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Analysis In Brief
 The global orthobiologics market was estimated by Espicom to be worth $4.2bn in 2007 and accounted for 13% of the $33bn total orthopaedic market. With an annual growth rate of 17%, orthobiologics is the fastest growing orthopaedic segment.
The global orthobiologics market is projected to almost double by 2012, driven by technological advances and an ageing, increasingly active population giving rise to more people over 60 diagnosed with musculoskeletal conditions. Stem-cell therapies are forecast to be the fastest-growing category, with a CAGR of 53.9% over the next five years.
The emergence and establishment of orthobiologic products and solutions is expanding treatment options in orthopaedics. The new generation of products is fast gaining acceptance and offers the potential to improve patient quality of life and reduce health costs.
The orthobiologics market is intensely competitive and is the fastest growing segment of the global orthopaedics market. There is a constant need for bone graft material to provide support, fill voids and enhance biologic repair of skeletal defects.
By 2012, the global spinal market will achieve revenues of $10.2bn and a CAGR of 12% - with faster growth in the future expected.
The array of non-fusion technologies being introduced to the market offers a great deal of pro-mise for spinal surgery patients.
However, despite the fact that some of these technologies have been in use in Europe and other international markets for many years, the clinical outcomes data available are extremely limited in proportion to the tens of thousands of fusion procedures performed.
In addition, as regulatory clearance criteria in the US and Japan are by far the most rigorous in the world, the paucity of well-designed studies to prove the safety and effectiveness of artificial discs has hindered the launch of motion preservation products, and therefore growth, in these markets.
Although motion preservation devices are expected to take some share from fusion products, this will be offset in the near-term by the rising number of people with spine-related disorders for whom fusion remains the most viable treatment and the increasing adoption of MIS-friendly fusion techniques.
Too Many Medical Companies ‘Rely On Overdraft’ As Recession Looms
Analysis from Plimsoll on the UK Medical Equipment industry confirms that 2008 has not been a comfortable year and economic conditions are accelerating the rate of change in the market. Companies are faced with a stark choice: hold on to sales at reduced margins, or opt to reduce in size and scale.
220 of the 800 firms analysed are losing money, a direct consequence of rising costs and price reductions set against a slowing market. Of most significance, is the amount of medical equipment firms using an overdraft as a permanent means of finance - a dangerous position.
The banks are taking a critical look at all unsecured finance and are reassessing their exposure to small businesses, which could leave these firms in a position where their overdraft would need paying back on demand.
At least 171 companies identified in the analysis are running a high chance of failure, unless the problems are addressed. Plimsoll have analysed previously failed companies, and noticed two characteristics in particular of failing or failed businesses. The financial performance of the company is allowed to slide. Costs are not brought under immediate control. As a knock-on effect, debts increase and interest payments then further deplete profitability.
The final blow, an outside factor hits the company, such as the loss of a large contract, a bad debt, or a slow down in business. The failing company simply does not have the financial resources to adjust in time and the inevitable occurs. When analysing previously failed business, Plimsoll found that 8 out of 10 previously failed businesses showed these features.
However, the latest report does show some good news - 105 of the 800 firms prove what can be done to improve performance. The companies have reported a return to profit after having previously reported losses, a result of tighter cost control and a reduction in overheads.
Towards the end of the year, the analysis predicts increased acquisition activity, this is been driven by two clear objectives:
- The distress sale as companies are able to profit from other’s misfortunes, buying sound businesses at a bargain price
- Larger players in the market may use the opportunity to snap up smaller players in the market who add value to their business. These companies will be pre- pared to pay well for these niche companies as they offer a clear and easy route to new markets.
Takeovers Will ‘Sweep’ Medical Market In The Coming Months - Report
A new report suggests that as the effects of the wider economy eventually reaches the UK medical equipment market, a series of takeovers and sell offs will sweep the market.
The report by Plimsoll has found that a combination of needs is forcing smaller companies to consider selling to their larger rivals and larger players are looking to buy their smaller rivals to diversify and develop their businesses.
David Pattison, senior analyst at Plimsoll, has a clear view on this: “It has a great deal to do with necessity. Many of the larger players in the market, despite the downturn, are desperate to find new ways to develop their business, but with the current climate, costs are being cut and business development is being slashed. So they need options to help them protect their futures and tap into exiting revenue and profit streams. Financing a series of small acquisitions at key niche players in the market will give them two clear benefits:
- A quick route to increasing sales for relevantly low cost
- A foothold in the emerging sectors of the market
The facts are very clear:
- For the last few years, the larger companies have been surviving on wafer thin margins, most only making 7.1% or less
- 80 of the UK’s top 800 players are actually losing money at the moment. This is evidence that their strategy of chasing sales and volume compromises profits.
Meanwhile at the other end of the market, an emerging group 164 companies, are smaller, high focused players. These fast-growing companies have been able to carve out niche markets for themselves, some with premium profit margins. The best examples of these companies are:
- Reporting sales increases of well over 24.4% per year
- Reporting margins of 9.4%
However, despite the excellent returns there now seems to be an eagerness to sell from many of owners. Several factors are at play here: a combination of their businesses now reaching a critical point in their development, twinned with the tightening of credit and a reluctance of the money markets to finance the next phase of development. In today’s market, selling their business makes sense for two clear reasons:.
- Brings the chance of stability and security to protect the business
- Accelerates the development of the company due to extra resources
David Pattison said: “It would be a pity of some of these exceptional businesses went to the wall, or do not get the maximum chance to prosper just through lack of funding.”
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