In 2022, we will continue to be optimistic about the three main lines of "import substitution of scientific research reagents, domestic high-end medical equipment ushering in an inflection point, and medical consumption upgrading"
1) Review of Q1-3 performance of medical devices and services in 2020 and 2021:
According to the classification of Shenwan Pharmaceuticals, the medical device sector will achieve an operating revenue of 197.196 billion yuan in 2020, with a year-on-year growth of 67.35%; 21Q1-3 achieved an operating revenue of 188.362 billion yuan, a year-on-year increase of 35.76%, and the growth rate declined compared with 2020; The medical service sector will achieve an operating revenue of 74.463 billion yuan in 2020, with a year-on-year growth of 15.22%; The operating revenue of 21Q1-3 was 75.205 billion yuan, up 46.03% year on year, and the growth rate was significantly higher than that of 2020.
In terms of medical device companies, under the COVID-19 in 2020, diagnostic enterprises such as Dongfang Biotech, Wanfu Biotech, Shengxiang Biotech, BGI, etc. will bring about rapid growth in performance through the sales of relevant COVID-19 diagnostic reagents at home and abroad, and equipment enterprises such as Mindray Medical, Yuyue Medical, etc. will also bring about significant increase in revenue through the sales of respirators, monitors and other products at home and abroad. From the second quarter of 2021, With the increase of vaccination rate, the epidemic situation at home and abroad has eased, the sales of anti epidemic products of medical device companies began to slow down, and the income growth rate dropped significantly under the high base in the same period last year. Previously, some enterprises who chose to diagnose or operate were impacted by the epidemic situation, and the epidemic situation gradually began to recover after the relief of the epidemic situation. We expect that the growth rate of non anti epidemic medical device products will gradually recover.
In terms of medical service companies, after the outbreak of the COVID-19 in 2020, most regions of the country took strict home isolation measures, which led to the suspension of outpatient services in hospitals, with a significant decline in the number of outpatient services, especially for dental, ophthalmology and other departments that can be treated on a selective basis. Based on this, medical service enterprises as a whole showed a trend of slowing income growth in 2020, and with the gradual improvement of the domestic epidemic, The performance of medical service enterprises will gradually show a recovery trend in the second half of 2020 and 2021, and Q1-3 in 2021 will achieve rapid growth under the low base in 2020.
2) Review of industry situation and major policies:
The market of China's medical device industry is growing rapidly, and the post epidemic era is expected to usher in new opportunities. China is the second largest medical device market in the world. Since 2020, the COVID-19 has struck suddenly. In the fight against the COVID-19, the medical device industry has timely provided a large number of diagnostic reagents, respirators, protective clothing, various protective masks and other protective equipment, playing an irreplaceable role. The SDA has continuously deepened the reform of medical device review and approval, optimized the review and approval process, improved the efficiency of review and approval, and accelerated the emergence of innovative medical device products. Looking ahead, our medical device industry is still in the "golden development period" with broad prospects.
National policies strongly support the restriction of domestic medical equipment and the import of products, and domestic equipment is expected to usher in a favorable admission. On June 21, 2021, Guangdong Drug Administration issued the Interim Provisions of Guangdong Province on the Administration of Clinical Urgent Imports of Drugs and Medical Devices in the Mainland of Guangdong, Hong Kong and Macao Bay Area (Draft). The draft proposed that, even for clinical urgent needs, only three special circumstances could be selected for import: (1) those not approved for registration in the mainland of China; (2) The registered products cannot be replaced; (3) It has been purchased by the hospital, is urgently needed clinically, and has progressiveness clinical application. After the application is submitted, it needs expert argumentation and is only valid for one year. Once the product is recalled overseas, it must also be stopped at home. A series of measures reflect the prudent application of imported products and support for domestic products.
In October 2021, the Ministry of Finance of the People's Republic of China and the Ministry of Industry and Information Technology jointly issued the Guiding Standards for the Audit of Government Procured Imported Products (2021 version), which clearly stipulated the proportion requirements for government agencies (institutions) to purchase domestic medical devices and instruments, of which 137 types of medical devices are required to be 100% domestic; 75% of the 12 kinds of medical devices shall be purchased domestically; For 24 kinds of medical devices, 50% of them shall be purchased domestically; 25% of the five kinds of medical devices are required to be purchased domestically. On this basis, the configuration of domestic medical devices is expected to usher in a favorable hospital admission.
3) Main investment strategies and directions in the future: We are optimistic about the three main lines of "import substitution of scientific research reagents, domestic high-end medical equipment ushering in a turning point, and medical consumption upgrading". 1) For the scientific research reagent industry, we believe that it is one of the few high-quality racetracks in the whole pharmaceutical sector that has the advantages of "large industry space growth, accelerated import substitution, and relatively immune policies". For the domestic enterprises growing gradually in the industry, their products have the strength to compete with foreign capital, and import substitution is an inevitable trend. 2) For high-end medical equipment enterprises, high-end equipment such as endoscopes has the characteristics of high technical barriers and late start in China. In recent years, a number of domestic enterprises with strong R&D capabilities, represented by Haitai Xinguang, Kaikai Medical and Mindray Medical, have gradually emerged in China. We believe that under the background of new medical infrastructure and the trend of strong government support for domestic equipment, Domestic high-end medical equipment enterprises are expected to achieve curve overtaking. 3) For medical consumer enterprises, the impact of policy repression on optional consumer terminals is relatively small, and the trend of aging and increasing per capita disposable income is expected to bring about a rapid rise in industrial demand.