Could Medtronic’s Kanghui Purchase Set Course For US Entry?

Since taking the CEO seat at Medtronic PLC last year, Omar Ishrak has set the multinational on two principal paths. The first path extends Medtronic’s reach into emerging markets, a popular destination for US and European health care companies seeking to tap into those countries’ surging economies to offset stagnant growth in their home markets. The second, less prominent, strategy is so-called reverse innovation, a philosophy Ishrak brought over from his time as CEO of GE HealthCare, the $12 billion subsidiary of General Electric. (SeeAlso see "Reverse Innovation: Is The US Losing Its Edge In Innovation?" - In Vivo, 24 January, 2012..) Historically, the US medical device industry has been rewarded for innovation that provides better clinical outcomes. But competing in emerging markets – and ultimately in developed markets – also might require device makers to produce tools that provide good-to-adequate outcomes at lower prices.

Medtronic brought both philosophies into play last month when it agreed to pay close to $800 million for Chinese orthopedics implant maker China Kanghui Holdings. [See Deal]...