Chunli Medical Partners with Beisida for Knee Implant OEM Amid National Joint Procurement-Driven Industry Transformation

Reporter |Yuan Yiming

Editor |Xie Xin

1

On September 22, Chunli Medical announced that the company has entered into a strategic cooperation agreement with Beijing Besida Biotechnology Co., Ltd. (hereinafter referred to as "Besida"). Through this collaboration, all of Besida's knee joint products will be manufactured by Chunli Medical via a complete contract manufacturing process, while preserving surgeons' established operative techniques to ensure the smooth execution of surgical procedures.

An industry insider told Jiemian News reporters that such behavior is essentially "banding together for mutual support." Specifically, Chunli Orthopedics' loss of the knee joint procurement bid means that over the next two years, the corresponding market share for knee joint implants will be steadily eroded by competitors, and the impact on the company is unpredictable.

The collaboration between Chunli Medical and Beisida is clearly attributable to the recently concluded National Volume-Based Procurement (VBP) for artificial joints, in which Chunli Medical's knee joint products failed to win the bid, whereas Beisida secured the bid at a higher price tier. Chunli Medical stated that many physicians are already accustomed to using Chunli Zhengda's knee joint products, and a broad base of distributors also hopes to stock a complete product line.

However, in reality, Chunli Medical's failure to win the knee joint tender will have a significant impact on the company. According to the prospectus disclosed by Chunli Medical, from 2018 to 2020, the combined revenue from its hip and knee standard joint prostheses and spinal implant products accounted for 89.94%, 90.64%, and 91.22% of its main business revenue, respectively. Artificial joint products constitute an exceptionally high proportion of Chunli Medical's business portfolio.

In this round of national centralized procurement for artificial joints, the first-year procurement demand for Chunli Medical's knee joint products was 18,909 units, representing a market value of approximately RMB 151 million. In other words, failing to win the bid resulted in Chunli Medical forfeiting a market share worth RMB 151 million. Furthermore, this could prevent Chunli Medical from reaching physicians at core hospitals for its knee joint products over a two-year period, and the long-term impact of such market absence is even more devastating. Under these circumstances, following the partnership between Chunli Zhengda and Besida, Chunli Medical will still be able to continue manufacturing knee joint products, thereby avoiding a complete exit from this product line.

From Bestar's perspective, although its knee joint products won the tender, its sales channels and brand influence are not as extensive as those of Chunli Medical. Under normal competitive conditions, Bestar would be at a disadvantage; however, collaboration with Chunli Medical will enable Bestar to further penetrate hospital channels and capture a portion of the market share.

Following the conclusion of the national centralized procurement for artificial joints, a new round of consolidation and reshuffling among orthopedic companies has already begun.

In addition to the strategic cooperation between Chunli Medical and Bestda, b-ONE has also strategically merged with Shanghai THYTEC Medical Device Technology Co., Ltd. (hereinafter referred to as "Shanghai THYTEC") through b-ONE's acquisition of the company. At a performance communication meeting for b-ONE-THYTEC, a relevant executive stated that this collaboration will better enable the provision of comprehensive solutions for joint replacement.

Furthermore, numerous manufacturers are also intensifying their efforts on products not yet included in volume-based procurement (VBP), such as dual mobility total hip joints, to capture market share. Amid fierce competition, some enterprises are also vying for hospital market share with strategies like "order three, get one free" and "order five, get one free". For example, at the national distributor recruitment conference for the second round of volume reporting under the national VBP for artificial joints, Justar Medical announced that hospitals choosing to report its products could apply under the "order three, get one free" scheme.

Buy Three, Get One Free: During centralized procurement volume reporting, for every three surgical procedure volumes a hospital reports for the company, the company will provide one additional free surgical procedure volume.

According to the aforementioned industry insiders, manufacturers of varying scales each have their own business strategies. At this stage, it remains difficult to assess the actual effectiveness of implementing these strategies, nor is it clear how they will reshape the orthopedic market. Furthermore, with the volume-based procurement (VBP) bidding process having just concluded, all enterprises—regardless of bid outcomes or future prospects—are actively striving to leverage their strengths and mitigate their weaknesses.