Mergers and acquisitions (M&As) in the Chinese medical device sector have greatly increased since 2018. According to GlobalData’s Medical Devices Deal Database, the number of key M&A activities in major markets almost quadrupled from 2018 to 2021. GlobalData expects a similar trend will continue this year. In-vitro diagnostics (IVD) remains the most active market for investors in China, especially in areas related to Covid-19 tests.
The medical device industry has been facing fierce competition due to China’s volume-based procurement policy in recent years. The players in the medical devices market have been under pressure for organic growth. In addition, device manufacturers need to keep investing in novel technology to update mature product lines or expand new product portfolios. Therefore, in order to continuously grow and enter high-potential market segments, many medical device companies choose to speed development by expediting M&As.
The most active market is IVD, followed by medical equipment distributors, specialised sectors, diagnostic imaging, cardiovascular devices and hospital supplies. The value of deals in IVD accounts for around 31% of the total deals value from 2018 to 2021. While other medical device companies have struggled during the Covid-19 pandemic, the revenues of IVD manufacturers, specifically Covid-19 testing firms, received a great boost. As a result, players are actively seeking M&A opportunities to further strengthen their product offerings and expand their market share in China. Last year, Shenzhen Mindray Bio-Medical Electronics (Mindray) acquired HyTest, a manufacturer of antibodies and antigens used in tests for Covid-19 and other illnesses, for $660.4m. The transaction would provide Mindray resources from a major developer and manufacturer of antibodies and antigens for IVD products, ensuring its upstream supply chain.
Almost at the same time, Shengxiang Biotechnology announced its acquisition of an 18.63% stake in Shanghai Kehua Bio-engineering for $303.3m. Shengxiang Biotechnology enjoyed robust growth during the pandemic due to its diverse portfolio of Covid-19 testing products. As a market leader in the IVD market in China, Shanghai Kehua Bio-Engineering has built technology platforms for clinical IVD reagents and automatic detection and analysis instruments. The acquisition brings together two leaders in technology platforms, product lines and sales channels.