As one of the fastest-growing medtech markets in the world, China has attracted global investors and medical device industry titans, but Chinese device makers need to step up quality and innovation to make the China “the next IT industry,” according to local analysts.
"Technological innovation will prove to be a driving force that in 10 to 20 years results in a batch of great Chinese medical equipment enterprises that will be similar to today’s large IT companies," Chinese equity investment firm Legend Capital managing director Ouyang Xiangyu told China Daily.
Chinese medical equipment companies won’t make much of a mark without new innovation, Ouyang added. They should take cues from the success of local IT firms, such as Lenovo Group, Huawei Technologies and ZTE Co., which invested heavily in research & development to drive the industry.
Many Chinese-made medical devices are of "low or middling quality" and require technological improvement, according to a report from Zero2IPO Research Center. Meanwhile, foreign medical device makers are dominating the Chinese market.
"Foreign companies are the main players in China’s advanced medical equipment market. They tend to charge high prices, making it difficult for anyone outside a small number of Chinese people to afford their services, and the best healthcare resources are often much more commonly found in large hospitals in economically developed regions," according to state-owned English-language newspaper China Daily.
Chinese venture capital and private equity firms have been seeking investment opportunities in the local healthcare industry since 2009. The amount of healthcare-related investments increased from $425 million in 2009 to $4.14 billion in 2011, according to the Zero2IPO report.
Legend Capital, which used to invest in the IT industry, started investing in healthcare in 2008, the director of the company told the paper.
U.S. medical device makers Medtronic (NYSE:MDT), Boston Scientific (NYSE:BSX), Johnson & Johnson (NYSE:JNJ) are meanwhile expanding their footprints.
Medtronic this month invested $66.2M into China’s LifeTech Scientific Corp., maker of medical devices for treating cardiovascular disease, following the $816 million acquisition of China Kanghui Holdings (NYSE:KH).
Boston Scientific last July announced a 5-year $150 million plan to expand Chinese commercial operations, including establishing manufacturing sites and developing training centers for Chinese health care providers.
Johnson & Johnson built an innovation center in China last year to design and develop medical devices and diagnostic products specifically for Asian markets.
