MEDICAL DEVICE
UPDATE

McIlvaine Company
April 2006

China is Fastest Growing Market

The medical device market in China is the fastest growing in the world and is expected to sustain a growth rate of 10-15 percent over the next ten years. This will mean that China by 2010 will be the third largest medtech market and rival the Japanese market as the second largest by 2020. Market growth is driven by a range of factors including an ageing population, healthcare reforms, increase in private healthcare insurance, product deregulation and the entry into the WTO. Overall, the Chinese market will provide substantial opportunities for medical device companies in general and even more so for companies providing cancer care solutions. Cancer incidence is expected to increase by 50 percent over the next 15 years and over 70 percent of cancer cases that would benefit from radiation therapy are currently not treated.

The need for clinical solutions for fighting cancer is very large not only in China, but throughout Asia, both for highly advanced solutions such as image guided radiation therapy (IGRT) and for more affordable solutions aimed at a broader market. Economic growth in many countries throughout the region is currently transforming this clinical need into demand for equipment in a broad spectrum of price and specification levels.

Kyphon Building New Manufacturing, Distribution and R&D Facility in Neuchatel, Switzerland

Kyphon Inc. announced that it is establishing an operational presence in the Canton of Neuchatel, Switzerland to support the company's rapid international growth. Kyphon Sarl, the newly created Swiss company, will house manufacturing and distribution activities for Kyphon's international markets, as well as administrative activities including clinical, regulatory, marketing and shared financial services. In addition, certain global research and development activities will be performed by Kyphon Sarl, which will serve to augment Kyphon's current research and development center in Sunnyvale, CA.

"We believe our new operations in Neuchatel, Switzerland will provide us with the logistical flexibility, scalability and technical talent to better serve our existing markets and to pursue development of additional overseas markets," stated Robert Vandervelde, President, International of Kyphon. "We selected Neuchatel in part due to its proximity to leading universities, R&D centers, orthopaedic industry suppliers and the pre-existing cluster of healthcare, medical device and biotechnology companies. We believe our location in the heart of such a region ensures access to a pool of highly educated, multi-lingual talent and innovative partners. In addition, the central location within Europe and the area's excellent infrastructure should allow us to provide optimal support to our customers' logistical and administrative needs. We look forward to leveraging this important investment in our international markets into increased productivity and profitability across our global business operations going forward."

Kyphon Sarl is beginning administrative operations immediately, and anticipates that it will have full manufacturing, distribution, R&D and administrative activities in effect by the end of 2007.

Kyphon develops and markets medical devices designed to restore spinal function using minimally invasive technologies. The company's KyphX line of products are used in balloon kyphoplasty, a minimally invasive procedure to treat spinal fractures caused by osteoporosis or cancer.

McIlvaine Company,
Northfield, IL 60093-2743|
Tel:  847-784-0012; Fax:  847-784-0061;
E-mail:  editor@mcilvainecompany.com;
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