1. MD&M West 2017 Why Big Companies Cannot Innovate
Stanton Rowe
Chief Scientific Officer

2. R&D Spend by Big 100 Med Device Companies

3. Pure-Play Med Device R&D Spend

4. Where the Cash is Spent

5. The Way the Medical Devices Industry Assesses Innovation and New Technology Has Changed
Stakeholder influence, 2012 vs. 2015
Decision factor importance, 2012 vs. 2015
Other
Other
C-suite
Efficacy
Purchasing managers
Reimbursement 45
Cost 60
Doctors 
Clinician preference
2012
2015
2012
2015
Relative stakeholder importance, n=250
C-suite, Purchasing Managers, and MDs are all predicting similar shifts in influence and factors that represent a dramatically different world for device companies
Source: McKinsey and Company
1)The old dynamic of the physician as judge of value has been replaced with the government, private insurers, and consumers increasingly determining what sells and at what price point.
2)Consumers refuse to pay for incremental enhancements that add bells and whistles that do not improve health or reduce cost.
3)The faster, better, smaller, cheaper innovations in medical devices are the devices that will maintain a sustainable advantage.
CHI-AAA

6. In 10 Years, Device CEOS Think the Key Characteristic of Winners in the Industry Will Be:
Source: AdvaMed CEO Summit breakout sessions / McKinsey and Company

7. Big Companies Should Be Best at Innovation
R&D infrastructure
Rich in tools and capabilities
Great talent in biomedical engineering and scientific/medical expertise
Know technology and the customer
Financial strength ü ü ü ü ü

8. Integrations Fail/Under-Deliver Due to Insufficient Value Capture
Good deal, well executed
Exceeded value capture expectations
Aligned cultures/management practices to deliver value creation expectations
Minimal (if any) key staff & key account losses
Accelerated decision-making
Successful
M&A
30%- 40%
30%- 40%
Good deal, poorly implemented
Insufficient value capture
Customer losses
Cultural differences undermining value creation/capture
Key staff losses
Insufficient integration management
45%- 50%
45%- 50%
Failed/ neutral
M&A
Bad deal
Erroneous synergy assumptions
Limited to no value capture
Weak strategic fit
Price too high
15%- 20%
15%- 20%
Source: McKinsey and Company

9. Big M&A deals add value, but are risky
It’s not whether M&A is good or bad – it’s whether companies are good or bad at M&A and integrations
Large acquirers by positive or negative change in excess Total Shareholder Return
Number of companies, n=251
Percent change in
excess TRS>0
Percent change in
excess TRS<0 36 48
2 years
post-deal
5 years
post-deal
1 Includes companies in Global 1000 from that did a deal worth over 30% of their market capitalization and had TRS for 5 years; excludes financials, energy and raw materials firms
SOURCE: CPAT, Dealogic

10. Risk-taking in larger companies
Choice of investment into incremental, innovative or disruptive technology
Timelines and funding
Predictability, expectations and persistence

11. How Much of R&D is Transformational?

12. Breakpoints for Transformational Innovation

13. Top Portfolio Management Challenges

14. Culture of Innovation Risk-taking and killing projects
Setting expectations for both management and project teams
Incubation
Early stage marketing
Learning and adapting
Speed to FIH

15. Edwards Research Center
Advanced Technology is Set Up Similar to a Start-up and Focused on Innovative Programs in Structural Heart Disease
Advanced Materials
Strategy & Marketing
Engineering
Manufacturing
Clinical & Regulatory
Edwards Research Center
Quality
Discovery
Sapien
Intuity
Centera
Project M
Fortis
Forma
Project A
Project R

16. Lessons in Innovation: J&J
Long ride as president of J&J
People had to have the faith and persevere to see it through

17. Success is going from failure to failure without losing enthusiasm
Lessons in Innovation
Success is going from failure to failure without losing enthusiasm
Failure is the tuition you pay for success
PVT animal studies
First live case
SAPIEN was an “overnight” 10-year success

18. Only those who dare to fail greatly can ever achieve greatly
Only those who dare to fail greatly can ever achieve greatly. – Robert F. Kennedy