Reverse Innovation: Is The US Losing Its Edge In Innovation?
Is US-style innovation in the medical device industry heading towards extinction? Gone are the days when companies believed they could build robust businesses by serving largely, if not exclusively, the US market. Today, emerging markets have become growth markets. But those markets, and even a post-health care reform US, challenge an innovation model that used to reward even incremental technology enhancements with premium pricing, by a price-insensitive customer.
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Funded initially in 1996 by private and government sources in Taiwan, Vivo Ventures has emerged as a leader among US-based VCs investing in China. The firm’s partners say its success will come through an intricate web of business development and licensing arrangements between health care companies in China with their counterparts in the US. The strategy has produced results. In the US, specialty pharmaceutical company Sagent Pharmaceuticals went public last year after building a booming business at least partially upon arrangements with China suppliers. In China, Medtronic stepped up in October to acquire Kanghui Medical, an orthopedics company with global vision and connections to privately held US companies.
Brief summaries of recent medtech market and industry developments. This month we cover Medtronic’s acquisition of Kanghui, Greatbatch’s new R&D center in Singapore, the outlook for the ICD/CRT market, and Cook Medical’s newly launched ENT unit.
Last month Medtronic agreed to pay close to $800 million for Chinese orthopedics implant maker China Kanghui Holdings. To be sure, the purchase of Kanghui secures Medtronic’s footing in China, one of the fastest growing health care economies in the world. In addition, it likely will help Medtronic close in on its goal of bringing in 20% of its revenue from emerging markets.