“The Midwest and the Medical Device Industry”

Michael S. RosenSr. Vice-President, New Business Development

Forest City Science + Technology Group

U.S. Healthcare Demographics2013

U.S.

Average Life Expectancy - years 78.62

% of Population 65 Years+ 13.9%

Healthcare Spend/capita $9,075

Healthcare Expenditure -% of GDP 17.9%

Number of Physicians 878,194

Number of Hospitals 5,724

Total of Patient Admissions 36.6 MM

Source: www.cia.gov

U.S. Health Spending Vs. Key Countries

U.S. Healthcare Procedures Vs. Key Countries

U.S. & EuropeanMedical Device Market – 2011

(Ernst & Young)

$331.7 Billion (U.S. + Europe: Public Companies)

+6% Growth

� Woundcare� Orthopedic� Infusion Systems� Opthalmology� Urology� Neurology� Respiratory� Renal� Dental� Homecare� Cardiovascular

� Stents� Cardiac Rhythm Management� Valves

� In Vitro Diagnostics� Imaging� Radiation (several modalities)

Key Medical Device Market Segments

U.S. & EuropeanMedical Device Market – 2012

(Ernst & Young)

• 411public companies� 254 U.S.� 157 Europe

• Employees: 725,900• Market Cap: $436.1 B

Leading Global Device Companies(Medical Product Outsourcing – 8/13)

Company Country 2012 Sales - B Key Areas

1. J & J U.S.

(Part Midwest)

$27.43 Surgical, orthopedic, diagnostics

2. GE Healthcare MIDWEST $18.29 Imaging, Diagnostics

3. Siemens Healthcare

Germany/

Part Midwest

$17.54 Imaging, Diagnostics

4. Medtronic MIDWEST $16.2 Cardiac, spine

5. Baxter International

MIDWEST $14.2 Hospital, infusion systems, dialysis, blood

6. Phillips Healthcare

Holland $13.19 Imaging, diagnostics

7. Covidien Bermuda $9.85 Surgical

8. Abbott Labs MIDWEST $9.79 Diagnostic, Spine, Cardiovascular, Optic

9. Cardinal Health MIDWEST $9.6 Medical supply, surgical

10. Stryker MIDWEST $8.66 Orthopedic, surgical, spine

Leading Global Device Companies

Company Country 2012 Sales-B Key Areas

11. Danaher U.S. $8.51 Dental, imaging, diagnostic

12. Becton Dickinson U.S. $7.8 Surgical, diagnostics, cell anaylsis

13. Boston Scientific

Part Midwest

$7.25 Cardiovascular

14. B. Braun Germany $6.67 Surgical, dialysis

15. Essilor France $6.59 Opthalmic/optic

16. St. Jude Medical Midwest $5.5 Cardiovascular

17. Novartis(Alcon) Swiss $5.48 Opthalmic

18. 3 M Healthcare Midwest $5.16 Surgical, lab

19. Zimmer Midwest $4.47 Ortho, surgical

20. Terumo Japan $4.27 Cardiac & vascular

Leading Global Device Companies

Company Country 2012 Sales-B Key Areas

21. Olympus Medical Japan $4.24 Surgical, endoscopy

22. Smith & Nephew UK $4.14 Woundcare

23. Hospira Midwest $4.1 Hospital, infusion systems

24. Toshiba Medical Japan $3.97 Cardiovascular, blood

25. Getinge Group Sweden $3.72 Intensive Care, surgical

26. CareFusion Part Midwest

$3.6 Hospital, infusion systems

27. Bayer Germany $3.5 Imaging, diagnostic

28. Fresenius Germany $3.31 Dialysis

29. C.R. Bard U.S. $2.96 Surgical

30. Dentsply U.S. $2.93 Dental

Getting to the U.S. Market

� Step 1:Regulatory Approval Process

� Step 2:Reimbursement (how to get paid)

U.S. Regulatory Process

� Class I Device� Non-life sustaining� Low risk� GMP and post-market surveillance

� Class II Device� Presents more risk than Class I� Subject to Performance Standards and Inspection

� Class III Device� Sustains/supports life� Failure life-threatening� Need to demonstrate safety and efficacy

U.S. Regulatory Process(FDA)

InvestigationalDevice

Exemption (IDE)

510kPre-MarketApproval(PMA)De Novo

510k

U.S. MARKET

Permission to initiate Clinical Trials

• Substantially Equivalent toSimilar Device on Market

• 90 Day Review TIme • Requires clinical trials

• < 2% of all submissions

• Extensive clinical trials• Labeling• 180 day review time

U.S. Pricing & Reimbursement

Reimbursement Price

Already ApprovedDevice

NOExisting Device

ExistingCPTCode

No CPTCode

Hospitals

Health Economic Study Needed!

Market Challenges

Positives� Obamacare

� 35 million “new” patients in the system over 5 years – increased volume for hospitals

� Aging population requiring greater healthcare expense

� Emergence of “blockbuster” devices:� $1+ billion annual sales

� Convergence of Drugs, Devices & Diagnostics� Glucose monitoring/insulin pumps

� Drug-eluding stents

� New Forms of Radiology/Imaging Growth � Proton Beam therapy for Cancer, Gamma-Knife,

etc.

� MRI/PET/CT/Ultrasound

Market Challenges

Negatives:� Industry Consolidation: M&A

� Increased Regulatory Scrutiny

� Longer Product Development Times

� Re-look at 510K/PMA by FDA

� FDA concerns on radiation reduction

� Reimbursement process

� New CPT code

� Excise Tax: 2.3%

� Short product life-cycle:

� Need for Continuous Product Innovation

Device Industry Consolidation (2009-2012)

� Novartis/Alcon = $41.2 B

� J&J/Synthes = $19.7 B

� ThermoFisherScientific/Life Tech. = $18.8 B

� Merck/Millipore = $7.2 B

� Apax/Kinetic Concepts = $6.3 B

� ThermoFisher Scientific/Phadia = $3.5 B

� Abbott/Advanced Med. Optics = $2.9 B

� Covidien/ev3 = $2.6 B

� TPG Capital/Immucor = $2.0 B

� Agilent/Varian = $1.5 B

� Cinven/Sebia = $1.4 B

� BeckmanCoulter/Olympus Diagnostics = $0.8 B

� Ethicon(J&J)/Acclarent = $0.8 B

� Medtronic/CoreValve = $0.7 B

>$90 B in M&A Activity