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MedTech Barometer 2020

Monetizing beyond the core

February 2020

Jörg Krütten,

Senior Partner and Global Head

of Life Science

Luxembourg office

52, Boulevard Marcel Cahen

1311 Luxembourg

Tel. +352 24 8391 0

[email protected]

35%

28%28%

21%

16%

Instruments

Implants

Diagnostics

Equipment

Other

84%

59%

0%

20%

40%

60%

80%

100%Western

Europe

Eastern

Europe

Middle East

Russia

Sub-sector1

Source: Simon-Kucher & Partners, 1: Multiple answers possible 2: Including technical aids and dental

Annual MedTech-specific online survey on short-term business expectations

2020 focus topic: Monetizing beyond the core

Responses: n = 51 (C-suite, business unit heads, functional heads)COLOURBOX/ -

Over 100 projects for world leading medical device and diagnostic companies

in the past 2 years alone

Simon-Kucher &

Partners

Regional responsibility1

(% respondents have following region in their area of responsibility)

MedTech Barometer 2020

Simon-Kucher & Partners: MedTech Barometer 2020 2

20% 21%12% 10% 10% 9% 7%

20%

5%

43% 40%

44% 42% 43%36%

33%

33%

28%

37% 39%44% 48% 47%

55% 60%47%

67%

0%

100%

2012 2013 2014 2015 2016 2017 2018 2019 2020

Worse than 2019 Same as 2019 Better than 2019

Around 70% of companies have positive outlook on 2020 driven by rich

innovation pipelines and enhancing commercial effectiveness

Market expansion leading to volume

increase via broadening of disease area

Rich innovation pipelines and a high

number of new product launches

On-going efforts to create new revenue

streams from digital solutions and services

Internal efforts to enhance commercial

effectiveness

Overall business expectations for 2020MedTech companies expect 2020 to be a

better year than 2019…Uncertainties around global trade dynamics and new regulations

(incl. EU MDR); fewer new product launches than previous years


4.8%

2.8%

7.0%

4.1%4.1%4.3%

0%

2%

4%

6%

8%

10%

202020192018201720162015

Companies expect an average profit increase of ~5% and limited to no

price erosion this year

MedTech industry profit expectations

0.0%

-0.4%-0.5%

-0.3%

0.4%0.3%

-1.0%

0.0%

1.0%

202020192018201720162015

Price change (%)Profit change (%)

MedTech industry price expectations


Despite the positive outlook, less than 10% of companies have full

confidence that all their innovations* will achieve their profit targets

42%

51%

7% I expect 9 out of 10 new product launches to

reach their profit targets this year

I expect 2 out of 10 new product launches to


I expect 6 out of 10 new product launches to



Beyond continuing to rely on innovation as a key success driver, adapting

revenue models is perceived as key to make bussines future-proof

9% 44% 33% 14%

We recently changed revenue

model and are ready for the future!

We are currently exploring new

revenue models

Pressure is increasing and we are

piloting ideas and plan to change

in 1-2 years

I see no signs of any change in

revenue model in the near future

85% of MedTech companies plan to future-proof their revenue model

<10% of MedTech companies have so far managed to do it


So far, success in monetizing value beyond the core is partial and

companies have primarily tackled simpler solutions

17% 11% 9% 14%

46%

33%

63%41%

38%

56%

28%

45%

0%

20%

40%

60%

80%

100%

Monetizing integrated

digital solutions

Forward integration into

care delivery

Enhanced value-add

services

Establishing win-win

contracting models

... failure

... partial success

... success

% companies consider

it to be a ...

73% 67%56% 42%

More than half of MedTech

companies attempting to

monetize digital solutions,

however success has so far been

limited

Despite fewer Medtech

companies attempted forward

integration, more than half

consider it a success

~3 in 4 MedTech companies

have tried enhanced value-

added services, most consider it

a partial success

Many MedTech companies

attempted win-win contracting

models where close to half

consider it full success

% companies that

have explored model


Digital solutions:

The share of revenue generated with digital solutions is expected to triple

by 2024

13%

28%

8%

22%

1%

12%

0%

20%

40%

Today 2024

Upper quartile Average Lower quartile

All respondents who currently have

revenue from digital, expect digital %

of total revenue to increase

85% of respondents who currently do

NOT have revenue from digital, expect

to create revenue from digital

solutions in 2024


High level of confirmation and

recognition on forward integration

being a longer term strategic goal …

… however, only ~40% feel equipped

today and only ~12% have so far

managed to do it

Forward integration into care delivery:

~70% companies see potential in exploring forward integration and

advancing into the provider value chain in the near future

26%

23%

40%

12%Not suitable

Not equipped

Equipped but have not yet

managed

Fully equipped and are already in

care deliveryWe are preparing ourselves to move

to care delivery, but not yet executed.


40% 44% 16%

We still provide all services free of charge

We defined services however lack structured monetization approach

We sell some services with a structured monetization approach

Enhanced value added services:

~40% of companies still offer all services free of charge and purely see it

as an investment to drive more products sales

Respondents reflected that barriers

to more service monetization are:

− [Market] Few benchmarks/anchors

− [Internal] Slow mindset change

…we have poorly identified the real

needs to tailor our services/solutions

to real value propositions for

successful monetization.


Source: Simon-Kucher & Partners.

Win-win contracting models:

Advanced contracting models are still in its infancy with most companies

still focusing on optimizing transactional contracting

100% 86% 47% 56% 37% 16%

0% 14%

53%44%

63%

84%

0%

20%

40%

60%

80%

100%

Yes No

Popu.

health

deals

Performance based contracting

models that tie prices to customer

performance/commitment have

gained traction

Advanced contracting models that

outcome driven are still in their

infancy due to complexity in design,

measurability challenges and

regulatory hurdles

Outcome

based

agreements

Portfolio

bundled

offerings

Payment

model

alignm.

Perfor-

mance

based

deals

Transac-

tional

deals


Source: Simon-Kucher & Partners, MedTech Barometer 2019. 1: Multiple answers possible

In order to successfully drive revenue model evolution companies need to

ensure organizational readiness in terms of resources, set-up and attention

In order to drive new revenue models companies

need...

… aligned organizational set-ups and functions

… deep commercial know-how and capabilities

… deep and holistic customer understanding

… strong top-management drive and attention

… enhanced sales/controlling tools and systems


GettyImages_lovelyday12_820374558Source: Simon-Kucher & Partners

Key takeaways

The overall short-term outlook of the industry is positive – product/

technology innovation continues to be a key growth driver

However, the vast majority of companies is looking beyond and into new

revenue models to make businesses future-proof

With few exceptions, companies are still in the exploration/piloting phase on

new revenue models and successes have been mixed so far

Market/customer openness/readiness, scalability and regulatory limitations

are important external hurdles that still need to largely be overcome

At the same time, companies need to ensure full organizational readiness in

terms of mindset, capabilities, set-up and systems/tools


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MedTech Barometer 2020 Results 20200212 For Upload