Current status of the medical device industry

Medical device industry cycle

In the entire medical device field, the performance of devices continues to improve over time, showing a spiral increase. In other words, companies can often continue to benefit from time and technology accumulation. At the same time, its downstream hospitals, once determined to use the product, are considering the stability and reliability of the device, and generally are unlikely to easily change to a new brand. When we go to the hospital, we often see that some instruments such as monitors, ventilators, defibrillators, operating beds, etc., have been a brand for almost many years. This indicates to a certain extent that the medical device industry is due to the characteristics of medical instruments and the hospital’s stickiness and other requirements often have a long service life and are not subject to time constraints such as seasons. This is very much in line with the stock selection conditions of value investment.

Completely different from medical devices, in the pharmaceutical industry, "time" is a very important variable. Internationally recognized innovative drugs basically follow the "Double Ten Principle", that is, the research and development cost of a single product of innovative drugs is more than 1 billion US dollars, and the research and development time is more than 10 years. The emergence of new drugs is very fast to replace the original drugs. This means that if someone else’s new drug is marketed a year earlier than the product developed by oneself, even if it is six months, the loss of oneself will be very large, even related to survival. Sooner or later" is very important.

After this year’s “new crown epidemic”, many pharmaceutical companies and biological vaccine research teams around the world have started the research and development of “new crown vaccine”. We will find that everyone’s focus has been following the progress of research and development, from early compound production to clinical In Phase I, Phase II, and Phase III, all teams are in a hurry, and we have also seen that the quality of clinical results is often directly related to the stock prices of related companies in the secondary market. 

Current status of medical devices

According to relevant data, the global medical device industry scale was 3 trillion yuan at the end of 2018, of which China's 500 billion yuan. Benefiting from the global aging trend and domestic import substitution, the industry is expected to maintain a 15-20% growth in the next 10 years. For the domestic market, with the outbreak of the "new crown epidemic" at the beginning of the year, a serious shortage of medical resources in my country has been exposed. According to statistics, there are currently only 12,000 public hospitals in my country and 22,000 private hospitals (mostly specialized hospitals). There is less than one public hospital per 100,000 people. Even in super first-tier cities such as Guangzhou and Shenzhen, there is a significant shortage of medical resources. Generally speaking, my country's medical institutions have a large gap, which is difficult to meet the needs of patients for medical treatment, and there is a huge demand for medical equipment. 

Foreign countries are not optimistic. In response to the second wave of epidemics, countries have increased their deployment of medical systems. Some key equipment such as ventilators and monitors have been in short supply for a long time. This can be seen from recent reports in some European and American countries. It is very clear that the industry's prosperity is expected to continue to improve.

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