After more than two years of acquiring 27.63% of the equity of Optimum Medical Device Inc. (OMD) through capital increase, Shanghai MicroPort Endovascular MedTech (Group) Co., Ltd. (688016. SH), the leader in aortic intervention devices, has again made a move. Its wholly-owned subsidiary has acquired the remaining 72.37% equity of OMD with its own funds of $65 million, at a transaction price of about RMB 463 million calculated on July 1 exchange rate. After the completion of the transaction, OMD will become a wholly-owned subsidiary of Shanghai MicroPort.

Compared with the capital increase transaction in March 2022, at that time OMD's pre-investment valuation for all equity was US$60.3561 million, with a post-investment valuation of about US$76 million, while the valuation for all OMD equity in this transaction was about US$91.2821 million. Shanghai MicroPort Endovascular MedTech said that the valuation increase is due to OMD's good business performance and is expected to turn losses into profits in 2024.

Information shows that in 2023, OMD achieved a revenue of RMB 112 million, a year-on-year increase of 43.55%, and a net loss of RMB 4.1795 million, compared with a loss of RMB 24.8293 million in the same period of 2022. Shanghai MicroPort Endovascular MedTech revealed that OMD was already in a slightly losing position in Q1 2024, but did not disclose specific data. "Star Daily" reporters have repeatedly dialed the phone of the secretary's office of Shanghai MicroPort Endovascular MedTech in an attempt to learn more information, but no one has answered.

Core business needs new impetus

"Star Daily" reporters found that for Shanghai MicroPort Endovascular MedTech, buying the remaining equity of OMD this time, it is mainly interested in the other party's aortic intervention products, and secondly in the sales resources established by the other party in overseas markets such as Europe.

As a leading enterprise in the field of aortic and peripheral vascular intervention in China, Shanghai MicroPort Endovascular MedTech's main business mainly covers two fields: "aortic intervention medical device field" and "peripheral vascular intervention medical device field", among which vascular stent products have always been the core source of income for Shanghai MicroPort Endovascular MedTech.

In 2023, Shanghai MicroPort Endovascular MedTech achieved a revenue of RMB 1.187 billion, a year-on-year increase of 32.43%. Among them, the revenue from vascular stent products was RMB 940 million, accounting for 79.16% of the overall revenue, a decrease of 2.7 percentage points compared with 2022. At the same time, the growth rate of sales of vascular stent products also decreased from 44.04% in 2021 to 28.07% in 2023.

Shanghai MicroPort Endovascular MedTech may need some external forces to help speed up the core product. OMD is undoubtedly a suitable choice for Shanghai MicroPort Endovascular MedTech.

In terms of products, OMD has two commercialized abdominal aortic stent systems, Aorfix and Altura, and a next-generation open-window abdominal aortic stent product developed based on Altura. The new product is planned to submit a CE registration application in Q3 2024 and is expected to be approved in the first half of 2025.

After obtaining the CE certification of Europe in 2001, Aorfix has continued to promote new indications, and then successively obtained the approval of the US FDA and the Japanese PMDA. Altura obtained the CE certification of Europe in 2015, and its globally unique Double-D structure meets the positioning requirements of different anatomical structures of the clinical renal arteries.

In the view of Shanghai MicroPort Endovascular MedTech, after the existing aortic products and OMD's product portfolio are combined, more treatment options can be provided for aortic aneurysms with different position, morphology, and size.

In terms of channel resources, OMD has a history of more than 20 years of product promotion in developed countries such as Europe, the United States, and Japan. The product Aorfix has covered 23 countries worldwide, including 15 in Europe, and the Altura product has covered 19 countries worldwide, including 15 in Europe as well. In 2023, OMD's revenues in Europe, Japan, and other overseas markets accounted for 67.12%, 22.30%, and 10.58%, respectively.

It is reported that before cooperating with OMD, Shanghai MicroPort Endovascular MedTech's overseas market promotion mainly covered developing countries in the Asia-Pacific and Latin America regions, and relatively lacked experience and resources in mature markets of developed countries. Since the last capital increase cooperation, Shanghai MicroPort Endovascular MedTech has made breakthroughs, one of which is that its Minos product has been quickly promoted in the European market. Currently, Minos has covered 14 European countries.

According to data, the market size of aortic stent grafts in Europe will reach approximately USD 824 million in 2029, accounting for 22.8% of the global market size, ranking second in the world after the USA.

In 2022, according to the number of surgeries, Shanghai MicroPort Endovascular Medtech (Group) Co., Ltd. (hereinafter referred to as 'SME') has a market share of less than 2% in the European market. According to the plan, SME hopes to gradually increase this market share to more than 10% in the next 5 years. The difference also needs to be greatly improved to achieve the goal. "OMD's deep penetration of the company's products in the European market is of great significance for the global development strategy of SME," the company said.

Responding to the pressure of joint procurement in advance.

It is also worth noting that the pressure of joint procurement is an important reason for promoting SME's accelerated layout of overseas markets.

As of now, more than 10 high-value medical consumables, including vascular intervention, non-vascular intervention, orthopedic consumables, extracorporeal circulation and blood purification, have been included in the joint procurement. SME realizes that with the advancement of joint procurement, future products will also face joint procurement. If the product fails to win the bid, it will affect the sales volume. If it wins the bid, it will affect the price.

SME said, "Whether the product wins the bid or not, the company's sales revenue and profit level may be affected to a certain extent." Therefore, in order to reduce the impact of domestic business on the overall business development, SME is accelerating its international development strategy in order to diversify the risk of a single market environment.

From 2021 to 2023, SME's overseas business income was RMB 30.1423 million, RMB 52.7198 million, and RMB 82.345 million respectively, with a compound growth rate of 65.28% and maintaining a rapid growth trend. During the same period, the proportion of overseas business income to the overall income gradually increased from 4.40% to 6.94%.

It is worth mentioning that on the same day when SME announced the acquisition of OMD's equity, it also disclosed the performance forecast for the first half of 2024, mentioning that it is actively promoting clinical trials of new products before they are launched in Europe and Japan in the international market.

In the first half of 2024, SME is expected to achieve a revenue of RMB 777 million to RMB 808 million, a year-on-year increase of 25% to 30%, and a net profit attributable to the parent of RMB 391 million to RMB 419 million, a year-on-year increase of 40% to 50%.