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Stock opportunity: Boston Scientific opens new center in Shanghai

Amritpal Khalsa

China as an emerging market

Government officials in China expect the medical device market to reach $38 billion by 2015—a 271% increase from 2009. The USITC projects an 11% compound growth rate in device demand through 2018. Imports to the country are also expected to increase in the coming years following an approximate 15% jump in 2012 alone.

(Read more: Medtronic purchases Cardiocom: Bad for medical device industry?)

Boston Scientific (BSX)

Boston Scientific is one of the largest medical device manufacturers in the world, with a market cap of $15.66 billion. The device maker has 24,000 global employees and it spent $886 million in R&D (research and development) globally in 2012.

The company recently set up a new research center on September 17 to innovate products better-suited to the Chinese market. Zhu Lin, a public relations officer at the company, explains that the company is attempting to innovate in three ways:

(Read more: Why shifts in Chinese regulation could benefit U.S. device makers)

  1. Increasing the clinical and economic value of their products
  2. Improving patient outcomes
  3. Reducing healthcare costs and increasing patient accessibility

The research center plans to train 700 medical practitioners per year. The center will also gather consumer data that the company will use to tailor its products.

According to Boston Scientific, the company has experienced sustained revenue growth in China of about 25% over the past five years. It’s worth mentioning, however, that the company had a failed trial in 2004 with a direct sales business model. It’s now using distributors.

Late to the game

Boston Scientific (BSX) is late to the game behind Johnson & Johnson (JNJ) and Medtronic (MDT). Both companies have larger operations and are significantly invested in the market. Jonhson and Johnson (JNJ) set up an innovation center in 2011 to “design and develop medical devices and diagnostic products specifically for emerging markets.” It’s looking to launch another innovation center towards the end of 2013. Medtronic (MDT) opened an R&D center in 2012 and started operating in the country in 1989. Medtronic (MDT) plans to double its employees in the country and recently purchased the largest domestic device maker in the country, Kangui Holdings.

If Boston Scientific (BSX) can catch up to its competitors, look for the company to capture an increasing amount of the device market, leading to a boost in revenues.

(Read more: Brazil’s medical device industry: Market outlook)

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