China has ambitious plans to expand its health care provider network. The recently announced government blueprint has provisions to build at least 2,000 county level hospitals, 2,400 health service centers in urban areas, as well as renovate 3,700 community clinics and 11,000 urban health service centers.
These numbers are staggering, but so is the sheer volume of medical devices that will be required to equip this new infrastructure.
“There are going to be more hospitals, and they are going to purchase more equipment and encourage more prevention and early diagnosis, so the medical equipment, diagnostic reagents and vaccines manufacturers will certainly benefit.” said Mandy Chui, China principal for IMS Health, a consultancy.
Leader of the pack
While short-term spending on health care reform will focus on insurance and infrastructure, the medical devices industry is viewed as a natural long-term beneficiary of the reforms. Analysts see New York-listed Mindray Medical International as the leader in the field.
Mindray specializes in equipment such as patient monitoring and life support devices, in-vitro diagnostics and medical imaging systems. The Shenzhen-based firm targets foreign and domestic markets in equal measure. Local business accounted for 42% of its US$548 in sales last year, down from 49% in 2007. Due to the global financial crisis and China’s health care reform, Mindray is likely to intensify its domestic focus in 2009, said Cathy Gao, a company spokesperson.
Net profit for 2008 rose 39% year-on-year to US$108.7 million, in part due to increased government spending in the fourth quarter. Government tenders for medical devices are expected to contribute to a projected 20% yearly revenue growth in 2009, Gao said.
Brokerage Citi projects Mindray’s total sales will grow by 22% to US$669 million on the back of a 35% rise in China sales.
“We believe that given Mindray’s leadership in its markets and the scarcity of high-growth, high-quality public Chinese health care companies, Mindray deserves a premium to its Chinese peers,” Citi analyst Hoki Luk wrote in a recent report.