China Economic Network on January 17, with the "14th Five-Year" Medical Equipment Industry Development Plan officially introduced, the localization of medical equipment has been pushed to the national strategic height. At the same time, domestic outstanding enterprises have rushed to the capital market intensively, which has become a portrayal of the prosperity of the industry.
On December 31, 2021, following the submission of a prospectus by Neusoft Medical Systems Co., Ltd. (hereinafter referred to as "Neusoft Medical") to the Hong Kong Stock Exchange, the application of Shanghai United Pictures Medical Technology Co., Ltd. (hereinafter referred to as "United Pictures Medical") for listing on the Science and Technology Innovation Board was accepted. As a representative of domestic high-end medical equipment manufacturers, Neusoft Medical and Lianying Medical have raced to form a joint force leading domestic substitution, and gradually breaking the tiger dragon disk of foreign brands.
Founded in 1998, Neusoft Medical's prospectus shows that the company is one of the leaders in China's medical imaging equipment market, and its business covers digital medical diagnosis and treatment equipment, equipment services and training, MDaaS platform (medical equipment and medical imaging data services) and in vitro diagnostic equipment and reagents. According to Frost & Sullivan, from 2017 to 2019, neusoft Medical's sales of CT scanners ranked first among Chinese domestic brands in terms of revenue. In terms of sales from 2018 to 2020, Neusoft Healthcare is the largest exporter of CT systems in China. Based on the total number of installed systems in 2020, Neusoft Medical is the largest MANUFACTURER of CT systems in China, with a market share of 10.6%.
Founded in 2011, The main business of Lianying Medical is high-performance medical imaging equipment, radiation therapy products, life science instruments, and provides medical digitalization and intelligent solutions.
According to its prospectus, in 2020, the consolidated revenue of United Shadow Medical in the Chinese market was 5.76 billion yuan, higher than Neusoft Medical's 2.46 billion yuan. According to the caliber of the number of new units in China, The new market share of United Shadow MR products ranked first in China, and the 1.5T and 3.0T MR ranked first and fourth respectively; CT products ranked first in the domestic new market share, and CT below 64 ranked first, and CT ranked fourth with 64 rows and above.
In terms of innovation, in the past 20 years, Neusoft Healthcare has created China's first CT, the first DR, the first superconducting magnetic resonance, the first trackless suspension dual-center seven-axis angiography machine, and the first 256-layer wide-body detector energy spectrum CT, 512-layer CT and other innovative achievements, which have won a place in the high-end CT, MRI, DSA and other markets originally controlled by multinational giants such as GE, Siemens and Philips.
From the perspective of revenue contribution, CT is still the core product line of Neusoft Medical, with its CT product revenue of 1.29 billion yuan in 2020, accounting for 52.6% of the overall revenue. It is worth noting that in 2020, Neusoft Medical's DSA product revenue soared to 38.66 million yuan, an increase of 313% year-on-year. The sudden emergence of DSA has brought considerable growth expectations to Neusoft Medical.
In addition, Neusoft Healthcare has built the MDaaS (Medical Devices and Medical Imaging Data Service) platform, which includes medical imaging services, image-based clinical solutions, and medical imaging research and development services. The platform has helped healthcare organizations store, manage, or process more than four million sets of image data, enabling more than 1,000 healthcare facilities to remotely diagnose more than one million clinical cases. In the first half of 2021, Neusoft Medical's MDaaS business revenue grew rapidly to nearly 80 million yuan, showing good growth. With the advent of the digital age, it is believed that the image data service market will become the next blue ocean that all parties are struggling to compete for.
United Pictures Medical also has a relatively rich product line. As of the end of the prospectus, United Imaging Medical has launched more than 70 products to the market, including magnetic resonance imaging systems (MR), X-ray computed tomography systems (CT), X-ray imaging systems (XR), molecular imaging systems (PET/CT, PET/MR), medical linear accelerator systems (RT) and life science instruments. Among them, MR, CT and XR products account for more than 75% of the traditional main sources of income. CT products are also the most important source of revenue for Lianying, with the proportion of revenue in the reporting period rising from 9.01% in 2018 to 53.56% in January-June 2021, with a compound revenue growth rate of 82.28% in the first three years. Starting from 2019, the sales volume and unit price of Lianying Medical CT products began to exceed Neusoft Medical.
Compared with neusoft Medical's rise in the DSA market, United Pictures has chosen to continue to make efforts in the field of high-end MI molecular imaging systems. At present, Lianying is the only PET/MR equipment manufacturer in China, and its MI product sales revenue increased from 137.59 million yuan in 2018 to 381.62 million yuan in January-June 2021, and the revenue proportion increased from 6.93% to 12.46%, reflecting the differentiation strategy of Lianying and its ambition to master cutting-edge technology and advance higher barriers to the high-end customer market. In addition, Lianying has mastered a series of core technologies in the field of magnetic resonance, launched the first domestic 3.0T MR, 9.4T animal MR products and the industry's first 75cm large-aperture 3.0T superconducting magnetic and other iconic products, snatching a lot of market share from imported brands.
Figure: Comparison of Neusoft Medical and MediaTek (Source: United Imaging Medical Prospectus)
From the perspective of R&D, as of June 30, 2021, Neusoft Medical has more than 790 R&D personnel. In 2018, 2019 and 2020, R&D expenditure (including capitalized R&D costs) accounted for 20.9%, 21.4% and 15.3% of total revenue, respectively. At present, Neusoft Medical has participated in 37 national and provincial key technology research and development projects, won 14 national, provincial and ministerial science and technology awards including the second prize of the National Science and Technology Progress Award, and has more than 1480 patent applications and more than 170 computer software copyrights worldwide. After the listing, Neusoft Medical plans to use the funds raised to strengthen the research and development and acquisition of high-end digital medical imaging equipment and core component products, expand MDaaS business, develop sales network, and improve brand awareness.
In terms of United Pictures, from 2018 to the first half of 2021, the R&D investment of United Pictures Medical was 666 million yuan, 690 million yuan, 850 million yuan and 499 million yuan, accounting for 32.73%, 23.17%, 14.76% and 16.17% of the operating income, respectively. As of the end of the reporting period, Lianying Medical has obtained more than 1500 authorized invention patents, including more than 100 domestic invention patents and more than 380 overseas invention patents. In addition, Lianying has led nearly 40 national and provincial R&D projects, including nearly 20 major national science and technology projects, and won many honors such as the first prize of the National Science and Technology Progress Award in 2020.
Source: United Pictures Prospectus
According to the prospectus, in this offering, Lianying Medical intends to raise 12.480 billion yuan for the purposes of next-generation product research and development, high-end medical imaging equipment industrialization fund project, marketing service network project, information improvement project and supplementary liquidity funds.
In terms of internationalization, Neusoft Medical started relatively early. In 2000, Neusoft Medical established its first overseas subsidiary in Brazil, officially opening the international development of the brand. At present, Neusoft Healthcare has subsidiaries in 9 countries in the United States, Germany, the United Arab Emirates, Russia, Brazil, Peru, Kenya, Thailand and South Korea, and a representative office in Vietnam, with an installed capacity of more than 41,000 units worldwide. The company has 14 customer service teams, 11 overseas spare parts centers and 2 training centers in the international market, so that it can respond to customer needs at any time. From the perspective of revenue data, neusoft medical's overseas business accounted for about 20% in recent years, and the overall overseas revenue showed an increasing trend.
Neusoft Medical's revenue by geography market
Although Lianying Medical has established R&D centers, sales companies and production capacity layout in the United States, set up sales companies in other countries such as Malaysia, the United Arab Emirates and Poland, and gradually built a global R&D, production and service network, compared with Neusoft Medical, internationalization is still its shortcoming. During the reporting period, the overseas revenue of Lianying Medical was 0.43 billion yuan, 0.99 billion yuan, 240 million yuan and 181 million yuan, accounting for only 2.18%, 3.37%, 4.21% and 5.89% of the revenue respectively.
Through the above comparison and analysis, it can be seen that Neusoft Medical and Lianying Medical have their own advantages, and the impact on the secondary market can be described as a natural success. The proposed valuation of Lianying Medical is more than 100 billion yuan, and if it is listed at this valuation, it will become the "second giant" in the medical device industry after Mindray. According to the distribution price, the static marketing rate of United Pictures in 2020 is about 18. According to this calculation, Neusoft Medical's market value under the blessing of MDaaS business may reach 44-50 billion yuan.
In 2020, the market size of China's medical imaging equipment has reached 53.7 billion yuan, and it is expected that the market size will be close to 110 billion yuan in 2030. Such a large market size requires more domestic manufacturers like Neusoft Medical and Lianying Medical to jointly develop and overtake from the core technology, product quality, brand reputation and other aspects, completely changing the pattern of China's large-scale medical equipment, especially the high-end medical equipment market being relatively monopolized by imported manufacturers.
It is believed that with the help of the capital market, Neusoft Medical and Lianying Medical will jointly usher in a new stage of rapid growth, thereby accelerating the realization of domestic substitution of medical equipment, and the future rise of China's medical imaging equipment industry will be smoother from now on.