GE and Russian Technologies form joint venture to manufacture medical devices

7 Jan 2011

GE and state corporation Russian Technologies (Rostekhnologii) are to form a joint venture to manufacture, assemble, sell and service medical diagnostic equipment in Russia. Financial details of the transaction were not disclosed.

The framework agreement, signed by GE International President and CEO Ferdinando Beccalli-Falco and Russian Technologies’ Deputy General Director Dmitry Shugayev and witnessed by Russian Prime Minister Vladimir Putin, supports the Russian government’s priorities of attracting foreign investment, enhancing the country’s aging energy infrastructure and modernizing its healthcare system.

The initiative, which was also signed with a gas turbine joint venture with Inter RAO UES, is aligned with GE’s and its partners’ core industrial capabilities. Until local production of components can be established in Russia, they will be imported from other GE locations or qualified suppliers.

“These strategic partnerships are the latest examples of GE’s long-term commitment to Russia and our ‘company to country’ strategy, in which we work directly with governments to satisfy their needs in rapidly developing markets,” said Beccalli-Falco.

“We are working with our Russian partners to bring technology to Russia and develop it locally. By harnessing GE’s wide range of products and services in strategic growth sectors, we and our partners can help to diversify Russia’s economy beyond natural resources and increase energy efficiency. In addition, we can apply innovative technology to help Russia reduce costs, increase access and improve quality in healthcare.”

Building on a memorandum of understanding the parties signed June 4, 2010, the agreement reflects GE’s deepening commitment to Russia, a major growth market for the company. The framework agreement envisions production of GE’s medical and energy equipment in Russia, as well as technology transfer, which will facilitate the development of a local supply chain and later, production in Russia of component parts for the joint ventures.

Healthcare Joint Venture

The healthcare joint venture is expected to start with production of CT scanners, then expand to other diagnostic equipment such as angiographs, MRI, ultrasound, digital X-ray, PET, gamma cameras and medical devices. The joint venture may use the recently established joint GE Healthcare-Medical Technologies Ltd CT scanner assembly facility in Moscow. In May 2010, GE Healthcare installed in a Moscow hospital the first Russian-assembled 16-slice CT scanner, and through the end of November, it had been used to perform more than 2,000 exams.

Healthcare components initially will be sourced from GE, shifting later to local production by qualified Russian suppliers in keeping with GE’s requirements for quality, cost-effectiveness, design specifications and intellectual property protection.

The government plans to spend more than US $15 billion from 2011-2013 on healthcare. GE estimates Russian demand today for CT scanners alone at 3,000 units.

 Shugayev said, “The medical joint venture, meanwhile, could make a substantial contribution toward modernizing Russia’s healthcare system. Establishing production in Russia will facilitate not only the transfer of modern technology and local sourcing of components, but timely and quality service, as well as the creation of a wide regional system for the preparation of specialists.”

 Russian Technologies and GE will each hold a 50% stake in the healthcare joint venture. GE will exercise operational control over the joint ventures, with joint decisions by the partners on strategic matters.