Multinational MedTech Giants Face Mounting Pressure in China Amid Intensified Volume-Based Procurement

　　【Pharmaceutical Network Industry Dynamics】With the advancement of the normalization of centralized procurement, not only drugs but also medical devices and consumables have become targets of procurement. In this context, China's medical device industry has rapidly risen, market competition has become increasingly fierce, and multinational medical device companies are facing performance pressures, urgently needing to find a way out.
 

Recently, Siemens released its Q2 2024 earnings report for the fiscal year ending March 31, 2024. In Q2 2024, Siemens achieved revenue of €5.435 billion, representing a 3% year-over-year increase.
 

Among the figures, the medical imaging business achieved revenue of 2.956 billion euros in the second quarter, representing a year-on-year increase of 2.6%, but failed to break through the 3 billion euro mark. The company stated that while the European and American markets showed strong growth in 2023, revenue from operations in China declined by double digits due to temporary delays in customer orders from previous quarters. Analysts believe that large medical imaging equipment, which involves high costs, has been a major focus since the implementation of healthcare anti-corruption measures in the second half of last year, impacting related companies' businesses to a certain extent.
 

Diagnostic Business Achieves Revenue of 1.104 Billion Yuan in Q2 2024, Increasing by 3.7% Year-on-Year; Excluding the Impact of COVID-19 Antigen Rapid Testing Business, Diagnostic Business Revenue Grows by 4.1% Year-on-Year.
 

In addition, Varian's medical and clinical treatment businesses achieved revenues of 910 million euros and 526 million euros respectively in the second quarter, with year-on-year changes of -2.1% and 8%. According to the financial report, both businesses also declined in China.
 

Looking at the longer timeline, Siemens Healthineers reported revenue of €10.611 billion in the first half of the fiscal year, representing a year-on-year increase of 4.3%. Looking ahead to fiscal year 2024, Siemens Healthineers stated that the company's revenue for fiscal year 2024 is expected to grow by 4.5% to 6.5% year-on-year; excluding the COVID-19 antigen rapid testing business, the year-on-year revenue growth rate is projected to be between 5% and 7%.
 

Not only Siemens, but also GE Healthcare, Medtronic and other multinational medical device leaders have seen a decline in their businesses in China, drawing industry attention.
 

For example, GE Healthcare's revenue in the first quarter of 2024 was $4.6 billion, basically flat compared to last year, with revenue in China at $597 million, a year-on-year decrease of 11%.
 

Medtronic's Q3 Revenue for Fiscal Year 2024 was $8.089 billion, a year-over-year increase of 4.7%; Quarterly Net Profit was $1.34 billion, an 8.8% year-over-year increase, with double-digit revenue decline in the Chinese market.
 

Facing the situation of performance pressure, these multinational giants are busy making adjustments in China. For instance, Medtronic inaugurated another brand-new factory in April 2023 in the Lingang Development Zone, Shanghai — Mai'an, which focuses on the production and R&D of high-quality cardiovascular products.
 

In May 2023, Siemens Healthineers invested over 1 billion yuan in its Shenzhen production base to build a brand-new R&D and manufacturing base for high-end medical equipment. Meanwhile, Siemens Healthineers is continuously promoting and expanding its localized innovation and cooperation ecosystem in China.
 

In February this year, the GE Healthcare Magnetic Resonance Eastern Hemisphere Headquarters project also signed and settled in Tianjin Binhai New Area, indicating that the company will further expand its production capacity. In March, the state issued a new policy to promote large-scale equipment updates. GE Healthcare believes there is a huge stage in China and plans to double its R&D investment in China over the next three years.
 

Notably, alongside the adjustments of multinational corporations in China, there has also been a series of personnel changes. For instance, on the evening of April 23, Johnson & Johnson announced via an internal email that Song Weiqun (Wii Song), Chairman of Johnson & Johnson's China region and President of Johnson & Johnson Medical Technology’s China branch, had submitted his resignation to pursue external development opportunities.
 

Disclaimer: Under no circumstances shall the information or opinions expressed in this article constitute investment advice to any person.