Seven Leading Non-Invasive and Minimally Invasive Aesthetic Device Companies Dominate Over 90% of China’s Market: What Drives Their Success?

With the continuous rise in urbanization rates and urban residents’ income, consumer demand for medical and aesthetic services has been steadily unleashed, driving sustained growth in the medical aesthetics market. As upstream products in the medical aesthetics industry chain, laser-based medical and aesthetic devices will continue to benefit from overall industry expansion, presenting substantial market potential.

Since the 1990s and into the 21st century, laser and its derived photoelectric energy-based therapeutic devices have undergone rapid development, finding widespread application in clinical departments such as dermatology, plastic surgery, urology, and ophthalmology.

Over the past two years, photoelectric beauty devices have gradually become widespread in the lifestyle beauty sector. Moreover, minimally invasive and non-invasive treatments have emerged as the prevailing trend in China’s medical aesthetics industry. In recent years, the volume of non-surgical procedures—such as botulinum toxin injections, laser or IPL skin rejuvenation, RF skin tightening, and dermal fillers—has surged rapidly in China, now surpassing that of surgical procedures.

In addition, laser-based anti-aging treatments—including skin tightening, lifting, wrinkle reduction, and various non-invasive or minimally invasive light-based aesthetic therapies—have gained widespread acceptance among general consumers. The age range of clients is becoming increasingly broad, indicating that non-interventional or minimally invasive medical aesthetic laser therapies are poised for significant growth. VCBeat (WeChat ID: vcbeat) has analyzed these industry trends.

According to the Medical Insight report, the global market size for non-invasive and minimally invasive medical aesthetic devices reached $8.4 billion in 2016 and is projected to reach $13.9 billion by 2021, with a compound annual growth rate (CAGR) of 10.5%.

Meanwhile, global direct sales revenue from energy-based medical aesthetic devices is projected to grow from USD 2.7 billion in 2016 to USD 4.4 billion in 2021, representing a compound annual growth rate (CAGR) of 10.4%.

The energy-based medical aesthetic device segment was the largest within the medical aesthetics equipment market in both 2014 and 2016, and is projected to remain a rapidly growing sector through 2021, with its industry growth rate in the coming years not to be underestimated.

The industry is in a continuous period of M&A consolidation, which will further intensify competition. An oligopolistic landscape has already emerged, led by Apax Partners, El.En., XIO, Fosun Pharma, and Hologic.

In March 2017, Cynosure, the company with the largest global market share, was acquired by Hologic for $1.65 billion;

In April 2017, Zeltiq Aesthetics, the second-largest player by market share, was acquired by Allergan for $2.48 billion;

Syneron, ranked third in market share, was proposed for acquisition by an Apax Partners-advised fund in July 2017;

Lumenis, which ranked fourth in market share, was acquired by XIO Group for $510 million in October 2015.

Sisram ranks fifth among global medical aesthetics device suppliers. In 2013, Fosun Pharma established Sisram as a subsidiary in Israel, primarily to prepare for the acquisition of the Israeli medical aesthetics device company Alma. In May of the same year, Fosun Pharma successfully acquired Alma through Sisram. On September 19, 2017, Sisram was listed on the Main Board of the Hong Kong Stock Exchange.

There are no fewer than one hundred manufacturers of laser medical and aesthetic devices in China. The market exhibits a fragmented landscape that is gradually consolidating. In terms of market share, the sector is dominated primarily by foreign giants and a select few leading domestic enterprises. The laser medical and aesthetic device industries in developed countries such as the United States, Israel, and Germany started earlier, resulting in more mature industrial chains, with their products being exported extensively to countries around the world.

Currently, the mainstream laser medical device manufacturers active in the Chinese market include Alma (Israel), Chirson Laser (China), Lumenis (USA), Cynosure (USA), Fotona (Europe), Syneron (Israel/USA), Peninsula Medical (China), and Shenzhen GSD (China). These brands occupy the vast majority (90%+) of the mid-to-high-end market for laser medical and aesthetic devices in China, including public hospitals and large chain plastic surgery hospitals.

Domestic leading enterprises have developed independent R&D capabilities for products at various levels. The quality gap between their products and imported ones is gradually narrowing, market share is steadily increasing, and they are accelerating the substitution of imported products.

Of course, the market is also flooded with a large number of small and medium-sized laser medical device manufacturers and numerous manufacturers of consumer-grade beauty devices, whose primary target customers are mainly small and medium-sized private beauty salons, private clinics, and the vast number of professional lifestyle beauty salons.

Due to their relatively late entry and limited technological accumulation, these enterprises face significant barriers inherent to the medical device industry. As a result, their products struggle to penetrate the mid-to-high-end hospital market, which is dominated by foreign companies and leading domestic firms. Instead, they are primarily concentrated in the low-to-mid-end medical market and the lifestyle aesthetics sector, where profit margins are comparatively lower.

In China, illegal medical clinics remain rampant in the market. In May 2017, seven national ministries and commissions issued a directive to launch a one-year special campaign to severely crack down on illegal medical aesthetics. The campaign targeted unlicensed medical practice, regulated medical aesthetic services, and addressed the illegal manufacturing and sale of pharmaceuticals and medical devices. It also strictly rectified non-compliant medical aesthetic training and rigorously investigated and punished illegal advertising and online information.

The number of laser medical device brands in the market is increasing, but for plastic surgery or photoelectric treatments, not only high-quality equipment is required, but also the physician’s technical expertise and clinic services are essential. Therefore, the medical aesthetics industry itself involves significant technological sophistication and costs.

For medical devices, original equipment manufacturers (OEMs) typically provide ample and frequent training on product knowledge and operational procedures. In contrast, distributors often lag in these areas, as they are less timely in keeping pace with equipment updates and iterations. However, using distributors imposes lower costs and less pressure on healthcare institutions.

Current Status and Issues in the Optoelectronic Medical Device Market:

Competition among upstream manufacturers has become extremely intense, with the emergence of various counterfeit and knockoff producers posing certain challenges to established upstream enterprises. Nevertheless, it is encouraging to note that the industry’s technical barriers remain exceptionally high. Both consumers and enterprises are increasingly capable of distinguishing authentic products from counterfeits, a trend further reinforced by the growing prevalence of patient education and enhanced discernment capabilities.

In terms of product categories, in addition to the relatively mature dermatological applications, which have achieved favorable outcomes in both efficacy and safety, emerging technologies for weight loss and body contouring are gradually gaining popularity, with ongoing improvements being made to enhance their treatment safety.

Furthermore, in addition to continuously updating and upgrading their equipment, mainstream laser medical device manufacturers are leveraging internet and cloud technologies to launch complementary products. These offerings are primarily targeted at small aesthetic clinics, which constitute the majority of the market, thereby providing them with better options. Consequently, beyond group clients and tertiary Grade-A hospitals, some manufacturers are also expanding their reach to individual physicians who have started their own private practices.

Medical device manufacturers commonly face risks associated with the periodic renewal of production qualifications and product registration. Increasingly stringent industry regulations have heightened the difficulty and uncertainty of new product registration. The national medical device regulatory authorities may require extended periods for technical evaluation and approval cycles. Consequently, manufacturers must exercise patience in refining their products and technologies. Prematurely introducing immature technologies to the market could prove devastating to a brand.

In terms of distribution channels for medical devices, the majority still rely on an agency model, with only a minority operating through direct sales. Large distributors continuously expand their scale through mergers and acquisitions, aiming to capture 25%–40% of the market share in specific regional markets. This is an inevitable path for any distributor seeking global prominence.

Customers are not merely purchasing medical devices; it is after-sales service that truly demonstrates competitiveness. Major medical device manufacturers employ factory-certified, clinically qualified personnel to establish standardized service protocols, assess the actual operational status of clinics, develop tailored marketing and promotion strategies, and provide services to support transitions into the medical aesthetics sector.

Following the introduction of equipment, training through roadshows and lectures informs customers on how to optimize its use, maintain it properly, and better apply the technology to aesthetic patients, thereby delivering superior treatment outcomes. Requirements in this regard are increasingly stringent, while technological differences among leading device manufacturers remain marginal.

Particularly for small and medium-sized clinics, which currently constitute the majority of offline medical aesthetics institutions, operators prioritize after-sales service when considering equipment purchases. Consequently, after-sales support becomes the primary criterion in their selection process. Secondary factors include the timeliness of service and the comprehensiveness of problem resolution, all of which serve as key metrics for evaluating after-sales quality. Therefore, beyond the intrinsic functionality of the equipment, the level of attention given to these additional service dimensions is a decisive factor in determining market competitiveness.

Medical aesthetics in the Chinese market is expanding from first- and second-tier cities to third- and fourth-tier cities, with customers of lifestyle beauty services and unlicensed clinics gradually shifting toward medical aesthetic treatments. This trend also indicates, to some extent, that consumers are increasingly pursuing the aesthetic outcomes offered by medical aesthetics.

How to penetrate more regions tests the strength of manufacturers. Some medical device companies have increased their layout in downstream businesses, improving the overall industrial chain system from R&D and manufacturing to domestic and international marketing, or directly investing in hospitals, especially maternity hospitals. Manufacturers themselves have postpartum repair or private part plastic surgery devices, which can achieve seamless connection and diversion.

Alma is a global leader in the supply of energy-based medical aesthetic devices, with in-house design, development, and manufacturing capabilities, leveraging its own innovative and proprietary technologies.

The company’s flagship products include: the Soprano series, primarily used for hair removal; the Harmony series, a versatile multi-application platform approved by the FDA for up to 65 indications; and the Accent series, mainly used for body contouring and skin tightening, all of which belong to the medical aesthetics product line. Additionally, FemiLift is a minimally invasive medical aesthetic device designed to treat various female health issues (such as intimate rejuvenation). Furthermore, the company offers lifestyle beauty product lines such as Rejuve and SPADEEP.

In May 2013, Fosun Pharma successfully acquired Alma through Sisram. On September 19, 2017, Sisram was listed on the Main Board of the Hong Kong Stock Exchange.

Based on 2016 revenue, Alma was the largest supplier of energy-based medical aesthetic devices in the mainland China market (excluding Hong Kong, Macau, and Taiwan). In 2017, revenue from the Chinese market accounted for 20.6% of total revenue.

Sisram sells its products through direct sales and distribution. In the United States, Canada, Germany, Austria, and India, the Company primarily sells directly to medical aesthetic institutions. In other regions worldwide, the Company primarily sells to distributors, who purchase the Company’s medical aesthetic devices and then resell them to medical aesthetic institutions as their customers.

In 2017, the Company’s total revenue increased by 15.9% year-on-year to US$136.9 million. Profit before tax and profit attributable to owners of the parent company were US$15.8 million and US$11.0 million, respectively, representing increases of 33.4% and 37.2%, respectively, compared with 2016. The vast majority of the Company’s revenue was derived from its medical aesthetics product line, which includes flagship non-invasive medical aesthetic devices (such as the Soprano, Harmony, and Accent series) as well as the Aesthetic Precision series and certain other medical aesthetic devices, generating revenue of US$101.0 million and accounting for 73.9% of total revenue.

Regarding its 2018 plans, Sisram will seek to expand its sales team and establish additional direct sales operations, while also exploring opportunities for joint ventures and mergers and acquisitions with minimally invasive medical device companies in the cosmeceutical, stem cell, and platelet-rich plasma (PRP) sectors. The partnership with IBSA, a leading Swiss pharmaceutical company, serves as one example of such joint ventures.

Meanwhile, Sisram plans to allocate its R&D resources to investigating the interactions between energy sources and pharmaceuticals, as well as developing products and solutions that best leverage the Company’s research achievements.

Sisram aims to transform Alma into a consumer brand through a B2C-focused rebranding process, with the goal of driving bottom-up demand and expanding business opportunities. Additionally, Sisram expects to further implement and expand its Internet of Things (IoT) technology.

Qizhi Laser, headquartered in Wuhan, is a provider of optoelectronic medical aesthetic solutions that integrates R&D, manufacturing, distribution, and sales. The company has undertaken more than ten key national and local optoelectronic medical projects. Its main products include laser medical and aesthetic devices for applications in cosmetology, urology, and other fields.

As of the first half of 2017, the company had obtained 24 medical device product registration certificates, leading the industry in number, and secured 44 patents (including one U.S. patent). It achieved ISO 9001 and ISO 13485 quality management system certifications, with some products also passing EU CE certification. As of the first half of 2017, the company reported operating revenue of RMB 87.0306 million and net profit of RMB 21.1697 million.

Currently, the Company maintains an independent and comprehensive system for research and development, production, procurement, and sales, along with a mature business model. It adopts a procurement strategy of “order-based purchasing supplemented by safety stock.” Production is primarily conducted on a make-to-order basis, while partial inventory buildup is carried out based on market forecasts to meet basic stock requirements.

Qizhi Laser employs a sales model combining direct sales and distributor channels. Some export products are sold through distributors. Its customer base primarily includes public hospitals at all levels, private medical institutions, medical device distributors, and aesthetic clinics.

Lumenis was first established in Silicon Valley, USA, in 1966, while the intense pulsed light manufacturer ESC Medical was founded in 1991.

In 2001, Coherent Medical merged with ESC Medical to establish a company specializing in light-based and medical laser technologies. The newly formed entity was renamed Lumenis, with manufacturing bases located in the United States and Israel.

Lumenis entered the Chinese market in 1992, with its product portfolio spanning medical fields such as aesthetics, ophthalmology, and urology. Lumenis has always placed great emphasis on clinical and academic research, as well as providing value-added services such as professional training for customers. Among its offerings, three products have been particularly well-received in the Chinese market: the LightSheer Duet vacuum-assisted painless rapid hair removal system, the M22 ResurFX OPT intense pulsed light (IPL) skin rejuvenation device, and the UltraPulse™ Encore™ super-pulsed CO2 fractional skin resurfacing system.

In October 2015, XIO Group completed the acquisition of Lumenis for RMB 510 million. XIO Group is a multi-billion-dollar global investment firm headquartered in London, with offices across Europe, North America, and Asia. The firm focuses on global mergers and acquisitions (M&A) opportunities and will actively seek to unlock the growth potential of its portfolio companies in China.

Following financial backing from XIO Group, Lumenis acquired Pollogen in November 2015, expanding its portfolio of aesthetic medical devices.

In terms of market strategy, Lumenis will strengthen the development of its laser treatment systems, laser aesthetic technologies (including hair growth stimulation, axillary osmidrosis treatment, and body contouring/weight loss), lifestyle beauty products, and portable home-use laser aesthetic devices.

Peninsula Medical Group was established in 2008. As a national high-tech enterprise specializing in medical aesthetic devices, it integrates international trade, product research and development, and marketing services. The company provides products and services to nearly 1,000 dermatology and plastic surgery departments. It holds 10 domestic invention patents, 4 international invention patents, 30 utility model patents, 13 design patents, 12 software copyrights, 39 registered trademarks, and 11 medical device registration certificates.

In 2013, the Group initiated industry-academia-research collaboration with Dr. Zhao Guang’s team at the Air Force General Hospital, while also partnering with multiple clinical teams from Shanghai Ninth People’s Hospital, Xijing Hospital, Beijing Anzhen Hospital, and Jiangsu Provincial Hospital of Traditional Chinese Medicine. Currently, the company is in a challenging phase of intensive R&D investment, featuring popular product lines such as LiTi Gold Radiofrequency Microneedling and the Tornado series.

Cynosure, founded in 1991 and headquartered in Boston, Massachusetts, USA, went public on the NASDAQ in 2005. It currently provides products, services, and technical support to more than 60 countries worldwide through its wholly-owned subsidiaries and distributors.

It acquired the two laser companies, ConBio and Palomar, through full acquisitions in 2011 and 2013. In March 2017, Hologic, a global leader in medical and diagnostic solutions, announced that it had completed the acquisition of Cynosure at a price of $66 per share.

Substantial R&D investment, pioneering theoretical research, more than 30 U.S. patented technologies, and comprehensive after-sales service ensure Cynosure products’ high market share and competitiveness.

In 2012, Cynosure launched the world’s first picosecond laser device—the PicoSure 755nm Picosecond Laser with Honeycomb Technology—featuring a 755nm wavelength and an unprecedented PressureWave™ treatment mechanism, thereby ushering the global medical aesthetics industry into a new era of picosecond laser therapy.

Fotona was founded in 1964, with its headquarters located in Deggingen, Germany. Its marketing center is based in the United States, and its production facilities are distributed across EU countries such as Slovenia, Denmark, and Germany. In April 2017, Hand Capital acquired Fotona Europe Star Laser Company.

Fotona’s medical laser portfolio primarily features seven flagship products: the Fotona QX Max Pigmentation Removal Laser, the “Fraxel” Fractional Erbium Laser, the IntimaLase Non-Invasive Intimate Laser, the FOTONA 4D Extreme Lifting System, the Dual Fractional Super Platform, the TightSculpting Non-Invasive Fat Reduction Laser, and the Red Pioneer Vascular Treatment Laser. All of these product series have received comprehensive certifications from the U.S. FDA, the European CE, and China’s SFDA.

As of 2015, Fotona had nearly 100,000 laser devices in operation worldwide. In 2004, Fotona Europe Star Laser officially entered the Chinese market, establishing its China headquarters in Shanghai and setting up offices in Chengdu, Beijing, and Guangzhou. It subsequently established “Fotona Europe Star Clinical Training and Demonstration Centers” at renowned medical institutions, including the Laser Center of the General Hospital of the Guangzhou Military Region, the Ninth People’s Hospital affiliated with Shanghai Jiao Tong University, the Plastic Surgery and Laser Center of Xijing Hospital, the Medical Aesthetics and Plastic Surgery Center of Foshan First People’s Hospital, and the Cosmetic Laser Center of Beijing Navy General Hospital, thereby providing Chinese customers with cutting-edge laser technologies and prompt after-sales service.

Syneron was founded in 2000 and listed on NASDAQ in 2004. The company maintains R&D and manufacturing operations in Israel and the United States. Its products are marketed under three brands: Syneron, Candela, and CoolTouch. Syneron is dedicated to addressing concerns such as body contouring, hair removal, wrinkle reduction, and skin improvement. One of its well-known proprietary technologies is Elos™ (Electro-Optical Synergy) technology.

The highly popular PicoWay picosecond laser is a dual-wavelength device featuring advanced pulse technology. Its pulse width is 40% shorter than that of similar picosecond laser devices on the market and 170% shorter than that of traditional lasers. The device has obtained certification from China's NMPA (formerly CFDA) and is suitable for all skin types.

Currently, Syneron has been acquired by Apax Partners. Apax Partners has extensive experience in the healthcare services sector, with successful investments including GHG, the largest private hospital group in the UK; Capio, a pan-European hospital group; and Apollo Hospitals, the largest private hospital group in India.

In 2016, Syneron entered into a strategic partnership with Bloomage Biotech. Under the agreement, Bloomage Biotech obtained exclusive operational rights in China for Syneron’s new Adeline product, encompassing marketing, channel sales, and after-sales services. Derived from Syneron-Candela’s patented elōs™ technology, the device offers multiple applications, including skin tightening, smoothing, and rejuvenation for the body and face, as well as hair removal, mole removal, and spot reduction.

References:

HK Stock Insights: The First Israeli-Listed Company on the HKEX: How Beautiful Is Sisram (1696.HK) in the Aesthetic Medicine Industry?

Sisram Medical Ltd. 2017 Annual Results Announcement