Revamped competitive strategies a must to sustain growth in the mature European wound closure markets

Aug 24 2004

Growing emphasis on reducing hospital expenditure and drastic reductions in healthcare budgets are affecting the prices of various wound closure products (such as sutures, mechanical closure devices, wound strips and skin adhesives) across Europe.

Group purchasing initiatives are on the rise and this means that the pressure to provide low-cost bulk shipment is proving to be the biggest threat to profitability for participants in this market.

"Wound closure device manufacturers are challenged by the high level of market maturity that is accompanied by price erosions and this is having a detrimental effect on their revenue," says Industry Manager Tanya Pullen from Frost & Sullivan.

Indicative of the high maturity prevailing in the European wound closure market, Frost & Sullivan estimates revenues to increase gradually from USD 495.0 million in 2003 to USD 532.0 million by 2010.

Participants' difficulties have been further compounded by the growing popularity of minimally invasive surgical techniques and the lack of product innovation in many segments, with the exception of absorbable sutures and skin adhesives segments.

To counter these challenges, wound closure device manufacturers have been adopting the time-tested strategy of mergers and acquisitions that are likely to offer a respite until they come up with suitable marketing strategies.

Such unprecedented level of consolidation, though benefiting participants in the long run, has caused considerable disruption in the functioning of companies and it will be a while before their operations are streamlined.

For maintaining revenue flow, participants have pinned their hopes on absorbable synthetic sutures and skin adhesives segments that are currently witnessing a brisk pace of R&D activities and technological advancements.

Synthetic absorbable sutures are expected to make strong gains at the expense of natural and non-absorbable varieties. The demand for new synthetic sutures is likely to increase with the majority of surgical procedures including general surgery, ear, nose and throat (ENT) care and ophthalmic applications witnessing a shift from the use of non-absorbable sutures to absorbable varieties.

These, along with newly developed skin adhesives, are also set to find extensive use in cosmetic and plastic reconstruction surgeries. Some typical applications include eyelid surgery, liposuction procedures, forehead lifts and various rhinoplasty procedures.

With the number of people seeking cosmetic and plastic surgeries expected to rise continuously, companies offering synthetic absorbable sutures and skin adhesives tailored for these applications are likely to reap high returns on their R&D investments.

"Profit margins are understandably higher for absorbable synthetic sutures than for other product categories," says Ms. Pullen. "Therefore, major companies are leveraging their strong customer bonds - a typical characteristic of this market - to push such highly profitable products, which will benefit not only them but also the overall market."

Even as a high pricing strategy is being followed in relatively strong segments such as synthetic absorbable sutures and skin adhesives segment, large discounts of up to 50 per cent are being offered, particularly for products in the declining nylon and silk sutures markets, to promote continued uptake.

Participants are also considering other strategic growth options including providing customers with a 'one-stop-shop' solution to wound closure where product bundling and discounting are likely to play a critical role in ensuring customer loyalty to suppliers.

Another strategy would be to invest in brand building and subsequently pricing the products in accordance with their brand equity.

"Intense focus on R&D of sophisticated wound closure devices and broadening the scope of applications - such as the use of absorbable sutures for thoracic surgeries - is a must," says Ms. Pullen.

"Comprehensive product offerings suitably backed by highly developed sales and marketing operations across Europe - for instance, selling through direct subsidiaries - will ensure customer-specific service and help participants to maintain overall profit margins," concludes Ms. Pullen.