GE HealthCare is expanding its partnership with Sinopharm in China

2023-03-03

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Shanghai-based Sinopharm is one of the largest life science products companies in the world. Its pharmaceutical business alone — with roughly $60 billion in annual revenue — places it at No. 2 in our sister publication Drug Discovery & Development‘s Pharma 50 report of the world’s largest pharma companies. In addition to drug development, Sinopharm operates a substantial China-based logistics network for drugs and medical devices. Meanwhile, GE HealthCare is No. 6 in Medical Design & Outsourcing’s Medtech Big 100 report of the largest medical device companies. In an SEC filing from Feb. 24, GE HealthCare said it has an existing joint venture relationship with Sinopharm that it made through Hangwei, a medical equipment manufacturing company formed in 1991. The new long-term joint venture is with Sinopharm’s China National Medical Device Co. (CMDC). It initially involves providing non-premium CT and general imaging ultrasound solutions for primary care and rural health. GE HealthCare said the two companies may further expand the agreement as the joint venture develops. Said GE HealthCare: “In line with GE HealthCare’s business strategy to grow in emerging markets with a local approach tailored to customer needs, the purpose of the new joint venture is to develop, manufacture, and commercialize medical equipment to address the growing needs of China’s healthcare market.” The formation of the joint venture is subject to required Chinese government regulatory approvals. GE HealthCare has been making a slew of deals amid its spinoff with GE, which went into effect in January. Just yesterday, it announced a 10-year agreement with Advantus Health Partners worth up to $760 million. The agreement provides GE HealthCare’s healthcare technology management services to Advantus’ clients. Roughly 13% of GE HealthCare’s $18.3 billion in revenue in 2022 came from China, according to the company’s most recent annual report. The company has 7,200 employees in China, just under half the 16,300 employees that GE HealthCare has in the U.S. The company’s revenue out of China was down 6%. On top of COVID-19 lockdowns, U.S. medtech companies have had to wrestle with Chinese government efforts to hold down healthcare costs through changes to the procurement process for the country’s national health system. In its annual report, GE HealthCare noted a policy that effectively prohibits the sale of products through multi-layer distributors (even between wholly owned subsidiaries). Just this week, Zimmer Biomet spine and dental tech spinoff ZimVie said its spine tech business is exiting the market because of the Chinese government’s volume-based procurement decisions. GE HealthCare, however, appears to be going in the opposite direction.

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