„By researching and understanding people’s needs and pushing the boundaries of advanced technology, we continue to develop amongst the most effective solutions and services available in the fields of prosthetics and bracing & supports“
Aging and more active population
The global population of 65 and older is increasing and will underpin market growth as an aging society brings an increase in the frequency of vascular diseases and diabetes, which are the two main causes of amputation. These individuals will also have an increased amount of fractures, joint instability and joint afflictions such as osteoarthritis, which increases the demand for different forms of bracing and supports products.
Stroke, diabetes and OA on the rise
With the growing number of people afflicted by diabetes and vascular diseases, the demand for prosthetics is expected to increase. Osteoarthritis is also expected to increase in correlation with, for example obesity, resulting in demand for bracing & supports products.
Healthcare providers are constrained by budgets and, accordingly, they demand cost effective solutions without compromising quality. This has led to substantial investment in demonstrating and providing functional, clinical, and economical outcomes to potential payers. The demand for lower healthcare expenses creates opportunities for lower-cost bracing as alternatives to high-cost surgery.
Changing healthcare requirements
Two vital requirements for any market player in the orthopaedics industry are the ability to adapt to changing healthcare requirements and tailoring product offerings to meet the prevailing regulatory system.
New technologies and technological combinations, as well as new materials, continuously yield improved products. Such technological advances lead to total market growth as demand is created for more technically advanced and expensive solutions, such as mind-controlled prosthetics and powered bionic bracing.
Consolidation in patient care
We are seeing an increase in the mergers of healthcare solutions and product providers with increasing cost pressures and the need for scale. This trend creates opportunities for forward integration in the healthcare industry.
From volume to value/premium
The demand for higher quality products creates opportunities for technology trade-up in our business.
Improved treatment options
Surgery, wound care and early accessible pain medication provide alternatives to bracing and prevent amputations but also encourages higher value customer service which is one of Össur’s key competencies.
Össur manufactures a wide range of prosthetics and bracing solutions with high standards of quality and excellence. These high-end products are developed with an indication based innovation approach to solve the needs of our end-users. The products are delivered to the end-users through our customers (healthcare providers) who specialize in assisting individuals who suffer from movement impairment. The end-users are referred to these healthcare providers by prescribers and the products are in more than 95% of the cases reimbursed by public or private insurance (payers). With the profits made, Össur reinvests significantly to further advance products and technologies for the benefit of all stakeholders.
The end-users are at the core of everything we do as they drive us to continuously innovate through our entire business model. Our end-users include lower and upper extremity amputees who have lost a limb due to, for example, vascular diseases including diabetes, trauma, cancer, and congenital diseases. We also help individuals who require support as they may have, for example, developed osteoarthritis in knee or hip ligaments, incurred temporary immobilization, or require enhanced healing after surgery.
By collaborating closely with the end-users, we gain a better understanding of their needs and challenges. In turn, we help them to improve their mobility by providing new technologically advanced products to achieve their goals. Our involvement with the end-user is not limited to research and development because we also aim to provide them with quality services, directly through clinics operated by Össur or indirectly through our customer service programs.
Össur’s research & development approach is indication based, meaning that only products that have medical indication and are clinically validated are brought to market. The aim is to deliver cost effective medical solutions that provide value for patients and the healthcare system. When a product is designed, Össur accumulates medical and biomechanical data during the development process to verify product safety and efficacy before launch. Also, to obtain independent clinical evidence for product outcomes as well as health economic data, Össur initiates and promotes clinical studies in cooperation with leading scientists, institutions, and healthcare professionals in the field.
Össur furthermore supports open collaboration within the industry and academia. An example of such an initiative is the recent joint investment by Össur and Comau in IUVO, a spin-off company of The BioRobotics Institute (Scuola Superiore Sant’Anna) in the field of wearable technologies. The objective of IUVO is to create wearable, intelligent and active tools for a better quality of life. The first concrete examples are bionic bracing (robotic exoskeletons) capable of aiding and improving the quality of life for workers in industrial and service fields, and for patients in need of improved mobility.
Össur is constantly striving for increased efficiency which includes maintaining a strong global manufacturing function. Manufacturing of advanced prosthetic solutions, including bionics, takes place in Iceland. Manufacturing of mainstream prosthetics solutions, components and premium bracing solutions mostly takes place in Mexico. We outsource the manufacturing of soft goods within our bracing segment to China. At Össur we continuously strive for profitability improvements, which includes further growth of the Mexico manufacturing facility and optimization of the manufacturing footprint.
As a healthcare company, Össur complies with various quality requirements and the company has had a certified quality system in place since 1993. We place great emphasis on quality, and being a manufacturer of medical device products, it is highly important that quality is an intrinsic part of our processes. Össur is currently certified with ISO9001:2008, ISO13485:2003/2012 and ISO14001:2015, and is currently in the process of implementing updated versions of the 13485 and 9001 standards.
Össur operates within a highly specialized industry. Össur’s primary customers are specialized healthcare providers who provide and fit individuals with Össur products. Various public and private insurance schemes generally reimburse the products.
Össur sells its products through its own direct sales network as well as distributors. Össur has developed a strategic partnership service with providers to assist them with activities such as patient documentation and reimbursement. As a result, the Company has better access to the key stakeholders: payers, providers, prescribers and finally the patient (end-user).
Prescribers include healthcare professionals who prescribe products based on the clinical indication of the users. These include orthopaedic surgeons, non-surgical physicians, and emergency physicians as well as other professionals providing medical diagnosis.
Providers are healthcare professionals who provide users with prosthetic and bracing products, and related services. These include certified prosthetists and orthotists (CPOs) working at orthopaedic and prosthetic (O&P) clinics, durable medical equipment (DME) clinics, orthopaedic clinics, and hospitals. Many providers not only recommend specific products but also fit and tailor-make certain products. For non-reimbursed products a provider can be a pharmacy or sports store.
Payers include government reimbursement plans or insurance companies with over 95% of Össur’s sales reimbursed by a third party. It should be noted that reimbursement systems vary substantially between countries. In other cases, the end-user would pay for the products out of pocket (e.g. at a pharmacy).
Össur is a pioneer of advanced technology and our brand recognition is based on innovative and scientifically-proven solutions that deliver effective clinical outcomes.
Össur’s proprietary technologies and products are protected with various types of intellectual property (IP), such as patents, design registrations and trade secrets. The IP portfolio is well diversified and representative of the business areas in which Össur operates.
At yearend 2017, Össur had more than 1,300 granted patents and about 400 pending patent applications
Össur has established a reputation as a provider of ground breaking technological innovation in the field of prosthetics. In recent years, our innovation efforts have gone beyond pure technology advancements and now aim to provide value to all stakeholders when it comes to treatment of amputees. User interface and smart apps are offering the opportunity to assist with training and provide feedback to our users on the effectiveness of the prosthetic solution.
Modularity is a key element in prosthetic solutions offered by Össur. Modularity means that basic features and components are shared across a family of products, allowing users to customize their prosthesis if they would like to add specific modules. For example, the family of Pro-Flex® feet, one of our high-end product lines, shares the same carbon fiber base plate, and the combination of additional blades and other mechanical components result in a unique function in line with each user profile’s needs.
Modularity enables efficiency in stock keeping and faster time to market for new solutions
Modular design allows modules to be reused and assembled in multiple ways. That increases production and stock keeping efficiency and, at the same time, increases the level of customization for users. Moreover, time to market for a new solution is faster when leveraging existing modules and proven technologies. This design approach results in clear benefits for the stakeholders involved; the provider, the end-users and Össur.
Continuum of care. This is what Össur’s indication based product design for B&S is focused on.
Mobility impairments can range from acute injuries, where users can be fitted with braces that supplement the rehabilitation process, to chronic indications such as osteoarthritis (OA) that can be treated with an unloading brace. The continuum of care for knee ligament injury is a good example of a comprehensive product line. The process is illustrated above and further detailed below.
2018 will see the launch of a new brace based on 3D knitting technology designed to provide pain relief for early symptoms of knee OA
Össur’s R&D will continue to strive towards providing clinically proven non-invasive OA solutions to all major indications, with associated health economic benefits to the users and the health care system, in addition to validated functional healing solutions to enhance the body’s natural healing process while maintaining maximum mobility.
Since 1999, Össur has acquired more than 20 companies. In 2000, Össur made acquisitions that allowed the Company to become a global player in the field of prosthetics and the second largest player in the segment in the world. In the period from 2003-2007, Össur acquired several players operating in bracing and supports, allowing Össur to become the second largest player in that segment today. In the following years Össur made various acquisitions within both business segments, most recently Touch Bionics and Medi Prosthetics in 2016. The acquisitions are in line with Össur’s overall acquisition strategy and ambition of becoming a top player in non-invasive orthopaedics, specializing in prosthetics and bracing and supports.
In 2013, Össur acquired three O&P clinics with the objective of better understanding the end-users needs. Össur is furthermore able to provide insights and assist providers with operational aspects such as patient treatment, custom manufacturing, and process optimization. Even though Össur focuses on strategic partnerships with providers, we will continue to explore the possibilities of forward integration should attractive opportunities arise.
Össur’s vision is to be the leading company in the non-invasive orthopaedic market. Össur’s business improves people’s mobility through innovative technologies within the fields of bracing & supports and prosthetics. Össur will continue to generate value for individuals and healthcare systems by focusing the business strategy on successful product and concept innovation, operational efficiency, and sustainable growth.
Execute Ideas that add Value
We embrace innovation in all our actions by creating value for our customers. We will be at the forefront of indication-related innovation to ensure our consistently strong position in the market.
Maintain Sustainable Growth
We will achieve growth by successfully commercializing our innovation through our local go-to-market strategy and commitment to our customers’ needs. We will further develop our business and leverage untapped market opportunities.
Conduct Business Efficiently
We strive to increase efficiency and drive continuous improvement. We run efficient operations in the most optimal locations, hire passionate employees and deliver strong profit and cash flow.
At Össur we nurture a spirit of innovation; we offer an open and vibrant environment where each employee can achieve his or her full potential. We live by a set of values that are the foundation for our strategy and success. Our core values are Honesty, Frugality, and Courage; and these values guide our decisions. We live these values every day in everything that we do—in our interactions with colleagues and customers, and in our work efforts.
We have over 3,000 employees working in over 25 countries. While we are a diverse company, we work as one to improve people’s mobility. Different ideas and points of view are beneficial to our business, and we believe in creating an environment where diversity, knowledge, skills, and strengths are fully utilized. As individuals, our employees can expect equal treatment and equal opportunities for growth within Össur. Our employees take responsibility, both for their current job and for their career advancement. We offer various learning opportunities, so employees can build lasting and rewarding careers with us.
We measure our employees’ motivation once a year and we are proud that our employee satisfaction and motivation is high. While we work hard, we also have fun. Our employees’ passion, drive, and capabilities to help our customers are our greatest assets.
Össur recruits competent and ambitious individuals that can work on demanding projects, and we are proud that we’ve been able to provide advancement opportunities for our talented employees. Our hiring decisions are based on a potential employee’s skills and abilities. If you are interested in joining our team you can view and apply for an open position on our applicant portal.
We show respect by adhering to facts and reality, fulfilling promises and claims, and admitting failures. We nurture honest communication throughout the Company by sharing information and respecting each other’s time and workload.
Make Every Step Count
We use resources wisely. The Company aims to minimize costs across all areas of its business through effective communication, preparedness, planning, and optimized processes.
We are open to change and constantly strive for improvement. We challenge unwritten rules, show initiative and take calculated risks, while at the same time taking responsibility for our ideas, decisions, and actions.
Investment in Össur’s shares involves various risks where the business, financial conditions, and results of operations going forward rest upon certain assumptions and could be negatively affected if any of the factors described in this chapter occur. Össur has chosen to highlight four key risks which are currently considered most relevant. Össur cannot ensure that its given assumptions for the description of the risk is correct. Furthermore, additional risks and uncertainties which are listed in the next section, or not presently known to Össur, or that the Company currently deems immaterial, may adversely affect its business operations and financial results, to an even greater extent, than the four risks identified here.
Most of Össur’s products and services are reimbursed by third-party payers, including both government healthcare programs and private health insurance plans. All third-party payers continue to develop methods of controlling healthcare costs, including review of claims, selective contracting, and competitive bidding.
These cost-control methods may limit or even eliminate the coverage and the amount of payment for which third-party payers may be willing to pay on Össur‘s products and services. As a result, sales may decline significantly, and customers may reduce or eliminate purchases. Reviews of claims may lead to repayment of prior sales.
Össur only brings products to the market that have medical indication and are clinically validated. Össur applies its reimbursement knowledge from the earliest stages of product development to the post-sale education of customers. Össur also pursues several strategies to manage the reimbursement of its products and services.
Össur’s products are medical devices that are subject to extensive global regulations by the respective authorities in countries where Össur conducts its business. Such regulations can restrict virtually all aspects of a medical device’s design and testing, manufacturing, safety, labeling, storage, recordkeeping, reporting, clearance and approval, promotion, distribution, and services.
Failure to comply with the regulatory requirements of the applicable authority may subject Össur to sanctions ranging from warning letters to penalties and product withdrawal. Össur’s failure to comply with regulatory requirements or receive regulatory clearance and approval for its products or operations would adversely affect Össur’s sales and potential for future growth.
Össur maintains a robust global quality system that complies with international medical device standards and is an intrinsic part of the Company‘s internal processes. Furthermore, employees actively monitor the medical device regulation landscape and stay on top of changes to international and local regulations in the countries where Össur markets and sells medical devices.
Össur operates in markets that are characterized by rapid technological change, driven by extensive research that is carried out by market participants. Technological innovation takes place at various stages in Össur’s value chain and may include individual components, design, and functionalities of Össur products, and patient care.
The development by any suppliers or competitors of substitute products or components that better satisfy market demands could have a material adverse effect on Össur’s business and results of operations. A failure to develop new products or enhance existing products could also have a material adverse effect on Össur’s operations and potential for future growth.
Significant reinvestment into R&D and constant strive to find new technologies has resulted in a vast IP portfolio and enables a strong position to compete with potential new entries. External connections and appeal to universities, research institutes and investors provides the opportunity to stay informed and review emerging innovation as part of acquisitions or research cooperation initiatives.
Major shifts in Össur’s market place include the consolidation of prosthetics manufacturers in recent years and the additional momentum that forward integration is gaining in the industries where the Company operates. Given the nature of acquisitions, it is uncertain to what degree Össur will be able to participate in further consolidation and to what degree forward integration will affect Össur‘s operations.
The consolidation has been a material contributor to the growth of Össur in the past. If Össur were not to participate in further consolidation or forward integration, it might limit Össur‘s potential for future growth. In addition, these shifts may impact the competitive landscape of the industries and the associated market shares. Changes in the industry may furthermore impact Össur’s customers.
Össur continuously reviews value enhancing acquisition and investment opportunities in its business segments and keeps a good relationship with the relevant stakeholders in the industry. Össur furthermore operates its own clinics in certain regions and has partnership programs in place with patient care providers to offer end-users quality services.
Össur is exposed to a range of other risks that have not been discussed in the previous section. Below is a list of other risks that Össur considers relevant but they are not listed in order of priority and the list is not exhaustive.