MARKET

High activity in the European Life Science market

AddLife is a leading player in Life Science with a strong presence across Europe, strategically well positioned for the post-pandemic market conditions. Through a decentralised business model targeting specific segments and a strong commitment to customer proximity and value-creating offerings, AddLife's companies can adjust to and benefit from the prevailing structural drivers and market trends.

AddLife is well positioned to benefit from the high level of activity in the European Life Science market, having strengthened its position through expanded geographical coverage. As more surgeries are conducted and healthcare budgets return to normal, the demand for resource-efficient products and services, advanced instruments, and consumables is on the rise. In 2023, the company also identified several prioritised growth segments expected to contribute to further profit growth.

The European Medtech market reached around EUR 140 billion in 2022. This market is growing at a rate of 5% per year and is insensitive to economic fluctuations. With a value of approximately EUR 17 billion, the diagnostics market has been growing steadily at an annual rate of 2-3 percent before the pandemic (around 4% including the volatile swings of the pandemic years) [1]. The combined Medtech and diagnostics market is forecasted to reach EUR 180 billion by 2025. 

The market is fragmented, consisting of about 35,000 companies - 92 percent of which are small and medium-sized enterprises. The five largest regional markets are Germany, France, the United Kingdom, Italy, and Spain.

In Europe, an average of 11 percent of GDP is spent on health services, of which almost 8 percent is spent on medical devices. In the markets where AddLife's companies operate, public funding plays a significant role in healthcare financing, resulting in a substantial portion of business transactions taking place through public procurement.

Public pprocurement is expanding in scope, often entailing long contract periods. A trend is emerging away from purely price-driven procurement towards models that also prioritise sustainability and the quality of service and support.

While clinical needs and healthcare products are similar worldwide, regulatory requirements, healthcare systems, procurement processes, and patient preferences vary significantly across countries and regions. Moreover, service and clinical support is becoming increasingly important for advanced treatments. Consequently, proximity to customers, flexibility, and a strong local presence are important attributes for suppliers to the healthcare sector.

AddLife's presence in 30 European markets has strengthened relationships with both new and existing suppliers, broadened the group's network and facilitated sales of both proprietary and distributed products in new markets. AddLife's sales are relatively evenly distributed across multiple European markets, thereby reducing exposure to local market fluctuations.

Prioritised segments for AddLife
AddLife has identified several prioritised segments in its portfolio that offer higher potential for both organic and inorganic growth. The selected segments demonstrate significant growth, with an average growth of 9.5 percent for Labtech segments and 7.5 percent for Medtech segments, both well above the industry average.

Markets: Europe and Australia. Welfare technology, only Europe 2021-2027.
Source: Market Data Forecast, Berg Insight, AddLife analysis, AddLife sales 2023.

Long-term structural drivers

The Life Science market is strongly influenced by structural drivers that fundamentally affect the market and provide a framework for long-term development.

Ageing population
The ageing population is a key factor; over the next 25 years, the EU's population segment aged 80 or above is predicted to substantially rise from the current 6 percent to 11 percent [2]. Individuals in this age bracket are major consumers of healthcare, homecare, and diagnostic products and services. Healthcare expenditures per capita accelerate from the age of 55-60 and peak around 80-85 years, remaining high thereafter.

Simultaneously, the prevalence of chronic illnesses is on the rise, leading to a progressively ageing population living longer with one or more chronic diseases. Consequently, there is sustained long-term demand for healthcare products, services, and solutions that facilitate more efficient care for an aging population.

Economic factors
In Europe, healthcare is largely funded by taxes and faces a constantly growing demand. Healthcare is a high-priority in society, especially in the wake of the pandemic. The demand remains constant, providing a certain level of resilience against budget cuts, even in times of economic austerity.

This stable growth can be observed by analysing GDP growth in relation to healthcare expenditure over time in the markets where AddLife is active. This indicates that AddLife operates in a market with consistently growing demand, which also remains relatively insulated from economic fluctuations [3].

Graph includes AddLife's markets in Europe and Australia.

Regulatory framework

An important characteristic of the market is its rigorous regulatory framework, which applies universally to both private and public entities. This creates a degree of caution and inertia, yet also ensures stability and predictability.

Suppliers are subject to rigorous standards concerning product quality, certifications, procurement specifications, regulatory compliance, and oversight, creating significant barriers to entry. The industry is in the process of implementing new EU regulations for medical devices (MDR) and in vitro diagnostic products (IVDR), although these efforts have faced some delays. In many cases, the new regulations will require renewed and more complex testing for CE certification. This task will be both costly and burdensome for small players with limited resources. As a result, large non-European suppliers may also seek out strong local partners for support in this effort. Furthermore, new sustainability standards are continuously introduced, with some variability in implementation across different regions.

Global factors
The local market relies heavily on international product development and manufacturing, rendering it vulnerable to global disruptions. The impact of protectionist trade agreements, pandemics, and geopolitical tensions, such as Russia's invasion of Ukraine and unrest in the Middle East, can disrupt the availability and delivery of raw materials and products to Europe. The risks associated with these global disruptions are mitigated by regional sourcing, the ability to find alternative suppliers, and close partnerships with local customers.

Technological developments
Technological advancements worldwide are rapidly transforming the Life Science sector through innovations in product development, research, and healthcare. The adoption of connected devices, automation, artificial intelligence (AI), and other technologies is not only fostering the creation of new products, but also paving the way for novel applications of instruments and diagnostic tests. This opens up avenues for new business opportunities through innovative treatment and care methods and also impacts the operational activities of suppliers. Key factors for success include understanding the needs of local customers, having the ability to expand the range of new technology (regardless of supplier) and offering a strong service and support organisations to assist the healthcare providers in implementing new technology.

Competition creates opportunities
AddLife is active in a dynamic market, interacting with competitors, suppliers, or potential acquisition targets - frequently with roles that overlap.

The year 2023 saw many changes, such as restructuring among global manufacturers and shifts in ownership among multinational distribution groups. These developments have provided favourable conditions for AddLife's future organic and inorganic growth.

Market trends

Dynamic and shorter-term trends also affect the market. These trends mirror present or recently emerged phenomena impacting the sector and its suppliers, requiring adaptability and flexibility. The decentralised nature of AddLife's business model enables swift adaptation and management of these trends by its companies.

Overarching trends

STAFFING SHORTAGES IN HEALTHCARE

• There is a shortage of healthcare personel across Europe, especially for nurses and primary care staff. The demand is expected to rise with the ageing population and higher prevalence of chronic diseases. The ageing workforce exacerbates the challenge, coupled with rising competency demands in digital skills. Consequently, healthcare faces capacity issues, with a heightened need for process and resource efficiency.
• AddLife offers an extensive range of products that address healthcare needs for more efficient patient care. The staffing shortage has resulted in increased demand for our resource-efficient and advanced technological solutions, such as minimally invasive surgery, thereby strengthening our position in the market.

HEALTHCARE SYSTEMS RETURN TO NORMAL BUDGET LEVELS

• During the pandemic, healthcare budgets were supplemented with additional funds, primarily aimed at expanding resources and meeting COVID-19-related needs, including procurement of protective equipment. Starting in 2023, budgets have stabilised at more normal levels, increasing the need to innovate and streamline healthcare work practices.
• AddLife, with its extensive product range, has been a dependable partner for the healthcare system throughout all phases of the pandemic, thanks to a decentralised business model allowing for swift decision-making to address rapidly evolving customer needs. With the transition back to more normal working conditions and budgets, the focus shifts to developing new healthcare methods and optimising processes, areas where AddLife companies are well positioned to support the healthcare sector.

ARTIFICIAL INTELLIGENCE

• In 2023, the gradual rise in the use of AI in healthcare raises expectations that new technologies will enhance both operational efficiency and clinical outcomes. The sector faces hurdles in adaptation due to strict regulations and the necessity for clinical trials, resulting in slower progress compared to other sectors.
• AddLife currently offers AI-based solutions, such as digital pathology and digital monitoring services, and is proactively developing and expanding its product offerings to meet the rising demand.

Labtech

GROWING APPLICATION AREA FOR DIAGNOSTICS

• Advances in technology are fuelling market expansion by enabling the creation of increasingly cost-effective testing methods. One example is personalised medicine, which involves genetic testing to identify specific genetic markers and determine the most effective treatment for individual patients. Another example involves rapid tests for the rising challenge of antibiotic resistance.
• AddLife is actively involved in advancing this development by providing products, consulting, and services in advanced diagnostics. In addition, AddLife has the potential to play a significant role as new technologies transition from research to clinical diagnostics. In 2023, collaborations with several current suppliers been expanded to new markets, such as Next Generation Sequencing (NGS) in genetic engineering and sepsis diagnostics.

DECENTRALISATION IN DIAGNOSTICS

• During the pandemic years, the trend towards smaller and more user-friendly diagnostic instruments, maintaining laboratory quality at reduced costs and enhanced accessibility, has been accelerated. These instruments, commonly used in Point-of-Care (PoC) settings, are now reaching new customer segments such as hospital wards and pharmacies. An increase in demand for multi-parameter instruments, allowing for multiple tests from a single sample, has also been noted.
• AddLife has solidified its position as an expert in the field, forging successful partnerships in Sweden, Norway, and Finland, and is actively pursuing new opportunities to address customer needs.

OUTSOURCING IN BIOTECH AND PHARMA

• The increased growth in drug discovery and development has sparked a higher need for outsourcing, particularly among smaller, innovative biotech firms that enlist external services and analysis functions. Consequently, both existing and new service offerings in the field have expanded.
• At present, AddLife offers comprehensive application support and development of analytical methods to this customer segment, while exploring avenues to improve its service offering.

DIGITAL SALES CHANNELS IN RESEARCH

• Non-European research suppliers are increasingly offering non-exclusive distribution agreements. Consequently, digital sales are on the rise, with manufacturers selling directly to customers and distributors reaching multiple geographic markets.
• AddLife has several companies offering products in this field, with the majority of sales occurring digitally. Additional companies within the Group are exploring opportunities to expand these services across their customer demographics and segments.

Medtech

ELECTIVE SURGERY

• Europe is still feeling the prolonged effects of the pandemic, with healthcare waiting lists continuing to grow and the recovery activities progressing at a slow pace. Some countries have implemented measures such as increased funding and personnel to address the healthcare backlog, including expanding the use of private healthcare and digital appointments.
• AddLife's comprehensive range of products and strong service offerings in elective surgery have contributed to reducing the healthcare backlog. Leveraging our decentralised business model and proximity to customers enables us to take a flexible approach to sales, and thereby taking market shares from competitors.

COST CONSCIOUSNESS

• In the wake of the pandemic, healthcare systems have transitioned to more normaL budget levels, prompting heightened cost consciousness among customers amid rising expenses. Consequently, there are constraints on price increases and a more challenging competitive landscape, especially in less complex product segments.
• With its offering of more advanced products and services, AddLife has been able to flexibly adapt to the new situation. By offering value-added services related to its products, AddLife is also positioned to implement price increases.
  
  

DIGITALISATION

• Healthcare digitalisation is reshaping the development of certain products and the delivery of care. For example, hospitals can reduce surgical operation times and thus patient risks through digital surgical planning. Localised solutions are frequently customised to fit the unique practices of each hospital, driving up demand for locally procured solutions and favouring suppliers with close customer relationships.
• AddLife's companies offer digital solutions in several product areas, including cardiology and orthopaedics. The companies' customer relationships, along with their understanding of treatment methods and healthcare procedures and protocols, are strengths in this regard.

CIRCULAR BUSINESS MODELS

• Interest in circular business models is growing, especially in the assistive devices sector, where products that can be refurbished and reused are becoming increasingly desirable. While this trend reduces demand in certain areas, it also paves the way for the emergence of novel business models.
• AddLife is actively engaging in this trend by providing services such as maintenance, refurbishment, and sterilisation of assistive medical devices in Ireland, along with equipment leasing for hospitals and private residences. The company is actively investigating options to broaden its product range with reusable items and devise new business models.

HOME CARE

• Changing demographics, rising healthcare costs, staff shortages and individual preferences are fuelling the trend of elderly individuals with care needs remaining in their homes longer. Adapting homes, implementing assistive technology, and leveraging digital innovations are vital for enabling this transition.
• AddLife contributes by offering welfare technology in multiple Nordic markets, including innovative solutions such as Hepro's "Night Owl", a digital supervision service that uses anonymisation features and AI for continuous learning.

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<sup>1. The 2021 Aging Report, European Commission
2. Eurostat
3. OECD, WHO, European Central Bank</sup>