MicroPort Medical Swings to Loss in 2020 Amid Impact of National Volume-Based Procurement of Medical Consumables

Original Title: MicroPort Turns from Profit to Loss in 2020 as the Impact of Centralized Procurement of Medical Consumables Emerges Source: Caixin Health

Introduction

The centralized procurement of coronary stents was officially implemented in 2021, with specific impacts yet to be observed; this highlights the risks associated with centralized procurement for orthopedic products; R&D expenditure growth tends to be invested in surgical procedures.Robotand heart valve business

Text | Reporter Liu Denghui, Intern Reporter Zhan Chaoyue

DomesticInnovative HealthcareMicroPort (00853.HK) swung from profit to loss in 2020. According to the announcement, the group’s revenue in 2020 was approximately US$649 million, a decrease of 18.2% compared with 2019. The company reported a loss of US$223 million in 2020, compared with a profit of US$29 million in 2019.

At the earnings conference call on March 31, Sun Hongbin, Chief Financial Officer of MicroPort, stated that the decline was primarily driven by factors such as the pandemic and the volume-based procurement policy for the cardiovascular business in China. Taking into account the post-pandemic recovery and the impact of centralized procurement, the orthopedics and cardiac rhythm management businesses are expected to achieve significant growth in 2021, with the Group’s sales revenue projected to reach double-digit growth of approximately 20%–25%.

MicroPort was listed on the Hong Kong Stock Exchange in 2010, with business segments covering cardiovascular intervention, orthopedic medical devices, rhythm management, aortic and peripheral vascular intervention, neurointervention, heart valves, surgical robots, and surgical medical devices. Since 2019, the company has begun to spin off its sub-businesses for separate listings, focusing on the field of aorta and peripheral vessels.MicroPort Endovascular(688016.SH) was spun off from its parent company and listed on the STAR Market in July 2019, becoming the first H-share spin-off to list on the STAR Market. In February this year, MicroPort CardioFlow (02160.HK), which focuses on heart valve business, also completed its spin-off and listing on the Hong Kong Stock Exchange. In addition, the two major businesses of cardiac electrophysiology interventional diagnosis and treatment, and surgical robots, are currently planning to list on the STAR Market.

In 2020, the National Healthcare Security Administration (NHSA) launched its first volume-based procurement (VBP) pilot for high-value medical consumables. As one of the initial product categories, coronary stents saw an average price reduction of over 90%. Two stent products from MicroPort were selected, securing the highest total intended procurement volume among all successful bidders. While current policies have already impacted MicroPort’s cardiovascular business, the formal implementation only began in January 2021, and the VBP policy for orthopedic products remains unclear; thus, the subsequent impact remains to be observed.

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