Compared with the excitement of the capital market, the business atmosphere of the industry seems a bit deserted.

An executive of a medical robot company directly described the current situation of the industry as "downturn". He hopes that this situation can be improved by the end of the year. Many practitioners in the medical equipment industry have similar feelings, among which the sales staff of multinational companies have the most obvious feelings.

Since 2024, the recruitment data of medical institutions and the performance of listed companies have shown that the medical equipment industry has entered a trough. Previously, many brokerages predicted that the industry is expected to recover in the fourth quarter of this year, driven by policies such as medical equipment updates.

"I hope the fourth quarter will improve, but the situation is still unclear." On October 10, a middle-level manager of a leading medical imaging equipment company told the Economic Observer that at the sales level, companies are more concerned about the medical anti-corruption actions of relevant departments. Compared with equipment update policies, anti-corruption has a more direct impact on hospitals’ purchasing intentions.

The trough has lasted for more than half a year

According to statistics from SDIC Securities, in the first half of 2024, the bidding scale of the medical equipment industry was approximately 55 billion yuan, a year-on-year decrease of approximately 35%. Among them, medical ultrasound fell by about 20% year-on-year, medical imaging fell by about 45% year-on-year, and the life information field fell by 50%-60% year-on-year.

The shrinking scale of bidding is directly reflected in the financial statements of listed companies. Mindray Medical’s domestic equipment business revenue fell 12% year-on-year in the first half of the year. United Imaging Medical's total revenue in the first half of the year was 5.333 billion yuan, a year-on-year increase of 1.18%, which was the smallest increase in the past five years. If excluding the international markets with larger growth, its domestic market revenue was 4.4 billion yuan, a year-on-year decrease of 3.5%.

By the second half of the year, the trend had not improved. Published bidding data for July and August show that the total bidding amount for medical equipment was 9.5 billion yuan and 9.7 billion yuan respectively. The bidding amount in August dropped 29% year-on-year.

A middle-level manager in the marketing department of a multinational company said that under the downturn in the market, several leading foreign companies in medical equipment are laying off employees. "There have been several rounds of layoffs since last year. The situation is very serious and has never happened before." He said that although the salaries of the remaining staff have not been reduced, most of them are unable to complete the workload and have not received bonuses for several months.

Regarding the decline in domestic equipment business, Mindray Medical's explanation is that it is mainly affected by two major factors: the rectification of the domestic medical industry and the equipment update policy. This year's medical equipment recruitment activities have been delayed due to the general wait-and-see state.

Rectification of the medical industry refers to medical anti-corruption. At the end of July 2023, a video conference on the centralized rectification of corruption issues in the pharmaceutical field was held across the country, and the anti-corruption storm spread to the entire field and chain of the pharmaceutical industry. A 35.2 million yuan linear accelerator was notified on the website of the Central Commission for Discipline Inspection and the State Supervision Commission. The director received more than 16 million yuan in kickbacks, and it has ranked first in the hot searches on multiple online platforms, bringing the previously relatively secretive field of medical devices into the spotlight. public view.

A medical device dealer told the Economic Observer at the time that due to the impact of the medical anti-corruption, the procurement projects under negotiation have been suspended. Projects that have been announced online will not be postponed. The projects that have been suspended are those that have not yet been announced. For those who can buy But the hospital will no longer buy the equipment that it does not want to buy.

In the first half of 2024, medical anti-corruption continues. In May, the "Key Points of Correcting Improper Practices in the Field of Pharmaceutical Purchase and Sales and Medical Services in 2024" jointly issued by 14 departments including the National Health Commission proposed to focus on the "critical minority" and key players in medical institutions such as "famous hospitals" and "famous doctors". Position personnel management focuses on punishing individuals or instigating relatives and friends to use business to run enterprises to "rely on medical care" and accept kickbacks from suppliers. In the first half of the year, more than 160 "key minorities" in the medical field across the country have been investigated, including many department-level cadres.

In addition to medical anti-corruption, equipment renewal policies supported by long-term national debt have also caused some medical institutions to delay purchases.

At the end of May, the "Notice on the Implementation Plan for Promoting Equipment Updates in the Medical and Health Fields" issued by the National Development and Reform Commission, the National Health Commission and other departments requires that by 2027, the scale of investment in equipment in the medical and health fields will increase by more than 25% compared with 2023, mainly large-scale equipment The number of medical equipment owned by one million people has basically reached the average level of middle- and high-income countries.

The above-mentioned document mentioned that top hospitals such as the National Medical Center are encouraged to appropriately deploy a batch of major medical and scientific research equipment in advance. At the same time, we will support township health centers with large service populations and strong basic medical service capabilities to equip them with CT, color ultrasound, and ventilator equipment. Funding sources for equipment renewal projects include ultra-long-term treasury bonds, local fiscal funds, local government special bonds, etc.

On July 25, the National Development and Reform Commission and the Ministry of Finance issued "Several Measures to Strengthen Support for Large-Scale Equipment Renewal and Trade-in of Consumer Goods", proposing that the National Development and Reform Commission take the lead in arranging special funds of approximately 148 billion yuan in ultra-long-term special treasury bonds for large-scale equipment renewal. Southwest Securities estimates that the scale of projects involving medical care is estimated at 30 billion to 40 billion yuan.

In late August, the National Development and Reform Commission approved the first batch of medical equipment update projects. In mid-September, Mindray Medical stated that once the supporting ultra-long-term government bond funds are in place, the hospital will gradually start the bidding process, but the confirmation of final performance depends on the execution rhythm of these projects.

It is understood that the implementation of medical equipment update projects supported by long-term national debt requires multiple steps, including hospital application, provincial government approval, National Development and Reform Commission approval, hospital bidding, and contract signing.

Will there be a rebound in the fourth quarter?

The person in charge of a tertiary hospital in the east said that an application has been submitted, but it has not yet been approved. From the perspective of stimulating demand, he believes that long-term government debt projects are good for hospitals that have their own needs. However, due to the different proportions of self-pay in each region, the stimulus effect is expected to be different. "It is estimated that the willingness will be greater in the western region and more in the eastern region," he said. It’s rational, after all, the out-of-pocket ratio is high.”

According to the policy, for local equipment renewal projects in the medical and health field, the arrangement standard for government bond funds is that in principle, the eastern, central, western and northeastern regions shall not exceed 40%, 60%, 80% and 80% of the total project investment respectively. ratio is supported. That is, local governments and medical institutions in the eastern region need to raise no less than 60% of the costs themselves.

The person in charge of a community medical and health institution in the eastern region also said that it is mainly based on its own needs and will not allocate in advance. "There are not many applications this year, and the allocation has been allocated in previous years." He introduced that his institution has been equipped with gastroenteroscopy, mobile CT and other equipment. In the past, these equipment only existed in hospitals at the county level and above.

Guosen Securities' research report shows that from the perspective of the pace of bidding and the impact on the performance of listed companies, it is expected that the bidding demand for the first batch of medical equipment update projects is expected to start in the third quarter of 2024, and the improvement in the performance of listed companies is expected to start from 2024 Starting in the fourth quarter and extending to the entire year of 2025.

Executives of the above-mentioned medical robot companies said that equipment update projects will definitely drive industry demand, but the impact on specific companies will be different. Take laparoscopic surgical robots as an example. A large number of Da Vinci laparoscopic surgical robots on the market have been in use for seven or eight years, and are just in the window for renewal, while products from domestic companies such as Minimally Invasive Robots (02252.HK) have just been launched. Soon, no updates are involved. "High-end equipment such as surgical robots also involves the issue of configuration certificates. For hospitals that do not have configuration certificates, the equipment update policy is difficult to stimulate their demand."

According to the middle-level managers of the above-mentioned leading medical imaging equipment companies, the industry is still most concerned about anti-corruption issues compared to equipment update projects. Recently, he learned that a large southern province is still vigorously arresting corrupt medical officials, which has led many hospitals to be very cautious in purchasing equipment projects. "Perhaps they have to clean the house before treating guests."

In addition to this province, Zhejiang, Shanghai and other provinces and cities have also recently continued to rectify the medical industry.

In September, the Zhejiang Provincial Audit Office issued the "Notice on Special Audit Investigation of Public Hospitals and the Production, Distribution and Use of Drugs and Medical Devices." It is planned to conduct special audit investigations on the production, distribution and use of public hospitals and drugs and medical devices. If necessary, the audit will be traced back to the relevant year or the audit will be extended to relevant units.

On October 9, Shanghai announced the "Key Points of Shanghai's 2024 Work to Correct Improper Practices in the Pharmaceutical Purchase and Sales Field and Medical Services." On the basis of the key work points of 14 departments including the National Health Commission, Shanghai has added new content such as conducting inspections of large hospitals and implementing the "Implementation Rules for the Nine Codes of Integrity for Staff in Medical Institutions in Shanghai".

On October 10, Deng Yong, head of the Beijing Big Health Legal Business Team, told the Economic Observer that he expected that medical anti-corruption efforts would not weaken in the second half of 2024, but would continue to maintain a high-pressure posture to further purify the medical industry ecology and maintain the health rights of the people.

His judgment is based on three reasons: First, policy orientation continues to strengthen. The Central Commission for Discipline Inspection has issued multiple documents emphasizing the importance of anti-corruption in medicine, clearly classifying the pharmaceutical field as a key area prone to corruption that is concentrated in power, intensive in capital, and rich in resources. At the same time, the National Health Commission and other departments issued the "Key Points of Correcting Improper Practices in the Field of Pharmaceutical Purchase and Sales and Medical Services in 2024" and other departments, which made specific arrangements for medical anti-corruption work. The deployment and arrangements will promote the continued in-depth development of medical anti-corruption work in the second half of the year; secondly, supervision will continue to increase, such as more comprehensive and in-depth medical insurance unannounced inspections, which will effectively combat corruption in the medical field and maintain the safety of medical insurance funds; thirdly, Corruption problems in the medical field are complex and hidden. Problems such as the inflated pricing of drugs and medical devices, the transfer of benefits during the procurement process, and the acceptance of kickbacks by doctors have not yet been completely eliminated.