1 Leading innovation, leading growth. SPECIAL PRINT FOR INVESTORS, ANALYSTS AND MEDIA CONFERENCE FEBRUARY 18, 2014 ANNUAL REPORT 2013
3 Contents. Annual review 2 Nobel Biocare at a glance 2 Key figures and Highlights Letter from the Chairman of the Board 8 Letter from the CEO 11 The dental market 14 Our strategy 15 Sustainability 20 Corporate governance 26 Corporate governance report 28 Board of Directors 34 Executive Committee 43 Remuneration report 51 Letter from the Chairman of the Nomination and Compensation Committee 52 Remuneration report 53 Share information 64 The Nobel Biocare share 65 Financial reporting 67 Key figures 68 Financial review 69 Risk management 74 Consolidated financial statements 78 Parent company accounts 132
4 2 Nobel Biocare Annual Report 2013 Nobel Biocare at a glance An innovative implant-based dental restoration company Nobel Biocare is a world leader in the field of innovative implant-based dental restorations from single tooth to fully edentulous indications. We offer dental implant systems, high-precision individualized prosthetics and CAD/CAM systems, diagnostics, treatment planning, guided surgery solutions and biomaterials. We support customers throughout their professional and practice development. Our headquarters is in Zurich, Switzerland, and our shares are listed on the SIX Swiss Exchange. Mahwah, USA Québec, Canada Zurich, Switzerland Global & EMEA headquarters Gothenburg, Sweden Karlskoga, Sweden Stockholm, Sweden Tel Aviv, Israel Yorba Linda, USA North America headquarters Belfeld, Netherlands Mechelen, Belgium Tokyo, Japan Hong Kong, China Asia/Pacific headquarters
5 Nobel Biocare Annual Report 2013 Nobel Biocare at a glance 3 Dental implant systems Extensive assortment of dental implants for all indications, bone types and surgical protocols, to fulfill all surgical needs and selected treatment concepts. NobelProcera individualized solutions NobelProcera provides a variety of individualized CAD/CAM dental prosthetics for every indication, from a single tooth to edentulous jaws, on natural teeth and implants. Scientific evidence Nobel Biocare products and solutions are well documented. To date, there are more than 2,000 publications covering our products and solutions. Machined implants have been followed in publications for more than 25 years and TiUnite implants for up to 9 years. Restorations for the edentulous For edentulous patients we offer a broad range of removable and fixed implant-supported restorations. A solution is available whatever the indication and financial situation of the patient. Abutments A full range of individualized CAD/ CAM abutments and a comprehensive portfolio of prefabricated temporary and final abutments. Biomaterials Nobel Biocare offers biomaterials for soft tissue and bone regeneration under the brand name creos. Digital diagnostics, treatment planning and guided surgery NobelClinician Software is for enhanced diagnostics and treatment planning. NobelGuide is a complete treatment concept for diagnostics, prosthetic-driven treatment planning and guided implant surgery.
6 4 Nobel Biocare Annual Report 2013 Nobel Biocare at a glance Unique heritage of scientific and innovation leadership Replace Select TC featuring a 3 mm machined tissue-level collar. NobelProcera System revolutionizes dental CAD/ CAM with new products like implant bars. An implant like no other, NobelActive is released following an extensive prelaunch period. Procera Implant Br Zirconia available in fu NobelReplace implant system receives two new additions: Conical Connection and Platform Shift. NobelClinician Software is the first diagnostics and treatment planning software available on both Mac OS X and Windows platforms. NobelActive 3.0 provides solutions for areas with limited space. OsseoCare Pro the first drill unit operated by an ipad. NobelClinician Communicator app helps patients better understand their treatments. Nobel Biocare endows the Foundation for Oral Rehabilitation (FOR). First titanium Procera Abutment. New NobelProcera 2G System launched. Launch of Brånemark System Zygoma (machined) Open access available for NobelProcera Abutments. Replace launched, goes on to be the world s most used implant system. Regenerative product line beginning with creos xeno.protect announced. Dr. Paulo Maló treats first patient using the All-on-4 Treatment Concept. New proprietary cold-worked Grade 4 Titanium surpasses yield strength standards. TiUnite implant surface launched to increase the predictability and speed of osseointegration. Dr. Matts Andersson pioneers industrially machined dental prosthetic production. Prototype worksh established. (Predecessor to the Custom-mad device service.) Professor Per-Ingvar Brånemark first observes osseointegration. Professor Brånemark treats first patient with titanium dental implants. Launch of the Brånemark System, the world s first successful system of dental implants. Toronto conference hosted Zarb validates dental implan
7 Nobel Biocare Annual Report 2013 Nobel Biocare at a glance 5 For every patient need Nobel Biocare focuses on treatment concepts that enhance diagnostics and treatment planning, primary implant stability, improving hard and soft tissue interaction, guided implant insertion for less invasive surgical protocols and highly precise prosthetic solutions that provide unmatched restorative flexibility. NobelClinician Software Accurate diagnostics and treatment planning is the key to success. Reliable clinical evidence Built on a long heritage of scientific leadership. Our products and solutions have proven themselves in all types of clinical studies many of them following the more demanding one-stage protocol with immediate loading. idge ll-arch. Procera Bridge Alumina. Procera Implant Bridge Zirconia. CerAdapt densely sintered alumina abutment is introduced. Fully integrated digital treatment workflow steered by the NobelConnect online network announced. Launch of 3.3 Brånemark System MK III adds to narrow implant development expertise. The first Mod 10 Procera Scanner. Zirconia abutments now available. Procera Forte Scanner capable of single units to full-arch bridges. Snappy Abutment offers an efficient and predictable prosthetic solution. First Procera Implant Bridge provides enhanced esthetic solutions for multiple missing teeth. First angled abutment simplifies prosthetic access for diverging implant angles. Procera Bridge Zirconia. First ceramic CeraOne Coping. Immediate Function receives FDA clearance, unique only to Nobel Biocare. Groovy implants further enhance osseointegration with added grooves. NobelGuide is the first comprehensive system for 3D diagnostics, treatment planning and guided surgery. Launch of All-on-4 Treatment Concept for efficient and effective edentulous treatment. Time-efficient NobelSpeedy launches, offering bicortical anchorage and high initial stability also in soft bone. Introduction of costeffective overdenture solution on two implants. Launch of Brånemark System Zygoma TiUnite. Image Schüpbach Ltd. The moderately rough implant surface TiUnite has been documented in more than 220 publications with up to 11 years follow-up. op e First sterile implant packaging in the industry. by Professor George ts & osseointegration. Procera launched with fullyautomated industrial manufacturing. Brånemark introduces machined zygomatic implants designed to rehabilitate the upper maxilla. High quality and safety standards All Nobel Biocare implants and final Nobel Biocare restorative components are covered by a lifetime warranty. As a leading medical device company, we strive to manufacture and distribute all products with maximum efficiency while meeting the highest standards of quality. All-on-4 treatment concept giving patients their quality of life back.
8 6 Nobel Biocare Annual Report 2013 Key figures Key figures. Overview of key financials Revenue 2013 (EUR millions, % of total revenues) in EUR millions FY 2013 FY restated Revenue Gross profit Operating expenses Operating profit (EBIT) Profit attributable to owners of Nobel Biocare Cash and cash equivalents Basic earnings per share (EUR) Dividend per share (CHF) Share price at year-end (CHF) Figures for 2012 have been restated due to changes in the presentation of the income statement and the adoption of IAS 19R. For more information, refer to note 2 in the notes to the consolidated financial statements. 2 Including bank overdraft 3 Proposed dividend for 2013 APAC 18% 3 Americas 41% 2 1 EUR million EUR million EUR million EMEA 41% 1 Revenue growth at CER (%) 2013 revenue growth by region (% at CER) Return on average equity (%) EMEA Americas Asia/Pacific Gross margin (%) Operating (EBIT) margin (%) Cash flow from operations (EUR millions) Employees worldwide Personnel costs per employee (EUR thousands) Net debt/(cash) , , , , ,000 2,
9 Nobel Biocare Annual Report highlights highlights. First year with growth (CER) since 2007 Outperforming peers, regaining market share Underlying EBIT improved to 13.4% * Progress in all strategic pillars: Designing for Life Launch of various solutions to improve treatment Launch of NobelReplace Partially Machined Collar (PMC) Launch of NobelProcera 2G Scanner and open access Opening of NobelProcera Scan and Design Centers Launch of new NobelClinician TM with volume rendering and communicator app Launch of regeneratives product line creos TM Introduction of NobelConnect TM to facilitate treatment workflow Seven years of double-digit growth with NobelActive Partnering for Life Expansion of customer partnering activities Expansion of online store to all major markets Strengthened distributor partnerships in Eastern Europe Reduced sales force turnover, largest sales force in the field Higher revenue per customer Learning for Life New Global Course Catalog Very well attended corporate forums at major dental conferences Sold-out Global Symposium in NYC, participants up 50% from 2010 Endowment of a new Foundation for Oral Rehabilitation (FOR) Organizational efficiency and effectiveness Continued shift of resources to growth drivers Corporate function realignment to be completed in 2014 Redesigned order-to-cash process New quality and efficiency program NobelQuality 3 introduced * Excluding realignment costs and currency impact
10 8 Nobel Biocare Annual Report 2013 Letter from the Chairman Letter from the Chairman. Dear Shareholder, 2013 was a year of significant progress for Nobel Biocare, and we are pleased to report solid results. In a market environment that remains challenging, we managed to close the year 2013 with positive revenue development at constant exchange rates. We achieved an improvement in underlying operating margins, which was in line with our expectations, and we observed a substantial increase in the share price of the company. We are gaining market share from our peers in key markets. This is the result of our continuous efforts to rebuild and reshape Nobel Biocare. As expected, the overall market conditions and trends in 2013 were very similar to the year before. Many economies continued to be depressed, primarily in Europe, and this held back patients demand for discretionary out-of-pocket dental treatments. The US market was more promising, showing accelerated growth rates compared with the year before. Overall, the implant market worldwide is estimated to have grown by about 2%, with the premium companies generally showing little to no growth. In this continually challenging market environment we were able to further improve and strengthen our competitive market position. As you remember, in 2011, when Richard Laube joined us as CEO and started to form a new team, the priority was stopping market share losses while starting to build an organization that can perform in line, and eventually ahead of, competition. This would, in turn, generate sustainable and profitable market share gains. We also indicated that this would require some initial investments. By year-end 2013, I can say we are on track to reach these objectives. After we had closed the relative performance gap to our peers in 2012, we started to gain market share in Further, we are recognized as the innovation leader in the industry once more. This is shown by, among other signs, the high participation at our company events at industry conferences and by the sold-out New York Global Symposium, attended by over 2,000 dental professionals in June. We are deeply convinced that innovation leadership leads to growth. The dental profession has noticed our efforts and our customers appreciate our focus on helping them to treat more patients better. This is the foundation from which we can now build to further improve the financial performance of our company. This has so far only been visible in the underlying performance, less in the reported numbers. You will read in more detail about the execution and the performance of the company in the letter from the CEO. All in all, management and their teams have fully lived up to our expectations and the confidence we as the Board place in them. As in every company, there is still room for improvement but we are well on track with our efforts to rebuild Nobel Biocare and to deliver sustainable results on all levels. Over the last few years, the Board of Directors has constantly been strengthened with expertise and skills to provide advice and guidance, but also to fulfill its supervisory duty towards management in their day-to-day tasks. The setup with the various committees has proven to be a very efficient and effective way to drive progress. We initially started with the Audit and the Nomination and Compensation Committees, and over the last two years added three more committees in
11 Nobel Biocare Annual Report 2013 Letter from the Chairman 9 the areas of strategy, innovation and operational excellence. These additional committees allow for very productive collaboration with management and are each aimed at supporting one or more pillars of our strategy Designing for Life. Our strategy is driven by four clearly defined pillars: Designing for Life, Partnering for Life, Learning for Life, and organizational efficiency and effectiveness. The strategy is designed to build market share and improve operating efficiency in a continuous improvement process and in a sustainable manner. The Innovation and Technology Committee (ITC) has closely supported management in setting up a systematic and structured R&D approach. This has supported the development of what we believe is an industry-leading pipeline of products and solutions focused on simplifying the overall treatment process and enabling dental professionals to treat a broader range of indications better. Unlike in other industries, innovation in our sector needs about 5-7 years to establish itself in the market, not least as dental professionals request multi-year follow-up data on the performance of new products. The impact of our recently launched innovations will become increasingly evident as many are currently in the early phase of their life cycle. Customer experience is crucial for the success of our company. This starts at the first customer interaction, be it digital or personal, then continues with the reliable delivery of the products and their exceptional quality. It eventually ends with the payment for the products and services. This all has to be designed and executed in the most efficient and effective way possible. The Operations and Process Excellence Committee (OPC) is involved in a number of programs that have shown good first results, evident by the gross margin and savings in the general administrative area. As mentioned already, patients continue to be cautious with their spending. The challenge for us is to improve patient flow to the customer s practice, optimize the treatment process, and eventually lower the cost of treatment. At the same time, we are experiencing a very dynamic market environment with many entrants and departures in the low-price implant segment, as well as new companies and technology ideas emerging in the digital dentistry field. It is challenging to keep a clear focus while at the same time looking at all that is happening and maintaining a good overview of the relevant developments. Some ideas that might look promising at the beginning will never make it to market or fail to provide a sustainable business model. It is therefore of utmost importance that our specialist teams evaluate new technologies and that we review a potential fit into our strategy to help more customers treat more patients better. Here, the Strategy Committee (STC) is constantly challenging management about opportunities and potential risks in our sector. This includes a constant review of our approach to market with our two brands, Nobel Biocare and Alpha-BioTec. The latter plays an important role by allowing us to serve customers and specific markets with reduced and more affordable componentry, primarily for treating single-tooth indications. With Alpha-Bio Tec we are very well represented in the lower price solutions sector and gain very detailed insight about the market dynamics in this segment. This approach of using separately managed brands in selected markets has delivered good results so far. This brings me to the Nomination and Compensation Committee (NCC). After the implementation of a new performance management system to better align the participants interest with those of the shareholders, while at the same time helping to attract, reward and retain key talent in 2013, the NCC was primarily responsible for the preparation and implementation of the new ordinance against excessive pay. As you know, in March 2013 Swiss voters approved a constitutional amendment (generally referred to as Minder Initiative ) against excessive compensation, which came into effect as of January 1, Under the new rules a variety of amendments to the Articles of Incorporation and the Organizational Regulations will become necessary, all of which have to be implemented by the end of At Nobel Biocare we plan, in line with many other Swiss companies, to implement these amendments already in spring In the upcoming Annual General Meeting, you will also have to vote on a few matters that come into force right away, such as the obligation to elect the Chairman of the Board of Directors, the members of the compensation committee and the independent proxy. If the Shareholder Meeting approves the proposed changes to the Articles of Incorporation in 2014, we will have a solid basis for the binding say-on-pay vote in 2015 which will cover the 2016 compensation. Note that we will maintain, in line with international practice, a consultative vote on each past year s compensation report as we have already done for a numbers of years.
12 10 Nobel Biocare Annual Report 2013 Letter from the Chairman To further support the company in its progress and to ensure continuity, all Members of the Board of Directors will be standing for re-election at the Annual General Meeting on March 26, The Board of Directors will also propose to the AGM 2014 an unchanged distribution of CHF 0.20 per share as dividend. The payment will again be done in a way that will not incur withholding tax. To further enhance the expertise and skills of the Executive Committee, the Board of Directors has appointed the company s Chief Information Officer (CIO) Dietmar Bettio as Executive Vice President to the Nobel Biocare Executive Committee, effective January 1, Dietmar joined our company in 2012 and has significantly strengthened and optimized IT processes and business alignment over the past two years. He will help effectively and efficiently build on our existing accomplishments to further increase the value of our services for our customers. For financial year 2014, we have set clear strategic and operational priorities to build upon the results achieved in Our strategy going forward remains unchanged: We continue to focus on profitable growth, further strengthening the company s market position in order to gain additional market share: leading Innovation, leading growth. On behalf of the Board of Directors, I would like to thank you, our valued shareholders, for the trust and confidence that you have placed in us the Board, the Management and all employees of Nobel Biocare. We would also like to thank the employees of the company for their commitment and perseverance in returning Nobel Biocare to a leading position. Last, but not least, all these efforts are to help our customers, whom I would like to thank for their loyalty and support. Sincerely, Rolf Watter Chairman of the Board of Directors
13 Nobel Biocare Annual Report 2013 Letter from the CEO 11 Letter from the CEO. Dear Shareholder, Our achievements in 2013 give us confidence that your company, Nobel Biocare, has strengthened its competitiveness and is positioned for a period of sustainable revenue and profit growth. By continuing to work in the right way with our customers and consistently execute our strategy, Designing for Life, to its full potential, we believe we have a long and rewarding period of sustainable growth ahead of us. In 2012, our customers said Nobel is back now they say Nobel is ahead. This is a bold statement and carries with it all the usual caveats of market development and unforeseen events. Nevertheless, assuming markets behave in a way that is similar to 2013, we firmly believe we can continue to grow because we understand how to build sustainable market share, one customer at a time and one patient at a time. We better understand how to help and support our customers by consistently providing them with a positive experience, enabling them to treat more patients better with our superior products and solutions. In 2013, market conditions were far from ideal. While the US market was solid, markets in Europe were still challenged due to the weak economic environment, and the Japanese market showed first signs of a recovery only toward the end of In this overall market environment we grew our total revenue by 2.2 percent at constant exchange rates. The major sign of progress for us in 2013 was regaining market share with our core business, Nobel Biocare Implant Systems, which represents 85 percent of our total revenue. We estimate the total market for dental implants grew by about 2 percent in value in Nobel Biocare Implant Systems have grown by 3.3 percent in the same period. Both brands, Nobel Biocare and Alpha-Bio Tec, which serve the value segment, are growing market share and we are back on track and performing better than the underlying market. In line with our expectations, the performance of our CAD/ CAM individualized business was mixed in 2013, as the tooth-based prosthetic components continued to decline. The implant-based restorations, which are the focus of our strategy, grew, with the primary driver being the strong growth of overdenture bars in the US. Operating profit (EBIT) was impacted by realignment costs and adverse currency effects. Excluding these two effects, EBIT margin would have increased to 13.4 percent in 2013, which was at the upper end of our outlook of a 100 to 150 basis points increase over prior year. We are becoming a more predictable company. Our strategy, initiated in 2012, is first and foremost customer focused to help them treat their patients better. This customer- centric strategy is dynamic and we adopted and adjusted to market realities and opportunities. Our strategy builds from a number of competitive advantages for Nobel
14 12 Nobel Biocare Annual Report 2013 Letter from the CEO Biocare. In this regard, we have competitive advantage with the best global footprint in the industry and a material presence in every important country for implant-based dentistry. This allows us to execute our strategy more effectively and efficiently. It also allows us to capture, over time, the value inherent in the similarities of implant restorations. It allows us to capture learnings and best practices from one market and quickly and effectively reapply them to others. A second and important area of competitive advantage is the vast and deep knowledge of our Nobel Biocare team in all areas of the business, but especially in R&D, where we benefit from over 30 years of experience in basic research, development and scientific application. Our recent challenge has been to align and activate this deep and unique knowledge. Our customers increasingly understand and appreciate our strategy because our total value proposition truly enables them to treat more patients better. This in turn allows their practice and laboratories to be more efficient, effective and profitable. Subsequently, they grow market share and order more products from us. We succeed when our customers succeed in treating their patients. Designing for Life is a growth strategy for both Nobel Biocare and our customers worldwide. All three growth pillars, innovation, customer partnering activities and training and education - are working in a mutually reinforcing and integrated way to create a superior customer experience. It enables a unique collaboration and a long-term relationship which is mutually productive, sustainable and profitable for both parties. To execute this strategy requires the right people and excellent teamwork, superior products and solutions, and a deep commitment to our customers success in treating their patients. We are confident this effort is well on the way and is a more distinctive, sustainable and profitable approach in the long run. Designing for Life (Innovation): From planning to final restoration our innovations enable our customers to deliver a superior solution for their patients, whether for a single tooth or a full arch restoration and even for the most comprised patients. We continue to see great opportunities to improve treatment outcomes and treatment efficiencies; therefore we increased our spending in Research & Development by over ten percent at CER in 2013 versus These investments in R&D are still at an early stage of productivity and customer acceptance, but our integrated treatment workflow approach clearly strengthens Nobel Biocare s innovation leadership as well as its competitive position. Partnering for Life (Customer partnering activities): We focus on three simple objectives in designing partnering activities with our customers: 1) We want our customers to deliver a superior treatment outcome and patient satisfaction. 2) We want our customers to have high treatment acceptance from patients and, 3) We help our customers increase patient traffic to their practice, including patient referrals to laboratories or surgical clinicians. In 2013, we saw our implant fixture growth increase by over 5 percent (CER) as our customers treated more patients. Learning for Life (Training and Education): We have fundamentally re-engineered our approach to training and education in the past two years by placing more resources on hands-on, skill-based training. An example of this was our New York Global Symposium, where over a four-day period, we held over 26 master courses and hands-on sessions involving over 100 trainers and over 2000 participants. Another good example is our Global Course Catalog with over 90 of the world s top clinicians and technicians giving over 100 hands-on training courses. To treat patients better is a skill requiring physical practice. In 2013, we also established the Foundation for Oral Rehabilitation (FOR) in 2013 to help dental professionals stay at the forefront of patient treatment understanding. FOR s primary education tool is web-based learning, reaching thousands of dental professionals efficiently and globally at the pace they wish to learn at. As a new generation of digitally literate dental professionals begin to treat patients, their learning patterns are significantly different to those of the first generation of implant- restoring dental professionals. FOR is designed to meet this learning need and is rapidly proving to be an exciting platform for cutting-edge learning among a new generation of dental professionals. The three growth drivers are supported by a fourth strategic pillar: A more Effective and Efficient Nobel Biocare. We have begun to reshape Nobel Biocare by reallocating operating expenses. Expenditure has been moved away from internal transaction costs toward more customer-focused efforts and growth drivers such as R&D or our sales representatives in growing markets such as the USA, China and India. Our employee number has slightly decreased since 2011, to 2,487 at the end of 2013 from 2,496 a year ago, but this understates the significant reshaping of Nobel Biocare for future growth. We have significantly more people in R&D, sales, and training and significantly less in administration. Our employee turnover has also decreased significantly from above 20% in
15 Nobel Biocare Annual Report 2013 Letter from the CEO to 12% in 2013 (about in line with industry peers) and to mid-single digits in our sales organizations where continuity of the customer relationship is key to revenue growth. We have initiated a series of very specific company-wide programs to reduce waste and to improve quality. We also initiated a program to reduce manufacturing costs and improve upon our high quality standards. I would like to express our gratitude to our shareholders for their trust, loyalty and interest in Nobel Biocare. I would like to also thank our customers and business partners for the fruitful relationship and, I would particularly like to thank our team across the globe for their daily efforts in creating an excellent customer experience. Sincerely, Richard Laube CEO
16 14 Nobel Biocare Annual Report 2013 The dental market The dental market. Facts, trends and dynamics. Facts About 1.7 million licensed dentists worldwide, of which only just over 10% place implants About 10 million patients treated per year with over 12 million implants placed Still very little penetration with implant treatments, in particular for fully edentulous patients (only 1% of missing teeth are treated with implants) due to lack of education of dental professionals at dental college as well as high out-of-pocket treatment cost An estimated 50% of all implants placed are single-tooth restorations, with slightly more in the posterior then in the anterior An estimated 42% of placements are multi-tooth restorations primarily 3-unit bridges and only 8% of all implants placed are involved in full-arch restorations, treating the edentulous patient Trends Increasing awareness of implant treatment especially for edentulous patients (internet, practice advertising) leading this to be the fastest growing segment in the industry Higher demands by dental professional and patients on treatment efficiency and effectiveness (number of visits, graftless solutions, esthetics, function and durability) More proactive direct doctor-to-patient communication Continued increase of implants as a treatment option by dental professionals Increased focus on practice profitability Increasing number of integrated dental clinics where all treatment teams are at one location Dynamics Stable number of about 200 companies offering dental implants, mostly offering components for simple indications Most companies differentiating over price, less and less focus on product innovation Dynamic and growing segment of Digital Dentistry (Treatment planning, Computer Aided Design linked with Computer Aided Manufacturing for prosthetics) with about 100 suppliers and different delivery methods (chair side, in-laboratory or central milling) Increasing share of women in dentistry Rapid growth of total solution providing clinics and corporate dentistry Patient indications Single tooth posterior 3.2 mio (27%) Single tooth anterior 2.8 mio (23%) Edentulous / compromised 1.0 mio (8%) Multiple teeth 5.0 mio (42%) 12 million implants placed in 2012
17 Nobel Biocare Annual Report 2013 Our strategy 15 Our strategy Designing for Life from underperformance to leading growth in 24 months marks the second year of our Designing for Life strategy and significant improvements are visible across all areas of the company and relative to our peer set. While Nobel Biocare was the innovator and pioneer of modern implant-based dentistry since 1965 when Professor P-I Brånemark treated his first edentulous patient, we unfortunately encountered a number of years of business underperformance and loss of market share between 2008 and To rebuild Nobel Biocare and our leadership we activated our strategy in The theme for the first year was titled Brilliant at the basics as we had to re-establish some fundamental activities, processes and business practices to work more effectively with customers. Our priorities in 2012 were: 1) to re-establish innovation as our primary growth driver by creating a valuable innovation pipeline, 2) to redesign our customer efforts from selling transactions to supporting our customers and helping them grow their practice or laboratory, 3) to redesign organizational processes and work patterns that led to inefficiencies. Our results in 2012 brought us more or less in line with our peers was our second year of Designing for Life. Not only did we close the gap, but we opened a modest lead in revenue growth relative to peers. To our first three strategic pillars from 2012, we added a fourth pillar: Learning for Life. As we observed customer growth we realized those clinicians and laboratories who received more skill based training to perform better restorations for their patients were treating more patients and growing their revenue will be our third year of Designing for Life and we are continually improving, learning and becoming more effective and efficient in helping our customers to grow. Nobel Biocare s mission Passionate and proud about making a real and lasting improvement in patient s quality of life Nobel Biocare s contribution Help more customers treat more patients better with our superior products and solutions Our performance objective Grow market share profitably Four strategically integrated pillars Designing for Life Superior innovation... beyond products Partnering for Life Customer-tailored business-building activities Learning for Life Exciting training, education & activation (TEA) programs Organizational efficiency and effectiveness Continual improvement
18 16 Nobel Biocare Annual Report 2013 Our strategy The strategic pillars for 2014 build on what works Designing for Life: Superior innovation beyond products Our aspiration is to improve quality of life for patients through excellence in implant-based dental restorations, designing and creating products, components or software, integrated in an efficient workflow of such superior design and quality that the treatment lasts for the life of the patient.in short, to give patients fully functional and natural-looking dental restorations that aspire to last a lifetime with a safe, affordable treatment process that is kept as short as possible. Our range of products and solutions is all designed to fulfill various requirements that help customers treat more patients better: Our portfolio is superior in many respects and, from a single-tooth posterior restoration to the most complex total oral rehabilitations, there is virtually no patient we cannot help our customers to treat. We have competitive advantage in full-jaw graftless restorations, anterior esthetic restorations, and in treatment productivity. The integration of the fully integrated and more efficient workflow is the key to achieving our mission. We develop solutions that support the core steps of the entire treatment workflow from the initial consultation to post-treatment care. We are also constantly working to improve the efficiency of the entire treatment workflow and to make the treatment team more effective and efficient. Our digital tools enable more efficient treatment. NobelClinician is emerging as the premier implant and restorative planning software and is available also on Mac, the preferred computer platform for many dentists. We have distributed over 6,000 licenses to enable customers to place our implants more accurately and in optimum positions for superior restorations. NobelConnect enables superior teamwork among the surgical clinician, the restorative clinician and the laboratory producing the teeth by sharing the same patient treatment plan. The new NobelCommunicator app allows the patient to review their treatment plan for greater understanding and treatment acceptance. We have also extended our conical connection implant portfolio. The implants lines with this more advanced connection are growing faster than the other implant lines in the portfolio and will soon represent the majority of our implant sales. On our Computer Aided Design (CAD)/Computer Aided Manufacturing (CAM) individualized business, we have continued to open our system to receive CAD files to produce superior restorative components from more sources. We opened our second Scan and Design center focusing initially on components for full-arch restorations such as overdenture bars. We can now receive CAD files from 3Shape scanners producing NobelProcera customized abutments. This will effectively triple the number of scanners able to send CAD files to our milling centers. We have introduced our new NobelProcera 2G Scanner which can dramatically improve laboratory production efficiency as it cuts scan time in half and requires significantly One integrated treatment workflow, countless benefits One integrated treatment workflow*, countless benefits. NobelConnect Clinical diagnostics and treatment acceptance Digitizing prosthetic information Treatment planning Communicate treatment plan Production of surgical template Implant surgery Prosthetic design Prosthetic delivery Restoration placement The first step to treatment success: A (CB)CT scan Take a scan of the complete dental Clinical arch. Just a standard (CB)CT scan is fine. Clinical pictures can be viewed in NobelClinician. Obtain treatment acceptance before diagnostics making further investments. and treatment acceptance Create a model surface scan Take a detailed look at the soft tissue with the NobelProcera 2G System s Digitizing precise model scan. Want to see the esthetics? There s also option to scan diagnostic tooth setup. prosthetic information Implant planning based on the facts Visualize the patient s (CB)CT data together with the intra-oral situation thanks to NobelClinician s smart Treatment fusion technology. Immediately see what a patientplanning look like. specific surgical template would Effectively explain the treatment plan Collaborate and communicate with your treatment partners through Communicate treat- the NobelClinician Viewer, via the ipad app. ment plan NobelClinician Communicator app or by sending the treatment plan report. Help your patient understand with 3D images and clinical pictures, all shown via the the NobelClinician Communicator Experience enhanced precision of fit Place implants precisely with a custommanufactured surgical template that is Production unique to your treatment plan. of surgical template Benefit from top quality, high accuracy, and prompt delivery every time thanks to our centralized production process. More predictable implant placement Predictable restorative outcome Every smile is different. Get the optimal Choose between guided pilot drilling result with individualized prosthetics. only or fully guided implant insertion. Prosthetic Enjoy maximum design flexibility and Record and document final implant save time with easy-to-use CAD tools. torque values or whatever surgical information you need with OsseoCare Pro. your treatment outcome by using Further increase the predictability of design prosthetic data that is aligned to your treatment plan. Go straight to the source of optimal restorations. Integrate directly with NobelProcera production facilities. with NobelGuide Implant surgery Consistent precision of fit Centralized production in state-of-theart manufacturing sites which comply with medical device standards. Optimum material and manufacturing processes for maximum predictability Prosthetic in quality and precision of fit. delivery Achieve optimal esthetics and function Choose the best possible restoration from a comprehensive range of pros- Restoration thetic solutions. placement Give your patients a natural-looking restoration that s designed to last a lifetime. Our superior products and solutions are designed to give patients a treatment result that s both functionally and esthetically excellent. *For partially edentulous patients only.
19 Nobel Biocare Annual Report 2013 Our strategy 17 less handling and training to operate. Today over 25 percent of Nobel Biocare implants placed have a screw-retained Nobel- Procera CAD/CAM component as part of the restoration as we increasingly offer an integrated and superior treatment solution. The digitization of our world has also changed the way dental professionals, can, and should work, Digital dentistry opens many opportunities to innovate and improve the treatment workflow for a successful outcome for every patient treated. It allows dental professionals to treat patients that they could not think of treating only a few years ago. Given the low penetration of treatments with implants compared with traditional cement-retained crowns and bridges, we are convinced there is still significant innovation and improvement potential with regards to treatments with dental implants. This is why we drive innovation beyond actual products to many areas of the treatment process. A more predictable outcome and the optimization of the treatment flow are the ultimate value-add and consequently lead to higher profitability for our customers. We identified over 400 steps in the process, starting with the initial patient consultation, diagnosis, treatment planning, treatment modality, individualized CAD/CAM restorative components, interdisciplinary treatment cooperation, handling and follow up. There are even more if we include proper patient education to raise treatment acceptance. As an example, some years ago the treatment modality for an edentulous patient would have included bone augmentation and would have required months from consultation to a final prosthetic restoration. Today, with Nobel Biocare s All-on-4 treatment concept the complete procedure time can be accomplished within 4-8 weeks and with higher success rates and patient satisfaction. To drive our competitive advantage in innovating the treatment workflow, we have significantly increased our R&D efforts in 2013 and increased investments by over ten percent compared to the year before. To remain focused, we apply three principles before we initiate any innovation project and it must address at least one of nine relevant clinical areas: Partnering for Life: Customer-tailored business-building activities We want to support dental professionals in increasing the patient flow and developing their practice. When our customers increase market share of patients, we increase our market share of components. We offer them a toolbox of initiatives and activities to make the workflows more efficient and to increase the number of referrals. We also show them how to use networking platforms, study clubs and esthetic alliances. Design principles for increased efficiency and efficacy Innovation themes 1 Minimally invasive Patient focused Innovation 2 Immediate function 3 Prosthetics / esthetics & function 4 Treatment of the fully edentulous 5 Osseointegration & bone preservation Clinically relevant Evidence based 6 Soft tissue health 7 Ease of use 8 Affordability through efficiency 9 Biologics
20 18 Nobel Biocare Annual Report 2013 Our strategy Our customers desire a partner to grow their practice with, a partner that can help them develop their practice and laboratories over many years, even decades. With this in mind, we have been re-engineering our country commercial organizations for the past two years, moving from a more transactionand price-driven organization to one where our teams can now partner with customers to help build the customer s practice. We have focused on three simple objectives in designing partnering activities with our customers: we want our customers to deliver superior patient treatment satisfaction, we want our customers to have high treatment acceptance from their patients and we help our customers increase patient flow to their practice, including patient referrals to laboratories or surgical clinicians. In short, we help our customers treat more patients better and they pay a premium, not only because of our superior products, but also because of our superior support. This support goes well beyond the day-to-day service levels expected by customers and is very valuable to them. It has been difficult to train the organization to this standard of performance, and there is still much work to be done, but this partnering is now a true competitive advantage for Nobel Biocare. Learning for Life: Exciting customers with skills- and knowledge-buidling programs Our comprehensive training program supports dental professionals along every step of the treatment workflow and also at every stage of their professional development. We have also fundamentally changed our approach to training and education in the past two years by placing more resources and holding more courses on hands-on, skills-based training and away from podium- and lecture-based education. We believe in peer-to-peer training through renowned expert professionals worldwide. An example of this was our New York Global Symposium, where over a four-day period, we held over 26 master courses and hands-on sessions involving over 100 trainers and over 2,000 participants. While we did hold lecture sessions, the heart of the program was smaller hands-on training and discussions. Another good example is our Global Course Catalog with over 90 of the world s top clinicians and technicians giving over 100 hands-on training courses. We have four areas where this training is supported: Diagnosis and treatment planning Initial surgical procedures Advanced surgical procedures and, CAD/CAM techniques and prosthetics. This focus on hands-on training is well integrated with our first two growth drivers and again helps our customers learn new skills and techniques to treat more patients better. We have also established the Foundation for Oral Rehabilitation (FOR) in 2013 to help dental professionals stay at the forefront of patient treatment understanding. FOR s primary education tool is web-based learning, reaching thousands of dental professionals efficiently and globally at a pace they wish to learn at. As a new generation of increasingly digitally literate dental professionals begin to treat patients, their learning patterns are significantly different than the first generation of implant restoring dental professionals. FOR is designed to meet this learning need and is rapidly proving to be an exciting platform for cutting-edge learning among a new generation of dental professionals so they too can treat patients better. Total quality execution AND improved organization efficiency Our ultimate performance objective is to rebuild market share profitably and create shareholder value. Subsequently, we are constantly reviewing and improving our processes as well as the allocation of our resources. We are also constantly reducing the complexity of our organization and streamlining processes while adjusting our resources to the changing market environment. The required changes and business improvements are done in such a way so as not to disrupt the efforts made with our growth drivers. All in all, over 300 positions, or over 10 percent, of Nobel Biocare positions, have been reassigned in the past 24 months. Efficiency gains can only be materially and sustainably executed and realized when the growth pillars are in place and are beginning to work. We achieved this in 2013 with accelerating revenue growth. The first benefits from the process improvements resulted in an improvement of the underlying cost/ revenue ratio enabling the acceleration of our growth driver initiatives.
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