Business Overview 2006 - Synthes

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Business Reports. Asia Pacific The Asia Pacific region consists of numerous heterogenous markets of which each demands particular attention and tailored solutions. Synthes’ efforts in addressing issues individually have already yielded positive results – particularly in Japan where we now are the strong number two in Trauma. Cervical Spine Screw 12
Synthes. Annual Report 2006 Business Report. Asia Pacific 2006 was a challenging but successful year for business in Asia Pacific. In this region management is confronted with a very heterogeneous group of countries and has to address a number of diverse issues related to the special characteristics of the individual markets. Throughout the region Synthes invested heavily in educational programs for surgeons, OR-personnel, and its own sales forces. Together with the AO, we offered more than 30% additional training days to surgeons compared to the previous year. Additionally, we installed training teams in dedicated facilities currently located in Japan, China and at the regional headquarters in Australia. Despite decreased prices in Japan and no price increases across the rest of the region, Synthes achieved a local currency growth rate of 14.1%. However, foreign currency loss of 2.7% negatively impacted the positive results. Japan – strong growth despite imposed price reductions Japan accounts for more than 50% of the region’s sales and contributes an even higher percentage to profits. In 2006, the market was affected by government intervention with the tightening of regulatory requirements for product introductions and the reduction of reimbursement for orthopedic products, particularly in the trauma business. Despite a price reduction of more than 4% for trauma products, we achieved a double-digit increase in revenues in this sector due to an excellent growth in volume. Synthes now holds a firm number two position in the Trauma segment with a market share of more than 20%. Synthes also achieved very strong results in Cranio-maxillofacial and even stronger ones in Spine, substantially outperforming the Japanese market in both segments. Nevertheless, the market shares in CMF and Spine remain far below the average Synthes enjoys in the rest of the world. A lot of work therefore remains to be done to achieve the growth potential in these market segments. The Japanese version of the Proximal Femur Nail (PFNA) is the first product especially designed to cater for the specific geometry of an Asian femur. The concept has been very well received by surgeons in the region and it will launch in the first quarter of 2007. products that generated sales in 2006. The Locking Compression Plate (LCP) system, which has become the established standard treatment for fractures of osteoporotic bone or complex fractures, and spinal products such as Pangea (a pedicle screw system), SynFix-LR and Vectra (a dynamic cervical plate) have been significantly contributing to growth since their launch during the course of the year. China, India and other Asian countries – long-term investments and educational efforts In terms of operative treatment of fractures and spinal diseases, China and India are still underdeveloped. But both are overpopulated countries with an enormous long-term growth reservoir. The major challenge in these areas is to establish a broad acceptance for our high quality products and for the AO philosophy of bone fracture management. Synthes has its own offices and sales forces in these two countries as well as in Indonesia, Korea and Taiwan. In all other Asian countries Synthes is represented by distributors. It will require strong educational efforts to establish our organization in those countries. We are confident that the manifold educational activities of the AO Foundation will help us achieve this goal. Investing in the development of these markets is a long-term endeavor. We are positive that our undertakings will not only strengthen our leading position as a foreign provider of outstanding orthopedic implants, but also support the emergence of an improved healthcare system for the benefit of patients, surgeons and the health authorities. Australia, New Zealand, Hong Kong, Malaysia and Singapore – successful launches These five countries are in many ways comparable to North America and Europe in factors such as the level of educational background, the regulatory environment, and the availability of reimbursement for healthcare services and medical devices. In all these countries Synthes has a direct presence, with our own subsidiaries and dedicated sales forces. Although the regulatory requirements are becoming more stringent, we were successful in introducing a number of new 13
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