Kailitai and Sinopharm Medical Establish Joint Venture to Launch GPO Business for Medical Devices

VCBeat (WeChat ID: vcbeat) reported that on the evening of May 9, CareRay (300326) announced its plan to jointly invest with Sinopharm Medical Device Co., Ltd. (hereinafter referred to as “Sinopharm Devices”) to establish Sinopharm CareRay (Shanghai) Medical Device Co., Ltd. (hereinafter referred to as the “Joint Venture”). The registered capital of the Joint Venture will be RMB 50 million. CareRay will hold a 49% equity stake in the Joint Venture, while Sinopharm Devices will hold a 51% equity stake.

Following the establishment of the joint venture, Kellytai will integrate its existing regional distribution platform business to build a high-standard regional medical device distribution and delivery platform, providing distribution and logistics services to the joint venture’s downstream distributors.

Meanwhile, driven by domestic healthcare insurance cost-containment measures, medical institutions are urgently seeking to reduce procurement costs and increasingly require specialized service providers. Leveraging the brand and financial strengths of Sinopharm, as well as the product portfolio advantages of Kindly Medical,By integrating industrial and commercial operations, leveraging regional distributor resources, and actively collaborating with various hospitals to conduct Group Purchasing Organization (GPO) business for medical devices.

Since its establishment, Kellytai has been primarily engaged in the research and development, manufacturing, and sales of minimally invasive interventional surgical systems for vertebroplasty. Its products are mainly used for the clinical minimally invasive surgical treatment of vertebral compression fractures caused by osteoporosis, specifically including percutaneous vertebroplasty (PVP) surgical systems and percutaneous balloon kyphoplasty (PKP) surgical systems.

Kaitai Medical has been committed to providing high-quality clinical treatment solutions for patients with vertebral compression fractures caused by osteoporosis. Through continuous efforts, the company pioneered the domestic production of compliant vertebral expansion balloon catheters in China, breaking the technological monopoly held by multinational corporations and significantly reducing product prices, thereby benefiting a larger number of patients.

Kellytai also engages in the research, development, production, and sales of cardiovascular medical devices, as well as medical device trading.Its wholly-owned subsidiary, Yisheng Technology, independently developed the “Aili Tivoli Drug-Eluting Coronary Stent System,” which holds multiple core proprietary intellectual property rights and is the first product to combine cobalt-chromium alloy with a fully biodegradable drug coating. The layout in the medical device distribution sector is carried out by its subsidiaries, including Shence Shengbo, Jiangsu Runzhitai, and Hubei Ruite.

Kaitai Medical's 2017 operating revenue was RMB 802 million., with orthopedic medical device products generating RMB 401 million in revenue, accounting for 50.14%; drug-eluting coronary stent products generating RMB 139 million in revenue, accounting for 17.36%; and other traded medical device products generating RMB 260 million in revenue, accounting for 32.50%.Net profit reached RMB 195 million, a year-on-year increase of 22.75%.

Sinopharm Group Medical Devices Co., Ltd. is a wholly-owned subsidiary of Sinopharm Group (HK.01099) and is responsible for the distribution and trading of medical devices under Sinopharm Group. Sinopharm Group is the largest pharmaceutical distributor and retailer in China.In 2017, Sinopharm Group Co., Ltd. reported operating revenue of RMB 277.717 billion and net profit of RMB 7.868 billion.

As of the end of 2017,Sinopharm Holding’s distribution network covers all 31 provinces, autonomous regions, and municipalities directly under the Central Government in China.The number of direct clients has reached 15,032 (referring exclusively to tiered hospitals, including 2,301 tertiary hospitals, which are the largest and highest-level facilities), with 128,000 small-scale end-users (including primary healthcare institutions) and 87,000 retail pharmacies.

Kaitai Medical stated that the establishment of the joint venture is a significant measure for the company to implement its next-phase development strategy, holding positive significance and driving force for its future growth, primarily reflected in the following two aspects.

One approach is to establish regional logistics and distribution platforms by forming joint venture subsidiaries with capable distributors in each region after the joint venture company is set up.will significantly facilitate market expansion for the company’s products in previously uncovered hospitals,It helps build, promote, and refine the brand of the company’s orthopedic product series, further enhancing its core competitiveness and profitability in China’s orthopedic medical device market.

Second, the joint venture leverages its extensive sales channel advantages,Leveraging the vigorous promotion of the Two-Invoice System, product agency services can be launched at an appropriate time, while Group Purchasing Organization (GPO) services for medical devices can be developed in collaboration with various hospitals., with a view to fully leveraging the advantages of Kaitai’s products and professional clinical support services, streamlining intermediate distribution channels, and enhancing the profitability of the joint venture.