On September 14, the joint procurement office of state-organized high-value medical consumables issued a public announcement of the proposed bid-winning results for the centralized procurement of artificial joints. This is the second collection of high-value consumables organized by the state after coronary stents.
Data source: national organization medical consumables joint procurement platform
This time, a total of 48 enterprises participated in the volume procurement of artificial joints in the country, and the final number of selected enterprises was 44. The procurement period is 2 years, covering hip and knee products, in which the hip joint is divided into ceramic-ceramic, ceramic-polyethylene and alloy-polyethylene according to the different materials of the femoral head and acetabular gasket, and the knee joint is purchased as a category. Procurement of the selected products is expected to begin in March 2022.
It is reported that the price of artificial joints to be selected this time has dropped from an average of 30,000 yuan to less than 10,000 yuan, a drop of more than 80 percent. However, compared with the 93% average reduction of coronary stent collection, the artificial joint collection is still much milder. From the market reaction, we can see that the announcement of the collection price can not only ensure the price reduction, but also reserve part of the profit space for orthopaedic companies, and the result is better than all the participating collection companies expected.
1The artificial joint fell to the ground, and the market enthusiasm began to recover.
First of all, from the overall market point of view, artificial orthopaedics companies have fallen to an all-time low.Since the country's first collection of high-value consumables in July last year, the 93% drop in coronary stents has caused panic in the market. The whole high-value medical device industry has been greatly affected, entering a continuous decline stage, artificial orthopaedics industry is no exception, such as Aikang Medical, Dabo Medical and other related companies' stock prices continue to decline, the valuation has gone to an all-time low.
Source: Oriental Wealth
According to the data of China Business Information Network, the market scale of orthopedic implanted medical devices in China is increasing year by year. Among them, the market size of joint implant devices increased from 4.9 billion yuan in 2016 to 10.1 billion yuan in 2020, with a compound annual growth rate of 20 percent, and is expected to reach 11.7 billion yuan in 2021.
Because of the relatively high technical difficulty, complex production process and long service life of joint implant devices, joint implant devices have long service life after implantation into human body. Therefore, the degree of localization of joint implant medical devices in China is still low, mainly by Johnson & Johnson, Xerohui, Beilang Medical and other import companies, with more than 70% of the market.In essence, the volume purchase of artificial joints can further accelerate the domestic replacement of imported products and occupy the market.
From the perspective of permeability, at present, the penetration rate of each segment of the domestic orthopedic implant market is less than 5%, which is far lower than 40% to 70% in the United States, and there is a lot of room for development. Orthopedic implant devices are expected to maintain a high growth rate. According to public data, the compound growth rate of artificial joint market penetration is expected to be about 15% from 2019 to 2024. The decline in collection prices will also further boost market penetration.
Therefore, the announcement of the winning bid results of this collection, the bad news fell to the ground, and the price fell better than expected, and the market began to rebound.Since September 14, the overall orthopedic medical device sector has continued to rise, and the share prices of related companies such as Aikang Medical and Weigu Hi-Tech have risen continuously, up more than 30% as of September 17.
2、Aikang Medical quoted a low price, can the price be exchanged for quantity in the future?
It is worth noting that in this collection, Aikang Medical has quoted a low price in many rounds of quotations.Aikang Medical is in the leading position in the field of orthopaedic equipment in China, and all the products are in Group A. This time, it quoted a low price of 4599 yuan in knee joint products, while most of its peers were in the range of 5500 yuan to 7000 yuan. In the all-ceramic hip joint, it quoted the lowest price of 6890 yuan in this group.
Is there really a profit for Aikang Medical, which is quoted at a low price?
As can be seen from Aikang Medical's prospectus, from 2014 to 2017, the average price of its knee joint products is about 5000 yuan, the average price of hip joint products is about 3000 yuan, and the average gross profit margin is about 69%. Therefore, it can be seen from this offer that Aikang Medical has reserved enough profit space for itself.
Data source: Aikang Medical prospectus
Aikang Medical and its subsidiary products have won the bid, and the intended purchase volume is in the lead as a whole.According to the release of the document on centralized Purchasing of artificial joints organized by the State, the country intends to purchase a total of 540000 sets in the first year. Among them, the total intention purchase of hip joint product system in the first year was 305542, Aikang Medical Hip accounted for 15.04%, ranking first overall; the total amount of intention purchase of knee joint product system in the first year was 231976, and Aikang Medical accounted for 13.34%, ranking second as a whole.
Data source: Societe Generale Securities Research report
This collection accounts for 90% of the total joint demand of medical institutions across the country. according to the data of the China Business Intelligence Network, the annual compound growth rate will be maintained at 15% to 20%. Aikang Medical will occupy a large part of the market share in the future. As a result, Aikang Medical's shares rose sharply in the afternoon after the results were announced, rising more than 25 per cent to HK $9.99 at one point, with a market capitalization of HK $11.1 billion, before closing up 20.25 per cent.
However, Weigu Hi-Tech, which also occupies a position in domestic orthopedic medical devices, has also won the bid for all its products in this collection. In the future, under the favorable collection and acquisition policy, if domestic leading enterprises want to occupy more market share, they still need to see the R & D and sales strength of the follow-up companies.
3, summary
On the whole, the Tianjin national artificial joint belt collection boots landed, which was out of profit, alleviating the market panic caused by the collection of coronary stents. The orthopedic medical device market, where valuations have fallen to a low ebb, has also begun to recover gradually, and the share prices of related companies affected by collection have begun to rise.
Aikang Medical has won the bid for all the products collected this time, and its intended purchase volume is also one of the 42 bid-winning enterprises. It is believed that its sales can increase in a short period of time by competing for more market share in the domestic industry by means of price-for-quantity. However, its future development depends on whether Aikang Medical can update its products more quickly to meet different medical needs.