Refurbished Medical Imaging Equipment – Growing Business During Lean Economy

Gideon Praveen Kumar, Senior Research Analyst

Healthcare

June 6, 2010

2

Market OverviewA

Segmentation and Scope1.

2.

Focus Points

Market Drivers

1.

3.

2.

Major Industry Challenges

B Analysis of the Industry

C

5.

2.

3.

Strategic Recommendations

2.

2. Market Overview

List of Major Market Participants

4.

Key Takeaways6.

Market Restraints

3

Modality Scope

X-Ray Mammography

X-Ray Radiography

X-Ray Angiography

MRI

CT

PET

Ultrasound

Geographic Scope

WESTERNGermanyFrance ItalySpain The United Kingdom BeneluxScandinavia

EASTERNCzech RepublicPolandHungaryRomaniaBulgaria

EUROPE

Segmentation and Scope

OTHERSSlovakiaGreeceRussiaUkraineKazakhstanTurkey

4

Introduction and Overview

The market for the European refurbished medical imaging equipment is at high growth stage.

After-sales service, coupled with providing warranty, plays a crucial role in attracting customers. Thus, the OEM refurbishers who provide such services, have an edge over

the third-party vendors in this market.

Devices that are commonly refurbished have generally been

designed to have extended longevity, many operating for thousands of

cycles.

Examples include medical imaging equipment such as X-ray

equipment, CT, PET, MRI and

ultrasound scanners.

Refurbishment is done by OEMs, such as Philips Healthcare, Siemens Healthcare, GE

Healthcare and Toshiba Medical Systems Europe and some stand-alone third-party refurbishers and

used systems sellers.

There are two types of refurbishing - cosmetic and

electromechanical.

There are many equipment that are sold in "as-is" form with or without cosmetic refurbishing,

without providing warranty.

The refurbished medical imaging equipment marketin Europe is growing vigorously, and if tapped

properly, it is poised to become a strong market inmost of the countries, with a CAGR of 7.1 percent

from 2009 to 2016.

The refurbished medical imaging equipment marketin Europe is growing vigorously, and if tapped

properly, it is poised to become a strong market inmost of the countries, with a CAGR of 7.1 percent

from 2009 to 2016.

Very few third-party vendors perform complete

electromechanical refurbishing.

5

Industry Industry

Challenges Challenges

Complex business interests of the OEM refurbishers *

Industry Challenges

Lack of awareness on the advantages of refurbished systems *

Need for consistent maintenance of the quality of products*

Regulatory challenges in different countries*

Difficulty faced by third-party refurbishers in finding suitable

dealer/distribution network*

Possible threat from low cost Asian manufacturers *

Private sector and small-sized hospitals being the major buyer*

Source: Frost & Sullivan

6

Increasing number of procedures

Market Drivers

Increasing number of old

systems

Government -funded cancer

programs

Financial recession

providing a conduciveplatform

Increase in the number of

private healthcare institutions

Source: Frost & SullivanNote: Size of the bubble represents the driver’s level of impact during the forecast period

7

Market Restraints

Lack of availability of

spare parts of the outdated

equipment

Governmenttenders acting as

a barrier to the purchase of

used systems

Source: Frost & Sullivan

Note: Size of the bubble represents the restraint’s level of impact during the forecast period

Lack of proper reimbursement

for used systems

8

Demand Analysis

Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

MRI, mammography and PET are the modalities that are hugely sought after by small- and medium-sized hospitals and private clinics in Europe.

Growth of the X-ray angiography and mammography modalities is due to increasing incidence of cardiovascular ailments and breast cancer.

Ultrasound modality’s short life cycle making replacement optional, coupled with competition from the lost cost Chinese manufacturers, keeps the growth of this segment at bay.

Germany has traditionally been a strong market and accounts for nearly half of the total refurbished market in Europe.

Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

8%

12%

6%

11%

12%

26%

25%

Mammography

MRI

CT

US

PET

Angiography

Radiography

42%

8%18%

12%

3%

5%

4%3% 1%1%1% 2%

Germany

France

Italy

Spain

UK

Benelux

Scandinavia

Poland

Hungary

Czech Rep

Bulgaria

Romania

50%

30%

5%

15%

Small & medium sized hospitals

Private practitioners

Universities

Large hospitals

Customers of Refurbished Medical Imaging Modalities

Percentage Composition of Demand in Europe European Share for Refurbished Medical Imaging Modalities

9

Revenue Forecasts

• The total European refurbished medical imaging equipment market generated a revenue of $358.5 million in

2009.

• This market grew at a healthy rate of 7.5 percent in 2009 and is expected to grow at a compound annual growth

rate of 7.1 percent from 2009 to 2016.

• This healthy growth is attributed to increasing demand for refurbished systems in countries where private

practice is profound.

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

2009 2010 2011 2012 2013 2014 2015 2016

Revenues ($ Million)

6.8

7.0

7.2

7.4

7.6

7.8

8.0

8.2

8.4

8.6

8.8

Growth Rate (%)

$ Million %

Note: All figures are rounded. Source: Frost & Sullivan

Refurbished

medical imaging

equipment market

is a high growth

market.

10

Geographic Analysis

Country Growth Rate [%] Future Market Potential

Germany 8.5 Increasing

France 7.9 Increasing

Spain 7.7 Increasing

Italy 7.6 Increasing

The United Kingdom 4.0 Decreasing

Benelux 8.1 Increasing

Scandinavia 8.2 Increasing

Poland 8.5 Increasing

The Czech Republic 5.1 Decreasing

Bulgaria 7.5 Increasing

Romania 7.6 Increasing

Hungary 8.4 Increasing

Turkey Increasing

Greece Increasing

Khazakhstan Increasing

Russia Increasing

Slovakia Increasing

Ukraine Increasing

11

Key Takeaways

• The refurbished market in Europe is a growth market, and if tapped properly, it is poised to become a

strong market in most of the countries with a CAGR of 7.1 from 2009 to 2016.

• Refurbishment is done by OEMs such as, Philips, Siemens and GE and some stand-alone third-party

refurbishers and used systems sellers.

• After-sales service, coupled with warranty, plays a crucial role in attracting customers. This way, the

OEM refurbishers have an edge over the 3rd party vendors.

• Very few third-party vendors perform complete electromechanical refurbishing. Incidentally, these

vendors have collaborative alliances with the OEM refurbishers.

• As-is sales is done with or without cosmetic refurbishing without providing warranty.

• The Average Selling Price of OEM-refurbished equipment is 30 to 40 percent less than that of a

respective new equipment. The ASP of a third-party refurbished equipment varies from 2.5 to 8 times

lesser than that of OEM’s price.

• The ASP is expected to depreciate at the rate of 8 percent per annum to maintain competitive pricing

and check the entry of low-cost Asian manufacturers.

• There is always more demand for cosmetic refurbishment over electromechanical refurbishment

because of the cost involved. This trend is stable across all modalities and stands at 70:30. However,

there is likely to be a shift towards electromechanical refurbishment at affordable cost.

12

Strategic Recommendations

Market Market

GrowthGrowth

BB

EE

CC

DD

AATarget countries

having more private practice

Carry out complete electromechanical refurbishing

End-user education

Collaborative alliances between third-party

refurbishers

Establish recognised refurbishing divisions

Source: Frost & Sullivan

13

Next Steps

� Request a strategic approach document for a Growth Partnership Service or Growth Consulting Service to support you and your team to accelerate the growth of your company.

(myfrost@frost.com) +44 (0)20 7343 8383

� Join us at our annual Growth, Innovation and Leadership 2011: A Frost & Sullivan Global Congress on Corporate Growth London, United Kingdom (www.gil-global.com)

� Register for the next Chairman’s Series on Growth: Accelerating Growth Through Vertical Market Expansion: A How-To Primer16 June 2010 10:00 AM BST (www.frost.com/growthEU)

� Register for Frost & Sullivan’s Growth Opportunity Newsletter and keepabreast of innovative growth opportunities (www.frost.com/news)

14

Your Feedback is Important to Us

Growth Forecasts?

Competitive Structure?

Emerging Trends?

Strategic Recommendations?

Other?

Please inform us by taking our survey.

What would you like to see from Frost & Sullivan?

15

Find us @Frost_Sullivan on Twitter

Frost & Sullivan on Twitter and Facebook

Become a fan of Frost & Sullivan on Facebook

16

For Additional Information

Katja Feick

Corporate Communications

Healthcare

0049 (0) 69 7703343

katja.feick@frost.com

Noel Anderson

European Vice President

New Business Development

+44 (0)207 343 8389

noel.anderson@frost.com

Siddharth Saha

Director of Research

Healthcare

+ 44 (0) 207 343 8374

siddharth.saha@frost.com