M&A Activity Continues and Regulatory Milestones Mark 2019: Which Medical Device Segments Are Gaining Traction? [Lunar New Year Special]
As the 2019 Spring Festival quietly arrived, VCBeat wishes all its readers a Happy New Year! On the occasion of this festive season, the VCBeat content team has specially curated a series of New Year reports. We have compiled the articles written over the past year across various healthcare subsectors into a cohesive collection, serving as our first knowledge package of the new year.
This initiative also invited entrepreneurs and investors deeply rooted in various medical sub-sectors to share their New Year’s messages on the future of healthcare. Amidst the turbulent transformations in the medical field, VCBeat remains committed to identifying innovative forces that are reshaping the healthcare landscape, providing support, and fostering mutual growth.
Today marks the launch of VCBeat’s New Year special feature on medical devices. In 2018, China’s medical device sector witnessed a surge in innovative vitality, with remarkable developments across products, M&A and financing, and technology.
According to data from VCBeat’s (WeChat ID: vcbeat) 2018 Report on Investment and Financing in the Healthcare Sector, the medical device sector recorded a total financing amount of $25.2 billion across 38 deals in 2018.
After a sharp decline in 2017, the number of domestic investment and financing events rebounded to 695 in 2018, just eight short of the historical peak recorded in 2014. The medical device industry played a significant role in this bottoming-out and recovery.
In 2018, large companies also made significant acquisitions to expand their scale and diversify their product portfolios.
At the policy level, 2018 can be regarded as a year that encouraged innovation. The FDA approved the first AI product, and in China, 197 products have entered the special review channel for innovative medical devices.
In 2019, the medical device industry will face numerous known risks. The “Two-Invoice System” has gained widespread momentum, and unicorns are likely to emerge in an increasing number of niche segments, potentially becoming the next industry giants.
As we bid farewell to the old and welcome the new, VCBeat has curated a selection of articles on the medical device industry from 2018 and invited industry insiders to share their Lunar New Year greetings.
Current Affairs
The US-China trade war has not yet concluded, with the first shots fired at the ten high-tech industries outlined in “Made in China 2025.” As one of the ten key development areas under this initiative, China’s high-performance medical device industry has unfortunately also been hit. The overseas market for medical devices differs significantly from the domestic market; when Chinese products compete in developed countries on a level playing field in terms of product homogeneity, price becomes a major advantage. However, the imposition of tariffs on high-performance medical devices imported from China will directly affect the market sales of some companies in the industry and may bring an abrupt end to the global expansion of newly emerging Chinese-made equipment and high-value consumables.
VCBeat analyzes which products are likely to be significantly impacted in this article, and how domestic manufacturers will respond to the shock.
The changes to the catalog are significant, and their impact on industry players will be equally substantial. The implementation of new policies, which decentralizes approval authority for the configuration of certain medical devices and exempts others from approval requirements, will serve as a positive incentive for healthcare institutions to increase their adoption of large-scale medical equipment. Devices such as PET-CT scanners and surgical robots are expected to accelerate their entry into major domestic hospitals, while equipment like CT and MRI scanners may also see accelerated deployment in primary healthcare institutions, including township health centers.
This year, during the opening of the “Public Welfare Training on Registration and Application for AI-Based Medical Devices” in Beijing, the entire conference lasted only one afternoon, yet it encapsulated critical approval information for three categories of devices that are of common concern in the medical AI field, marking the beginning of a milestone victory. At this meeting, the National Medical Products Administration (NMPA) provided a meticulous analysis of every stage affecting the approval of medical artificial intelligence devices, offering detailed explanations of each indicator, truly making it an “AI Medical Device Registration and Application Training.” Meanwhile, it was announced at the meeting that as of the end of November 2018, the NMPA had received 1,054 applications for innovative special approval, with 192 approved for review under the special procedure. Fifty-one innovative medical devices had been approved for market launch through the special procedure. Regrettably, no information regarding the approval status of AI-related products was disclosed at the meeting.
New Regulations for Medical Device Market Entry! FDA to Phase Out 510(k)
First, the FDA stated in its announcement that it would impose a 10-year time limit on predicate devices. In other words, if a device manufacturer seeks market approval by demonstrating substantial equivalence to a predicate device, that predicate device must have been on the market for no more than 10 years.
The FDA also announced that it would finalize guidance on establishing an alternative pathway to the 510(k) clearance process in early 2019. The statement indicated that this alternative approval pathway would require medical device manufacturers to rely on objective criteria for safety and effectiveness to demonstrate substantial equivalence. The FDA stated that this approach updates the previous method of direct comparison with predicate devices, thereby facilitating the adoption of modern standards to support emerging products.
85.427 billion! Mindray Medical lists today, marking the largest IPO on the ChiNext Board
Medtronic Acquires Mazor Robotics for $1.7 Billion to Jointly Develop Spinal Surgery Robots
Major Move! Boston Scientific Acquires Medical Device Company BTG for $4.2 Billion
Sub-sector
Between 2017 and 2018, numerous surgical robotics companies in China and abroad secured financing exceeding RMB 100 million. From late March to April 2018, Medical Microinstruments, Bornsun, and Vicarious Surgical each raised over RMB 100 million, while Auris secured USD 500 million in funding. Additionally, Titan Medical filed a prospectus with the Toronto Stock Exchange, planning for an initial public offering.
Seizing this opportunity, VCBeat has compiled an overview of the companies involved in newly emerging surgical robots in recent years, along with their product developments and financing activities.
On September 28, Butterfly Network, a U.S. manufacturer of handheld ultrasound devices, announced the completion of a $250 million Series D financing round, reaching a post-money valuation of $1.25 billion and instantly becoming a new unicorn in the digital health sector.
Who is Butterfly? Why are investors so bullish on it? What is the current state of the handheld ultrasound market? Are there any Chinese companies that can rival Butterfly? VCBeat attempts to answer these questions one by one through an in-depth analysis of the industry...
Nearly 50% of Wearable ECG Monitors Have FDA Approval: What’s the Next Move in Market Competition?
2012 marked the inaugural year for consumer-grade wearable devices, while 2018 was the dawn of medical-grade wearables. Internationally, this milestone arguably occurred in 2017, as VCBeat’s statistics revealed that many dynamic ECG monitoring products received FDA approval that year. A landmark event in 2018 was Apple’s release of the iWatch with FDA-cleared ECG detection capabilities, which reignited enthusiasm in the dynamic ECG monitoring market. In China, Huami’s AMAZFIT became the first medical-grade wearable dynamic ECG recorder to receive CFDA certification.
1. After clearing the hurdle of CFDA/FDA certification, the next step will be to connect physicians with diagnostics.
2. Two Tigers Can Coexist on One Mountain: Smartwatches and ECG Patches Will Further Converge.
With the continuous penetration of internet technologies and mobile devices, and the growing reliance of the national economy and general consumers on the internet, China’s economic development model has fully entered the internet era.“Internet Plus” has been applied across various industries, and the highly regulated healthcare sector is no exception. In particular, with the recent liberalization of policies on “Internet Plus” medical health and a stream of positive developments, the prospects for internet-based healthcare are exceptionally promising.Internet-based healthcare is inseparable from medical testing, which has also placed the IVD industry, a provider of diagnostic services, at the forefront of this trend. The “Internet + IVD” niche market is gradually emerging.
Applications of Robotics in the Diagnosis and Treatment of Lung Cancer
Driven by advancements in robotics and the growing demand for minimally invasive procedures among cancer patients, the market for lung cancer-related robotic systems holds broad development prospects. Whether in surgical robots for lung cancer, robots for early diagnosis, or robotic systems for stereotactic ablative radiotherapy (SABR), China still lags behind major developed countries in Europe and the United States. Time is needed to cultivate domestic companies with independent intellectual property rights and comprehensive capabilities across the entire industrial chain. Nevertheless, this sector remains a blue ocean; innovative Chinese companies that have identified these opportunities are rapidly catching up, and in certain areas, they are already on par with leading global medical device manufacturers.
Strategic Moves by Industry Giants
Digital medical devices refer to equipment in which processes such as data acquisition, processing, storage, and transmission are based on computer technology, enabling the devices to independently store, process, and transmit the collected information. Medical devices operating under computer software have gradually replaced conventional equipment to become the mainstream in current clinical practice. Examples include high-end, high-value medical devices such as CT scanners, MRI systems, color Doppler ultrasound machines, and digital X-ray systems (DR), which provide physicians with medical imaging information.
Digital medical devices encompass high-end diagnostic equipment, therapeutic devices, and home-use wearable devices. According to a report by Transparency Market Research, the global digital medical device market is experiencing rapid growth. Notably, the compound annual growth rate (CAGR) for therapeutic devices has reached as high as 15.6%. The global market size for therapeutic medical devices is projected to reach $20.83 billion by 2025, significantly higher than the $590.8 million recorded in 2016.
Philips, Medtronic, Elekta... Medical Device Giants at the CIIE Have All Embraced AI
During the inaugural China International Import Expo in Shanghai, VCBeat (WeChat Official Account: vcbeat) discovered through conversations with global medical device giants such as Philips, Medtronic, and Elekta that artificial intelligence has become a crucial component of their product portfolios. From Philips’ “HealthSuite Digital Platform,” to Medtronic’s “Hybrid Closed-Loop Automated Insulin Delivery System,” and Elekta’s “Intelligent Radiotherapy Solutions,” these innovations signal that the era of intelligent digital transformation for major medical device manufacturers has arrived.
Overview of the Top 15 Mergers and Acquisitions in the Medical Device Industry in 2018
Amid industry and regulatory changes, the need to reduce healthcare costs, and pressure from investors, large companies are seeking to expand their scale and diversify their product portfolios to eliminate redundant costs. In 2018, mergers and acquisitions in the medical device industry were finalized one after another, as companies strove to capture market share and deliver greater benefits to more patients.
The industry has witnessed countless milestone events. Beneath every highlight of 2018, there was not only focus but also accumulation and reflection. At the dawn of 2019, VCBeat invited professionals from the medical device industry to share their farewells to 2018 and their expectations for 2019.
In November 2018, as Chicago entered its snowy season, the city was abuzz with activity, hosting the Radiological Society of North America (RSNA) annual meeting as scheduled—the premier global conference in radiology. United Imaging, a Chinese company previously little-known in North America, made its debut exhibition appearance. For the first time in the history of China’s high-end medical equipment industry, a brand-new company unveiled its full portfolio of 16 products simultaneously. What challenges would we face? What customer feedback would we receive? Everything remained uncertain, leaving me both excited and apprehensive.
Yet on the very first day, the overwhelming enthusiasm at the venue dispelled all our concerns. Our booth was surrounded by layers of fair-haired, blue-eyed foreign experts, many standing on tiptoe to capture photos and videos with their smartphones. Attendees repeatedly examined our images, delved into the details of our products, and expressed astonishment at the rapid rise of a brand new to the scene within just a few years. “Wow,” “impressive,” “amazing”—over the course of the event, I was continually asked: “Who are you?” and “How have you managed to achieve this?”
Although we endured extremely challenging times and exerted tremendous efforts in preparing for this exhibition, and were already exhausted from the high-intensity workload during the setup period, our spirits remained incredibly high. A domestic radiology expert specifically told me, “I have attended RSNA every year, and the spotlight has always been on major foreign brands. This year, for the first time, I felt that Chinese companies finally had their own home turf, which filled me with great pride.” I, too, felt immensely proud and could not help but look forward to what new brilliance United Imaging Healthcare would create in 2019.
—— ——United Imaging
New Year’s Message — AI Innovation Creates Value for “Value-Based” Healthcare
In 2018, Philips China established the Big Data & AI Lab, the Digitalization Center of the Clinical Science Department, the China Imaging Research Institute, and an AI Innovation Enterprise Incubator. Leveraging Philips’ innovative influence in the healthcare sector, the company has been actively promoting the innovative practice and practical application of AI solutions in China.
As the new year begins, we will continue to implement Philips’ innovation strategy in alignment with the transition toward “value-based” healthcare, leading the application of AI technologies in real-world care settings, dedicated to improving diagnostic and therapeutic outcomes and enhancing the efficiency of healthcare professionals.
On behalf of Philips China, I extend my New Year greetings to all and wish you good health and happiness for your entire family in the coming year!
—— He Guowei, Member of the Global Executive Committee and CEO of Greater China, Royal Philips N.V.
If I were to summarize 2018 in eight Chinese characters, it would be “精彩纷呈、硕果累累,”
From a national perspective, over the 40 years of reform and opening-up, China has achieved remarkable results in both economic development and healthcare. We have also successfully hosted the world’s first national-level import expo, fully demonstrating the strength of China’s economic development.
From Elekta’s perspective, we have also achieved many firsts. As the sole representative from the radiation oncology community, we participated in and witnessed the China International Import Expo, a premier international event, for the first time. We unveiled the world’s first high-field-strength MRI-guided radiation therapy system, and established China’s first integrated platform for medical practice, education, and research collaboration in radiation oncology—the Elekta Radiation Oncology Academy. These milestones attest to our commitment to advancing radiation oncology in China and enhancing care for cancer patients.
Looking ahead, I hope Elekta will continue to create value for more users and safeguard the lives of more patients through integrity and innovation!
—— — Gong Anming, President of Elekta China
As the year draws to a close, looking back on 2018, it was a year in which all healthcare professionals jointly honed the sword of high technology, striving and forging ahead; a year of pioneering and expansion; a year filled with love and warmth; and an extraordinary year!
Take a long-term view. Standing at the new starting point of 2019 and looking to the future, the healthcare industry—driven by artificial intelligence, big data, and emerging technologies—will evolve into a new structure through the alignment of novel technologies, business models, and key factors. To all colleagues dedicated to medical innovation: we are filled with confidence. Upholding the pragmatic spirit that “a thousand-foot terrace begins with piles of earth,” staying true to our original mission, and forging ahead with determination, let us jointly build a shield for public health.
Special thanks to VCBeat for its unwavering support of healthcare entrepreneurs and innovators, walking hand in hand with the forces of medical innovation to jointly create a brighter future for healthcare!
—— — Huan Dandan, Vice President of Anhan Medical
The healthcare industry is increasingly following trends from other sectors, while neglecting its core essence and characteristics: medical care and safety. Medical technology innovation should focus less on disruption, restructuring, and macro-level strategic visions, and more on integrating with traditional industries and embracing new technologies to enhance efficiency, thereby addressing the monetization challenges posed by innovative models. As medical technology advances toward more specialized, personalized, and digitalized treatments, this presents a valuable opportunity for startup companies.
——Huang Xiaomin, Co-founder of Kailian Medical and Co-President of Kelite Medical
The above-mentioned speakers are listed in no particular order. We extend our sincere gratitude to the friends who have consistently supported and understood VCBeat. We are committed to continuously improving upon any shortcomings. In the new year, let us move forward together.