HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<ul>
<li>DRGs will become the main form of medical insurance payment, which will bring huge impact on all parties (hospitals, physicians, patients, companies) and fundamentally change the existing medical environment.</li>
<li>DRGs would force hospitals/doctors to cure patients within specified time and amount of cost, which would promote the improvement of technology with differentiated innovation that truly drives clinical benefits.</li>
<li>Overall, investors are advised to pay attention to related opportunities but also prepare for the potential risks in advance.</li>
</ul>


DRGs will become the main form of medical insurance payment, which will bring huge impact on all parties (hospitals, physicians, patients, companies) and fundamentally change the existing medical environment.
DRGs would force hospitals/doctors to cure patients within specified time and amount of cost, which would promote the improvement of technology with differentiated innovation that truly drives clinical benefits.
Overall, investors are advised to pay attention to related opportunities but also prepare for the potential risks in advance.


The Impact of DRGs Policy on China Medical System

Equity Bottom-Up

Shenzhen Mindray Bio-Medical Electronics / Equity Bottom-Up

<ul>
<li>In 2021/22Q1, Mindray’s 20%+ growth rate is not easy in this difficult/complicated environment, but the market hopes to see stronger data and a fresh logic of growth to restore confidence.</li>
<li>After China's “new infrastructure”  projects finish, how to maintain its 20%+ growth could be a challenge in the long term if Mindray couldn’t make breakthrough in internationalization or innovation.</li>
<li>However, Mindray is still a “safe play”. Its current PE/TTM is also more reasonable, but definitely not undervalued. It would be much better to long Mindray at a lower valuation.</li>
</ul>


In 2021/22Q1, Mindray’s 20%+ growth rate is not easy in this difficult/complicated environment, but the market hopes to see stronger data and a fresh logic of growth to restore confidence.
After China's “new infrastructure”  projects finish, how to maintain its 20%+ growth could be a challenge in the long term if Mindray couldn’t make breakthrough in internationalization or innovation.
However, Mindray is still a “safe play”. Its current PE/TTM is also more reasonable, but definitely not undervalued. It would be much better to long Mindray at a lower valuation.


Shenzhen Mindray Bio-Medical Electronics (300760.CH) - Still a “Safe Play” Despite Growth Slowdown

Equity Capital Markets

Scivita Medical Technology / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/scivita-medical-technology" target="_blank" data-smartkarma-citation="entities:34701:1" rel="noopener">Scivita Medical Technology (SMT HK)</a> has certain technical advantage and a comprehensive portfolio of products and candidates, which would help the Company seize a position in this market.</li>
<li>There are also some potential risks and concerns that could be unfavorable for Scivita’s development, which should be aware of by investors.</li>
<li>In terms of the valuation, SonoScape and Aohua Endoscopy (688212.CH) could be the comparable companies, but the valuation of Scivita should be lower than either of them.</li>
</ul>



Scivita Medical Technology (SMT HK) has certain technical advantage and a comprehensive portfolio of products and candidates, which would help the Company seize a position in this market.
There are also some potential risks and concerns that could be unfavorable for Scivita’s development, which should be aware of by investors.
In terms of the valuation, SonoScape and Aohua Endoscopy (688212.CH) could be the comparable companies, but the valuation of Scivita should be lower than either of them.


Pre-IPO Scivita Medical Technology - The Industry, the Business, and the Concerns

<ul>
<li>The quit of the centralized procurement of chemiluminescence products in Anhui directly put <a href="https://www.smartkarma.com/entities/autobio-diagnostics-co-ltd" target="_blank" data-smartkarma-citation="entities:30185:1" rel="noopener">Autobio Diagnostics (603658 CH)</a> in a passive position. The implications could be deeper and more complex than expected.</li>
<li>Autobio didn’t seize COVID-19 testing opportunities, leading to the doubts about the Company's market sensitivity and team execution, thus losing the opportunity to generate substantial cash flow for future acquisitions.</li>
<li>Together with weak internationalization business, Autobio's future performance growth could be uncertain and may not be able to support the rapid valuation expansion as expected.</li>
</ul>


The quit of the centralized procurement of chemiluminescence products in Anhui directly put Autobio Diagnostics (603658 CH) in a passive position. The implications could be deeper and more complex than expected.
Autobio didn’t seize COVID-19 testing opportunities, leading to the doubts about the Company's market sensitivity and team execution, thus losing the opportunity to generate substantial cash flow for future acquisitions.
Together with weak internationalization business, Autobio's future performance growth could be uncertain and may not be able to support the rapid valuation expansion as expected.


Autobio Diagnostics Co Ltd (603658.CH) - Logic Changes

<ul>
<li>The Beijing municipality has added fertility treatment in its medical insurance program. We analyzed related impact.</li>
<li>If we hope to have more companies entering global TOP50 during “14th Five-Year Plan” period, domestic medical device companies need at least 25% annualized revenue growth to make it happen.</li>
<li>Actually, the national medical insurance doesn't determine market size directly but adjust the “distribution”. There's no need to focus solely on anti-tumor field, but rare diseases and central nervous system diseases.</li>
</ul>


The Beijing municipality has added fertility treatment in its medical insurance program. We analyzed related impact.
If we hope to have more companies entering global TOP50 during “14th Five-Year Plan” period, domestic medical device companies need at least 25% annualized revenue growth to make it happen.
Actually, the national medical insurance doesn't determine market size directly but adjust the “distribution”. There's no need to focus solely on anti-tumor field, but rare diseases and central nervous system diseases.


China Healthcare Weekly (Feb.25)-Assisted Reproduction, Medical Device Co. Globalization, New Growth

China

Shenzhen Mindray Bio-Medical Electronics Co., Ltd. manufactures and distributes medical equipment. The Company produces life information supporting, in vitro diagnostic, and medical imaging equipment equipment. Shenzhen Mindray Bio-Medical Electronics also produces supporting reagents.

Shenzhen Mindray Bio-Medical Electronics (300760 CH)

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Shenzhen Mindray Bio-Medical Electronics (300760 CH)

The Impact of DRGs Policy on China Medical System

An important remaining piece of China healthcare reform is DRGs, which will fundamentally change the existing medical environment. Investors need...

Xinyao (Criss) Wang