Chinese medical devices major
Mindray Medical International Limited
) recently revealed a definitive agreement to take a dominating
stake in Wuhan Dragonbio Surgical Implant Co., Ltd.
As per the terms of the deal, Mindray is expected to pay about
$35.5 million for the acquisition. The company will avail of funds
from its cash reserves. It expects the transaction to close in July
2012 and the deal to have a minor impact on its earnings results
for 2012. Consequently, Mindray retains its guidance for 2012.
Based in Wuhan, China, Dragonbio sells orthopedic offerings,
such as joint, spine and trauma products, in its domestic market.
The company had sales of about $7.7 million in 2011.
Mindray is a bellwether in the Chinese MedTech industry with a
solid international presence. A key distinction with domestic
competitors is that the majority of Mindray's products have CE Mark
and/or Food and Drug Administration ("FDA") clearance.
Mindray maintains a decent product pipeline and brings out
several new products each year. New products contribute in a major
way to Mindray's revenues. In fiscal 2011, the company launched 13
The company has entered the premium segment globally, where its
competitive advantage is still unclear. Also, on the negative side,
health care reform, in China and the U.S., may reduce demand for
Mindray's products. Competition is fierce and leads to price
erosion over time.
Mindray's competitors, in different niche segments, include GE
Healthcare, a part of
). Our Neutral recommendation is supported by a short-term Zacks #3
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