China's Top Three Medical Consumables Giants: 2018 Annual Performance Showdown
WEGO
Medical Device and Pharmaceutical R&D Manufacturer
[Editor's Note] In terms of total market capitalization, Lepu Medical, listed on the A-share market, is the largest with a value of RMB 47.78 billion and a price-to-earnings ratio of approximately 39 times; WEGO ranks second with RMB 33.74 billion; MicroPort ranks third with RMB 11.78 billion. In the context of advancing import substitution in China, our countryMedical DevicesHow Are the Three Giants of Medical Consumables Performing? What Impact Will Changes in Their Performance and Business Have on the Industry? This Article Provides a Detailed Analysis.
This article was first published on the Medical Device Distributors Alliance, authored by Alliance Jun; edited by YiOu Health for industry reference.
WEGO, Lepu, andMicroPort MedicalAs the "Big Three" in the consumables sector of China's medical device industry, their every move and financial performance serve as bellwethers for the development and changes in the consumables field, consistently drawing significant attention from industry insiders.
So, among the three most influential giants in the consumables sector, which one had the strongest performance in 2018? How will changes in their performance and business operations impact the industry? Let’s delve into the details with Alliance Jun. Corrections and feedback are welcome—thank you!
As can be seen from the table below,Among the three major players in consumables, Weigao Group has the highest operating revenue, followed by Lepu Medical in second place and MicroPort in third.WEGO’s 2018 revenue reached RMB 8.809 billion, with a growth rate of 40%; Lepu Medical’s revenue was RMB 6.356 billion, with a growth rate of 40.08%; MicroPort’s revenue amounted to RMB 4.49 billion, with a growth rate of 50.7%.
Characteristics of consumables-oriented enterprises include high gross profit margins, with the "Big Three" all exceeding 60%. Among them, MicroPort has the highest gross profit margin, reaching as high as 72%, surpassing 70%!
In terms of R&D investment among the three industry giants, MicroPort’s rate is the highest, exceeding 15.7%, while Weigao and Lepu’s rates are relatively lower, with Weigao at only 3.5% and Lepu at just 7.4%.
In terms of total market capitalization, Lepu Medical, listed on the A-share market, is undoubtedly the largest at RMB 47.78 billion, with a price-to-earnings ratio of approximately 39 times; WEGO ranks second at RMB 33.74 billion, followed by MicroPort at RMB 11.78 billion.
The Three Giants of China's Medical Consumables Market: A Comprehensive Comparison by Product Line!
Weigao Group
Revenue Analysis of the Six Major Business Divisions
In 2018, WEGO Group's total revenue reached RMB 8.809 billion, a year-on-year increase of 40.0%; the company's net profit was RMB 1.473 billion, a year-on-year increase of 12.6%; the gross profit margin decreased from 63.5% last year to 62.2%., WEGO attributed this decline in its annual report to the impact of changes in product mix.
From the perspective of business segments, WEGO Group has further adjusted its business segments, changing from three major segments—disposable consumables, orthopedics, and others—toSix operating segments: medical device products, orthopedic products, interventional products, pharmaceutical packaging products, blood management products, and others.Among them, the interventional products are manufactured by Argon.
January 24, 2018,WEGO SharesAnnouncement Issued on the Completion of the Acquisition of Argon Medical Devices Holdings, Inc. (Argon) in the United States for a Transaction Amount of US$844.2 Million (Approximately RMB 5.398 Billion); Thereby, Argon Has Become a Subsidiary of Weigao Group Co., Ltd. The Annual Report Indicates That the Acquisition of Argon Will Serve as One of the Core Platforms for the Group’s Overseas Expansion.
Based on the 2018 revenue of the six major business divisions:
Total revenue from medical device products amounted to RMB 4.448 billion, accounting for 50.5% of total revenue. The product portfolio is divided into four lines: clinical care, wound care, anesthesia and surgery, and medical diagnostics.
Among them, clinical nursing services generated RMB 3.892 billion in revenue, accounting for the highest proportion of total revenue at 44.18%.; The annual report shows that this product category, leveraging its diverse product portfolio, drove an 8.7% year-over-year increase in overall revenue, enabling WEGO to maintain its leading market position in this sector.
In addition, the revenues from trauma care, anesthesia and surgery, medical laboratory testing, and other consumables were RMB 299.9 million, RMB 105.9 million, RMB 150.7 million, and RMB 378.2 million, respectively, accounting for 3.40%, 1.20%, 1.71%, and 4.29% of total revenue; whereasIn terms of year-on-year revenue growth rate, the highest was for anesthesia and surgery-related products,up to 192.43%, with year-on-year revenue growth rates of 35.47% for trauma care, 26.67% for medical diagnostics, and 54.86% for other consumables.
Total revenue from orthopedic products reached RMB 1.181 billion, accounting for 13.4% of total revenue, with a year-on-year growth rate of 35.64%.In 2018, WEGO further consolidated its market position in the spinal field and intensified the marketing promotion of joint products.
Due to the acquisition of Argon Medical Devices in the United States, the interventional products segment generated revenue of RMB 1.444 billion, accounting for 16.4% of total revenue, with a year-on-year growth rate of 868.62%. However, it still reported a net loss of RMB 100 million. WEGO stated that the establishment of Argon China will accelerate the entry of interventional devices into the Chinese market, and the segment is expected to turn profitable in 2019.
Total revenue from pharmaceutical packaging products reached RMB 956 million, accounting for 10.58% of total revenue, with a year-on-year growth rate of 32.92%, maintaining strong growth momentum. Pre-filled syringes further expanded their market influence in the biopharmaceutical packaging sector, establishing a broad customer base. Flush syringes continued to achieve rapid growth.
Total revenue from blood management products amounted to RMB 402 million, accounting for 4.56% of total revenue, with a year-on-year revenue growth rate of 14.12%.
Regional Contribution to Sales Performance
Annual Report Shows,In 2018, the domestic market still accounted for the highest proportion of WEGO Group's revenue, reaching 81.17%, a year-on-year increase of 20%.; among which, East China and Central China accounted for the highest proportion, at 38.93%.; overseas revenue accounted for 18.83% of the total, with revenue in the United States increasing by 3707.7% year-on-year due to the acquisition of Argon Medical Devices, demonstrating strong momentum in overseas revenue growth.
R&D Analysis
In 2018, WEGO Group's R&D expenditure amounted to RMB 311 million, an increase from RMB 274 million in 2017. However, in terms of R&D intensity, the proportion of R&D investment to total revenue was only 3.5% in 2018, down from 4.35% in 2017. Meanwhile, WEGO’s R&D intensity was the lowest among these three companies.
2019 Business Plan
1. The planned investment in 2019 was approximately RMB 2.8 billion to acquire new production lines, which were expected to gradually commence production by the end of 2021.
2. In 2019, the company planned to continue investing approximately RMB 1.5 billion in equipment upgrades and retrofitting projects for disposable consumables, further enhancing the level of production automation.
3. Plan to invest $40 million in outsourced R&D projects for interventional products to enrich the company's high-end product portfolio.
2In 2018, Lepu Medical's total revenue was RMB 6.356 billion, a year-on-year increase of 40.08%.The company's net profit reached RMB 1.255 billion, a year-on-year increase of 26.29%; the gross profit margin rose from 67.23% last year to 72.45%.
From the perspective of business segments, Lepu Medical comprises four major sectors: medical devices, pharmaceuticals, healthcare services, and emerging healthcare formats.Among them, revenue from medical devices amounted to RMB 2.907 billion, accounting for 45.74% of total revenue, representing a year-on-year increase of 15.31%.
Revenue Analysis of Subcategories of Medical Devices
It is divided into self-produced device products, including stent systems, in vitro diagnostic products, surgical instruments, and other self-produced device products.Revenue from self-manufactured medical device products amounted to RMB 2.492 billion, accounting for 39.21% of total revenue, representing a year-on-year increase of 18.47%.
Among them, the stent system accounted for the highest proportion of total revenue, at 22.24%, reaching as high as RMB 1.413 billion.relativelyYear-on-year growth of 20.66%.All other in vitro diagnostic products, surgical instruments, and other self-produced medical devices achieved high growth of over 15%.
Agency and Distribution Business for Medical Devices. Total revenue amounted to RMB 414 million, accounting for 6.53% of the total revenue, representing a year-on-year decrease of 0.64%.
Regional Contribution to Sales Performance
Lepu Medical currently derives 93.1% of its operating revenue from the domestic market., representing a year-on-year increase of 42.81%; overseas sales accounted for only 6.9%, a year-on-year increase of 11.25%. The sales revenue from the top five customers accounted for 7.58% of the total sales revenue.
R&D Analysis
In terms of R&D investment, Lepu Medical’s total R&D expenditure in 2018 amounted to RMB 472 million, accounting for 7.42% of its revenue, representing an increase from the previous year; the number of R&D personnel reached 1,769, an increase of 518 compared to the prior year.
In February 2019, Lepu Medical’s NeoVas bioresorbable scaffold was approved for market launch. As the first bioresorbable scaffold approved in China, its registration approval came at least three years ahead of major competitors, significantly enhancing Lepu Medical’s technological and market advantages while substantially increasing the proportion of revenue derived from innovative products., effectively mitigating the impact of revenue declines caused by future annual volume-based procurement or price reductions of other products, driving overall brand enhancement and technological leadership for the company, and generating new momentum for high-speed growth over the next 3–5 years.
Lepu Medical's AI-ECG Platform received US FDA clearance and EU CE certification in 2018. The product's analytical and diagnostic capabilities cover major cardiovascular diseases, with an accuracy rate exceeding 95%.The AI-ECG Platform is the first AI-based medical technology in China to achieve industrialization, and it ranks among the world’s leading AI medical technologies for ECG analysis and diagnosis. As a leader in industry technology, Lepu Medical has further strengthened its competitive advantage.
2019 Development Plan (Excerpt)
1、Intensify product marketing efforts and fully implement the domestic promotion of the NeoVas bioresorbable stent to facilitate its widespread adoption.
1) Strive to have the product adopted by the majority of hospitals performing PCI procedures;
2) Strive to provide comprehensive implantation technique training for all interventional operators in China;
3) Achieve stent implantation in 20,000 to 60,000 patients.
2. Increase investment in R&D and innovation to accelerate the company's innovative transformation
3. Strengthen the development of the company's medical services segment to safeguard its future growth
4. Continue to prioritize market promotion efforts for the pharmaceutical segment
5. Invest in and construct an international business operation platform centered on the medical industry in the “cardiovascular + oncology” sectors, along with a closed-loop service system that integrates health insurance for disease prevention, surgical treatment coverage, and rehabilitation monitoring.
MicroPort Medical
In 2018, MicroPort’s revenue reached US$669 million (RMB 4.49 billion), a year-on-year increase of 50.7%; the company’s net profit was RMB 123 million, a year-on-year decrease of 2.7%; and the gross profit margin declined from 71.7% in the previous year to 70.2%.
From the perspective of business segments, itsThe orthopedics business generated $236 million in revenue, accounting for 35.3% of total revenue, a year-on-year increase of 5.2%.; driven by the concentrated development of new sales channels, effective physician training, and the launch of new products, the U.S. market accelerated its revenue growth trend, achieving a 2.7% increase.
Revenue from cardiovascular interventional products amounted to USD 202.8 million, representing a year-on-year increase of 24.2%. The increase in revenue was primarily attributable to (i) the entry of Firehawk into more hospitals in China and overseas countries, resulting in a 40.9% year-on-year increase in global revenue.
On April 30, 2018, MicroPort successfully acquired the cardiac rhythm management business of LivaNova. By the end of 2018, it had achieved revenue of USD 158.4 million.
Interventional products for the aorta and peripheral vessels generated revenue of USD 35.0 million in 2018, representing a year-on-year increase of 41.1% (in USD terms).
Neurointerventional products generated revenue of USD 18.4 million in 2018, representing a year-on-year increase of 36.4% (in USD terms).
Electrophysiology medical devices generated $12.7 million in revenue in 2018, a year-over-year increase of 34.8% (in USD).
Surgical medical devices generated revenue of US$5.9 million in 2018, representing a year-on-year increase of 7.8% (in USD).
MicroPort’s diabetes and endocrinology medical device business underwent restructuring in 2017, pursuant to which the Company ceased to hold controlling equity interests in Shanghai MicroPort Life Sciences.
Regional Contribution to Sales Performance
Regional Contribution to MicroPort's 2018 Revenue: A Narrow Gap Between Domestic and International Markets. The domestic market accounted for 42% of total revenue, while the international market contributed 58%, with Europe representing the largest share.
R&D Analysis
MicroPort Medical’s R&D Investment Reached US$104.8 Million in 2018, up 80.2% from USD 58.2 million in the previous year, with R&D investment rising rapidly to account for 15.7% of total revenue,also significantly higher than those of the other two companies.
2019 Development Plan (Excerpt)
In 2019, Shanghai MicroPort CardioFlow and MicroPort EP, both subsidiaries of MicroPort Scientific Corporation, are set to secure additional financing. Meanwhile, the spin-off of Shanghai MicroPort Endovascular MedTech by MicroPort Scientific Corporation had its listing application on the STAR Market accepted on April 3.
In 2019, the medical consumables sector witnessed significant turbulence. With the establishment of the National Healthcare Security Administration, centralized volume-based procurement for medical consumables, initiated with high-value items, ushered in an unprecedented era of stringent cost containment within hospitals. However, this may present a valuable opportunity for domestically produced medical consumables to catch up. Policy support for cost-effective Chinese-made medical consumables is intensifying. By strengthening independent innovation, leading domestic enterprises will achieve import substitution through superior cost-performance ratios and expand their market presence.
With the release of the “Outline of the ‘Healthy China 2030’ Planning” and the in-depth development of healthcare reform policies, China’s medical service industry is entering a new phase of upgrading, marking a transformation from “scale” to “value.” As the medical industry increasingly integrates with new technologies, purely volume-driven medical services are no longer the preferred investment choice, and numerous “pseudo-demands” will be eliminated as consumers “vote with their feet”… How can one turn crisis into opportunity, leverage existing strengths, and ultimately stand out in 2019 after the capital winter?
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