Shuimu Medical Rides the Surge in MedTech CXO: A Detection-Centric Powerhouse Files for IPO

In 2017, the Medical Device Registrant (MAH) system was first piloted in the Shanghai Free Trade Zone. By 2019, the MAH system had been expanded to pilot programs in 21 provinces and municipalities, ushering in the first wave of rapid growth in China’s medical device CRO/CDMO market.

In 2021, the domestic medical device CRO/CDMO sector witnessed a surge in financing activities, ushering in a golden age for its development.

Beijing Shuimu Zhonghui Science and Technology Development Co., Ltd. has seized the opportunities of this golden era. Established in 2017—the year the Medical Device Registrant system was first piloted in Shanghai—the company is a one-stop, full-industry-chain service platform integrating engineering R&D (including the R&D and manufacturing of IVD standards and control materials), testing and inspection, clinical trials, and regulatory registration. It specializes in active medical devices and in vitro diagnostics (IVD).

Last year, Shuimu Medical became the first privately owned, independently established third-party professional medical device testing and inspection agency in China.

Recently, Shuimu Medical completed a Series A+ financing round worth hundreds of millions of yuan. It is evident that Shuimu Medical has positioned itself at the forefront of the industry trend.

Discussions on medical devices inevitably involve comparisons with pharmaceuticals. The pharmaceutical CRO industry developed earlier than the medical device CRO sector and has now formed an industrial landscape characterized by one dominant player alongside several strong competitors across the entire value chain. In contrast, the medical device CRO industry remains in its early stages of development, with no monopolistic structure yet established.

“The bottleneck in the development of medical device CROs lies in technology,” said Sun Jingsheng, Chairman and General Manager of Shuimu Medical.Sun Jingsheng holds a master’s degree in Biomedical Engineering from Tsinghua University. He previously served as Deputy Director of the Beijing Medical Device Testing Institute and as Director of the Medical Device Registration and Supervision Division at the Beijing Municipal Food and Drug Administration, bringing 17 years of experience in medical device management.

Sun Jingsheng holds his own views on the development of pharmaceutical CROs and medical device CROs: Although there is a wide variety of pharmaceutical drugs, their underlying R&D technologies are nearly identical, allowing them to largely share the same technical platform. In contrast, the R&D pathway for medical devices is far more complex. The technological principles vary completely across different fields, ranging from large-scale equipment such as medical linear accelerators, CT scanners, and MRI machines, to smaller implants like artificial joints and coronary stents.

In contrast to technology, the key factor is talent. Professionals required for drug development tend to have similar academic backgrounds. However, medical device R&D demands interdisciplinary experts who possess both device engineering and clinical knowledge. Experts from different fields “may not even share a common academic language,” which inevitably makes the development of contract research organizations (CROs) in the medical device sector more challenging than that of pharmaceutical CROs.

However, the rapid development of medical device CROs is inevitable, as they are virtually essential for medical device companies.

Domestic medical device R&D and manufacturing primarily follow two major directions: one is the imitation of mature imported products, and the other is innovation originating from universities or hospitals. Device development in both directions must undergo the following processes: functional completion, performance validation, compliance verification, reliability testing, usability validation, efficacy enhancement, and mass production.

“Reverse-engineering imported products is not difficult; by disassembling the device, one can clearly see its internal components and circuitry. However, superficial resemblance does not equate to functional equivalence, as the underlying design philosophy cannot be gleaned merely from studying individual components,” said Sun Jingsheng. The drawbacks of the alternative approach are even more pronounced. Innovations originating from universities and hospitals often demonstrate a strong grasp of technological innovation and clinical needs, making it relatively easy to develop a functioning prototype. Yet, functionality does not necessarily translate to usability. Once such products enter the clinical phase, progress tends to be sluggish, resulting in protracted regulatory approval cycles.

These challenges cannot be resolved by startups overnight. The continuous evolution of medical device technology underscores the critical importance of accumulating industrial data. Having benefited from a century of empirical data accumulation in the medical device sector, Western countries exhibit a market dynamic where, although national and industry standards in China are aligned with those in the West, European and American companies achieve higher registration efficiency than their Chinese counterparts.

The high registration efficiency of European and American enterprises is inseparable from the rapidly developing overseas basic platform companies for medical devices and R&D service providers. These startups outsource common issues to other institutions while focusing on refining their core technologies.

The demand for product engineering from the numerous domestic startups is precisely the driving force behind the development of China’s medical device CRO industry.

Currently, the mainstream practice in the medical device CXO industry is to bypass engineering processes with high technical barriers and instead provide clinical trial services to enterprises. Building on traditional medical device CRO services, Shuimu Medical has established engineering design as its core competitive advantage.

“Approaching from a technical perspective and implementing engineering design for medical devices substantially enhances product compliance,” said Sun Jingsheng.Shuimu Medical has currently obtained 21 software copyrights, 3 invention patents, and 8 utility model patents, with 12 invention patents under substantive examination.

As mentioned above, the biggest bottleneck in the development of medical device CROs is the wide and fragmented span of technical platforms. Shuimu Medical has identified commonalities between active medical devices and IVDs within its testing laboratories.

Shuimu Medical’s testing laboratory was established in 2020. The laboratory is capable of evaluating products’ electrical design, software logic, and other aspects, and provides analysis reports to help researchers rapidly identify and locate potential reliability and usability issues and defects. According to Sun Jingsheng, Shuimu Medical’s testing services cover more than 90% of active medical devices and in vitro diagnostics.

Shuimu Medical’s core team possesses many years of experience in medical device testing, providing enterprises with consulting services on issues such as med-tech interdisciplinary technologies and regulatory compliance, and offering recommendations for addressing product engineering challenges.

Based on its testing laboratory, Shuimu Medical has established a comprehensive suite of algorithms for assessing the reliability of its diagnostic products.CompanyWe have established analytical business models for electronic compliance, reliability, usability, and efficacy enhancement of large-scale medical devices, including surgical robots, proton and heavy ion therapy systems, endoscopes, ventilators, and radiotherapy equipment. The next step is to develop analytical business models for related fields such as active implants, diagnostic ultrasound imaging, and hearing aids.

In the IVD sector, Shuimu Medical has established a wholly-owned subsidiary, Shuimu Jiheng, dedicated to the research and development of IVD reagent standards and quality control materials.

IVD reference materials and control materials are essential core consumables for evaluating effectiveness throughout the entire process of IVD research and development, production, and application. Their development process demands a high level of technical expertise, such as ensuring uniformity and stability in lyophilization processes. Currently, foreign products hold a high market share, leaving significant room for domestic substitution.

The Shuimu Jiheng team has been deeply engaged in the IVD field for over a decade, possessing independently innovative raw material preparation technologies and the capability to produce highly simulated molecular diagnostic reference materials for tumors. Leveraging the third-party service platform of Shuimu Medical, the team employs reference methods published by the Joint Committee for Traceability in Laboratory Medicine (JCTLM) to conduct timely product testing, facilitating quality control and traceability. Its offerings currently cover the majority of the IVD sector.

In recent years, the Chinese government has vigorously promoted the development of the medical device industry and gradually liberalized third-party medical device testing. In August 2021, the newly issued Administrative Measures for Medical Device Registration and Filing stipulated that inspection reports submitted for registration applications or filings may be issued by qualified medical device inspection institutions commissioned to perform such tests. This policy has further advanced the marketization of inspection and testing agencies.

Leveraging the core advantage of its clinical laboratory,Shuimu Medical has obtained China Metrology Accreditation (CMA) and accreditation from the China National Accreditation Service for Conformity Assessment (CNAS), becoming the first privately owned, independently established third-party professional medical device testing institution in China.

At this point, Shuimu Medical has established an “end-to-end” integrated service system for innovative medical devices, covering engineering R&D, testing and inspection, clinical CRO, and regulatory registration services.

Currently, Shuimu Medical serves over 500 healthcare enterprises, with active medical devices accounting for 90% of its CRO business.

“Shuimu Medical officially commenced operations in 2020. The rapid aggregation of enterprises in this sector underscores the industry’s urgent need to overcome engineering bottlenecks and accelerate testing speeds,” said Sun Jingsheng. While Chinese companies possess strong original innovation capabilities, their technology transfer rate remains below 5%. After several years of market education, innovative medical device companies have gradually recognized the importance of “division of labor and collaboration” in facilitating technology translation.

As the saying goes, “A single flower does not make spring.” The true golden age of medical device innovation will arrive only when the entire medical device CXO industry thrives. Currently, the trend in the medical device CRO sector is expanding toward CDMO and testing services.

Recently, Shuimu Medical completed a Series A+ financing round worth hundreds of millions of yuan, with Yijing Capital and Sinovest Capital as the investors. Shuimu Medical plans to use this funding to expand its services in medical device CDMO and animal testing, enhancing its "end-to-end" integrated innovation services to cover the entire lifecycle and various stages of medical device products.