The "first shot" of the New Year's acquisition of the A-share medical equipment industry was fired!
On the evening of January 28, Mindray Medical and Huitai Medical simultaneously announced that Shenmai Holdings, a subsidiary of Mindray Medical, will take about 66500 million yuan to acquire Huitai Medical 2112% equity. Cheng Zhenghui, the current controlling shareholder and actual controller of Huitai Medical, also promised to permanently and irrevocably give up the voting rights of the 10% shares of Huitai Medical that he still holds.
At the same time as the transfer of this agreement, Shenmai Holdings intends to acquire all 012% general partnership interest (Mindray Medical holds 9988% of the limited partnership interest), Zhuhai Tongsheng currently holds 349% of the shares. Finally, after the completion of this transaction, Shenmaikong and its concerted actor Zhuhai Tongsheng will control Huitai Medical 2461% of the shares.
According to public information, Mindray Medical is the largest medical device company in China in terms of revenue, and its monitors, anesthesia machines, blood cell analyzers and ventilators have all reached the world-class level.
Huitai Medical is a leading enterprise in the cardiovascular segment in China, and is also the first domestic manufacturer in China to obtain market access for electrophysiology electrode catheters, controllable radiofrequency ablation electrode catheters, and floating temporary pacing electrode catheters and enter clinical applications, filling the domestic gap in the field of cardiac electrophysiology.
The medical equipment leader "captures" the industry gazelle
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For Huitai Medical's sudden "selling", the market is a little surprised.
Huitai Medical focuses on two major business segments: electrophysiology and vascular intervention. As the earliest company to lay out the domestic electrophysiology market, and also the earliest enterprise in the industry to integrate with foreign technical level, Huitai Medical has the potential to be favored by investors.
According to Frost & Sullivan data, in 2020, Huitai Medical will be about 3The market share of 1% ranks first among domestic manufacturers.
On January 7, 2021, Huitai Medical officially landed on the Science and Technology Innovation Board of the Shanghai Stock Exchange. In the year of listing, it can be described as a "lone show" in the medical sector, with an annual increase of 28894%。The "sudden" change of ownership is exactly three years after the company went public.
In the past three years, due to the sales growth brought about by new product launches, centralized procurement, mergers and acquisitions, etc., Huitai Medical's revenue has "jumped" and easily crossed the billion mark, from 47.9 billion skyrocketed to 12 in 20226.1 billion yuan, and the net profit also increased from more than 70 million to 3400 million.
On the eve of the change of control, on the evening of January 24, Huitai Medical just released a "beautiful" performance forecast, and it is expected to achieve a net profit of 5 net profit attributable to the parent company in 2023100 million to 56.5 billion yuan, compared with the same period last year, an increase of 4245% to 5781%。
For the follow-up plan after the acquisition, the parties to the transaction said in the disclosed announcement"Mindray Medical will use this to enter the cardiovascular field and use its accumulation and talent reserve in the field of medical devices to help Huitai Medical improve its R&D capabilities. It will also combine the advantages of global marketing resources to promote the development of cardiovascular business such as Huitai Medical's electrophysiology and related consumables; At the same time, it will lay the foundation for future horizontal business expansion, enhance the comprehensive business competitiveness of Huitai Medical, and promote the development of China's medical and health industry. ”
This statement is quite pertinent in the eyes of industry insiders.
Limited by the first-mover advantage of foreign brands and high technical barriers, China's cardiac electrophysiology device market is still dominated by foreign-funded enterprises. Frost & Sullivan data shows that in 2020, Johnson & Johnson, Abbott, and Medtronic together accounted for more than 85% of the market share.
Among domestic manufacturers, although Huitai Medical's market share in the electrophysiology market ranks first, it does not have a gap with the second place Microelectrophysiology (in 2020, Huitai Medical's market share is only about 0 percent higher than that of Microelectrophysiology).4 percentage points). The latter's products have surpassed Huitai Medical in the volume of three-dimensional cardiac electrophysiological surgeries in China. In addition, in the peripheral vascular intervention business, some catheters of Huitai Medical are still under development, resulting in the loss of some opportunities in centralized procurement in recent years. Under the influence of Mindray's product engineering and system integration capabilities, Huitai Medical's product performance is expected to be further improved.
Holding strong alliance, innovation and channel first-mover advantage leading. Debang ** said in the research report that Huitai is a leading enterprise in the domestic cardiovascular field, with a layout in the fields of electrophysiology, coronary access, and peripheral vascular intervention, and has the leading technological innovation capabilities in China, as well as the research and development, production capacity and process of consumables from raw materials to products. Mindray's strategy, R&D, and marketing have been further empowered, benefiting from domestic substitution in the context of domestic centralized procurement, and overseas channel sales have formed a joint force to burst out strong product competitiveness.
What is the consideration for a 25% premium?
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Although the competition in the track is quite fierce, whether in terms of financial dimensions or corporate qualifications, Huitai Medical can be called high-quality.
According to the financial report data, as of September 30, 2023, Huitai Medical's total assets were 244.4 billion yuan, the asset-liability ratio is only 2482%, which is at the leading level in the same industry. Currently, the monetary funds on the books are 45.2 billion yuan, trading financial assets 77.2 billion yuan.
It is understood that in this transaction, the comprehensive cost of acquisition is about 450 yuan shares, and the combined valuation of the transaction is 30.2 billion, corresponding to the average premium rate of Huitai Medical on January 26 ** price of 25%, referring to the average premium rate of the average price of the previous 60 days of 23%.
Although there has been a premium acquisition, in the eyes of many industry insiders, this market-oriented acquisition of Mindray is quite fair.
On the one hand, in recent years, the overall valuation of the medical sector has continued to decline due to centralized procurement, the consolidation of the medical industry and the overall environment of the capital market. Wind data shows that since 2023, as of January 26, 2024, medical ETFs (512170) have accumulated by 45%, and medical device ETFs (159883) have also fallen by more than 20%. At present, the overall valuation level of the medical device industry in the A** field is low.
From the perspective of growth, the electrophysiology and vascular intervention market where Huitai Medical is located belongs to the "sunrise industry" with considerable industry prospects, especially in the context of continuous deepening of domestic expansion, and domestic excellent manufacturers have great potential.
According to the data of the Pacific Ocean, the market size of cardiac electrophysiology devices in China in 2021 is 658 billion yuan, which is expected to increase to 157 in 20252.6 billion yuan, reaching 419 in 20327.3 billion yuan. At the same time, according to Frost & Sullivan data, in 2021, the market size of cardiovascular interventional devices in China will reach 37.2 billion yuan, and the market size is expected to reach about 140 billion yuan in 2030.
Compared with other domestic manufacturers, Huitai Medical's first-mover advantage and production line advantage are also relatively obvious.
Among them, in the field of electrophysiology, Huitai Medical's research projects include pulse ablation catheters, pulse ablation instruments, high-density mapping catheters, pressure radiofrequency instruments and pressure-sensing ablation catheters, all of which have entered the clinical trial stage; In the field of cardiovascular intervention, the distal embolization protection system, contrast balloon, transjugular intrahepatic puncture device and peripheral balloon dilation catheter in Huitai Medical's peripheral product series have also obtained the domestic registration certificate, and the products under development such as peripheral guidewire, peripheral balloon dilation catheter, carotid balloon balloon dilation catheter and support catheter have entered the registration review stage.
As of June 30, 2023, Huitai Medical has obtained 75 domestic medical device registration certificates or filing certificates, including 53 Class III medical devices; It has obtained EU CE certification for 15 products, and has completed registration and market access in more than 90 other countries and regions.
In the past three years, even if Huitai Medical has reduced the price of some products in the "price for volume" due to the impact of centralized procurement, the company's sales gross profit margin has always remained at about 70%, and the sales gross profit margin in the first three quarters of 2023 is 7138%, compared to 70. in the same period in 202299% and still growing.
In addition, referring to the control transfer cases of the Shanghai and Shenzhen Stock Exchanges with a transaction size of more than 1 billion yuan since 2021, the average premium rate reached 2958%, of which the average premium rate for medical-related cases reached 3284%；Referring to the cases of transfer of control in the non-pharmaceutical medical and health field with a transaction size of more than US$500 million in overseas markets in recent years, the average premium rate has also reached 3443%。
Medical equipment giants have entered the cardiovascular blue ocean market
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For Mindray Medical, the acquisition of Huitai Medical is an important step in improving its cardiovascular industry layout.
Throughout Mindray's development history over the past 30 years, it has been an important path for the company's rapid development to continuously expand its product line and enter new business areas through mergers and acquisitions.
In 2008, Mindray acquired DataScope Life Information and Support Business in the United States and Artema, a well-known brand in the field of respiratory gas monitoring in Sweden, expanding the overseas life monitoring business market and obtaining some key technologies. Later, through the acquisition of Datascope, it became the third largest monitor brand in the world. Subsequently, Mindray expanded its IVD, infusion pump, orthopedic and endoscopy businesses through mergers and acquisitions, entered the high-end ultrasound imaging business in the European and American markets, and improved the upstream of the IVD industry chain.
At present, Mindray Medical has built three major production lines, led by life information and support, in vitro diagnostics, and medical imaging, and has continuously expanded more subdivisions in the three production lines. By the end of 2022, the company's global market share of monitors, anesthesia machines, ventilators, and blood cells has achieved the top three positions in the market.
With the aging of the population and the continuation of the trend of new medical infrastructure, the rapid expansion of the accessible market through epitaxial acquisitions has also become one of the important development strategies of Mindray Medical.
In the announcement related to the transaction, Mindray Medical said that the acquisition is based on Mindray's firm optimism about the development prospects of the cardiovascular industry and its desire to promote the development of China's medical and health industry. As the global population ages, the number of patients with cardiovascular diseases continues to increase, and the number of cardiovascular-related surgeries** continues to grow worldwide.
Market data also shows that the cardiovascular device market involved in this acquisition ranks second in the world in the medical device market, second only to IVD (in vitro diagnostics). According to IQVIA, the global cardiovascular medical device market size was $59.3 billion in 2021 and is expected to be 7.0% CAGR from 2021 to 20259%, which belongs to the track with large space and fast growth.
"Mindray is firmly optimistic about the future development potential of the cardiovascular field, and entering the cardiovascular track will also greatly increase Mindray's accessible market space, which is of great significance to help Mindray achieve rapid growth in long-term performance. Guosheng ** said.
It is worth mentioning that this transaction** totals 66500 million yuan, all of which were delivered by Mindray Medical with its own funds. As of the end of September 2023, the balance of Mindray's monetary funds was 1966.7 billion yuan. This means that the cost of this transaction is less than 1 3 of Mindray's book capital, and it does not pose a great pressure.
From a higher-dimensional industry perspective, Mindray Medical and Huitai Medical have joined forces to launch the "first shot" of the integration of the domestic medical device industry in 2024.
In recent years, as the volume procurement of medical and health products has spread from drugs to the field of medical equipment, the bid-winning products of many multinational medical device giants in the fields of cardiovascular and orthopedics have also begun to decline sharply, squeezing the profitability of domestic manufacturers. In this context, the centralization, scale and enrichment of production lines in the medical device industry have become the general trend.
Different from other high-tech industries, the field of medical devices is characterized by high industry concentration and strong Hengqiang, foreign medical device companies usually make themselves more and more powerful through acquisitions, the concentration of the world's large medical device companies is very high, and the domestic scale and concentration can be compared with not much. A medical device service provider in South China said in an interview. In the view of the service provider, large-scale industry consolidation generally occurs when the market is at a low point, and the current emergence of the medical sector as a whole is a good time to accelerate industry integration, and the same is true for industry leaders such as Mindray Medical.