Dentists around the world rely on the Swiss innovations of Geistlich Pharma
Geistlich Pharma AG is a global leader in the regeneration of bones and gums. For CEO Paul Note, subsidiaries are a critical success factor for exporting from Switzerland. Read why he encourages SMEs to take the same step.
At first, you might think adhesives have little in common with bone augmentation products. But both can be made from animal bone and skin. Geistlich first became successful with glue, binding agents, manure, animal feed, and granulated gelatin, all of which are made from animal byproducts. The company still owes its success to its expertise in bones, tissue, collagen and the related processing methods.
What is now Geistlich Pharma set a milestone back in World War II when it received a contract from the Swiss government for a nutritional supplement to prevent osteoporosis. It was a smart move for Geistlich. Some years later – 1983 to be exact – the company discovered the use of sterile cattle bones to make bone augmentation products, which is now the core business of Geistlich Pharma.
Subsidiaries: the critical success factor for exporting from Switzerland
A good 20 years before that, Geistlich started its first international subsidiary in the UK. For Paul Note, subsidiaries such as these are the recipe for success. He has unveiled a new subsidiary nearly every year since becoming CEO of Geistlich Pharma AG in 2006. One example is China, launched in 2008 just as the Summer Olympics were under way. Now there are ten subsidiaries, the most recent of which being India in 2016.
He says that exporting is much easier with a subsidiary than with distributors. Geistlich has about 60 of the latter to develop other markets without a separate local company, but this accounts for only 15 percent of revenue. "We feel that direct contact to doctors and dentists is essential. This is most easily done using subsidiaries with local employees who speak the local language," Note says. Geistlich Pharma arranges for continuing education and training on location, depending on the local needs. "There is a lot of consensus when it comes to surgical techniques, but there can be a great deal of discrepancy on the details." This is why he feels it is so important to have a strong local presence in the medical technology segment.
Fewer barriers to trade in the US than in Europe
Credibility is at least as important as a local presence. Geistlich Pharma makes good use of its role as a pioneer: It was the first to make bone augmentation products from cattle bones. Today, Geistlich's regenerative biomaterials are used in dentistry and orthopedics. "We are the global market leader in regenerative dentistry," says Note. This is due in no small part to the "Swiss made" aspect. From R&D to production, the entire value chain is located in Wolhusen.
It takes an average of seven years to bring a new product to market. It can be up to two more years until the registration and clinical trials are completed and the medical product is approved. The barriers differ greatly by country. "The Food and Drug Administration (FDA) in the US used to be very strict." Today, Note says, the European requirements are much more complex than those in the US. The introduction of the Medical Device Regulation (MDR) in 2020 will require additional studies. "We can already see the impact it's going to have. Our area is affected by the new regulations too." However, he hasn't felt the effects of protectionism.
We feel that direct contact to doctors and dentists is essential. This is most easily done using subsidiaries with local employees who speak the local language.
Paul Note, CEO of Geistlich Pharma
Exports easier with subsidiaries in India
Market access is also a challenge in India. "Some of the processes are very lengthy. It's not because the requirements are so strict, but the authorities are not always easy to interpret," says Note. Sometimes it's very difficult to know why they need additional clinical data for a product. This makes it all the more important to have a local subsidiary of Geistlich Pharma. It is a way of establishing direct contact to government officials and finding a learning curve.
With a staff of just nine people, the Indian subsidiary is Geistlich Pharma's smallest. Others are much larger. However, Note feels the size and potential of the market are just two of many factors when considering whether to start a subsidiary. "For us, the critical mass is seven million francs in revenue." At the same time, there must be ways of increasing continuing education. There must also be a suitable intermediary – a general manager. The success or failure of a company depends on it.
Most of Geistlich Pharma's products are exported
Geistlich Pharma generates 90 percent of its revenues in foreign countries. This long‑standing Swiss company has become a global giant with a market niche. While Europe has historically played a central role, Asia, North America and South America have become just as essential.
"Today, we generate around one-third of our revenue in Europe, another third in North and South America, and the rest in Asia. China is now the most important country in terms of revenue," explains Note. Further expansion plans are in the pipeline. Where the next subsidiary will be established, however, is still under wraps.