United States-based medical device giant Medtronic has announced its expansion in China with the opening of a research and development centre in Shanghai and the launch of its Resolute coronary stent in Japan.
IHS Global Insight Perspective | |
Significance | The opening of the Shanghai Innovation Centre within Medtronic's existing country headquarters is the first step taken by the company towards working with local researchers and doctors to develop China-specific products. |
Implications | The launch of Resolute in Japan, the world's second largest medical device market, follows the approval of the drug-eluting stent (DES) earlier in 2012 as a treatment for coronary artery disease following the Japan-based RESOLUTE trial. |
Outlook | Medtronic joins the rush of medical device firms to enter China, where hospital infrastructure has been earmarked for upgrade. Resolute's entry into Japan, meanwhile, will strengthen the firm's DES portfolio, and the hope will be that the product's US success can be repeated. |
United States medical device giant Medtronic has made two announcements relating to its business operations in Asia, opening a research and development (R&D) centre in Shanghai, China, and launching its Resolute drug-eluting coronary stent in Japan.
The Shanghai Innovation Center is incorporated within the firm's existing China headquarters in the city, and will hire and train 1,000 employees over the next five years. According to the accompanying press release, the centre will co-ordinate China-focused R&D activity with universities, research institutes, and particularly local doctors, and will provide access to the firm's global R&D network. Local physicians in particular will be brought in to develop products best suited to local needs. The centre
Separately, the Resolute Integrity drug-eluting stent (DES) has been launched in Japan, after gaining approval for the coronary artery disease indication earlier in 2012. Approval followed the two-year RESOLUTE study carried out in Japan, which showed superiority to US firm Boston Scientific's Taxus DES in the primary endpoint of "in-stent late lumen loss". Resolute also demonstrated no target lesion revascularisation events within the two-year period. The Phase III single-arm, open-label trial enrolled 100 people at 14 sites across Japan, starting in March 2009, and its results were published at the 21st annual meeting of the Japanese Association of Cardiovascular Intervention and Therapeutics in July.
Outlook and Implications
Medtronic's opening of an R&D centre in China follows a rush of other investment from major medical device players, after Covidien (US) announced a USD45-million centre earlier in August with similar goals of liaising with local physicians to develop products with local-market focus (see China - United States: 3 August 2012: Covidien Opens USD45-Mil. Chinese R&D Centre). GE Healthcare (US) set up an USD80-million site in Chengdu in May, while Johnson & Johnson and Boston Scientific (both US) each invested over USD115 million in expanding their local operations during 2011.
Foreign firms, particularly US but also Japanese and German, supply around 50% of China's medical devices, particularly middle- and top-end medical devices. The whole market is valued at around USD23 billion, and is currently growing at 15–20% annually (source: Scrip). There is clearly a trend towards establishing local R&D facilities, and the reasons for this go beyond cost savings. While demand for foreign-made (and quality-guaranteed) medical devices is relatively inelastic, Medtronic and other firms may be looking to develop chearper products more suitable to tier-2 and tier-3 cities as well as the rural market. Local presence will also allow closer relationships with hospitals and distributors, and help to monitor medical device good manufacturing practice standards, which are in the process of being refined.
The Chinese government's focus on upgrading the country's hospital infrastructure and facilities has seen significant funding earmarked for medical devices—USD10 billion of the USD125-billion 2009 health stimulus funding reportedly went towards medical devices. Such momentum is set to continue as the government has planned continued hospital building and upgrades under the 2011–15 12th Five-Year Plan. Given these conditions, Medtronic's chief executive officer Omar Ishrak was led to describe investing in launching products in China, and other emerging markets, as "potentially less risky than creating new products for the flat US market", as quoted by Massdevice.com.
Medtronic will be hopeful of maintaining growth in its DES portfolio after gaining access to Japan's USD500-million market, which means the product is now available in all major world markets. Resolute is approved for nine separate indications in Europe, and is the only stent approved for diabetics in the US, so there is the potential for further expansion of indications in Japan. The product has been a strong performer for the firm in the US, where it helped to boost DES segment sales by 36% in the first quarter of fiscal year 2013, and has tripled its market share over the past two quarters, with Medtronic hopeful of a repeat performance in Japan.
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