EMDT_European Medical Device Technology

European Medical Device Technology, Spring 2015

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NEWSTRENDSANALYSIS 8 | Spring 2015 European Medical Device Technology emdt.co.uk Pricing pressures caused by shrinking healthcare budgets, ever-shorter product lifecy- cles, rising product complex- ity and a more demanding regulatory landscape are increasing the risks for medi- cal device companies. In turn, many manufacturers are pass- ing those risks on to suppliers and contract manufacturers, opting for providers with integrated offerings. More outsourcing compa- nies are thus adopting a one- stop shop model to provide a broader range of services and added value to OEMs. "The continually increasing sophis- tication of electronics within medical devices will encourage OEMs to utilise broad-service EMS providers as part of their business and manufacturing strategies," according to Amy To, phar- maceutical and medical devices analyst at the research company Visiongain. "To meet these demands, EMS providers are increasing their service offerings to include design, testing, assembly, distri- bution, customer service, logistics and postmarket surveillance." Although there are still small contract manufacturing organisations (CMOs) generating less than $5 million in rev- enue, To expects that the medtech out- sourcing industry will follow in OEMs' footsteps, continuing the recent wave of consolidation. "We have seen a number of leading CMOs carry out acquisitions over the last few years to bolster up their service offerings." The motivation for many such acquisitions is to add complementary capabilities to companies' existing port- folios. Jabil Circuit's 2013 acquisition of Nypro Inc. for $665 million, for exam- ple, was heavily influenced by the latter's experience in injection moulding. A post on Jabil's blog stated: "Jabil's experience in electronics and optics, combined with Nypro's experience in healthcare and consumables, create big opportunities." Also in 2013, global supply-chain solutions company Flextronics acquired Swiss plastics processing special- ist RIWISA just a year after it bought California-based EMS provider Stellar Microelectronics. And recently, Galway- based Creganna-Tactx Medical acquired Oregon-based Precision Wire Compo- nents LLC to deepen its expertise in minimally invasive devices. More recently in August 2014, spe- cialty chemical company Lubriziol pur- chased contact manufacturer Vesta. "As medical device companies look for total solution providers, the exper- tise and capabilities of Vesta give us the ability to provide a more valuable offering to these customers on a global basis," explained Deb Langer, general manager Lubrizol LifeSciences. Another major driver of mergers is the increasing need to combine a global footprint with local presence. In 2010, the financial group Kohlberg acquired Phillips Plastics, and, in 2011, merged it with Medisize Corp. to create Phillips-Medisize. "Customers are look- ing for contract manufacturers who have a global footprint—especially in interna- tional manufacturing locations—so they can call on local companies who have European quality standards," according to Christof Plätzer, sales and marketing director EU at the company. "Prior to our merger with Phillips, Medisize was a European manufacturer with high levels of expertise mainly in Europe. When we became Phillips-Medisize, this was married with Phillips's U.S. focus and we now offer a global contract manufactur- ing option." As these developments are likely to continue and outsourcing providers seek to round out their range of offerings, we probably will see more M&A activity in this area in 2015. Thomas Klein Will the Medtech Outsourcing Market See a Wave of Consolidation?

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