Author: Owen Tang, Founder at ChinaBionews
The Chinese medical device market is keeping strong growth these years, and its industrial output value increased from RMB 51.5 billion in 2007 to RMB 114.0 billion in 2011, with a CAGR of more than 20%.
With more than ten thousand local manufacturers and a large amount of multinational players, the Chinese medical device industry is so fragmented and there are more merge and acquisition opportunities for big players. There are around 10 merge and acquisition deals in China's medical device market in 2012, covering many business segments including endoscopes, IVDs, orthopedics, and surgical equipment.
In 2012 many big multinational medical device companies had accelerated their steps of expanding China business, and M&A is an efficient way of their localization and expanding product lines. Meanwhile the leading local companies were also actively expanding their business with the same way.
In 2012 Shenzhen-based Mindray had finished three M&A deals and expanded its product lines to endoscopes, orthopedics and other surgical equipment.
In May 2012 Mindray acquired controlling stakes of Hangzhou-based Optcla company which is the manufacturer of rigid endoscopes and other surgical equipment. It was reported that the Chinese endoscopy market was USD 240 million in 2010 with a CAGR of 15%.
In June 2012 Mindray acquired Wuhan Dragonbio company with cash of USD 35.5 million. Founded in 2005, Dragonbio is the manufacturer of spine, trauma and artificial joints with revenues of USD 7.7 million in 2011.
In October 2012 Mindray acquired Shanghai Medical Optical Instruments Factory (SMOIF) which is the manufacturer of four series of medical optical instruments: electronic endoscopes, flexible endoscopes, rigid endoscopes and operation microscopes. With this deal Mindray has enlarged its product lines and obtained a new growth point in the minimal invasive surgical markets.
Besides Mindray other two local companies, MicroPort and Shinva Medical, were also active in M&A in 2012.
In June 2012 MicroPort acquired 100% equity interest in Dongguan Kewei Medical Instrument Co., Ltd. which is the manufacturer of cardiac surgery device oxygenators in extra-corporal circulation and occludes for minimally invasive interventional devices for structural heart diseases. Founded in 1993, Kewei Medical has 14 products that have been approved by China's State Food and Drug Administration (SFDA). With the RMB 108 million deal MicroPort has officially entered into the field of cardiac surgery.
In September 2012 Shinva Medical announced that it would expand medical service business via investing Pingyin county traditional Chinese medicine hospital, which is a tier 2 hospital with 300 sick beds. With around RMB 200 million investment, from both Shinva Medical and local government, the hospital will move to a new location with 600 sick beds. As one of the leading medical device manufacturers in China, Shinva Medical had actively expanded the business into medical service area. It had already set up a new company in Zibo city of Shandong province to manage hospital investment.
In June 2012 Renfu Pharmaceutical acquired 80% shares of Beijing Barui Medical, which is oen of the biggest distributors of Roche Diagnostic in China. In 2011 Barui Medical had achieved sales revenues of RMB 410 million with net profits of RMB 97 million. Renfu Pharmaceutical expected to enter into the IVD market with this deal.
In 2012 multinational companies may not have as many M&A deals as local companies, but their deals were really big deals. Medtronic was the most active player with two deals. In September 2012 Medtronic paid approximately $816 million in cash to acquire China Kanghui Holding which is the orthopedics manufacturers in Changzhou city of Jiangsu province.
As China is one of the fastest growing medical device markets to Medtronic, Medtronic will establish a bigger and more direct local presence. Kanghui is believed to bring Medtronic a broad product portfolio, a strong local R&D and manufacturing operation, a vast China distribution network and an exceptional management team.
In October 2012 Medtronic purchased a 19.0 percent equity interest in Shenzhen-based LifeTech. "China is key to our global strategy as we continue to expand our geographic footprint and strive to meet the needs of local cardiovascular patients, and this agreement reaffirms our commitment to this important market," said Mike Coyle, executive vice president and president of the Cardiac and Vascular Group at Medtronic.
In November 2012 PerkinElmer fully acquired Shanghai Haoyuan Biotech which is a China-based infectious disease diagnostics company. The USD $38 million in cash deal will extend PerkinElmer's capabilities into nucleic acid blood screening and in the growing molecular clinical diagnostics market in China.
In 2011 there were only five M&A deals in the Chinese medical device market with around RMB 9.6 billion involved, said Owen Tang who is founder at ChinaBionews, but in 2012 the number of deals had almost doubled and more than RMB 10 billion is believed to be involved. Distribution channels play a key role in the Chinese medical device market, and with M&A deals multinational companies could strengthen local presence with wider channels.
With strong growth of the Chinese medical device market, both leading local companies and big multinational companies had accelerated their steps of expanding China business, especially in the rural healthcare segment to which China government had planned to give a strong support. The competition will be much fierce in 2013, commented by Owen Tang, big multinational companies such as GE Healthcare, Philips Healthcare and Siemens Healthcare, will more actively expand their business to rural healthcare which is the main market segment to most of local manufacturers. ChinaBionews will keep tracking the industry dynamics and provide the clients with weekly newsletters.
Focusing on the Chinese medical technology industry, ChinaBionews is to be the reliable information and marketing solutions provider in China market. ChinaBionews provides web-based services, publications and consulting service tos the companies that are expanding their business in China.
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Owen Tang, founder at ChinaBionews