IMDM&T 2007

Medical DeviceOutsourcing MarketGrowing

In 2004, the global medical deviceoutsourcing market forcardiovascular, endoscopic and

orthopaedic devices was valued at$4,022.2 million growing at a CAGR(Compound Annual Growth Rate) of14 per cent to 2009 when the marketis estimated to be valued at $7,734million according to the MillenniumResearch Group’s Global Markets ForMedical Device Outsourcing, 2006.

The Medical DeviceOutsourcing Market

The main categories of medicaldevice outsourcing are:

• design engineering• component manufacturing• final goods assembly

• supply chain management to includesterilisation, packaging and warehousing.

In 2004, the design engineeringsegment was valued at 8.6 per cent ofthe outsourcing market growing to

14.4 per cent in 2009. Of all foursegments, the design engineeringsegment is poised to exhibit the

The trend towards outsourcing medical device design is set to accelerate in the coming years

Maura Leahy, Creganna Medical Devices - ContractDesign Services Division, writes about the benefits ofoutsourced design engineering.

Irish Medical Device Manufacturing & Technology&

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“Savvy manufacturers have been quick to

capitalise on using outsourced design services as a

route to cut product development costs and beat

competitors to market”

IMDMT Yearbook 07 4/4/07 2:33 pm Page 11

strongest growth in revenue.

Outsourced DesignEngineering

Outsourced design engineeringservices enable medical devicemanufacturers to accelerate productdevelopment timelines or accessspecialist expertise in key productdesign fields e.g. delivery devicesystems. Traditionally, designengineering has been conducted in-house by medical devicemanufacturers.

When the outsourced designbusiness model first emerged,manufacturers had concerns about IPprotection but robust clientconfidentiality processes and systemswithin the sector has allayed any suchunease and manufacturer confidenceis high.

Savvy manufacturers have beenquick to capitalise on usingoutsourced design services as a routeto cut product development costs andbeat competitors to market. As thetrend to use outsourced designservices accelerates it will underpin asubstantial growth in this sector.

Who is Outsourcing Design?In a growing medical device

industry, new entrants to the marketare emerging at a rapid pace and arefuelled by burgeoning venture capitalinvestment into the sector. Thebusiness model of many new entrantsis to bring a product to market,achieve regulatory approval and thensell to a larger manufacturer. Such

new ventures seek to operate asvirtual companies without theoverhead of manufacturing or largeR&D functions. Outsourcing of designis an attractive choice for companiesoperating to this model.

It is not just start-up companies thatare driving growth in demand foroutsourced design as largermanufacturers endeavour to keeppace with new product introductions.Research from Frost & Sullivanindicates that up to 80 per cent of amedical device firm’s revenues comefrom products released to the marketwithin the past five years and up to 70per cent of revenue from productportfolios launched in the last threeyears.

Despite the larger resource base ofleading manufacturers, the rapid paceof innovation is refocusing them ontheir core competencies and veryoften their optimum strategy may beto outsource other non-coreelements of product R&D. Asmanufacturers have a number of

projects in the development pipelineat any one time and all these projectsare competing for the same internalresources, outsourcing designbecomes an attractive option forproduct development teams.

Benefits of OutsourcedDesign Engineering

The obvious benefits of outsourcingdesign engineering are acceleratedtime to market for new productintroductions, cost savings andincreased profitability. Less obviousbenefits arise from the focus of theoutsourced design team on modulesof the overall innovation.

An outsourced design team willoften undertake more intensive end-user research on the area of theirdesign leading to value-adding designoutputs. For example, a design partnerfocussed solely on the deliverymechanism for a medical device maydesign a superior system that enablesthe physician to achieve greater deviceplacement accuracy and an overallbetter outcome for the patient.

Outsourced design teams will alsofocus on the overall effectiveness of adesign from a manufacturingstandpoint. They are more likely torefine product design formanufacturability than an R&Dengineer who is focused solely onspecifications.

Future Increases Outsourced design engineering is

set to flourish in the coming years asan increased number of manufacturersfrom start-up ventures to largeestablished companies reap thebenefits associated with outsourceddesign engineering - better productdesign, cost savings and winning therace to market.

Maura Leahy, Contract Design Services Division with Creganna Medical Devices

IMDM&T 2007

Irish Medical Device Manufacturing & Technology&

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“The obvious benefits of outsourcing design

engineering are accelerated time to market for

new product introductions, cost savings and

increased profitability”

IMDMT Yearbook 07 4/4/07 2:33 pm Page 12