Specialist
Former VP at Integer Holdings Corp
Agenda
- Recent trends and developments within the medical device CDMO (contract development and manufacturing organisation) market, including strengths and weaknesses of Integer (NYSE: ITGR), Cirtec and Velentium
- Assessment of infrastructure to shore up supply chains and mitigate inefficiencies
- Insourcing vs outsourcing trends between large medical technology manufacturers and OEMs delineated by customer size
- Potential margin expansion opportunities and H2 2023 growth outlook
Questions
1.
What are some of the most important trends and developments you’ve been following in the outsourced medical device manufacturing market over the past 9-12 months or so that may better inform our discussion?
2.
Could we start with a deep dive into the competitive landscape for the outsourced medical device manufacturing market, including the core players you’re most familiar with, such as Integer, Cirtec, Velentium and any others? How do relative portfolio breadths, reliability and scale differ? What are the core strengths and weaknesses of these companies?
3.
How should investors be thinking about the margin profile and some of the core product segments across interventional cardiology, neuromodulation, CRM [cardiac rhythm management], ventricular assist devices, for companies like Integer and Cirtec? Feel free to delineate by segment, product, vendor or however you’re most comfortable.
4.
How would you segment the core OEM customer demographics? Who are the key OEMs the aforementioned CDMOs [contract development and manufacturing organisations] are vying for new contracts with? How do they differ in product focus, customised needs and size or scale?
5.
What capabilities differentiate players in the eyes of customers? Is it perhaps early-stage design or development offerings, or otherwise? How are they weighing some of these considerations, relatively?
6.
I’m assuming there’s a lot more order volume for the larger players, as you noted, but the smaller players may require that further effort and early-stage manufacturing component. How do the CDMOs prioritise volume-vs-margin trade-offs when going after new business?
7.
Is there any particular strategy, rhyme or reason to choosing one of the smaller upstarts? How are the CDMOs thinking about making or hedging bets based on their likely commercial chance of success from an intellectual property or market-need standpoint?
8.
How have the switching costs across CDMOs trended over the past 9-12 months? In light of your comments on differentiated capabilities, how are the CDMOs looking to create more entrenched relationships with OEMs and enhance stickiness there?
9.
How would you compare the relative implantable battery manufacturing capabilities market-wide? How much of a leg-up do larger players such as Integer have in implantable battery manufacturing relative to some of the smaller CDMOs we’ve discussed?
10.
Could you comment on Cirtec’s purchases of QMD Precision Components and Cardea Catheter Innovations? What advantages does acquiring those product lines bring to the company’s existing portfolio? What are the product synergies or cross-sell opportunities?
11.
What’s your assessment of supply chain health industry-wide? What are we seeing in terms of cost pressures, bottlenecks and other inefficiencies that pose headwinds to manufacturing operation?
12.
In light of some of the supply chain dynamics, how much of a differentiator is it to be able to produce LSR [liquid silicone rubber] in-house?
13.
From the OEMs’ perspective, how do raw material shortages and other supply chain cost pressures impact insourcing vs outsourcing trends? Would the easing of supply chain pressures that we noted accelerate or mitigate OEM outsourcing, and to what extent?
14.
You mentioned having vertically integrated manufacturing was a big differentiator in terms of customer stickiness. In light of that, as well as our discussion on supply chain, which of the major players (Integer, Cirtec, Velentium) have the most diversified manufacturing footprints and advanced sourcing capabilities?
15.
What headwind does the macro slowdown in VC funding have on the activity of the smaller upstart OEMs? What’s the trickle-down impact on the CDMOs from reduced investment from some of their smaller clients?
16.
Could you discuss the opportunity in active implant devices and how players are looking to capitalise on these product adjacencies to expand margins? Which players are ahead of the curve on active implant product innovation?
17.
You noted that the impetus for M&A is to become a one-stop shop or more vertically integrated. How do you anticipate those consolidation trends will unfold over the next 12-18 months or so? What might we see in terms of further inorganic growth activity, and why?
18.
Where do you see the greatest unmet need in the interventional cardiology market, perhaps considering various types of catheters, guidewires, balloons, stents, etc?
19.
Who are you keeping an eye on in the market in terms of upstart CDMOs with disruptive potential? Are there any smaller names with differentiated capabilities or approach to product development or innovation?
20.
What do you think are the 2-3 most material risks to large CDMO players over the next year or so, and why?
21.
From a product capability standpoint, how should Integer, Cirtec, Resonetics, Velentium and others you’re familiar with think about their product focuses in order to reduce margin compression risk?
22.
Where do you think Integer has the most room to expand product-wise to augment margins?
23.
Is there anything we haven’t touched on that might be especially important to highlight when thinking about the outsourced medical device manufacturers?
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