全球醫(yī)療技術(shù)2023-Global MedTech 2023 - Stem the tide How companies can stop margins eroding with operational excellence and ESG performance

REPORT

GlobalMedTech2023-Stemthetide

Howcompaniescanstop

marginserodingwithoperational

excellenceandESGperformance

Regardlessoftheirsector,winningcompanieshadalowercostofgoodssold(COGS;

winnersonaveragespent43.7%ofrevenuesagainstunderperformers’54.6%),longer

leadershiptenure(5.6yearsagainst3.6years),andstrongerbalancesheets(withan

averagedebt-to-EBITDAratioof1.8against5.1).Thesewinningkeyperformanceindicatorsshowtheimportanceofoperationalexcellence–butshouldnotdistractfromtheneedtocementESGmeasures.

TheRolandBergerGlobalMedTechStudy2023

endswithsomeessentialquestionsforexecutives:

1.Wheredoesmycompanystandonthepathtobeingawinner–andwhatdoesitneedtodotodeployallwinningcharacteristicsforpatients,customers,shareholdersandemployees?

2.Howbigarethegapsinoperationalexcellencemycompanymaydisplayinareasfromproductdevelopmentandmanufacturingtothecommercializationofproducts?

3.DoesmycompanyhaveaclearagendaforESGperformancethatincludesawell-

definedambitionlevelandrobuststrategicinitiativesthatwilldriveittowardsitsgoal?

Byansweringthesequestionsandapplyingwinners’bestpractices,allexecutivescansteertheircompaniestowardsdeliveringconsistentlysuperiorandrisingshareholderreturnsagain.

3RolandBerger|GlobalMedTech2023

Contents

Page

5

10

15

18

21

25

1

2

3

4

5

6

MedTechperspectives–Profitability

remainsunderpressure

Industrywinners–Diagnosticsstillontop,

Asiaontherise

Corporatewinners–Efficientops,

compellingESGvision

Winningremedies–Short-term

operationalexcellence

Winningremedies–ESGperformanceas

alicensetooperate

Appendix

4RolandBerger|GlobalMedTech2023

Revenuegrowth[EURbn]

567

511

1

MedTechperspectives–

Profitabilityremainsunderpressure

TheglobalMedTechindustrysawEBITDAmarginsdropthreepercentagepointsin2022.AstheworldfinallygotagripontheCOVID-19pandemic,thissharpdipwastheresultofgeopoliticallyinducedenergyandraw-materialpriceincreasesandinflation-drivensalaryrises.Whilecompaniestriedtopassonhigherproductioncoststocustomers,mostdidnotmanagetodosofully.Asaresult,MedTechswillhavetofocusevenmoreonoperationalexcellenceandinnovativepricingmodelsthattakeintoaccountproduct-andservice-relatedvaluepropositions.TheMedTechindustrywillinthecomingyearsbeshapedbycompaniesaimingforthesegoals,whileunrelentingcostpressureonhospitalsmakesforachallengingcustomerenvironment.A

MedTech’sprofitabilitychallengeshavecomeevenasoverallrevenuesgrewbyjustunder11%from2021to2022andaverageannualgrowthwasconsistentlystrongat8%overthelastfiveyears.InEurope,costincreasesafterRussia’sattackonUkraineerodedtheprofitsofcompanieswithastrongfootprintintheregionincludingheadquarters,majorproductionandresearchanddevelopment(R&D)sites.Asaresult,theprofitabilitygapbetweenEurope-headquarteredandUSandAsia/Pacificcompetitors–whichweidentifiedinourlastGlobalMedTechReport–widenedfurther.EuropeanEBITDAmarginsaveraged17%ofsalesin2022,sevenpointsbehindthoseofUScompaniesandthreepointsworsethantheprioryear.B

APost-pandemicmarginsdippedsharplyasrevenuescontinuedtogrow

FinancialsofRolandBergerMedTechstudysample[n=109],2018-2022

24

22

EBITDAmargin[%]22

22

21

+8%

439

428

413

20182019202020212022

CAGR

Source:CapIQ,RolandBerger

5RolandBerger|GlobalMedTech2023

COVID-19

BProfitabilitygap:GermanMedTechs

lagwaybehindNorthAmericanandAsianrivals

Keyperformanceindicatorsbyregion,2012–2022

EBITDAmargin[%]

27

26

25

24

23

22

21

20

19

18

17

16

15

14

8

COVID-19

26

24

24

23

23

22

20

1920

17

17

16

15

13

25

23

1213141516171819202122

Revenue[index100]

240

220

200

180

160

140

120

104

80

1213141516171819202122

North

America

Asia/

Pacific

?20

Europe

Germany

North

America

Germany

Europe

Asia/

Pacific

Average

CAGR

7.7%

6.9%

5.3%

4.2%

Source:CapIQ,RolandBerger

6RolandBerger|GlobalMedTech2023

+1.5%

CMarginsremainunderpressureandprofitslooksettofallagainasof2023

Financials,H12022vs.H12023

EBITDAmargin[%]

30

25

20

15

10

5

0

25

24

22

21

20

17

17

14

H12022

H12023

Delta

H122–H123

-2.7pp.

-3.0pp.

-2.9pp.

-3.2pp.

Revenue[EURbn]

271

275

H12022

H12023

Europe

N.America

Asia/Pacific

Germany

CAGR

Source:CapIQ,RolandBerger

Germany-headquarteredMedTechsfaceanevenbiggerchallenge.WithaverageEBITDAmarginsdecliningto13%in2022from15%in2021,theyboastthelowestprofitabilityoftheregionalgroupsweidentified–andthemostprotractedmarginerosion,whichstartedwiththepandemicin2020.WithaverageEBITDAmarginafulltenandelevenpercentagepointsbehindtheirAsia/PacificandUScompetitors,respectively,GermanMedTechshavefewermeansthanthesepeerstoinvestinR&D,productionandcommercialoperations.

EuropeanMedTechsabsolutelyhavetomasterefficientoperations,includingahighdegreeofautomationinproductionduetoevenhigherinflationarypressuresandenergycosts.Ontopofthis,GermanMedTechscanonlyreversethetrendbyrethinkingoperationalexcellencemorerigorouslyandfocusingmoreresolutelyonsuccessfulsegmentsattheexpenseoflesssuccessfulones.Havingsaidthat,thereareMedTechsbasedinEuropethatcontinuetoperformsolidly–companieslikeCarlZeiss,SiemensHealthineers,Straumann,SonovaandTecan.Laterinthisstudy,weanalyzewhatrecipesleadingMedTechcompaniesarefollowingtostayaheadofregionalandglobalcompetitors.

MedTechsheadquarteredinAsia/Pacific,ontheotherhand,sawthesmallestdeclineinprofitability,withaverageEBITDAmarginssofteningto23%ofrevenuesin2022from24%theyearbefore.TheywereabletomaintainverysolidprofitabilitydespitesufferingtheeffectsofaCOVID-19-hitChineseeconomyandtheslowestrevenuegrowthofalltheMedTechregions.CompanieslikeMindray,IntCoMedicalTechnology,UnitedImagingandLepuwere

7RolandBerger|GlobalMedTech2023

evenabletoincreaseEBITDAmarginssignificantlyandsustainthemathighlevelsastheycontinuedtobenefitfrompartlyCOVID-19-drivendemandforproductplatformslaunchedbetween2018and2021.Allofthesecompanieshavesolidmarginswellabove20%andcouldincreaseprofitabilityevenfurtherastheirproductportfoliosexpandandtheyentermajormarketsacrosstheworld.

USMedTechsremainedthemostprofitablecompaniesintheindustry,withaverageEBITDAmarginsrunningat24%ofrevenuesin2022,downfrom26%in2021.TheyprofitedfromcontinuedrevenuegrowthintheUS,thelargestMedTechmarket,andonlymodestenergy-pricerises.Stand-outcompaniesboaststrategiccoherenceandstandard-setting,innovation-drivenproductportfolios.ThisallowsthelikesofIntuitiveSurgical,Strykerand

Theprofitabilitygap

betweenEuropean companiesandothers widenedfurther. EuropeanEBITDAmargins averaged17%ofsalesin 2022,sevenpointsbehindthoseofUScompaniesand onepointworsethantheprioryear.”

MarcoBühren,Principal

Abbotttofocusonbusinessleadershipintheirchosenfields–respectively,robot-assistedsurgery,next-generationorthopedicsandassociatedequipment,and(amongotherthings)automateddiabetescare.Ouroutlookforfull-year2023seesafurtherdeclineinprofitability.H12023EBITDAmarginsinallregionswerethreepercentagepointslowerthanH12022,asrawmaterialprices,energycostsandsalariescontinuedtosapprofits.Germany-headquarteredMedTechs,forexample,reportedaveragemarginsofonly14%ofrevenues–andfoundlittletocheerintheone-pointincreaseoverH22022,asH1profitsaretraditionallyhigherinMedTech.Industryrevenuegrewonly1.5%fromH12022toH12023,considerablybelowthemedium-termindustryaverageofjustunder8%peryear.ThisindicatesthatMedTechswillhavetocontinuedealingwithachallengingmarketenvironmentfortheforeseeablefuture.C

MedTechcompanies’mostrecentfinancialreportingshowsthattheprofitsoflargerelectromedicalandequipmentsuppliersarecurrentlyunderthestrongestpressure.TheEBITDAmarginsofthissegment,whichisreliantonsignificantcapitalexpenditurebyhospitals,fellbytwopercentagepointsto15%fromtheendoflastyeartothemiddleof2023.CompaniessuchasSiemensHealthineers,Philips,GetingeandOlympuswereaffectedbythisdevelopment.D

Thetools,labanddiagnosticssegmentremainedthemostprofitablepartoftheindustry.ButH12023averagemarginsof26%wereonepointbelow2022marginsandfivepointsoffall-timehighsseenin2021,whenauthoritiesworldwideweretestingforCOVID-19infections.

Dentalsegmentmarginsalsofellbyonepointto14%.Innovationanddigitalizationhave,forexample,seensignificantimprovementsincompanies’serviceportfolios.Resultingstrongrevenuegrowthhasinpartcounteredtheeffectsoffiercecompetitionandsignificantbargainingpoweronthecustomerside,whichhavetraditionallykeptmarginsinthissegmentlower.

Butthesegmentswiththelowestmarginsremainservicesanddisposablesandsupplies,whichhaverespectivelybeensufferingunderrecentinflation-inducedsalaryincreasesandlimitedproductdifferentiation.Bothsegmentsweretheonlyonesthatcould

8RolandBerger|GlobalMedTech2023

7.2%

9.4%

11.9%

7.3%

14.2%

0.8%

9.6%

Revenuegrowth

2020–

2022CAGR

22

19

12

9

6

5

21

15

DOnlytwoofeightMedTechsegments

sawbettermarginsinthefirsthalfof2023

Keyperformanceindicatorsbysegment[%]

14.7%

Company

count

EBITDAmargin

2120

17

15

24

222322

31

30

27

26

21

18

1818

15

13

1112

17

1514

13

14

15

12

11

26

24

2423

Electromedical

Surgical

Tools,laband

Medicalaids

Services

Dental

Disposables

Diversified

andequipment

instrumentsandappliances

diagnostics

anddevices

andsupplies

2020

2021

2022

H12023

Source:CapIQ,RolandBerger

stabilize–andevenslightlyimprove–marginsinH12023.Companiesinbothfieldsappeartobeprofitingfromperformance-improvementprogramsthathave,forexample,ledtomoreautomationandheadcountreductions.

Meanwhile,theprofitabilityofsurgicalinstrumentsandmedicalaidsanddevicessuppliershasfallenfrompandemic-drivenhighsin2021.Butbothsegmentsdoappeartohavestabilizedrecentmargindeclinestorespectablepre-COVIDlevelsofrespectively22%and18%ofsales.

ErodingmarginsareaclearsignoftheincreasingpressuretheMedTechindustryisfacing–andfinancialresultsshowclearlythatsomecompaniesarefaringbetterthanothers.Thistoughbusinessenvironmentmakesthequestionofwhatleadingcompaniesdobetterthanlaggardsacrucialone.Thenextchapterisadeep,quantitativeanalysisofkeyperformanceindicators.Itidentifiesbestpracticesandstrategiccharacteristicsthatsetaparttheindustry’s“winners”.

9RolandBerger|GlobalMedTech2023

MedTech

industrystudysample

2

Industrywinners–

Diagnosticsstillontop,Asiaontherise

ThemostsuccessfulMedTechcompanieshaveallowedtheindustrytocontinuedeliveringstrongreturnsdespitedecliningprofitability.MedTechs’stotalshareholderreturns(TSR)fromdividendsandstock-pricerisesaveraged10.4%ayearbetweenQ32018andQ32023–almostathirdmorethanthereturnsoftheS&P500indexthattracksthelargestUScompaniesandalmostdoublethoseoftheMSCIWorldindexcomprising1510globallarge-andmid-capcompanies.E

EMedTechstillperformswithbettershareholderreturnsthanotherindustries

Totalshareholderreturns[index100],Q12018–Q32023

260

240

220

200

180

160

140

120

100

80

CAGR

Q32018-

Q32023

10.4%

8.0%

.

5.5%·

.

S&P500

MSCIWorld

01/1807/1801/1907/1901/2007/2001/2107/2101/2207/2201/2307/2301/24

Note:N=109forMedTechindustrystudysampleTotalShareholderReturn:Priceend-Pricebegin+Dividends/Pricebegin

Source:CapIQ,RolandBerger

IIToincreaseshareholderreturns,

companieshavetoembraceoperational

excellenceintheshorttermand

environmental,socialandgovernance

(ESG)performanceoverthelongerterm.”

ThiloKaltenbach,SeniorPartner

10RolandBerger|GlobalMedTech2023

Quicklyadjustingtothe“newnormal”ofhighraw-materialandenergypricesandsupplychainuncertaintiesin2022,top-performingMedTechsmanagedtorecover–andevenbenefit–frommarketconditionsin2023.RolandBergeranalyzedthe109largestandmostlystock-listedMedTechcompaniestoidentifythetopperformersandtheattributesthatmakethemsuccessful.Thecompaniesanalyzedcomefromaroundtheworldandeachonefitsintooneofeightsegments:

1.ElectromedicalandmedicalequipmentcompanieslikeBostonScientific,SiemensHealthineersandPhilips

2.SurgicalinstrumentsandappliancesmakerslikeColoplast,ZimmerBiometandConvatec

3.Tools,labanddiagnosticscompanieslikeThermoFisher,QiagenandbioMerieux4.MedicalaidsanddevicescompanieslikeSonova,DexcomandSmith&Nephew5.ServicesproviderslikeFreseniusMedicalCare,DaVitaandOakStreeHealth

6.DisposablesandsuppliescompanieslikePaulHartmann,Owens&MinorandHogyMedical7.Diversifiedmulti-segmentplayerslikeMedtronic,B.BraunandAbbott

8.DentalsolutionscompanieslikeStraumann,DentsplyandAlign

RolandBergerassessedthefinancialperformanceofeachcompanybycompilingthreekeyperformanceindicators–TSR,thecompoundannualgrowthrate(CAGR)ofrevenues,andmeaneconomicprofit.Thisallowedustoidentifytheattributesthatmakesomecompaniesmoresuccessfulthanothers.This,inturn,allowedustoidentifythecommonstrategiccharacteristicsallMedTechcompaniesshouldadopttoachieve–ormaintain–MedTechindustryleadership.

Top-rankingMedTechcompanies–“winners”withbothhighprofitandrevenuegrowth–achievedanaverageTSRof9%peryearbetween2019and2022,whilethelowest-rankingquartile–thelow-growth,low-profitability“underperformers”–sawTSRshrinkby10%.Thisdisparityallowedustoidentify1)thecompaniesthatconsistentlyoutperformpeers,2)thefactorsthatdrivetheirindustry-leadingTSRs,and3)thestrategicattributesthesewinnershaveincommon.F

OurWinnersAnalysistookacompany’spastperformanceasablueprintforfuturestrategy.Itratedacompany’svalue-creationpotentialbytakingpastCAGRsofrevenueasthebestproxyforfuturegrowth,andrateditseconomicprofitability(EP)bycalculatingthedifferencebetweenitsreturnoninvestedcapital(ROIC)andtheweightedaveragecostofthiscapital(WACC).MedTech’saverageEPof1.1%from2019to2022showsthattheindustryasawholewasabletorefinanceitscapital,evenifalargenumberofcompanieshadhighercapitalcoststhanreturns.

So-called“profitlessgrowers”–companieswithhigherrevenuegrowthbutlowerprofitability–achievedanaverageTSRof5%peryear,notablybetterthanso-called“valuegenerators”–MedTechswithlowergrowthbuthigherprofitability–whichaveragedTSRsofjust1%.Asidefromrewardingwinners,investorsappeartolikeMedTechcompaniesthatsacrificeprofitabilityforhigherrevenuegrowth–akeydifferencetoourrecentstudyofthepharmaceuticalsindustry,whichfoundinvestorspreferredcompaniesthatsacrificerevenuegrowthforhigherprofits.

11RolandBerger|GlobalMedTech2023

3-yearrevenueCAGR[%]

4.4

1.1

XX

FAboutonethirdofwinnersmaketools,labanddiagnosticssolutions

Financialperformancematrix(clusteredbyproductsegment),2019–2022

15

10

5

0

-5

10

Profitlessgrowers

5%

1%

Valuegenerators

-10%

Underperformers

Winners

9%

-16-14-12-10-8-6-4-2-02468101214161820

MeanEPspread[%]

▲Electromedicalandequipment

Surgicalinstrumentsandappliances

Tools,labanddiagnostics

Medicalaidsanddevices

Services.Dental

Disposablesandsupplies

◆Diversified

XXAveragetotalShareholderReturn:Priceend-Pricebegin+Dividends/Pricebegin

Threshold

Source:CapIQ,RolandBerger

WhileourWinnersAnalysisusespastperformancetoassessacompany’sfuturepotential,itiscrucialtonotethatpastreturnsarenoguaranteeoffutureones.Ouranalysisquantitativelyandqualitativelyassessescompanies’pastperformancetoidentifysharedwinningcharacteristicsatthatmomentintime–itprovidesnoinvestmentadviceasitcannotpredictfuturerisksandvolatility.Butbycomparingindustrysegmentsandregionsitcanrendernewinsightsintopastrelativeperformance–forexample,thefactthattools,labanddiagnosticsplayersandcompaniesbasedinAsiahadthehighestshareofhigh-profitandhigh-revenue-growthwinnersbetween2019and2022.

Electromedicalandmedicalequipmentcompaniesfoundtheirwayintoallfourcategoriesbyperformingverydifferentlyfrom2019to2022.WinningcompaniesinthefieldincludeUnitedImaging,afastgrowingChina-basedcompanythatisusingattractivepricingtotapintonewsegmentsandcompetewithEuropeanimagingincumbentsSiemensHealthineersandPhilips.AnotherexampleofawinnerisUS-basedResMed,aleadingmanufacturerofequipmentforsleepapneaandchronicobstructivepulmonorydisease(COPD)treatments.Asharedcharacteristicofwinningplayersinthesegmentwasthattheyusedtheirplatformtechnologytooutgrowpeers.

Thesurgicalinstrumentsandappliancessegmenthadthesecondhighestshareofunderperformers.ThecompanieswerehitintheCOVID-19years2020and2021ashospitals

12RolandBerger|GlobalMedTech2023

GMostunderperformersmakesurgicalinstrumentsanddisposables

Financialperformancebyproductsegment,2019–2022

Averagerevenue[EURbn]

3.1

1.9

3.7

1.6

5.4

3.4

0.9

11.1

MedianTSR[%]

3.5%

-4.9%

13.8%

-0.7%

13.3%

4.3%

0.4%

1.2%

Company

count

22

19

15

12

9

6

5

21

32%

11%

73%

42%

11%

67%

40%

33%

Winners

5%26%

33%

Value

32%

14%

generators

58%

17%

33%

60%

14%

Profitless

growers

Underperformers

9%

32%

7%13%

7%

42%

22%

33%

38%

ElectromedicalSurgical

andequipmentinstruments

andappliances

Tools,labanddiagnostics

Medicalaids

anddevices

Services

Dental

Disposablesandsupplies

Diversified

Source:CapIQ,RolandBerger

usedfewersurgicalinstrumentsafterpostponingelectiveprocedures.OnenotableexceptionwasthewinnerEdwardsLifesciences,aUScompanythatusescutting-edgetechnologytomakeinstrumentsfortreatingstructuralheartdiseaseaswellasprovidingcriticalcareandsurgicalmonitoring.G

Thetools,labanddiagnosticsproductssegmentmaintainedaverypositiveperformancefueledbyCOVID-19.Thepositiveeffectsofsalesandmarginincreaseswerevisiblewellinto2022.ExamplesofcompaniesthatperformedverystronglyareSartorius,ThermoFisherandTecan.

Inthemedicalaidsanddevicessegment,hearingaidmanufacturersSonova,DemantandGNGroupwereamongthewinners.Allthreecompaniesprofitedfromagingpopulationsdrivingdemandforhelpwithhearingproblems–andthereweredirectcompetitorsthatdidnotbenefitinthesameway.AnotherwinnerwasDexcom,acompanyofferingnext-generationdiabetescarethroughacontinuousglucose-monitoringplatform.Platformscanbeverylucrative,buttheydemandstrategiccoherenceandstamina,giventhatdevelopmentcantakealmostadecade.

ServicescompaniessawonlyUS-basedEnsignGroup,aproviderofpost-acutehealthcareservices,makeitintothewinnersquartile.Thispeople-intensivesegmentfaceschallengesinfindingskilledtalent,particularlynurses,givenrelativelylowsalaries.In2022,anumberof

13RolandBerger|GlobalMedTech2023

.

·6.3%·

.

.

·6.9%·

.

.

·11.2%·

.

-3.2%

1.4%

-0.2%

9

32

54

38%

9%

13%

41%

33%

11%

56%

30%

9%

24%

37%

39%

39%

22%

X

companieshadtocontendwithinflation-drivensalaryincreasesthatputpressureonmargins.Disposablesandsuppliescompanieswereeithervaluegeneratorsorunderperformers.

Companiesinthisprice-sensitivesegmentremainunderpressuretoreassesstheirbusinessmodels.Digitalandservice-basedofferingswouldallowthemtodifferentiateproductofferings–andincreasetheefficiencyoftheiroperationsbyintroducingautomationwherepossible.

Diversifiedplayerswereeitherverysuccessfulwinnersorunsuccesfulunderperformers.OnewinningcompanywasDanaher,whichperformedextremelywelldespiteservingcustomersinverydifferentbusinessareas.Partofitssuccessisstringentandcoherentmanagement,centeredaroundpeople,cultureandprocesses.AnotherwinnerwasStryker,whichleadsbyinnovationinfieldsasdiverseasmedicalandsurgicalequipment,orthopedics,neurotechnologyandservices.

Thedentalsolutionssegmenthadalmostthesameshareofwinnersastools,labanddiagnostics.Givenfavorabledemographicsandsuccessfuldigitalizationofthebusiness,companiesparticipatinginthissegmentstandtogrowsignificantly.WinnersincludeStraumann,focusedoninnovativeimplants,andAlign,whichhasdevelopedaplatformsystemfororthodontictreatments.

Aregionalanalysis,meanwhile,showsanalarmingtrend.WhileAsianandparticularlyChineseMedTechshavethehighestshareofwinningcompanies,companiesheadquarteredinGermanyhavethehighestshareofunderperformers.WhilealargeshareofGermanMedTechsisstruggling,companieslikeCarlZeissandSartoriusfallsquarelyintothetopquartileofwinners.H

HAlmost80%ofAsiancompaniesarewinnersorvaluegenerators

Financialperformanceperregion,2019–2022

AveragerevenueCAGR

MedianTSR

Winners

Value

generators

Profitless

growers

Underperformers

37

17

17

38

.

·5.3%·

.

6.9%

23

N.America

Germany

Asia/Pacific

Europe

incl.Germany

Companycount

Source:CapIQ,RolandBerger

14RolandBerger|GlobalMedTech2023

2.1

1.4

2.2

1.3

Limitingdependencyon

fewclientsormarketsegments

Above-market-revenuegrowth

2.3

StrongfocusonR&Dandproductinnovations

onconsistentgrowth

2.4

Focus

+

+

3.1

4.3

3.2

+

3.3

4.1

3

Corporatewinners–

Efficientops,compellingESGvision

Ouranalysisoftheselectedfinancialdataandoperatingfigureshighlightsstrategicimperativescommontowinners.Therefollowssomegeneralfindingsfromthekeyindicatorsdescribedabove.Moredetaileddeepdivesaboutwinningoperationsandenvironmental,socialandgovernance(ESG)performancefollowinthenextchapters.Allindicatorsareanalyzedquantitativelytogiveanobjectiveunderstandingofthedifferencesbetweenwinningandunderperformingcompanies.I

IWinnerssucceedbecausetheyidentifyandpursuestrategicgoals

StrategicimperativesforMedTechcompanies–Summary

1

Business

leadership

Thoughtleadership

fornewproducts

ClearlyformulatedESGvisionandtangibleESGagenda

+

2

Strategic

coherence

Activeportfoliomanagementwithhigh

numberofM&Atransactionsandbolddeals

Businessmodelwithrecurring

revenuestreams

1.2

1.1

2.5

Soundcapitalstructure

4.4

Stableandexperiencedmanagementteam

Efficientmarketingandadmin

Above-averagemarket

capitalization

efficiency

HighCOGS

4.2

Above-averagecompanysize

Leanworkingcapital

Resolutecapitalallocation

3.4

3

Disciplinedinventoryplanning

4

Provenabilitytoexecute

Sizeandfinancial

position

Source:CapIQ,RolandBerger

Largestdifferencebetweenwinners&underperformers

winners&underperformers

Smallestdifferencebetween

+Deepdive

15RolandBerger|GlobalMedTech2023

JLeadershiptenureandoveralltimeatcompanyarekeysuccessfactors

Managementboardcharacteristicscharacteristics,2019–2022

Managementtenure[years]

+54.1%

5.6

3.6

WinnersUnderperformers

Management’stime

withthecompany[years]

+53.6%

12.9

8.4

WinnersUnderperformers

Source:CapIQ,RolandBerger

Inshort,winnersarecompaniesthatstrengthentheircompetitivenessbystrivingforcontinuousandabove-market-revenuegrowththroughinnovation,strategicallycoherentinvestmentsandbest-in-classcoststructures.Tocatchup,valuegeneratorsshouldconsiderinvestingmoreinexpandingtheirproductportfoliosandmarkets,profitlessgrowersneedtogenerallyenhanceperformanceandproductivitytostimulatemoreprofitablegrowth,whileunderperformersshouldgoasfarasconsideringstrategicoverhaulstoimprovebothrevenuegrowthandprofitability.

Animportantbuildingblockofstrategiccoherenceisastableandexperiencedmanagementteam.Longmanagementtenureleadstoadeepunderstandingofthecompany’sstrengthsandweaknesses.Boardmembershaveonaverageservedtheircompanytwoyearslongeratthetimeofbeingpromotedtoitsleadership–andonaverageservetwoyearslongeratthislevel.J

Sizeandfinancialpositionisalsoasharedcharactisticofwinningcompanies.OuranalysisofmarketcapitalizationandtheratioofdebttoEBITDAhighlightstheimportanceofaccesstocomparativelycheapcapitalonstockmarketsaswellassolidprofitabilityandbalance-sheetmanagement.K

Winnersalsocontinuetodisplayaprovenabili