Runda Medical to Acquire 43.1% Stake in Response Biomedical Corp. for $6M to Achieve Full IVD Product Portfolio Coverage

On June 20, Runda Medical disclosed in an announcement that the company plans to invest in and acquire Response Biomedical Corp. (hereinafter referred to as “RBM”) through a special purpose vehicle (SPV) in conjunction with OrbiMed Advisors, with a cumulative investment not exceeding USD 6 million (approximately RMB 39.6 million). Upon completion of the acquisition, Runda Medical will hold approximately 43.1% of the equity interest in RBM.

VCBeat has learned that RBM’s sole domestic distributor in China terminated its agreement in March 2016. Upon completion of this acquisition, Runda Medical will not only become the exclusive distributor of RBM products in China but also emerge as RBM’s largest shareholder.

Pre-InvestmentRBMShareholder Information

RBMKey Financial Indicators of the Company

Following the completion of this transactionRBM Company Shareholding Structure

OrbiMed Investment Group

As one of the world’s largest healthcare investment firms, OrbiMed manages approximately $15 billion in assets under management. It is dedicated to identifying and supporting biopharmaceutical and life sciences companies that advance human health. Its investment portfolio spans biopharmaceuticals, life sciences technologies, medical devices, healthcare services, and diagnostics.

RBM Company

RBM is a company engaged in the research and development, manufacturing, and sales of POCT, environmental diagnostics, and laboratory diagnostic products. The company was founded in Vancouver in 1980.

RBM’s product portfolio comprises four major categories: cardiovascular disease (cardiac marker) diagnostics, infectious disease diagnostics, biodefense products, and environmental diagnostics. Its flagship product is the RAMP® cardiac marker diagnostic system, which accounts for approximately 90% of RBM’s total revenue.

RBM Company primarily sells its cardiovascular series of instruments and consumables through distributors, which are distributed across the United States, China, Russia, Japan, and other countries. Over the past three years, RBM’s revenue has mainly come from the United States, Europe, and Asia, with China accounting for more than 60% of total revenue. In 2015, RBM achieved sales revenue of USD 11.97 million, of which USD 7.52 million came from the Chinese region.

According to the publicly disclosed financial reports of RBM by Runda Medical, RBM’s operational performance steadily deteriorated from 2013 to 2015, accumulating losses of USD 120 million by the end of 2015. In its financial statements, RBM revealed that competitors held significant advantages in product portfolios and capital resources, while RBM itself suffered from inadequate development of its sales team and distribution channels. Under these circumstances, the company’s market share and revenue-generating capacity gradually declined. Currently, RBM is valued at just over USD 10 million, making it an opportune moment for Runda Medical to acquire the company at a bargain price.

RBM Company Financial Report

Runda Medical

Shanghai Runda Medical Technology Co., Ltd. (“Runda Medical”), established in 1999, is a company listed on the Main Board of the Shanghai Stock Exchange. It is a comprehensive service provider for medical laboratories, headquartered in East China and serving customers nationwide. Its core business involves providing integrated services to various medical laboratories through its proprietary comprehensive service system, offering in vitro diagnostic products and professional technical support.

Runda Medical's core business is to provide comprehensive services, including IVD products and professional technical support, to various medical laboratories through its proprietary integrated service system. According to Runda Medical's 2015 annual report, the company achieved a full-year revenue of RMB 1,628.6419 million in 2015, representing a year-on-year increase of 19.89%. The net profit attributable to shareholders of the parent company was RMB 91.7603 million, up 22.08% year on year.

Currently, East China is Runda Medical's core sales region, accounting for 90% of its sales. It covers more than 2,000 medical institutions, including medical laboratories (clinical laboratories) at hospitals of all levels, independent clinical laboratories (ICLs), health examination centers, centers for disease control and prevention, and blood stations.

Runda Medical has established a procurement system covering nearly all in vitro diagnostic (IVD) products required by medical laboratories, tailored to the specific brands and categories used by its customers. By leveraging bulk centralized purchasing, the company achieves lower procurement costs. Its portfolio includes top-tier international and domestic brands such as Johnson & Johnson/OCD, Abbott, Roche, Siemens, Sysmex, and Mindray.

Industry Overview

Currently, cardiovascular disease is the “leading killer” threatening human health. According to statistics from the World Heart Federation, one in every three deaths worldwide is caused by cardiovascular disease.

Data from Southwest Securities shows that in 2015, the global POCT market size was approximately USD 14 billion. Cardiac markers represent the fastest-growing segment within the POCT market, with estimated global sales of around USD 2 billion and an annual growth rate of 14%. In China, driven by the trend of population aging, the market size for POCT cardiac markers is expected to exceed RMB 1.5 billion this year, with a growth rate of over 30%.

Channel Development

According to Runda Medical’s 2015 annual report, its product sales network primarily covers four regions: East China, Northeast China, North China, and Southwest China, with sales in East China accounting for 90% of total revenue. However, outside of East China, Runda Medical’s in vitro diagnostic (IVD) products have not yet gained a competitive advantage in the domestic market.

Currently, the domestic IVD industry features a multitude of brands, with companies such as Dian Diagnostics, Jiuqiang Biology, and Daan Gene each offering products with distinct competitive advantages. Given that the domestic market landscape remains unsettled, leveraging RBM’s mature and stable sales channels and expansion experience in countries such as the United States, Russia, and Japan will have a positive impact on the coordinated development of Runda Medical’s domestic and international distribution networks. Meanwhile, it will also actively promote the overseas sales of Runda’s proprietary products.

Product R&D

Furthermore, VCBeat has learned that Runda Medical’s core business is primarily divided into two segments: first, comprehensive medical laboratory services, which fall under the distribution and service of in vitro diagnostic (IVD) products and are predominantly commercial in nature; second, the production and sales of proprietary brand products, which belong to IVD product manufacturing and are mainly industrial in nature. The industrial segment accounts for only approximately 6% of total revenue.

Therefore, continuing to strengthen R&D capabilities for diagnostic products and expanding sales channels will be the strategic core of Runda Medical’s future. Previously, Runda Medical had entered the chemiluminescence market by increasing its capital investment in Beijing Runuosi, and the molecular diagnostics sector by investing in Wuhan Haili; however, its product variety and volume remain limited, with a particular gap in the cardiovascular POCT field.

By leveraging RBM’s product R&D capabilities, Runda Medical will initially establish a comprehensive in vitro diagnostics (IVD) portfolio covering clinical chemistry, immunoassays, molecular diagnostics, and point-of-care testing (POCT). Furthermore, RBM can utilize Runda Medical’s distribution channels in the Chinese market to enhance its product coverage in China. The two parties will achieve synergistic complementarity across multiple areas, including R&D and channel distribution.