As a member of the medical device stocks in the Hong Kong stock market, MicroPort Medical (00853) has frequently been listed on the list of pharmaceutical stocks recommended by major institutions due to “low valuation and outstanding growth”. According to Zhitong Finance, since October, MicroPort Medical has increased by more than 18%, with a maximum of HK$6.26.

In the past two years, Minimally Invasive Medicine, which started with cardiovascular intervention products, has enriched its product portfolio through mergers and acquisitions and expanded its orthopaedic business. Despite the drag on mergers and acquisitions, the group recorded losses from 2014 to 2015. However, with the gradual completion of the integration of orthopedics business and the continued growth of traditional businesses, in the first half of 2016, minimally invasive medical care has turned a profit.

On the one hand, it is a rich product portfolio and research and development reserve. On the other hand, the policy dividend is about to drive the overall development of the industry. The growth space of minimally invasive medical care is worth looking forward to.

Overseas M&A rich product portfolio

MicroPort Medical, which landed on the main board of the Hong Kong Stock Exchange in 2010, is principally engaged in the development, manufacture and sale of medical device products. At present, the group's business products include orthopedic medical device business, cardiovascular intervention products, aorta and peripheral vascular intervention products. As of December 31, 2015, MicroPort Medical had sold 165 products.

Among them, orthopedic medical device business and cardiovascular intervention product business are the pillar businesses of minimally invasive medical care. Products provided by the orthopaedic medical device segment include reconstruction of joints, spine, trauma and other specialized implants and equipment products. The Cardiovascular Intervention Products business mainly provides products and services for the interventional treatment of coronary artery related diseases. The main products are drug-eluting stents, including the second-generation coronary stent Firebird2 coronary rapamycin-eluting cobalt-based alloy stent system, and the third. The drug-eluting stent product Firehawk coronary rapamycin targeted eluting stent and the like.

Prior to 2014, the orthopaedic business of Minimally Invasive Medicine has not grown, and its revenue is mainly dependent on the sales of cardiovascular intervention products. Taking the 2013 results as an example, the income of Minimally Invasive Medicine was US$152 million (the same below), and the contribution of cardiovascular intervention products accounted for 79.3% of the total income. In addition, the remaining business products accounted for a single digit of revenue, and orthopedic medical devices contributed only 0.3%.

The proportion of this business has changed due to a merger. In June 2013, in order to expand its product mix and improve the regional coverage of its products, MicroPort Medical spent US$290 million to acquire the OrthoRecon joint reconstruction business and related assets of Wright Medical, an established American orthopaedic company.

According to information obtained by Zhitong Finance, Wright Medical has been operating in the global orthopaedic industry for more than 60 years, focusing on the development of hip and knee products, including the new generation of EVOLUTIO total knee products, SUPERPARTH microtrauma hip reduction devices. The former is considered to be one of the most advanced products in the world, and some analysts say that its structural design is very suitable for Asian human body. The latter is also a surgical product specifically for microtrauma.

After the completion of the acquisition, MicroPort Medical, which had only one cardiovascular intervention product, successfully owned a complete orthopaedic product line, more advanced orthopedic technology and some overseas market share.

In 2014, the revenue contributed by the orthopaedic medical device business accounted for 59.2% of the total revenue of MicroPort Medical, which became the business segment of the group that contributed the most to revenue. Minimally invasive medical treatment ranks fifth in the global cross-sectional hip and knee orthopedic reconstruction business.

In fact, the ambition of minimally invasive medical care is not only satisfied with the field of orthopedics. In 2014, the group signed an agreement with Johnson & Johnson to acquire assets related to the manufacture of drug-eluting stents from its Cordis company, and to obtain a non-exclusive license for Cordis's major patents in the worldwide coronary stents sector.

Through this asset acquisition, MicroPort Medical has achieved a global leadership in coronary-targeted eluting stent technology, a key technology for the Firehawk, the group's third-generation drug-eluting stent.

While expanding its own field, MicroPort Medical will also focus on the heart rate management device market, which is almost monopolized by foreign medical giants. In 2014, MicroPort Medical and Sorin established a joint venture company to create Heart Rhythm Management Medical Devices Co., Ltd. to promote and develop heart rate management devices such as implantable pacemakers in China.

In June 2015, the joint venture launched the first domestic pacemaker production line. The BonaFire cardiac pacing lead wire is now fully FIM clinically enrolled, and the self-developed pacemaker is also in progress.

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