Welcome to BioMarketing Insight's monthly newsletter.

The pharma/biotech industry has actively pursued the emerging markets because the US and European markets are saturated and cost cutting measures have become dominant. This month, I will be looking at the what the medical device industry is doing in the emerging markets.

Read on to learn more about this topic and other current news. On the right are quick links to the topics covered in this month's newsletter. The next newsletter will be published on December 17th.

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Sincerely,

Regina Au

Principal, Strategic Marketing Consultant

BioMarketing Insight 

For those who haven't had the opportunity to view the interviews of my speakers by BIO, you can view all the interviews on my website.

Enjoy the presentation and interviews.     

We all know that the US and European markets have become saturated and governments have implemented cost cutting measures to reduce the cost of healthcare. Unless a product is truly "innovative" in changing the paradigm on how we treat diseases, "me-too," "nice to have" and slight improvements to products will not make it to the market successfully.

The pharma/biotech industry has already turned to the emerging markets for growth and now the medical device industry is actively pursuing the emerging markets. As emerging countries become more developed, more regulations will be enforced similar to the US and Europe, but the opportunity for products being used will increase.

China

As of 2011, the Chinese medical equipment market was worth about $15.7 billion, China Daily reports, a 26.6% jump over the previous year.  Medical device giants like Johnson & Johnson tend to be the biggest device players in the country but carry high price tags that are generally only accessible to China's wealthiest hospitals and residents, Li Guoqiang, Director of Lepu Medical Technology, a Chinese devicemaker, told the newspaper. If local companies can get their tech up to Western standards and inexpensively, they can snatch profits from the heavy-hitters, Li said.

Ouyang Xiangyu, Managing Director of Legend Capital, tells China Daily that China's demand for medical devices represents an enormous opportunity for Chinese devicemakers, but most China-made products on the market aren't of Western standards. But with a little innovation, "Chinese devicemakers will be able to undercut foreign firms and cash in on the huge domestic market," said Ouyang.

"We are glad to see that more and more people who have returned with strong experiences in healthcare are starting their own businesses in China," Ouyang said. "They are trying to achieve technological innovations and offer high-quality products with affordable prices to supply the large domestic market that exists for medical equipment."

"It will prove to be a driving force that in 10 to 20 years results in a batch of great Chinese medical equipment enterprises that will be similar to today's large (Chinese) IT companies, such as Lenovo Group, Huawei Technologies and ZTE Co.," Ouyang told the paper.

Of course, industry giants are well aware of the Chinese landscape and most are looking to commercialize lower-cost products specifically tailored for the country's population. Medtronic recently bought orthopedics company China Kanghui Holdings for $816 million and 26.4% of Shenzhen's LifeTech Scientific for $66.2 million. J&J, Covidien and St. Jude Medical are among the many companies that have opened R&D shops in the country, looking to use local talent to develop products designed for Chinese success.

Taiwan

While China is the focus for most companies, one can not discount Taiwan. In 2011, sales of medical devices in Taiwan reached nearly NT$100 billion (US$3.42 billion) and estimated to grow by 7 percent this year according to Vice Economics Minister Duh Tyzz-jiun.  

The Ministry of Economic Affairs is targeting five areas in medical devices: kidney dialysis machinery, respiratory care equipment, in vitro diagnostic technology, microsurgery and high-end dental device tech. The demand for medical devices is rising due to the increasing number of elderly patients and chronic disease.

Brazil

The Brazilian government has introduced legislation that would ease the social security contributions requirements for medtech companies in boosting manufacturing competitiveness. The legislation which will go into effect from Jan. 1, 2013 to Dec. 31, 2014 and is expected to save the medtech industry at least $9 million a year.

What Types of Devices are Predicted to Grow Rapidly in these Emerging Markets?

Mammography equipment is forecast to grow nearly 60% by 2016 in the emerging markets, such as Southeast Asia, China and Latin America, due to strong health care investment in women's health for those regions according to a report by InMedica.  Increased awareness and education of breast cancer in the last 10 years, combined with economic prosperity, is increasing demand by women and the private providers are meeting this demand by investing in mammography X-ray equipment.

Universal access to mammograms will not happen overnight. "Despite our growth forecast of 8%-10% annually in emerging regions for the period 2012 to 2016, full access to mammography service penetration will take far longer," commented Stephen Holloway, a senior analyst at InMedica. "In many regions, resources and investment in healthcare remains far below the global average. Unfortunately in these regions, mammography is not seen as essential to warrant investment."

Mature healthcare markets are predicted to see saturated markets with a large proportion of sites utilizing digital flat panel mammography equipment. "However, use and awareness of these services is dogged by confusing contradictory clinical studies and the lack of one clear advance in mammography technology. Tomosynthesis, "compound-view," and contrast-enhancement have all been developed and proposed recently, however, no technology has emerged as a distinct industry standard. An absence of clarity on the importance and implication of breast density is also clouding much of the evidence and adding to the muddle." said Holloway.

CT Scanning Devices

The global market for CT scanning devices could grow from $3.4 billion in 2011 to $3.7 billion in 2012 according to a BCC Research report.  The report also forecast that global CT sales could hit about $5.1 billion by 2017. Asia is predicted to contribute almost 43% of the overall market. According to BCC's forecast, Asia will experience a CAGR of 9.8% and grow from $1.4 billion to $2.2 billion by 2017. In contrast, Europe will have a CAGR of 3.7%, and grow from $1.1 billion in 2012 to $1.3 billion by 2017.

Novo Nordisk 

Novo Nordisk A/S, the world's largest insulin maker, plans to hire about 1,000 people in the next two years to expand treatment for diabetes in emerging markets such as Colombia, Egypt, Ukraine, Malaysia, Indonesia, and Vietnam in the years to come, said Jesper Hoiland, Head of International Operations for Novo in an interview.

Novo is "rapidly" adding headcount in these countries and he predicts "Vietnam is going to be a new mini-China."  Hoiland oversees 136 countries except for Europe, North America, China and Japan.  Obesity and diabetes in these regions are rising rapidly due to longer life expectancy, rising income levels, lifestyle changes and urbanization, Hoiland said.  Approximately 200 million people suffer from diabetes in these countries and only a quarter of these people have access to care, he said.

Minivan Clinics

In Vietnam, a survey of adults in Ho Chi Minh City found 11 percent of men and 12 percent of women have undiagnosed type-2 diabetes, the most common form of the disease, according to research published in the journal Diabetologia in July.  Access to physicians and medicines are a big issue in treating these patients.

To expand Novo's reach in countries such as Vietnam and Indonesia, where diabetics can't access medicines because there aren't enough specialists to write prescriptions, the company trains doctors to train local physicians, according to Hoiland.

Novo plans to train at least 10,000 doctors annually, said Hoiland, who joined the company 25 years ago. The Danish drugmaker has also set up mobile clinics inside minivans, trailers and trucks that travel to remote areas to screen people for diabetes and help them access treatment, he said.

Medtronic

Medtronic, as mentioned previously, recently purchased China Kanghui Holdings for $816 million in cash. Kanghui, a manufacturer of orthopedic technologies has a robust portfolio of trauma, spine and joint reconstruction devices that will help Medtronic get 20% of its revenue from emerging markets by 2016, one of CEO Omar Ishrak's stated goals.

This is Medtronic's largest acquisition ever made in China, Bloomberg notes. Medtronic has had China in its sights for a few years, buying a 15% stake in devicemaker Shandong Weigao in 2007 and unveiling a new R&D shop in Shanghai last month. The Kanghui acquisition gives the company a greater presence in one of the world's fastest-growing medical device markets, Executive Vice President and President of Medtronic's Restorative Therapies Group Chris O'Connell said in a statement.

Other Companies in China

St. Jude Medical, Covidien and GE Healthcare have all opened R&D outposts in China over the past year or so, looking to develop products specifically catering to the Chinese market. Earlier this month, Johnson & Johnson announced an ambitious plan to open four "innovation centers" around the world, including China, to scout for potential partnerships and M&A targets.

Covidien

Covidien announced a US$50 million investment to build a medical device manufacturing plant in Costa Rica this past March.  According to a joint statement by Covidien and the Costa Rican Investment Promotion Agency (CINDE), the new factory will employ 350 highly skilled local workers and produce innovative devices for vascular therapies, for worldwide distribution. 

CareFusion

CareFusion, a San Diego-based company will acquire Intermed Equipamento Medico Hospitalar for two reasons: compatibility and a built-in regional distribution network. CareFusion makes infusion pumps, patient ID systems, ventilation and respiratory devices and surgical instruments. Intermed manufactures and sells lung ventilation, anesthesia and other kinds of medical equipment.

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As emerging markets become more developed, there will be more demand for newer technologies and future growth for most manufacturers. However, since the infrastructure is not present in many emerging markets, products do need to be tailored to the country and the products tend to be smaller, as in the example with China, and to some extent Taiwan.  With the US trending toward point-of-care (POC) products, I believe the POC products will take off faster than the traditional products that are larger in the emerging countries.

As demand for new technologies in emerging countries increases, the regulatory systems will become more westernized. Recently, there have been new regulatory initiatives in China and India for medical device companies doing business in their country.

China's State Food and Drug Administration (SFDA) released guidelines on how foreign medical device manufacturers label and package their products, according to China-briefing.com.  Companies have until April 1, 2013 to comply.

According to SFDA's guidelines entitled "Circular on Standardizing the Labels and Packaging Marks of Foreign Medical Devices," there are three main points to the guidelines:  

1) Product labeling must be in Chinese (though other languages can be added). Product labeling must be attached to any and all devices, otherwise it will be prohibited from being sold or used.

2) Foreign medical device companies must develop quality control practices that comply with Chinese regulations. All documentation must ensure the safety and effectiveness of the medical device sold.

3) "The terms and technical expressions in this Circular shall have the same meaning as those provided in the "Regulations and Administrative Measures on the Registration of Medical Devices (SFDA Order No.16).'"

India

The Drug Controller General of India (DCGI) will launch initiatives to monitor the medical device manufacturers to ensure the safety and efficacy of product sold and used in India.  This initiative is Central Drugs Standard Control Organization's (CDSCO) effort to recognizing the importance of the medical device industry as part of the Indian healthcare system and the need to have an effective regulatory system specifically to regulate and monitor the medical devices sector.

DCGI's Dr. G. N. Singh stressed, "Considering the important role that the medical devices play in preserving the health of the patients, it is high time to recognize it as a separate and individual entity in line with the drugs and cosmetics in the country. Since they are different from drugs ...different set of rules and regulations that are specific to this sector (are needed) and we hope that steps will be taken by the government to hasten the process to pass the bill at the earliest."

Medical devices are currently classified as a drug under the Drugs and Cosmetics (D&C) Act. However, since manufacturing and quality controls of medical devices are different from drugs, the CDSCO has recently drafted a guidance document entitled the Drugs Cosmetics and Medical Devise Bill specifically for the medical device industry. Once the bill is passed by Parliament, the D&C Act will be amended to Drugs, Cosmetics and Medical Device Act. If applicable, Dr. Singh will hire additional experts and biomedical engineers as medical device inspectors within the regulatory system to monitor this sector.

These new regulations will certainly help companies be able to navigate the regulatory process more easily and weed out foreign device companies that do not comply with the countries' regulatory standards. This helps medical device giants like Medtronic, J&J and St. Jude, but they face increase competition from local device companies in the respective countries as they develop innovative products that meet western quality standards. China is very motivated in recruiting experienced healthcare expatriates back to China to start their own business.

A few months ago, I highlighted an article about German scientists at the Fraunhofer Institute being able to print blood vessels. Now you may be able to download software, print a vaccine and inject it at home in the future.

J. Craig Venter Source: The Atlantic

This is geneticist J. Craig Venter's vision for the future of vaccines. "Venter and his team of scientists are testing a version of the digital biological converter, a concept dubbed biological teleportation," Wired reports. This technology would offer people the benefit of producing a digitized vaccine in no time and it can be emailed around the world.

"Imagine being able to download a vaccine or your medicine on your computer at home," Venter said, as quoted by The Atlantic. "That's the not-too-distant future, and it wipes out the possibility of an epidemic."

To read the full article in FierceVaccine, click here.  

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Fifteen Medical Device and Sixteen Pharma/Biotech Funding Deals

To determine whether funding is picking up, I will be focusing on all types of funding that are $1 million or greater in seed investments and series A or B (or the valley of death) that are pre-IPO. Even though VCs are investing, they continue to invest in their existing portfolio companies and less in start-ups. Incubators, state funding, and business competitions are great for initial seed money but not enough to keep the company going long-term.  These are worldwide funding deals. 

Partnerships and licensing deals with upfront payments and milestones will not be included.

Funding deals are in chronological order by date.

$0 = No financial terms disclosed. For more information, read more ....

Funding deals are in chronological order by date.

$0 = No financial terms disclosed. For more information, read  more..     

Mergers & Acquisitions continue to be made for both medical device (18) and pharma/biotech (11).  

Investment firm OpenGate Capital purchased Thermo Fisher Scientific's Lab Workstations for an undisclosed amount.

Watson Pharmaceuticals is acquiring Actavis, a Swiss drugmaker for $5.53 billion making Watson Pharmaceuticals the world's third largest generic maker.     

Acquisitions are in chronological order by date with Medical Device/Diagnostics followed by Pharma/Biotech.

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