• By lukez
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• Posted May 27 , 2018

Aim at 6 Directions in Medical Instruments with 600 Billion Market Scale in 2018

Following a recent publication 2018 Forecast and Outlook in Medical Device Industry in China! (22ndJan 2018), we further discuss the medical device market in China.

It is estimated that the scale of medical equipment market will reach about 600 billion Yuan (RBM) this year in China. The further development of medical equipment can be expected due to the profitable policy and boosted new technology. The 6 main directions in the development of medical equipment are worth attention.

According to CFDA data, the medical equipment market in 2017 continued the high growth trend of recent years. In the year 2011-2016, the annual compound growth rate (CAGR) of medical technology and medical device industry in China reached 20.7%, which is much higher than the global average CAGR of around 3%.

In 2016, Chinese medical equipment market was about 370 billion Yuan (RMB). It is expected that the market will reach about 600 billion Yuan in 2018. Imaging equipment, in vitro diagnosis (IVD) and high value consumables occupy the first three parts of the medical device market, which account for 19%, 16% and 13% of the total market, respectively.

Policy, market and new technology are still the three major factors that affect the development of the medical equipment industry in China. In 2018, the directions of investment are to 6 main sub industries in innovative medical devices, which include imaging equipment, IVD, cardiovascular and cerebrovascular, tumour related device, surgery/orthopaedics and medical artificial intelligence (AI).

1. Imaging equipment

2018-2020 China Health Industry Investment Research Report:

The medical imaging industry is mainly divided into the upstream medical imaging equipment, consumables and the downstream imaging diagnosis service. Medical imaging is also a top segment of the global medical device. In 2012, sales of global medical device reached US $349 billion, of which the sales of imaging diagnostic products reached US $36.1 billion with a rank at 3 and accounted for 10.3% in the global medical device market. China has the fourth largest medical imaging market in the world, accounting for 12% of the global share. It is expected that the medical imaging market will reach $5.5 billion by 2018.

Investment directions: There are only a few of outstanding early projects with high valuations in large general-purpose device fields, such as CT, MRI, PET-CT etc. We are more optimistic about the imaging equipment sub-industry, especially which has unique hardware for their own application scenarios with AI algorithm, such as breast cancer ultrasound and dental cone beam CT. In addition, we are also more optimistic about the upstream industry which has the core technology in the imaging industry.

1. In vitro diagnosis (IVD)

2018-2020 China Health Industry Investment Research Report:

IVD reagents include blood, biochemistry, immunity, molecular biology, bacteria, point of care testing (POCT) and other major aspects. Chinese IVD reagents industry has already had a certain market scale and foundation. It is entering the growing stage and has a good market prospect. According to statistics, one third is involved in IVD among $50 million M&A deals in medical equipment in 2014 – 2015. In 2016, IVD market is about 51 billion Yuan in China. It is expected to maintain 15-20% growth in the next 3-5 years and the market size will exceed 85 billion Yuan by 2020.

Compared with foreign mature markets, the size of Chinese IVD industry is relatively smaller at present. Chinese population accounts for more than 1/5 in the world, but its IVD market share has only accounted for 4% in the world. The annual per capita consumption on IVD products is US$1.5 in China, while the average consumption is US$25 to 30 in the developed countries. In general, Chinese IVD industry has a large market, but the market potential is even greater. Therefore, IVD is a hot piece in the investment and financing of the medical equipment industry.

Investment directions: The future trend of IVD is to achieve a comprehensive detection of a disease using a drop of blood, a breath and a mouthful of saliva. A difficult point in the investment is how to find effective and reliable means of testing.

Molecular diagnosis and POCT are still the main directions of the innovation. In molecular diagnosis, big data and AI will change the overall molecular diagnostic pattern. For example, sequencing services are facing a new round of shuffle. Companies that own their databases, core algorithms and clinical interpretation capabilities will have the chance to make breakthroughs. Gene sequencing is also an important opportunity for the localization of upstream related reagents. The tumour diagnosis related products are one of the directions worth investing.

1. Cardio- and cerebral vascular

2018-2020 China Health Industry Investment Research Report:

A total number of patients with cardiovascular diseases in China is 290 million and about 3.7 million people die from cardiovascular diseases every year, which is accounting for 42% of the total number of deaths in China. The field of cardiovascular medical devices has been one of the largest segments of the global medical device market.

Due to the aging and high incidence of cardiovascular and cerebrovascular diseases in China, the market demand for cardiovascular interventional apparatus is huge with a great prospect in this industry. However, there is still a big gap between Chinese cardiovascular devices and European and American competitors. Most of the market is in the hands of foreign-funded enterprises. The largest share of the total market is the high-end interventional consumables and pacemaker. The Medtronic, St. Jude, Boston science, Abbott and other foreign enterprises account for 80% of the total market share. With the accumulation of domestic corporate technology and continuous investment in R & D, domestic enterprises have begun to make breakthroughs.

Investment directions: Stent is no longer our focus.  Our attention is on transcatheter valve interventions, instruments for diagnosis of coronary heart disease, cardiac pacemaker, drug balloon, radiofrequency ablation devices and cardiac occluder.

1. Tumour related equipment

According to the prediction of International Agency for Research on Cancer (IARC), the mortality of malignant tumours will be higher than the global average of 10% in China in the future. There is a huge gap between the supply and demand of excellent methods for cancer treatment. At present, there are three major therapies for cancer in the world: surgery, chemotherapy and radiotherapy. Radiotherapy is the adjuvant therapy for most tumours and the first choice for a few radiotherapy sensitive tumours. More than 70% of the patients with cancer need to be treated with radiotherapy, that is, most patients who receive surgery and chemotherapy also need to take radiotherapy as an adjuvant therapy.

China has not installed sufficient gamma knife and imported gamma knife accounts for less than 10%. At present, linear accelerator (linac) is the absolute mainstream in the radiotherapy market of China. The main producers are foreign capital, Elekta and Varian, but their products are expensive and have some side effects. Thus, gamma knife has a huge potential market in China.

Investment directions: The tumour ablation equipment that had been hot for a period of time, including freezing, radiofrequency, microwave and laser, was no longer the scene. In the field of radiotherapy, the domestic enterprises of proton heavy ion technology need the long-term development to make a breakthrough. The enterprises of the electronic linac are worthy of attention, but it is necessary to focus on their ability to develop and produce high energy machines. In addition, tumour intervention has been growing rapidly in recent years. New drug loaded microspheres should be a focus and microsphere transport system consumables may be a new market growth point in the future, but the technology is not yet fully matured.

1. Surgical and orthopaedics equipment

2018-2020 China Health Industry Investment Research Report:

Orthopaedics instruments cannot be ignored in the medical device industry and account for about 6% of the total medical devices. In the past five years, the domestic orthopaedics equipment industry has maintained a CAGR of around 15.5%, which is far more than the global growth rate of around 4.5%. It is predicted that a CAGR of 15% will be maintained from 2015 to 2018, and the market size will reach 21 billion Yuan. The larger areas of growth during the period are joint and spinal instruments, which can reach more than 20%. Orthopaedics instruments in the medical device industry are also regarded as high value consumables, high technology content, high gross margin level and huge market growth space, which are attracting a large number of domestic and foreign manufacturers to enter the industry. At present, the domestic orthopaedics equipment industry is still at an early stage of the development, which is characterised by a large number of enterprises with smaller scales.

Investment directions: In view of the huge growth of the orthopaedics market and the characteristics of many smaller and weak enterprises in the orthopaedics, it is still a hot topic for the investment and financing in the future. There is no doubt that the operation robot is still one of the important directions. However, in recent years, due to the excessive pursuit of capital, the price is deviated from the real value. 3D printing combined with biomaterials is also one of the most promising directions.

1. Medical AI

On 31st August, 2017, CFDA issued a new version of the Classification of Medical Devices, which will be formally implemented on 1st August, 2018. The original 43 sub categories are reduced to 22 sub categories in the new version. Of particular note is that it adds a new category corresponding to AI diagnosis, which is embodied in the analysis of medical images and pathological images.

Investment directions: Medical AI is a direction of the future development of medical treatment. Compared with other industries, the foundation of AI applications in the medical industry is better.  Based on current observations, AI of medical images and medical virtual assistants are relatively mature, and some of them are worth to pay attention to.

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