Economic development around the world and global macrotrends in the market create demand and opportunities for growth. We have selected six trends that create opportunities for Össur:
Össur operates within the global non-invasive orthopaedic industry, delivering advanced and innovative solutions within the prosthetics and bracing & supports markets.
Prosthetics include artificial limbs and related products for individuals who were born without limbs or who have had limbs amputated. Össur offers a full range of premium lower- and upper-limb prosthetics, including feet, knees, hands, liners, and other components.
The size of the global prosthetics component market is estimated to be approximately USD 1.3-1.4 billion. Össur is the second largest company operating in prosthetics with a market share estimated at 23-24%. The share has increased from our previous estimates of 22-23%, largely due to the acquisition of the prosthetics manufacturer College Park which was completed during the year.
The growth rate of the prosthetics market is estimated to be 3-5%. Volume growth in the market is estimated to be moderate. Volume growth is determined by a relatively stable global amputee population and a moderate increase in the number of new amputees that get fitted with a prosthesis every year. Pricing in the prosthetics market is on average relatively stable. Growth in the prosthetics industry is mainly driven by increased utilization of higher quality prosthetics that lead to increased mobility and quality of life for the users.
Primary Sales Channels
Orthotic & Prosthetic clinics (O&P)
Source: Össur management estimates
Note: Estimates only account for component sales from providers to suppliers, i.e. not clinical services
* Increased penetration of high-end innovative products
Bracing & supports (B&S) include products used to support joints and other body parts for therapeutic and preventative purposes. The B&S market includes devices supporting spinal, knee, hip, foot, ankle, and hands. Össur offers a comprehensive line of products with primary focus on osteoarthritis and injury solutions.
The size of the global B&S product market is estimated to be approximately USD 2.7-3.0 billion. Össur’s market share is estimated at 5-7% compared to previous estimates of 6-8%. The change in market share is largely due to Össur’s divestment of Gibaud which was completed during the year.
The growth rate of the B&S market is estimated to be 3-5%. Market growth is driven by a healthy volume growth in the B&S market supported by global healthcare trends such as an aging and more active population. Price levels are relatively stable as B&S products are fully reimbursed in most of the markets that Össur operates in. For some markets, there is moderate price pressure for selected product categories, mainly products of a lower innovation level. In addition, measures such as Competitive Bidding for off-the-shelve spinal and back braces in the US which came into effect in January 2021 further puts pressure on pricing for certain products. Increased utilization of high-end innovative products such as Unloader bracing supports market growth in B&S.
Primary Sales Channels
Orthotic & Prosthetic clinics (O&P)
Source: Össur management estimates
Note: Estimates only account for component sales from providers to suppliers, i.e. not clinical services
* Increased penetration of high-end innovative products
In the orthopaedic industry, many stakeholders and decision makers are involved in the purchasing decision. Stakeholders can be categorized into five groups.
Healthcare systems, insurance companies, medical associations, end-users and their families.
In December 1987, Jami and her good friend Lisa were stranded during a brutal snowstorm in the Arizona desert. Eleven days later, they were found dehydrated and near starving. Both women would fall victim to severe frostbite. For Jami, that would mean battling gangrene and eventual amputation of both legs below the knee. Within a matter of days, Jami’s life was up ended as she experienced grief, sadness and loss.
Over the next several years, Jami began an aggressive physical therapy routine, incorporated nutrition and wellness and learned how to walk again with the aid of prosthetics. But that was just the beginning.
“I was watching the 1996 Paralympic Games and decided then to become a professional Paralympic runner,” said Jami. From that moment on, she became a runner. Buoyed by a strong family support network and fitted with her now well-recognized prosthetic running blades, she began a rigorous training regime that would ultimately lead her to join the US Paralympic Track and Field team and later compete in several triathlons, marathons and more.
On October 11, 2015 Jami became the first bi-lateral below knee female amputee to finish any marathon (Chicago Marathon), and on April 18, 2016 she became the first bi-lateral below knee female amputee to finish the Boston Marathon.
As a wife, mother, teacher, philanthropist – and now, cancer-survivor – Jami’s story serves as a remarkable testament to the power of hope, strength and gratitude.
“Overcoming is living your life full of love, passion and perseverance.”
Össur develops, manufactures, and brings to market a wide range of prosthetics and bracing & supports solutions with high standards of quality. These high-end products are developed with the objective to improve the mobility of end-users. The products are delivered to the end-users through healthcare providers who specialize in assisting individuals who suffer from movement impairment. Össur’s products are in most cases reimbursed by public or private insurance (payers). Össur makes a significant investment every year in R&D to further advance products and technologies for the benefit of all stakeholders.
End-users include lower and upper extremity amputees who have lost a limb due to, for example, vascular diseases including diabetes, trauma, and cancer. They also include 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, Össur gains a better understanding of their needs and challenges. In turn, Össur improves their mobility by providing new technologically advanced products to achieve their goals. The involvement with the end-user is not limited to research and development as there is also an aim to provide them with quality services, directly through clinics operated by Össur or indirectly through customer service programs.
Össur develops prosthetics and bracing & supports, from an idea to a finished product. With every product, the aim is to deliver cost effective medical solutions that provide value for end-users 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 supports open collaboration within the industry and academia. An example of such an initiative is the collaboration between Össur and the Alfred Mann Foundation on the development and licensing of a myoelectric sensor system (IMES®). The solution utilizes implantable sensors that collect signals from the amputee’s muscles and translate those into prosthetic movements. In other words, mind-controlled prosthetics.
Össur maintains a strong global manufacturing function. Manufacturing of advanced prosthetic solutions, including bionics, takes place in Iceland and Scotland. Manufacturing of other prosthetics solutions, components and premium bracing solutions takes place in Mexico. Össur outsources the manufacturing of soft goods to China. At Össur there is a continuous strive for profitability improvements, which includes finding ways to optimize the manufacturing process.
Great emphasis is placed on quality and it is highly important that quality is an intrinsic part of processes whereby Össur has had a certified quality system in place since 1993. Össur complies with various global quality and regulatory requirements for medical devices and is currently certified with the ISO9001:2008/2015, ISO14001:2015 and ISO13485:2016 standards.
Össur operates within a highly specialized industry where the primary customers are specialized healthcare providers who provide and fit individuals with Össur products. In prosthetics these customers are orthopaedic and prosthetic (O&P) clinics and in bracing & supports it is a combination of O&P clinics, hospitals, and surgery centers. In a few selected markets, Össur operates its own O&P clinics. In most cases, when a user has been fitted with a product, Össur’s customers claim reimbursement from the relevant public institutions or private insurance companies. Össur largely sells its products through its own direct sales network.
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 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 or insurance companies, where over 95% of Össur’s products are estimated to be 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.
Össur protects its investment in R&D by strategically growing its intellectual property portfolio. Proprietary technologies and products are protected with various types of intellectual property rights, such as patents, design registrations and, trade secrets. The IP portfolio is well diversified and representative of the business areas and markets in which Össur operates. In recent years, the portfolio has grown around 10% annually, which is mostly contributed to in-house innovation efforts. In 2020 alone, Össur was granted 85 new patents in addition to filing 117 new patent applications. At year-end 2020, Össur had over 1,700 granted patents and some 317 patent applications pending. In addition, Össur’s brand is protected by more than 500 trademark registrations.
In 2020, Össur introduced three new product groups catering specifically for the less active amputees and facilitating functional trade-up through technology for this population. To continue Össur’s journey towards innovation for the elderly, development of the Mobili Knee™ has been one of the focus points in 2020. Mobili Knee is a microprocessor controlled, motorized prosthetic knee, based on Össur’s powered knee technology, to be launched in 2021.
Össur first introduced powered technology to the prosthetics market in 2005 by launching the first generation of Power Knee™ which remains the only powered knee joint commercially available. The second generation was introduced in 2010 and the third generation, which has been in development for the past years, will launch in 2021. This third generation will cater for the higher active population as its predecessors and will continue to carry the name Power Knee. The knee is intended to facilitate symmetrical loading during various activities, provide confidence when negotiating obstacles and cover greater distances. Another version of the third generation, the Mobili Knee, is specifically tailored to the needs of the low active population. The objective is to apply power to assist users to move from a seated position to a standing one and facilitate safe and assisted walking, allowing the amputee to ambulate in their desired environment and encouraging increased mobility. The launch of the Mobili Knee marks an important milestone in Össur’s ambition to bring innovation to this user group.
Innovation in powered prosthetics is based on Össur’s vision to replace lost muscle function by applying a specialized motor which is controlled by an internal computer. Above knee amputees typically rely solely on their sound side limb and arms to lift themselves up from a chair, putting strain on the body and compromising balance throughout this activity. By utilizing powered knee extension, the Power Knee and Mobili Knee can extend the joint under load and lift the prosthetic wearer from a seated to a standing position. The technology enables the user to stand up in a symmetrical fashion, putting equal amount of load on both legs and therefore achieving improved balance.
Amputees, specifically lower active and elderly amputees, name stumbles and the risks of falling as their key fear and contribution to insecurity while walking. During ambulation, it is important to create enough space between the foot and the ground when swinging the leg through to avoid the toe from stubbing on the floor as this can lead to stumbles or falls. The motorized control of Össur’s powered knees allows for active control of the degree of knee flexion (against the gravity driven extension) during forward swing of the leg and thereby the possibility of influencing this important parameter of ground clearance of the foot, a major determinant for stumbles and falls.
By applying the powered technology to prosthetics, Össur is living up to its mission to improve people’s mobility.
Össur launched five new and exciting products within bracing & supports (B&S) during the year for both reimbursed channels as well as our direct-to-consumer (DTC) platform. Throughout the year, the B&S team continued on its innovation journey with focus on products that are designed and built to fulfill the needs of our customers and end users all while continuing to offer competitive pricing without compromising patient care.
A new walker boot is an excellent example of a product that is expected to set new standards in compliance, function, and biomechanisms within the B&S industry. When launched, this new walker boot will have a clear differentiation from other competing products and will address unmet needs in the marketplace.
Össur launched a direct-to-consumer platform in 2020 offering braces, compression, sleeves, accessories, and parts. Since launch Össur has focused on technology that provides the ultimate end user experience, for example with the CTi Ultra brace which is designed to offer best in class protection and stabilization of the knee joint. The development of the CTi Ultra has distilled decades of experience into Össur’s first ever dedicated DTC product and will come to market in 2021.
By listening to the needs of our customers and end users, Össur continues to be in the forefront of innovation within the B&S industry.
Össur is a pioneer of advanced technology and by listening to people’s needs and pushing the boundaries of technology, continues to create some of the best products and services available in the fields of prosthetics and bracing & supports. In the end, we strive to create a Life Without Limitations for all our users. Össur’s mission is to improve people’s mobility and its vision is to be a leading company in the non-invasive orthopaedics market.
Össur will continue to generate value for individuals and healthcare systems by focusing our business strategy on successful product innovation, sustainable growth, and efficiency.
In 2020, Össur continued to invest in research & development amounting to 5% of sales or USD 31 million. Össur launched more than 20 new products and incremental updates to the market.
In 2020, Össur introduced new product groups catering specifically for the less active amputees and facilitating functional trade-up through technology for this population. These include the Balance Foot S and new Direct Socket TF and Connect TF socket technologies. The Balance Foot S was developed to support less-active prosthetic users, ideal for people who want a lightweight, comfortable foot for everyday use. Direct Socket TF is a socket solution for transfemoral amputees of all activity levels. Connect TF is an adjustable socket indicated for low active amputees, including an open socket donning feature.
Össur also launched new and exciting products within bracing & supports during the year for both reimbursed channels as well as our direct-to-consumer platform. Product launches for example include the Unloader One X Custom knee brace, which is manufactured to fit the patient’s leg contour.
During the year, good progress continued to be made in research & development in new technologies for our users. For example, within powered prosthetics technology with products anticipated to be launched in 2021 and a new walker boot within B&S which will have a clear differentiation from other competing products and will address unmet needs in the marketplace.
Organic sales declined by 10% in 2020 as sales during the year were impacted in most markets by measures to control the COVID-19 pandemic. Due to these measures, average sales compared to the same period last year were as follows during the year: January and February 2020 were around 100% of last year’s sales, March 80-90%, April 60-70%, May 70-80%, June 80-90%, and through the remainder of the year between 90-100%. The impact from the pandemic is expected to be short-term and that the long-term prospects and underlying fundamental drivers of the business are unchanged.
A key growth opportunity is within emerging markets where penetration of prosthetics and bracing is still relatively low. Össur continued to invest in selected emerging markets during the year by establishing direct sales and infrastructure. The goal in these markets is to drive conversion, technology trade-up, and offer partnership services.
Össur made good progress during the year with its partnership service model. These services include professional education, solutions to ease the reimbursement claim process, tools to enhance clinical outcomes, and outsourced fabrication.
Össur’s strategy furthermore includes exploring growth opportunities through acquisitions, and additionally divestments were made during the year to further focus the business. Össur completed the acquisition of the prosthetics manufacturer College Park Industries during the year and additionally acquired several other companies. The combined full year sales of these acquisitions amount to USD 59 million (incl. an acquisition in the first week of January 2021). Divestments completed during the year include Gibaud in France and entities focused on B&S sales in the US. The combined full year sales of these divestments amount to USD 71 million.
EBITDA margin for 2020 was 15%. Profitability was strong despite the impact on topline due to COVID-19 and underlines that profitability will return to normalized levels as sales recover.
Gross profit for 2020 amounted to 62% of sales compared 64% of sales for 2019. During a large part of 2020, manufacturing capacity was reduced due to lower sales in relation to COVID-19, which resulted in a lower gross profit margin.
Good progress was made with the ongoing efficiency initiatives this year which are focused on distribution, manufacturing, and strategic sourcing. The savings target of USD 10 million in 2020 was reached, corresponding to USD 4 million in additional savings when compared to the previous year.
Össur has been investing in an increasingly scalable infrastructure. As an example, the global manufacturing platform is consolidating with about 12 fewer locations since the year 2009. Investments have been made in centralized procurement (strategic sourcing) and implementation of a new CRM platform. The shared service center in Poland supports around 60% of Össur’s entities and the global IT department which is supporting majority of Össur‘s entities.
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 about 3,500 employees working in over 30 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 fair and 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. Our employees’ passion, drive, and capabilities to help our customers are our greatest assets.
We have a Competency Framework within Össur that allows us to identify the behaviors that drive successful performance and supports business strategy. Our competencies are collaboration, communication, driving results, customer focus and change. Regular check-ins are encouraged between employees and managers to discuss both performance and development of these competencies which are supported by Össur‘s Development Guide that lists training and development opportunities for each competency. All employees regardless of their role or location, have access to thousands of on-line and virtual courses to learn and grow.
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. Our global team of talented professionals is passionate about helping people live a Life Without Limitations. While innovation drives us as we strive to be the leading company in non-invasive orthopaedics, it is the people that work at Össur that make this possible.
If you are interested in joining our team you can view and apply for an open position on Össur’s applicant portal.
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.
Every day we interact with people from a wide range of cultures and backgrounds. We do business in numerous locations around the world, working and communicating with many different colleagues, customers and other stakeholders in our industry.
Diversity and equality are extremely important to us. Different ideas and points of view are beneficial to our business, and we believe in creating an environment where all our knowledge, skills and strengths are fully utilized. As individuals, we can expect equal treatment and equal opportunities for growth within Össur.
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 (apart from the expected short-term impact of COVID-19). Össur cannot ensure that given assumptions for the description of the risk is correct. Furthermore, additional risks and uncertainties which are listed on Össur’s corporate website, 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.
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 maintains a robust global quality system that complies with international medical device standards and is an intrinsic part of 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.
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.
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 operates its own clinics in certain regions and has partnership programs in place with patient care providers to offer end-users quality services.
For other relevant risk factors please see the Investor Relations section on our corporate website.