Medical Device Daily Contributing Writer

STUTTGART — The German medical device industry was in its glory on the second day of the MEDTEC 2007 exposition, held here last week.

Outside the show, Bundesverband Medizintechnologie (BVMed;Berlin), the German medical technology association, reported 2006 revenues among 200 member manufacturers grew by 4.3%, double the growth rate recorded in 2005, according to Director General Joachim Schmitt.

Germany stretched its lead among European nations for device manufacturing, with the market estimated at 1 20 billion ($26 billion), ranking it as the third-largest worldwide, according to the association. The U.S. is the largest market at an estimated 1 79 billion ($103 billion), with Japan in second place.

In a boast of national pride, BVMed added that the German market “is about twice as large as the French and three times as large as the Italian and the British market.”

Meanwhile, inside the Stuttgart Messe the exposition by device manufacturers set a new record, reaching 100,000 sq. ft. of exhibit space, with more than 400 companies presenting, easily half of whom are based in Germany. Attendance was reported up 20% on the second day, with the show’s organizer, Canon Communications (Los Angeles), expecting the database to settle at 7,500 participants.

The expo footprint grew 30,000 square feet over 2005 and space contracted for the 2008 show is at 120,000 square feet in the new convention space now being completed near the airport. Exhibitors stood in line at the organizer’s booth on the third day to renew their contracts and mark off booth spaces.

“Medical is becoming mainstream,” said Mark Temple-Smith of Canon. “Where it was very much a niche market for these companies in the past, we are seeing more of a transfer of manufacturing toward medical because, flat out, medical is growing.”

Half of Germany’s medical device manufacturers are based in Baden-W rttemberg, the region surrounding Stuttgart, its capital city.

And while there is a solid business base for precision machining, plastics and specialized manufacturing from DaimlerChrysler and Porche, both headquartered here, the manufacturing base for medical devices is significant, with 62% producing intensive and nursing care devices, 15% dressing materials, 7% surgical equipment and 16% incontinence and ostomy care.

“We have seen a big increase in plastics,” Temple-Smith said. “This is new to the show.” He suggested that with large-scale plastics programs moving offshore, there is a shift to specialty medical, including medical plastics with profitable runs for single-use products and specialized packaging.

A case in point is Kobusch-Sengewald (Warburg, Germany), whose primary business is foodservice packaging. The company expanded its booth for this year’s show to present a line of PVC-free bags, pouches and sleeves.

“Traditionally this has been a heavy metal show,” said Robert Farkas, chairman of the German Medical Technology Alliance. “But the plastics people are coming now with polymers, silicons, extruding and treating and all the technologies that surround it. It is now extremely competitive for these pieces.”

Urs Schneider, practice leader for the medical technology development group for the Fraunhofer Instuitute (Stuttgart, Germany), said, “The context is harshly competitive,” “These companies either aggressively reduce their costs or else they need to innovate to remain competitive. We recognize that we are in a comfortable space in Germany.” He added: “What is new in recent years is that even small producers employing five people here in southern Germany are having parts produced in South Korea.”

Outsourcing is no longer a dirty word in Europe, according to Daniel Kunst, executive VP for sales and marketing at Avail Medical Products (Fort Worth, Texas), a specialist in outsource manufacturing of sterile, single-use medical devices. “I walk the floor and count 50 exhibits that mention outsourcing. It is the buzzword at this conference, and everyone is interested, even if they do not always know what it means.”

“Fifty outsourcers sounds about right,” said Temple-Smith, who is in charge of exhibitions for Canon. “I would say outsourcing participation has grown proportionately with the show.”

Off the expo floor in the conference sessions, Thomas Michaels of Tri-Meridian (Wilmington, North Carolina) presented during a day-long session dedicated to outsourcing and said that he found that “companies are struggling with the idea. Outsourcing remains a threat here in societies where maintaining employment has been the core value.”

Hr said, “more companies in Europe would list manufacturing as a core competency than their counterparts in the U.S. It is difficult for them to believe that someone else can produce it cheaper than they can, do it on time and do it continually.”

Innovation as a major growth strategy in Germany. The week before the show the European Innovation Scoreboard 2006 from Eurostat, the statistical office of the European communities, placed Germany far in the lead among its indicators for innovation performance. Two-thirds of German companies met standards for innovative activities, followed by Austria, Denmark and Ireland, where a little more than half of companies met the criteria.

For device manufacturing in a precision machining culture, innovation translates into new applications of techniques, according to Fraunhofer Institute’s Schneider. “We see a movement from mechanisms to integrating functions, where a part is formed, for example, with the electronics inside drops out of production assembled as a single piece,” he said. “There are also modifications and manipulations of surfaces, merging metals with biocompatible materials, creating micro structures, such as cell scaffolds or with chemical surface treatments.”

Schneider, a physician, extracted from the Fraunhofer display case a surgical probe to illustrate German innovation.

“This is a bipolar needle used to stimulate nerves built for a Spanish customer,” he said. “It is a needle like many others you see displayed, though this is a much finer navigational tool for a surgeon that allows him to identify nerves that will then be blocked with an anesthesia.

“There is no need to run a current through the patient; it remains localized by the needle that has insulating coatings and a grounding circuit,” he said. “It also includes cold forming metal processes that allow the thicker segment to be flexible while the thin taper at the end is the most rigid, exactly the opposite of what you would expect.”

Participation by U.S.-based companies in MEDTEC Stuttgart has fallen dramatically, even as participation increases among European companies.

France, Ireland and Switzerland each hosted a pavilion at this year’s show, grouping small companies with a trade delegation. Exhibitors from Italy, the Benelux countries and the Nordic countries were mixed throughout.

The show will be called MEDTEC-Europe starting next year. And Temple-Smith suggested the reason participation by U.S.-based companies fell from 40% in 2002 — when MEDTEC was considered to be a regional show — to only 15% this year — when it achieved the critical mass to be considered a European-wide show — is that American companies today have set up European-based operations or acquired new subsidiaries in Europe.

He added that during the same period of 2002 to 2007, 13 of the top 20 medical device OEMs built manufacturing operations in Galway, Ireland.