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| Medtronic CEO Omar Ishrak |
Medtronic ($MDT) is on the prowl for acquisitions in China, reflecting CEO Omar Ishrak's bullish view of the country, which remains among the world's fastest-growing economies.
Ishrak did not provide any specifics about the plans during his interview with the Wall Street Journal, such as whether his company is in negotiations with any Chinese device players. It wouldn't be Medtronic's first Chinese M&A foray, for the company purchased local orthopedics company China Kanghui Holdings for $816 million in 2012.
The industry bigwig faces growing competition from local firms, that've increased their share of the drug-eluting stent market to 80% from 20% a decade ago. Another change is an increase in adoption of lower-tier products, a sign of the country's growing middle class, many of whom remain unable to afford premium devices.
"China's health-care reform initiatives have significantly expanded the lower tier of hospital infrastructure and payment, and the economic growth and urbanization has opened up the value segment," Helen Chen, a director and partner at the Shanghai arm of consultancy L.E.K., told the WSJ.
Medtronic is responding by focusing on lower-priced devices and targeting sales at smaller hospitals that are not in the big cities.
The Chinese government is encouraging hospitals to buy domestic devices and imposing stringent clinical trial requirements on new medical technology, but that doesn't erode the med tech market's main allure: growth.
Chinese device expenditure will soon reach $18 billion, making it the third largest market behind the U.S. and Japan, but Ishrak told the WSJ that the country will someday be "the largest market and it's not a debate. It's a matter of when."
The CEO aims to increase Medtronic's sales growth in emerging markets to 15% at constant currencies, up from the current 12%. China accounts for about 5% of Medtronic's revenues, which stood at $20 billion during its recently completed fiscal year.
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