The orthopaedic devices market is a multi-billion-dollar industry in China, particularly due to its large population facing orthopaedic challenges like arthritis, fractures, and sports injuries. Various treatments are growing in demand to improve mobility and reduce pain, and an ageing population with higher rates of osteoporosis is driving industry growth.

Recognising the immense potential of this lucrative market, global regenerative medicine company Osteopore (ASX: OSX) is now one step closer to expanding to China. The Company has signed a Memorandum of Understanding (MOU) with InnoVentures Inc, a China-based medical device innovation accelerator, to form a Joint Venture (JV). 

The JV’s goal is to introduce and market Osteopore’s orthopaedic products in China, including reconstruction, regenerative implants, and solutions for bone defects. This effort is aimed at tapping into a market that is projected to generate approximately US$2.31b in revenue in 2023. Furthermore, the orthopaedic devices market in China is expected to exhibit a strong annual growth rate (CAGR 2023-2028) of 7.13%, ultimately reaching a market volume of US$3.26b by 2028.

The JV partnership plans to establish the JV Company (JV Co) in Singapore. Osteopore will grant InnoVentures an exclusive, royalty-free licence for specific intellectual property (IP) and in exchange will receive a 30% equity stake in the JV. JV Co will initially prioritise on obtaining regulatory approval to commercialise Osteopore’s in-house developed High Tibial Osteotomy (HTO) implant, which is used for knee joint realignment surgery.

Commenting on the partnership, Osteopore Executive Chairman Mark Leong said: “We are delighted to announce our MOU with InnoVentures, representing a critical step in our strategy to commercialise our innovative orthopaedic products in China.”

“The potential JV not only leverages InnoVentures’ regulatory expertise and deep network but also demonstrates the importance of Chinese market expansion to our strategy.”

Osteopore and InnoVentures plan to finalise a formal agreement and address any related fees for the JV by 30 November 2023. The JV’s objectives include setting up manufacturing facilities, developing sales and distribution networks, and handling the overall management of the JV Company.

The JV will create a wholly-owned subsidiary in China to serve as the main operating entity. InnoVentures will focus on raising capital, recruiting, and maintaining a support team for the JV Co. Meanwhile, Osteopore is responsible for technology development and commercialisation support. 

The JV is expected to be managed by a Board of Directors consisting of an InnoVentures-appointed director (will also be the Chairperson of the Board), an Osteopore-appointed director, and an independent director mutually appointed by the parties.

InnoVentures is a China-based medical device company that oversees the entire product development process, from creation to regulatory approval and market launch. Established in 2014, InnoVentures also has a sister company called Gateway Medical, which operates in Shanghai and Beijing. One of InnoVentures’ key investors is Singapore-based Vertex Ventures HC – the venture capital offshoot of global investment company Temasek Holdings. The Government of Singapore is the sole equity shareholder of Temasek Holdings.

InnoVentures has found a potential investor, a major Chinese medical device and pharmaceutical company, who is keen on joining the JV. InnoVentures is currently navigating partnership opportunities with this investor and additional agreements will be established between the prospective investor and the JV Co in the future. However, this agreement doesn’t create a formal relationship between the investor and the JV Co at this stage.

Another pathway to enter the Chinese market, in late July, Osteopore signed a non-binding licensing agreement with CellHeal to set up manufacturing facilities, attain regulatory approvals and commercialise select Osteopore regenerative medicine technology applications in China. CellHeal is committed to raising $10 million to fund these commercialisation activities.

For the half year ending 30 June 2023 (Osteopore reports its financials on a full-year basis ending in December), Osteopore recorded a revenue of $997k compared to $816k revenue in the previous corresponding period (pcp). However, this was offset by increased expenditure within the half and unfavourable foreign exchange rates, thus resulting in $3.02m Net Loss After Tax (NLAT) compared to $1.98 NLAT on pcp. The Company ended the half with $1.85m cash at bank.