CONMED Corporation A World of Solutions MEDSC Meeting November 8, 2012 A Commercial Perspective & the Importance of Supply Chain Chip Jones, VP Corporate Sales
Our History Corporate Overview Headquartered in Utica, Central New York Founded in 1973 to sell disposable medical devices Growth fueled via internal product development & acquisitions 25 years as a public company on NASDAQ
Corporate Overview Corporate Overview ConMed develops, manufactures and markets thousands of products used in: Operating Rooms Surgery Centers Physicians Offices Hospitals Products sold in 100+ countries 50% of Sales from outside the U.S. 40% Europe, 25% Americas, 35% Middle East & Asia 3,400 World-wide employees
Corporate Overview Corporate Overview Focus Surgical products: 90% used in surgical applications Single-use, disposables: 75% - 80% of revenue (annuity) Minimally Invasive Surgery (MIS): 50% of products sales derived from minimally invasive surgical products
Primary Markets of Activity Corporate Overview Endosurgery 10% Endoscopic Technologies 7% Arthroscopy 40% Patient Care 9% Arthroscopy 40% Powered Instruments 20% Electrosurgery 14% Patient Care 9% Endosurgery 10% Electrosurgery 14% Endoscopic Technologies 7% Powered Instruments 20% 2011 Sales: $725.1 MM
Growth Strategy Corporate Overview Growth Strategy Organic Sales Growth Mfg. & Operational Efficiencies New Product Development ROW Growth Leverage Structure Cost Improvement Leverage Structure Leverage Structure Result: Leverage the structure and increase operating margin
Demographics: Driving Growth Trends, Growth Drivers, Long-Term View Demographics Increase in Surgical Procedures Increase in Ave. Life Expectancy Aging Population Technological Advancements Longer, Active Lives More Injuries at Earlier Ages 90% of ConMed Sales are Surgical Products
Health Cost Pressures: Driving Growth Trends, Growth Drivers, Long-Term View Economics of Healthcare GPO s, IDN s Leveraging Purchasing Power Comprehensive Purchasing Agreements Fewer Suppliers Broader Array of Products CONMED Offers a Diverse, Yet Integrated Product Portfolio
Increased Demand for Single-Use Disposables Trends, Growth Drivers, Long-Term View Demand for Single-Use Disposables Reduces Costs Eliminate Risk of Cross Contamination 75% - 80% of CONMED s Sales Are Derived From Single-Use Disposables
Outlook For 2013 Financial Review We expect improved profitability over 2012 due to: New products gain traction MTF distribution financial benefit We realize economic benefit of cost efficiencies Manufacturing consolidation Santa Barbara plant consolidation Lean manufacturing initiatives Product line moves to Mexican plant Begin consolidation of Finnish plant Leverage the fixed cost structure
2013 Potential Head Winds Currency Exchange Rates Medical Excise Tax China ~ Barriers To Entry Global Trade Item Numbers (GTIN) Patient Protection and Affordable Care Act (PPACA)
Future Healthcare Model - Better Care at Lower Cost - "Executive leadership needs to change its view of supply chain from an operational department to a strategic arm critical to the financial and clinical success of the organization." Mathew Pehrson President Supply Chain Management Presbyterian Healthcare Services Albuquerque, New Mexico
Healthcare Supply Chain Success Stories Intermountain Healthcare University of Pittsburgh Medical Center Cooperative Services of Florida
IHC Supply Chain A Success Story IHC developed improved systems and also developed data and performance metrics Identify Key Process Measure Current Outcomes Identify Best Practices Define Pathway to Improve Implement New Processes Re-measure Outcomes
IHC Supply Chain A Success Story IHC developed improved systems and also developed data and performance metrics 25 New Staff members Dedicated Buyers Total of 600 Supply Chain Employees across 18 Hospital Chain Expanding Self Contracting Self Distribution Joint Contracting (Cherry Picking) Exercise more control over Supply Chains beyond MedSurg (ie - clinical, IT, Nutrition) Commitment to Industry Data Standards, GS1 $130M in savings over 4-Years
Current Healthcare Supply Chain is Inherently Complex and Costly This drives the SCO Vision National GPO Contracting Tracing Fees (3-4%) Channel Fees (4-6%) Manufacturer Distributor Additional Provider Payment Term Discount (2%) Distribution (4-12%) Markup (4-8%) Volume Rebates (1-2%)
Another view at Healthcare s Supply Chain Raw Material Supplier Med/Surg Mfg. Med/Surg Dist. Member Hospital Raw Material Supplier Pharma Mfg. Pharma Dist. Member Clinics Raw Material Supplier Lab Mfg. Lab Dist. Other Hospitals Raw Material Supplier Film Mfg. Radiology Dist. Other Clinics Raw Material Supplier Dietary Mfg. Dietary Dist. Retail Pharmacy Raw Material Supplier Linen Mfg. Linen Service Home Health Raw Material Supplier EVS Mfg EVS Dist Retail Raw Material Supplier MRO Mfg MRO Dist Mass Merc. Direct Suppliers Other???
HEALTHCARE Suppliers in Healthcare Have Double SG&A Costs Retail vs. Healthcare Suppliers RETAIL 27.6% Opportunity (13.5%) 14.1% Source: Average of group as per public company financials.
Supply Chain Professionals Keys to Supply Chain best practices needed in the healthcare industry Greater use of Strategic Alliances between Hospitals & Suppliers Simplify the supply chain control the distribution
Supply Chain Professionals Opportunities & Responsibilities More talent More skills More data & technology More rigorous strategies More recognition by C-suit
Q&A Thank You!