Welllead Medical Expands Global Footprint with Over 2,600 Catheter Specifications and 30% YoY Overseas Revenue Growth

According to the 2022 annual report released by Well Lead Medical Co., Ltd. (Well Lead Medical, 603309.SH), the company achieved a revenue of RMB 1.363 billion in 2022, representing a year-on-year increase of 21.88%; its net profit amounted to RMB 178 million, a year-on-year increase of 55.00%.

Among them, domestic revenue reached RMB 707 million, a year-on-year increase of 17.90%; overseas revenue amounted to RMB 646 million, a year-on-year increase of 27.76%, accounting for 47.39% of total revenue.

Data Source: Company public reports, chart by VCBeat

Well Lead Medical (Welllead), established in 2004, is one of the leading global suppliers of medical catheters.The company’s product portfolio primarily consists of medical catheters, which are mainly applied in urinary catheterization, anesthesia, urology, nursing care, respiratory therapy, and hemodialysis. Among these, its tracheal intubation tubes and indwelling urinary catheters rank among the top in both domestic and international markets in terms of production and sales.

Nowadays, the global expansion of Chinese medical device companies has become an inevitable trend. However, in 2004, when Well Lead Medical was founded, the market size of China's medical device industry was less than RMB 20 billion, while the global medical device market stood at approximately USD 187 billion (around RMB 1.3 trillion). Although overseas markets offered substantial allure, many domestic manufacturers struggled financially within China, constrained by the dominance of imported brands, let alone venturing into high-end international markets.

In contrast, Well Lead Medical chose to expand overseas at an early stage, when its domestic momentum was still insufficient, challenging larger but more strictly regulated mainstream markets such as North America, Europe, and Japan.

Registration and certification of medical products in various countries serve as the first barrier for enterprises expanding overseas. As of the reporting period ending in 2022, Well Lead Medical has obtainedU.S. FDA 510(k) Clearances: 21; CE Certifications: 90; Health Canada Licenses: 23; German Regulatory Registrations: 83, possesses excellent capabilities in international product registration, and some of its products have gradually become competitive with major foreign competitors.

Furthermore, Well Lead Medical has established business relationships with over 100 overseas medical device distributors and dozens of domestic medical device export distributors, with its products sold to more than 90 countries and regions worldwide.

This raises the question: How did Well Lead Medical break into overseas markets? And how has it maintained its presence in these markets for two decades, sustaining a 30% growth in overseas revenue?

Before dissecting the logic behind Well Lead Medical’s global expansion, it is undeniable that the company still lags behind its major international competitors in terms of corporate scale, R&D capabilities, product quality and performance stability, brand concentration, and corporate recognition.

Well Lead Medical has been able to establish a firm foothold in the global medical catheter market, thanks to the support of one key player.This is JD Capital (600053.SH), the first private equity (PE) investment firm to list on the National Equities Exchange and Quotations (NEEQ), with a market capitalization of RMB 100 billion.

JD Capital invested over RMB 30 million in Well Lead Medical in 2011 and gradually exited its stake after the company’s IPO. This investment journey delivered JD Capital nearly a tenfold return, with an annualized IRR as high as 50%.

Why did JD Capital “ride the coattails” of Well Lead Medical at an early stage? And how did it safeguard Well Lead Medical’s journey into overseas markets?

First, the capital injection put Well Lead Medical on a fast track for development.

In 2011, Well Lead Medical’s annual net profit was less than RMB 50 million, with an asset-liability ratio of 47.06%. The capital injection of over RMB 30 million not only enabled the company to introduce advanced equipment, strengthen its R&D capabilities, and improve process technologies ahead of schedule, thereby overcoming production capacity constraints, but also enhanced the management of its marketing network, allowing for broader and more timely access to market information and a deeper understanding of customer needs.

Secondly, jointly formulate the development strategy for the “Two Wings”.Amid a complex market environment and a volatile international landscape, enterprises and investment institutions maintain a relationship akin to that of a driver and a co-pilot. It was not until the year before JD Capital invested in Well Lead Medical that the management teams of both parties met for the first time; yet, during their initial exchange, they found themselves in complete agreement on their strategic vision for the medical catheter industry.

Population aging has become a significant global trend that will persist for the foreseeable future. In 2000, the proportion of the global population aged 60 and above was 9.9%, on the eve of becoming an aging society; by 2020, this figure had risen to 13.5%; and by 2030, one in six people worldwide is projected to be aged 60 or older.

In line with the aging trend, medical catheters, as fundamental medical device products, are widely used in respiratory and urological surgeries, treatments, emergency care, and nursing, leading to a significant increase in their global usage frequency.

JD Capital and Well Lead Medical identified the market prospects for medical catheters under the aging population “tailwind” as early as 2010. The two parties jointly developed a dual-pronged development strategy.

Step 1: Given the fragmented competitive landscape and low industry concentration of medical catheters in China, companies should rapidly expand market share and extend the industrial chain through horizontal and vertical mergers and acquisitions. Step 2: Pursue overseas M&A to establish brand image, thereby completing the transformation from an OEM/ODM manufacturer to a high-end manufacturing enterprise.

As a result, Well Lead Medical achieved annual growth rates of over 12% in both total revenue and net profit during its IPO sprint period from 2012 to 2015.

Data source: Company public reports; chart by VCBeat

Post-investment management is one of the core areas where strategic investors build differentiated advantages.Only by helping entrepreneurs identify effective learning approaches and methods, supplemented with appropriate resources, can companies build their own competitive moats. Yet, the enterprise itself remains the ultimate helmsman. Therefore, how can it take direct charge to achieve strategic objectives, establish advantages in overseas markets, and build an independent brand?

By reviewing and analyzing Well Lead Medical’s public reports and corporate performance from 2012 to the present, its early advantage and success in overseas markets can be attributed to one word: “speed.”

Undoubtedly, existing products from Chinese manufacturers lack inherent advantages in overseas markets, whether in terms of brand or technology. Even with market access and sales qualifications secured, breaking into these markets remains challenging. Therefore, when addressing market challenges, Chinese medical device companies expanding globally should cultivate more competitive, differentiated advantages.

Innovation requires not only good ideas, but also a solid foundation to support and translate innovation into practice. Well Lead Medical primarily adopts the OEM/ODM sales model for its overseas markets. Under this sales model, how to rapidly integrateof the industrial chainUpstream, midstream, and downstream: It is particularly important to accelerate the pace from R&D of raw materials, to component production, and finally to assembly and delivery.

Beyond in-house R&D, the fastest route to innovation is “buying.”

In terms of upstream raw materials, Well Lead Medical has invested in and established production bases for PVC, Hainan latex, emerging medical materials (phthalate-free PVC), and silicone. On the downstream product front, the company acquired Langhe Medical to form a product portfolio comprising “medical urinary catheters + circumcision surgical instruments,” and has also invested in Suzhou Medsoon’s anesthesia product line.

In 2017, Well Lead Medical invested nearly RMB 400 million to establish the Zhongyu Weili M&A Investment Fund, aimed at accelerating the company’s integration of the medical catheter industry chain.

Leveraging the delivery advantages derived from its comprehensive industrial chain, Well Lead Medical can secure non-standard customized product projects from major overseas clients more quickly and in greater volume, delivering products to these key customers with quality and quantity assured at a pace unmatched by overseas competitors.

As mergers and acquisitions and overseas customized projects continue to accumulate, Well Lead Medical’s core business scale continues to expand, and its product portfolio becomes increasingly diverse,From an initial three business lines to the current six, and from fewer than 10 products to over 100. In the field of medical catheters alone, the portfolio covers four major areas—anesthesia, respiration, urology, and hemodialysis—comprising five major categories, more than 60 varieties, and over 2,600 specifications.

Through this, the company has also deeply bound its core major clients, with its largest overseas client currently being a Global Fortune 100 company.Cardinal Health, Inc.and a U.S. medical device company with a century-long historyMedline。

Although the global market resembles a vast blue ocean brimming with allure, significant challenges such as the lack of fit for domestic experience in foreign contexts and cultural differences stand in the way. These obstacles result in prolonged preliminary negotiations and development cycles for projects with major overseas clients. Therefore, even as new products are continuously launched, it is particularly crucial to address not only R&D timelines but also how to further shorten the extended response times caused by geographical distance and cultural barriers.

Compared to major overseas competitors, which are large in scale, have relatively complex organizational structures, and exhibit slower response times,Well Lead Medical’s export operations are directly managed by its International Business Department and Shanghai Well Lead Medical Products Import & Export Co., Ltd. This lean management scale and flat organizational structure enable rapid response to and fulfillment of the specific needs of customers in different market regions, thereby enhancing efficiency in market and customer responsiveness.

Regarding the development plan for the sales team, Well Lead Medical’s current overseas sales are primarily trade-based, with its main export sales team, comprising fewer than 20 members, based in Shanghai.

Therefore, to more rapidly and effectively meet the evolving needs of overseas customers,In 2023, the company formulated a strategy to shift its export sales operations closer to the front lines, planning to implement this initial sales relocation in its North American and European businesses by establishing overseas subsidiaries, recruiting local sales personnel, and cultivating more high-quality local medical partner institutions.

In terms of production, the scale advantages brought by Well Lead Medical's automated production system have also resulted in strong procurement bargaining power.

Well Lead Medical has comprehensively enhanced its quality management capabilities, supply chain assurance, and technical process implementation by rapidly advancing flexible production characterized by automation, intelligence, and standardization. This strategy continuously improves the delivery capacity and product quality stability of export orders while reducing unit production costs, enabling the company to maintain strong profitability while ensuring a competitive price advantage.

The company currently holds ISO 13485 quality management system certification and MDSAP certification (applicable to five countries, including the United States, Japan, Canada, Brazil, and Australia), and has successfully passed U.S. FDA factory inspections three times.

In 2023, Well Lead Medical planned to implement 44 automation projects, nine of which are now operational. Meanwhile, to further enhance response efficiency,Well Lead Medical will select a site and build a factory in Southeast Asia, localizing part of its production capacity overseas.

Leveraging its three major efficiency advantages of “rapid R&D, rapid production, and rapid sales,” Well Lead Medical has achieved substantial profits even amid head-to-head competition with foreign giants.According to the 2022 annual report, Well Lead Medical achieved overseas main business revenue of RMB 646.0079 million, a year-on-year increase of 27.76%. Revenue from the North American market increased by 25.24% year on year, and revenue from the European market increased by 38.66% year on year. Revenues from the Asian, South American, Oceanian, and African markets all achieved rapid growth.

China's medical catheter industry emerged in the 1970s and 1980s, achieving rapid growth following the reform and opening-up policy. It has progressively evolved from a state of near-zero technological capability and low value-added products toward the development of high-precision, high-end medical catheters.In the second year after its listing, Well Lead Medical completed the acquisition of a 25% stake in Creative Balloons GmbH, a German company specializing in novel materials, officially launching its strategic expansion into the high-end global market for medical consumables.

Leveraging years of accumulated experience in technical products and enhanced R&D capabilities, Well Lead Medical has launched a series of new visualization-enabled, antibacterial medical catheters, continuing to deepen its presence in higher value-added and market-value product segments.

Taking urinary catheterization as an example, Well Lead Medical has achieved maximum coverage of the international market by leveraging its brand, quality, and production capacity advantages, while continuously launching differentiated innovative products, such asHydrophilic Coated Ultra-Slippery Urinary Catheters, BIP Antibacterial Urinary Catheters, Sterile Temperature-Measuring Silicone Urinary Cathetersetc., to promote the upgrading of urinary catheter products and further enhance their market competitiveness.

With the ramp-up in sales of new high-margin products, the overall gross margin and profitability of urinary catheterization products continue to improve.In 2022, Well Lead Medical’s urinary catheterization product revenue reached RMB 424.188 million, representing a year-on-year increase of 46.07% and accounting for 31.1% of the company’s total revenue.

Data Source: Company Public Reports, Chart by VCBeat

Furthermore, Well Lead Medical also offers a comprehensive product portfolio in the field of stone management.Among them,Disposable Negative Pressure Stone Extraction SheathIt is a revolutionary innovative product of the company in the field of urological calculi, and has obtained multiple product registration certificates including FDA, NMPA, CE, and Canadian certification. Produced by its subsidiary Langhe MedicalDisposable Circumcision StaplerA leading player in its niche sector in China, with coverage spanning more than 20 countries and regions worldwide.

Stone clearance sheath, stone retrieval basket, minimally invasive dilation and drainage kit, disposable circumcision stapler (from left to right)

Source: 2022 Annual Report

Based on the aforementioned advantages of innovative technologies,The gross profit margin of the company's urology products exceeded 80% in 2022.。

In the future, Well Lead Medical will also establish a professional academic team in its urology division. By engaging in in-depth exchanges with physicians at end-user medical institutions to understand actual clinical needs, the company will carry out extensive clinical improvements of new urological products and promote their academic outreach overseas.

On August 9, Well Lead Medical received visits from 143 institutional investors, including QFIIs, insurance companies, fund management firms, overseas institutions, securities firms, and registered private equity funds. According to the subsequently released record of investor relations activities, the company’s main business export revenue amounted to RMB 263.8068 million, representing a year-on-year decline of 18.44%, due to destocking by major North American customers and a subsequent drop in orders.

The slowdown in operating revenue is merely a temporary reflection of market supply and demand, whereas global expansion represents an inevitable trend for Chinese enterprises seeking new growth curves and life cycles, embodying a long-term strategic approach.It is reported that Well Lead Medical currently has approximately 20 overseas key-account projects under development, which will provide a continuous growth engine for the sustained expansion of its overseas business in the future.

References:

1. Who Reigns Supreme in the $400 Billion Overseas Medical Device Market? - VCBeat

2. Medical Device “Tenbagger” Strategizes Overseas M&A: The Full Story of JD Capital’s Investment in Well Lead Medical - Voice of Medicine

3. Domestic Leader in Medical Catheters, Well Lead Medical: Intensive Cultivation Enters a New Growth Phase - Guosheng Securities

4. Well Lead Medical: Big Vision in a Small Business - Cyzone