Medical device producer announces M&A strategy (China Daily)
Medtronic Inc plans to bolster its presence in China via mergers and acquisitions of local companies, becoming the first multinational medical equipment provider to announce such astrategy in the world’s fastest-growing medical device market.
Simon Li, vice-president of the US-based company and president of Medtronic Greater China,said that the medical device producer already has some candidates and is still looking forothers.
He refused to provide names of the potential targets.
Medtronic, the largest producer of heart pacemakers in the world, develops and manufacturesdevices and therapies for more than 30 chronic diseases, including cardiovascular illnesses,Parkinson’s disease, diabetes, chronic pain and osteoarthropathy.
Medtronic is assessing the market potential of the products and technologies of the targetedcompanies. Li also said that the targeted companies “must have a common vision andbusiness philosophy” with Medtronic.
Medtronic is the first multinational medical device company that has publicly said it will makeM&A one of its key strategies in China.
Cai Tianzhi, director of the medical device department under the China Chamber ofCommerce for Import & Export of Medicine and Healthcare Products, said the gap betweenforeign giants and domestic companies in terms of research-and-development capability andconsuming groups are rather large, so M&A may face a series of challenges, includingbranding, quality control and staff training.
On the other hand, this kind of M&A will help foreigners enrich their product portfolio, tailor tolocal markets and get access to distribution networks and sound government relations set upby local counterparts, Cai said.
Multinational medical equipment providers are adopting various strategies to develop businessin China.
St Jude Medical Inc, Medtronic’s archrival in development and production of cardiovascularequipment, had said that it will continue organic growth in China. It set up two technologycenters to introduce its technologies to the emerging market and provide training for localdoctors in a bid to promote its sophisticated products to Chinese hospitals.
GE Healthcare, the medical care arm of General Electric Co, launched an R&D center inChengdu and doubled its sales staff in 2011 to penetrate China’s grassroots market.
Johnson & Johnson Medical China will expand its presence in China by cooperating withgovernment departments and academic institutions.
Medtronic had tested the waters for M&A in China. In 2008, it set up a joint venture withShandong Weigao Group Co Ltd, one of China’s major medical equipment companies. The UScompany holds a 51 percent stake, and the joint venture has been developing and marketingMedtronic’s vertebral and joint products.
In September, Medtronic-Weigao Orthopedic Technological Support Center, using a 20 millionyuan ($3.14 million) investment in R&D equipment, was set up in Beijing to focus on thedevelopment of orthopedic technologies and devices.
China’s medical equipment sales will hit 400 billion yuan this year and is expected to continueto rise more than 20 percent annually through 2015, compared with around 7 percent indeveloped markets, according to Fan Yubo, chairman of the Chinese Society of BiomedicalEngineering.
Li said that Medtronic’s annual sales in China increased by 27 percent to 30 percent onaverage over the last six years, while profits jumped 20 percent a year. “China contributes 40percent of Medtronic’s growing market sector so far, and our global CEO hopes the sector willrise 20 percent annually,” said Li.
Contact the writer at liujie@chinadaily.com.cn