachocomb throughout Scandinavia by early 2004. Haemostats There are essentially two products on the market throughout Scandinavia. These are Surgicell from Ethicon (J&J) and Lyostypt marketed by B. Braun. Although not currently present in the Scandinavian market the product known as CoStasis has received some recent publicity as a result of the acquisition of Cohesion Technologies, Inc by Angiotech Pharmaceuticals, Inc. Ligating Clips There are essentially two ligation clips sold into the Scandinavian market. These are Absolok sold by the Mitek division of Ethicon and Laproclip marketed by Tyco Healthcare.
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Surgical Adhesives and Glues Until 1999 Histoacryl marketed by B. Braun through their direct subsidiaries in Sweden, Finland, Norway and Denmark dominated this market. At that time Ethicon and Tyco Healthcare entered the market with the products Dermabond and Indermil respectively. As a result of the market introduction of these products B. Braun has lost its monopoly position in this market and its share of this sub-segment has declined to approximately 70 percent. Ethicon with Dermabond have captured about 15-17 percent of this sub-segment throughout Scandinavia whilst Tyco Healthcare have obtained approximately10-12 percent of the market. It has been determined as a result of market intelligence gathered that the total market value for this sub-segment is estimated to be approximately $180,000 with Sweden accounting for an estimated $75,000. Todate none of the other products such as Quixil from Omrix Biopharmaceuticals or FocalSeal-L Sealant manufactured by Genzyme Biosurgery and marketed by Ethicon (J&J) have had any impact on the market. Adhesion Barriers Currently the market for adhesion barrier is almost totally unexploited in Scandinavia despite the recognition by surgeons particularly general surgeons and gynaecologists. Currently the product known as Spray Gel marketed by Confluent Surgical Inc is available on trail on a named patient basis only. Market intelligence suggests that currently Seprafilm from Genzyme Biosurgery is not yet available in Scandinavia. The appointed distributors for Adept from Shire Pharmaceuticals i.e. Meda are at the time of writing were waiting to receive delivery from the UK so that they could commence commercialsing the product in Scandinavia.

Figure 9-11 and Chart 9.5 lists and illustrates the market share of the major market participants and the percent change from year to year for absorbable and erodible wound closure biomaterials in Scandinavia. The overall market leader for absorbable and erodible wound closure biomaterials is Ethicon (J&J) with an estimated 57.2 percent of the market. Ethicons (J&J) strength lies in its high share of the absorbable surgical sutures market. The company is however coming under increasing pressure from Tyco Healthcare as a result of their aggressive market posture and their policy of gaining competitive advantage through gaining market share.
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Figure 9-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Scandinavia), 2002-2003
2002 Company Ethicon (J&J) Tyco Healthcare Baxter International Inc B. Braun Others Total Key: Scandinavia = Denmark, Finland, Norway and Sweden Market Share (%) 57.2 19.6 14.0 7.5 1.7 100 2002/03 Trend Down Up No Change Up -----
Note: Others include: Shire Pharmaceuticals, Genzyme Biosurgery, Alcon Laboratories, Goretex, Resorba Wundversorgung, Confluent Surgical Inc and Assut Medical Company Nycomed are planning on introducing Tachocomb throughout Scandinavia by early 2004
Chart 9.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Scandinavia), 2003
Baxter International Inc 14.0%
B. Braun 7.5% Others 1.7%
Ethicon (J&J) 57.2%
Key:

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Tyco Healthcare is in second position overall with an estimated 19.6 percent of the market. Tyco Healthcare second position is attributed to their strong presence in the absorbable surgical sutures market. Baxter International Inc is in third position with an estimated 14.0 percent of the overall market whilst B.Braun is in fourth position with an estimated 7.5 percent of the overall market. B. Braun has had historically a high market share of the adhesives and glues subsegment with their product Histacryl. They have however only recently entered the absorbable surgical sutures market but are gaining market share principally through sales to the orthopaedic surgeons. Other companies who are included in others are Alcon Laboratories, Goretex, Assut Medical Company and Resorba Wundversorgung.
Forecasts
of
the
Absorbable
and
Erodible
Orthopaedic
Biomaterials
Market
Market Drivers
Figure 9-12 shows the drivers for the absorbable and erodible orthopaedic biomaterials market in Scandinavia. Figure 9-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Scandinavia), 2003-2009
Rank 1 Drivers Increased Participation in Sports Activity amongst the General Population Stimulates Growth of Absorbable and Erodible Orthopaedic Biomaterials Large Elderly Population Enhances Need for Bone Graft Substitutes Scandinavia = Denmark, Finland, Norway and Sweden
1-2 Years 3-4 Years 5-6 Years High High Medium
High
Medium
Medium
Key:
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I ncr eased Part ic ipatio n in Spo rts Ac tiv it y amongs t the General Population Stimulates Growth of Absorbable and Erodible Orthopaedic Biomaterials Increased sports participation has resulted in an increased incidence of injuries to the small joint such as the elbow, shoulder and ankle. The ankle joint for example experiences more weight per unit of area than any other joint in the body. Ankle injuries are among the most common reasons for visits to clinics and emergency rooms. The most common mechanism of injury at the ankle is twisting or rotation, which usually involves inward twisting (inversion) of the foot at the ankle joint. Commonly an inversion injury will produce a sprain of the ligaments of the ankle or a bony fracture. Pronation injuries to the medial ligaments on the inside of the foot, caused by twisting the foot outward, are less common. Sprains are graded on a scale of 1 to 3 (mild, moderate, or severe), reflecting the amount of tearing to the ligaments. Elbow injuries usually fall into two basic classifications. A sudden, forceful injury that results in fracture and/or dislocation is known as macrotrauma. Repetitive motionssuch as pitching or tennis strokescan cause an overload to bones, ligaments, cartilage, or tendons of the elbow joint. These types of injuries are referred to as microtrauma. Elbow injuries are relatively common among athletes. Adolescents and older adults are most at riskadolescents because their bones and ligaments are still growing, and older adults because their ligaments and tendons lose normal elasticity with age. Wrist injuries occur in a variety of different types and are usually caused by accidents and are hard to prevent. They include broken bones, dislocations, and sprains. Sudden injury can occur from trying to break a fall with your hands, or from direct impact to the wrists. A sudden wrist injury that causes instant, severe pain and tenderness with swelling, lack of movement, or crookedness needs medical evaluation quickly. Many sports related wrist injuries include tendonitis. This results from a sudden twist-and-snap motion. It can be caused by work- or sports-related activities, such as baseball, tennis, golf, bowling, weight lifting, and rowing. Large Elderly Population Enhances Need for Bone Graft Substitutes An increasing trend in orthopaedic surgery to augment bone stock prophylactically in osteoporotic patients has been observed, as patients with weak bones are not generally suitable for autograft. Morbidity problems associated with the use of autograft are accentuated in elderly patients, as they have decreased bone mass, and their bone is too weak to use for grafting. The number of elderly patients with fractures due to falls is increasingly higher.
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These osteoporotic fractures are much harder to heal and many elderly people never recover from femoral fractures. Surgeons are now looking to treat these patients prophylactically, in other words they are attempting to prevent these fractures from occurring in the first place. Norian SRS from Synthes-Stratec is designed for this purpose. It is strong in compression and can be injected percutaneously in liquid form, providing direct support to the cancellous bone, by acting as an internal cast. Other companies may follow with similar materials if this concept of preventative treatment for osteoporosis continues. Osteoporosis is an increasingly large health problem, and this could be a potentially large market.
Market Restraints
Figure 9-13 show the restraints for the absorbable and erodible orthopaedic biomaterials market in Scandinavia. Figure 9-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Scandinavia), 2003-2009
Rank Restraint 1 1-2 Years 3-4 Years 5-6 Years High High
Requirement to Provide Clinical Evidence to Prove Product Efficacy High Restrains Development of the Absorbable and Erodible Orthopaedic Biomaterials Market Relatively High Cost of Synthetic Bone Graft Substitutes Hinders Market Development The Need to Target Scandinavian Countries Separately Requires Larger Marketing Efforts Domination of Bone Banks Supplying Allograft Hinders Development of Synthetic Bone Graft Substitute Market Scandinavia = Denmark, Finland, Norway and Sweden Medium Medium Medium
2 3 4
Key:
R e q u i r e m e n t t o P r o v i d e C l i n i c a l E v i d e n c e t o P r o ve Product Efficacy Restrains Development of the Absorbable and Erodible Orthopaedic Biomaterials Market Clinicians throughout Scandinavia are increasingly demanding proof that not only will a particular product do exactly what it says it will do but that it does it cheaper and better than alternative solutions. This requires manufacturers to have conducted and published the results of clinical trials providing data and information supporting the promotional claims for that product.
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Although healthcare clinicians rely on many sources of medical information to make decisions including-journal articles and reviews, textbooks, colleagues, continuing medical education conferences, practice guidelines, videotapes and audiotapes, and pharmaceutical representatives-many have had little formal training in assessing the clinical usefulness of the information obtained from each source. This makes it difficult for the commercialisation of products even if clinical evidence is available. Relatively Hi gh Cost of Synthetic Bone Graft Substitutes Hinders Market Development Autologous bone graft obtained from the patient has no cost and is regarded as the gold standard for the generation of bone-producing cells for osteogenesis. Synthetic bone graft substitutes have to be purchased from suppliers and in the majority of cases is used only when there is insufficient autologous bone stock. Th e N e e d t o Ta r g e t S c a n d i n a v i a n C o u n t r i e s S e p a r a t e l y Requires Larger Marketing Effort s Although Scandinavia is considered as one larger region, it is composed of four relatively small countries, each with its own healthcare system. Companies need to raise awareness of their products separately in each of these countries. In Sweden, awareness is currently high and the bone graft substitutes market is growing rapidly. However, in Finland the market is still in its very early stages. Generally speaking, these new technologies generate substantial interest, but as yet not many hospitals outside of Sweden are buying these products. The need to market these products separately in every country takes considerable time and financial resources from manufacturers, which is unlikely to ease their operations in the Scandinavian region. Domi nation of Bone Banks Supplying Allograft Hi nders Development of Synthetic Bone Graft Substitute Market The vast majority of bone graft material in Scandinavia originates from bone banks. The majority of donor bone throughout Scandinavia is obtained from living donors, in particular patients undergoing elective total hip replacement. The exclusions and testing of live donors is similar to that undertaken for blood donors. As bone can be stored frozen for indefinite periods there is the added advantage that live donors can be re-tested six months after the initial donation. This improves the accuracy of detecting a variety of donor infections, which could potentially be transmitted to the bone recipient.
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There is also the requirement for anatomic specific allograft transplantation. This bone is obtained by harvesting the pelvis and long bones from donors that have recently died (within 12 hours). The screening of donors and donated bone is identical to that initially carried out for live donors, in addition brain samples are analysed for any evidence of Jakob-Creutzfeldt disease. The clinical indications for the use of allograft bone are quite specific. It is required to replace extensive bone loss, which cannot be managed by autologous bone graft techniques. Initially allograft bone was largely used as a structural support to replace defects in bone. It is still commonly used to achieve this. However as understanding of bone biology has improved there have been a number of new developments in the technical use of allograft bone. The most important of these relates to the use of allograft bone to initiate extensive host bone formation. This is achieved most commonly by morselisation of the allograft, which permits resorption of the graft. It is known that within bone are proteins, which stimulate the proliferation and differentiation of bone forming cells. Currently the most common indication for the use of allograft bone is the replacement of extensive bone loss associated with a failed joint replacement and in skeletal reconstruction following tumour surgery or trauma. As bone loss associated with joint replacement surgery is becoming an increasing problem, the requirement for allograft bone in the foreseeable future will continue to increase. As the understanding of bone biology improves, however there is likely to be alternative methods for replacing extensive bone loss. These include the direct application of osteoinductive proteins, the development of bioactive bone substitutes and the use of in vitro expanded autologous osteogenic precursor cells. The expansion of synthetic bone graft substitutes is being hindered by the continued acceptance of allograft from bone banks throughout Scandinavia.
Market Forecasts
Figure 9-14 provides a summary review of the analysis of the revenue forecasts for the absorbable and erodible orthopaedic biomaterials market in Scandianvia. It has been estimated that the market for absorbable and erodible orthopaedic biomaterials was valued at $2.0 million in 1999. This had increased to an estimated $3.2 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $11.3 million (CAGR 19.8 percent). Currently the market for synthetic bone graft substitutes is in its infancy as a result of the domination of allograft supplied through bone banks. It is however anticipated that synthetic bone graft substitutes will become more popular as orthopaedic surgeons in particular turn to more convenient methods and as manufacturers provide data and information proving the clinical efficacy of these products.
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Figure 9-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts
(Scandinavia), 1999-2009
Growth Rate (%) --15.0 16.3 18.1 19.5 20.6 21.2 20.6 19.3 18.8 18.5
($ Million) 2.0 2.3 2.7 3.2 3.8 4.6 5.6 6.7 8.0 9.6 11.3
The use of absorbable biomaterials such as interference screws, suture anchors etc has been stimulated and continues to be stimulated by the influence and presence of Bionx in Finland. Finland is the largest single market by far in Scandinavia and is principally attributed to the promotional activities of Bionx in this country. The other Scandinavian countries are following the trend established in Finland and as a result the markets are expected to grow throughout the forecast period.

Although absorbable and erodible orthopaedic biomaterials are normally purchased either directly by the hospital purchasing authorities with the subsidiary or distributor occasionally they may issue tenders. This is used as an attempt to obtain better or more favourable terms and conditions for those products. Typically however the purchasing authorities would go directly to the company and attempt to obtain some form of discount based on the volumes already used or anticipated future usage. The product manager in conjunction with the marketing and sales manager would provide a discount structure based on volume whilst ensuring that their marketing and financial objectives were still being met.
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Figure 9-15 illustrates the competitive structure for the absorbable and erodible orthopaedic biomaterials market in Scandinavia. Figure 9-15 Absorbable and Erodible Orthopaedic Biomaterials Market: Competitive Structure
(Scandinavia), 2002
Number of Companies in Market 16 Types of Competitors The market is dominated by Bionx Implants Ltd. This company being indigenous to Finland and has established a major market share for the biomaterials for use in orthopaedics. The operating base is in Finland and then uses distributors througnout Scandinavia The rest of the market comprises a complex mix of direct subsidiaries for the major multinational manufacturers and distributors within each Scandinavian country for other manufacturers 1st Tier includes: Bionx Implants Inc, Biomet Merck, Arthrex 2nd Tier includes: Ethicon (J&J) (Mitek), Sofamor Danek (Medtronic), Smith & Nephew (Acufex). Stryker and Linvatec (Conmed) 3rd Tier includes: Atlantech, Aesculap (B. Braun), Depuy (J&J), Orthovita, SulzerMedica (Centerpulse), Artimplant, Inion Ltd and NeuColl Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All senior orthopaedic surgeons, sports medicine specialists and centres, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity is forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Manufacturers seeking competitive advantage need to secure a distributor agreement with a major distributor in each individual Scandinavian country Proven Efficacy: It is almost mandatory to provide clinicial evidence proving the efficacy of the product Key: Scandinavia = Denmark, Finland, Norway and Sweden
Once again the market comprises a complex mixture of direct subsidiaries of major overseas suppliers and a complex network of distributors with distributors and/or joint venture agreements with indigenous companies.
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There are a number of indigenous companies in Scandinavia which Frost & Sullivan wishes to highlight. These include: Bionx Implants, Inc Bionx Implants, Inc. has been described as one of the leading developers, manufacturers and marketers of Self-Reinforced, resorbable polymer implants, including screws, pins, arrows and stents, for use in a variety of applications which include Orthopedic Trauma, SportsMedicine, Urology and Craniofacial Surgery. The Company has proprietary manufacturing processes for Self-Reinforced resorbable polymers, modifying the brittle polymer structure into a physiologically strong structure with controlled, variable strength retention. Bionx Implants, Inc. was incorporated Delaware in October 1995 to coordinate the business of four related companies controlled by United States and Finnish investors, namely: Bioscience, Ltd., which has been renamed Bionx Implants, Ltd. and has been engaged in the development of resorbable polymer products since 1984; Biocon, Ltd., which held most of the Company's patents and patent applications and, during 1997, was merged into Bionx Implants, Ltd. The company has a wide variety of absorbable products including: PLLA and PGA Pins Fracture fixation pins are indicated for the management of cancellous bone fractures and osteotomies in the non-loadbearing areas of the skeletal system, including fractures of the ankle, knee, wrist, elbow, hand and foot. The Company's resorbable pins, which range in diameter from 1.1 mm to 4.5 mm and in length from 10 mm to 70 mm, can be cut by a surgeon to the precise length required for an individual patient, thereby reducing the risk of discomfort and infection. The pins are designed to improve the fixation of fractures. These pins can be used in open surgical procedures and percutaneous and endoscopic techniques. The Company's PLLA pins currently are cleared only for use in bunionectomies, the Company's PGA pins may be used in a variety of cancellous bone fixations. PLLA and PGA Screws The Company's screws range in diameter from 2mm for delicate hand and foot procedures to 4.5 mm for use in ankle fractures. The Company's screw threads were specifically designed for use in cancellous fractures. The Company's screws are designed to take advantage of the swelling properties of Self-Reinforced materials to achieve optimum fixation with minimal bone damage. Cannulated SmartScrew The 4.5 mm Cannulated SmartScrew is a absorbable implant indicated for the maintenance of alignment of cancerous bone fractures of the malleolus of the ankle. The cannulation enables the surgeon to place a guidewire in order to obtain exact reduction and then placement of the resorbable screw, thus allowing for complete fracture fixation that will dissolve over time as the bone heals.
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The Company's resorbable polymers are designed to diminish the osteopenia associated with stress shielding that accompanies metal implants, and to eliminate the need for a second surgery to remove the implant and have been shown in studies to reduce the overall costs when compared to metallic osteosynthesis. Me niscus Arrows The Meniscus Arrow, commercially introduced by the Company in the United States during the second quarter of 1996, was the first resorbable, arthroscopically implanted fixation device designed for use in the repair of longitudinal, vertical tears of the medial and lateral meniscus. The Meniscus Arrow is a thin, pointed, barbed shaft with a t-shaped head that is driven across the meniscal tear, fixing the torn pieces of the meniscus together. P L L A Ta c k s PLLA tacks provide the surgeon with an easy to use implant designated to reduce the risk of long-term and intra-operative tissue damage that may occur in traditional suturing techniques. The Company's tack is designed to swell in the drill hole in order to provide immediate fixation and to withstand stresses in the thumb. The Company's PLLA tacks are cleared for use in repairing ligaments of the thumb. P L L A B a n k a r t Ta c k s The Bionx Bankart Tack is used in reattaching soft tissue to bone to repair a specific type of forward shoulder dislocation. It is a high-strength, biocompatible, resorbable tack-type product, which can be used in either open or minimally invasive surgery. The SR-PLLA material enables the device to retain sufficient strength to maintain soft tissue reattachment throughout the healing period, while its gradual resorption eliminates the need to remove the device at a later point in time. Contour Labral Nail The Contour Labral Nail is a cannulated bioresorbable device used to reattach soft tissue to bone resulting from traumatic shoulder injuries. The Contour Labral Nail allows the surgeon to reposition the labrum ligament complex back to the shoulder's glenoid rim with a relatively quick and easy minimally invasive surgical technique. The Company believes that the design of the Contour Labral Nail allows for an easy and safe arthroscopic technique through creation of two portals, resulting in a quick and simple minimally invasive procedure.
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SmartNail The SmartNail is a bioresorbable implant used during orthopaedic surgery. The SmartNail is indicated to maintain fixation and accurate alignment of small bone fractures, osteochondral fragments or osteochondritis dissecans lesions, which are generally subchondral bone, chips involving the overlying cartilage. SmartScrew ACL The SmartScrew ACL is a cannulated, bioresorbable interference screw used to attach a graft during cruciate ligament reconstruction, including bone-patella tendon-bone or soft tissue grafts. Made from a patented, Self-Reinforcing manufacturing process, the SmartScrew ACL reduces the chances of the screw shearing and breaking during insertionan occurrence that has been associated with moulded polymer implants. Craniofacial Fixation The Company's BioSorb family of resorbable products includes screws and plates for craniofacial cosmetic, trauma, and reconstructive surgery. The Company's self-reinforcing process imparts to the BioSorb line a unique set of performance characteristics including enhanced strength retention, resistance to torque damage, and the ability to bend the BioSorb plates without the need for external devices to heat the plates. Urology Stents The Company has developed a resorbable, self-expanding stent for use in urological procedures. The Company's resorbable prostate stents are used to improve urine flow-rates whenever the temporary relief of BPH symptoms is needed. The design of the Company's stent allows it to be easily inserted under direct vision with a cystoscope, making the device suitable for both hospital as well as physician office use. The self-expanding nature of the Company's stent fixes the device firmly in the prostate to prevent the problems of dislocation so prevalent with previously marketed temporary stents. BioCuff", Bioresorbable Screw and Spiked Washer Implant Bionx Implant Inc announced on the 31st October 2000 the market launch of the BioCuff", a bioresorbable screw and spiked washer implant designed to fixate torn rotator cuff tissue back to bone. BioCuff was developed by Bionx to allow the surgeon to address some of the current issues surrounding the use of metal fixation implants for rotator cuff repair.
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The principle advantages of the Biocuff over a metal implant in shoulder surgery include: 1) revision surgery with resorbable implants is believed to be easier and safer; 2) resorbable implants are radiolucent, which do not interfere with post surgical radiographs; and 3) resorbable implants allow for a gradual loss of stiffness to reduce stress shielding and tissue necrosis that has been associated with metal implants. To date, Bionx Implants Inc manufactures its products solely in its facility in Tampere, Finland. Bionx Implants Inc sells products in the U.S. Approximately 85 %, 80 % and 82 % of the Company's revenue from external customers in 1997, 1998 and 1999, respectively was generated in the US. The remaining external revenue was generated in foreign countries concentrated in Europe and Asia. In Europe, the Company sells its products through networks of independent distributors and dealers that purchase products from the Company at discounts that vary by product and by market. These international distributors and dealers have the primary relationships with the physicians and hospitals that are using the Company's products. The Company typically operates under written agreements with its domestic and international sales agents, distributors and dealers. These agreements grant the dealers the right to sell the Company's products on an exclusive basis within a defined territory and permit the distributors to sell other medical products. The company currently employs approximately 120 worldwide. Approximately 80 employees work in Tampere, Finland where all the Company's manufacturing and the vast majority of the Research and Development is carried out. A key feature of the company and its product portfolio has been and continues to be the work carried out by Professor Pertti Tormala and his colleagues at the Technical University in Tampere, Finland. Professor Tormala, a founder, director and executive officer of the Company, is currently an Academy Professor at the Technical University and has been permitted by the University to devote his efforts to developing new products for the Company. Professor Tormala utilises a group of senior researchers, graduate students and faculty at the Technical University to perform research and development projects involving resorbable polymers and other topics relating to the Company's technologies and manufacturing processes. This arrangement, permitted in Finland as a means of encouraging the commercialisation of technological development, has resulted in substantial cost savings to the Company while greatly expanding its product development efforts.
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I n i o n Lt d Inion Ltd. was founded in 1999 originally from previous employees of Bionx who are also internationally recognised experts in CMF (craniomaxillofacial) surgery and biomaterial sciences. Inion Ltd. develops and manufactures biomaterial-based medical devices. Solutions stem from the use of proprietary technologies and processes. Inion has received ISO 9001, EN 46001 and ISO 13485 certificates, audited by Lloyd's Register and complies with GMP guidelines. The core competence of Inion lies in its know-how on both surgical biodegradable polymer applications and production processes. In addition, the Inion organization has wide experience in registration procedures and quality standards. There promotional stance is to offer particularly products for traumatology which are priced competitively with the traditional metallic implants. They stated that this has been achieved as a result of highly efficient manufacturing procedures which have brought the manufacturing costs done. Artimplant Artimplant was founded in 1986 by a interdisciplinary group of scientists in Gothenburg, Sweden, led by Professors Lars Peterson and Bengt Edberg. The research carried out was to develop a biocompatible and degradable material to use as a prosthesis in ACL reconstruction. Following the success of this project the company was incorporated in 1990. In 1997 a Swedish patent (the principal patent) was issued for hydrolysable fiber polymers for use in temporary implants. In 1999 Artimplant continued its work on ACL reconstruction through partnership agreements with M_lnlycke Health Care and Genzyme Tissue Repair. In the year 2000 the principal patent for fibre material was awarded in the U.S. and Europe and in 2001 Artimplant's first productArtelon Augmentation Device ACLreceived CE approval, enabling sales in Europe. The market for bone substitutes is dominated by 3 suppliers i.e. Synthes-Stratec (Norian SRS) distributed by Stryker, Wright Medical Technology (Osteoset and Osteoset T) distributed by Sofamor Danek (Medtronic) and Biomet Merck with Endobon and Biobon. With only three competitors in the marketplace, the Scandinavian market is open to new entrants. The most likely contenders will be the large US companies, which have the financial backing and experience to successfully market their products in these smaller areas. Smaller companies may wait until awareness has been raised, as it takes considerable resources to do this with innovative technology. Currently the leading manufacturers distribute using local distributors.
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Figure 9-16 and Chart 9.6 lists and illustrates the market share of the major market participants and the percent change from year to year for the absorbable and erodible orthopaedic biomaterials market in Scandinavia. Figure 9-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Scandinavia), 2002-2003
2002 Company Bionx Implants Inc Biomet Merck Arthrex Ethicon (J&J) (Mitek) Sofamor Danek (Medtronic) Smith & Nephew (Acufex) Stryker Linvatec (Conmed) Others Total Key: Scandinavia = Denmark, Finland, Norway and Sweden Market Share (%) 35.5 14.5 10.5 9.0 8.0 6.5 6.5 3.5 6.0 100 2002/03 Trend Down (slightly) Up No Change No Change No Change No Change Up (slightly) No Change -----
Note: Others include: Atlantech, Aesculap (B. Braun), Depuy (J&J), Orthovita, SulzerMedica (Centerpulse), Artimplant, Inion Ltd and NeuColl
The overall market leader for absorbable and erodible orthopaedic biomaterials in Scandinavia is Bionx Implants with an estimated 35.5 percent of the market. Their strength lies in their indigenous presence in the market and that most of the research that has been conducted in this field throughout Scandinavia and in particular Finland has been originated by Bionx Implants.
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Chart 9.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (Scandinavia), 2003
Sofamor Danek Smith & Nephew (Medtronic) (Acufex) Ethicon (J&J) (Mitek) 8.0% 6.5% 9.0% Stryker 6.5% Arthrex 10.5% Linvatec (Conmed) 3.5% Others 6.0% Biomet Merck 14.5%
Bionx Implants Inc 35.5%
Key:

Biomet Merck is the second largest supplier of absorbable and erodible orthoapedic biomaterials in Scandinavia as a result of its sales of synthetic bone graft substitutes i.e. Endobon and its range of interference screws, meniscal fixation devices, suture anchors, and fracture fixation screws. It is estimated that Biomet Merck has 14.5 percent of the market whilst Arthrex in third position has an estimated 10.5 percent of the market. Arthrex operates through distributors in each of the Scandinavian countries including Artroline in Sweden and Orthomedic in Norway. Ethicon (J&J) (Mitek) is in third position with an estimated 9.0 percent of the market derived solely from interference screws, meniscal fixation devices and suture anchors. Sofamor Danek (Medtronic) are in fourth position with an estimated 8.0 percent of the overall market as a result of sales of its synthetic bone graft substitute Osteoset distributed on behalf of Wright Medical Technology. Stryker and Smith & Nephew (Acufex) are in fifth and sixth positions respectively with each having an estimated 6.5 percent of the overall market. Stryker presence in this market being attributed to their distribution agreement with Mathys Synthes-Stratec for the distribution of the synthetic bone graft substitute Norian.
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10

Belgium The provision of health care in Belgium involves the interaction of a large number of ministerial departments each with specific functions of financing and organisation of the health care system. These include the Ministry of Public Health (Ministre de la Sant publique). The Ministry of Public Health is responsible for setting policy directions including any legislative changes, establishing priority health care issues and co-ordinating the implementation of the health care policies throughout Belgium. The Ministry of Finance in conjunction with the Ministry of Social Affairs is responsible for supervising the gathering of the social security contributions and distribution or allocation of funds to the regional authorities through the National Social Security Organisation (Office National de Scurit Sociale (ONSS). The Ministry of Social Affairs (Ministre des Affaires Sociale is responsible for the administration of the social security system and the financing of the healthcare in Belgium. The National Sickness and Disability Insurance Institute (Institut National d' Assurance Maladie-Invalidit (l'INAMI) within the Ministry of Social Affairs is responsible for the management of the sick-funds. The Ministry of Economic Affairs (Ministre des Affaires conomiques) is responsible for establishing the prices of pharmaceuticals in Belgium.
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Th e N e t h e r l a n d s The Dutch health care presents an unusual mix of public and private; few countries have so much private activity where the government is simultaneously omnipresent. The authority for planning and implementation of health policy is the Ministry of Public Health, Welfare and Sport (VWS). According to the Ministry (Ministry of Health 2000), the Dutch health care system has three important characteristics: a mix of public and private financing; the predominantly private character of supply; a typically Dutch consultative approach to policymaking. To these three at least one more might be added strong supply-side controls, which result in so-called 'soft-rationing' in the form of long waiting lists. Public and Private Health Insuranc e Dutch healthcare expenditure per capita is above the EU average, but well below expenditure in France and Germany. In 2001, the share of GNP spent on health care was 8.7 percent. With a booming economy spending levels are increasing fasttotal health services expenditure is increasing by 5.9 percent per year. But the share of GDP spent on health has remained fairly constant since 1980 (7.9% in 1980 8.5% in 1997). Among OECD countries, only the United States has a greater share of private health insurance. The Dutch healthcare system has been described as a hybrid of the German social insurance model and the American private insurance model. One guiding principle being that if people become able to pay for themselves they shouldand therefore, unlike German neighbours who may, having reached an annually determined income threshold, choose whether or not to leave the statutory scheme, the Dutch must leave. About 65 percent of the population have compulsory health insurance, 31 percent take out private insurance voluntarily. The remainder have insurance under a public scheme. Insurance schemes contribute 85 percent to the cost of health care. General taxation pays a share of less than 10 percent while patient participation or co-payments total 7 percent. The predominantly private character of supply has its roots in local and regional voluntary provider organisations, which were founded throughout Europe in the Middle Ages. Medieval workers guilds, local communities, monasteries and churches provided financial support, medical care and shelter to those who could not support themselves. Such organisations were predecessors of today's hospitals. This tradition of private ownership has not been overturned as it was in the United Kingdom through the nationalisation of care. Instead, the vast majority of modern Dutch hospitals are owned or managed on a private not-for-profit basis.
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Government involvement in Dutch healthcare began in 1941, German occupying forces introduced Bismarkian compulsory social insurance for the poor with the Health Insurance Act. After more than 50 years of reforms, the 1998 coalition government agreement identified three 'compartments' in Dutch health care:
Expensive, uninsurable and long-term health care paid for under the Exceptional Medical Expenses Act (AWBZ).
Acute medical care paid for under the compulsory Health Insurance Act (Zfw) 64 percent of the population, private insurance 31 percent, and public law schemes for civil servants 5 percent.
Other health care, not in the first two compartments.
The VWS Ministry has overall responsibility for healthcare, each year, publishing a spending ceiling known as the 'macro health care budget.' The Health Care Insurance Board (CVZ) oversees the implementation of the AWBZ and the Zfw at a national level. It gives permission, subject to regional capacity, to organisations wishing to provide health care. It also accredits statutory and private health care insurers. Th e Fi rs t C o m par t m e n t Introduced by the 1968 second social insurance law, the Exceptional Medical Expenses Act (AWBZ) provides cover for exceptional care, 'major' medical risks and what are considered uninsurable risks, such as that for handicapped people. Insurance is provided by one insurer in each of the 12 Provinces. Standard cover is provided by all the funds. They do not compete for members seeking this cover. Health care services are provided in kind. The AWBZ is funded by income-related contributions, general taxation and other social insurance contributions. With the exception of certain hotel-type expenses, there are no copayments for long-term or chronic care. The government sets the premium level annually. In 1998, it was 9.6 per cent of the first taxable income bracket NLG 46,184 (13,000). These premiums are deducted in the same way as income tax. The government pays on behalf of the unemployed and those others without independent taxable income. Payments for AWBZ services are made retrospectively on a fee-for-service basis. Thus, insurers are reimbursed by the General Fund for actual costs incurredin order to limit expenditure, provider charges are based on set tariffs. This means of financing is often regarded as offering strong incentives for inefficiency. Supply of first compartment health care is strongly and centrally controlled. Permission to provide health care is necessary. Every provider must contract with the monopoly insurer. Institutions must stay within estimates of the necessary capacity. Charges for care are subject to government approval, maximums being set annually. The result for providers is a complete lack of freedom. For what it is worth though, the sick apply to a practitioner or institution of their choice.
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Th e S e c o n d C o m pa rt m e n t Compartment covers acute/general medical care insurance. Somewhat like the German dual system, the majority of the population have social insurance (roughly two-thirds), while the remaining third choose to purchase private insurance. There are four sections in the second compartment: Zfw, Civil service schemes, Private insurance, WTZ. Firstly, the Health Insurance Act (Zfw) in force since 1966 is the largest section and provides benefits in kind cover for 64 percent of the population. This percentage has been relatively stable since its inception. Zfw cover is mandatory for those earning below an income threshold of 64,6000 NLG. This income threshold is significantly lower than the German equivalent. Zfw also covers those over-65 with an annual pension of less than NLG 41,800, partners and children of the insured, the unemployed and self-employed with low earnings. Premiums, set annually by the government, are mainly income-based, employees paying 1.2 percent and employers, 5.6 percent, (1998). Financial resources are managed by the CVZ. Taking into account a complex risk-adjustment formula, the CVZ pays allocated budgets to the insurance funds from its General Treasury. The funds are only given 90 percent of their costsproviding an incentive towards efficiency. The remaining income required is made up by charging all members of the fund (funds may charge different amounts) a flat-rate 'per-capita premium'regardless of risk. There is a clear incentive to keep this premium as low as possible in order to attract new customers. There is freedom of choice from about 30 non-profit competing insurance funds, which nearly all operate nationwide. The insurers have an obligation to accept all eligible applicants. All insurers have to offer a certain standard of health insurance policy with a statutorily defined package of medical care benefitsthough its scope has changed frequently. Benefits are provided in kindthere is no fee payable at point of use. In this respect the Dutch social insurance system resembles that in Germany, rather than the French. Supply of Zfw health care is also centrally controlled. Institutions must apply for permission to provide health care. Every provider must contract every insurer. Charges for care are subject to government approval, maximums being set annually. GPs receive a fixed amount per insured person. The result for providers is a complete lack of freedom. Meanwhile, insured have choice of provider, though they must register with a GP.
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Civil Service Insurance: Compulsory civil service packages correspond with those of the Zfw, but are broader in some areas, such as dental care. Private insurance is purchased voluntarily by 31% of the population for 2nd compartment cover. The privately insured generally pay for medical care on a fee for service basis and seek reimbursement from sickness funds. The private insurance quandary of adverse selection is minimised by government regulation and an obligation to contract, under a special scheme for the elderly and certain other groups (the MOOZ and WTZ system). Insurers must contract with all hospitals, but can selectively contract with the self-employed health professionals of their choice. Th i rd Co m pa rt m e n t Dutch medical procedures or services must meet criteria of necessity, effectiveness, efficiency, and individual responsibility, otherwise, they will be excluded, or 'de-listed' from the compulsory health insurance. The 3rd compartment offers supplementary private insurance for medical services not covered by the Zfw or AWBZ; policies are available for elective care such as plastic surgery, much dental care, foreign medical expenses, medical aids, alternative medicine treatments etc. Some 90 percent of those with Zfw insurance purchase these supplementary policies. The Government is responsible only for quality control in this sector. Primary Care: The Dutch have choice of ambulatory physician, but unlike, their French and German neighbours who may visit specialists without referral, GP gate-keeping plays an important role in access to specialist medical services. GPs are mainly independent contractors working in private practice. GPs receive an annual capitation fee for Zfw patients. Private patients may choose any doctor, but like Zfw patients, must register with a GP. Services to private patients are provided on a fee-for service basis, after which reimbursement is claimed. Hospital Care: Although most specialists are self-employed, specialist care is almost exclusively organised by hospitals. Specialists are paid by a combination of capitation and fixed fee-for-service for technical interventions and diagnostics. Some suggest that efforts to cut the level of specialist fees have been of limited effect due to a provider-led compensatory increase in the volume of services provided. (supply-led demand). Since 1983 hospitals have been financed by a global budget applied by each County Council. A draft budget is calculated for each of 106 hospitals, based on anticipated activities and expected expenses for capital investments and personnel. Once annual departmental budget limits are reached, a hospital specialist cannot continue to treat, thus waiting lists grow longer.
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Proposed Reforms to the Dutch Health Care System Since the Dekker Plan of 1986, health care has also been the subject of much reform, at least rhetorically market orientated. Although the Dekker Plan was not fully implemented, nevertheless important changes have taken place. Mandatory contracting of services by sickness funds was abolished, and decision-making power over planning and contracting was shifted from the government to the health insurance agencies. The 1990 Simon Plan amended Dekker, and toned down language of markets. Despite this, the transformation has been rapid and real; traditional relationships have been giving way to a more market-orientated health care system. Although the reforms were full of market orientated rhetoric, proposals have not been implemented and many were reversed by subsequent coalition governments. For certain there has been a policy trend in favour of markets and competition, but this has not been constant. Indeed, the Dutch have experienced the 'two steps forward, one step back' model of incremental change. In July 1999, Minister of Health asked the Social and Economic Committee (SER) to produce a report on a system of transfer payments in the medical insurance sector and on the health care management model as it relates to each individual's own responsibility. This raised the question of the future of the health care system in the Netherlands. As a result of this report SER prescribed some major reforms In summary, there will be a shift of healthcare services from the first to the second compartment so that only expensive care is covered, meanwhile, the third compartment will remain broadly as it is today. Secondly, and most importantly, in the future healthcare must be demand-driven. There should be: No monopoly insurers; No monopoly providers; Conditions that encourage innovative care; and more possibilities for innovative financing. The SER also proposed the introduction, by 2005, of a system of compulsory national health insurance (NHCI) for curative care. This system would rest on a system of financial solidarity between high-income and low-income groups, and between high-risk and low-risk groups. Thus, the second compartment will be changed radically. Everyone will have private law agreement with a risk-bearing health insurer of choice. These insurers (formerly health insurance funds, agencies, civil service plans and private insurers) whether they are for-profit, organisations or non-profit organisations, will negotiate with providers (once shortages in supply are resolved) and compete with one another on the basis of price, volume, and quality and effectiveness of health services. The SER proposes to abandon mandatory contracting with hospitals.
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Chart 10.1 shows the market engineering research measurements for the Benelux absorbable and erodible biomaterials market as it appeared in 2002. Chart 10.1 Absorbable and Erodible Biomaterials Market: Market Engineering Measurements (Benelux), 2002
Market Research
Market Engineer
Market Strategy
Implementation
Market Planning
Potential revenues (maximum future market size) Replacement rate (average period of unit replacement) Market concentration (percent of 2002 market controlled by top three competitors) Number of competitors (active market competitors in 2002) Key: Benelux = Belgium, Luxembourg and the Netherlands
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Market Drivers
Figure 10-1 reviews the specific drivers for the absorbable and erodible biomaterials market in the Benelux respectively. Figure 10-1 Absorbable and Erodible Biomaterials Market: Market Drivers Ranked in Order of Impact (Benelux), 2003-2009
Rank Drivers 1 2 3 4 5 Key: 1-2 Years 3-4 Years 5-6 Years High High Medium Medium Medium Medium Medium High High Medium
Direct Purchasing in The Netherlands Provides Better Market High Access for Manufacturers of Absorbable and Erodible Biomaterials Growth in Sports Injuries Stimulates Market for Absorbable and Erodible Biomaterials Applications of Absorbable and Erodible Biomaterials in Tissue Engineering Techniques Aging Population and Age Related Orthopaedic Back Problems Increase Demand for Absorbable and Erodible Biomaterials Evidence Based Outcomes Key to Market Success Benelux = Belgium, Luxembourg and the Netherlands High Medium Medium Medium
D i r e c t Pu rch as i n g i n Th e N e t h e r l a n d s P rovi d e s B e t t e r Market Access for Manufacturers of Absorbable and Erodible Biomaterials The Dutch have a tradition of consensus building known as the 'Poldermodel', Dutch political tradition is based on negotiation, consensus building, compromise being sought between various denominational and non-denominational interest groups, often in the context of special advisory councils such as the SER. Actors involved in health policy consultation include trade unions, employers' associations, consumer organisations, and patient's groups. This mix of interest groups with conflicting vested interests gives rise to compromise policies and often great complexity. As a result of the traditional 'Poldermodel' process, hospitals in The Netherlands normally purchase medical devices directly with the manufacturers rather than through public tenders as the cost does not exceed the threshold regulations stipulated by the Official Journal of the European Community. The consequence of direct purchasing is the establishment of strong brand loyalties with known manufacturers who are recognised for providing product service and support. The ability of hospitals to negotiate with manufacturers directly rather than having to use tenders helps to reduce price, as this is the single most important criteria used when deciding which products are to be purchased.
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Growth in Sp ort s Injuri es St imulat es Market for Absorbable and Erodible Biomaterials In both Belgium and The Netherlands there is a considerable increase in all sectors of the population taking part in some form of sports activity. There has been a dramatic increase in the number of older people that are more involved in exercise and sports than ever before. Quality of life has improved due to better health from improved medical resources, resulting in a longer life expectancy of an individual. As a result the geriatric age group individuals, even in their late 80s-90s, are more physically active than before. A balanced program of moderate physical activity for 30 minutes a day is beneficial even for people with chronic conditions of bones and joints. The largest increase in injuries by far is among baby boomers age group doing general exercise and running. Most of the sports injuries involve sprains, strains, torn tendons and ligaments to parts of the body that are sensitive to repetitive injuries with age collagen in the body weakens and becomes less elastic, making muscles and joints more vulnerable to injury. Less active sports, such as golf and bowling, showed little increase in the number of injuries during the study period. As a result of this increased incidence of sports related injuries and a corresponding increase in clinicians specialising in sports related injuries the market for absorbable and erodible orthopaedic biomaterials has increased dramatically in recent years and is expected to continue expansion throughout the forecast period. Evidence Based Outcomes Key to Market Succes s The Benelux markets have become highly evidence based purchasers i.e. purchasers require clinical evidence and information which supports the claims made by the companies concerning the quality, reliability, longevity and long-term outcomes and post-operative quality of life issues. In addition cost-effectiveness data are taking on a greater significance in gaining market acceptance for healthcare purchasers. Without being able to present clinical data and information supporting the claims made by the company products will find it at best difficult to gain market acceptance and at worst resulting in complete product failure. Aging Population and Age Related Orthopaedic Back Problems Increase Demand for Absorbable and Erodible Biomaterials The Economist Intelligence Unit Limited reported in May 2001 that the population size of the over 65s for both Belgium and The Netherlands will increasing rather alarmingly over the forecast period.
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The Netherlands The Economist Intelligence Unit Limited reported that the over 65s accounted for 13.24 percent of the population in the year 1995 in The Netherlands and they reported that they accounted for 13.64 percent in the year 2000. They predict that the over 65s will account for 14.24 percent of the population by the year 2005 and 15.44 percent of the population by the year 2010. As a result of the increased longevity the population of The Netherlands is predicted to increase from an estimated 15.89 million in the year 2000 to 16.2 million by the year 2010. Belgium The Economist Intelligence Unit Limited reported that the over 65s accounted for 15.80 percent of the population in the year 1995 in Belgium and they reported that they accounted for 16.4 percent in the year 2000. They predict that the over 65s will account for 16.6 percent of the population by the year 2005 and 16.8 percent of the population by the year 2010. As a result of the increased longevity the population of Belgium is predicted to increase from an estimated 10.32 million in the year 2000 to 10.34 million by the year 2010. According to UN population projections, the Belgian population will remain almost stable at around 10.3 million to 10.4 million between 2000 and 2020. One of the major consequences of the aging population is the anticipated increased incidence of age related diseases including back problems and in particular degenerative changes of the intervertebral discs. This helps stimulate the development and growth of synthetic bone graft substitutes throughout the Benelux. Applications of Absorbable and Erodible Biomaterials i n Ti s s u e E n g i n e e r i n g Te c h n i q u e s Current tissue engineering techniques require the use of a porous biodegradable/bioresorbable scaffold, which serves as three-dimensional template for initial cell attachment and subsequent tissue formation, both in vitro and in vivo. Ideally, such scaffolds should have several properties that allow them to be used as organs or tissue substitutes. Firstly and most importantly, they should be biocompatible, that is, they must not trigger strong immunological responses nor cytotoxicity phenomena. Moreover, these materials should disclose mechanical properties that match those of the tissue that is going to be substituted and at the same time allow for the sequential growth of the tissue while the scaffold slowly degrades. Porosity is also a very important issue because of the need for nutrient delivery, gas exchanges and the three-dimensional cell and tissue growth within the scaffold structure. Finally, these materials should have a suitable surface chemistry in order to allow good cell attachment, proliferation and differentiation, and at the same time should be easily sterilisable During the last few years, several materials, as well as distinct original processing techniques, have been proposed for being used in tissue engineering. However, the ideal biomaterials/scaffolds are yet to be found. In the last years, natural polymers have been presented as an alternative to the current biomaterials used in tissue engineering.
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One of the advantages of these materials is their low cost as a result of an almost unfailing source of raw material. Biodegradable starch-based polymeric blends have recently been suggested for a wide range of biomedical applications such as tissue engineering scaffolds, bone cements, devices and hydrogels for controlled release of drugs and to be used in bone fixation/filling of bone defects in the orthopaedic field. Such blends have shown to be biodegradable and biocompatible, being lower molecular weight starch chains, fructose and maltose, their typical degradation products. Current developments include a new scaffold based on a blend of starch with cellulose acetate (SCA) processed by a novel extrusion technique based on the use of the raw polymeric material mixed with a certain percentage of blowing agents.
Market Restraints
Figure 10-2 review the specific restraints for the absorbable and erodible biomaterials market in the Benelux. Figure 10-2 Absorbable and Erodible Biomaterials Market: Market Restraints Ranked in Order of Impact (Benelux), 2003-2009
Rank Restraints 1 2 3 Key: Dutch Waiting Times for Surgical Procedures Increasing Reducing Market Potential for Absorbable and Erodible Biomaterials Financial Restraints Curb Expenditure on Absorbable and Erodible Biomaterials Reimbursement System In Belgium Restrains Product Pricing Benelux = Belgium, Luxembourg and the Netherlands
1-2 Years 3-4 Years 5-6 Years High Medium Medium High High Medium High High Medium
D u t c h Wa i t i n g Ti m e s f o r S u r g i c a l P r o c e d u r e s Increasing Reducing Market Potential for Absorbable and Erodible Biomaterials A hot issue in the Netherlands at present is the length of waiting lists for treatment and rehabilitation. In the treatment sector of the health care system, patients have to wait between two and six weeks for an initial medical consultation in hospital. To undergo an operation, the waiting time can be from several weeks up to several months, depending on the type of operation and the hospital in question. Simultaneously, changes in the Dutch social security system oblige employers to pay for their ill employees during the first year of the illness. Due to long waiting lists, many people end up at home, sometimes waiting for several months.
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Recently the Dutch Federation of Patients and Consumers Organizations (NP/CF) has been focusing on resolving this increasing problem of lengthening hospital waiting times. One proposed solution is to require employers to fund private clinics, so that their employees will be treated more quickly than those who are not working. The NP/CF is against this type of discrimination of the non-working population. It believes that reduction of waiting times could be accomplished more efficiently by improving hospital efficiency and by investing more money in the health care system. As part of the measures to increase efficiency, the NP/CF proposes publicising information on hospital waiting lists on the Internet so that doctors who refer patients, and the patients themselves, can make better informed choices. The NP/CF initially will start providing the surveys for five regions. In the future, the organisation will even try to tackle the problem at a European level. Since the market for the largest sub-segment i.e. absorbable surgical sutures is dependent on the number of procedures carried out and increasing in waiting lists for operations is a major market restraint. Financial Restraints Curb Expenditure on Absorbable and Erodible Biomaterials To curb healthcare expenditure in Belgium, hospitals with less than 150 beds, which are under performing, are being incorporated into larger hospitals or closed. This practice is planned to be extended through the year 2000 to 2002 when hospitals of 200 beds or less will also be susceptible to be closed or amalgamated with larger centralised hospitals. It is anticipated that this will result in a rationalisation of hospital inventories as one hospital and the ability to ask for additional product price discounting as purchasing authorities seek better value for money. Reimbursement System In Belgium Restra ins Product Pricing In Belgium product price is an important issue as the government control prices by using fixed reimbursement rules which govern the reimbursement value to the end-user. Currently companies are free to set the selling pricing of their products. Under the current system patients receive as fixed reimbursement value through the Mutelles and then any difference between this reimbursement value and the product selling price is paid for by the patient. Under normal circumstance between 85-90 percent of the product cost is reimbursed and the remainder is paid by the patient. This is known as the "safety margin". Currently the only way to have a reimbursement of the self-payment value is if the patient has taken out a private healthcare scheme. Under proposed legislation there is the possibility that the government will set product prices under a similar system used to establish the prices of new products.
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For new products prices are determined after the company has submitted a dossier to the Ministry of Economic Affairs. The dossier needs to include the method used to calculate the product price together with clinical evidence to support the market introduction of the product. If the Ministry of Economic Affairs does not agree with the information contained in the dossier then they impose a selling price on the company.
Market Forecasts
Figure 10-3 and Chart 10.2 provides a summary review of the analysis of the revenue forecasts for the Benelux absorbable and erodible biomaterials market. Figure 10-3 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Benelux), 1999-2009
Revenue Revenues Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Compound Annual Growth Rate (2002-2009): 6.9% Key: Benelux = Belgium, Luxembourg and the Netherlands
Growth Rate (%) --4.4 4.7 5.1 5.8 6.3 6.8 7.1 7.2 7.3 7.5
($ Million) 28.4 29.7 31.1 32.7 34.5 36.7 39.2 42.0 45.0 48.3 52.0
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Chart 10.2 Absorbable and Erodible Biomaterials Market: Revenue Forecasts (Benelux), 1999-2009
Revenues ($ Million) 60 50 Revenues ($ Million) 40 30 20 10 0 1999 2000 2001 2002 2003 2004 Year 2005 2006 2007 2008 2009
Key:
Benelux = Belgium, Luxembourg and the Netherlands

It has been estimated that the Benelux market for absorbable and erodible biomaterials was valued at $28.4 million in 1999. This had declined to an estimated $32.7 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $52.0 million (CAGR 6.9 percent). The largest of the two segments examined in this report is dominated by the size of the absorbable surgical suture sub-segment. This segment has been described as being static with only marginal growth in value expected as a result of small incremental price increases introduced on an annual basis. The sub-segments of adhesion barriers and adhesives and glues are regarded as major growth sub-segments. However market intelligence suggests that growth in the adhesives and glues segment will be attributed to its use as a replacement for absorbable surgical sutures. In effect growth in one segment will result in a decline of another. The majority of the growth expected in absorbable and erodible biomaterials in the Benelux is expected to be derived from the orthopaedic sector particularly in the synthetic bone graft substitute sub-segment.
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T r e n d s b y P r o d u c t Ty p e Figure 10-4 and Chart 10.3 provides a summary review of the analysis of the percent of revenue forecasts by product type for the Benelux absorbable and erodible biomaterials market over the forecast period. Figure 10-4 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Benelux), 1999-2009
European Absorbable and Erodible Biomaterials Market Absorbable and Erodible Wound Closure Biomaterials Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Key: Benelux = Belgium, Luxembourg and the Netherlands
Adsorbable and Erodible Orthopaedic Biomaterials (%) 7.4 8.2 9.2 10.4 11.9 13.6 15.5 17.5 19.5 21.5 23.6
(%) 92.6 91.8 90.8 89.6 88.1 86.4 84.5 82.5 80.5 78.5 76.4
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Chart 10.3 Absorbable and Erodible Biomaterials Market: Percent of Revenues by Product Type (Benelux), 1999-2009
99
00
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08 20
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Key:

In 1999 the absorbable and erodible wound closure biomaterials market segment represented 92.6 percent of the total Benelux absorbable and erodible biomaterials market. By the year 2002 the absorbable and erodible wound closure biomaterials market segment had declined and represented 89.6 percent of the total market. From the market intelligence gathered Frost & Sulivan predict that by the year 2009 the absorbable and erodible wound closure biomaterials market segment will have declined further and will represent 76.4 percent of the overall market. This represents a 16.2 percent increase in the percent of revenues for the absorbable and erodible orthopaedic biomaterials market between 1999 and 2009 and reflects the anticipated compounded annual growth rates expected for this segment. It is clear that the relatively static nature of the absorbable surgical suture market is affecting the structure and profile of the total market. On the other hand the use of absorbable and erodible orthopaedic biomaterials is increasing as surgeons recognise and accept the benefits attributed to products which are translucent to X-ray, which do not require an additional surgical procedure for their removal and do not require bone graft harvesting from the patient.
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Belgium and The Netherlands have separate and distinct healthcare systems, which necessitate the implementation of completely different product pricing tactics and strategies. Th e N e t h e r l a n d s Product pricing policies and strategies in The Netherlands are based on examining competitor products and their selling prices. This involves the gathering of market intelligence assessing the selling prices in different regions in The Netherlands and then applying this intelligence to offer competitive product prices to the hospital purchasing administrator. Belgium The pricing strategy for suppliers of absorbable and erodible biomaterials in Belgium is dominated by the reimbursement system and the nomenclature system, which provides approval for certain types of absorbable and erodible biomaterials products. Most absorbable and erodible biomaterials products are reimbursed between 80-90 percent of the product price with the remaining 20 percent being paid for by the Mutuelles or complimentary insurance cover. This nomenclature system was introduced and price calculation made in 1992 and then applied in 1993. Price increases within the reimbursement system are made twice a year and the price increases made are based on the government price increase index. Companies whose products fall within the nomenclature system are free to set prices but need to carry out a careful assessment of the cost price or purchase price from the manufacturer and the mark up required to cover overheads etc and the margin necessary to run their business and whether these prices are viable within the reimbursement system. As a result of information gathered during the preparation of this report there are three critical areas, which are examined when determining the price levels, which are set. These are:
Examination of competitor prices and their discount structures to determine whether they are able to compete effectively with competitors for products which may be described as me-to products. Examine the prices of similar or the same products in the neighbouring countries. For example prices in Germany may be cheaper than in Belgium in which case individuals are at liberty to cross the borders and buy the product in Germany rather than in Belgium.
Examine the prices of products in the country of origin. For example products originating in the USA have a high cost price and consequently the distributor may decide that the profit margin would be too low if they were to price the product within the reimbursement system.
One company representative stated that the Belgium market and in particular the reimbursement system appears to be designed to provide the end-user with low priced/poor quality product.
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Figure 10-5 illustrates the competitive structure of the Benelux absorbable and erodible biomaterials market Figure 10-5 Absorbable and Erodible Biomaterials Market: Competitive Structure (Benelux), 2002
Number of Companies in Market 30 Types of Competitors Direct subsidiaries from the leading multinational companies such as Ethicon (Mitek division), Sofamor Danek through the Medtronic offices in The Netherlands and Belgium Local distributors for leading suppliers from overseas such as Bionx who have appointed distributors in The Netherlands and Belgium. These are Hospithera S.A. in Belgium and Oudshoorn Chirurgische Techniek B.V in the The Netherlands Distributor agreements from smaller specialised overseas suppliers whose products are distributed by major multinational orthopaedic companies in each of the respective countries Distribution Structure Tiers of Competition The major suppliers distribute directly through subsidiary companies 1st Tier includes: Ethicon (J&J) 2nd Tier includes: Baxter International Inc, Tyco Healthcare, B. Braun and Biomet Merck 3rd Tier includes: Will Pharma, Cura Cell, CryoLife, Genzyme Bosurgery, Dr Hammer, Goretex, Alcon Laboratories, Cohesion Technologies (now Angiotech Pharmaceuticals Inc), Peters S.A., Confluent Surgical Inc, Gliatech Inc, Teknimed, Inion Ltd, Zimmer, Unilab Surgibone Inc. (Canada), Ceraver Osteal, Inoteb, SulzerMedica (Centerpulse), Orthovita, Orquest, Tornier (Phusis), Aesculap (B. Braun), Integra, Waldemar Link and Tutogen Medical Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity is forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Manufacturers seeking competitive advantage need to secure a distributor agreement with a major distributor in each individual Benelux country Proven Efficacy: Manufacturers and distributors require to submit proof of efficacy to the healthcare professionals Benelux = Belgium, Luxembourg and the Netherlands
Key:
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The market is a complex mixture of organisational structures and coverage in each of the geographic regions. This includes:
Direct subsidiaries from the leading multinational companies such as Ethicon (Mitek division), Sofamor Danek through the Medtronic offices in The Netherlands and Belgium. Local distributors for leading suppliers from overseas such as Bionx who have appointed distributors in The Netherlands and Belgium. These are Hospithera S.A. in Belgium and Oudshoorn Chirurgische Techniek B.V in the The Netherlands. Distributor agreements from smaller specialised overseas suppliers whose products are distributed by major multinational orthopaedic companies in each of the respective countries.
Examples of the organisational structures of selected countries includes: B. Braun Sales Organisation The Netherlands There is one Product Manager who is responsible for endoscopic products at B. Braun/ Aesculap. The sales force structure is a complicated division of product specialists divided by product division. In total there are 96 individuals involved in the sales department of B.Braun. Of these 96 individuals 50 are product specialists (sales representatives). The sales force is sub-divided into 3 divisions i.e. Hospital Products Division Aesculap and Disposables. The Aesculap sales force currently totals 12 product specialists of which 2 were dedicated to endoscopic products. Belgium There is a relatively small operation within Belgium for Aesculap Endoscopy products. There is one product manager who is responsible for 4 sometimes 5 sales representatives. Aesculap market directly through their B. Braun subsidiary and do not use distributors in Belgium. Linvatec Sales Organisation There is one country manager for both Belgium and The Netherlands whilst there is a general manager for the Benelux countries. Linvatec Europe based in Anderlecht is the central European warehouse supplying product throughout Europe and which also acts as a co-ordinating centres for repairs that need to be sent back to Linvatec in Florida. There are 3 product specialists in Belgium and 2 product specialists in The Netherlands.
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Smith and Nephew Sales Organisation The Netherlands Smith & Nephew operate an endoscopy division with a direct sales and marketing operation. The endoscopy division of Smith & Nephew is small with a single sales and marketing manager. The marketing manager is responsible for 5 sales representatives referred to as Product Specialists. Belgium The endoscopic sales and marketing team is relatively small with a Marketing Manager, one Product Manager and a total of 6 sales representatives involved in Endoscopy.

Figure 10-6 and Chart 10.4 illustrates and lists the market share of the major market participants and the percent change from year to year for the Benelux absorbable and erodible biomaterials market. Figure 10-6 Absorbable and Erodible Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Benelux), 2002-2003
2002 Company Ethicon (J&J) Baxter International Inc Tyco Healthcare B.Braun Biomet Merck Others Total Key: Benelux = Belgium, Luxembourg and the Netherlands Market Share (%) 57.7 15.6 8.1 6.8 1.4 10.4 100 2002/03 Trend Down (slightly) No Change Up Up Up -----
Note: Others include: Will Pharma, Cura Cell, CryoLife, Genzyme Bosurgery, Dr Hammer, Goretex, Alcon Laboratories, Cohesion Technologies (now Angiotech Pharmaceuticals Inc), Peters S.A., Confluent Surgical Inc, Gliatech Inc, Teknimed, Inion Ltd, Zimmer, Unilab Surgibone Inc. (Canada), Ceraver Osteal, Inoteb, SulzerMedica (Centerpulse), Orthovita, Integra, Orquest, Tornier (Phusis), Aesculap (B. Braun), Waldemar Link and Tutogen Medical
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Chart 10.4 Absorbable and Erodible Biomaterials Market: Market Share Analysis of Major Market Participants (Benelux), 2003
Baxter International Inc 15.6%
Tyco Healthcare 8.1% B.Braun 6.8% Biomet Merck 1.4% Others 10.4%
Ethicon (J&J) 57.7%
Key:

The overall market leader for absorbable and erodible biomaterials in the Benelux is Ethicon (J&J) with an estimated 57.5 percent of the market. The vast majority of this market share is attributed to sales of absorbable surgical sutures. Since this market in volume terms is static and only increasing in value marginally as a result of small annual incremental price rises the overall market share attributed to Ethicon (J&J) is expected to decline. This is not a function of any decline in sales value for the company but as a consequence of the higher growth rates in segments which Ethicon (J&J) does not operate in. Baxter International Inc is in second position with an estimated 15.6 percent of the market. Although the market presence is principally due to their tissue sealant market it is expected that their market share will grow as a result of the introduction of new and innovative product modifications and the anticipated introduction of new absorbable and erodible biomaterials into their product portfolio. Tyco Healthcare is in third position with an estimated 8.1 percent of the market principally as a result of its presence in the absorbable surgical sutures market. It is expected that the overall share of this segment will remain the same as although they are expected to gain market share from Ethicon (J&J) this segment is static. B. Braun is in fourth position with an estimated 6.8 percent of the market. B. Braun is predicted to increase its share of the overall market as a result of its recent entry into the absorbable surgical suture market and the predicted entry into absorbable trauma products through the Aesculap division.
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Market Drivers
Figure 10-7 shows the drivers for absorbable and erodible wound closure biomaterials in the Benelux market. Figure 10-7 Absorbable and Erodible Wound Closure Biomaterials Market: Market Drivers Ranked in Order of Impact (Benelux), 2003-2009
Rank 1 2 Drivers Development of the Existing Absorbable Surgical Sutures Through Growth in Different Surgical Applications 1-2 Years 3-4 Years 5-6 Years High Medium Medium Medium Medium
Growth in Absorbable and Erodible Wound Closure Biomaterials High Market Through Extended Applications of Tissue Sealants (Tissucol) Benelux = Belgium, Luxembourg and the Netherlands
Key:
Development of the Existing Absorbable Surgical S u t u re s Th ro u g h G row t h i n D i f f e r e n t S u rg i ca l Applications Absorbable sutures are becoming increasingly popular for specific cosmetic and plastic reconstruction surgery. For example absorbable sutures are being used routinely for a variety of cosmetic and plastic reconstruction procedures including eyelid, liposuction, forehead lifts and various rhinoplasty procedures etc. Market intelligence has determined that this clinical speciality is seen by the market as the fastest growing clinical application of absorbable sutures in the Benelux. It is anticipated that this growth will continue throughout the forecast period as individuals seek to improve their appearance for either cosmetic/aesthetic or for clinical reasons. G row t h i n A bs o rba bl e a n d E ro d i bl e Wo u n d C l o s u r e Biomaterials Market through Extended Applications of Ti s s u e S e a l a n t s ( Ti s s u c o l ) Baxter International have determined that the existing market for Tisseel or otherwise known under its trademark Tissucol fibrin sealant is saturated. They are currently assessing the future development of the market through the introduction of novel product presentations for use in different applications such as the spray application devices and in combination with other biomaterials e.g. collagen, ceramics and cellulose gelatin.
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The use of Tisseel in combination with other biomaterials provides an opportunity for Tisseel to be made available to a wider range of applications which would have otherwise have been impossible to use for example in the control of bleeding.
Market Restraints
Figure 10-8 shows the restraints for absorbable and erodible wound closure biomaterials in the Benelux market. Figure 10-8 Absorbable and Erodible Wound Closure Biomaterials Market: Market Restraints Ranked in Order of Impact (Benelux), 2003-2009
Rank 1 Restraints 1-2 Years 3-4 Years 5-6 Years High Medium
High Advent of Minimally Invasive Surgical Techniques Restrains Market Development of Absorbable and Erodible Wound Closure Biomaterials Lack of Incentive or Initiatives in The Netherlands to Reduce Waiting Lists Benelux = Belgium, Luxembourg and the Netherlands High
High
Medium
Key:
Advent o f Min ima lly Invasive Surg ical Techn iques Restrains Market Development of Absorbable and E ro d i bl e Wo u n d C l o s u r e B i o m at e r i a l s The increased popularity of minimally invasive surgery particularly in the largest clinical use of absorbable surgical sutures i.e. general surgery is a major restraint to the development and growth of these products over the forecast period. Today minimally invasive surgery has become become the standard of care for many procedures and has become widely accepted in nearly all medical specialties, often replacing traditional, open surgery. In many instances, such as surgery for stomach tumours and ulcers, laparoscopic procedures have replaced open surgery, resulting in a faster recovery time for patients. Other procedures that were routinely performed by the open approach have been replaced with laparoscopic techniques. These include gallbladder removal (cholecystectomy), removal of the spleen and adrenal glands, and abdominal wall and inguinal hernia repair. For patients who are considered morbidly obese and have tried dieting and weight management programs with limited results, surgeons are now able to offer minimally invasive bariatric surgery. With this procedure, patients lose about 70 percent of excess body weight. Laparoscopic bariatric procedures lower the risk of wound complications, shorten hospital stays, and allow patients to return to normal activities more quickly. In addition a relatively new advance in general surgery is the development of small (2 to 3 mm diameter) laparoscopic instruments. Referred to as micro-laparoscopy, this type of surgery is almost scarless. General surgeons use this technique for laparoscopic cholecystectomy and inguinal hernia repair.
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L ac k o f I n ce n t i v e o r I n i t i at i v e s i n Th e N e t h e r l a n d s to R e d u c e Wa i t i n g L i s t s As already discussed The Netherlands has been and is endured differing degrees of waiting list difficulties. As a result of market intelligence gathered during the preparation of this report it is not anticipated that there will be any major initiatives or drives to reduce the waiting lists and indeed it is considered by many to be a method of rationing health services, although supposedly only for certain non-urgent conditions. As a consequence the total number of surgical procedures which are expected to be carried out in The Netherlands is expected to remain stable restraining the potential growth of absorbable and erodible wound closure biomaterials.
Market Forecasts
Figure 10-9 provides a summary review of the analysis of the revenue forecasts for the Benelux absorbable and erodible wound closure biomaterials market. Figure 10-9 Absorbable and Erodible Wound Closure Biomaterials Market: Revenue Forecasts (Benelux), 1999-2009
Growth Rate (%) --3.5 3.6 3.7 4.0 4.2 4.5 4.6 4.6 4.6 4.6
($ Million) 26.3 27.2 28.2 29.3 30.4 31.7 33.1 34.7 36.3 37.9 39.7
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It has been estimated that the market for absorbable and erodible wound closure products was valued at $26.3 million in 1999. This had increased slightly to an estimated $29.3 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $39.7 million (CAGR 4.4 percent). The absorbable surgical suture market is valued at approximately $20.8 million and represents approximately 70 percent of the total surgical suture market. Currently and for the forecast period the market for absorbable surgical sutures has been described as static with approximately 70 percent of absorbable surgical sutures being used in general surgery. As an individual segment the tissue sealants market is estimated to be valued at $5.1 million. The market is static in volume and any increase in the value of the market is attributed to small incremental annual price rises by the manufacturer. In terms of value the Belgium market and the Dutch market are approximately equal in value. In terms of volume the Belgium market is larger than the Dutch market as individual product prices are lower in Belgium than in The Netherlands as a direct result of the reimbursement system and the nomenclatures used for approving products. The haemostat market sub-segment has been estimated to be valued at approximately $2.35 million but is not expected to grow in value significantly over the forecast period as volume sales are static whilst product pricing increase marginally by small annual increments. In contrast the adhesives and glues market sub-segment however is growing significantly and estimates suggest that the annual growth rates is exceeding 20 percent per annum. Currently the market is estimated to be valued at approximately $0.85 million. Although B. Braun has been on the market for over 20 years it has come under increasing competitive pressures from Ethicon (J&J) with their product Dermabond and Tyco Healthcare with their product Indermil. Although in its early stages of its market life cycle the adhesion barrier market sub-segment is growing rapidly and there is a clear and immediate requirement for surgeons to have products which prevent surgical adhesions. This sub-segment has been identified by surgeons as being a major clinical problem and one where a solution is required.

A description of the healthcare systems and the method of payments has already been described. In The Netherlands the cost of absorbable and erodible biomaterials is covered by the operating room or operating theatre budgets and consequently the patient is not required or is not involved in any reimbursement procedure. In Belgium however patient are required to process a procedure, which reimburses approximately 80 percent of the procedure costs through the social security system. They are able to recover the remainder of the cost provided they have subscribed to a Mutelle insurance company. The general pricing strategies and tactics used by companies in the individual member states has also been described and is applicable to this market segment.
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Figure 10-10 illustrates the competitive structure of the Benelux absorbable and erodible wound closure biomaterials market. Figure 10-10 Absorbable and Erodible Wound Closure Biomaterials Market: Competitive Structure (Benelux), 2002
Number of Companies in Market 16 Types of Competitors The market structure for the absorbable and erodible wound closure segment is highly concentrated with one company in particular dominating the market i.e. Ethicon (J&J) Other major multinational companies operating through direct subsidiaries include Baxter International, Tyco Healthcare and B. Braun Distribution Structure Tiers of Competition The main suppliers operate through direct subsidiaries 1st Tier includes: Ethicon (J&J) 2nd Tier includes: Baxter International Inc, Tyco Healthcare and B. Braun 3rd Tier includes: Will Pharma, Cura Cell, CryoLife, Genzyme Bosurgery, Dr Hammer, Goretex, Alcon Laboratories, Cohesion Technologies (now Angiotech Pharmaceuticals Inc), Peters S.A., Gliatech Inc, Integra and Confluent Surgical Inc Notable Acquisitions, Mergers Key End-user Groups No major acquisition or mergers noted All surgeons particularly general, orthopaedic cardiovascular and oncology surgeons, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity is forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Manufacturers seeking competitive advantage need to secure a distributor agreement with a major distributor in each individual Benelux country Key: Benelux = Belgium, Luxembourg and the Netherlands
The market structure for the absorbable and erodible wound closure segment is highly concentrated with one company in particular dominating the market i.e. Ethicon (J&J). In addition to Ethicon (J&J) the bulk of the remainder of the market comprises the large multinational companies Baxter International, Tyco Healthcare and B. Braun. In addition these companies create joint ventures and alliances with other smaller companies as distributors of products developed from the proprietary technologies of these companies.
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Absorbable Surgical Sutures "Catgut" sutures have been voluntarily discontinued in the Benelux countries as a result of recommendations made by the respective Health Ministries. The market is dominated by Ethicon (J&J), particularly in The Netherlands and the market is supplied through their direct subsidiaries. The other major suppliers also operate through direct subsidiaries. Ti s s u e S e a l a n t s The market for tissue sealants in the Benelux is dominated by Baxter International with Tisseel (licensed under the trademark Tissucol fibrin sealant). Neither Aventis with Beriplast or Nycomed with their product Tachocomb are currently present in Scandinavia. The product from Ethicon (J&J) known as AdvaSeal and originating from Genzyme Biosurgery has reportedly been taken off the market in the Benelux as a result of unfavourable clinical results from a US based clinical trial. CoSeal manufactured by Cohesion Technologies Inc is not yet sold in either Belgium or The Netherlands. Haemostats The market for haemostat is dominated by two companies i.e. Ethicon (J&J) and B. Braun with their products Surgicell and Lyostypt respectively. They too however are coming under increasing pressure from a number of smaller indigenous companies in The Netherlands i.e. Will Pharma and Cura Cell. Ligating Clips There are two main companies supplying ligating clips to the Benelux. These are Ethicon through their Mitek division with their Absolok and the Laproclip from Tyco Healthcare. Surgical Adhesives and Glues In the past this market sub-segment had been dominated by Histacryl from B. Braun. This product has been on the market for over 20 years and has an established reputation. During the late 1990s Ethicon and Tyco Healthcare entered the market with their products Dermabond and Indermil respectively. Both these companies have marketed their products aggressively and have taken market share from B. Braun. In addition to the major multinational companies present in the market smaller companies with proprietary technologies have entered the market. These include CryoLife with their product BioGlue and the imminent arrival of Omrix Biopharmaceuticals with their product Quixil.
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Ethicon (J&J) were at one time distributing a product known as FocalSeal-L Sealant. This product had been developed by Focal which in turn was acquired by Genzyme and included into the Genzyme Biosurgery division. Ethicon then dropped the product for undisclosed reasons and the product is now distributed in The Netherlands by a local distributors known as Rembrandt Ltd. Adhesion Barriers The products which are currently available on the market in the Benelux are: Seprafilm: There are three forms of Seprafilm relevent to this report and sold in the Benelux directly through the Genzyme Biosurgery subsidiary in The Netherlands. These are
Seprafilm Adhesion Barrier: Seprafilm Adhesion Barrier has had European approval since 1996.
Seprafilm II Adhesion Barrier: Seprafilm II Adhesion Barrier has had European approval since 1999.
CV Seprafilm II has been approved since the year 2000.
S eprafil m card iovascular Gliatech Inc focused on the development of ADCON (as a method of controlling adhesion) gels and solutions. There are two products available. These are ADCON-L and ADCONT/N. ADCON-L an approved product for the inhibition of postsurgical scarring and adhesions following laminectomy surgery. Gliatech is expanding its line of ADCON products to address other surgical applications. These include pelvic and gynecological surgeries (ADCON-P), abdominal surgery (ADCON-A), implant and prosthetic surgery (ADCON-I), and cardiac surgery (ADCON-C). The other known adhesion barrier is Adhibit adhesion prevention gel. Adhibit adhesion prevention gel is approved in Europe to prevent or reduce the incidence, severity and extent of post-surgical adhesion formation in patients undergoing cardiac surgery. Adhibit is a product developed by Cohesion Technologies, Inc. (now Angiotech Pharmaceuticals, Inc.) and distributed by Tyco Healthcare At the time of writing Adept from Shire Pharmaceuticals is not on the market but is planned to be launched during 2003.
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Figure 10-11 and Chart 10.5 lists and illustrates the market share of the major market participants and the percent change from year to year for absorbable and erodible wound closure biomaterials in the Benelux. Figure 10-11 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Benelux), 2002-2003
2002 Company Ethicon (J&J) Baxter International Inc Tyco Healthcare B. Braun Others Total Key: Benelux = Belgium, Luxembourg and the Netherlands Market Share (%) 64.4 17.4 9.0 7.6 1.5 100 2002/03 Trend Down No Change Up No Change -----
Note: Others include: Will Pharma, Cura Cell, CryoLife, Genzyme Bosurgery, Dr Hammer, Goretex, Alcon Laboratories, Cohesion Technologies (now Angiotech Pharmaceuticals Inc), Peters S.A.,Integra and Confluent Surgical Inc, Gliatech Inc
Chart 10.5 Absorbable and Erodible Wound Closure Biomaterials Market: Market Share Analysis of Major Market Participants (Benelux), 2003
Baxter International Inc 17.4% Tyco Healthcare 9.0%
B. Braun 7.6% Others 1.5%
Ethicon (J&J) 64.5%
Key:

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Ethicon (J&J) is by far the largest market shareholder in this market segment and they also arguably have a larger share of the Dutch market. Currently they are estimated to have a total of 64.4 percent of this market segment. Ethicon (J&J) is however coming under increasing competitive pressure from Baxter International, Tyco Healthcare and B. Braun. Consequently it is anticipated that Ethicon (J&J) domination of the market will be tested over the forecast period but it is expected that they will remain the supplier. Baxter International Inc is in second position with an estimated 17.4 percent of this market. Unless Baxter International Inc can identify new market opportunities with their tissue sealant or introduce new products within this segment it is not clear how they will gain market share. Tyco Healthcare is in third position with an estimated 9.0 percent of the market. Tyco Healthcare have gained and are expected to continue gaining market share from Ethicon (J&J) through their absorbable surgical suture products. B. Braun is in fourth position with an estimated 7.6 percent of the market. Their strengths lie in the adhesives/glues and ligating clips sub-segments. They are however gaining market share in the absorbable surgical suture market and have gained a few percentage points from Ethicon (J&J).
Forecasts
of
the
Absorbable
and
Erodible
Orthopaedic
Biomaterials
Market
Market Drivers
Figure 10-12 shows the drivers for the absorbable and erodible orthopaedic biomaterials market in the Benelux. Figure 10-12 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Drivers Ranked in Order of Impact (Benelux), 2003-2009
Rank Drivers 1 2 3 Key: Technological Advances and Market Introduction of New and Innovative Stimulates Market Development 1-2 Years 3-4 Years 5-6 Years High High High Medium Medium Medium Medium
Advantages of Synthetic Bone Substitutes Helps Stimulate Market High Development Technology-Driven Market Fosters Growth in Benelux Benelux = Belgium, Luxembourg and the Netherlands Medium
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Te c h n o l o g i c a l A dvan c e s a n d M ar k e t I n t ro du c t i o n o f Ne w and Innovat ive Stimula tes Mark et Developmen t Most implants currently used in trauma surgery are manufactured from stainless steel alloys or Titanium alloys. Significant problems such as stress shielding, allergic reactions, and corrosion are associated with the use of metallic fracture fixation devices. These hazards and the accompanying patient discomfort in most cases have led to the necessity of an additional operation to remove the metal implant after fracture healing. The use of biodegradable fracture fixation devices obviates the need for a removal operation, saving the patient from considerable psychological, physical and economical discomfort. During the controlled degradation the implant will gradually lose its strength, and the load on the fractured bone will shift from the implant to the bone therefore stress shielding and osteopnia will diminish encouraging a more rapid remodeling of the regenerating bone. These technological developments and the market introduction of absorbable biomaterials has helped surgeons perform procedures routinely which would have been impossible 20 years ago. Advantages of Synthe tic Bone Substit utes He lps Stimulate Market Developmen t There are a number of distinct advantages attributed to synthetic bone substitutes. The principal advantages are:

Completely syntheticno animal or human derived components. No chance of disease transmission. Completely absorbed in a relatively short time (<6 months). Biocompatible- no immunogenic response. No need to carry out a separate operative procedure to harvest autologous bone graft, which can cause a serious amount of discomfort, increased morbidity and which is recognised as being inadvisable for elderly or at-risk patients.
These factors contribute to reducing costs by

Reduce operating time Increase the use of minimal invasive surgery Reduce the length of stay for patients in hospital Reduce post-operative rehabilitation time
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Te c h n o l o g y- D ri ve n M ar k e t Fo s t e rs G row t h i n B e n e l u x The Dutch market is extremely receptive to new technology, and surgeons are keen to investigate new possibilities. Doctors in the Benelux region have been involved in clinical trials for both Norian SRS, by Synthes-Stratec, and Ostoset T, an advanced formulation of the Osteoset product, by Wright Medical Technology. As a result, both of these products have had successful launches in the market. This also enhances the image of other bone graft substitutes, as surgeons can be confident that clinical performance is favourable.
Market Restraints
Figure 10-13 shows the restraints for the absorbable and erodible orthopaedic biomaterials market in the Benelux. Figure 10-13 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Restraints Ranked in Order of Impact (Benelux), 2003-2009
Rank Restraint 1 2 Domination of Bone Banks Supplying Allograft Hinders Development of Synthetic Bone Graft Substitute Market Requirement to Provide Clinical Evidence to Prove Product Efficacy Restrains Development of the Absorbable and Erodible Orthopaedic Biomaterials Market Benelux = Belgium, Luxembourg and the Netherlands
1-2 Years 3-4 Years 5-6 Years High Medium High Medium High Medium
Key:
Domi nation of Bone Banks Supplying Allograft Hi nders Development of Synthetic Bone Graft Substitute Market A considerable proportion of bone graft material originates from either bone banks supplying allograft or from autograft i.e., bone transplanted from one part of a person's body to another part. This has been the traditional method of replacing extensive bone loss throughout the Benelux and there are many who are reluctant to change. Those who prefer to continue using traditional methods state that they have do not have problems using these materials and it is considerably cheaper than using synthetic bone graft substitutes. Frost & Sullivan anticipate that attitudes will change over time as a result of the gradual recognition by traditionalists of the benefits associated with synthetic bone graft substitutes and as the understanding of bone biology improves.
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R e q u i r e m e n t t o P r o v i d e C l i n i c a l E v i d e n c e t o P r o ve Product Efficacy Restrains Development of the Absorbable and Erodible Orthopaedic Biomaterials Market As with the Scandinavian market the clinicians and healthcare professionals in the Benelux are increasingly demanding evidence supporting the claims made by the company about a particular products and which supports the clinical efficacy of the product. It has become increasingly difficult to launch and support the market introduction of a new product without proven clinical efficacy. Suppliers need to ensure that clinical trials are conducted throughout the development stage before the planned market introduction of the market. Without this evidence there is string possibility that the product will fail.
Market Forecasts
Figure 10-14 provides a summary review of the analysis of the revenue forecasts for the absorbable and erodible orthopaedic biomaterials market in the Benelux. Figure 10-14 Adsorbable and Erodible Orthopaedic Biomaterials Market: Revenue Forecasts (Benelux), 1999-2009
Growth Rate (%) --16.0 17.2 18.8 20.9 21.7 21.7 20.8 19.4 18.4 18.1
($ Million) 2.1 2.4 2.9 3.4 4.1 5.0 6.1 7.4 8.8 10.4 12.3
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It has been estimated that the market for absorbable and erodible orthopaedic biomaterials market in the Benelux was valued at $2.1 million in 1999. This had increased to an estimated $3.4 million in the year 2002. By the end of the forecast period it is predicted that the market will have increased in value to $12.3 million (CAGR 20.1 percent). The absorbable and erodible orthopaedic biomaterials used for trauma, sports medicine and cranio maxillo facial surgery is expected to grow at an annual growth rates of about 10 percent per annum and is currently valued at about $2.0 million. The market for absorbable and erodible biomaterials used in traumatology i.e. bone plates and absorbable and erodible products used for cranio maxillo facial surgery is growing at between 10-12 percent per annum whilst the relatively more mature and established market for absorbable and erodible products used in sports medicine is growing at between 7-8 percent per annum. The market for synthetic bone graft substitutes is currently valued at about $1.4 million but is exhibiting growth rates of between 20-30 percent depending on the specific geographic regions. This sub-segment is predicted to continue to grow at this rate throughout the forecast period.

A description of the healthcare systems and the method of payments has already been described. In The Netherlands the cost of absorbable and erodible orthopaedic biomaterials is covered by the operating room or operating theatre budgets and consequently the patient is not required or is not involved in any reimbursement procedure. In Belgium however patient are required to process a procedure, which reimburses approximately 80 percent of the procedure costs through the social security system. They are able to recover the remainder of the cost provided they have subscribed to a Mutelle insurance company. The general pricing strategies and tactics used by companies in the individual member states have also been described and are applicable to this market segment.
Figure 10-15 illustrates the competitive structure for the absorbable and erodible orthopaedic biomaterials market in the Benelux.
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(Benelux), 2002
Number of Companies in Market 26 Types of Competitors Direct subsidiaries from the leading multinational companies such as Ethicon (Mitek division), Sofamor Danek through the Medtronic offices in The Netherlands and Belgium Local distributors for leading suppliers from overseas such as Bionx who have appointed distributors in The Netherlands and Belgium. These are Hospithera S.A. in Belgium and Oudshoorn Chirurgische Techniek B.V in The Netherlands Distributor agreements from smaller specialised overseas suppliers whose products are distributed by major multinational orthopaedic companies in each of the respective countries Distribution Structure The rest of the market comprises a complex mix of direct subsidiaries for the major multinational manufacturers and distributors within each Benelux country for other manufacturers 1st Tier includes: Biomet Merck, Arthrex and Ethicon (J&J) (Mitek) 2nd Tier includes: Sofamor Danek (Medtronic), Wright Medical Technology (Osteoset), Smith & Nephew (Acufex), Depuy (J&J), Linvatec (Conmed), NeuColl (Collagraft), Stryker, Mathys SynthesStratec, Bionx Implants Inc and Interpore Cross International 3rd Tier includes: Teknimed, Inion Ltd, Zimmer, Unilab Surgibone Inc. (Canada), Ceraver Osteal, Inoteb, SulzerMedica (Centerpulse), Orthovita, Orquest, Tornier (Phusis), Aesculap (B. Braun), Waldemar Link and Tutogen Medical Notable Acquisitions, Mergers Key End-User Groups No major acquisition or mergers noted All senior orthopaedic surgeons, sports medicine specialists, spinal surgeons and centres of excellence, senior OR nursing personnel and head of the OR department Hospital administrators, Hospital purchasing authorities and Key Purchasing Personnel Competitive Factors Product Pricing: Competitor activity is forcing a decline in product pricing and as a result increasing competitor activity Distribution Agreements: Manufacturers seeking competitive advantage need to secure a distributor agreement with a major distributor in each individual Benelux country Proven Efficacy: It is almost mandatory to provide clinical evidence proving the efficacy of the product Key: Benelux = Belgium, Luxembourg and the Netherlands
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The market is a complex mixture of organisational structures and coverage in each of the geographic regions. This includes:
Direct subsidiaries from the leading multinational companies such as Ethicon (Mitek division), Sofamor Danek through the Medtronic offices in The Netherlands and Belgium. Local distributors for leading suppliers from overseas such as Bionx who have appointed distributors in The Netherlands and Belgium. These are Hospithera S.A. in Belgium and Oudshoorn Chirurgische Techniek B.V in The Netherlands. Distributor agreements from smaller specialised overseas suppliers whose products are distributed by major multinational orthopaedic companies in each of the respective countries.

Figure 10-16 and Chart 10.6 lists and illustrates the market share of the major market participants and the percent change from year to year for the absorbable and erodible orthopaedic biomaterials market in the Benelux. Figure 10-16 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis and Trends of Major Market Participants (Benelux), 2002-2003
2002 Company Biomet Merck Arthrex Ethicon (J&J) (Mitek) Sofamor Danek (Medtronic) Wright Medical Technology (Osteoset) Smith & Nephew (Acufex) Depuy (J&J) Linvatec (Conmed) NeuColl (Collagraft) Stryker Mathys Synthes-Stratec Bionx Implants Inc Interpore Cross International Others Total Key: Benelux = Belgium, Luxembourg and the Netherlands Market Share (%) 13.5 9.8 9.2 8.5 7.5 6.8 6.5 5.5 5.4 5.0 4.8 4.5 4.5 8.5 100 2002/03 Trend Up Up Down (slightly) Up No Change No Change No Change No Change No Change No Change No Change Down (slightly) No Change -----
Note: Others include: Teknimed, Inion Ltd, Zimmer, Unilab Surgibone Inc. (Canada), Ceraver Osteal, Inoteb, SulzerMedica (Centerpulse), Orthovita, Orquest, Tornier (Phusis), Aesculap (B. Braun), Waldemar Link and Tutogen Medical
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Chart 10.6 Absorbable and Erodible Orthopaedic Biomaterials Market: Market Share Analysis of Major Market Participants (Benelux), 2003
Mathys SynthesStratec 4.8% Bionx Implants Inc 4.5% Interpore Cross International 4.5% Others 8.5%
NeuColl (Collagraft) 5.4% Stryker 5.0% Linvatec (Conmed) 5.5% Depuy (J&J) 6.5% Smith & Nephew (Acufex) 6.8% Wright Medical Technology (Osteoset) 7.5%
Sofamor Danek (Medtronic) 8.5% Ethicon (J&J) (Mitek) Arthrex 9.8% 9.2%
Biomet Merck 13.5%
Key:

The overall market leader is Biomet Merck with an estimated 13.5 percent of the market. Biomet Merck have this leadership position through their activities in both the synthetic bone graft substitutes with Endobon and absorbable trauma and suture anchor devices. It is anticipated that Biomet Merck will continue to grow and progressively gain market share throughout the forecast period. Arthrex is in second position with an estimated 9.8 percent of the market as a result of their wide range of trauma and sports medicine related absorbables. They are predicted to continue gaining market share in this segment throughout the forecast period but without synthetic bone graft substitutes their overall position may decline slightly. Ethicon (J&J) (Mitek) is in third position with an estimated 9.2 percent of the overall market. Ethicon (J&J) (Mitek) position is due to their presence in the endoscopy market and the range of absorbables that can be inserted using endoscopic techniques. Sofamor Danek (Medtronic) is in fourth position with an estimated 8.5 percent of the market as a result of the distribution rights it has for Osteoset bone graft substitute.
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11
Market Engineering Strategy
What Is Market Engineering Strategy?
Most strategy in business fails because it is not based on measurements. Instead, it is based on business theory, which means that the organisation cannot measure its effectiveness and does not know how to implement it. The three key advantages of Market Engineering strategy development over theoretical, university or guru-developed strategies are: Market Engineering strategy is very simply defined as how a company gets from point A to point B. Point A is the current market position, point B the desired position. This simplified definition of strategy greatly aids the communication process for the entire company-wide team.
How to Improve the Market Engineering Strategy Development Process

This section describes four important elements that support effective strategy development: M e as u re me n t s Th at Ad d r e s s C h a l l e n g e s t o t h e I n du s t ry A measurement-driven strategy is only as effective as the measurements used are valid. If the measurements do not properly monitor industry challenges and market trends, they make an effective strategy difficult to create. Measurements That Show Trends The perspective of time significantly increases the ability to gain strategic insight. Without this perspective, it is difficult for each measurement to pass the test known in marketing as the "so what" test, that is, determining the strategic significance of the measurement. Every measurement should go through this test. The test is simple, but it is difficult to pass. For example, a marketing director reads the most recent market research report, which states that the company market share was 22 percent in the last quarter. The director asks "so what?" Twenty-two percent holds no significance for the director or probably anyone else in the company. However, if the marketing director learns that last year the company market share was 25 percent, then he or she has discovered a strategically important measurement.
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In this case, the measurement taken relative to time provided much greater strategic insight than the measurement taken at just one point in time. Goals Based on Market Measurement s Setting goals is an important part of the Market Engineering strategy development process. It should take place after the measurements have been taken and the company's current location and competitive position in the market determined. Frost & Sullivan believes that if a company does not know the direction in which it is headed, it cannot take steps to change its ultimate destination. It is critically important for every healthy and ambitious company to develop measurementbased goals. The management team should set goals that are: Once the goals are set, the strategy should take the company from point A (where it is now) to point B (where it wants to be). Market Engineering helps a company navigate from point A to point B. Strategy Segmentation System To create strategic options that give maximum benefit, it is useful to create a matrix of measurement trends and different segmentation strategies that will be affected by the new options. The two-dimensional matrix in Figure 12-1 shows measurements and related trends on one axis and the strategic segmentation on the other. The figure illustrates the Market Engineering measurements in relation to segmentation by company department. It is condensed to show the Market Engineering strategy development system. Various systems of strategy segmentation can be used, for example:

by product by country by customer group by application by market position
In brainstorming sessions, companies should create different types of segmentation to stimulate new ideas and strategies. As the company continues the analysis, it should use each segmentation strategy to search for every strategic idea available. Any given cell might have as many as ten strategies or as few as zero. Not every cell will generate a unique and exciting strategy. However, each segmentation matrix can be expected to generate powerful insights.
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The next section makes strategic recommendations to aid companies in the development of their own unique strategy.
Market
Engineering
Strategic
Recommendations
Strategies Based on Technology and Strategic Alternatives

Market Evaluation The marketing environment consists of external forces that directly or indirectly influence an organisation's ability to maintain its competitive position and retain its ability to meet its strategic and financial objectives. Changes in the marketing environment create uncertainty, threats, and opportunities for marketers. It is the responsibility of the marketers to identify these changes and respond appropriately by modifying their marketing strategies in response to a dynamic environment. Failure to recognise these changes will leave the company unprepared to capitalise on marketing opportunities or to cope with threats created by changes in the environment. The most significant of these external forces in the current macroenvironment are the political forces, which are being brought to bear on the structure, organisation and funding of the public healthcare services. In response to these changes and as a method of maintaining the profitability, it is necessary to review the existing product ranges to:
Determine which products and/or product ranges do or do not meet the organisational profitability objectives
Determine those products and/or product ranges, which have the highest profitability Review and determine product areas, which have the greatest potential for future growth and profit maximisation
Clearly there are a number of factors which need to be taken into account when carrying out a product review of this type. These would include the product's position in its life cycle, the current levels for promotional activity and whether these promotional activites can be maintained and sustained at a level which will result in sales, competitor strengths and weaknesses (especially after the recent series of acquisitions and mergers), its ability to meet the customers requirements (technology assessment), its synergy and importance with other company products and/or long term organisational objectives etc.
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Typically it would be necessary to establish a system for identifying weak products through the appointment of a product review committee with representatives from marketing, R&D, manufacturing, and finance. The purpose of the product review committee is to examine each product showing trends in market size, market share, prices, costs and profits. Clearly a company recognising that it has an uncompetitive position with regards to for example absorbable surgical sutures as part of its product portfolio may decide to abandon this product range altogether or alternatively avoid committing resources or any promotional activity but retaining the products as a complimentary service to the other more profitable product groups. The recent cessation of "catgut sutures" has also provided companies with an opportunity to introduce new products and/or product line extensions that have been created as a result of the technological advances that have been made. Based on these assessments, companies have an opportunity to be able to differentiate their products and focus on developing their product portfolios and concentrated on developing sales from a smaller more profitable product base.
Strategies Based on Mergers and Acquisitions

As a result of the internal business appraisal and the need to implement a new strategic approach as a method of meeting any new and/or established key objectives, companies examine competitors to assess whether there are any synergistic advantages of merging or acquiring that competitor. Typically, the merger and acquisition process has been used as a method to:
Rationalise manufacturing by integrating, horizontally and vertically, the manufacture of the acquired products and reduce the number of manufacturing sites
Acquire products and brand name/image as a method of obtaining market share, eliminate competition and improve profitability by having better control over prices
Improve profitability by reducing duplication and rationalisation of human resources within the merged organisation
Acquiring new technologies from the Research and Development processes of the acquired company. Some of the recent changes in the orthopaedic industry indicate that the major suppliers are critically examining new market opportunities in biomaterials, tissue engineering and material sciences as a means of gaining and maintaining competitive advantage.
Rationalise the structure of the sales and marketing/distribution network and use the acquired distribution network to enter new markets
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The recent acquisition of Cohesion Technologies, Inc. by Angiotech Pharmaceuticals, Inc. has provided a platform from which Angiotech Pharmaceuticals, Inc. will be able to merge its "drug-loading expertise" with the product development and research capabilities, regulatory and clinical experience and intellectual property portfolio of Cohesion Technologies, Inc. Similarly the recent acquisitions of of Instrument Makar and Orthopaedic Biosystems Ltd, Inc., and Acufex by Smith and Nephew illustrates their strategic intent by gaining both market share and as a method of gaining proprietary technologies. These could both be regarded as a typical examples of companies which should be able to extend its presence into existing markets by gaining collective marketing strength by broadening the depth and breadth of its product range, acquiring market share in this particular major European market and gained significant market shares in key market segments i.e. bioactive devices and implants.
Strategies Based on Alliances and Joint Ventures

Corporate joint venture refers to a corporation owned and operated by a small group of businesses (the "joint venturers") as a separate and specific business or project for the mutual benefit of the members of the group. A government may also be a member of the group. The purpose of a corporate joint venture frequently is to share risks and rewards in developing a new market, product or technology; to combine complementary technological knowledge; or to pool resources in developing production or other facilities. A corporate joint venture also usually provides an arrangement under which each joint venturer may participate, directly or indirectly, in the overall management of the joint venture. Joint venturers thus have an interest or relationship other than as passive investors. An entity which is a subsidiary of one of the "joint venturers" is not a corporate joint venture. The ownership of a corporate joint venture seldom changes, and its stock is usually not traded publicly. A minority public ownership, however, does not preclude a corporation from being a corporate joint venture. Argueably one of the most interesting partnership agreements recently established in the absorbable and erodible biomaterials industry has been the agreement reached between Biomet and Merck KGaA.
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The joint venture formed in January 1998 with Merck KGaA, Darmstadt, Germany, significantly expanded Biomet's presence in the European marketplace and provided access to key biomaterials technologies. The sales-force contributed by Merck KGaA, with a particularly strong presence in France and Germany, complemented Biomet's sales-force, which has market-leading positions in other parts of Europe. Under the terms of the agreement, Biomet and Merck KGaA each contributed its European orthopaedic and biomaterials business operations to a new partnership entity and its whollyowned holding company. Both the partnership and holding company, known as BioMer are organised under the laws of The Netherlands. Biomet is the general partner with a 50 percent interest and Merck KGaA is a limited partner with a 50 percent interest. Biomet has control of BioMer through its voting control of the board of directors and, accordingly, the Company has consolidated the financial statements of BioMer for financial reporting beginning 1st January 1998 and has shown a minority interest for Merck KGaA's 50 percent interest.
Strategies Based on Organisational Re-Engineering

This involves an almost endless list of re-structuring and re-organisation processes across the entire organisation and at every step in the business management process to improve operational efficiency. Arguably some of the more important areas include the: Location of the organisation headquarters and the proximity to the companies largest and most important markets.
Re-appraisal of the cultural dynamics of the company to determine the "fitness" of the company's human resources and their ability to respond to the new challenges in the marketplace.
Re-evaluation of the sourcing and re-negotiation of the purchase of raw materials for manufacturing.
Improvement of the marketing forecasting process through the computerised forecasting and production scheduling as a method of being more responsive to market needs whilst ensuring obsolescence attributed to high stock levels does not exceed finished stock levels established by operations management.
Examination of the manufacturing processes to improve efficiency by the elimination of waste and improve product quality to minimise customer complaints.
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Strategies
Based
on
Competitive
Advantage
Service Differentiation
Adding service added value helps create a differentiated service and improves brand loyalty to a particular company. The service provided must however be able to respond rapidly to customer requirements, otherwise they will lose confidence and seek help from other sources. To improve and differentiate a company's service, a review of the following service initiatives will help gain and maintain service competitive advantage.
Delivery: To improve the speed, accuracy and care during the delivery process through careful vetting of external delivery systems or consider the use of in-house delivery systems rather than relying on delivery by external agents. On-site training and education about use of new products and advantages of existing products: Training of medical staff is recognised as a major issue by the administrators of the healthcare systems. In partnership with the healthcare providers companies can gain competitive advantage by establishing extensive product training programmes and sponsoring medical education programmes and seminars. The classic example often cited as an exemplary method of of end-user training and education is the AO Centre based in Davos, Switzerland. This site organises and carries out a large number of specialist courses for the training of both surgeons and operating room personnel. Although the AO/ASIF Foundation would point out that the Foundation does not specifically promote the instruments and implants developed from its research activities, it is clear that the seminars and teaching activities carried out by the Foundation are an extremely powerful marketing tool and powerful influencing factor on orthopaedic surgeons. Warranties, supply and maintenance contracts: Extended warranties and maintenance contracts are frequently used in the medical device industry to not only help ensure the continuity of the existing equipment but also to help gather market intelligence about the projected life expectancies of existing products. Clinical Efficacy: Clinicians throughout Europe are increasingly demanding proof that not only will a particular product do exactly what it says it will do but that it does it cheaper and better than alternative solutions. This requires manufacturers to have conducted and published the results of clinical trials providing data and information supporting the promotional claims for that product. In addition although healthcare clinicians rely on many sources of medical information to make decisions includingjournal articles and reviews, textbooks, colleagues, continuing medical education conferences, practice guidelines, videotapes and audiotapes, and pharmaceutical representatives-many have had little formal training in assessing the clinical usefulness of the information obtained from each source. This makes it difficult for the commercialisation of products even if clinical evidence is available. Companies need to ensure that clinicians recogniseand understand the data and information provided to them. This requires substantial assistance and support from well trained and informative sales and marketing personnel.
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Strategies Based on Product Development

The purpose of this section is to offer suggestions, which will help develop strategies designed to provide product differentiation.
Product Feature Design strategies

In the opinion of the author it is essential to consult with influential surgeons based in the major centres of excellence when preparing to develop new and innovative absorbable and erodible biomaterials. This not only establishes end-user needs but also develops a rapport with a centre of excellence, which could be used as a referral site for potential future customers.
Conformity
Manufacturers of medical devices including absorbable and erodible biomaterials need to ensure that the product complies with the criteria established in the Medical Device Directive. In addition to the Medical Device Directive, medical device manufacturers need to investigate whether there are any specific national requirements which, if the company is unaware, may delay the launch of a new product. Manufacturing This essentially covers the three areas described below:

Manufacturing cost of the product Consistency in product quality Forecast and process management
Manufacturing Costs: New and innovative absorbable and erodible biomaterials not only have to prove clinical efficacy they also have to provide value for money. The objection often cited for clinician reluctance to convert from metallic implants to abosrobable implants has often been cost. Metallic implants are recognised as being significantly cheaper than absorbable implants. Frost & Sullivan has determined that manufacturers of absorbable implants must develop manufacturing processes which reduce the existing cost profiles of existing absorbable and erodible products to be more competitive with metallic implants whilst increasing the value of the market. Consistency in product quality: One of the original problems asociated with the manufacturing of absorbable and erodible implants was the ability to control the consistency and shelf life of the finished products.
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Forecast and process management: Product forecasting for new and innovative products is especially difficult but marketing management must develop a systematic system which will allow more accurate product demand so that process scheduling in manufacturing can be controlled helping to reduce costs.
Market Strategies for Leading Suppliers

The following are a few suggestions for leading suppliers of absorbable and erodible products to obtain and maintain competitive advantage in the European market. Incremental product improvements: To expand the market for its branded products by making a series of incremental product modifications. A company whose product development strategy results in the introduction of a series of progressive product improvements can build on the company image and product branding and will earn the reputation of being a market leader and one which is responding to changes in the market and user needs. The areas covered by incremental product improvements include:

Product feature improvements Product style improvements Product quality improvements
Add new product lines: Extend the range of existing products to cover other healthcare applications. Bionx Implant and Ethicon (J&J) are exemplary examples of companies who have embarked on making a series of incremental product improvements and new product additions as a method of continually re-stimulating the market and advancing knowledge acquistion about absorbable and erodible biomaterial products in general.
Marketing-Mix modifications: In searching for ways to stimulate sales for the market leader, marketing management should consider modifying one or more of the following market mix elements: a) Pricing: Given any competitive situation, should additional consideration be given to special pricing for volume purchases or early-purchase discounts following new product launches? b) Distribution: If market penetration is slow or weak should the company re-consider its method of distribution and/or consider the establishing of a direct subsidiary or changes in the structure of the sales force? c) Advertising: Would the company benefit from increasing the level of advertising through trade journals, exhibitions etc.? d) Sales promotions: Would a company benefit from increasing the level of sales promotion by trade-in deals for slow moving stock; additional short-term promotional efforts via contract sales forces; or increasing promotional activity in certain geographic regions?
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e) Personal selling: This includes a variety of options open to sales management in an attempt to improve the direct contact between the company and the healthcare provider and healthcare purchaser. Some of the options include: Should the number or quality of salespeople be increased? Should a company improve personal selling through sales training and improvements in recruitment policies? Should there be any changes to the size and structure of the sales force territories? It may be necessary to change the boundaries of the territories to reflect the structural changes in the healthcare systems and boundaries for purchasing authorities.
Market Strategies for New Entrants

Assuming a company has determined the market attractiveness by carrying out an extensive evaluation of the market through a standard situational analysis, prepared cost-benefit data and carried out marketing testing in selected sites, then the product is ready for commercialisation. There are four considerations which the author suggests will need to be reviewed before commercialisation.
Market Entry Timing

In commercialisation of a new product, the marketing managers need to determine the market-entry timing. If for example a company is nearing the completion of the development and production of a new product and then hears that the launch of a competitor is imminent the company faces three choices: First Entry: The first firm entering a market should enjoy "first mover advantage" and gain reputational leadership. This is assuming that any design and manufacturing problems have been resolved, otherwise the company will lose credibility, not only for the new product but also for its other products. Parallel Entry: This is the entry of the new product at the same time as the competitor. Sometimes one company can benefit from the promotional costs incurred by another company as the company who is promoting heavily creates a new market niche. It is however essential that the other company must launch their product at the same time to benefit from the activity of the other.
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Late Entry: If a company delays the launch of a product until after the competitor there are three potential advantages:

The competitor will have borne the cost of educating the market. The competitor's product may reveal faults that the late entrant can avoid. The company is able to obtain a more accurate assessment of the size of the market.
Geographic Strategy
The company will need to decide whether the new product is to be launched in a single region, several regions, a national market or an international market. For those companies without the resources to launch a product throughout Europe, planned market roll out programmes, in particularly attractive markets or selected centres of excellence, offer the most cost effective method of bringing a new product to market. When considering roll out programmes the marketing manager needs to consider the market potential, the company's local reputation, the quality of market research data in that region, the influence that centre of excellence has in other areas and the level of competitive penetration.
Target Customers
When determining which target markets should be included in the roll out programmes, the company should select and rate potential customers on the following basis:

Those who are recognised as early adopters. Those who are recognised as being responsible for purchasing a large volumes. Those who are opinion leaders.
Once the marketing strategy has been transposed into an action plan it will be necessary for the marketing manager to carefully control and monitor the plans progress and to ensure each planned step is critically examined and met. This normally involves the use of networkplanning techniques such as critical path scheduling using any of the proprietary commercially available software solutions.
Frost & Sullivan's Strategic Recommendations for Further Research

Buyers of this research report have been motivated to enhance their businesses by strengthening their market or expanding into new market segments. Because its customers have these clear objectives, Frost & Sullivan is endeavouring to add value to this report by a series of strategic recommendations for further research.
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This section includes insightful recommendations for key departments within the absorbable and erodible biomaterials market. These recommendations are divided by company department to address the needs of individual department managers. Some recommendations are reiterated to show how several departments can benefit from a single research investment. Recommendations are organised as follows:

Recommendations for the Marketing Department Recommendations for the Sales Department Recommendations for the Product Development Department Recommendations for Corporate Management and Business Development
Recommendations for the Marketing Department

Market Engineering An annual or quarterly market engineering monitoring programme should be established to monitor the movements in the absorbable and erodible biomaterials market over time and a company's position relative to it. The market engineering measurements selected should depend on a company's needs, but the core measurements must be measured over time to ensure that no key market trends are missed or ignored. The study of accurate measurements over time may reveal important trends in the absorbable and erodible biomaterials market that should drive the development of strategy and market planning. Creative Market Segmentation Analysis Creative market segmentation analysis can identify opportunities for future growth. The research is based upon segmenting the absorbable and erodible biomaterials market in a variety of ways and then analysing each market segment. Analysing each segment individually should reveal areas with the lowest saturation and highest market potential for growth. The most common ways to segment the market, a few of which have been used in this report, are by geography, by customer, by application and by industry. The segmentation of the absorbable and erodible biomaterials market by geographic region is discussed next. Market Analysis by Geographic Region The industrialised nations within Europe are recognising the benefits of absorbable and erodible biomaterials products and as a result are exhibiting significant growth in selected subsegments. An obvious way to expand is by focusing on specific niche markets in certain geographic regions. Frost & Sullivan recommends that companies interested in this type of expansion perform an in-depth market analysis with forecasts of market potential for each region targeted. To enter these markets without first doing a thorough analysis would unnecessarily risk valuable capital and resources.
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Frost & Sullivan recommends that manufacturers and distributors of absorbable and erodible biomaterials products carry out a complete in-depth analysis of this region on the basis of individual products and strengths. Information on distribution channels, competitor strategies, customer demographics and customer attitudes can provide the foundation for an effective market penetration strategy. Distri bution Channel Analysis Analysing a distribution channel for the absorbable and erodible biomaterials market may enable a company to become more proactive regarding changes in the marketing structure of the industry. The company that optimises the distribution channel strategy in future is anticipated to show large gains in profitability and sales growth. End- user Demand Analysis As the absorbable and erodible biomaterials market grows it becomes increasingly competitive and as profit margins drop, future sales and profit gains will be derived only by gaining a thorough understanding of the needs of end-users. To make continuous improvements in end-user focus, companies must be prepared to measure and monitor their customer bases constantly. Companies should design an annual or quarterly customer survey to take specific customer measurements that relate to their absorbable and erodible biomaterials product portfolio. These measurements must be monitored over time to track the movement and trends of customer attitudes and behaviour. End-user Demographic Analysis Frost & Sullivan strongly recommends an in-depth customer demographic analysis of the absorbable and erodible biomaterials market to help develop an effective and powerful strategy. Without the full and complete knowledge of absorbable and erodible biomaterials end-user demographics derived from such in-depth analysis, any strategy would be reduced to guesswork and the resulting choices would not be optimal. A customer demographic analysis would help support sales strategy, distribution strategy, market tool allocation strategy and database development effort. Competitive End- user Analysis Frost & Sullivan recommends that companies survey the end-users of key competitors to gain insights into why these end-users purchase from these competitors. This information may be quite effective in helping a company to draw customers away from the competition. Without this information, many firms will rely on guesswork, which most likely will not optimise their growth.
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A n a l y s i s o f P r i c i n g Tr e n d s As the absorbable and erodible biomaterials market becomes increasingly competitive, an important part of a winning market strategy will be to set up a quarterly/annual price-monitoring programme. To optimise profitability and sales in the absorbable and erodible biomaterials market, companies should implement a price-monitoring system covering all competitors in all significant geographic regions. This information could be gathered quickly by way of a series of telephone interviews. It could then be stored on a file server in a database format to provide access to it for all key departments, such as sales, marketing, finance and research and development (R&D). Departmental Budget Monitorin g As the market grows more competitive, the marketing mix, or the way marketing budgets are allocated over the marketing tools, will need to change in order for companies to maintain profit margins. Marketing tools that worked in the past, such as advertising or public relations techniques, may not be effective future tools for generating leads. A disciplined measurement system for tracking lead generation, lead qualification, sales and related costs by each marketing tool should be developed in order to optimise the allocation of budget over the tools. These tools include advertising, seminars, trade shows, direct mail, direct sales, telesales and the like. Marketing Audit For those companies that have competed in the absorbable and erodible biomaterials market for more than five years, certain elements of the sales and marketing strategy are likely to have grown stale and might put companies at risk during the next recession. A marketing audit by an outside consultant would be a wise investment to ensure that all systems are under constant review and are flexible enough to change with the times. Typically, people do not like change, so a healthy organisation is always open to outside review. In such a review, all elements of customer interaction should be audited. Elements to be audited include sales force structuring, the customer database, lead-tracking and analysis systems, corporate training programmes, competitive monitoring programmes, level of market orientation, promotional activities and measurement systems and productivity of each area.
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Customer Surveys All companies active in the absorbable and erodible biomaterials market should conduct an annual customer survey to monitor the satisfaction of customers and their needs, attitudes, budgets, purchasing patterns and buying windows. Finding and filling unmet customer needs is the source for many great business success stories. A systematic customer survey system can be developed across many market subsegments; this has the potential to reveal unmet customer needs. A hundred well-designed customer telephone surveys performed in each segment would reveal areas for potential sales. An annual customer survey of not fewer than 500 customers would clearly reveal the reasons customers buy, as well as their purchasing patterns. This information would provide the critical elements needed to design and implement a powerful and effective sales strategy. Frost & Sullivan have seen many cases in which sales strategy, product literature and promotional material all emphasised features that were not critical customer concerns. Sales can improve if the entire strategy is focused on customer needs. The only way to identify these needs is to take measurements on a statistically significant sample size of customers in each absorbable and erodible biomaterials market segment. Competitive Sales Strategy Analysi s An aggressively competitive monitoring programme should be established in order to help improve the competitive close ratio of a firm. Monitoring the competition's sales tactics, structure, sales pitch and strategy can reveal clearly and distinctly how a company can train its sales force to draw clients away from its competitors. Each percentage change in close ratio makes a huge impact on a company's profitability. Competitive monitoring can reveal many new ideas and techniques that can help a company develop a continuous improvement programme for its sales force. A n n ua l C o m p e t i t i v e Tr a i n i n g S e m i n a r s Collecting and analysing the competitive information is the first step in sales improvement. The second, more important step is ensuring that the information reaches members of the sales force so that they can use it to increase their sales close ratio. To disseminate the information, companies should hold quarterly or annual events to educate salespersons and discuss and develop winning strategies. A systematic matrix approach of comparisons; measurements; and strengths, weaknesses, opportunities and threats (SWOT) analysis should be used.
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Major Ac co unt Dev el opment Ana lysis Market research can significantly improve this process by providing more in-depth and strategic profiles of absorbable and erodible biomaterials manufacturers. The sales manager must realise that the data currently available at low cost on key companies is not sufficient for creating an intelligent sales strategy. Typically, a substantive profile costs between $1,500 and $2,500, while often the cost of a qualified lead is even higher. Measuring of Lead Generation Process A disciplined measurement programme of lead tracking, cost allocation and sales by marketing tool is essential in building a world-class sales support system of lead generation. This is the area of marketing that Frost & Sullivan most often sees run on the basis of opinions and gut feelings, rather than on market measurements. Using the customer engineering system, a company can greatly increase its sales profitability. C u s t o m e r Da t a b a s e Au d i t Frost & Sullivan recommends a customer database audit primarily because salespeople typically claim that they know their customers and that the database is kept current through discipline and hard work. Frost & Sullivan has learned in its experience as a consultant that this is seldom so and that sales force-maintained databases are rarely more than 50 percent accurate. The customer database audit consists of taking the first 500 names off the customer database and interviewing them by telephone using a detailed and disciplined survey. The audit includes three key tests that must be passed in order for a company's products to achieve full market penetration. The tests are accuracy, comprehensiveness and detail. If the database does not pass the audit, the company may not be selling up to its potential because it is not in proper contact with its customer base. C u s t o m e r Da t a b a s e E n h a n c e m e n t If the customer database audit reveals that the database is not detailed, not accurate, or not comprehensive, the next important step is to structure a database cleaning project or programme that will systematically "clean" and update the database and identify all potential clients. This programme needs to be closely coordinated with members of the sales force to provide leads to them in an orderly fashion. Leads are an important side benefit of cleaning the database. Ultimately, there should be a measurable and significant return on investment from these projects.
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C u s t o m e r Da t a b a s e D e v e l o p m e n t New customer segments and customer databases that have been developed with an ad hoc system should now be processed through a formalised database development methodology. Frost & Sullivan recommends a customer engineering methodology built around three concepts of development: accuracy, detail and comprehensiveness. This system results in a highly powerful and effective sales tool on which any marketing and sales team can build.

N e w Te c h n o l o g y E v a l u a t i o n New developments in the absorbable and erodible biomaterials market look exciting to engineers, inventors and developers. It is important, however, to invest approximately 5 percent of the proposed development budget in investigating the role of the new technology or product ideas in the marketplace. Telephone surveys or focus groups should be arranged with disciplined interviewing and probing techniques so as to identify precisely the end-user needs and acceptance rates for the product. At the same time, a specification and price matrix should be made with all the competitors' products to verify that this new product does fill a gap in the marketplace. One must remember that this process typically has a financial return of thousands to one. Analysis of New Product Potential Analysis of the potential of a new product is a necessary strategy if the product has not already been tested by others in the absorbable and erodible biomaterials market. A new technology, distribution channel or pricing strategy could be worthy of a decision to develop the product to enter the market. Before a company makes the decision to invest in new product development, however, it should undertake a comprehensive analysis of both the competition and the end-user base to ensure that the development project is indeed bringing a product to the market that the competition does not already offer and that the customers want. Specifications and attributes of a competitor's products should be analysed in a matrix measurement methodology to identify holes in the market's product line. At the same time, one should market test the unique attributes of the new product by performing at least several hundred interviews with end-users in person or over the telephone in order to gauge their reactions to the product idea.
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Evaluation of New Product Launches Mistakes are made virtually every time a new product is launched in a market by a new competitor. Absorbable and erodible biomaterials manufacturers can avoid this problem by conducting market engineering before launching the product. Market engineering refers to the use of extensive market measurements on which to base the development of goals, market strategy, market plan and implementation plan to ensure that a product is introduced in the market to optimise sales and profits. The market engineering measurements that should be integrated in this process should include the minimum of end-user demographics, attitude measurements, market share trends, market concentration, market saturation, replacement rates, pricing measurements, price performance measurements and market growth measurements. Monitoring of Competitor Research and Development R&D departments intent on staying on the cutting edge of development must monitor their competition very closely. A quarterly competitive monitoring programme should be set up to analyse and measure systematically competitors' activities across all strategic areas; this could reveal new product development plans, new technology evaluation, strategic partnership arrangements, original equipment manufacturer (OEM) deals and the like. Frost & Sullivan strongly recommends monitoring the top five competitors quarterly in order to help R&D departments keep abreast of their developments and find new ideas for product improvements. The risk of being late on the market with the wrong technology is too great for a company not to take a portion of the R&D budget for competitive research. Mo nitori ng of I ndust ry Produc t Spe cif icat ion s Many times, Frost & Sullivan has found that the development staff is too far removed from the marketplace and does not have adequate sources of market information about the competition. Even where a wealth of information exists, it is often poorly organised and therefore has little strategic value to the developer. Therefore, it is important to create an absorbable and erodible biomaterials product specification measurement comparison matrix of all the products on the absorbable and erodible biomaterials market. This specification comparison can be helpful to developers, who are often trying to hit a moving target with their development efforts. This specification measurement system can help a company to forecast the direction of the price-to-performance trend and can aid developers in hitting or beating the measurement.
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Compi lati on and Analysis of Industry Product Literature Compilation and monitoring of competitor product literature is another key support tool for the R&D laboratory. This literature must be collected for all absorbable and erodible biomaterials manufacturers and must include all absorbable and erodible biomaterials products and related products so that no feature or development is omitted in the development of product strategy. A stack of literature or information is not as helpful, however, as is having someone analyse the data and highlight the specific areas that deserve strategic focus.

Competitive Benchmarking It will most likely become increasingly important to monitor the leaders in this industry on a continuous basis in order to keep other companies fully prepared for changes they could bring to the market. If a competitor monitoring programme is not continuous, the chances of being caught off guard by competitive strategy increase significantly. A systematic competitor benchmarking and analysis system can also provide a wealth of new ideas to improve a company. Acquisition Analysis For both current producers and companies that are considering entering the absorbable and erodible biomaterials market, Frost & Sullivan recommends conducting an acquisition analysis. An acquisition could be the most cost-effective way of capturing this market. An acquisition analysis of all potential participants in the market could provide firms with the strategic insight needed to fulfil objectives more rapidly. The analysis would include a review of all companies by category, a screening system based on market measurements and a SWOT analysis of the way each company would potentially fit into the overall strategy. I mp leme ntati on of Co ntinuous I mprovement Programme Corporate management teams are engaged in a continuous struggle to find new ways to improve the efficiency and quality of their companies. A well-structured and well-managed market research programme is an effective way to generate a wealth of ideas for improvement and to identify areas that need improving. Ideas generated from inside the company eventually die out; the only source of never-ending feedback is the marketplace. This is the reason that Frost & Sullivan recommends a periodic programme of customer surveys, customer visits, marketing audits, database audits and market training programmes to keep a company constantly on the cutting edge of the absorbable and erodible biomaterials market.
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12
Frost & Sullivan's 12-Step Market Engineering Research Methodology
Frost & Sullivan employs a rigorous and comprehensive 12-step methodology in its market research. Frost & Sullivan has refined its methodology over many years of experience, having researched a wide diversity of markets in many different life cyclesfrom embryonic to mature. Frost & Sullivan's reference publication, Industrial Market Engineering (Publication 5168-80), explains the research methodology in great depth. That same methodology is the one presented here, called the 12-Step Frost & Sullivan Market Engineering Research Methodology. Frost & Sullivan's Market Engineering system:

Focuses on challenges, problems, and needs of industry participants Is based on primary market research, not secondary or previously published research Is based on detailed, comprehensive "bottom-up" data collection techniques Is based on measurements
Step 1: Define Market Problems, Needs, and Opportunities

Phase One: Analysis The first phase in this step of the research process is to establish why this subject deserves an extensive market research report. During this stage, the research team analyses the market to identify past problems faced by industry participants competing in the market, the key challenges they confront now, and the opportunities that may arise. Frost & Sullivan gathers its information from various sources. The data represent mainly primary information gained from interviews with industry competitors. Frost & Sullivan encourages its customers to specify what they seek in a research report. To create the overall research strategy and structure of the project, Frost & Sullivan uses this information in combination with feedback from its sales force, its consultants, and its research directors.
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P h a s e Tw o : K i c k o f f M e e t i n g The kickoff meeting is a valuable element of the process. It allows the entire industry unit to play a role in the research process. At this meeting, all staff members involved in the industry discuss the research topic in great detail. This meeting greatly improves Frost & Sullivan's depth of insight into the needs, problems, and challenges of the industry.
Step 2: Define Objectives and Goals of the Research Project

The second step is to define the research objectives toward meeting the challenges, problems, and needs identified in Step 1. The objectives of Step 2 are to:

Determine market research measurements Choose segmentation Select research instrumentation Identify key issues and trends in the market Designate key customer groups Single out competitors
Step 3: Design Optimal Research Team

Research projects demand close participation among many key people, all of whom contribute to a project's final value. Participants typically involved in the research project include the lead research analyst, the support research analyst, research directors, account executives, Market Engineering consultants, key customers, industry advisers, and research editors. Lead Research Analyst The lead research analyst has primary responsibility for designing and implementing the research project. The lead analyst defines the project scope, identifies key research issues, ensures compliance with Frost & Sullivan's Market Engineering methodology, and has ultimate responsibility for the quality, accuracy, and completeness of the research. Support Research Analyst The support research analyst works closely with the lead research analyst to assist in data collection and analysis. This collaboration greatly augments the report's strategic insight.
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Research Directors Research directors manage all research projects in a given industry segment. Their role is to ensure consistency among research projects and to assist the analyst team when needed. They are also responsible for assembling an industry research team whose skills and knowledge include the entire industry. The research director is highly experienced in all facets of the industry and the research process and plays a valuable role in the structuring and analysis of each project. Account Executives Account executives verify that all feedback and inputs from the customer are fully integrated in the research team's findings. Account executives solicit customers for feedback generated by previous research reports as well as for their needs in future research. When the research is complete and the research report issued, Frost & Sullivan account executives also facilitate communication and feedback between customers and analysts. Market Engineering Consultants Market Engineering consultants work with clients on their unique marketing and business problems. This ongoing relationship with key clients allows the clients to play a valuable advisory role in many market research projects. Market Engineering consultants also work closely with clients in choosing larger-scale research projects stemming from questions and issues stimulated by the research publication. Typical projects are acquisition searches, new product investigation, and strategic planning to augment market share. Key Customers Many of Frost & Sullivan's larger client companies participate in the research process by consulting on segmentation strategies, analysis, and research design. Frost & Sullivan greatly encourages this relationship with clients. It improves the customer-focused orientation of products. I ndustry Advise rs In some cases, Frost & Sullivan employs key industry advisers and consultants to design the research project, to better reflect the nuances of the specific subject. Research Editors Research editors work closely with analyst teams to help the research projects meet Frost & Sullivan's quality-control standards. Frost & Sullivan's editors have developed advanced, detailed linguistic and formatting templates to guide the research group in presenting its findings clearly, concisely, and accurately. This mechanism ensures that clients always receive the highest quality research.
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Step 4: Launch Data Collection Phase

During this step, the analyst team designs the data collection process and implements the secondary research phase. The tasks involved in this work are to:
Review all secondary research data based on: Frost & Sullivan research database Frost & Sullivan corporate library Frost & Sullivan customer database Frost & Sullivan competitor database Online databases University library affiliations
Create filing systems Structure research tables, figures, and charts Develop in-depth table of contents Develop customer database Develop competitor database
Step 5: Select Interview Strategy and Design of Survey

The strategy used to conduct effective interviews during customer surveys is critical to the success of every research project. In Step 5, Frost & Sullivan analysts receive extensive training in interview designs, techniques, and strategies. Frost & Sullivan often employs end-user surveys to identify competitive threats and trends in the market. The company takes great care in designing surveys that will optimise customer response and minimise the bias surveys can introduce to market research. (Frost & Sullivan's Customer Engineering [Publication 5338-80] provides a much fuller description of the company's survey design strategy and procedure for end-user surveys.)
Step 6: Test the Survey Design

Before Frost & Sullivan puts interview strategies and surveys into use across the entire market, it tests them for efficacy and accuracy. The analyst team corrects all design problems before attempting any interviews.
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Participants in customer surveys and competitive interviews review each survey instrument to ensure that the survey:

Uses readily understandable terminology Takes all measurements in the same format Asks all questions in the right order Can yield the desired information Stimulates respondents to cooperate
Step 7: Conduct Primary Market Research

The primary market research is the heart of every Frost & Sullivan study. Step 7 is to obtain primary data directly from industry participants. Its finely honed interviewing skills enable the analyst team to elicit valuable strategic information from market participants. Using Frost & Sullivan's uniquely designed research techniques, its analysts are able to obtain masses of information invaluable for identifying trends, threats, and opportunities in the marketplace. C ro s s - Ve r i f i c a t i o n o f Da t a Cross-verifying the information received is an important part of this step. Frost & Sullivan analysts are trained to listen for misleading or incorrect information, to detect when a respondent may be purposefully providing incorrect information or is merely guessing. Erroneous information thus almost always reveals itself during the cross-verification stage of the Market Engineering process. Frost & Sullivan cross-verifies all data from each respondent by interviewing others in the same company. Furthermore, the company confirms answers by speaking to other competitors, end users, and customers. Finally, the results are corroborated using other market research measurements. The analyst team discards any misleading information that does not integrate with the entire market analysis. Bot to m-Up Ap proach Frost & Sullivan prides itself on its use of a so-called bottom-up Market Engineering methodology. In a bottom-up method of market measurement, each final market measurement represents the sum of many detailed, bottom-rung measurements. Frost & Sullivan calculates market forecasts and market sizes by interviewing each industry competitor and deriving each company's annual shipments toor revenues fromthe defined market. To calculate the total market size, measure its growth rate, and make market forecasts, the analyst team first cross-verifies all measurements, then adds them to derive the final measurement of the total market.
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B o t t o m - U p Ve r s u s To p - D o w n A p p r o a c h The top-down approach is to ask a few industry participants to estimate the total size of the market, assess its growth rate, and make a forecast. These numbers are then averaged to make a final projection. This methodology is commonly used but is highly imprecise and can lead to serious problems when used to make strategic decisions. The top-down approach assumes that the average industry participant has a solid perception of market measurements of an entire market segment or industry. Frost & Sullivan has found that it is often not so. Rarely found is the spokesperson that can accurately portray the actions of its own companies, let alone gauge the entire market segment or industry. It may be easy enough to describe a house across the street, but less easy to describe one on the next block. That is why Frost & Sullivan has chosen a "closer-to-home" approachthe bottom-up approach to market measurement. Measuring Revenue Growth Rate Frost & Sullivan uses an 11-year period to characterise a market. To illustrate both historic and future changes in the market over that period, all forecasts measuring revenue growth apply a compound annual growth rate (CAGR) calculation. Unlike the average annual growth rate (AAGR) method, the CAGR method takes into account the changes from year to year, not only in revenues, but also in revenue growth rate. The compound annual growth rate, therefore, is the rate at which the amount in the final year represents the future value of the amount in the first year after a specific interval. In its interviews with market participants, Frost & Sullivan first makes sure that participants thoroughly understand and agree on how to define product segments. Frost & Sullivan's industry analysts exercise care that these terms coincide with those of most industry spokespersons. For consistency and accuracy, Frost & Sullivan reports always calculate future revenues using current-year U.S. dollar values. This approach ensures that each revenue forecast reflects the dollar's true purchasing power in each of those specific years. This methodology also allows for the impact of inflation on growth rates, since inflation is the only thing that affects the dollar's purchasing power.
Step 8: Research Analysis: Finding "Point A"

Once all the information has been collected, the analyst team explores the most important question of any market research project: Where is the market right now? In other words, where is "Point A"?
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Companies cannot possibly navigate the marketplace until they have obtained this market "fix." Without it, business planning and strategic decision support are not possible. Point A can typically be determined using several key measurements, such as:

Market share Historic market growth rate Market size Market segmentation Pricing Competitive activities Number of competitors Customer base measurements Market maturity
Step 9: Market Forecasting: Finding "Point B"

Once Point A is accurately identified, the next step is to identify the future position in the market (Point B). This measurement can be difficult to take, because many market trends and technical trends need to be surveyed over time to refine the accuracy of the forecast. Most market research firms provide forecasts that cite only the measurement of market sizes at some future time. In contrast, Frost & Sullivan's forecasts include:

Market trends Technical trends Regulatory trends Market maturity measurements Market share movements
The forecast also includes many other measurements, which when taken over time can help support a market forecast or analysis of a certain marketing scenario. Frost & Sullivan analyses the primary market drivers for each market segment before constructing a total market forecast.
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Expert-Opinion Consensus Model To improve the quality, accuracy, and depth of its forecasts, Frost & Sullivan uses the expert-opinion consensus forecasting model of market measurement. The company begins by analysing all the data collected in the previous steps. From this analysis as well as from many measurements of change over time, an indication of the market's pattern and direction emerges. Frost & Sullivan then discusses these data with market experts, including key customers, government regulators, sales managers, marketing managers, R&D managers, business development managers, management consultants, market research consultants, trade press journalists, company presidents, and others. After reviewing the data, these experts often provide significant strategic insights into the direction and velocity of the market. In its more than 35 years of market research experience, Frost & Sullivan has found the expert-opinion consensus forecasting methodology to be the most reliable system of forecasting when combined with other elements of the Market Engineering methodology. Because of the many uncontrollable variables in the marketplace, the accuracy of any forecast is almost impossible to guarantee. What can and must be determined with some accuracy, to enable companies to plan accordingly, are the direction of the market and its approximate speed. Frost & Sullivan finds the expert-opinion consensus forecasting model to be the most reliable forecasting tool for this in today's market. Forecasting models based solely on statistics often do not adequately describe the high-technology markets on which Frost & Sullivan reports. The statistical data underlying these approaches often cannot be found, or the markets that are the subject of the forecast are simply moving too fast. Moreover, many statistical forecasting models do not adequately incorporate the wide variety of market drivers denoting most markets.
Step 10: Develop Strategic Recommendations

At this stage, Frost & Sullivan's analyst team has learned in broad terms why some companies are gaining and some are losing market share in a given market. The analyst team's next step is to prepare its strategic recommendationsperhaps the most intricate and important element of the entire research methodology. These strategic recommendations allow readers to take corrective strategic action; so Frost & Sullivan's customers stand to benefit perhaps more from them than from any other single feature of Frost & Sullivan reports. Tailoring specific action plans to fit each company is not possible, but the analyst team enumerates guidelines that any company can use to be a winner in a given market.
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Who Is Winning, Who Is Losing, and Why? Studying the gain and loss of market share yields a telling measurement of strategy. It is important to identify both the companies that are winning and the ones that are losing market share, and then determine the cause. Market share is difficult to gain, so answers to this simple question provide indications of tremendous value for companies to use when navigating their own course. The contemporaneous actions of winning competitors should shape their own strategies.
Step 11: Confirm Results with Quality Control

In its drive to continuously upgrade its products, Frost & Sullivan uses three procedures:

Quality control Verification Refinement
These procedures help guarantee superior, accurate market data for Frost & Sullivan clients. Research Director's Final Review Once market research concludes its work, the analyst team and a senior research director review and distil the results. The goal is to verify that all issues are covered, that the conclusions and analysis are logical, that all measurements have been included, and that the report is as accurate, comprehensive, and as detailed as possible, given the timetable for the research. The analyst team then adds any approved changes and additional information to the report. Fi nal Revi ew Preparation At this stage in the quality-control procedure, the Final Review Preparation (FRP) team checks several important elements of the report for accuracy and completeness. E d i t i n g a n d P ro d uc t i o n Te a m Editors check the document completely for internal consistency, grammatical and spelling correctness, and mathematical accuracy.
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Step 12: Market Monitoring and Customer Feedback Review

Market Monitorin g The market monitoring stage includes two critical elements, in which the analyst team:

Solicits customer feedback to upgrade the report Continues market research in the industry
Customer Feedback and Review Frost & Sullivan regards dialogue with customers as crucial to the process of constant improvement. Each client is urged to provide feedback and to pose further questions prompted by the research publication. The project teams gladly provide free clarification to clients. Frost & Sullivan teams immediately correct report inconsistencies, mistakes, and typographical errors to ensure that reports are up-to-date and accurate. Frost & Sullivan commissioned its Research Services Group specifically to provide clients with clarification and support for additional research needs. Customers sometimes need information on more market segmentsor simply more measurements within a given segmentto fit their specific needs. In these cases, the Research Services Group provides clients with cost estimates. This cost is typically only a fraction of the original research cost. Continuous Market Research Monitoring All Frost & Sullivan research publications are living market databases, which means that the company promptly incorporates any new information, corrections, and segmentation strategies. This gives clients the added advantage of always having a reliable source for up-to-date market research. Frost & Sullivan analysts are always available to help clients with any research needs. Frost & Sullivan constantly monitors all markets on which it performs research. This kind of market vigilance fosters a strong and enduring market research relationship.
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Market
Engineering
Forecasting
Methodology
Overview
One of the most common questions Frost & Sullivan receives from its clients is, "What is your forecasting methodology and how can I assess its level of credibility and accuracy?" This section on Frost & Sullivan's proprietary Market Engineering forecasting methodology has been added to answer this question. Frost & Sullivan developed this proprietary system of forecasting because high-technology markets typically do not lend themselves well to statistically based forecasting methodologies. This methodology integrates several forecasting techniques with the Market Engineering measurement-based system. It relies on the expertise of the analyst team in integrating the critical market elements investigated during the research phase of the project. These elements include:

Expert-opinion forecasting methodology Delphi forecasting methodology Integration of market drivers and restraints Integration with the market challenges Integration of the Market Engineering measurement trends Integration of econometric variables Integration of customer demographics
The Market Engineering forecasting methodology is a seven-step system that maximises the credibility and accuracy of the forecasts. The steps in this process are summarised in Figure 14-1 and discussed in the following text.
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Figure 12-1 Market Engineering Supplement: Seven-Step Market Engineering Forecast Methodology, 2001
Step 1 2 3 4 5 6 7 Method Market Engineering research process completed Measurements and challenges analysed over time Identification of market drivers and restraints Expert-opinion integration with analyst team Forecasts calculated Delphi technique integration when needed Quality control within research department
Source: Frost & S ullivan
Market Engineering Research Process Completed The Market Engineering research process provides the navigational measurements of current market position and trends, which become the basis of the forecast. M e a s u r e m e n t s a n d C h a l l e n g e s A n a ly s e d ov e r Ti m e Measurements and challenges are analysed over time to provide more insight into their potential impact on market size and development. Identification of Market Drivers and Restraints At this stage, the analyst specifies the factors that will drive the market forward in terms of revenues and determines the elements that will inhibit growth. E x p e rt- O p i n i o n I n t e g r at i o n w i t h An a lys t Te a m The interview process includes a variety of industry experts: competitors, regulatory officials, and key customers. These expert opinions on the direction of the market are integrated with the data and analysis already created. Forecasts Calculated At this stage, analysts collect all the market data needed to create the initial forecast scenarios. Each scenario is tested to determine the most probable outcome for the market
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size. For example, the forecasts are matched to the leading economic indicators and drivers for each specific industry. D e l p h i Te c h n i q u e I n t e g r a t i o n W h e n N e e d e d If data and forecast scenarios conflict, it becomes necessary to again discuss the market forecasts with the industry experts interviewed in the research process. Quality Control Wi thi n Research Department Once the forecasts are integrated into the market section, they are checked by other team members in the industry research group (IRG) and the research director. The forecasts are also checked for mathematical accuracy and internal consistency by the Final Review Preparation Department and the Editing Department.
Strategic Significance of the Market Engineering Forecast

The Market Engineering forecast can have a significant impact on the business in several areas. Therefore, it should be integrated into business planning, strategy development, and decision making. Figure 14-2 illustrates the strategic significance of the Market Engineering forecast. Figure 12-2 Market Engineering Supplement: Strategic Significance of Market Engineering Forecast, 2001
Item 1 2 3 4 5 6 7 8 9 10 11 12 Significance Helps gauge timing and size of research and development investments Informs sales force of how fast to gear up or down Supports investment decisions Helps allocate management attention and talent Impacts on business planning process Serves as a credibility check against internal company forecasts Helps create the company's own forecasts Supports acquisition strategies Creates timing strategies for new product development Assists in allocation of investments to marketing tools Helps production departments plan future needs Supports companies in financial and cash flow planning
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Judging Credibility and Accuracy of Market Engineering Forecasts

Frost & Sullivan forecasts integrate the key elements that typically have an impact on market growth and size. No one can consistently make accurate forecasts, but market research has a proven track record in making accurate projections of market trends and growth rates. The key test of credibility is whether the analyst team integrated all the critical elements of the market into the forecast. If all the elements that create a credible forecast are included in the analysis, then the forecast has strong credibility. The accuracy of a forecast to within a 10 percent range over a five-year period is not vitally important. What is important is that the overall trend be forecast correctly, because the overall trend drives the appropriate strategy and subsequent decisions. The Market Engineering forecasting methodology has consistently proved an accurate and reliable forecasting tool, particularly for high-technology and industrial markets. Over the past 35 years, Frost & Sullivan has had an impressive track record in forecasting emerging markets, new technologies, and shifts in existing markets. Unexpected events have always significantly changed the marketplace, but these do not occur often, and they typically merely delay the development of the market rather than destroy it. Frost & Sullivan always advises clients that its forecasts should not be the exclusive basis for decision making at their companies. It should be one more source of input and a support tool for their own work in investigating the market and creating a winning strategy. In the final analysis, decision making is based on the general trend of the forecast, not its absolute accuracy. Growth rate forecasts tend to fall into one of the following categories:

Fast growth: 25 to 50 percent a year Medium growth: 5 to 25 percent a year No growth: 0 percent a year Medium decline: 5 to 25 percent a year Fast decline: 25 to 50 percent a year
It is important to accurately determine the range of the forecast, because that will have the greatest impact on the investment or strategy decision. Typically the decisions revolve around questions such as:

Should the company enter the market? Should the company increase or decrease its investment? Should the company improve its performance in the market?
These decisions do not require accuracy within a few percentage points. They require accuracy in the determination of the general trend category. All business decisions carry some risk. Market Engineering increases the probability that the decisions will be correct, but it does not eliminate all risk.
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Forecast Assumptions
Frost & Sullivan forecasts the world markets for goods and services by providing independent and economically unbiased information. Frost & Sullivan uses specific assumptions that support the forecasts in research reports. Indexes are essentially an attempt to summarise masses of data, showing general changes over time. In developing forecasts, Frost & Sullivan analysts use those indexes that can have a direct correlation to the behaviour of markets. The use of and reliance on specific indexes can vary according to the scope of the research study and the specific client needs. In Europe, the data used for key indicators in all Frost & Sullivan publications, come from national statistical sources in most cases. Some of the key indicators used are as follows: consumer price index (CPI): The rate of increase/decrease in prices for consumer goods. gross domestic product (GDP): The total output of goods and services produced by labour and property in the relevant country. gross national product (GNP): The GDP plus income derived from labour and property operating abroad. inflation: A general rise in prices for goods and factors of production. producer price index (PPI): The average change in price received by producers of all nationally-produced commodities at all stages of processing. factory inventories: A measure of the amount of product residing in warehouses or along the distribution channel. Shrinking inventory may signal diminishing supply, increasing demand, rising prices, or more efficient distribution methods. Rising inventories may suggest the opposite. population: Census figures used for sizing potential consumer markets. interest rates: Used to forecast the cost of borrowing money for expansion or capital investments. The standard economic assumptions for forecasting include the behaviour that specific industries exhibit in relation to these indexes. As an example, the market for the construction of heating systems has historically trailed the market for new construction by a few months. Therefore, the accuracy of some forecasts can be increased by understanding and following the appropriate indexes. Frost & Sullivan research can provide timely measurement information on market position and related trends, providing the basis for the forecast. This is often achieved through an understanding of the economic models and conditions that have a potential impact on market development.
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Once market data is collected and analysed, and the forecasts are developed, the forecasts are matched to the appropriate leading economic indicators for each specific industry. Analyst teams check the relationship to the economic indicators as part of the overall Frost & Sullivan quality control process.
Strategic Significance of Market Engineering Measurements

This part of the chapter explains why a particular measurement has been included in the study and highlights the strategic significance of that measurement. Frost & Sullivan clarifies the meaning of the measurement and shows how to use it. Clients also learn how to do their own Market Engineering. Each section that follows includes a brief tutorial to define the measurement used, present the research methodology applied, and highlight the significance of the measurement to the client's strategy. Frost & Sullivan's ultimate goal is to assist clients in developing highly effective and successful business strategies. For clarity and ease of reference, the strategic significance of each measurement is itemised in a bulleted list. Each measurement section has the following subsections:

Definition of measurement Research methodology Strategic significance of measurement
The market analysis subsection is unique to each section. It is prepared by the analyst and pertains specifically to the research performed for each individual report. Market Size in Dollar s Definition of Measurement Market size in dollars is calculated by measuring the total market of consumed (not produced) products or services for the current year. Market size is measured in US dollars unless otherwise indicated. Research Methodology Market size in dollars is measured by calculating the total sales of all products included in the market by all manufacturers or suppliers in all regions covered by this report. A bottom-up approach is used, which means that the market total is calculated by adding all individual companies' sales to arrive at a total market figure.
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Data on individual product and company sales are gathered through extensive interviews with manufacturers, end users, suppliers, distributors, and other relevant sources. These interviews typically include marketing managers, sales managers, owners, salespeople, presidents, former employees, and research and development (R&D) managers. This measurement methodology is typically referred to as "competitive interviewing". Data derived from competitive interviews are cross-verified by other interviews and by secondary sources such as articles in the trade press, press releases, annual reports, online databases and government reports. Strategic Significance of Market Size in Dollars Measurement

This measurement provides a gauge for how to allocate resources for all departments. It helps plan the amount of R&D capital that can be invested in new
product development.

A positive trend in this measurement would justify continued investment. A negative trend in this measurement would imply the need for a retraction or cautious market strategy.
Market Size in Unit s Definition of Measurement The market size in units is the total of all units sold in a given period by all competitors in the market. Research Methodology Market size in units is calculated by totalling the sales of all products included in the market by all manufacturers from all countries. A bottom-up approach is used, which means that the world market total is calculated by adding all individual companies' sales to derive a total market figure. This methodology differs from the so-called top-down approach of measuring market size, which consists of taking the average of many expert guesses to arrive at total market size. Information on individual products and company sales is obtained through extensive interviews with manufacturers. These interviews are typically with marketing managers, sales managers, owners, salespeople, presidents, former employees, and R&D managers. This measurement methodology is typically referred to as "competitive interviewing". Data derived from competitive interviews are cross-verified by other interviews and by secondary sources such as articles in the trade press, press releases, annual reports, online databases, and government reports.
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Strategic Significance of Market Size in Units Measurement
This measurement helps determine the amount of time and resources to devote to marketing and sales efforts.
Measuring market size in units helps gauge the amount of R&D capital that can be invested in new product development. The measurement can often reveal a different growth trend in the market, which because of price variationsmay not be revealed in measurements of market size in revenues.
Knowing the rate of growth in units is an important aid to determining market age and subsequent strategies.
Annual Mark et Growt h Definition of Measurement Measuring annual market growth entails measuring market growth percentage changes from the previous year. This growth can be measured in either revenues or units. In this report, the annual market growth rate is based on revenues. Research Methodology Annual market growth is calculated by dividing the market size of the current year by that of the previous year. Market size is derived primarily from competitive interviews. In the absence of an accurate measurement of market size for previous years, the analyst interviews competitors and manufacturers to obtain their sales growth rates from the previous year. These rates are weighted on the basis of sales volume, and a calculation of market growth is obtained. Strategic Significance of Annual Market Growth Measurement
This measurement indicates the speed at which a market is changing. Knowing this speed should influence the timing of all investment decisions, whether they are in sales and marketing or in R&D.
Measuring annual market growth gives insight into the age of a market. Faster growth typically implies a younger market and should serve as a warning to companies to focus on aggressive R&D and marketing efforts to capture market share.
This measurement can help a company select the appropriate competitive strategy on the basis of product life cycle theory.
Higher growth rates typically indicate more new competitive entrants to the field. Lower growth rates typically signify that growth could come from the acquisition of existing market participants.
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Marke t Growth by Compo und Annual Growth Rate Definition of Measurement The measurement of the compound annual growth rate (CAGR) over the forecast period reflects the general projected growth rate of the industry. Research Methodology The CAGR is derived from a calculation of actual forecast years. The forecast is based on the analyst's expert opinion, which has been developed through monitoring the market and through interviews with a significant number of industry participants. Strategic Significance of Market Growth by CAGR Measurement

The CAGR measurement provides insight into the age of the market. It helps gauge R&D and marketing investment. It influences business planning, which must reflect the projected market growth. It serves as a gauge to rank the attractiveness of markets for investment and strategy.
Ave rage Pr ic e
Defi ni tion of Measurement
Average price is obtained by calculating the total market size divided by number of units sold. It is not a simple average of all the product prices on the market. Research Methodology Average price information is gathered primarily through competitor interviews and from published price lists and trade press sources. Street prices are also verified to check for any variance between list price and actual price. Strategic Significance of Average Price Measurement

This measurement aids determination of the overall market position of a product. It helps in calculating return on investment of new R&D projects. It is a key element in the development of competitive strategies.
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Price Range Definition of Measurement Price range is calculated on the basis of the lowest-priced product in the market and the highest-priced product in the market. Research Methodology Price information is gathered primarily from competitor and end-user interviews. Price data are also gathered from published price lists and trade press sources. Strategic Significance of Price Range Measurement

This measurement aids in determination of a product's overall market position. It helps in calculating return on investment of new R&D projects. Knowing the accurate price range is key to developing competitive strategies. This measurement provides the outside parameters on the range of products in the market.
Price Sensitivit y Definition of Measurement This measurement determines how sensitive sales are to changes in price. A highly price-sensitive market will see large drops in consumption with small increases in price. A less price-sensitive market will not see significant changes in consumption as a result of price changes. Research Methodology Price sensitivity can be measured by studying the history of the market or by interviewing customers. Customer interviews may reveal how much customers are willing to buy at given price points. Another method is to interview experienced market competitors that have experimented with pricing strategy. Strategic Significance of Price Sensitivity Measurement
This measurement serves to alert makers of highly price-sensitive products to price reductions among competitors that could significantly harm sales.
Highly price-sensitive markets drive competition to be very efficient in production, sales and marketing.
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Indications that price sensitivity is increasing each year could mean that the market is maturing or that the products are becoming commodities.
Indications that the market is not price-sensitive might mean that price increases would not have a great impact on sales.
Market Saturatio n Definition of Measurement Measuring market saturation helps determine the degree to which the product is accepted and used by the market. In new and developing markets, the saturation rate is very low. Mature markets, in contrast, typically have high rates of saturation. Research Methodology Customer interviews by mail or telephone are the primary research measurement instrument used to determine market saturation. Estimates from manufacturers or other sources, such as trade associations, tend to be biased. In high-technology markets, typically 100 to 1,000 customers are interviewed to determine the market saturation rate. Another method sometimes used is to calculate the installed base of products in the market divided by the total number of potential customers for that product in the market. Strategic Significance of Market Saturation Measurement
An accurate measure of market saturation greatly influences the types of marketing tool required to attract customers.
Indications of low market saturation convey the message that more education and support is needed.
Entering heavily saturated markets requires a significant contribution to the market and larger investments in marketing because taking market share from existing competitors will be difficult.
This measurement is related to the market age measurement and will influence all R&D investment strategies, pricing, and timing of marketing strategies.
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M a r k e t A g e / P r o d u c t L i f e Cy c l e Definition of Measurement The measurement of market age is typically broken down into four phases of the product life cycle:

Market development Market growth Market maturity Market decline
Research Methodology Market age measurements are based primarily on other measurements, such as market growth, market saturation, degree of competitiveness, pricing trends, and degree of technical change. Once all these variants have been considered, the analyst is qualified to use the expert-opinion method of measurement. This measurement is based on the combination of all market data obtained from customers and competitors, including both quantitative and qualitative data. Strategic Significance of Market Age Measurement
Knowing the market age through market measurement influences the size of investment made by both R&D and marketing.
The measurement influences the role of timing and time pressure. It influences pricing strategy. It may influence the profit expectations of the product line.
Price-Performance Ratio Definition of Measurement A measurement of price-performance ratio helps determine how the price of technology is changing in the market. A descending price-performance ratio trend indicates that customers receive more product for their money each year. An ascending price-performance ratio trend means that the price is increasing for the same amount of technology received.
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Research Methodology The price-performance ratio is obtained by measuring prices and specifications of products currently on the market. Information is gathered primarily from competitive telephone interviews and is supplemented by price lists and secondary data. The information on product specifications is gathered mainly through product literature reviews and is supplemented by competitive interviews. Strategic Significance of Price-Performance Ratio Measurement
This measurement assists in establishing the return on investment calculation for new product development by helping to estimate future price levels.
It helps keep management aware of the demand for future price changes. It influences the speed of, investment in and organisation of the R&D effort. It has an impact on the marketing strategy.
Replacement Rate Definition of Measurement This measurement of the replacement rate gauges how often the average product is replaced by the average customer. Research Methodology The primary way to measure the replacement rate is through customer interviews by mail or telephone surveys. Telephone surveys are used more frequently because of their speed, low cost, and high response rates. Another way to measure replacement rate is to base the calculation on other measurements, such as annual unit sales, size of the potential customer base, market saturation, the number of customer sites, and the installed base. This method is not considered accurate enough, however, because of the possible compounding of measurement error. The method is often used to verify the realism of the primary methodology. Strategic Significance of Replacement Rate Measurement
The replacement rate significantly affects the amount of customer monitoring required on the part of the marketing department to maximise market share.
If the replacement rate is decreasing, the sales and marketing department will need to monitor the customers more closely.
The replacement rate indicates the size of the replacement segment of the market versus the new user segment.
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Market Concentration Definition of Measurement Market concentration is a measure of how much of the market is dominated by key suppliers. The measurement is based on the percentage market share in dollars that the top three suppliers are capturing each year. Research Methodology Market concentration is measured by adding together the market shares of the top three suppliers. The information used to obtain this measurement is derived primarily from interviews with manufacturers and the determination of market share. A rough verification of this measurement can be taken by interviewing customers to determine which products they are using and buying. Strategic Significance of Market Concentration Measurement

The measurement of market concentration has an impact on acquisition strategies. It targets companies for competitive benchmarking. This measurement indicates trends toward industry consolidation or fragmentation.
Number of Competitors Definition of Measurement Knowing how many competitors are already in the market helps determine the competitiveness of the market. The measurement takes into account the total number of manufacturers currently in the market. It does not consider companies that are engaged in R&D but have not yet introduced products into the market. Research Methodology The number of competitors in the market is the sum of all the companies currently in the market. To find all the current market competitors, the analyst studies the world trade press, interviews competitors, searches online databases and directories, and visits trade shows. Strategic Significance of Measurement of Number of Competitors
The number and type of competitors revealed by this measurement may help a company decide whether to enter the marketplace.
This measurement reveals the degree of competitiveness in the market, which influences pricing, marketing and sales strategy decisions.
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If plotted over time, this measurement can be a key indicator of market age, which helps create market strategies that optimise market share and profitability.
This measurement is a key to determining competitive strategy.
Number of Products Definition of Measurement The number of products considered in this measurement is the sum total of all the products on the market. It is yet another way to gauge the competitiveness of the market. Research Methodology The number of products is calculated by summing all the products currently on the market. To find all the current products in a market, the analyst studies the trade press, interviews competitors, searches online databases and directories, and visits trade shows. Strategic Significance of Measurement of Number of Products

The number and type of products influence a company's decision to enter the market. The degree of competitiveness in the market revealed by this measurement influences pricing, marketing, and sales strategy decisions.
If plotted over time, this measurement provides a clue to the age of the market, making it possible to create market strategies that optimise market share and profitability.
It should be key to determining competitive strategy.
Degree of Competitiveness Definition of Measurement Competitiveness is a relative measurement that gauges the level of competition in the market. It is ranked on a 1 to 10 scale, where 1 means no competition and 10 indicates fierce competition. Research Methodology This measurement combines several other competitive measurements and non-quantitative information gathered in the research process. An expert-opinion methodology is used to form the final quantitative measurement. Once the analyst has interviewed the industry participants, reviewed all the secondary literature available, and taken the market measurements, the analyst is qualified to make this measurement.
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Strategic Significance of Competitiveness Measurement

The competitiveness measurement aids the decision to enter or leave a market. It is an indicator of expected profitability. This measurement influences the pricing strategy used. It has a large influence on the degree to which the marketing strategy is competitively oriented.
It may have an influence on the type of R&D projects that are accepted. Highly competitive development projects. environments typically require faster, smaller product
Installed Base Definition of Measurement The installed base measurement is a gauge of how many products are currently in use in the market. It excludes products that are not in use or are sitting on shelves. Measurement of the installed base provides insight into the actual size of a market. The standard market size measurement differs from the installed base measurement: It measures the size of the market only in terms of what was sold in a given period. The installed base measurement results in a more accurate assessment of the market size in that there are typically many more users than purchasers of a product each year. Research Methodology The installed base measurement is taken primarily from competitor interviews. Each manufacturer is interviewed for each product to determine the total number of products shipped over the product's lifetime. This is done for all products on the market, and the sum of all products minus those replaced determines the installed base. The measurement can also be taken by customer interviews on how many products a sample size is using. These data can then be extrapolated to the entire population of customer sites. The number of customer sites can be calculated by secondary research on the customer base. Strategic Significance of Installed Base Measurement
The installed base helps gauge the total potential revenues to be generated by a product, thus providing an indication of how much to invest in R&D and marketing.
The installed base can be a vital measurement for developing new product accessories or products designed to replace those that are technically inferior.
A positive or negative trend in the installed base should make a significant impact on sales and marketing strategy.
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Number of Customer Sites Definition of Measurement The number of customer sites is a measure of the total number of potential sites where a product could be used. Several sites may exist within the customer location. Research Methodology This measurement is taken mainly through the use of secondary research (already published data). Typically, once the customer has been identified, secondary sources of information can provide the statistics on the number of customer sites available. In cases where it is difficult to identify actual customers for a given product or service, customer interviews can be carried out to define more precisely the actual customer base. This is typically done for new products and technology. In some cases, customers for existing products can be quantified and defined by an in-depth analysis of historic sales. To define the number of potential customer sites, several parameters can be used, such as location, size, application, and industry. These parameters can help make a more accurate determination of the actual customer base. Strategic Significance of Measurement of Number of Customer Sites
This measurement provides a clear understanding of how much should be budgeted for various marketing tools such as the direct sales force, direct mail and telemarketing, to fully penetrate the market.
It helps market managers make more accurate forecasts for existing products and new product launches.
It provides knowledge of who the customers are and where to find them.
D e g r e e o f Te c h n i ca l C h a n g e Definition of Measurement The degree of technical change is a measurement that estimates the amount of new technology introduced into the market each year. Markets with a high rate of technical change move much faster and are more difficult to monitor than those with low rates of change.
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Research Methodology This measurement is based on several important factors that the analyst uses to make the final measurement. They include:

Number of new products introduced each year Number of technical specifications used to describe a product Number of companies exiting or entering the market Customer understanding of the new products Amount of patent activity in the market Length of time a product stays on the market Speed of product development time Number of product improvements over time Price-performance ratio
Once the research on the market has been carried out, these factors are combined to give the analyst the expert opinion needed to make this measurement. The measurement is relative to all the other markets included in the market. Strategic Significance of Measurement of Degree of Technical Change
This measurement helps a company determine the type and style of R&D to pursue. A high rate of technology change should stimulate a strategy of rapid product introduction designed for short payback periods, with planning for constant product improvements and updating.
It helps stimulate marketing managers and technical managers to monitor competitive technology more closely in markets with a high degree of change.
High rates of technology change should encourage companies to become involved in more strategic relationships, such as with original equipment manufacturers (OEMs), licensing, and joint ventures.
Market Forecast Definition of Measurement The market forecast is a measurement of the future market based on expert opinion. In this study, a seven-year forecast has been made of annual sales. The measurement should be used only as a rough indicator of the general trend of the market.
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Research Methodology The market forecast takes into account all the quantitative and qualitative data gathered during the market research phase. These data are combined with external data, including political and economic data, and the analyst begins to gain a general understanding of where a market is going in the future. Key to this forecast is the information collected from customers on their use of the product, the benefits they derive, and their future intention to purchase. The specific data playing a major role in the forecast include market saturation, market age, replacement rate, the number of customer sites, and the installed base. Strategic Significance of Market Forecast Measurement

This measurement provides a guide to product forecasts and pricing points. It helps create budgets for marketing expenses based on the direction of the market growth.
It helps determine correct levels of R&D spending to maximise profitability.
Market Shar e Definition of Measurement The market share is the measurement of the portion of the annual market the company is able to capture in terms of revenues during the current year of measurement. It is the basic measurement of market health and should be monitored annually for changes. A decreasing share of the market implies that competitors are pushing that company out of the market. Sales levels and sales growth or decline do not necessarily indicate equivalent changes in market share. It should not be assumed that increasing sales are an indication that market share is doing well. Market share is an important strategic measurement, yet many companies do not have much interest in or knowledge of their actual market share. They do not track it or use it to measure their performance. Companies that do not accurately measure and monitor their market share over time can be making a significant and costly strategic mistake. Market share is the foremost indicator of a company's health. When market share is not monitored regularly, a company is left unaware of its status in the market, which can lead to disaster. A market share measurement typically does not in itself offer much strategic insight. When measurements are taken over time, however, they serve as a major indicator of a company's market performance. This section provides a competitive analysis based on market share and market share trends over the past year.
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The Frost & Sullivan Market Engineering research methodology strives to provide data on market share trends that are as accurate as possible. To do so, the research team verifies and cross-verifies the data during the interview process. Some companies are slow to reveal their sales statistics, and others do not know them exactly, so the market share statistics are not always 100 percent accurate. It is more important to rank companies accurately and arrive at a solid understanding of which companies gained and which companies lost market share. Gain and loss in market share drive Frost & Sullivan's analysis in this section. The analysis provides valuable insight into the competitors in the market. It indicates the companies against which competitive benchmarking should be carried out to find process improvements. Also, the analysis reveals mistakes that companies may have made, from which lessons can be learned. This section almost always evokes a strong reaction from market participants in regard to both analysis and measurement accuracy. Companies that would like to comment on this section with Frost & Sullivan should feel free to call and arrange a discussion. Feedback is always appreciated and used. Frost & Sullivan strives to make the entire report as accurate as possible and to provide the maximum value possible to its clients. If readers find errors or omissions, they are encouraged to fax or e-mail them to Frost & Sullivan. Research Methodology The measurement of market share is gained primarily through interviews with the competitors in the market. Great care is taken to avoid bias and untruths through developing a good relationship on the telephone and by using carefully worded questions that cross-verify themselves. The answers from the respondents are cross-verified with answers from other employees and owners of the same company as well as from other manufacturers. Annual reports and the trade press can also confirm that the data collected are in the correct range. Sales data are sometimes obtained in a format that is not directly applicable to the measurement. In such cases, the data are manipulated and extrapolated to fit the measurement format. Examples include sales data for a fiscal year that does not run from December to December, sales data by month or quarter, and sales data by geographic region.
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Strategic Significance of Market Share Measurement

Market share provides a critical measurement of the product's health in the market. It can be a valuable indicator of approaching problems. It can provide feedback on the success of marketing programmes. In some cases, it can be used in promotional campaigns to improve relationships with customers.
It has a great impact on the type of competitive strategy implemented. It can influence the choice of customer marketing strategy.
Customer Satisfaction Definition of Measurement Customer satisfaction measurements provide information about the degree of customer satisfaction with a product or service. These measurements are typically used to rank competitors on how well they meet their customers' needs. Research Methodology Customer satisfaction is typically measured by performing customer interviews. Strategic Significance of Customer Satisfaction Measurement

This measurement can be used in sales strategies with customers. It can support a competitive benchmarking project by identifying the world-class performers.
It highlights key areas for improvement. It is an excellent measure of the performance of customer service staff. A negative trend in this measurement should be taken seriously.
C usto mer Loya lty Definition of Measurement This measurement reveals the role played by loyalty in the purchasing pattern of customers. Customer loyalty is difficult to measure because it is determined by the amount of resistance that must be overcome before the customer changes brands.
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Research Methodology Customer loyalty is typically measured by performing customer interviews, using a series of questions about brand loyalty and about how much effort is needed to get the customer group to change brands. A fairly accurate estimate of this measurement can be made based on the expert opinion of the analyst after interviewing a significant number of industry participants. Strategic Significance of Customer Loyalty Measurement

A highly loyal customer group allows for higher prices. This measurement provides insight into the degree to which the competition must be monitored.
It measures the effectiveness of marketing, sales and product development effort. Customer loyalty enjoyed by competitors makes the capture of market share from them more difficult.
Competitive pricing strategy is less effective in markets with high customer loyalty.
Market
Engineering
Planning
Integrating Market Engineering into the Business Planning Process

The Market Engineering planning process can support the planning process for product launches, business plans, and project planning. It is a road map or navigational system to assist companies in attaining their goals. It integrates the measurements, goals and strategies into a tactical plan by which to measure progress towards the goals over time. Unlike most business planning, Market Engineering planning integrates a measurement-based market perspective and includes departments of the company. To be effective, the plan must answer the following questions regarding the company's future goals: 1. What is the company's current market position? 2. Where does the company want to be? 3. What strategy will the company follow to attain this market position? 4. How will the company turn the strategy into action plans?
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This list of questions might seem simplistic. Most plans, however, lack one or more of these elements, making effective implementation virtually impossible. The next four sections explain briefly why each of these elements is critical to success.
Current Company Market Position

A company must know where it now stands in the market before it can identify an effective plan for achieving the status it desires. Using a set of Market Engineering measurements it is possible to map the company's current location status.
Desired Market Position: Goal Setting

A company must determine where it wants to be in the market. Without this goal-setting phase, there is no point in planning.
Defining the Strategy

A company can advance from its current market position to its goals only by developing a clear strategy that defines how it will get there.
Developing the Action Plan

Once established, the strategy must be turned into a specific, tactical plan of action. Setting realistic budgets, identifying projects and making time frames are all essential to the successful implementation of the strategy.
Using Market Engineering Planning to Support the Business Planning Process

Figure 14-3 is a checklist of what should be the ten most important elements in any company's business planning process. Even if not all elements or questions listed are relevant to a company's specific planning process or goals, it is vital to the company's market success that it review its own business plan against these elements and implement the necessary and relevant changes.
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Figure 12-3 Market Engineering Supplement: Ten Most Important Market Elements to Integrate into Business Planning, 2001
Item 1 2 3 4 5 6 7 8 9 10 Ten Most Important Elements What is the company's current market position? How will the company monitor the competition next year? What will the company do about the top three competitors? How will the company address changing technological trends? Which areas show the greatest growth potential? What will the company do with this new market opportunity? What response will competitors make to increased globalisation? How are customer demands changing? How will the company respond to the internet? What action will the company take in its key markets?
The integration of these elements into the business plan will greatly improve the likelihood of the company reaching its goals and being proactive in terms of market dynamics.

Most strategy in business fails because it is not based on measurements. Instead, it is based on business theory, which means that the organisation cannot measure its effectiveness and does not know how to implement it. The three key advantages of Market Engineering strategy development over theoretical, university or guru-developed strategies are: 1. It is based on measurements and, therefore, easy to communicate to others in the company. 2. It provides a measurement system in which the effectiveness of the chosen strategy can be evaluated. 3. The strategy drives action, which provides return on investment from the Market Engineering process. Market Engineering strategy is very simply defined as how a company gets from point A to point B. Point A is the current market position, point B the desired position. This simplified definition of strategy greatly aids the communication process for the entire company-wide team.
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This section describes four important elements that support effective strategy development: 1. Measurements that address challenges to the industry 2. Measurements that show trends 3. Goals based on market measurements 4. Strategy segmentation system
Measurements That Address Challenges to the Industry

A measurement-driven strategy is only as effective as the measurements used are valid. If the measurements do not properly monitor industry challenges and market trends, they make an effective strategy difficult to create.
Measurements That Show Trends

The perspective of time significantly increases the ability to gain strategic insight. Without this perspective, it is difficult for each measurement to pass the test known in marketing as the "so what" test, that is, determining the strategic significance of the measurement. Every measurement should go through this test. The test is simple, but it is difficult to pass. For example, a marketing director reads the most recent market research report, which states that the company market share was 22 percent in the last quarter. The director asks "so what?" Twenty-two percent holds no significance for the director or probably anyone else in the company. However, if the marketing director learns that last year the company market share was 25 percent, then he or she has discovered a strategically important measurement. In this case, the measurement taken relative to time provided much greater strategic insight than the measurement taken at just one point in time.
Goals Based on Market Measurements

Setting goals is an important part of the Market Engineering strategy development process. It should take place after the measurements have been taken and the company's current location and competitive position in the market determined. Frost & Sullivan believes that if a company does not know the direction in which it is headed, it cannot take steps to change its ultimate destination.
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It
is
critically
important
for
every
healthy
and
ambitious
company
to
develop measurement-based goals. The management team should set goals that are: 1. Based on measurements 2. Challenging 3. Realistic Once the goals are set, the strategy should take the company from point A (where it is now) to point B (where it wants to be). Market Engineering helps a company navigate from point A to point B.
Strategy Segmentation System

To create strategic options that give maximum benefit, it is useful to create a matrix of measurement trends and different segmentation strategies that will be affected by the new options. Various systems of strategy segmentation can be used, for example:

by product by country by customer group by application by market position
In brainstorming sessions, companies should create different types of segmentation to stimulate new ideas and strategies. As the company continues the analysis, it should use each segmentation strategy to search for every strategic idea available. Any given cell might have as many as ten strategies or as few as zero. Not every cell will generate a unique and exciting strategy. However, each segmentation matrix can be expected to generate powerful insights.
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Market
Engineering
Implementation
Introduction and Summary

This Market Engineering consulting report can be used to create a market-driven company. To achieve that distinction, the entire company must become market-driven. As many staff members as possible should be part of the market education process, including:

Salespeople Production workers Designers Marketing Finance Management
For the Market Engineering system to be effective, it must provide a constant flow of information to the staff on the situation and activities of the market. It must continually monitor its position and movement towards its goals in the marketplace. In a ten-point matrix, companies are given a list of ways to implement the programme and involve the entire company, from top management and salespeople down through every level of workers in the company. In a 12-step programme to increase market focus and improve the company's position, Frost & Sullivan then suggests ways for its clients to:

Get maximum value from this report Become market-driven and market-focused Understand the competition they face Improve their position in the market
How to Implement Market Engineering in a Company

Virtually all companies would like to become more market-oriented and customer-focused. Companies overestimating their marketing skills and underestimating market fluctuations are probably heading for a fall. Such was the situation for many market leaders in the 1980s. The Market Engineering system or similar processes can serve as an effective catalyst to help companies become more focused on the customer and the market.
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Figure 14-4 is a ten-point checklist for implementing the Market Engineering system and plan. Reviewing this checklist is helpful at any time, but particularly so during the implementation of the Market Engineering system. Figure 12-4 Market Engineering Supplement: Ten-Point Checklist of Market Engineering
Implementation, 2001
Item 1 2 3 4 5 6 7 8 9 10 Checklist Commit top management to plan implementation Create the implementation team Train the team Keep the team involved and informed Create team agreement and commitment Develop team-building skills Develop incentive systems to drive progress Use communication systems fully Use the Market Engineering navigational system Create and use a feedback loop
Committing Top Management to Plan Implementation

Successful implementation of the plan requires total top management commitment. Without this, it is difficult to maintain the Market Engineering programme. Only with a commitment over several years can the Market Engineering concept become a successful and vital element in the running of the company.
Creating the Team

Implementing the Market Engineering system requires an integrated approach. For the most effective implementation, the Market Engineering team should include members from all company departments. Unlike most business planning projects, which greatly limit the number of participants, the Market Engineering system works best with the maximum number of participants.
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Training the Team

The Market Engineering system is based on practical experience and common sense. It is easy for marketing managers to understand but difficult for an entire company to grasp. To expedite the process, everyone in the company must understand the system. Therefore, massive and continual training is necessary. An effective training programme might include courses on teamwork, leadership, customer analysis, marketing strategy, and Market Engineering.
Keeping the Team Involved and Informed

Unlike confidential and top-secret planning, the Market Engineering system works best when the entire team takes part in its creation and implementation. Involvement and being informed greatly reduces resistance to new ideas and measurement systems.
Team Agreement and Commitment

Once the location of the market has been determined, goals set, strategies created and plans developed, the team responsible for implementation of the plan must be in full agreement and committed to making the system work.
Incentive Systems to Drive Progress

To change an organisation requires hard work and sacrifice. Incentive systems that recognise and reward team members financially are an important part of maintaining team enthusiasm.
Team-Building Skills
Team-building skills are essential for speeding up the implementation and reaching the goals the company has set for itself. True teamwork requires special training and the development of an atmosphere of trust.
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Making Full Use of Communication Systems

Communication must flow rapidly and freely in all directions within the organisation. Memos and electronic mail are inadequate for communicating information about the implementation of a system of change such as Market Engineering. Many types of communication are needed to maximise the effectiveness of the exchanges.
Using the Market Engineering Navigational System

To accurately measure its progress towards its established goals, the company must develop a Market Engineering measurement and navigational system. This monitoring system is described later in this chapter.
Creating and Using a Feedback Loop

All team members must receive continuous feedback on the progress toward goals, the effectiveness of communication, their role in teamwork, and areas that need more development. This feedback loop system is vital to the continuous change process that Market Engineering is designed to provide.
How to Make the Most of This Market Engineering Report

To reap the full benefits of their investment in Frost & Sullivan or other market reports, companies must focus on the market. Too many companies are technology-driven, focusing on their own product and that of the competition and neglecting the market itself. The result can be serious loss of market share, key customers, and profitability. A lack of market focus causes most harm during recessions or economic downturns, when finances tighten. Technology-driven companies are usually those hardest hit. Presented next are two approaches to using this report for most benefit to the company. The first approach is an easy ten-step programme to follow to get the entire company involved. A more detailed 12-step system is then presented. It shows how to involve the entire management team in developing a marketing-based strategy for success. Both tools are helpful. The choice of a system depends on the time available and the level of commitment to the Market Engineering process.
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Top Ten Ways To Maximise the Value of this Report

The simple "to-do" list in Figure 14-5 illustrates ten ways to maximise the value of this report. Adhering to this simple list will strengthen the company's focus on the market. Figure 12-5 Market Engineering Supplement: Ten Ways to Maximise the Value of This Report, 2001
Item 1 2 3 4 5 6 7 8 9 10 Maximising Methods Demand that all department heads read and discuss the report. Hold an off-site meeting to create plans for strategy and action. Integrate the key elements of the report into goal setting and business plans. Telephone Frost & Sullivan to discuss questions in a conference call. Require all new employees to read the report as part of training. Create a list of ideas for action that the report has stimulated. Create an annual market monitoring programme that integrates the ideas of the report. Improve and expand measurements, challenges, and strategies. Give a management presentation of highlights of the report. Create various market outcome scenarios to drive strategic discussions.
Twelve Steps to SuccessThe Market Engineering Task Force

The second way to get more value from this Market Engineering report is through the Market Engineering task force retreat. This programme requires much more time, financial investment, and commitment from the management team. This 12-step programme is designed to assist companies in becoming more market-focused. It uses this Market Engineering report, or others like it, to drive the transformational process through a company. This report can be the foundation for this process, but it should not be the sole source for decision-making or strategic design. Conflicting and incorrect information on market trends, forecasts and market measurements that may be identified should be viewed as a motivation to improve the efficiency of the company's strategy development.
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M a r k e t E n g i n e e r i n g Ta s k F o r c e R e t r e a t S e l l i n g t h e Market Engineering Concept The first and most important step is to convince the company that this system can greatly improve its position in the marketplace. The success of the system requires a significant commitment of time and resources. Perhaps the most effective way to sell the concept is to propose a two-day weekend retreat to focus on the company's market position and strategic plan for the future. Time Required: 1 Month Creating the Market Engineering Team The most effective Market Engineering team is cross-functional. All divisions and departments of the company should be represented. Improvement should be the common goal for all participants. Time required: One week Team size: 10 to 20 Identifying and Defining Company Challenges, Opportunities, Problems and Needs
Part I. Indivi dual Study Sessi on
In this session, each participant should read and analyse this market report and other marketing reports, sales reports, articles or market research which the company may have on hand. Each participant should then suggest ideas on key issues to be discussed during the workshops. Frost & Sullivan can help companies compile the industry reports and related reading materials needed for this session. Time: One to two hours
Part II . Brai nstormi ng of Challenges
Three or four cross-functional teams should be formed to discuss and brainstorm the challenges, threats, needs and opportunities of the company. Each team should then create lists of ideas for presentation in a plenum session. Time: One hour
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Part
II I .
To t a l
Group
Analysis
i n
Plenum
After hearing the team presentations, the facilitator should summarise the findings into specific lists. The plenum group can discuss the significance of the items in each list. List items chosen for discussion might include:

Threats facing the industry Opportunities for growth Challenges to the company Key industry issues to be addressed
The facilitator then makes a list of all items discussed under each section. The group is then ready to determine priorities for each list item. Time: One to two hours Prioritising List Items
Part I. Group Wo r k
In this session, each group is given one or two of the lists developed in the previous session. The groups then rank in order of priority, from most to least important, each item on the list. The market research report should be used to substantiate each ranking. The priority assigned to each item should be weighed by measurable impacts on various aspects of the company. These aspects can include market share, sales, finances, customer satisfaction, and image. Time: One hour
Part II . Plenum Sessi on
In a plenum session, each group presents its list of priorities for discussion and review. The goal of this session is to reach general consensus for each list. Time: One hour
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Competitive Analysis Using the Lists Developed

Part I. Ta s k Forces at Wor k
Now is the time for a competitive analysis of the lists developed. Each task force starts by identifying all current and potential competitors in the industry, taking care not to focus on large companies only. This market research report can serve as a guide to identifying some of the company's competitors.
Part II . Winners, Losers, and Why
Each task force is given two of the developed lists and then analyses how each competitor is faring in terms of the specific issue, need, opportunity or threat. Special grids or scoring systems should be used to quantify each competitor's position.
Part II I . Where Does the Company Stand?
Each task force determines where the company ranks in each of these categories in relation to its competitors.
Part I V. Presentati on i n Plenum
In this group session, the competitive rankings of each task force are presented and discussed. Customer Analysis The next step in the Market Engineering study is to identify customer groups, the market issues that affect the customers, and the company's position in relation to its customers. The four parts of the customer analysis include:

Identification of customer groups Determining how trends, issues, opportunities, and threats affect them Determining where the company stands Presentation to the plenum
The Company's Position Today In this step, the company should define its position in terms of trends, opportunities and threats in the marketplace (Point A) and determine the company's position in the market. Where the Company Wants to Be This step identifies the company's desired market location over the next five years in terms of threats, trends, opportunities and competition.
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Strategy Formulation This step determines what the company needs to do to get where it wants to be (point B). Each major goal is assigned a strategic plan of action for the coming one to five years. Presentation for Approval of Plan of Action Each team now presents to the board or management team the importance of reaching the goal and ways to achieve it. Monitoring Progress Towards the Goal Progress towards goals must be monitored constantly by measuring the variables that relate to those goals. This process keeps the company on track and keeps it moving efficiently towards the goal. If the company is not making progress, the monitoring process will alert the company to the fact that corrective action is needed.
Market
Engineering
Monitoring
The Purpose of Market Engineering Monitoring

The Market Engineering system is a continuous feedback loop system. Using this system, the market challenges, measurements, goals, strategies and plans are reassessed at regular intervals over time. Because a company is likely to be committed to the market over the long term, a monitoring programme is an important element of its future success. The key role of the monitoring programme is to serve as a navigational system for the company as it moves through the market towards its goals.
How to Design a Successful Monitoring Programme

The success of a monitoring programme depends on its design and the elements it includes. This section outlines, by way of two tables, the elements most integral to developing such a programme.
Top Ten Critical Elements of a Market Engineering Programme

Every industry has several unique characteristics that require frequent monitoring. Monitoring these characteristics over time helps the company to be proactive in terms of changes in the marketplace. This proactive element drives market leadership and improvements in profitability.
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Figure 14-6 lists key characteristics of the marketplace that the company should integrate into its market monitoring programme. These characteristics include many of the industry challenges, measurement trends, technical trends and market trends already discussed. Many of these challenges will always be present, but a company can stay on top of the market by monitoring them over time. Figure 12-6 Market Engineering Supplement: Key Elements to include in the Market Monitoring Programme, 2001
Item 1 2 3 4 5 6 7 8 9 10 Elements Industry challenges Names of key competitors Key customer segments Key market trends Technical trends Regulatory issues Customer attitudes Product pricing Distribution channels Geographic segments
Frost
&
Sullivan's
Strategic Further Research
Recommendations
for
Buyers of this research report have been motivated to enhance their businesses by strengthening their position in the market or expanding into new market segments. Because its customers have these clear objectives, Frost & Sullivan is endeavouring to add value to this report by way of a series of strategic recommendations for further research. This section includes recommendations for key departments divided by company department to address the needs of individual department managers. Some recommendations are reiterated to show how several departments can benefit from a single research investment. Recommendations are organised as follows:

Recommendations for the Marketing Department Recommendations for the Sales Department Recommendations for the Product Development Department Recommendations for Corporate Management and Business Development
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Recommendations for the Marketing Department

Market Engineering An annual or quarterly Market Engineering monitoring programme should be established to monitor the movements in the market over time and the company's position relative to it. The Market Engineering measurements selected should depend on the company's needs, but the core measurements must be measured over time to ensure that no key market trends are missed or ignored. The study of accurate measurements over time may reveal important trends in the market that should drive the development of strategy and market planning. Creative Market Segmentation Analysis Creative market segmentation analysis can identify opportunities for future growth. The research is based upon segmenting the market in a variety of ways and then analysing each market segment. Analysing each segment individually should reveal areas with low saturation and high market potential for growth. Thorough analysis of competitors and customers, along with other key interviews, should be performed in order to establish a comprehensive overview of the market segment's dynamics. Distri bution Channel Analysis Analysing a distribution channel for the market may enable a company to become more proactive regarding changes in the marketing structure of the industry. The company that optimises the distribution channel strategy in future can be expected to show large gains in profitability and sales growth. End- User Demand Analysis As the market grows increasingly competitive, and as profit margins drop, future sales and profit gains will be achieved only by gaining a thorough understanding of the needs of end-users. To make continuous improvements in end-user focus, companies must be prepared to measure and monitor their customer bases constantly. Companies should design an annual or quarterly customer survey to take specific customer measurements that relate to their products. These measurements must be monitored over time to track the movement and trends of customer attitudes and behaviour. End- User Demographic Analysis Frost & Sullivan strongly recommends an in-depth customer demographic analysis of the market to help develop an effective and powerful strategy. Without full and complete knowledge of end-user demographics derived from such in-depth analysis, any strategy
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would be reduced to guesswork, and the resulting choices would not be optimal. A customer demographic analysis would help support sales strategy, distribution strategy, market tool allocation strategy, and database development effort. Competitive End-User Analysis Frost & Sullivan recommends that companies survey the end users of key competitors to gain insights into why these end users purchase from these competitors. This information may be quite effective in helping a company to draw customers away from the competition. Without this information, many firms will rely on guesswork, which is unlikely to optimise their growth. A n a l y s i s o f P r i c i n g Tr e n d s As the market becomes increasingly competitive, an important part of a winning market strategy will be to set up a quarterly/annual price-monitoring programme. To optimise profitability and sales in the market, companies should implement a price-monitoring system covering all competitors in all significant geographical regions. This information could be gathered quickly by way of a series of telephone interviews. It could then be stored on a file server in database format to provide access to it for all key departments, such as sales, marketing, finance, and research and development (R&D). Departmental Budget Monitorin g As the market grows more competitive, the marketing mix, or the way marketing budgets are allocated over the marketing tools, will need to change in order for companies to maintain profit margins. Marketing tools that worked in the past, such as advertising or public relations techniques, may not be effective future tools for generating leads. A disciplined measurement system for tracking lead generation, lead qualification, sales and related costs by each marketing tool should be developed in order to optimise the allocation of budget over the tools. These tools include advertising, seminars, trade shows, direct mail, direct sales, telesales, and the like. Marketing Audit For those companies that have competed in the market for more than five years, certain elements of the sales and marketing strategy are likely to have grown stale and might put companies at risk during the next recession. A marketing audit by an outside consultant would be a wise investment to ensure that all systems are under constant review and are flexible enough to change with the times. Typically, people do not like change, so a healthy organisation is always open to outside review.
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In such a review, all elements of customer interaction should be audited. Elements to be audited include sales force structuring, the customer database, lead-tracking and analysis systems, corporate training programmes, competitive monitoring programmes, level of market orientation, promotional activities, and measurement systems and productivity of each area.

Customer Surveys All companies active in the market should conduct an annual customer survey to monitor the satisfaction of customers and their needs, attitudes, budgets, purchasing patterns and buying windows. Identifying and addressing unmet customer needs is the source of many great business success stories. A systematic customer survey system can be developed across many market subsegments; this has the potential to reveal unmet customer needs. A hundred well-designed customer telephone surveys performed in each segment would reveal areas for potential sales. An annual customer survey of not fewer than 500 customers would clearly reveal the reasons why customers buy, as well as their purchasing patterns. This information would provide the critical elements needed to design and implement a powerful and effective sales strategy. Frost & Sullivan has seen many cases in which sales strategy, product literature and promotional material all emphasised features that were not critical customer concerns. Sales can improve if the entire strategy is focused on customer needs. The only way to identify these needs is to take measurements on a statistically significant sample size of customers in each market segment. Competitive Sales Strategy Analysi s An aggressively competitive monitoring programme should be established in order to help improve the competitive close ratio of a firm. Monitoring the competition's sales tactics, structure, sales pitch and strategy can reveal clearly and distinctly how a company can train its sales force to draw clients away from its competitors. Each percentage change in close ratio makes a huge impact on a company's profitability. Competitive monitoring can reveal many new ideas and techniques that can help a company develop a continuous improvement programme for its sales force.
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A n n ua l C o m p e t i t i v e Tr a i n i n g S e m i n a r s Collecting and analysing the competitive information is the first step in sales improvement. The second, more important step is ensuring that the information reaches members of the sales force so that they can use it to increase their sales close ratio. To disseminate the information, companies should hold quarterly or annual events to educate salespeople and discuss and develop winning strategies. A systematic matrix approach of comparisons; measurements; and strengths, weaknesses, opportunities, and threats (SWOT) analysis should be used. Major Ac co unt Dev el opment Ana lysis Market research can significantly improve this process by providing more in-depth and strategic profiles of manufacturers. The sales manager must realise that the data currently available at low cost on key companies is not sufficient for creating an intelligent sales strategy. Typically, a substantive profile costs between $500 and $1,000, while often the cost of a qualified lead is even higher. Measuring of Lead Generation Process A disciplined measurement programme of lead tracking, cost allocation, and sales by marketing tool is essential in building a world-class sales support system of lead generation. This is the area of marketing that Frost & Sullivan most often sees run on the basis of opinions and gut feelings, rather than on market measurements. Using the customer engineering system, a company can greatly increase its sales profitability. C u s t o m e r Da t a b a s e Au d i t Frost & Sullivan recommends a customer database audit primarily because salespeople typically claim that they know their customers and that the database is kept current through discipline and hard work. Frost & Sullivan has learned through its experience as a consultant that this is seldom so and that sales force-maintained databases are rarely more than 50 percent accurate. The customer database audit consists of taking the first 500 names off the customer database and interviewing those people by telephone using a detailed and disciplined survey. The audit includes three key tests that must be passed in order for a company's products to achieve full market penetration. The tests are accuracy, comprehensiveness and detail. If the database does not pass the audit, the company may not be selling up to its potential because it is not in proper contact with its customer base.
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C u s t o m e r Da t a b a s e E n h a n c e m e n t If the customer database audit reveals that the database is not detailed, not accurate or not comprehensive, the next important step is to structure a database cleaning project or programme that will systematically "clean" and update the database and identify all potential clients. This programme needs to be closely coordinated with members of the sales force to provide leads to them in an orderly fashion. Leads are an important side benefit of cleaning the database. Ultimately, there should be a measurable and significant return on investment from these projects. C u s t o m e r Da t a b a s e D e v e l o p m e n t New customer segments and customer databases that have been developed with an ad hoc system should now be processed through a formalised database development methodology. Frost & Sullivan recommends a customer engineering methodology built around three concepts of development: accuracy, detail and comprehensiveness. This system results in a highly powerful and effective sales tool on which any marketing and sales team can build.

N e w Te c h n o l o g y E v a l u a t i o n New developments in technology look exciting to engineers, inventors and developers. It is important, however, to invest approximately 5 percent of the proposed development budget in investigating the role of the new technology or product idea in the marketplace. Telephone surveys or focus groups should be arranged with disciplined interviewing and probing techniques so as to identify precisely the end-user needs and acceptance rates for the product. At the same time, a specification and price matrix should be made with all competitors' products to verify that this new product does fill a gap in the marketplace. One must remember that this process typically has a financial return of thousands to one. Analysis of New Product Potential Analysis of the potential of a new product is a necessary strategy if the product has not already been tested by others in the market. A new technology, distribution channel or pricing strategy could be worthy of a decision to develop the product to enter the market. Before a company makes the decision to invest in new product development, however, it should undertake a comprehensive analysis of both the competition and the end-user base to ensure that the development project is indeed bringing a product to the market which the competition does not already offer and which the customers want.
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Specifications and attributes of a competitor's products should be analysed in a matrix measurement methodology to identify holes in the market's product line. At the same time, one should market test the unique attributes of the new product by performing at least several hundred interviews with end users in person or over the telephone in order to gauge their reactions to the product idea. Evaluation of New Product Launches Mistakes are made virtually every time a new product is launched in a market by a new competitor. Manufacturers can avoid this problem by conducting Market Engineering before launching the product. Market Engineering refers to the use of extensive market measurements on which to base the development of goals, market strategy, market plan and implementation plan to ensure that a product is introduced in the market in such a way as to optimise sales and profits. The Market Engineering measurements that should be integrated in this process include the minimum of end-user demographics, attitude measurements, market share trends, market concentration, market saturation, replacement rates, pricing measurements, price performance measurements, and market growth measurements. Monitoring of Competitor Research and Development R&D departments intent on staying at the cutting edge of development must monitor their competition very closely. A quarterly competitive monitoring programme should be set up to analyse and measure systematically competitors' activities across all strategic areas; this could reveal new product development plans, new technology evaluation, strategic partnership arrangements, original equipment manufacturer (OEM) deals, and the like. Frost & Sullivan strongly recommends monitoring the top five competitors quarterly in order to help R&D departments keep abreast of their developments and find new ideas for product improvements. The risk of being late on the market with the wrong technology is too great for a company not to allocate a portion of the R&D budget to competitive research. Mo nitori ng of I ndust ry Produc t Spe cif icat ion s Many times, Frost & Sullivan has found that the development staff are too far removed from the marketplace and do not have adequate sources of market information about the competition. Even where a wealth of information exists, it is often poorly organised and therefore has little strategic value to the developer. Therefore, it is important to create a product specification measurement comparison matrix of all the products on the market. This specification comparison can be helpful to developers, who are often trying to hit a moving target with their development efforts. This specification measurement system can help a company to forecast the direction of the price-to-performance trend and can aid developers in hitting or beating the measurement.
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Compi lati on and Analysis of Industry Product Literature Compilation and monitoring of competitor product literature is another key support tool for the R&D laboratory. This literature must be collected for all manufacturers and must include all and related products so that no feature or development is omitted in the development of product strategy. A stack of literature or information is of little use, however, unless someone analyses the data and highlights the specific areas that deserve strategic focus.

Competitive Benchmarking It will probably become increasingly important to monitor the leaders in this industry on a continuous basis in order to keep other companies fully prepared for changes they could bring to the market. If a competitor monitoring programme is not continuous, the chances of being caught off guard by competitive strategy increase significantly. A systematic competitor benchmarking and analysis system can also provide a wealth of new ideas to improve a company. Acquisition Analysis For both current producers and companies that are considering entering the market, Frost & Sullivan recommends conducting an acquisition analysis. An acquisition could be the most cost-effective way of capturing this market. An acquisition analysis of all potential participants in the market could provide firms with the strategic insight needed to fulfil objectives more rapidly. The analysis would include a review of all companies by category, a screening system based on market measurements, and a SWOT analysis of the way each company would potentially fit into the overall strategy. I mp leme ntati on of Co ntinuous I mprovement Programme Corporate management teams are engaged in a continuous struggle to find new ways to improve the efficiency and quality of their companies. A well-structured and well-managed market research programme is an effective way to generate a wealth of ideas for improvement and to identify areas that need improving. Ideas generated from inside the company eventually die out; the only source of never-ending feedback is the marketplace. This is the reason that Frost & Sullivan recommends a periodic programme of customer surveys, customer visits, marketing audits, database audits, and market training programmes to keep a company constantly at the cutting edge of market developments.
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European Biomaterials Markets B152-54

Publications Division Terms and Conditions of Business

2002 Frost & Sullivan

Strategic Benefits of Market Engineering for Readers of This Report

Top Ten Benefits of a Market Engineering Consulting Report

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Summary of Major Findings Total Forecast Market Growth and Opportunities

Analysis by Major Segment

Analysis by Geographic Region Competitive Analysis

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Time Frame Analysis of Industry Challenges

Glossary of Terms Definitions

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Presentation of Strategic Significance of Measurements

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Market Engineering Research Measurement System Market Drivers and Restraints

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Market Share Analysis

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