This local medical device company's profit in the first quarter exceeded 3.1 billion! Mindray, Xinhua, and United Imaging ranked in the top three, while GE, Philips, and Siemens lost momentum

Compared with the overall performance pressure in 2023, the domestic medical device sector showed an accelerated growth trend in the first quarter of 2024.

Recently, the first quarter reports of major domestic medical device companies have all been released. The New Media Center of "Pharmaceutical Economic News" has comprehensively sorted out the financial report data of the top 5 medical device companies. Among them, Mindray Medical, Xinhua Medical, United Imaging Healthcare, Yuyue Medical, and Intech Medical have revenues exceeding 2 billion yuan; if ranked by R&D investment, Mindray Medical, United Imaging Healthcare, Neusoft Medical, Lepu Medical, and Yuyue Medical rank high, and their R&D investment has exceeded 100 million yuan.

In contrast, in the first quarter of 2024, the global market revenue growth of the three major international medical device giants GE Healthcare, Philips Healthcare and Siemens Healthcare (hereinafter referred to as "GPS") continued to slow down, and all showed a downward trend in performance in the Chinese market.

At a time when the global environment is relatively "depressed", the industry has seen a number of leading Chinese innovative pharmaceutical and medical device companies working hard to achieve breakthroughs in technological innovation, continue to expand their business at home and abroad, break into the domestic and overseas first-tier markets with "global firsts" and "best in class", and continuously enhance their brand influence.

At the same time, under favorable policies, my country's medical device industry has continued to develop rapidly in recent years, and the market size has exceeded the trillion yuan mark. According to Roland Berger's "China Medical Device Industry Development Status and Trends" report, my country's current drug-to-device ratio is 2.9, and per capita medical device expenditure and clinical penetration are relatively low. From another perspective, this means that the medical device industry has huge room for future growth.

Industry insiders said that the Chinese medical device market is expected to have a golden development period of ten years in the future. At present, centralized procurement has gradually become normalized, and the pace of "going overseas" has continued to accelerate. Breakthroughs in high-end fields have continued. Under the trends of "trading old for new" and tackling key core technologies, leading companies have begun to accelerate. At this critical juncture of the industry's transformation, how to find new growth poles and expand incremental markets in a market environment where challenges and opportunities coexist is an important issue facing medical device companies.

According to statistics, among the TOP5 companies in terms of revenue in the first quarter financial report of 2024, four medical device companies achieved year-on-year revenue growth, namely Mindray Medical, Xinhua Medical, United Imaging Healthcare, and Intech Medical. Yuyue Medical, which ranked fourth, saw a year-on-year decline in revenue.

Specifically, the company with the highest revenue in the first quarter was still Mindray Medical, which led by a huge margin, with total revenue of 9.373 billion yuan, up 12.1% year-on-year; net profit attributable to the parent company was 3.16 billion yuan, up 22.9% year-on-year. This is the result of Mindray Medical's accelerated progress in innovation and harvest in recent years.

It is understood that in the field of medical imaging, Mindray Medical launched mid-to-high-end desktop Resona/NuewaI9 Elite Edition, mid-to-high-end desktop Resona/NuewaI8 and other new products this quarter; at the same time, in the field of life information and support, Mindray Medical launched New products such as A3/A1 anesthesia system and 4K three-dimensional electronic thoracoabdominal endoscope system. With its rich product lines and significant supply channels, Mindray Medical has also received a large number of overseas orders. Monitoring, testing, ultrasound products and overall solutions have entered more high-end hospitals, group hospitals and large chain laboratories.

The revenues of the other four leading medical device companies also reached the 2 billion yuan level, including Xinhua Medical at 2.529 billion yuan, United Imaging Healthcare at 2.350 billion yuan, Yuyue Medical at 2.231 billion yuan, and Intech Medical at 2.203 billion yuan.

It is worth noting that Yuyue Medical ranked fourth in total revenue in the first quarter of 2024, with operating income of 2.231 billion yuan, a decrease of 17.44% from the same period last year; net profit attributable to the parent company was 659 million yuan, a year-on-year decrease of 7.58%. Although the revenue growth rate is slightly behind, Yuyue Medical's net profit far exceeds that of other companies and ranks second.

As a leading medical device company in China, Yuyue Medical's products are mainly concentrated in the business areas of respiratory oxygen generation, diabetes care, infection control solutions, home electronic testing and in vitro diagnostics, emergency and clinical and rehabilitation equipment, etc. Yuyue Medical's double decline in performance this time may be related to the greater competitive pressure faced by its core products.

From the perspective of R&D investment, Mindray Medical has firmly held the throne of both revenue and R&D investment. In the first quarter of 2024, Mindray Medical's R&D investment totaled 1.03 billion yuan, accounting for 10.99% of its revenue; Yuyue Medical's R&D investment was also not low, accounting for 5.55% of its revenue, totaling 124 million yuan.

It is worth mentioning that among the top five companies in terms of revenue, United Imaging Healthcare's R&D investment accounts for the highest proportion of revenue, reaching 21.67%, and the absolute value of its R&D expenses is second only to Mindray Medical.

At present, after years of accumulation, with the intensification of market introduction and the effective implementation of commercialization, United Imaging Medical's market coverage has been effectively improved, covering almost most high-end medical imaging diagnosis and radiotherapy products. According to the statistics of new domestic market orders, among United Imaging Medical's products, CT ranks second, with high-end and ultra-high-end CT growing significantly; MR ranks third, with 3.0T and above MR products growing strongly; MI ranks first, It has maintained a leading position in the Chinese market for many consecutive years; diagnostic XR products, including fixed DR, mobile DR, breast DR, etc., also rank first; RT products rank third, and its product portfolio continues to enrich.

What is remarkable is that the high-end equipment of United Imaging Medical has grown rapidly in overseas markets. In 2023, United Imaging Medical entered Huntsman, CHRISTUS and other medical institutions in North America, and its full range of products has covered more than 50% of state-level administrative districts in the United States; in Europe, United Imaging Medical's PET/CT is installed in the Curie Cancer Institute in France, and CT is installed in Effidia Roca Hospital, one of the most important medical groups in Spain.

Currently, United Imaging Healthcare's users cover more than 12,600 medical institutions in over 65 countries. According to the 2023 annual report, United Imaging Healthcare achieved overseas revenue of 1.678 billion yuan in 2023, a year-on-year increase of more than 50%, and the proportion of overseas revenue increased from 11.74% in the same period last year to 14.70%.

With the expansion of overseas market share, United Imaging Healthcare's brand influence will increase rapidly.

In March 2024, the State Council issued the "Action Plan to Promote Large-Scale Equipment Updates and Consumer Goods Trade-in", requiring that by 2027, the scale of equipment investment in medical and other fields will increase by more than 25% compared with 2023, and accelerate the update and transformation of medical equipment such as medical imaging, radiotherapy, remote diagnosis and treatment, and surgical robots.

So far, Guangdong, Zhejiang and other places have made clear plans for "trading old for new". Among them, Guangdong plans to update more than 20,000 equipment by 2027, and Hubei is expected to update 300 large equipment each year by 2027. It can be foreseen that driven by market demand and policy dividends, the medical device market will usher in a window of rapid development, and domestic medical device companies are also expected to take advantage of policy opportunities to further expand their market share.

Compared with the "rapid progress" of domestic medical device companies, the three multinational "GPS" giants have all lost momentum. Judging from the financial data in the first quarter of 2024, the growth rate of the three companies is slightly weak.

Among them, Siemens Healthineers achieved revenue of 5.435 billion euros in the first quarter of 2024, a year-on-year increase of 3% (excluding the impact of exchange rates and investments); Philips Healthcare achieved revenue of 4.138 billion euros, a year-on-year increase of 2.4%; GE Healthcare's revenue in 2024 was 4.650 billion US dollars, a year-on-year decrease of 1%.

It is worth noting that in the report, "GPS" mentioned the decline in China's performance. Among them, Siemens Healthineers achieved revenue of 595 million euros in China in the first quarter of 2024, a year-on-year decrease of 14%; GE Healthcare's revenue in China was 597 million US dollars, a decrease of 11%; although Philips did not disclose the specific revenue in China, it mentioned that due to the impact of the Chinese market, the company's comparable orders decreased by 3.8%.

In response to the decline in revenue growth in China in the first quarter, "GPS" gave explanations in their respective earnings calls.

GE said that the interest-subsidized loan policy released in September 2022 stimulated equipment purchases in the first quarter of 2023, and China had recovered from the epidemic in the first quarter of 2023. These positive factors enabled GE to achieve about 20% growth in China in the first quarter of last year. The first quarter of 2024 was still affected by the anti-corruption campaign in the medical field, and there were customers waiting for clearer information on large-scale equipment update policies, which caused a lag in orders. These reasons led to a year-on-year decline of 11% in its performance in the first quarter of 2024. In addition, Philips Healthcare and Siemens Healthcare also gave similar explanations in their earnings conference calls.

It is worth mentioning that the domestic large-scale equipment replacement policy is also good news for "GPS". The three giants all said that China is an attractive market, orders are recovering and growing, and the large-scale equipment replacement policy will have a positive effect on the performance growth in China.

At present, all companies have paid enough attention to the Chinese market. Faced with the strong rise of local enterprises and the acceleration of "domestic substitution", "GPS" have also strengthened localization transformation to adapt to more intense competition.

In June 2022, Siemens Healthineers China officially released its new localization strategy of "National Intelligence and Innovation", announcing that it will deeply participate in the construction of "Healthy China" as a "Chinese company" through the three dimensions of "promoting the localization of the entire product line", "further deepening innovation and research and development based on Chinese market needs", and "promoting the upgrading of local business models".

In October of the same year, Siemens Healthineers announced that it would split the original Asia Pacific region into two parts: China and Asia Pacific (including Japan). After this split, the status of the China region will be further enhanced, becoming one of the four major regions of Siemens Healthineers worldwide.

Philips Healthcare specifically mentioned in its 2023 annual report that in order to better serve the Chinese market, the company will continue to adhere to its "in China, for China" strategy, focus on local innovation, manufacturing, services and partnerships, continue to promote the realization of "Made in China", and leverage the local ecosystem to provide more locally suitable solutions for professional and consumer markets.

GE Healthcare is also stepping up its local business. In April 2023, GE Healthcare China officially announced that its China strategy would be upgraded to "comprehensive localization, boundless innovation, and win-win cooperation", focusing on the three key points of localization, innovation, and cooperation.

In addition to GPS, other multinational medical device giants have also increased their investment in China. For example, Boston Scientific signed a contract with Shanghai, and its first Chinese factory will be located in Shanghai Lingang; Medtronic also invested hundreds of millions of yuan in Shanghai to establish related product lines by investing its core business manufacturing in China for the first time.

The global landscape is being restructured, and local development is accelerating. At present, leading enterprises represented by Mindray Medical and United Imaging Healthcare are constantly developing and innovating, and the level of advanced medical equipment industry foundation and modernization of the industrial chain has been significantly improved. More and more local medical device companies are striving to seize the opportunities of the times and policies, review their own development strategies, and look forward to the future.

However, faced with the changing international market situation and fierce challenges from domestic enterprises, "GPS" have not sat idly by, but are actively using "local manufacturing" and "local innovation" to better meet domestic clinical needs and enhance their competitiveness with local enterprises.

Editor: Zheng Miao