Medtronic Expands Chinese Presence

Medtronic, Inc. (MDT), the US$12 billion (sales) medical device maker, announced that it is expanding its presence in China via joint venture. The company will partner with Shandong Weigao Group Medical Polymer Co. Ltd. [HKG: 8199 ] to market spine and orthopedic therapies in China. Medtronic also has acquired a 15% stake in Weigao for US$221 million.The joint venture will market Medtronic's spinal products and Weigao's orthopedic products in China, including therapies for the hip, shoulder, spine and trauma. Under the joint venture agreement Medtronic will have a 51% interest in the joint venture and Weigao will have a 49% interest.

"China is key to our global strategy as we continue to expand our geographic footprint," said Medtronic president and CEO Bill Hawkins. "Weigao has a broad orthopedic and trauma product line that compliments Medtronic's offerings, but even more importantly, we feel we can generate synergies with their very strong presence and reputation in China. We view Weigao as an ideal strategic partner."

Based in Weihai City of Shandong Province, Weigao focuses on the development, manufacturer and sale of medical devices and products. Its orthopedic products include plates, screws and spinal implants used in the treatment of traumatic injuries. The company also manufacturers an extensive line of medical consumables, including drug-eluting stents, syringes, IV tubing, and equipment for use in renal dialysis and blood donation. The company's sales network is established in 100 Chinese cities, with service to over 2700 hospitals and over 1100 clinics and blood banks.

Weigao is publicly listed on the Hong Kong Growth Enterprise Market [GEM]. For FY 2006 the company reported revenues of over US$100 million, with net margins of 21.7%. For the nine months ended Sept. 30 2007, the company reports sales of US$107 million, up 36.8% over the previous year. Net margins also increased to 27.4%. The company's stronger performance was due in part to the acquisition of several orthopedic products including spinal implants and artificial joints. Weigao shares have done well this year, rising 121% to a recent HKD17.50. The Chinese market is important to Medtronic. According to Burrill & Co. the Chinese medical device market is growing at a CAGR of nearly 18% annually, twice the growth rate of GDP. Frost & Sullivan estimates that the total Chinese medical device market in 2006 exceeded US$10 billion. Although the company doesn't specifically release China numbers, sales in Asia Pacific were US$1.2 billion in fiscal year 2007, up nearly 17% from the previous year.

Disclosure: none