Device Companies Set Their Sights on China

31 Oct

By Danielle Silva, VP of Business Development, LSN

In recent time, many emerging life science companies have begun to turn towards emerging markets for both capital and potential distribution opportunities. China has been a central figure in the discussion, and rightfully so: the nation boasts a large amount of new wealth (prospective investors), a lack of domestic innovation and a rapidly growing middle class requiring better healthcare (demand), and a government with the capacity to selectively accelerate industries via central planning (infrastructure). Though China presents opportunities across the board, it has become particularly attractive to a growing number of medical device companies.

A primary reason for this is that the demand for devices in China will almost certainly outpace developed regions like the US and Europe in coming years. This is a reflection of the increasing incomes of the emergent middle class (who want quality care and can pay for it) and the stated intent of the Chinese government to improve access to care. More hospitals and more consumer demand for care translates into a huge opportunity for companies and investors alike.

More importantly, China’s health system is developing in sync with several major device innovations that could be solutions for major diseases in the Chinese market. One example is the high rate of diabetes in China intersecting the proliferation of home-use devices such as glucose monitoring systems and insulin patch pumps. For Chinese consumers, this translates to time and travel reduction (and potentially lower costs), while for the Chinese healthcare system it means reduced strain on hospitals, clinics, and doctors.

However, there are several items that entrepreneurs should consider aside from the obvious cultural and language gaps: one primary challenge for companies looking towards China is the protection of IP in a market that is notorious for a lack of legal enforcement around technology. A strategy to protect against IP theft must be in place to enter the Chinese marketplace. Another major issue is price. Companies will likely need to follow a low-cost strategy to effectively capture the large opportunity, and it is a question of making the economics work. This puts cost reduction-oriented devices at a major strategic advantage, and will likely make them the subject of a great deal of investor interest. At this point, the full potential of the Chinese market has yet to be recognized, but one thing is sure – the opportunity is huge.

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