Medical device BD is experiencing rapid growth

In the first half of the year, BD transactions in the pharmaceutical sector exceeded $60.8 billion, driving up Chinese innovative drug assets. This wave, however, overshadowed the booming BD activity in innovative medical devices.

In fact, China's innovative medical device sector was also aggressively engaged in business development (BD) in the first half of the year. For instance, Grand Pharmaceutical Group Limited partnered with Antong Medical, Trulive Medtech, and CED Medical to distribute several innovative products; Johnson & Johnson collaborated with Ronovo Surgical to advance the commercialization of surgical technologies in China; Olympus secured exclusive distribution rights for Macrolux's disposable urology series in the U.S. and other regions.

Unlike BD transactions in the innovative drug sector, which are mainly dominated by license out deals, BD in the medical device sector encompasses a variety of activities, including technology licensing, regional exclusive agency, strategic investment, and corporate mergers and acquisitions.

Why can't BD in the medical device field simply "sell patent licenses" like that in the innovative drug sector, but instead adopt multiple forms?

This is because innovative drugs can establish a unified evaluation standard, and clinical data can be globally applicable; medical devices, on the other hand, are customized products that require continuous optimization and adjustment based on clinical feedback after the product is launched. For example, doctors in Europe and America have larger hands, so the handles of surgical instruments need to be thicker; Chinese doctors have smaller hands, so the handles need to be made thinner. Uncomfortable handles may directly affect the efficiency of surgery and could potentially lead to elimination from the local market.

At the same time, medical devices involve an additional operational use phase by doctors compared to innovative drugs, placing higher demands and reliance on channel capabilities and post-launch promotion. Therefore, business development (BD) in the medical device field cannot simply sell patents like innovative drugs. Instead, BD often requires both parties to collaborate, fully leveraging their respective innovative strengths and channel advantages to jointly expand the market.

In the past, China's innovative medical devices were rarely seen in global medical device BD transactions. The BD transaction targets of domestic leading enterprises and multinational giants were mainly overseas medical device companies.

For example, Genesis MedTech previously introduced innovative products such as shock wave balloon and Transcarotid Artery Revascularization (TCAR) from overseas companies like Shockwave Medical, Sejong Medical, and Silk Road Medical; Johnson & Johnson consecutively acquired overseas medical device companies such as Abiomed, Laminar, and V-Wave.

Today, with the continuous breakthrough of bottleneck technologies and the overseas promotion of domestic brands, China's innovative medical devices have moved to the forefront globally and are becoming the first choice in global medical device BD transactions. Multinational giants and leading enterprises have also shifted from only purchasing overseas projects to increasing cooperation with Chinese innovative medical device companies.

From being no one's choice to becoming the first choice: what has China's innovative medical devices done right?

First, a series of globally pioneering, globally unique innovative medical devices have emerged in the domestic market. For example, the J-Valve system, a transcatheter aortic valve system developed by JC Medical, a subsidiary of Genesis MedTech, is the only domestically produced marketed product that can treat both severe aortic regurgitation (reflux) and stenosis.

Based on the originality of this product, Edwards Lifesciences has partnered with Genesis MedTech to acquire the overseas rights to the J-Valve system.

Secondly, the number of domestically produced innovative medical devices is large, and the competition is fierce. For example, in the neurointerventional sector, the main players in the overseas market are only Medtronic, Johnson & Johnson, Stryker, and Terumo, four major giants, while the domestic market has over 50 companies competing; in the field of disposable endoscopes, more than 60 companies have laid out domestically, with extremely fierce competition.

And the current BD market is "buyers choose sellers." Leading companies, with cash and channels in hand, can select the most suitable enterprises from dozens of innovative medical device companies. In order not to lose opportunities to competitors, innovative companies are more willing to make concessions in cooperation. This makes collaboration between leading companies and Chinese innovative medical device firms more beneficial.

For example, Olympus, the world's largest endoscope leader, has chosen to strategically collaborate with domestic innovative medical device companies Vathin Medical and MacroLux Medical to accelerate its presence in the disposable endoscope market: acquiring sales rights for Vathin Medical's disposable bronchoscopes and disposable nasolaryngoscopes; obtaining exclusive distribution rights in the United States, Canada, parts of Europe, and parts of the Asia-Pacific region for MacroLux Medical's disposable urology series.

Finally, due to factors such as policy, innovation environment, medical and patient resources, and labor costs, domestically produced innovative medical devices have lower costs in clinical trials and research and development compared to overseas products.

Therefore, based on the innovativeness of domestically produced innovative medical devices, strong R&D capabilities, stronger bargaining willingness, and more reasonable BD transaction prices, leading domestic medical device companies, multinational giants, and other enterprises are more willing to choose Chinese innovative medical devices for BD transactions.

As Chinese innovative medical devices step onto the international stage, multinational giants are beginning to collaborate with domestic innovative device companies. For example, Johnson & Johnson has formed a strategic partnership with Ronovo Surgical to advance the commercialization of surgical technologies in China. Similarly, Cordis, a global leader in vascular intervention, signed an agreement with BrosMed Medical to exclusively distribute BBrosMed Medical's independently developed next-generation drug-coated peripheral balloon dilation catheters.

Reviewing the innovative medical device BD transactions since the beginning of this year, VCBeat found: An increasing number of domestically listed medical device companies are beginning to engage in strategic partnerships with innovative domestic medical devices.

Among them, Grand Pharmaceutical Group Limited is the listed company with the largest number of collaborations in the statistics. It has reached partnerships with innovative medical device companies such as CED Medical, Antong Medical, Trulive Medtech, and AcornmMed to acquire intracranial stents, renal artery radiofrequency ablation systems (RDN), transcatheter mitral valve clip system, coronary shockwave balloon, and other innovative product sales rights.

The reason for continuously collaborating with innovative medical device companies is that Grand Pharmaceutical Group Limited has ample cash flow, which allows it to accelerate the layout of new fields and markets by partnering with companies that have innovative advantages through BD transactions.

In the nuclear medicine anti-tumor diagnosis and treatment segment that Grand Pharmaceutical Group Limited focuses on, AcornmMed has launched the only currently approved early detection product for urothelial carcinoma in China that utilizes both methylation and gene mutation mechanisms. Additionally, its self-developed urothelial carcinoma follow-up product (Uai MRD) and prostate cancer early detection product (Ucare) are highly innovative and competitive, both receiving Breakthrough Device Designation from the U.S. FDA.

In view of this, Grand Pharmaceutical Group Limited proactively collaborated with AcornmMed to obtain the exclusive commercialization and co-development rights for the latter's early detection products for urological tumors (AcornmMed·Youai, Youai MRD, Youhu) in mainland China.

Through this BD deal, Grand Pharmaceutical Group Limited will integrate AcornmMed's early detection products for urological tumors with the group's precision diagnosis and treatment integrated nuclear medicine products, forming a diversified product portfolio to comprehensively meet the clinical needs of patients with urological tumors for early examination, early diagnosis, efficacy monitoring, and recurrence surveillance after treatment throughout the entire disease management process.

Similar to Grand Pharmaceutical Group Limited, listed medical device companies such as Peijia Medical, Endovastec, and OrbusNeich are collaborating with high-quality innovative projects to expand their product lines. For instance, Peijia Medical has partnered with NowYonMedical to obtain the exclusive distribution rights for its YonFlow flow diverter in the Greater China Region, completing the last piece of the puzzle for its neurointerventional hemorrhagic product portfolio and forming a comprehensive product suite covering "hemorrhagic, ischemic, and access."

It is worth mentioning that, these listed companies are also driven by investment and acquisition logic when seeking BD partner enterprises. As Grand Pharmaceutical Group Limited mentioned in its interim report regarding investment cooperation: seeking targets that can help the group enter new markets or expand its product portfolio; seeking targets that can create synergies with the group's existing products and markets; seeking early-stage companies with innovative products of great potential.

Besides, China's medical device BD has evolved from "bringing in" to "going out". In the past, the BD transaction model of China's medical device companies mainly involved introducing innovative medical device products from overseas and promoting their application in the Chinese market; now, leading companies are increasingly collaborating with China's innovative medical device enterprises to promote Chinese innovative medical devices in the global market, accelerating their "going out" process.

For example, OrbusNeich cooperates with SonoScape to obtain the exclusive distribution rights of SonoScape's IVUS system in 12 markets; EverBridge cooperates with Advanced Medical to become the exclusive general authorized agent of Advanced Medical's medical carbon dioxide contrast pressure injection kit in Latin America.

This also means that, China's innovative medical devices have secured a place in the global top tier in terms of innovation and performance quality, accelerating their expansion overseas.。

From the perspective of innovative medical device companies, innovative medical devices such as IVUS systems, RDN systems, and PFA systems are more popular with buyers.

Taking the IVUS (Intravascular Ultrasound Imaging) system as an example, this product combines ultrasound technology with catheter technology, allowing a miniature ultrasound probe to enter the vascular cavity for detection. It provides doctors with clear cross-sectional images of the vascular cavity, enabling precise diagnosis of the structure and nature of diseased vessels, guiding the accurate implementation of interventional surgeries, and evaluating treatment outcomes.

Currently, the IVUS market is mainly dominated by imported brands such as Boston Scientific and Philips. The IVUS systems launched by domestic innovative companies like InSight Lifetech, SonoScape Medical, Horimed, and Panovision have also been approved.

Among them, the V20P model IVUS system from SonoScape Medical is the world's smallest IVUS system; the IVUS system from InSight Lifetech is the first domestically approved 60MHz high-definition high-speed IVUS product in China; Panovision launched the first domestic "IVUS and OCT all-in-one" intravascular imaging device.

Perhaps due to the strong innovation of the aforementioned domestically produced IVUS systems, along with the small number of industry-wide approvals, limited competition, and broad market prospects, several leading companies have chosen to form strategic partnerships with relevant domestic enterprises: for instance, the collaboration between OrbusNeich Medical and SonoScape Medical, the partnership between Blue Sail Medical and InSight Lifetech, and the cooperation between Philips and Panovision.

Not only the IVUS system but also the RDN system, which is highly innovative, has little competition, and boasts broad prospects, is gaining popularity in the buyer's market.

RDN system mainly used for treating resistant hypertension. According to the Expert Consensus on Refractory Hypertension, there are approximately 245 million adults with hypertension in China, of whom about 10% (around 24.5 million) have refractory hypertension.

Refractory hypertension has long lacked effective treatment methods. The emergence of RDN has brought hope to patients with refractory hypertension. RDN is a minimally invasive treatment technology developed over the past decade, using methods such as radiofrequency ablation and ultrasound ablation to block renal sympathetic nerves, playing a role in treating hypertension. Multiple clinical studies have proven that RDN can effectively reduce blood pressure and improve blood pressure target achievement rates in patients with poorly controlled and refractory hypertension.

As of now, four RDN products have been approved in China, coming from Medtronic, SyMap, BRATTEA, Antong Medical. On the day Antong Medical's multi-pole renal artery radiofrequency ablation system was approved, Grand Pharmaceutical Group Limited announced a partnership with them to promote this innovative medical device. This also adds a highly innovative blockbuster product to Grand Pharmaceutical's cardiovascular intervention portfolio.

Besides, leading companies and publicly traded medical device enterprises are also leveraging BD deals to position themselves in the highly competitive emerging markets. In the shockwave balloon market, despite over 13 domestically produced products receiving approval, buyers still choose to collaborate with relevant companies. This is because the shockwave balloon is an innovative solution for addressing vascular calcification, offering significant advantages over traditional methods and representing the mainstream product for treating vascular calcification in the future.

It is reported that after the shockwave balloon is implanted in the diseased blood vessel segment, it emits acoustic pressure waves to the calcified area to loosen or crack the calcified lesion, restoring elasticity to the blood vessel and providing an ideal lumen for subsequent treatment. Currently, shockwave balloon technology is not only used in coronary arteries but has also been expanded to peripheral vessels. Among them, the shockwave balloon products from companies such as Sonosemi Medical, Lepu Medical, Hui Healthcare, Spectrumedics, Blue Sail Medical, JIA MU YAO, MicroPort Melody Medical, and Trulive Medtech have been approved for application.

In 2024, the number of domestic percutaneous coronary intervention (PCI) surgeries for coronary artery disease in China is estimated to be approximately 1.911 million cases. Among these, 20%-30% of patients have vascular calcification, requiring treatment for calcification before undergoing PCI surgery. This implies that for every five PCI surgeries, one will need to use a shockwave balloon, corresponding to an annual potential demand of over 380,000 surgeries.

Perhaps for this reason, Endovastec and Grand Pharmaceutical Group Limited have entered this niche market through BD deals: Endovastec has partnered with Sonosemi, with Endovastec having the exclusive rights to sell Sonosemi's peripheral intravascular shockwave treatment system in mainland China; Grand Pharmaceutical Group Limited has also reached a cooperation with Trulive Medtech to distribute its coronary intravascular shockwave system and peripheral intravascular shockwave system.

PFA (Pulmonary Vein Focal Ablation System for Atrial Fibrillation) is also a highly competitive market. As the next-generation mainstream product in electrophysiology, the PFA systems of domestic companies such as Jinkang Electronic Medical, Denuo Electrophysiology, APT Medical, SHINEYOMEDICAL, AccuPulse, Alpmed, Shangyang Medical, and PULSECARE have been approved. Moreover, more domestically innovative PFA products are in the process of registration.

In 2024, Boston Scientific's PFA product achieved sales exceeding $1 billion within a year of its overseas launch. This not only validates the vast potential of the PFA market but also boosts confidence in the development of domestic PFA enterprises.

Under the temptation of a billion-dollar market, despite fierce competition, MicroPort EP still chose to cooperate with Shangyang Medical to incorporate its PFA system into the product portfolio, building a full-spectrum atrial fibrillation ablation solution that combines "cryo, thermal, magnetic and electric" technologies.

In addition, surgical robots, as a major innovative product in recent years, have continued to attract market attention. For instance, after Rossum Robot launched its Rossom Intelligent Orthopedic Robot, it quickly formed strategic partnerships with industry giants such as Medtronic Kanghui and Siemens Healthineers.

Recently, there have been new BD deals in the surgical robotics field. On September 5, Ronovo Surgical, a Chinese surgical robotics innovator, announced the completion of a $67 million Series D financing round led by Johnson & Johnson Development Corporation (JJDC). At the same time, Ronovo Surgical signed a strategic cooperation agreement with Johnson & Johnson Medical Devices. The two parties will combine Ronovo Surgical's modular robotic surgery system with Johnson & Johnson's technical expertise in minimally invasive surgery to jointly provide digital surgical solutions for medical institutions in China.

Overall, BD transactions in China's innovative medical device sector are becoming increasingly active. Domestic listed device companies, leading enterprises, and multinational giants are choosing to collaborate with domestic innovative device companies, especially those with strong innovation capabilities and broad market prospects, which are highly favored.

With the industry's development and increasing market concentration, leading enterprises with advantages in cash flow and distribution channels are expected to collaborate more with domestic startups that possess innovative strengths, forming strong alliances, complementing resources, and achieving win–win outcomes.