A media report indicated that Boston Scientific Corporation (BSX) has made plans to increase its presence in China. The decision to expand its footprints in one of the most emerging markets aims to offset the negative impact of slow medical device sales in the U.S. The announcement has moved the company's share prices up by 1.5%, ending the session at $12.17 as on Dec 26, 2013.
Boston Scientific had entered the Chinese market in 1997. Thereafter, the company has continuously strived to consolidate its position in the emerging markets of Brazil, Russia, India and China (BRIC) that recorded over 29% growth on a combined basis in the recently completed quarter.
BSX' plans for expansion in the Chinese market are justified. Recent estimates show that the annual Cardiovascular Disease (CVD) events in China are expected to increase by more than 50% between 2010 and 2030. This translates into the potential for 39 million Coronary Artery Disease (CAD) events and 130 million strokes (total 169 million). It has also been observed that more than 230 million Chinese people have some form of CVD, resulting in 3 million deaths.
Foreseeing the potential, the company has been taking several initiatives to capture a significant portion of the Chinese medical device market. Boston Scientific plans to expand its 400-strong sales and marketing employee base in China by 24% in the next year. It will also customize products with focus on the Chinese market. BSX has devised a three-tier plan to compete against rivals, comprising better after-sales service, doctors’ training and continued innovation.
Accordingly, Boston Scientific plans to open new doctor-education centers across the country, adding to its newly opened multimillion-dollar innovation center in Shanghai. This will help gain faster and effective patient access as doctors are believed to have a strong hold in the Chinese market.
Recently, a Shanghai branch of the Boston Scientific Institute for Advancing Science (IAS) was opened to train medical professionals in China and in other Asia-Pacific countries. The training exclusively will be focused in areas like interventional cardiology, cardiac rhythm, electrophysiology, endoscopy peripheral interventions, urology and women's health.
Competition in the Chinese Medical device market is likely to increase further from the current level. Boston Scientific’s competitors have also adopted business initiatives in the country. St. Jude Medical Inc. (STJ) has unveiled its Advanced Technology Center Asia Pacific in Beijing, while Medtronic Inc. (MDT) has opened a new regional headquarters in Shanghai, China.
Boston Scientific might face major access hurdles and bureaucratic barriers in the country going forward. However, the company expects its positive initiatives will increase sales by 30% in China over the next five years.
Besides these initiatives, the company is also planning to tread the inorganic route to further expand its operation and offer lower-priced devices to its customers.
Currently, Boston Scientific Corporation carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is NuVasive, Inc. (NUVA), carrying a Zacks Rank #1 (Strong Buy).
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