2019 Annual BEYOND Report CONTINUITY HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 2
Contents Beyond continuity
With the Straumann Group delivering double- 3 HIGHLIGHTS digit revenue growth for five consecutive 7 LETTER TO SHAREHOLDERS years, the question is, can we sustain this 14 MANAGEMENT COMMENTARY continuity in the years ahead? 15 STRAUMANN GROUP IN BRIEF 18 STRATEGY IN ACTION In 2019, we took a number of key steps and 21 PRODUCTS, SOLUTIONS AND SERVICES created further opportunities that we believe 25 INNOVATION will continue the success of our company 27 MARKETS and enable us to achieve more in the future. 36 BUSINESS PERFORMANCE (GROUP) The imagery of surfers surmounting wave 41 BUSINESS PERFORMANCE (REGIONS) after wave, seeking bigger opportunities and 47 BUSINESS PERFORMANCE (FINANCIALS) enjoying the thrill they bring illustrate perfectly 49 SHARE PERFORMANCE our ambition to go ‘beyond continuity’. 51 RISK MANAGEMENT 59 SUSTAINABILITY REPORT 85 CORPORATE GOVERNANCE 117 COMPENSATION REPORT 135 FINANCIAL REPORT 193 APPENDIX 2019 Annual2019 Report
Straumann’s Annual Reports for online users
Straumann Group Straumann http://annualreport.straumann.com HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 3 Key figures
Performance highlights
Group key figures (in CHF million)
2019 2018 Change (%) Revenue 1 596 1 364 17 Gross profit 1 200 1 019 18 Core¹ 1 207 1 028 17 + % REVENUE17 GROWTH EBITDA 481 395 22 Core¹ 505 404 25 Operating profit (EBIT) 387 343 13 Core¹ 432 348 24 Net profit 308 278 11 Core¹ 338 293 15 + % Cash generated from operating activities 378 277 36 13EBIT Capital expenditure 150 110 36 Free cash flow 230 169 36 Basic EPS (in CHF) 19.33 17.24 12 Core¹ 21.21 18.16 17 Employees (at year end) 7 590 5 954 28 + % 36CASH FROM Notes OPERATING ACTIVITIES 1 In accordance with the new directive of the Swiss Stock Exchange, the Group has started to implement the reporting of alternative performance measures (APM), which facilitates the assessment of the underlying business performance but may differ from IFRS reported figures. The ‘core’ figures used in this document exclude one-time M&A effects, exceptional pension-plan items, restructuring expenses, amortization and impairment of goodwill and acquisition-related intangible assets. ‘Before-exceptional results’, which were used historically, excluded the same non-recurring items but not acquisition-related asset amortizations. A reconciliation table of the reported and core income statement with additional descriptions is provided on p. 137 f. of the Financial Report. The figures for 2018 in the table above have been adjusted accordingly. 2019 Annual2019 Report Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 4 Key figures
Revenue (in CHF million) Operating and net profit (in CHF million) More on p. 36 ff. More on p. 37 ff.
5-year CAGR: 15% in CHF (15% organic growth) 1600 1400 1200 1000 800 % 5Y15 ORGANIC REVENUE 600 GROWTH 400 200 0 CHF 2015 2016 2017 2018 2019 2019
Reported revenue er g r fi e r fi m 387EBIT – DOUBLED OVER 5Y Profitability (in %) Cash flow and investments (in CHF million) More on p. 48 ff. More on p. 39 ff.
60 400 350 50 300 > bn 1INVESTED IN 40 250 THE FUTURE OVER 5Y 30 200 150 20 100 10 50
2019 Annual2019 Report 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Return on equity (ROE) Operating cash ow Acquisitions & participations Return on capital employed (ROCE) Capital expenditure Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 5 Key figures
Organic growth by region
All our regions achieved double-digit organic revenue growth, fuelled by emerging markets like Brazil, China, Russia, and Turkey. The largest regional contribution to growth came from our biggest region, EMEA, which grew 13%. Asia/Pacific (+22%) continued to grow the fastest, while North America (+20%) almost achieved its highest growth rate in 15 years, and Latin America (+17%) performed exceptionally in an unstable environment.
+28%
NORTH AMERICA REVENUE +22% +20% +20% +20%CHF 482m +17% REVENUE +15% ASIA/PACIFIC +13% CHF 305m REVENUE +28% CHF 670m +22% +20% +20% +20% +28% LATIN AMERICA +17% 2018 2019 2018 2019 REVENUE 2018 2019 2018 2019 +22% +15% +28% +20% +20% +20% CHF 140m +13% +17% EUROPE, +15% MIDDLE EAST +22% +20% +20% +20% +13% & AFRICA +17% 2019 Annual2019 Report +15% +13% 2018 2019 2018 2019 2018 2019 2018 2019
2018 2019 2018 2019 2018 2019 2018 2019 Straumann Group Straumann 2018 2019 2018 2019 2018 2019 2018 2019 HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 6 Key figures
Share information
Relative share price development (in CHF) Total shareholder return (in %) 1000 80 70 900 60 50 800 40 30 700 20 10 600 0 –10 500 –20 400 2015 2016 2017 2018 2019 Straumann SMIM Total Return Index 300
200
Share information (in CHF) 100 2015 2016 2017 2018 2019 2019 2018
Straumann Swiss Mid Cap index (SMIM) adjusted STOXX® Europe 600 index (in CHF) adjusted Earnings per share (EPS)¹ 21.21 18.16 Ordinary dividend per share 5.75² 5.25 Payout ratio¹ 27% 29% Share price at year end 950.40 618.00
1 Based on core results. 2 Payable in April 2020 subject to shareholder approval. 2019 Annual2019 Report Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 7 Letter to shareholders
Dear Shareholder,
In 2019, the Straumann Group achieved double-digit growth for a fifth consecutive year, lifting reve- nue by 17% to CHF 1.6 billion. Excluding external growth and currencies, the organic increase also Growth of 17% & gross profit of amounted to 17%, clearly exceeding our initial target of revenue growth in the low teens. Fuelled by CHF 1.2 billion enabled us to invest strong top-line growth, gross profit rose to CHF 1.2 billion (75.6% margin core), enabling us to invest further in faster, better further in innovation, research and development with the goal of providing faster, better treatments with additional predictability, comfort and convenience. We also continued to invest in people treatments. (p. 66 ff.) and production (p. 74 ff.). 2019 Annual2019 Report Despite these developments and the increased share of lower-margin products in our portfolio, we achieved our objectives for improved profitability, as core EBITDA, EBIT and net profit margins reached 31.6%, 27.1% and 21.2%, respectively (29.6%, 26.9% and 21.5% in 2018; see note on page 3 for definition of core). Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 8 Letter to shareholders
To expand our value business and to secure key technologies and services, we acquired / incorpo- rated several companies around the world (see p. 40). Collectively, these investments amounted to Cash from operating activities approximately CHF 102 million. We also invested heavily to expand manufacturing capacity, which surged to CHF 378 million and free together with investments in information technology and other fixed assets, resulted in capital cash flow rose to CHF 230 million. expenditures of CHF 150 million – our highest level to date. Notwithstanding, cash from operating activities surged to CHF 378 million (CHF 277 million in 2018) and free cash flow rose to CHF 230 mil- lion (CHF 169 million in 2018).
IMPRESSIVE GROWTH IN ALL OUR REGIONS AND BUSINESSES Building on strong prior year performances, all our regions achieved double-digit organic revenue growth, fuelled by emerging markets like Brazil, China, Russia, Turkey. With growth exceeding 20% for a third consecutive year, Asia/Pacific (+22%) continued to be our fastest performer. North Amer- ica (+20%) came close to achieving its highest growth in 15 years, while Latin America (+17%) deliv- ered an exceptional performance in an unstable environment. Europe, Middle East & Africa climbed a solid 13% and, being our largest region, contributed the largest share of our growth (see p. 41 ff.).
By business, more than half of our growth came from implants, driven by robust demand for pre- mium solutions and the expansion of our value brands. Our innovative Straumann BLX implant attracted customers from competitors and sold more than 100 000 units in its first year on the We won customers across the market. Biomaterials sales continued to thrive, while dynamic sales expansion in clear aligners board, reflecting the attractiveness added to the challenges of meeting demand and building additional capacity for launches outside of our solutions. North America.
One set back in 2019 was the fire at Dental Wings in Montreal, which fortunately caused no casual- ties but severely disrupted our scanner business. However, thanks to our distribution and cobrand- ing agreements with 3Shape, Carestream and Medit, we continued to build our position in this fast- growing, strategically important area.
2019 Annual2019 Report We won customers across the board, reflecting the attractiveness of our solutions, the power of our marketing and the effectiveness of our sales approach. Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 9 Letter to shareholders
MARKETS, ENVIRONMENT – TRENDS Driven by demographics, affordability, awareness and esthetics, the global market for implant den- Once again, we outperformed the tistry continued to grow in the mid-single-digit range and is worth approximately CHF 4.6 billion 1. It market by a factor of three and offers considerable potential and is expected to outpace the dental market in general. Once again, extended our leading share to 26%. we outperformed by a factor of three and extended our leading share to 26%, lifted by organic growth in the premium and value segments as well as new launches and acquisitions.
Our second largest market, clear aligners, is also highly attractive and, having grown at around 20%, is now estimated to be worth approximately CHF 3.2 billion (see p. 32). Having entered this market in 2017, our share is modest but expanding dynamically with good prospects. Entering this field is one of several initiatives to broaden our scope, that have more than trebled our addressable market in the past three years to approximately CHF 14 billion (see pp. 20, 33). We created 830 new jobs A GROWTH STRATEGY TO TAKE US BEYOND CONTINUITY worldwide. The key trends we observe in dentistry are affordability, consolidation, digitalization, education, esthetics, gender shift, innovation and prevention. Each of them is an opportunity for the Strau- mann Group. To address them and our various markets, our strategy is built around three key priori- ties (see p. 18) and is designed for sustainable success.
DRIVING A HIGH PERFORMANCE CULTURE AND ORGANIZATION Throughout the past six years, our first priority has focused on culture and the ‘player-learner’ mind- set that drives results, creates value and enables us to excel. In 2019, more than a thousand col- leagues around the world took part in Cultural Journey workshops. In addition, the two top manage- ment tiers completed a new program to help them reach their full potential, inspire high performance, and drive organizational culture. Our annual global pulse-check survey continued to show high levels of engagement (>90%) and support for the Cultural Journey (80%) (see p. 66 f.).
With our business expanding, the size, diversity and spread of our team increased significantly. We
2019 Annual2019 Report created 830 new jobs worldwide, and added 800 more through acquisitions, increasing our work- force to approximately 7600. To build, manage, support, and develop this fast growing team, we continued to focus on leadership while introducing new digital processes and platforms (see p. 66 ff.).
We have also focused on career development and key succession plans. The CEO transition from Continuity: the CEO transition from Marco Gadola to Guillaume Daniellot
Straumann Group Straumann Marco Gadola to Guillaume Daniellot has gone smoothly, as have the other executive management has gone smoothly. HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 10 Letter to shareholders
changes (see p. 108 ff.). By developing internal talents and bringing in experience and diversity from leading multinational firms, we have fostered continuity and looked beyond. Behind our excellent results and progress in 2019 are dedicated The most significant organizational change has been to separate Digital and Orthodontics into sepa- people who deserve recognition rated dedicated business units, reflecting their strategic importance and high growth potential. At the same time, we raised our emphasis on digital transformation and data management internally. and reward.
Behind our excellent results and progress in 2019 are dedicated people, whose outstanding perfor- mance and achievements deserve recognition and reward. We met the majority of our short-term incentive targets across countries and businesses, resulting in a bonus payout at or above target for eligible employees. We also surpassed the 3-year objectives for total shareholder return (+14% CAGR) and EBIT growth (CHF +50 million), which determined the long-term incentive (LTI). As a result, our senior management received a capped maximum award for 2019 (see p. 129 ff.).
TARGETING UNEXPLOITED GROWTH MARKETS AND SEGMENTS Our efforts to target unexploited growth markets and segments were intense and fruitful. We opened new subsidiaries in Taiwan and Croatia, increasing our geographical reach and proximity to customers. To increase affordability, we continued the global rollout of To further penetrate the fully-tapered implant segment, which accounts for roughly a quarter of the 27 million dental implants placed annually, and to offer faster treatment options, we launched Neodent and strengthened our Straumann BLX (see p. 23) and a suite of immediacy solutions. We also extended our range of portfolio of value brands. ceramic implants.
To increase affordability, we continued the global rollout of Neodent and strengthened our portfolio of value brands, acquiring Anthogyr and Zinedent, in addition to increasing our ownership of Meden- tika and investing in Warantec. We also developed a completely new brand for the lower value seg- ment (see p. 24). 2019 Annual2019 Report In the corporate segment, we secured further partnerships with leading dental service organiza- tions (DSOs) in the US and Europe and began to intensify our focus on emerging private chains in China. DSOs now account for roughly a tenth of our business. Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 11 Letter to shareholders
BECOMING THE TOTAL SOLUTION PROVIDER IN ESTHETIC DENTISTRY Our strategy to provide complete solutions for replacement and corrective dentistry addresses the Our strength in innovation and general desire for dental esthetics as well as customer preferences for convenient, comprehensive, ability to create partnerships efficient solutions from one supplying partner. enabled us to expand our Our strength in innovation and ability to create partnerships enabled us to expand our differenti- differentiated offering in 2019. ated offering in 2019. In addition to complementing our extensive ranges of premium and value implant systems, we expanded our digital solutions to support a fully digital workflow. We entered further agreements to cobrand and distribute third-party scanners and to promote our DWOS system as the preferred software. To complement our clear aligner business, we acquired a design / planning company as well as a specialist developer of thermoplastics, which provides us with a top-performance material and entry into the orthodontics material supply business.
CONTINUED COMMITMENT TO LONG-TERM VALUE CREATION We remain committed to sustainable development and value creation. This means running our operations efficiently and using natural resources effectively to avoid waste and to minimize our impact on the environment (see p. 78 ff.). Our commitment also encompasses our charitable proj- ects that offer dental healthcare to underprivileged people in 14 countries (see p. 70 ff.).
The continuing growth of our markets, our strong business performance and anticipation of future prosperity were reflected in the Group’s share price and market capitalization, which rose to a record high of more than CHF 15 billion. By year end, the share price had climbed to more than CHF 950 and In 5 years our revenue and profits closed 53.8% up from the prior year, while the SMI and SMIM indices closed the year up 26.0% and have more than doubled. 31.7% respectively. Straumann was the fourth-best performing share in the SMIM universe in 2019 and the best performer over the past four years.
Based on the positive results in 2019 and the favourable outlook, the Board of Directors proposes a further dividend increase to CHF 5.75 per share, payable on 15 April 2020. 2019 Annual2019 Report OUTLOOK (BARRING UNFORESEEN EVENTS) Over the past five years, our revenue and profits have more than doubled, and the size of our global team has more than tripled. Having outperformed our market year after year, the question arises, can we sustain this continuity and go beyond? We are confident that we can for following reasons: Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 12 Letter to shareholders
We have a strong culture and a highly engaged team focused on performance with high-caliber experienced leaders. The market for clear aligners offers huge potential and we have all the The market for tooth replacement offers significant opportunity. In premium, we have only just components to succeed. launched Straumann BLX in initial markets and we have a strong innovation pipeline. In value, we have one of the broadest ranges covering all price tiers in most markets. We also have the capabili- ties to expand these brands internationally.
The market for clear aligners offers huge potential and we have all the components to succeed, including a range of intra-oral scanners, which are a key to the digital ecosystem. Barring unforeseen events, we expect the global dental implant market to continue growing at about 4 –5% in 2020, and We are confident that we can are confident that we can continue to gain share by achieving organic revenue growth in the low continue to outperform and gain double-digit percentage range. The expected organic revenue growth will support further invest- ments in Sales & Marketing and Research & Development, resulting in a stable core EBIT margin, market share. excluding the impact of currency fluctuations and the coronavirus.
We would like to thank all our employees for their commitment, engagement and hard work in 2019. On behalf of the Board, we also thank you, our shareholders, for your ongoing support and confidence in our company.
Yours sincerely,
2019 Annual2019 Report Gilbert Achermann Guillaume Daniellot Marco Gadola Chairman of the Board Chief Executive Officer Chief Executive Officer of Directors (as of 1 Jan. 2020) (until 31 Dec. 2019) Notes and references 1 Decision Resources Group 2017–18, iData 2017 and Straumann bottom-up 14 February 2020 estimates in 70 countries. Straumann Group Straumann FEATURE STORY 13 Confidence to takedifferent approaches
BEYOND CONTINUITY The International Dental Show in Cologne for customer hospitality and interactive lectures AT CONGRESSES attracted 160 000 visitors from 166 nations in given by experts and key opinion leaders, cover- 2019, underscoring its status as the world’s larg- ing a wide range of topics from immediacy and Confidence to take est dental event and confirming that dental con- full-arch restorations to ceramic implants, intra- gresses and shows continue to be an effective oral scanning, 3D-printing, clear aligners, artifi- different approaches marketing platform. The IDS has been a major cial intelligence and next-generation dentistry. event for our company over three decades and in 2019, we used it to launch key innovations like From the Arena, we broadcast more than 50 live Straumann BLX and SNOW – in addition show- sessions and lectures via the internet, attracting
2019 Annual2019 Report casing more than a hundred new items. thousands of participants online. This new con- cept is a further example of moving beyond Our key brands extended across seven large continuity. stands but the Straumann booth was in a league of its own. At its heart was the Arena of Confi- Watch the linked video
Straumann Group Straumann dence, which simultaneously provided a venue MANAGEMENT COMMENTARY
15 STRAUMANN GROUP IN BRIEF 18 STRATEGY IN ACTION 21 PRODUCTS, SOLUTIONS & SERVICES 25 INNOVATION 27 MARKETS 36 BUSINESS PERFORMANCE (GROUP) 41 BUSINESS PERFORMANCE (REGIONS) 47 BUSINESS PERFORMANCE (FINANCIALS) 49 SHARE PERFORMANCE 51 RISK MANAGEMENT HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 15 Straumann Group in brief
Straumann Group in brief Our business and vision
WHO WE ARE, WHAT WE DO AND WHERE WE ARE HEADED Headquartered in Basel, Switzerland, the Straumann Group is a global leader in esthetic dentistry. It unites global and international brands that stand for excellence, innovation and quality in replace- ment, corrective, preventive and digital dentistry, including Anthogyr, ClearCorrect, Dental Wings, Medentika, Neodent, and Straumann, as well as other fully or partly-owned companies and partners.
The Group develops, manufactures and supplies dental implant systems, biomaterials, CADCAM prosthetics, digital equipment, software, clear aligner systems and various materials for dental applications. Its principal production sites are in Brazil, France, Germany, Switzerland and the US.
As a total solution provider for esthetic dentistry, the Group takes a holistic approach, including training, support and a wide range of services to dental practitioners, clinics and laboratories all over the world. It is recognized as a leading innovator and works together with universities, clinics, research institutes, networks and communities to enhance the standard of patient care. Through Straumann Group is a global leader in esthetic dentistry. Beyond creating smiles, our aim is to restore confidence in patients around the world. unique collaborations with academic networks like the International Team for Implantology (ITI) and the Latin American Institute of Dental Research and Education (Instituto Latino Americano de Pes- quisa e Ensino Odontológico ILAPEO), the Group supports research and offers training and education to dental professionals.
With a team of approximately 7600 people, the Group is present in more than 100 countries around the world through a broad network of subsidiaries and distribution partners. Our vision: More than creating smiles, restoring confidence – we Straumann’s heritage stretches back to the early 1950s, although the company in its present form with an exclusive focus on dentistry was established 30 years ago. Over the years, it has enabled mil- want to be the partner of choice
2019 Annual2019 Report lions of people to smile and laugh without the stigma of ugly or missing teeth. By restoring the abil- in esthetic dentistry. ity to eat and enjoy food, it has helped to restore health, self-esteem, well-being and confidence – literally changing lives. Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 16 Straumann Group in brief
OUR VISION Our company home Confidence relates to all our activities; it is built on trust, integrity, respect, communication, transpar- VALUE CREATION ency, collaboration and delivering what we promise. To our customers, confidence means peace of
mind, because our solutions are predictable and durable. To our employees, it means secure, rewarding What we want VISION to achieve jobs. To our shareholders, it means sustainable returns from a highly ethical business. For the commu- More than creating smiles, nities in which we operate, confidence means that we care for the world around us as a responsible restoring condence – corporate citizen. For all our stakeholders it means that the Straumann Group is a reliable partner. we want to be the partner of choice in esthetic dentistry
We want to be the first place that people come to do business, to find genuine solutions, to turn
ideas into reality, to learn, master and succeed and to improve lives. This is what being the partner CULTURE STRATEGY Player-learner Strategic of choice means for us. How we will achieve it mindset priorities Core behaviors & initiatives A PLAYER-LEARNER MINDSET, LED BY EXAMPLE The Group’s unique culture is a key to its success. It pivots on the mindset of players and learners, who inspire trust, are energized and embrace change, listen, find out, share, collaborate, take risks, Making vision a reality find solutions, learn by doing, encourage and celebrate. The way to a sustainable future is mapped out in our three ‘strategic priorities’ (see p. 18 ff.), which form the backbone of our strategy. Making it happen is a matter of culture and behavior. Thus, vision, strategy and To help our employees achieve their best, we strive for a culture that builds trust and collaboration, behavior form the figurative building of our company home. fosters diversity and inclusion, promotes learning and engagement, and encourages people to take responsibility and ownership. To support this, we have a set of core behaviors that apply for every- one in the Straumann Group and which are listed in our Code of Conduct.
OUR BRAND STRAUMANN GROUP – UNITING GLOBAL EXCELLENCE IN DENTISTRY Our journey into new segments, geographies and technologies has turned Straumann into a global group of national and international brands, companies and partners. The Group’s umbrella brand pro- vides a common identity that generates value for the individual brands, companies and partners.
2019 Annual2019 Report Straumann is the leading premium brand in implant dentistry, renowned for innovation, quality, clinically proven long-term success, support, expertise, education and peace of mind. At the same time, the Group is a global leader in the non-premium segment, making high quality implant and
prosthetic solutions more affordable to a broader population through our Anthogyr, Equinox, We strive for a culture that builds trust and collaboration, fosters Medentika, Neodent, T-Plus, Warantec and Zinedent brands. diversity and inclusion. Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 17 Straumann Group in brief
In these and its other businesses, including biomaterials, digital dentistry and orthodontic clear aligners, the Group is committed to being the partner of choice.
UMBRELLA BRAND
GLOBAL BRANDS
LOCAL BRANDS
The Straumann Group unites various global and local or regional product brands with a number of fully or partially owned companies, as well as independent partners, which provide technology and manufacturing expertise. 2019 Annual2019 Report Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 18 Strategy in action
Strategy in action Esthetic dentistry: beyond tooth replacement
With our focus continuing on esthetic dentistry, our three strategic priorities remained unchanged in 2019. They translate into a number of clearly defined initiatives and deliverables, which are continu- ously tracked and adjusted as necessary. They are reflected in the investments, launches, pipeline, partnerships, achievements and other activities featured in this report (see following examples). The Group’s continuing strong growth and outperformance confirm that our strategy is appropriate.
We continue to drive a high performance culture, to embrace change, raise bars and focus on execution. The leadership succession plans that we worked on in 2019 were designed both to ensure continuity and yet also to drive change. By filling the CEO and two other EMB positions with talented internal can- didates we have achieved a smooth transition and continuity in our strategy and culture. At the same time, we have brought in experience from other industries to challenge and broaden our thinking.
STRATEGIC PRIORITIES UNCHANGED Our strategy addresses the increase in society’s desire for esthetics. DRIVE OUR HIGH PERFORMANCE STRAUMANN GROUP CULTURE AND ORGANIZATION Culture is at the heart of execution; it drives results and creates value, which is why it has remained our key priority.
Examples of this strategic priority in action in 2019 Culture • Continued high investment in Cultural Journey program (see p. 66) • Cultural Journey 2.0 initiated to help leaders reach full potential, inspire high performance, and drive organizational culture through others (see p. 67) • Good progress confirmed in annual staff survey (see p. 66 ff.) People • Global team expanded to support business growth (see pp. 66 ff.) • CEO, EMB & Board succession planning: smooth transition and continuity (see p. 108) We continue to drive a high • Increased investment in People Management & Development (see p. 66 ff.) performance culture, to embrace 2019 Annual2019 Report Operational excellence • Investments in production expansion (see p. 74) • Ensuring readiness for European Medical Device Regulation (MDR) (see p. 58 ff.) change, raise bars and focus • Operational excellence program • Program / initiatives to optimize sales channel approach on execution. Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 19 Strategy in action
TARGET UNEXPLOITED GROWTH MARKETS AND SEGMENTS Our efforts to target unexploited growth markets and segments were intense and fruitful. In addi- tion to opening new subsidiaries, we made further inroads into the non-premium implant segment.
Examples of this strategic priority in action in 2019 Geographic reach • Distributor buyouts; new subsidiaries in Taiwan and Croatia (Adriatic regional hub) • Joint venture to serve the dental communities in Hong Kong and Macau Non-premium • Investment in Warantec; increased ownership of Anthogyr, Medentika, Zinedent • International roll-out of Neodent, Anthogyr and Medentika • Expansion of multiplatform prosthetics for third-party implants • Development of nuvo, a completely new brand targeting the lower value segment Corporate dentistry • Partnerships with the top implant-focused DSO chains in the US and Europe • Initial steps into DSO business in China 3D-printing – an exciting technology that is driving change in the dental industry.
BECOME THE TOTAL SOLUTION PROVIDER FOR ESTHETIC DENTISTRY The increase in society’s desire for dental esthetics and in customer preferences for a single supplier are reflected in our strategy to providing complete solutions that cover replacement and corrective dentistry. Our strength in innovation and our ability to create partnerships enabled us to expand our offering in 2019.
Examples of this strategic priority in action in 2019 Differentiating solutions • BLX implant system & immediacy suite launched • Two-piece fully-ceramic implant launched Our strength in innovation and our • First products made by ceramic injection moulding launched (see p. 35) ability to create partnerships Digital and orthodontic • Clear aligner business launched in Brazil, Europe and China dentistry • Further agreements to cobrand and distribute third-party scanners enabled us to expand our offering • Agreements to link / integrate DWOS as preferred software in third party scanners • Entry into thermoplastics and 3D-printing materials businesses in 2019. • Acquisition of clear aligner design / planning company
2019 Annual2019 Report Biomaterials • Continued roll-out of botiss and Nibec products Preventive dentistry • Pilots to assess implant health and other products in selected GP markets Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 20 Strategy in action
STRATEGY DELIVERS SUSTAINABLE GROWTH Through internal development, acquisitions, investments and partnerships, we have significantly We have set the stage for expanded our addressable market, which has more than trebled over the past three years (see sustainable future growth and will below) and still offers considerable growth potential (see p. 27 ff.). We have set the stage for sustain- able future growth and will continue to create opportunities that are aligned with our strategic pri- continue to create opportunities. orities, constantly vigilant and agile to adapt to a fast-changing environment.
Straumann Group’s expanding addressable market
Milestone Variobase BLT Neodent Lab and chairside Clear BLX launches/events: abutment implant consolidation CADCAM systems aligners implant
Biomaterials 2012 201 2019 Non-premium Premium implants parallel-walled implants
Premium Premium Premium Clear aligners, fully-tapered apically-tapered fully-tapered CADCAM equipment, prosthetics implants implants implants and related materials
Total market: CHF 3.4 bn Total market: CHF 4.0 bn Total market: CHF 14 bn
PriorA r to e e the acquisition ot a r of e e Neodent in mid-2012, we focused on a market worth CHF 3.4 billion, of which we were able to
2019 Annual2019 Report address segments worth a total of just CHF 1 billion because our portfolio focused on premium parallel-walled implants, standard CADCAM prosthetics and a limited range of biomaterials. In seven years we have expanded in the non-premium segment, and have entered the large tapered implant segments. Through partnerships we have assembled a complete portfolio of biomaterials and we have added lab- and chairside-milling solutions, 3D-printing and a range of digital scanners. In 2019, our addressable market had increased to CHF 14 billion. Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 21 Products, solutions and services
Products, solutions and services Click here for more product
Some of our brands have been innovating, developing, testing and refining products for decades information that address patient needs and contribute to their quality of life. Our product range includes dental implant systems, prosthetics, digital equipment and solutions, orthodontics, biomaterials, implant health and caries treatments as well as materials for 3D-printing and clear aligner production. As a Group, we strive to provide total solutions across segments, enhancing convenience, raising effi- ciency, and adding value, comfort and security for customers and patients.
To complement the Group’s products and solutions, we offer a broad spectrum of services under the Straumann Group brands, such as: • Modular surgical planning, prosthetic design and centralized manufacturing services covering a wide range of indications • Comprehensive service packages tailored to the specific needs of future dentists or those who have recently started their careers, with professional practice-oriented and individual support • Information concepts to address trends in patient information behavior, in order to support den- tists in reaching patients who wish to learn more about treatment • Exclusive access to a great variety of practice-oriented training materials related to the treatment Launched in 2019, Straumann BLX is much more than an innovative implant design; it's a complete system of implants, prosthetics, heat-reducing drills of straightforward implant cases and more. • Blended learning opportunities, that combine online modules and hands-on tuition.
To provide services of this kind, our staff requires a comprehensive understanding of the dental busi- ness and our products. Extensive staff training is therefore an important aspect of our service offering.
MEETING CUSTOMER NEEDS In line with the Group’s strategic priorities to offer total solutions and to penetrate unexploited mar- kets / segments, we introduced numerous new items and solutions at various trade shows in 2019.
2019 Annual2019 Report We began rolling them out on a country by country basis following regulatory approvals.
Trios 4, a best-in-class intraoral scanner sold under the Straumann brand
Straumann Group Straumann through our partnership with 3Shape. HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 22 Products, solutions and services
Preventive Main brands dentistry Treatment planning Implant surgery & orthodontic treatment Prosthetic design, production & placement
Perio Data Planning and Ortho- Implants and Biologics Design service Multiplatform CADCAM treatment acquisition services dontics prosthetics prosthetics production Anthogyr • • • • Bay Materials • ClearCorrect • • Createch • • • Dental Wings • • Equinox • Medentika • • Neodent • • • • nuvo • Straumann • • • • • • T-Plus • Controlled by Straumann GroupStraumann Zinedent • botiss biomaterials
• Dental Monitoring • • maxon dental • Rapid Shape • Valoc • Warantec • Partially owned by Straumann Group Straumann Z-Systems •
3shape • Amann Girrbach • Carestream • Zirkonzahn Partnering businesses (distributor) • 2019 Annual2019 Report This chart shows the Group's main brands, the degree of ownership and how they each support the dental treatment cycle from prevention and correction to replacement and restoration. Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 23 Products, solutions and services
The Group's new offerings include implant systems and components (both titanium and ceramic), guided and non-guided surgical instruments, fully integrated digital workflows, additional edentulous solutions, more efficient prosthetics, as well as new digital and orthodontic solutions (see table below).
2019 main product launches Benefit and added value for customers and their patients Surgical Straumann BLX implant • New fully tapered implant for all bone types and indications, especially for immediacy (Brazil, Europe and North America) • Excellent osseointegration and bone maintenance properties; designed to shorten treatment duration Straumann VeloDrill • Innovative drill concept • Reduced heat generation, high stability and time saving Straumann SNOW • First completely metal- and plastic-free, two-piece, screw-retained dental implant for prosthetic flexibility and highly esthetic results Straumann Modular Cassette • Customizable surgical cassette for all workflows; increased efficiency Restorative Straumann Ceramic Healing Abutments • Ensures favorable conditions for soft-tissue attachment, supporting a healthy peri-implant environment Straumann screw-retained abutments • Unique slim and edge-free design for better soft-tissue health (SRAs) – new range • SRAs are the most popular abutments for immediate fixed full-arch rehabilitations Digital 3Shape TRIOS 4 intraoral scanning solutions • High-end intraoral scanner with fluorescent technology to identify surface caries; zero radiation, infrared scanning detects interproximal caries Straumann Virtuo Vivo • High-speed intraoral scanner, powder-free, color scanning, highly attractive price, compact • Very small light hand piece for easy handling and enhanced patient comfort Orthodontics ClearCorrect • High-quality, easy-to-use clear aligner solutions; transparent, removable, comfortable, attractively priced • Typically used to treat minor-to-medium malocclusions DenToGo • Suite of software solutions using artificial intelligence and smartphone / tablet technology to remotely assess patient’s oral situation prior to and during treatment • Produces photo simulations of patient’s smile after treatment Biomaterials and prevention Emdogain Flapless • Regeneration and elimination of periodontal pockets up to 9mm deep as part of periodontal procedures without surgical flap
2019 Annual2019 Report GP portfolio (pilot) • Various products to prevent tooth and implant loss and to support esthetic treatments Integrated solutions Straumann Smile in a Box • Digital, modular, integrated treatment planning and manufacturing service to cover surgical and prosthetic indications • Everything needed for treatment conveniently supplied in one box Straumann Group Straumann FEATURE STORY 24 Our strategy to become a leader in all price segments
BEYOND THE FEAR OF CANNIBALIZATION Our strategy to become a leader in all price segments
The economic recession of 2008–2010, the surge in low price com- petitors and the opportunities in emerging markets made it clear that we could not continue in the long term as an exclusively pre- mium company. In 2012, we took our first step into the upper value segment by investing in Neodent in Brazil. Overcoming the con- cern of cannibalization, we extended Neodent to new markets and fuelled growth in our Swiss premium brand through innovation and a new pricing strategy. With the two businesses thriving, we intensified our efforts to penetrate the upper value segment by joining forces with Medentika in Germany and Anthogyr in France.
The logical progression was to create opportunities in the lower value segment – especially in emerging markets. We therefore invested in T-Plus in Taiwan, equinox in India and Zinedent in Tur- key. In 2019, we had a unique opportunity to invest in Warantec, an established implant brand in Korea, who granted us distribu- tion rights for their products outside Korea. Furthermore, we took over T-Plus and Zinedent. 2019 Annual2019 Report Beyond this, we developed nuvo, a new brand of attractively priced implants made in Brazil. These are ready for launch pending regulatory approvals. These initiatives broaden our path into the lower value segment and enable us to offer high quality solutions
Straumann Group Straumann for patients who have not been able to afford implant treatment. HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 25 Innovation
Innovation Turning ideas into innovations
Straumann has been a leading innovator in the field since the pioneering days of implant dentistry. As in previous years, we continued to invest in research and development in 2019 to fuel our pipe- line and to bring significant benefits to patients and customers. As changemakers, we promote innovation in all our activities – for example the use of artificial intelligence in treatment planning. In the past 24 months, we have revised our core competences and technologies to gain competitive advantages and to ensure that our innovation pipeline is focused on customers and patients.
DRIVING INNOVATION ACROSS THE GROUP Innovative products, processes and solutions are the key drivers of our global success. Their seed ideas come from various sources. An important characteristic of the Group’s culture of innovation is Developed by our partner Z-Systems and launched in 2019, Straumann the ‘freedom to flourish’ – the ability to provide space and resources for innovation across busi- SNOW is the first metal- and plastic-free screw-retained two-piece nesses, brands, locations and functions – within a centralized organized framework that coordi- ceramic implant. nates, shares and prioritizes.
The Straumann Group is in a unique position to identify and bring in technologies and expertise from outside and to blend them into total solutions that span the dental ecosystem. Often the inno- vation is not in the individual elements but in combining and commercializing them.
The addition of companies and partners with their own innovation capabilities – like Anthogyr, Bay Materials, or Yller Biomateriais and Z-Systems – has increased our access to customers, helping the Group to identify current and future customer needs, generate ideas, create opportunities, develop products and solutions, and successfully commercialise them.
BRINGING INNOVATIONS TO CUSTOMERS AND PATIENTS
2019 Annual2019 Report The following table highlights the development pipeline projects that we worked on in 2019 with a view to launches starting in 2020. The DenToGo remote monitoring system uses smart phone technology and artificial intelligence. Watch the DenToGo video here. Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 26 Innovation
Examples of development projects scheduled for introduction or rollout starting in 2020
Project Key benefit target Premium Value Surgical New implant designs Less invasive and shorter procedures (immediacy), additional indications
Ceramic portfolio extension Highly esthetic, metal-free advanced implant design and novel production technology
Prosthetics Angulated solutions Enhanced screw-retained prosthetic solutions for tilted implants, focus on CADCAM
Ti-base portfolio Extends multi-implant offering, including angulated solutions for conventional and CADCAM workflows
Edentulous Edentulous solution offerings Patient-centric approach with a broad choice of fixed and removable options, mini implants, focus on immediate procedures
MPS portfolio Portfolio extension covering additional competitive brands, attractively priced alternatives to in-market competitor products
Ortho Software Automatic assessment of patient’s oral health, aligner treatment acceptance tool, software upgrades to simplify and manage treatment setups Integrated planning and Add-on central service for finalized tooth or implant-borne restorations design service Improved clear aligner material Patient comfort, esthetics
Digital dentistry CADCAM materials Full range of materials for labs and dentists, additional material options in centralized milling service
3D-printer resins Portfolio extension
Planning software New feature releases of CoDiagnostiX
Biomaterials Periodontal pocket treatment Minimally invasive, easy to perform
Novel regeneration system Controlled degradation time, reduced invasiveness and reduced chair time
Implant health
2019 Annual2019 Report Treatments for peri-implantitis Innovative portfolio aimed at long-term success in peri-implant conditions Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 27 Markets
Markets Further market share gains – new segments tapped
THE GLOBAL DENTAL SUPPLY AND EQUIPMENT MARKET The dental supply and equipment market is an attractive subsector of the medical device sector Having outperformed again, and ranges from instruments, adhesives and filling materials to imaging hardware and practice we lead the implant market with equipment. It also includes specialty segments like implant dentistry, endodontics, biomaterials, CADCAM equipment, prosthetics, and orthodontics. The total dentistry market was valued at CHF a share of 26%. 27−29 billion in 2019 (see chart on the right) and is growing rapidly, driven by the aging and growing population, increasing prosperity, awareness of oral health, and innovation.
IMPLANT DENTISTRY The Straumann Group’s main market is implant dentistry 1, which is estimated to be worth approxi- Dental market overview 2 mately CHF 4 billion globally (or CHF 4.6 billion including healing screws, temporary abutments and Total dentistry Implant dentistry ¹ copings). Based on initial reports, we estimate that it grew in the mid-single digit percentage range Market CHF ≈27–29 bn CHF 4.6 bn in 2019, driven almost entirely by volume growth. Having continually outperformed for several years and with the addition of Anthogyr, Createch, Medentika and T-Plus complementing our organic Straumann share 6% 26% growth, we now lead the implant market with a share of 26%. Three quarters of the market are con- Straumann position #6 #1 trolled by the leading six companies, while the rest is divided among several hundred manufactur- ers, most of whom operate on a regional or local basis and compete in the non-premium segment. The latter has been growing faster than premium, due to the increase in manufacturers, the lack of reimbursem*nt schemes, and stronger growth in emerging markets where procedure prices and dis-
posable income are lower. The non-premium brands collectively account for approximately half of r u r u the worldwide implant market in value terms. er s e s ry e s y r e ry e
2019 Annual2019 Report Having focused exclusively on premium implants, Straumann entered the non-premium segment in ss e er e 2012 and, by acquiring various brands, now offers a broad range of solutions in both the upper and e u lower value price segments. Since then, the Group has gained a leading position in the non-premium ers segment, although our market share is still only about 10% and therefore offers an attractive growth e e s ry r e seg e u es fi ures u e s e r ry u e s e g s re s gs re e s ru e s potential in the coming years. r se e s es ur es r u r u Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 28 Markets
THE TAPERED IMPLANT SEGMENT Dental implants can be distinguished by their shape. Tapered implants offer high primary stability and are the preferred choice of many clinicians in extraction-socket indications and immediacy pro- tocols or when patients have a soft bone morphology. Almost 80% of dental implants sold in 2018 had a tapered design. Parallel-walled implants, on the other hand, are valued for their periodontal We have a broad range to performance (soft-tissue attachment properties) and have been documented for more than 30 penetrate the fastest-growing years. The Straumann brand dominates the latter category, while our Neodent and other value brands focus on tapered implants. implant segment.
In 2014, Straumann entered the premium tapered segment with its apically-tapered BLT implant, which has spurred growth and enabled us to outpace the market. A major highlight in 2019 was the launch of Straumann BLX in Brazil, EMEA and North America. This next-generation implant, together with BLT, Neodent Helix and Drive GM, Anthogyr Axiom PX and Medentika Quattrocone, provides us with a formidable portfolio of fully and apically tapered implants. This broad range will enable the Group to win further market share in the fastest growing implant segment and to become the lead- ing provider of immediacy solutions – which was hardly imaginable a few years ago, when our fully- tapered offering comprised a single non-premium design.
Unparalled range of immediacy solutions
Straumann Straumann Neodent Neodent Anthogyr Medentika Full-arch replacements on four implants are a popular choice for BLT BLX Helix GM Drive GM Axiom PX Quattrocone immediacy protocols. 2019 Annual2019 Report Straumann Group Straumann HIGHLIGHTS MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX COMMENTARY REPORT GOVERNANCE REPORT REPORT 29 Markets
CONSIDERABLE POTENTIAL Independent researchers expect implant dentistry to continue outpacing the overall dental market. In the world’s largest dental market, the US, more than 120 million people are missing at least one tooth, yet just one and a half million are treated each year (corresponding to 2.7 million implants). This is low in absolute terms and in comparison with other countries. Our analysis shows that only one in four medically eligible US residents who seek treatment for tooth loss actually receive implants. In Germany, the penetration level is approximately 30%, while in Switzerland, it is close to 40% 3. The tooth replacement market therefore offers considerable potential and its principal growth drivers are: • demographics – in an ageing population, more elderly people need tooth replacement • affordability – the middle class is growing in developing countries • treatment provision – rising number of trained dentists who are confident placing implants • awareness – patients are better informed about the negative effects of poor oral health • esthetics – the trend in people choosing cosmetic treatments and dental implants is growing and In an ageing population, more elderly people need tooth replacement. consumer expectations are rising.
As the chart below shows, the number of patients treated per 10 000 adult population in the US is only half that of Italy and only a third that of Spain, the largest European market. This illustrates the consid- erable growth potential there. Penetration in other highly populated countries like the UK, India, China and Japan is also clearly below average, offering strong upside potential in the coming years.
Implant penetration: Patients treated annually (per 10 000 adult population)
