Specialist
Former senior executive at WS Audiology AS
Agenda
- Update on realised synergies from Widex and Sivantos merger into WS Audiology – procurement power, R&D and manufacturing scale
- WS Audiology’s global footprint – exposure to growth markets and route to market
- Competitive dynamics – R&D, transition to online and reputation among audiologists
Questions
1.
What is your assessment of the demand recovery for hearing aids across key markets? It’s quite commonly believed that April was the bottom of the market. Do you agree with that?
2.
Sonova’s management noted their H1 performance included a strong rebound in China, but then GN Store’s release painted a much shallower recovery for hearing than even the investment consensus was anticipating. What is your growth outlook for key markets, and when do you expect a return to pre-coronavirus levels? If we are getting to about 60% in June, by which point could we return to 100%?
3.
What headwinds might WS Audiology face following the coronavirus pandemic? Is there anything that might hamper its return to demand recovery?
4.
In a previous Sivantos-Widex merger Interview [see WS Audiology – Sivantos & Widex Merger Update – 5 December 2019], our specialist alluded to potential negative synergies which could allow players such as Demant and Sonova to build their market position. Have you noted anything to suggest this is the case?
5.
In our pre-Interview discussions, you highlighted two key areas for operational improvement in the Sivantos-Widex merger – the manufacturing, and potential procurement power. How much overlap do these two businesses have on the R&D side, and how much can they realistically cut out?
6.
Are there prior examples of acquisitions in the hearing aid sector where companies have struggled to integrate IT systems? Has this been quite an issue historically?
7.
WS Audiology’s end-of-2019 release outlined a strong margin performance in 2019, but only about EUR 8m worth of synergies vs the EUR 21m originally expected by the group and some ratings agencies. What do you think might be slowing down the process to driving these synergies?
8.
What do you think is driving WS Audiology’s relatively high post-merger management turnover?
9.
WS Audiology released its Widex Moment with ZeroDelay technology in March. How might the timing of this product release impact its sales? Do you think there was any opportunity cost of launching in March vs waiting until the end of lockdown?
10.
How is the Widex Moment technologically positioned vs other hearing aid options in the market?
11.
Which of the newer releases from the Sivantos and the Widex portfolio are you most excited about, across the Moment, the Evoke, the Signia Nx, etc? Which of these is technically the best product, and which do you think is likely to have a strong future, drawing upon your background as an audiologist?
12.
Specialists in our previous Interviews have highlighted that product innovation is seemingly becoming a very, very difficult route to differentiation for the manufacturers. This is perhaps one of the reasons why manufacturers are getting much closer to the end consumer. Do you think we have reached a tech plateau for innovation, and if so, what does this actually mean for the market?
13.
Once we reach a tech plateau or a peak in a R&D, it’s likely that development will focus a little more on the workflow side. Do you foresee this impacting product cycles and upgrade cycles across the market?
14.
Sonova has been able to drive its market shares higher through volume in H1 2020, and also increase the ASP on its Phonak Marvel. What has allowed the company to do this, and why do you think the Phonak Marvel has been such a strong performer?
15.
Even if WS Audiology were able to produce and market a hearing aid within the next year or so that matches the Phonak Marvel, you mentioned there is quite strong customer loyalty. Does WS Audiology simply gain volume from people buying their first hearing aids, or is there actually an opportunity to take market share from Sonova?
16.
Why do you think WS Audiology lost the Costco private label contract?
17.
There is quite a lot of vertical integration from the manufacturers in the hearing aid market moving a lot closer to the end consumer. There is Demant’s acquisition of Audilab, but you mentioned Sonova has quite a high presence as well. How well-positioned do you think WS Audiology is in retail vs its competitors? Do you expect it to make sizeable movements in this direction through consolidation?
18.
How important do you think retail exposure is for a hearing aid manufacturer? Is there still a place in this market for a standalone manufacturer?
19.
Do you think we can expect a meaningful short-term movement in sales volumes to online platforms? What are the headwinds to actually achieving this?
20.
What percentage of the European market do you think is reimbursed vs self-paid or privately funded?
21.
How would you position Audibene’s online presence vs players such as Demant and Sonova?
22.
The FDA [Food and Drug Administration] has to submit its decision on OTC hearing aids by 18 August. How much of a threat could incoming players such as Apple and Bose pose to incumbent manufacturers?
23.
Thinking beyond Apple, how could larger technology companies entering the OTC market impact the distribution or route-to-market for some of the existing manufacturers? Does that become much tougher?
