State-Owned Jianfa Healthcare Acquires Controlling Stake in ZhiXin Medical, a High-Value Medical Consumables Distributor with RMB 7 Billion Revenue

A Dark Horse Emerges in the High-Value Consumables Supply Chain: With 2019 Revenue of RMB 7 Billion, It Has Been Acquired and Taken Under State-Owned Control. Backed by Strong Financial Supply Chain Support and a Solid Foundation in Distribution Supply Chain, the “Dark Horse” Is Gaining Momentum.

Recently, CIBLUE Medical Devices learned that, with the approval of the State-owned Assets Supervision and Administration Commission of Xiamen Municipality, C&D Medical has signed an equity acquisition agreement with Zhixin Medical, through which the former will acquire a controlling 51.02% stake in the latter, marking the commencement of its industrial layout in the national high-value consumables supply chain business. Zhixin Medical has been dedicated to the high-value consumables supply chain sector for nearly a decade, establishing a solid distribution foundation. Backed by Xiamen C&D Group, C&D Medical boasts strong financial capabilities and has also been expanding its presence in the healthcare industry in recent years. Through this acquisition, C&D Medical and Zhixin Medical have joined forces, leveraging their respective strengths to achieve complementary synergy.

Xiamen C&D International Building

Amid the rapid expansion of China’s high-value medical consumables distribution market, the industry remains relatively fragmented, presenting a significant window for consolidation and substantial growth potential.

C&D Healthcare, fully named Xiamen C&D Medical Health Investment Co., Ltd., is a subsidiary of Xiamen C&D Group Corporation. Its core business areas include health management, medical services, elderly care, centralized procurement and distribution of pharmaceuticals and medical devices, equipment leasing and maintenance, and medical linen laundering. C&D Group is a large state-owned enterprise in Fujian Province, with total assets exceeding RMB 250 billion and annual operating revenue surpassing RMB 280 billion. Its main businesses span supply chain operations, real estate development, tourism and hospitality, convention and exhibition services, and investment. In 2019, C&D Group ranked 277th on the Fortune Global 500 list and has topped the Top 100 Enterprise Groups in Fujian Province for many consecutive years.

This controlling stake in Zhixin Medical is not C&D’s first move in the healthcare industry; in fact, as early as 2014, the group had designated healthcare as one of its core future businesses. That same year, ground was broken for Xiamen Hong’ai Hospital, a tertiary general hospital established by the Ren’ai Medical Foundation, which was spearheaded and founded by C&D Group.

In September 2018, Xiamen Hongai Hospital, Xiamen Hongai Rehabilitation Hospital, and Xiamen Hongai Nursing Home officially opened. Meanwhile, various logistical support services for the hospitals were also launched.

Building on this foundation, C&D Group has established a synergistic development pattern in the healthcare sector, integrating medical services and pharmaceuticals with elderly care, wellness, and nursing support. C&D Healthcare serves as the vehicle for the Group’s coordinated development in the healthcare industry and is one of the platforms through which C&D Group cultivates emerging industries.

As a dark horse in China’s medical device distribution sector, Zhixin Medical has rapidly expanded its footprint and achieved significant growth in recent years.

Established in August 2010, Shanghai Zhixin Medical Supply Chain Management Co., Ltd. specializes in end-to-end supply chain solutions for high-value medical consumables. Its management team has been directly involved in the development of China’s high-value medical consumables market for over two decades, possessing profound insights and extensive experience in the medical device distribution sector.

In 2014, Zhixin Medical began establishing its nationwide network of distribution subsidiaries. Benefiting from this national marketing network layout, Zhixin Medical saw a concurrent increase in its base of end customers, upstream suppliers, and the variety of products under distribution.

According to information disclosed by the listed company and Zhixin Medical, Zhixin Medical’s operating revenue amounted to RMB 666 million in 2015. In January 2018, Zhixin Medical secured RMB 250 million in Series A private equity financing, drawing strong interest from numerous investment institutions. Its operating revenue reached RMB 7 billion in 2019, as the company rapidly completed the layout and expansion of its distribution business within six years.

Zhixin Medical has now grown into one of the leading enterprises in China’s high-value medical consumables supply chain sector. In terms of sales network, it operates more than 30 subsidiaries across the country, with business coverage extending to over 50% of Grade III Class A hospitals nationwide. Regarding its business model, the company provides services including wholesale and distribution of high-value medical consumables, SPD (Supply, Processing, and Distribution) integrated management, medical device informatization, and third-party logistics (3PL) centralized warehousing and distribution for medical devices. In terms of its distribution product portfolio, its upstream manufacturing partners include mainstream companies such as Shanghai MicroPort, Jiwei Medical, Lepu Medical, Terumo, Medtronic, Cook Medical, Boston Scientific, Abbott, ASHI, Goldman, and Siemens Healthineers.

At present, the high-value medical consumables distribution market is experiencing annual growth while simultaneously facing a window of opportunity for industry consolidation, driven by the centralized procurement of medical devices and the implementation of the “Two-Invoice System.”

Data shows that China's high-value consumables market is in a stage of rapid development, with a compound annual growth rate exceeding 20%. In 2018, the market size of China's medical devices exceeded RMB 530 billion, among which the medical equipment market was the largest, accounting for approximately 57%, followed by the high-value consumables market, with a scale of about RMB 104.6 billion, accounting for approximately 20%.

However, the domestic market for the distribution of high-value medical consumables remains relatively fragmented. By comparison, while the RMB 1.48 trillion pharmaceutical market is contested by 13,000 operating enterprises, the high-value medical consumables market, valued at hundreds of billions of yuan, involves as many as 180,000 such enterprises. This clearly indicates an urgent need to increase concentration in the high-value medical consumables circulation market.

In the past two years, with the nationwide implementation of the “Two-Invoice System” for medical consumables, distributors of high-value consumables have been required to engage directly with manufacturers and hospitals. This shift has imposed stricter requirements on their marketing scale and financial strength, leading to a gradual consolidation of market share—previously held by numerous small and medium-sized distributors under a multi-tiered agency model—toward leading industry players. Furthermore, the volume-based procurement (VBP) policy for medical consumables, implemented since 2019, has further challenged the scale of distribution enterprises, thereby accelerating the increase in market concentration.

Under this trend, industry market share will further concentrate among companies with high coverage, professional operations, strong financial capabilities, and supply chain management expertise. For instance, leading medical consumables distributors such as Sinopharm Medical Devices, Realcan Pharmaceutical, Jiashitang, and Jointown Pharmaceutical have been continuously expanding their market presence and strengthening their competitive positions in recent years. The combination of C&D Inc. and Zhixin Medical represents an industrial M&A model of “strong alliance” that aligns with this trend, facilitating the full realization of both companies’ respective professional advantages and synergies.

Upon completion of this transaction, Zhixin Medical will undoubtedly be significantly strengthened. In addition to more abundant capital, the company will gain access to greater industry resources, enhanced financing capabilities, and valuable operational management expertise in areas such as funding and credit. This will further bolster Zhixin Medical’s competitive edge in the field of “medical device distribution and logistics supply chain,” building upon its existing professional strengths. Meanwhile, leveraging its proprietary medical device supply chain management system and adhering to a “vertically integrated” management model, Zhixin Medical will continue to steadfastly pursue specialized and scaled development in the sectors of medical device distribution, wholesale, SPD (Supply, Processing, and Distribution) comprehensive management, healthcare informatics, and third-party logistics for pharmaceuticals and medical devices.

Zhixin Medical Completes the Construction of Its Core Competitiveness in “Distribution Supply Chain + Capital Supply Chain,” Vying for a Share of the RMB 100 Billion High-Value Consumables Distribution Market.