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Medical device industry: rapid growth and fierce competition

In the long run, China's medical device market has huge potential. At present, the industry is at the critical point of integrated development. In the process of comprehensive and professional development, it will give birth to future industry giants.
At present, the medical device industry has the following investment highlights:
China's medical device industry is at the critical point of integration and development. Specialized M & A cultivates market leaders and comprehensive M & A gives birth to industry giants. From the initial stage of primary health care materials to the initial stage of category expansion, and then to the structural change stage promoted by private capital in the 1990s, China's medical device industry has completed the original technology and capital accumulation, and initially realized the product structure adjustment and regional industrial layout. After the launch of the new medical reform in 2006, the industry ushered in a new historical period. Diversified strategic demands, fierce industry competition and capital strength have become the catalyst for industry integration. Under the joint action of the industry's endogenous characteristics and external environment, the concentration degree is improved and the diversified development trend is formed. China's local medical device enterprises will promote industry concentration through merger and acquisition. In the process of comprehensive and professional development, more market leaders will emerge, and the birth of future industry giants.
Strategic positioning determines the future development, leading and expanding enterprises are expected to become industry giants. In the period of integrated development, Chinese medical device enterprises will face three kinds of development pattern choices: 1) focus on market segmentation and achieve segmentation leader; 2) become a comprehensive giant through merger and acquisition expansion; 3) realize medical and electrical integration with the help of scientific and technological advantages. Focus and diversification are indispensable. We believe that enterprises with diversified development and active integration and expansion are more likely to be winners. Mindray medical, Weigao, Yuyue medical and Lepu medical have become the leaders of integration through joint venture and merger. Minimally invasive medical, Kanghui medical, Chuangsheng medical, Jiuan medical, Yangpu medical and Xinhua medical are the leaders in the subdivided fields. Although Wandong Medical Co., Ltd. only focuses on one subdivision field, it carries the expectation of China Resources Group on the development of medical device industry.
As the general trend of industrial upgrading, China's medical device industry is moving from traditional manufacturing to high-tech development. Manufacturing and processing is the basis for the development of China's medical device industry. After accumulation, it has established a complete product system, and has established a pivotal position in the field of medium and low-end products. China's medical devices are actively upgrading technology, striving for opportunities for domestic market and external industry transfer. With the improvement of product quality and technical structure, Chinese enterprises have made remarkable achievements in the fields of monitoring, medical imaging equipment, clinical laboratory equipment and minimally invasive interventional therapy. The general trend of innovation and development is irreversible. Computerized tomography, nuclear magnetic resonance, ECG physiological instruments and artificial joints will be the commanding heights to be occupied in the next step.
   China's medical device market has huge potential and will maintain rapid growth. The growth of the global medical device industry is better than that of the drug market, and will maintain a compound growth rate of 10% - 15% in the future. Although the developed countries occupy 78% of the market share, the developing countries, represented by China, are experiencing rapid growth, relying on cost advantages and R & D accumulation to enhance the position of industrial chain. The increasing medical expenses, increasing consumption ability and health awareness will be the positive factors to promote the development of the industry. The reform of medical and health system will inject additional impetus into the development of the industry and become the inducing force to release the suppressed demand and open up the potential space in the future. Internal and external forces such as resource allocation rebalancing, upgrading and industrial transfer are intertwined. The compound growth rate of China's medical device industry will maintain at 20% - 30%.
Industrial risks:
1) Economic recession and reduction of fiscal expenditure may restrain the demand of high-end export market; 2) RMB appreciation weakens the global competitiveness of China's manufactured products; 3) the production and sales of medical devices are strictly regulated in various countries, and policy changes may significantly increase the cost of manufacturing enterprises; 4) foreign large-scale medical device enterprises accelerate to enter the Chinese market, as well as the competition of domestic brands Drama, may depress industry profits.
Good sales and poor profit margin
Large medical equipment companies will benefit from the new GMP and infrastructure expansion. Due to the increasing industry standards in China and the increasing demand for cost-effective production equipment from global generic drug manufacturers, especially Indian pharmaceutical companies, Xinhua medical and dongfelong are optimistic about the medium and long-term growth prospects of large medical equipment companies. We reiterate our positive view on Xinhua medical, because the company's profit is expected to achieve a strong growth of 96.8% after the implementation of the new GMP in 2011. In addition, with strong R & D capability, the company will continue to launch new products and services (overall solution for operating room).
Cost and speed are critical in the medical consumables market. We believe that domestic enterprises have the potential to seize market share from multinational companies. Domestic manufacturers are moving towards the upstream of the industrial chain by focusing on the development of high profit margin products (such as switching from traditional syringes to pre filled syringes). In order to remain competitive in the bidding, companies such as Chuangsheng medical and minimally invasive medical are trying to enter the joint (knee and hip) device market by providing a series of products instead of a single product. However, due to the poor reputation of the product quality, there are still doubts about whether the domestic joint products can be accepted by the market.
The market expects strong sales growth, but profit margin pressure is a new concern: first, prepare for bidding in the second half of 2011. We



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