Biosensors falls to Chinese private equity and hints at a trend

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The purchase of Biosensors International by Chinese private equity group Citic for $817m is not wholly astonishing. Biosensors helped pioneer the use of bioresorbable polymers to affix drug molecules to coronary stents, but in the drug-eluting stent (DES) race its flagship BioMatrix Flex device was one of the also-rans.

This is the third purchase this year of a foreign medtech company by a Chinese firm: Sinocare Group bought Nipro’s diagnostics business for $273m last week, and in June Israeli medtech Lumenis was bought by Hong Kong-based investment company XIO Group for $510m. Chinese companies appear to see value abroad.

Singapore-based Biosensors managed to snare a European CE mark for several of its DESs, starting with Axxion in 2005. But, like many other DES makers, it failed to get across the Atlantic with its devices. Even if it had secured FDA approval it would stand little chance of making a dent in a market split between Abbott Labs, Boston Scientific and Medtronic – a market abandoned in 2011 by the much larger Cordis, then part of Johnson & Johnson, owing to the pressure of competition.

Instead Biosensors looked east, building a customer base in China and Japan and signing a distribution agreement with Japan's largest medtech company, Terumo. But its share price steadily decreased throughout 2013 and 2014, and with no realistic chance of accessing the world’s largest stent market it was ripe for a buyout by private equity.

Citic, which already owned around 20% of Biosensors, is paying 84 Singapore cents for each remaining share, a 24% premium to the share price on Tuesday.

Expansion

Added to the purchase of Florida-based Nipro Diagnostics by Sinocare and Yokneamand Israel-based Lumenis by XIO, the Biosensors deal looks like the most recent example of Chinese companies seeking growth outside their home base.

Of the 28 medtech acquisitions made by Chinese companies between 2010 and 2014, six were of non-Chinese companies with the rest of the targets being based in China or Hong Kong. Before June, the last foreign medtech to be bought by a China-based group was two years earlier (MicroPort’s Wright turn could lead to parallel ortho market, June 21, 2013).  

Chinese takeouts: China-based companies buying foreign medtech groups
Announcement Date Acquirer Target Target country Value ($m)
November 4, 2015 Citic (private equity) Biosensors International Singapore 817
October 27, 2015 Sinocare Diagnostics business of Nipro USA 273
June 18, 2015 XIO Group (investor group) Lumenis Israel  510
June 19, 2013 MicroPort Scientific OrthoRecon business of Wright Medical Group USA 290
June 12, 2013 Mindray Medical International ZONARE Medical Systems USA 105
April 27, 2013 Fosun International Alma Lasers Israel 222
February 20, 2012 Fosun International SD Biosensor South Korea -
November 16, 2011 Lepu Medical Technology Comed The Netherlands 2
June 2, 2010 Huiheng medical Portola Medical USA -

Setting aside the private equity and investor purchasers, which will perhaps be less interested in running the business long-term, the Nipro deal gives an insight into the Chinese market. Nipro specialises in diabetes care, and China has now overtaken the US in terms of diabetes prevalence, with around 12% of Chinese adults thought to have the condition. Sinocare will have a greater range of blood glucose monitoring technologies to offer domestic buyers.

But there is more to it than that. Where previously an emerging market would have been an opportunity for US or Europe-based companies to begin selling their products, now Chinese groups are interested in gaining a footprint in the US and beyond.

This is not, of course, a full-scale reversal of the usual emerging market model. But, though Biosensors is the latest foreign company to be acquired by a Chinese group, it may not be the last.

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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