M & A is a high-frequency word in the medical device industry in recent years. Since this year, the whole medical device industry has announced new transactions at an amazing speed. According to Ernst & Young data, in the first half of this year alone, there were 33 M & A transactions in the medical device industry, which has exceeded the annual record in 2020. It is worth noting that Chinese enterprises are highly active in the wave of global medical device M & A.

In the past, due to the lack of volume and limited management capacity, domestic medical device enterprises were not active in overseas acquisitions. In recent years, the competition in the medical device industry is fierce. The centralized purchase policy makes the mature business of enterprises face growth pressure. In addition, the product iteration speed in the medical device field is accelerated, and various factors bring huge survival pressure to the medical device enterprises. M & A can quickly break the ceiling of enterprises, seize high potential market segments and become a fast lane for the development of medical device enterprises.

M & A is expansion and survival

In the development process of medical device enterprises, M & A is one of the basic paths. From the perspective of product characteristics, the medical device industry has the attributes of fragmentation and discrete manufacturing. There are not only great differences among various subdivided fields, but also rapid product technology change. The impact of new technologies on old technologies is often subversive. From a market perspective, the ceiling of medical device segmentation is obvious. If it is unable to further expand its own market share, the fierce external competition will quickly reduce the market share.

This year, the reasons for accelerating M & A of domestic and foreign medical device enterprises are different. Novel coronavirus pneumonia is the main reason for M & A in the world. According to the first half report of 2021 released by the global medical device giant, the global top 10 medical device enterprises have achieved revenue growth. In addition to the rapid growth of diagnostic business closely related to epidemic prevention and control, the high-value consumables business has also rebounded strongly, and the industry development has gradually returned to the normal track.

The reasons for M & A in domestic medical device industry from cold to hot are different from overseas. Previously, the M & A integration of China's medical device enterprises was not normal. Some people believe that the main reason for the infrequent M & A in the past is that the domestic medical device market has maintained a growth rate much higher than that of the international mature market, and can maintain rapid development only by relying on endogenous growth. Moreover, due to business habits, asset prices and capital market environment, the M & A of domestic high-quality assets is relatively difficult. A large number of projects seek independent listing, and the M & A integration between listed companies is even more difficult. In addition, the recognition of M & a development in the capital market is not high.

Although the scale of China's medical device market still maintains a high growth trend, the centralized purchase policy puts pressure on high-value medical consumables enterprises. At present, one of the market segments most affected by the centralized purchase policy of high-value medical consumables is cardiovascular consumables. Coronary stents are the earliest varieties of national centralized procurement of high-value medical consumables. Enterprises mainly engaged in coronary stents are generally under pressure. Under this, medical device enterprises have to open up a new battlefield. In many mergers and acquisitions, cardiovascular intervention high-value medical consumables enterprises are quite active and sell frequently.

The intervention and non implantation solution is favored by domestic enterprises

This year's M & A transactions of medical device enterprises in China mainly show three characteristics.

First, mergers and acquisitions in the cardiovascular field are active. Cardiovascular high-value consumables enterprises began to expand the industrial chain and product line in an all-round way. The key goal of enterprise M & A is to seize the market share of the track and strive to cooperate with existing channels in the selection of M & A targets. Taking lanfan medical as an example, the enterprise invested in Oct (optical coherence tomography) enterprise Nanjing Wolfman this year. OCT imaging can accurately guide PCI (percutaneous coronary intervention) surgery. In the past, lanfan medical's products in the cardiovascular field mainly focused on the treatment link. After investing in Wolfman, it grafted Wolfman's new diagnostic technology on the existing sales platform in the cardiovascular field to expand its business territory.

Secondly, in terms of target preference, in the cardiovascular track frequently shot by domestic enterprises, the intervention of non implant solutions has become a "favorite". The commercial potential of interventional non implantation solution has been verified by the market. The first half report of Lepu medical in 2021 shows that the revenue of its interventional non implantation product portfolio (including degradable stents, drug balloons, cutting balloons, etc.) is RMB 364 million, with a year-on-year increase of 1951.55%, becoming a new pillar of Lepu medical growth. The reason why interventional non implantation can become a new track favored by medical device enterprises is that the therapy can not implant permanent metal implants in patients, but also restore the blood supply function of blood vessels. Representative products in the field of interventional non implantation include shock wave balloon, drug balloon, bioabsorbable stent, volume reduction device, etc. Judging from the domestic M & a trend this year, the most popular product is shock wave balloon.

Shockwave medical is the first company in the world to launch shock wave balloon. Its C2 catheter for the treatment of coronary artery calcification showed great clinical value in a series of clinical studies, and was approved by the FDA in February this year. In March this year, shockwave's shockwave balloon was included in the income bag of health care - health care and reached a cooperation with shockwave. The two sides jointly established a joint venture controlled by health care to introduce intravascular shockwave technology into China. On the basis of establishing a joint venture, health care will establish a production line in China to transform and produce shockwave products. There has never been a lack of competitors in the advantageous medical device track. Shockwave is not the only player in the shockwave balloon track. Fastwave medical has also joined the competition and won the ambitious pharmaceutical strategic investment in August this year. At present, some domestic enterprises have entered the field of shock wave balloon. It is expected that this product will face fierce competition in the domestic market in the future.

Finally, with the highlight of the traditional business ceiling, some medical device enterprises began to try cross track M & A to break through the industry ceiling. On the one hand, domestic mature high-value medical consumables enterprises test the field of water consumption medical products; On the other hand, the field of domestic high-value medical consumables also began to usher in more participants. For example, Lepu medical is making an overall layout of the dental industry. This year, it acquired bosmei for more than 200 million yuan to enter the invisible orthodontic track. In addition, it also entered the fields of digital and professional 3D scanning (intraoral scanning) through M & A, and independently developed dental implants. Qiming medical, a leading enterprise of heart valve, has entered the field of interventional therapy of hypertension and established a joint venture company renaly Ltd. with Israeli high-tech company healium Medical Ltd. to introduce healium's new generation of renal sympathetic denervation (RDN) related medical devices, and carry out R & D, production and commercialization of RDN products all over the world.

At present, in the overseas mergers and acquisitions and cooperation of domestic medical device enterprises, the "licensing + independent research and development" of medical devices is a very active business model, which also has a certain impact on the innovation pattern of domestic medical devices. For medical device enterprises, the first mover advantage is very important. In the market environment where domestic enterprises frequently introduce overseas products, the competition among enterprises will intensify in the future. After the license in mode becomes the norm, the time left for domestic enterprises to innovate the me too mode will be shorter, which is a great test for the innovation strength and innovation differentiation level of enterprises. This requires that domestic medical device enterprises should not stay in the imitation stage. The key to sound development is to have forward-looking thinking and strategic vision. It can be predicted that with the intensification of competition, some enterprises will fall behind in the competition, and mergers and acquisitions in the medical device industry will occur frequently in the future.

Overseas giants are optimistic about the otolaryngology market

Whether in the selling enterprises or the selling direction, the M & a trend of the domestic medical device industry is generally greatly affected by the centralized purchase policy. In contrast, the M & A of overseas giant enterprises is less affected by China's policies, mainly from the judgment of products and markets.

The M & a direction of overseas medical device enterprises reflects the giants' perception of market changes. From the acquisition trend, with the improvement of industry concentration, there are not many mergers and acquisitions between giants. Most large enterprises consolidate their market position in segments, improve product solutions, and occupy emerging high growth segments. Through the statistical analysis of arterial network, the otolaryngology medical device market is most favored by overseas giants. Otorhinolaryngological diseases, such as allergic rhinitis, vocal cord polyps, tinnitus, snoring, etc., are common diseases. There are many segments of otorhinolaryngological medical devices. Products include otoendoscopy, nasopharynx endoscopy, hearing aid and ablation, laser equipment, etc. some markets have not been fully developed.

The field of patient monitoring has also attracted the attention of overseas giants. For example, Philips acquired capsule technologies, a provider of medical equipment integration and data technology for hospitals and medical institutions. Boston science acquired preventive, a heart health management solution company that includes a wearable remote heart monitor.

M & A can help enterprises quickly break the ceiling and is an important path for the development and growth of medical device enterprises. For medical device enterprises, M & A is not only for expansion but also for survival. Fierce external competition may lead to a rapid decline in market share, and M & A can bring rapid breakthroughs. However, not all mergers and acquisitions can succeed, and there are many failure cases in the field of medical devices. With the advent of M & a era, consolidating endogenous growth ability is the basis for the success of M & A.

Source: China Medical Journal