Text: Amino observations.Merck's founder said, "We should never forget that pharmaceuticals are for people, not for profit." ”
Yes, both in the pharmaceutical and medical device industries, the business model is very "pure": the core is to create value for patients, and profits follow.
Looking overseas, the underlying logic behind the birth of those giant companies is all like this. For example, this is the case with Dekang Medical, which focuses on blood glucose monitoring.
Since its establishment in 1999, its purpose has been very pure: to bring better monitoring products to diabetic patients. Based on this goal, the company's products have gone through 7 iterations and have always been in the position of the industry leader.
This has also paid off handsomely. In the capital market, since its listing in 2005, Dekang Medical's share price has risen by more than 50 times, with a maximum market value of more than $60 billion. At present, even if the stock price is **, the market value still reaches $45.4 billion.
Nowadays, when we look back at the development of Dekang Medical in the past 20 years, there will still be many inspirations.
01 A leader in the blood glucose monitoring marketAny company that is sought after by capital has its own unique hard-core logic, and Dekang Medical is no exception.
The sustained share price of Dekang Medical is inseparable from its outstanding performance. Since its listing in 2005, the company's revenue has maintained a growth trend.
What's even more surprising is that after nearly 20 years of growth, its revenue growth rate is still not low. In 2023, the company's revenue reached 36US$200 million, a year-on-year increase of 24%; Net profit reached 5US$400 million, a year-on-year increase of 58%.
From the perspective of operating cash flow performance, Dekang Medical's operating data is very solid, and it is better than profit performance. In 2023, its operating cash flow reached 7$4.9 billion. The significant inflow of operating cash flow brought the company's cash on books to $2.7 billion.
Behind the bright financial data, it is closely related to the track and business model of Dekang Medical. Strictly speaking, Dekang Medical has only one business: continuous glucose monitoring (CGM).
For diabetic patients, blood glucose monitoring can help them better grasp blood sugar changes and is essential in daily life. This brings us to the need for blood glucose monitoring tools.
BGM (fingerstick blood test) is the traditional means of blood glucose monitoring, but due to the pain points such as being highly invasive and unable to continuously monitor blood glucose values, it has given CGM the opportunity to rise.
The CGM consists of a sensor, transmitter and receiver, which can be worn and received in a relatively flexible way, enabling real-time monitoring of the patient's blood glucose level and being reflected on the mobile phone.
Compared with traditional finger blood testing, continuous glucose monitoring can not only effectively reduce the pain of patients, but also provide all-day blood glucose information for several days, so as to detect hidden high and low blood glucose that is not easy to be detected by traditional blood glucose testing, fully understand blood glucose fluctuations, and help patients control blood glucose levels.
In the U.S. market, CGM sales in 2019 were only about $2 billion, but they doubled in 2022. Brokerage**, the market size will reach $9.4 billion in 2023.
Of course, the explosion of the CGM market, in addition to the increase in penetration, the unique business model is also the core assist. CGM is not a one-time transaction, and its accessory "sensor" is a real high-consumption product.
Take Dekang Medical's DEXCOM G6 series products as an example. The price of this series of sensors reaches 116$33, but only 10 days to live. As a result, the annual cost for a single diabetic reaches $4,246.
This is also the core income of Dekang Medical**. In 2023, the company's disposable sensor revenue will account for 90% of the company's total revenue; Reusable hardware accounts for only about 10% of revenue.
It is the unique business model that makes Dekang Medical's performance and stock price continue to grow. Of course, the premise of all this is that Dekang medical technology is powerful.
02 Define value with technology
The blood glucose monitoring device market is highly competitive and ever-changing. From Medtronic to Abbott, the competitiveness of traditional Haoqiang in this field has not been weak. However, Dekang Medical has always been the leader in the U.S. market and is the No. 1 player in market share, which is the basis for ensuring its performance.
Carefully**, this is the story of the rise of a deep digger.
From 2006 to the present, the FDA has successively approved Dekang Medical's 7th generation CGM products. It is through continuous product iteration that Dekang Medical continues to define new industry standards, so that it can continue to lead.
Specifically, the iteration of Dekang medical series products revolves around three levels.
First, the performance of the product continues to improve.
In the field of blood glucose monitoring, the Mard value is an important indicator to measure the accuracy of the blood glucose meter. The Mard value refers to the overall mean absolute relative difference of the blood glucose meter monitoring results, and the smaller the value, the higher the accuracy of the blood glucose meter.
The MARD value of Dekang medical products has been declining from 26% at the beginning, and the 7th generation CGM products have dropped to single digits, which is the most outstanding performance among all products.
At the same time, the company's G6 product is the first FDA-cleared integrated CGM that can be used in combination with other insulin pumps to guide insulin infusion volume and speed through CGM measurements, further enhancing the monitoring implications.
Second, the user-friendliness of patients is constantly improving.
CGM products are one of the most frequently touched accessories for diabetics due to their continuous wear, so it is very important to improve their friendliness.
The upgrade of Dekang medical products also continues to make a fuss around this point. For example, the area of the sensor continues to shrink to give patients a better wearing experience; Through the way of technology upgrading, it is no longer necessary to rely on fingerstick calibration, which reduces the pain ...... of patients
It is through the improvement of these details that the CGM product has become a popular blood glucose monitoring product for patients.
Third, the ** continues to decrease.
As mentioned above, the core of the business model is "razor + blade", and disposable sensors continue to contribute revenue every year. But overall, the cost of thousands of dollars per year is clearly an excessive burden. For enterprises, it is necessary to consider patients, which is the key to long-term success.
In the continuous iteration of products, Dekang Medical is also constantly reducing the ** of sensors. The annual cost of the company's G5 product sensor is $4,692, but the cost of the G6 has been reduced to $4,246 through the extension of life. In the G7 product, the sensor** drops below $3,000.
In the final analysis, the core competitiveness of C-end medical devices is the insight into users and market demand. Whoever understands the user best and who really understands the product will be able to maintain differentiation in the competition and naturally gain more markets.
03 Not everyone can become Dekang
The field of CGM is technically difficult. Investing a lot of R&D resources and insisting on self-developed core components is the way that the successful ones have verified. But this path is not something that everyone can learn.
The core reason why Dekang Medical can stand out is that it has made good use of the past technology accumulation.
The predecessor of the company was the Markerwell Medical Institute, which was established in 1981, and was the first to engage in the research of blood glucose detection sensors, specializing in the first generation of sensor technologyUpdike is one of the inventors of the simplified electrochemical assay of glucose.
Markerwell's research in the direction of sensors and glucose membranes has achieved great results, which has laid the foundation for the subsequent development of Dekang's industry-leading outer membrane technology and the first generation of sensors.
This is a story about technology precipitation, but it is not limited to Dekang Medical's lone struggle.
In the process of development, Dekang Medical not only develops its own CGM products, but also cooperates with many companies such as Tandem, Insulet, and Livongo.
The ability to use its monitoring products in conjunction with insulin pumps benefits from a win-win partnership. Its CGM products are integrated with Tandem's insulin pumps, and integrate Insulet's patch delivery technology to complete the closed-loop operation of "blood glucose monitoring-automatic insulin administration".
"Integration" is not a simple patchwork, it involves the understanding of technology and products, and only industry cultivators can know what cards to play.
Another intangible resource invested by Dekang Medical is to be firm enough to dare to do whatever it takes and endure poor profits for nearly 20 years on the big battlefield and the chosen route.
Due to the need to continue to invest in high R&D and market education costs, Dekang Medical has not made a profit for more than 20 years. The company's first profit was in 2019.
But as Merck's founder said, "We should never forget that pharmaceuticals are for people, not for profit." If we keep this in mind, profits never disappear: the clearer you remember, the more profits will come. ”
In the 13 years before 2019, Dekang Medical accumulated a loss of 8$6.8 billion. In 2019, the company achieved a net profit of 10.1 billion US dollars, as of 2023, the total net profit in just 5 years will reach 17$5.1 billion, twice the loss in the past decade or so.
For medical devices, there is no such thing as a hero coming and winning with one move, but more about enduring losses and doubts, gritting your teeth and persevering.
This is not only the essence of the so-called "Dekang" model, but also what we can learn.