Opportunities and Challenges for Medical Devices Companies expanding to Asia – Third Cicor Innovation Insights Symposium

Cooperation event Cicor – EDB, Singapore

The Cicor Group is a complete-solutions partner with production sites in Europe, Eastern Europe, Singapore, China, Vietnam and Indonesia. The Group works together with its customers to develop innovative products and solutions that meet the needs of the market, reflect the latest trends and convince through their application. EDB is the lead government agency for planning and executing strategies to enhance Singapore’s position as a global business centre. EDB designs and delivers solutions that create value for Investors and companies in Singapore.

Cicor's "Third Innovation Insights Symposium" took place at the Priora Busniess Center on 27 September 2016. The event was devoted to the topic "Opportunities and Challenges for Medical Devices companies expanding to Asia".

During this Symposium Cicor discussed economic opportunities and complex regulatory challenges in the ASEAN region, as well as reveal solutions together with international experts and leading medical technology companies.

Speakers

 

  • Alexander Hagemann, CEO Cicor Group
  • Philippe Koller, Vice President of Marketing & Sales AMS Division Cicor Group
  • Thomas Aebischer, CEO Acutronic
  • Ulrike Bauer, Senior Vice President of Marketing & Sales Delivery Systems at Ypsomed.
  • Terence Gan, CEO Singapore Economic Development Board (EDB)
  • Danielle Giroud, Founder of WMDO, Founder of MD-Clinicals
  • Kelly Lai, Singapore Economic Development Board (EDB)
  • Dr. Andreas Schmidt, CEO and founder of Ayoxxa
  • Josep Sitjes Heras, DKSH

About the event

"It was not so long ago that one believed innovations were imported from Europe and the USA to the domestic markets, and only years later possibly to Asia," Cicor CEO Alexander Hagemann opened the symposium. "Today, Asia expects products to be available to them right from the start." In order for Western companies to successfully take this step, they need a good plan, the right resources and a functioning network.

It is impossible to speak of "one" Asia, all of the speakers agreed unanimously at the third Cicor Innovation Insights Symposium. "Regulations vary from country to country and there are sometimes more sometimes fewer constraints to comply with," noted Hagemann. For example, in some cases there are strict rules concerning the production of corners and edges. It is important to be aware of such details, otherwise entry into a foreign market can be difficult. Josep Sitjes Heras from the Swiss service and trade company DKSH also said that, in his experience, the Asian continent cannot be viewed as a single unit. A company that is venturing towards Asia must define clear goals beforehand and find out for which markets it needs personal, financial and temporal resources. A reliable, local partner, be it a distributor or a consulting company, can identify problems at an early stage and help to solve them. However, one should avoid working with several Asian markets at the same time, as each one's requirements and constraints are fundamentally different. Anyone who is communicating with Asia from Europe must also take the time difference into account. Asians often expect a short response time. For example, if a question comes up from Asia at the beginning of the European working day, only half a day remains to clarify it before it once again becomes nighttime over there.

The Asian medical device markets are all very different

Some of the medical device markets in Asia are growing at a double-digit percentage rate, said Thomas Aebischer from Acutronic. In 2020, China will be the second-largest market, directly behind the USA. The dynamics are driven by economic growth, which causes pollution. This is why many Asians suffer from respiratory diseases. Add to that lifestyle diseases, such as obesity and diabetes, and there is an increased demand for medical device products. However, China has also recognized this development and is promoting local companies in order to generate jobs and reduce dependency on imports.

Those with an interest in Asia should be quick to look for potential local partners. DKSH is one such example and responds to requests from companies wishing to work with Asian markets. For many people when they think of Asia, China immediately comes to mind; with its size and high price level, it is considered a dream market. However, only 10% of interested parties request information on China, said Sitjes. The majority are looking towards Singapore, Vietnam, Laos, Cambodia, Thailand and Myanmar. China is too complex, too expensive, and requires too much time to deal with its regulations, he added, summarizing the disadvantages of the Chinese market.

Asia is large and it is worthwhile evaluating the markets in other countries as well. "Large areas of Asia are still underserved in terms of medical resources," Danielle Giroud highlighted the potential. "In addition, these less-developed markets are still barely regulated." Hagemann added: "Respiratory diseases, for example, are not only increasing in China, but also in India." However, for those who are solely focused on high margins, emerging markets are unattractive, given that the majority of the Indian population is poor. "Although sales can also be profitable, emerging markets may require low-budget products." For those who can bring an exclusive product onto the market though, Hagemann is convinced that it is still possible to achieve high prices. "However, there is no guarantee."

China: by far the largest and seemingly most attractive market

According to Credit Suisse, more than 60 million of the total 1.4 billion Chinese population are already considered to be middle class. Growing prosperity brings with it great opportunities for Western companies, said Hagemann. The medical devices industry is benefiting from the fact that increasingly more Western medication and treatments are being accepted alongside Chinese medicine. Unfortunately, development in China is difficult to predict, added Sitjes. Many things are changing very quickly. This dynamic requires flexibility and staff who can deal with such challenges. In Sitjes' experience, this unpredictability can very quickly overwhelm SMEs, especially young startups. Bauer gave an example of what Western companies sometimes experience with their initial step into the Chinese market: "Sometimes there are funny chicken and egg situations. To establish a company in China, you need a local address and office. However, the Chinese only rent office spaces to registered companies. It is as if you are chasing own tail. It took us two years to overcome these contradictions with our own branch office and then open a bank account."

A firm position in Switzerland and a courageous step into Asia
While Cicor is anchored in Switzerland, it also has a firm hold in Singapore. When I saw the equipment our people worked with in Singapore, I felt as though I could have been in the West, said Cicor's CEO, Hagemann. In order to produce high-precision tools, equipment originates from say Georg Fischer (GF). Ypsomed, which makes insulin syringes, among other things, generally manufacturers its products in Europe. "However, if we take the opportunity to carry out production directly in China, we would seek a real partner, just as we would in Europe, not just the cheapest or most established local option." Bauer described a specific course of action in this way. An ideal partner is an international company with a strong network in China. Such companies are run by people who are familiar with both Western culture and Western expectations. Sitjes demonstrated how this type of collaboration can work: The service company, which has been active in Asia for many years, assumes tasks for its clients such as marketing and sales, as well as product licensing. Everything you want a strong partner for. Their two-step model is very popular, he explained, where, in the first phase, the client's marketing and sales staff work on site at DKSH but remain in close contact with their own people in Europe. The local partner provides assistance with the formalities regarding opening an office in Asia, as well as with other practical questions. In the second phase of market entry, the marketing and sales staff are once again given their own professional freedom.

Regulatory hurdles and pricing as primary Tasks
In the past ten years, requirements, such as those for the China Food and Drug Administration (CFDA), have changed radically, becoming much more stringent, reported Bauer. In the case of Ypsomed, its pharmaceutical partners take over the certification processes; as a manufacturer Ypsomed merely supplies them with the necessary documents. As varied as the practical examples of this afternoon were, they all demonstrated one thing: Regulatory hurdles are the main obstacles to overcome on the path to Asia. In China, one must expect to wait two years for the approval of a medical device. And because the system can change during this time, for reasons which are often incomprehensible to outsiders, it is worth working with a strong local Partner. Danielle Giroud's professional activities complement one another as, on one hand, she formulates regulatory requirements and, on the other, she helps companies to comply with them. She described a case where a company failed to deal with regulatory risks: "An SME signed a contract with a Chinese distributor. They agreed to implement the market entry for December 2016. In the case of non-fulfillment, a monthly penalty of $100,000 would be imposed from January 2017 onwards. They recently came to us and asked us to help with the necessary clarifications before it was too late. Unfortunately, she had to disappoint the company: "We can't perform magic." She warned: "Such contracts should never be signed!" It would be enough to break a small company's neck. In the case of staff-intensive work, for example, when producing for an Asian market, it can be worthwhile setting up a local production site. However, you often need machinery or measuring equipment from Germany or Switzerland, says Bauer. The initial costs of such equipment cannot be reduced, hence one can carry out high-autonomy production in Europe just as economically. So, what does it take to make the move to Asia a successful one? Serious market studies are a basic prerequisite, says Bauer. However, one should not make the mistake of conducting countless evaluations and endless research. The conditions can change too quickly. Here is a tip, which was highlighted in several lectures: First, obtain solid information but then quickly and confidently decide on and implement your plans consistently, with or without a partner. Yet one should not expect an Asian partner to pave the way and solve all problems, Koller warned. It takes many conversations, a lot of understanding and, inevitably, some compromising. All the presentations and practical examples illustrated this. Good ideas from startups are a good prerequisite, and existing prototypes a plus. However, the actual market entry may become tough, and "dreams can be shattered at any time," said Koller.

Cicor Innovation Insights Symposium
Cicor again recruited experienced experts to speak at the third Innovation Insights Symposium and participate in its two stimulating panel discussions. For the whole afternoon, approximately 60 experts from the medical device industry explored the topic, "medical device companies expanding into Asia." This is only a summary of this engaging afternoon, which showed how promising, yet how challenging, a company's move into Asia can be.

Presentation downloads