Their story|Medical device people, not all of them will be involved in the "Dead Sea".

After Xia Kefu, a senior medical device person, left a well-known "cottage factory" and went to a little-known small company called Runmaid, he had the dream of exporting original medical devices overseas, and died in the Philippines before it was realized.

This incident is a wake-up call for many medical device companies that are seeking to go overseas. Some people say that the domestic environment is "out of the game if you don't go to sea", but now there is a high probability that you will be involved in the "Dead Sea". Some people also believe that the reason why it is difficult for Chinese medical device companies to break through is that it is difficult to get rid of the "copycat" thinking, there are many imitations, and they are not competitive when they go overseas.

The first financial reporter recently interviewed more than 10 medical device industry managers, entrepreneurs, overseas business service providers and investors, who used their own stories to tell their views on innovative medical devices going overseas.

Southeast Asia becomes a "shadow"?

The core products of Runmed, the medical device company of Xia Kefu who died in the Philippines, are caFFR systems and vascular interventional surgical robots. Among them, the caFFR system and its pressure sensor accounted for more than 80% of the company's total revenue in 2023. In 2019, Runmed obtained the certificate overseas for the first time and successfully sold the caFFR system to Malaysia. The main function of the caFFR system is to measure the patient's coronary blood flow reserve fraction, and its power lies in the GPS navigation function, which can provide doctors with clinical diagnosis and treatment plans, and can also be used with vascular interventional surgery robots.

The first financial reporter recently learned that Xia Kefu's successor has been put in place, and the company is re-evaluating its overseas strategy.

However, in the eyes of industry insiders, the medical device market in the Philippines is not large enough, and the ability to pay is also very limited. "It is difficult for high-risk innovative devices to obtain good commercial returns in Southeast Asia, which is nothing more than rolling from domestic to foreign, and the product profit is very low. The real innovative medical devices should go to Europe and the United States for development, where there is a broad market space and payment capacity. Deng Xiaoyu, founder of Xiyi Medical, told the first financial reporter.

In recent years, the demand for Chinese medical device companies to go overseas has soared. Professor Pan Wenzhi, chief physician of the Department of Cardiology at Zhongshan Hospital affiliated to Fudan University, just completed three surgeries in Turkey at the end of last month, using the Venus-P self-inflating pulmonary valve independently developed by the domestic medical device company Qiming Medical. In recent years, Venus Medtech has also been actively seeking to go overseas.

"Countries with large populations and relatively developed economies, such as Turkey, Indonesia, Malaysia, etc., have become popular countries for domestic medical device companies to go overseas." Pan Wenzhi told the first financial reporter.

He shared his feelings during his trip to Turkey, saying that local doctors do not know enough about Chinese medical devices and are also using medical devices exported from India. "India entered the market at a fairly low price, and these emerging markets are still price sensitive." Pan Wenzhi said.

The "low-hanging fruits" under the domestic substitution policy of domestic equipment have been almost finished, and the production capacity and R&D capabilities under the help of capital have expanded rapidly, and the Chinese market has been unable to meet the industry.

Due to the long-term inertia of pure export trade thinking in China's medical device industry, China's medical device overseas strategy and the corresponding overseas clinical trials and overseas medical insurance access capabilities are relatively weak. At present, the strategy of a large number of equipment companies to go overseas is to follow the trade mode of the past 40 years of production factories looking for agents.

In recent years, aiming at the overseas demand of Chinese medical device companies, a number of suppliers specializing in overseas clinical services have also been born in China. In the industry, this model is known as CRO (Research and Development Contract Outsourcing Service Provider). WuXi AppTec and Tigermed are domestic CRO giants, but there are still not many professional CRO service providers for medical devices going overseas in China.

A few years ago, Deng Xiaoyu changed from the head of the Asia-Pacific business of a leading global CRO to the founder of Xiyi Medical, a comprehensive service platform for Chinese pharmaceuticals to go overseas. The first pot of gold he earned came from the overseas demand of Chinese medical companies during the epidemic, when Xiyi Medical undertook the overseas business of Jiu'an Medical, a new crown antigen reagent manufacturer, and helped the latter earn more than 30 billion yuan in United States.

But as the limelight of the epidemic passes, CRO service providers are beginning to look for the next business opportunity, and the medical device market is their ideal target.

In the past 4 years, Deng Xiaoyu has designed strategic plans for more than 700 pharmaceutical projects to go overseas, and finally signed more than 60 projects, mainly to help China's innovative medical devices go to Europe and the United States, and there are also some attempts to build countries along the "Belt and Road". He reminded that there are also many "scammers" in the field of overseas services in the pharmaceutical field, and there are many cases of customers he has personally contacted being "pitted" by overseas Chinese and foreign-funded service agencies, and some have delayed the product and missed a whole generation of products.

"Specifically, Chinese device companies currently lack an overall and systematic strategy to go overseas, do not have a deep understanding of the key countries that are suitable for them, passively go to sea, scatter out of focus, only look at the registration certificate, do not pay attention to whether they can really achieve sales and payment, and do not have an overall overseas clinical strategy and reliable partners, which are all challenges faced by enterprises when going overseas." Deng Xiaoyu told the first financial reporter. He reminded entrepreneurs not to go to sea blindly.

After Xia Kefu was killed in the Philippines, the idea of some medical device people who originally planned to go to Southeast Asia was also dispelled. Fang Daming, a senior medical device entrepreneur, told the first financial reporter that he originally planned to open up the market in ASEAN's "Belt and Road" countries, but the Philippine kidnapping incident made him decide to stop ASEAN business.

"My other friends have gone to sea in Viet Nam, Africa, Ukraine, North Korea, Russia, but they are far from expectations, blood loss!" Fang Daming said, "The domestic environment is that if you don't go to sea, you will be out, but now there is a high probability that you will go to the 'Dead Sea'." I don't think their stories are good examples to share. ”

There is no shortcut for innovative devices to go overseas

Chen Zhi is a veteran investor in the medical device industry, and his investment logic is to only invest in innovative projects, and he will specifically look for managers for some particularly difficult projects. He spent more than a year looking for the right CEO for an investee company.

He believes that for most enterprises, going overseas is "rolling from domestic to foreign". At present, most of the companies going overseas are still mainly low-end medical devices, but he said that in recent years, some innovative medical devices have begun to go overseas after financing enough funds, and their common characteristic is "the world's first".

For a long time, China's medical devices have been dominated by imitation. "Generally, generic medical devices are not difficult to obtain certification even if they are certified by the United States FDA, and the time, cost and quality requirements are relatively clear." Deng Xiaoyu told the first financial reporter, "But the problem is that it is difficult for generic medical devices to be sold in the United States, and only products with real obvious advantages can truly enter the world's largest and most lucrative device market, which is also one of the important challenges faced by many Chinese medical device companies that want to go overseas in the United States market." ”

Li Yuan is a salesperson of an overseas medical device company, and he recently saw that a domestic medical device company was recruiting overseas sales leaders, and claimed to focus on the European and American markets, which made Li Yuan moved and decided to go for an interview.

The interviewer told him that the product that the company was going to sell in United States had obtained the FDA registration certificate, but Li Yuan learned that the performance of this product was quite different from that of a similar United States giant company, so he asked the interviewer how he was going to sell it.

When the interviewer replied that the company's intention was not really to make substantial revenue in the United States market, but only to obtain a United States FDA registration certificate so that it could be approved more quickly in other market regions, Li Yuan gave up the idea of joining the company. He told the first financial reporter: "What I want to go to is a truly innovative medical device company, so that China's high-end medical devices can truly go global, rather than just brushing a presence in a market like United States." ”

In recent years, there are more and more truly original medical device products that are moving towards the global high-end market. When these products are unveiled at certain international exhibitions, they attract the attention of manufacturers and distributors around the world.

Yinjie's company is developing a heart pulsed electric field ablation (PFA) device, which belongs to the electrophysiology track. Pulse ablation is an emerging technology in recent years, with great market potential, including developed countries such as Europe and the United States. Mainland China has also approved two pulse ablation devices.

Yin Jie has not participated in international exhibitions in the past two years, and his company recently participated in the annual meeting of the United States Heart Rhythm Society in Boston, and doctors in Europe and the United States are also very interested in the products they develop. In his opinion, going to sea is a "must". "Half of the world's largest medical device market is in United States, one-third in Europe, we have good products and good patents, going to Europe and the United States is a more ideal choice, Southeast Asia may not be our main market." He said.

The track that Yinjie is aiming at is also the next business flashpoint that multinational medical device manufacturers are optimistic about. Although domestic electrophysiology equipment has begun centralized procurement, emerging products in the field of pulse ablation are not expected to be included in centralized procurement soon due to high technical barriers.

For some domestic medical device products that can run into the world's first echelon in subdivided fields, many people are optimistic about their prospects for going overseas. However, the polishing of good products and clinical research and development and registration require long-term patience and solid efforts, and investment institutions need to give innovative device companies enough time and space.

"There is no shortcut to the global listing of innovative devices, and the fastest way is to fully plan and implement it step by step, in accordance with the regulations of European and American regulators and the best practices of overseas giants. Deng Xiaoyu told the first financial reporter.

For example, he said that during the new crown epidemic, a large number of in vitro diagnostic (IVD) device companies sought to United States overseas, but only a single digit of the actual license, "the rest were deceived by agencies claiming to United States the FDA."

Zhong Hui has worked in multinational medical device companies for more than ten years, and now has become the head of the heart implant device business of a major United States manufacturer in China. As the head of business for a multinational company, he is closely concerned about the movements of China's fast-rising local medical device companies, which could compete with them at any time.

However, Zhong Hui is more concerned about the standardized development of local medical innovation enterprises and the soil for cultivating the growth of these enterprises. He believes that the accelerated research and development of China's medical devices in recent years is certainly a good thing to promote the overall development of the industry and benefit patients, but it is very important for these innovative medical devices to go to overseas markets and compete with high-end equipment from large manufacturers.

Zhong Hui told the first financial reporter that domestic innovative medical devices should be more standardized in terms of clinical trials and indications, so as to be in line with international standards. "Domestic medical device manufacturers sometimes do not do enough self-regulation and self-regulation, that is because the cost of violations is very low, and multinational companies dare not do it, because once the violation is investigated and punished, it will have to pay an extremely high price." He told the first financial reporter.

He added that when a company is ready to go global, it should be fully able to withstand the test of the international market, and now domestic regulators are helping these manufacturers to better regulate.

I didn't drink less coffee, and financing was really difficult

Wang Zhenhua left the local medical device manufacturer in 2020 and embarked on the road of entrepreneurship and entered the laparoscopic surgical robot track. This is not a new field, but in his opinion, the products that can meet the common needs are the ones that can survive in the end.

"Products that aim at common needs will inevitably bring the problem of competition, and it is normal to die for a lifetime." He told the first financial reporter, "We almost hear about the failure of our peers every day, and I still have fear at the beginning of the business, but now I am also making myself stronger." ”

Wang Zhenhua said that from his communication with domestic medical device regulatory approval agencies, the support received is far greater than the doubt. "In recent years, the drug regulatory department has also been more in line with international standards, and the staff of the drug regulatory department has given us more positive suggestions, and from the perspective of approval policies, our drug regulatory agencies are more open, which will also lay the foundation for China's medical device products to go overseas." He said.

However, the domestic capital environment is still a big challenge for these medical device entrepreneurs. Wang Zhenhua said that he entered the medical device business in 2020, at most he just caught up with the "tail of the tuyere".

Since 2016, the financing of the domestic medical track has become hot, and at the beginning of the epidemic in 2020, there has been a wave of "back-to-shine" phenomenon in the investment and financing of medical devices. "After the outbreak of the epidemic, the medical industry was still sought after by capital, but after that, everyone became clear, the economic situation began to decline, and it became more and more difficult for investors to get money." He said.

In the context of medical insurance cost control, investment institutions are paying more and more attention to the ability of innovative medical devices in medical payment, as well as the policies and measures introduced by the state. Some enterprises are greatly affected by the centralized procurement policy, and their profits do not meet the expectations of investors.

"For example, if some products have just entered commercialization, will they be charged fees, which is also very concerned by investment institutions, and some institutions will be very pessimistic." Wang Zhenhua said, "As an enterprise, we need to continuously reduce early operating costs through technological innovation and operational efficiency. ”

Although it is difficult to be excited when it comes to the medical device industry this year, Chen Zhi told the first financial reporter that 9 new companies have been invested this year. "We're not going to wait until valuations are flying to get into it, and now is the perfect time." He said, "As long as it is an innovative product and a product with market demand, its value will definitely be recognized, and it can better go to overseas markets." Investing in low-end products may have some income in the short term, but it will affect the reputation of the fund. ”

Yin Jie told the first financial reporter that the current domestic financing environment is indeed not good, investors are still very cautious, and the approval rate of the project is very low. "It used to be a venture capital firm (VC) that normally invests in one or twenty projects a year, but now it only invests in one or two because there is no prospect of exiting. None of the big institutions could vote, and many of the smaller ones disappeared. He said.

He further said that the investment life cycle of the medical device industry is generally 5-6 years, and if the institution does not see the hope of exiting, then it will not invest. Recently, there have even been cases where some organizations have returned the money raised.

"But the roll, the investment in the past few years has seen returns, and the big wave of capital may also be a good thing at the macro level, so that some high-quality projects can be better manifested and a number of inferior ones will be eliminated." He said.

China's investment institutions are also gradually improving their understanding of the medical device industry. Lin Danqing has worked in multinational medical device companies for many years. At that time, multinational companies were still in the stage of "lying down to make money" in China, and Lin Danqing also enjoyed a wave of dividends and bought a business in Shanghai.

In recent years, insiders of multinational medical companies have been in turmoil, and Lin Danqing simply retreated after changing two companies and joined the entrepreneurial army of China's medical devices. He is in charge of financing-related businesses and often likes to pull investors to cafes to talk about strategy. He admitted: "There is no shortage of coffee, but it is really not easy to raise money. ”

He told the first financial reporter about the confusion in the financing process - many investors do not believe in China's original medical devices, and some investors will even explicitly ask the entrepreneur whether he has brought out the business information of the large enterprise in the past, and if so, then invest, because this will greatly reduce the risk of research and development.

"This approach is quite undesirable, on the one hand, there is a risk of intellectual property infringement, and on the other hand, it is to follow others and always be slower than others. Investors must change this way of thinking, because China also has quite good engineers, and they don't all need to rely on copycats and imitations. Lin Danqing said, "If you don't have your own ideas, it's like you will always be a place to mass-produce international imitation masterpieces." ”

(Fang Daming, Chen Zhi, Li Yuan, Zhong Hui, Wang Zhenhua, and Lin Danqing are pseudonyms)

(This article is from Yicai)