Qiming Venture Partners Dialogue with HelpTec and MicroTech Medical: How Medical Device Companies Evolve from Product Competitiveness to Systemic Competitiveness

The Qiming Venture Partners CEO Cloud Summit was successfully held on December 30–31, 2021.

Dai Zhenhua, Director, Deputy General Manager, Chief Financial Officer, and Board Secretary of Huitai MedicalShi Yonghui, Executive Director, Senior Vice President, and Chief Strategy Development Officer of MicroTech MedicalDiscussion on "From Product Competitiveness to Systemic Competitiveness"Qiming Venture Partners, Executive Director Zhang AoServe as the moderator.

Huitai Medical was listed on the STAR Market on January 7, 2021, while MicroTech Medical was listed on the Main Board of the Hong Kong Stock Exchange on October 19, 2021. What sparks will fly from their dialogue? VCBeat has compiled the following insights based on on-site materials.

Host:In 2021, the most unavoidable keyword in the medical device sector was centralized procurement. Do you believe that centralized procurement presents more opportunities or challenges for enterprises? What strategies has your company adopted to respond to centralized procurement policies?

Dai Zhenhua, Huitai Medical:Volume-based procurement presents both opportunities and risks for many enterprises. A specific assessment must be made in light of each enterprise’s circumstances and industry conditions.

For Huitai MedicalThe opportunities outweigh the risks.First, our market share is minimal. In the domestic market, no Chinese brand holds a market share exceeding 10%. Second, our product pricing is relatively reasonable. The volume-based procurement cases for products such as balloons, guidewires, and catheters in certain provinces and cities in 2021 have also validated our judgment that centralized procurement can help our related product lines enter the market more rapidly.

What we can still do isDeliver high-quality products,ElevationInternational market share, meanwhileReductionCosts, Further Strengthening InnovationDomestic health insurance funds are under significant pressure, yet a comprehensive approach is essential. For instance, while negotiating price reductions, policymakers should also evaluate enterprises within a global context. Companies cannot operate without profits or with razor-thin margins. Although this may pose no immediate problems in the short term, it will undermine the competitiveness of domestic firms in the global market over the long run. We urge decision-makers to strike a balance, as this constitutes genuine protection for domestic enterprises and helps enhance their core competitiveness.

MicroTech Medical's Shi Yonghui:We are optimistic about the innovative medical device sector.Currently, some multinational corporations are conducting preliminary market education, but overallThe domestic production rate is very low.

Therapy penetration is also relatively low.Taking the insulin pump therapy and continuous glucose monitoring (CGM) therapy for diabetes that we have implemented as examples, the penetration rate of insulin pump therapy for diabetes in China is less than 3%, while the penetration rate of CGM in type 1 diabetes is 5%. Compared with the penetration rate of over 30% in Europe and the United States, we are at a very early stage of growth.

Home Use Is a Larger ScenarioThis segment is currently unaffected by volume-based procurement (VBP). In fact, VBP encourages us to focus more on identifying scenarios that truly deliver value to patients and physicians. Future growth will increasingly depend on commercial insurance coverage and individuals’ out-of-pocket payment capacity. This necessitates strengthening our health economics capabilities to provide greater clinical value to patients.

One more point regarding the internationalization mentioned by Mr. Dai just now,International markets and globalization are undoubtedly the path forward for innovative medical devices.

Host:I’d like to invite both of you to share your perspectives: from our current standpoint, how does your company define and understand innovation?

MicroTech Medical's Shi Yonghui:Our understanding of innovation is based on product-centric innovation. One isThe originality of the product’s design constitutes its intellectual property and patents.; second, inTo what extent do enterprises truly master core processes or raw materials during product development?. For example, our insulin pumps and continuous glucose monitoring systems are highly challenging to develop, representing two fields with substantial patent layout barriers.

Our two co-founders possess strong technical backgrounds. Had we merely engaged in simple imitation and replication, we could have developed a product within two to three years. In reality, however, it took us a full six years to develop our first product, as we were determined not to create a mundane, repetitive offering lacking genuine originality. Instead, we aimed to build a product with global competitiveness capable of succeeding in international markets. Over the past two years, numerous medical device companies listed in Hong Kong and on China’s A-share market have faced patent challenges, whereas we have remained unaffected. Our solid foundational R&D efforts have proven highly beneficial for our subsequent global expansion.

Furthermore, holding patents does not necessarily guarantee a product’s commercial success. For instance, developing continuous glucose monitoring (CGM) devices requires multidisciplinary expertise, the ability to rapidly mobilize and concentrate substantial resources within a short timeframe, and resilience against disruptions in the current international supply chain—all of which present significant challenges. We have achieved innovations in numerous manufacturing processes, such as semi-permeable membrane technology and impedance technology, which are not disclosed in our patents. The complete internalization of these product manufacturing processes gives us the confidence to meet substantial domestic and international demand.

Dai Zhenhua, Huitai Medical:The electrophysiology and vascular intervention industry is relatively mature, with foreign giants having operated in the field for many years.

We understand innovation as follows: first,Technology is the foundation of a brand,Corporate technology must possess originality."This is not the end after copying; continuous innovation in processes and other aspects is also required."

Second, we need toImprovement-Oriented Innovation by Standing on the Shoulders of Giants.There are many leading players in our industry who have undergone years of technical trials and tribulations. We aim to rapidly reach the 75th percentile of their performance level, and on this basis, drive innovation in performance and manufacturing processes.

Third,Innovation is a means; never forget your original aspiration.. Throughout this process, we have always adhered to several key points: first, the productTechnologyThis is beneficial for both patients and operators. Second, product development must establish a certain level of technical barrier; if the barrier is low, entering the market to make quick profits carries significant risk. While we cannot guarantee that every decision or opportunity will be successfully captured, we will always keep these key points in mind when evaluating long-term business opportunities.

Moderator:We’d also like to briefly expand on this point: How do you both view the industry’s active pursuit of collaboration or M&A opportunities?

Dai Zhenhua of Huitai Medical:We are striking a balance. In theory, our company’s product portfolio can become fully saturated within a certain period, eliminating the need for further expansion. From this perspective, we are open to external opportunities and do not reject them outright. The decision to pursue or bypass such opportunities depends on balancing several factors. Specifically, we assess the estimated costs and time windows associated with in-house development, compared against the costs and business growth potential offered by external M&A opportunities. By weighing these two approaches, we can generally determine whether to proceed. Of course, the optimal timing for mergers and acquisitions is typically during industry downturns, when the probability of success is relatively higher.

MicroTech Medical’s Shi Yonghui:Compared with the internal pipeline, timing of acquisitions is also critical. Given the currently low market penetration in our therapeutic area, our primary focus remains on expanding the market for our existing pipeline and solidifying our market leadership. That said, we closely monitor cutting-edge technologies, as technological innovation is now driving major industry trends. Additionally, in our internationalization efforts, we can strategically leverage agency partnerships. We are also open to considering structural opportunities, including mergers and acquisitions.

Host:Both of you have repeatedly mentioned the topic of “going global” in our discussion just now. For the medical device industry, whether driven by policy or by companies’ internal needs, the vast majority of medical device firms are talking about taking their products overseas. We would like to invite both of you to share your perspectives: Has the time come for products to be sold internationally, ushering in an era of “dual circulation”? Has this era already arrived? And for your respective companies, what are the unique characteristics of overseas opportunities?

MicroTech Medical's Shi Yonghui:"I believe now is an opportune time for medical device companies to expand overseas.", especially for companies with certain technical thresholds and barriers. Since medical devices are products of bioengineering, such products hold a significant advantage in China, a major manufacturing powerhouse.

The pace of internationalization is relatively slow, primarily due to patent issues and market access barriers.Market access comprises two aspects: first, obtaining local registration certificates, with clinical trials required for many product categories; and second, gaining inclusion in the local medical insurance reimbursement system. Only on this foundation can brand building—specifically, the establishment of a genuine Chinese brand—be addressed. In this regard, domestic companies such as Mindray Medical are leading the way.

Regarding innovative medical devices, we must first be able to provide high-value-added products that can obtain regulatory approval abroad and gain access to local reimbursement systems. Subsequently, we should leverage the genuine advantages of our products to build a strong reputation. Although each sector has its dominant players, Chinese brands can realistically expect to capture a 5%–10% market share, provided their products possess unique advantages and patented technologies, supported by well-structured local distribution channels. However, achieving the goal of becoming a mainstream brand in the local market will require more sustained, long-term efforts.

Huitai Medical's Dai Zhenhua:Our international expansion is proceeding smoothly, with overseas sales currently accounting for approximately 10% to 12% of our total revenue. At present, our exports are primarily focused on channel products, and we have achieved significant success in regions such as Asia-Pacific, Eastern Europe, and Latin America. After obtaining the necessary certifications, we engage local distributors and partners to drive market penetration. As Mr. Shi mentioned earlier, as we look to enter developed markets such as North America and Western Europe in the future, we will also explore collaborations with local partners.Establish another strategy similar to dual branding, etc.。

Host:We would like to invite the two of you to share your insights on building organizational capabilities and developing talent pipelines.

Dai Zhenhua of Huitai Medical:First, it is important for entrepreneurs to share.. In today’s fully open society, top-tier talent is highly sought after in the job market. If you hesitate to make decisive commitments, you will struggle to retain such individuals; therefore, sharing equity or rewards should be the top priority. Of course, this sharing must be balanced. For talent, especially the top 5%–10% of high-end professionals, hiring should not focus on positioning a single executive but rather on building an entire team. The expectation is that he or she will bring in or cultivate a group of people, thereby allowing the chairman or founder to minimize involvement in subsequent management operations.

The second point is the company’s self-sustaining capability.It is essential to prioritize the cultivation of culture and values, identify shared core values, and foster a culture characterized by openness, transparency, and fairness. This includes ensuring that performance evaluations and incentive mechanisms are transparent and equitable. Such an approach facilitates resonance among employees, enables the systematic development of talent pipelines, and serves as a critical strategy for enterprises to sustainably reduce labor costs.

Another point is that many companies have a development cycle,You need to find talent whose career trajectories align with the company’s development cycle.. For example, if a company is in a rapid growth cycle but its talent pool is conservative in nature, there will be a mismatch.

Last point,The Personality of Senior Executives Is Crucial."Some individuals possess extensive experience and seniority, yet they are risk-averse and remain trapped in the glory of their past achievements; such candidates are not what we seek. We are looking for talented professionals who are competent, driven, willing to take risks, and highly ambitious."

MicroTech Medical's Shi Yonghui:At different stages of development, enterprises have varying talent and organizational needs. Shared values and aligned worldviews are the cornerstone of long-term collaboration. For candidates in key roles, even if they possess impressive resumes and strong interest, we would rather leave positions vacant if their values do not align with ours, taking more time to communicate and observe before making a decision.