Pulse of the industry

Looking beyond China to create a global IVD company

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Richard Ding
CEO, Shanghai Kehua Bio-Engineering (KHB)

Diagnostics is the gatekeeper for health care, enhancing the ability to diagnose disease — and even predict outcomes — with accuracy and efficiency. China is a large and fast-growing in vitro diagnostics (IVD) market — in fact, only second to the US in size. Historically, large multinational corporations have dominated IVD sales in China; today, domestic companies — Shanghai Kehua Bio-Engineering (KHB) being one of the largest — are now gaining market share.

Building on our success in China, KHB wants to expand its geographic footprint to capture value for the global IVD market. To jump-start our global ambitions, KHB is currently focused on using alliances and acquisitions as a critical mechanism for adding geographic reach as well as technological capabilities.

In December 2015, we announced our first major acquisition outside of China, purchasing Technogenetics (TGS), an Italian diagnostic maker focused on immunodiagnostics. The assets and know-how from the transaction strengthen our R&D and technical capabilities, particularly in the area of diagnostics for infectious and autoimmune diseases. It also marks our first step to establish a commercial network in the complex but attractive European market.

Our growth strategy is currently focused more on acquisitions than alliances. That’s because acquisitions provide a more direct route to building our portfolio of products and capabilities and expanding our network. It’s also about ownership and efficiency — with acquisitions you can control how you build your commercial strategy and own the two-way transfer of knowledge and R&D capabilities. You also aren’t limited by market or product exclusivities, which can be an issue when licensing a product in a given territory or region.

As other China-based companies look to expand globally, they must first take a step back and understand their core competencies. Building on these successes, they must take the time to clearly define objectives and a strategy for international expansion that utilizes the knowledge and experience of local advisors.

Long-term planning is also essential. For KHB, preparation for the TGS acquisition began years before the actual transaction took place. As we outlined our growth strategy, we developed a wish list of features we were looking for in acquisition targets. Critical factors we weighed as part of our decision-making process included the size of the company, the scale of its operations, its location, and its portfolio of products and capabilities.

We continue to actively look for additional deals outside China, but with an eye to balancing what is best for the market and our business in the short term against where we need to invest for the long-term sustainability of our company.

We’re building a culture, we’re building a product portfolio, and we’re building commercial channels that I believe give us the best foundation for sustainable growth on the global stage.

Shanghai Kehua Bio-Engineering (KHB), which was founded in 1981 and went public in 2004, is one of the first in vitro diagnostics companies in China. It develops, manufactures and markets a range of IVD products and is a global supplier of tests to international health agencies such as the World Health Organization.

This article is excerpted from our annual report, Pulse of the industry: Medical technology report 2017. Download the pdf for more from our report, including these featured guest articles: