An increasing number of Western device companies have been acquiring or entering into joint ventures with Asian medical firms. Acquisitions and joint ventures with Asian medical companies can provide many advantages for Western firms looking to grow their businesses in the Asian medical device markets. For instance, Western medical device firms can utilize their Asian partner’s distribution channels and local established relationships, which are key to success in Asia. An acquisition can increase the Western company’s product range with more products tailored to the local market. A local partner can also help a Western firm obtain device registration and approval, oftentimes more quickly than if the foreign company did so on its own.
The dynamics of an acquisition or a joint venture varies from country to country in Asia. For instance, an acquisition of a private medical device company in China may be on the basis of Net Asset Value plus a premium, since no one believes the Chinese company’s “books.” Western companies should also make sure to do their due diligence. It is important to have an on-the-ground presence to investigate a potential partner or target as well as during negotiations. Utilizing an outside independent third party to investigate the local Asian company is crucial.
Small, medium and large Western medical device firms have been taking advantage of these strategies to more quickly gain access to the medical device markets in Asia. For companies looking to jump start their success in Asia, acquisitions and joint ventures may be a good choice.
Joint ventures have been an increasingly common strategy used by Western device companies to grow their market share in Asia. In January 2014, Covidien (Ireland) announced a joint venture with Changzhou Kangdi Medical Stapler (China), giving Covidien a majority share. The partnership will allow Covidien to use Changzhou Kangdi’s surgical stapler product portfolio, manufacturing infrastructure and local relationships to strengthen Covidien’s position in China’s market for affordable medical devices.
Sorin (Italy) and MicroPort Scientific (China) also announced a joint venture in early 2014. Sorin will have a 49% stake in the partnership, named MicroPort Sorin CRM. The two companies are together investing $20 million in the project. The joint venture will import, sell and service Sorin’s cardiac rhythm management (CRM) devices in China and will also investigate producing locally manufactured CRM devices targeted to the Chinese market.
Smaller Western companies have also been investing in joint ventures with Asian partners. For example, Akers Biosciences (Thorofare, NJ) agreed to form a joint venture with Hainan Savy Investment Management (China) in October 2014. The partnership will operate as Hainan Savy Akers Biosciences and will develop, manufacture and market Akers’ diagnostic products in China. Valorem Surgical (Chicago, IL) announced a joint venture with NHS Bio, a Korean contract original equipment manufacturer (OEM), in November 2014. The partnership, called Valorem Surgical AP (Asia Pacific), will control the sales, marketing and distribution for NHS Bio’s spinal device technologies in Asia.
Also, in October 2014, Enigma Diagnostics (United Kingdom) announced a joint venture with Beijing Leadman Biochemistry (China). The joint venture will market Enigma’s point-of-care diagnostic system in China. The partnership will provide Enigma with a Chinese research and development program, a distribution network and manufacturing capabilities in China.
While some joint ventures can work in Asia, sometimes joint venture relationships can sour over time and end in a messy divorce.
Acquisitions have also been a popular way for Western medical companies to gain market share and product portfolios in the Asian markets. In October 2014, Carlisle (Charlotte, NC) acquired LHi Technology (Singapore) for $195 million. LHi manufactures cables and leads for medical devices, including imaging machines and surgical tools. Carlisle will also utilize LHi’s 150,000 square foot manufacturing and testing facility in China, as well as LHi’s five international offices — including one in Japan.
In early 2013, Smith & Nephew (United Kingdom) announced the acquisition of Adler Mediequip (India). The deal included the brands and assets of Sushrut Surgicals and provided Smith & Nephew with greater market share in the Indian orthopedic trauma sector.
Stryker (Kalamazoo, MI) bought Trauson Holdings (China) in 2013 as well; the two companies have had an original equipment manufacturer (OEM) relationship since 2007. Stryker’s President and CEO said that the acquisition was key for Stryker to expand its presence in China while gaining research and development capability, manufacturing capacity, a strong distribution network and a well-established brand in China.
In April 2013, Life Technologies (Frederick, MD) purchased KDR Biotech (South Korea), a leading Korean distributor of lab instruments and reagents. KDR Biotech has been Life Technologies’ primary Korean reagent distributor for over 20 years, and the acquisition will allow Life Technologies to grow its brand and market share in Korea.
Asian device companies look to expand their business in the West
In 2013, two large Chinese device companies purchased U.S. assets:
- MicroPort Medical B.V., a subsidiary of MicroPort Scientific, acquired Wright Medical Group (Memphis, TN)’s OrthoRecon business for $290 million in June of 2013. Wright’s OrthoRecon business manufactures hip and knee implants, earning a revenue of about $269 million worldwide in 2012.
- In July of 2013, Mindray Medical (Shenzhen, China) purchased Zonare Medical Systems (Mountain View, CA) for $102 million, allowing Mindray to access a direct sales force in key North American and European markets.