Oral medical device companies face major challenges | Industry may encounter a major reshuffle

Medical Network September 30th News 2018 is not a calm year for China and the United States.

According to statistics, the size of China's dental medical equipment market in 2016 is about 134.6 billion yuan. It is estimated that by 2020, the market size of China's dental medical equipment and related products and services will reach 400 billion yuan. However, due to the late development of dental in China, China is currently 90% of oral medical devices rely on imports, especially high-end oral medical equipment and consumables. China's oral medical device companies are mainly based on agent dealers, and less independent research and development enterprises.

According to statistics, there are nearly 190,000 medical device channel companies in China. In the past, due to the lack of GSP specifications and unified bidding for medical devices in China, the access threshold for medical devices is low, and there are a large number of unlicensed units and individuals in the agency distribution industry. As a result, the competition pattern of medical equipment in China is fierce and has a profound impact on SMEs.

Taking the dental communication (838768 announcement, quote, comment, financial report) as an example, from the perspective of its business model, its profit model is mainly medical institution direct sales and channel distribution. Its VIP customers are mainly public hospitals in Beijing, private Chain dental clinics, dental specialist hospitals, etc., but the main customers are still public hospitals, including Peking University School of Stomatology and its outpatient department, Peking University People's Hospital, Beijing Tiantan Hospital affiliated to Capital Medical University and other famous public hospitals. In 2016 Previously, the company was mainly profitable by direct sales to medical institutions. On this basis, the company continued to expand its distribution channels to obtain profit. As of the end of 2016, there were more than 30 dental and China's 31 autonomous regions and municipalities. The distributors established a cooperative relationship and achieved sales coverage for about 75% of the mainland China.

Although the customer coverage of the company is wide, the business situation is slightly worrying. According to public information, the operating profit of the dental company in 2014 and 2015 remained at around 3.5 million yuan, but after 2016, the operating profit has increased significantly. decline.

Why did the dental communication, which was originally stable and profitable, have such a large fluctuation in 2016?

The main reason is that as a distributor of dental medical devices, the operating income structure is single. The company's revenue mainly comes from sales agent products, which are easily affected by the uncertainty of product agent, agency product price, market competition and other uncertain factors.

From the perspective of product structure, Dental is mainly engaged in oral minimally invasive treatment equipment (such as dental laser treatment machine, oral diode laser treatment instrument and diode laser treatment instrument) and intelligent digital dental treatment equipment (such as high-definition digital observation instrument, digital oral CT, Agent sales of dental tablets, etc.).

Although the intelligent digital dental treatment equipment is just the need for dental and orthodontic medical projects such as dental implants and orthodontics, but the demand is small, generally only 1-2 digital oral CTs are needed in a medical institution, so the sales volume of products is not stable and seriously affects. The company's revenue situation. In addition, the product authorization and medical device registration certificate also seriously affect the company's revenue. In 2016, due to the company's main agent product, one of the company's Syneron dental laser treatment machine registration certificate failed to obtain national food in time. drug The approval of the Supervisory Authority caused the products to be sold for more than half a year, seriously affecting the company's sales revenue and profits.

In addition, for small and medium-sized enterprises, the company's operation management is not standardized, and the mobility of personnel is high, which may lead to poor management. As a dealer, the sales of dental personnel are also lost. The performance of the company has also dropped significantly. According to the 2018 The report shows that its operating income in the first half of the year was about 3.01 million yuan, and the sales contract of about 5.45 million yuan was signed in the second half of the year. However, the total annual revenue of the estimated annual revenue has not yet reached the amount of operating income last year.

The dilemma of dental communication is not only the dilemma of the company, but the situation of many domestic distributors of dental medical devices. Since the current research and development technology of oral medical devices in China has not reached the level of foreign countries, the equipment used by dental institutions And the consumables are highly dependent on imported products, which leads to the distribution of dental medical equipment enterprises in China. The whole industry suffers from the pain that its business model can not adapt to the current development situation. The oral medical equipment agent distribution enterprise as the distribution channel of medical equipment The key is to connect the medical device manufacturers with the medical device institutions. Enterprises can build corresponding sales channels through their own control capabilities. Currently, the domestic oral import medical device circulation links are as follows:

The domestic medical device distribution channel marketing method is more chaotic, but still based on the following three traditional business models:

1, the manufacturer's own (direct) mode: The device manufacturer sets up its own sales team to carry out promotion and sales activities to the terminal medical institutions. At the same time, it delivers the goods to the distributors and collects the weak money, and the products are delivered by the distributors to the terminal medical institutions. Under this model, the general producers are invoicing normally, and the producers have strong control over the channels and terminal medical institutions, but the cost of sales will be greatly improved, so such models are less likely to appear.

2, reserve price agent mode: The device manufacturer will hand over part or all of the sales process to the agent dealer, and the delivery can be either the manufacturer looking for the distributor to ship, or the agent dealer looking for the distributor to ship the goods. In this mode, The manufacturer invoices to the first-level agent, and then the first-level agent invoices to the multi-level agent. There are acts such as calling and passing the ticket. Since the sales process is completed by the agent dealers, the producers are on the channel and The terminal customer has weak control ability, but the manufacturer's sales cost has been greatly reduced. This model is the main business model of domestic oral medical device enterprises.

3, high open high return mode: Same as the reserve price proxy mode, medical device manufacturers pass the sales functions such as channel and promotion to the agent dealers to realize the outsourcing of the sales team. In this mode, the producers supply low prices, high Invoicing to the agent dealer, but the extra tax due to the high invoicing is returned to the manufacturer by the dealer. Since the sales process is completed by the agent dealer, the manufacturer also controls the channel and terminal medical structure. Lower.

As mentioned above, the most important business model of domestic oral medical device enterprises is the reserve price agency model. Under this model, because the same type of medical device products are less differentiated, the channel vendors are recognized by the method of price and spelling, resulting in 4. The profit fell, and the business situation of the agency was deteriorating.

At present, there are many medical device dealers in China that are profitable through hang-up and ticketing in the circulation channels. However, in order to solve medicine And tax issues in the medical device industry, improve the transparency of the industry's overall distribution chain, and eliminate proxy Dealers have the effect of raising prices to ultimately reduce the overall price paid by patients for medical services. Since April 2016, the national and provincial administrative districts have issued a series of policies and guidance documents centered on two-vote system. The two-vote system began to rectify in the pharmaceutical industry, starting in 2018. medical instruments The industry gradually promoted implementation.

As of May 2018, Anhui Province, Shaanxi Province, Qinghai Province as a pilot, officially issued a two-vote guidance document in the medical device field, the scope of future reform will be extended to other provinces and cities. The two-vote system of the medical device industry will be imperative .

The implementation of the 'two-vote system' policy has a profound impact on the distributors of medical devices in the distribution channels of medical devices. For manufacturers, compared with the current multi-level agent distribution model, manufacturers put products on the market. In the process of going to the hospital, only single-level agents including distribution services are allowed. In the new mode, the behaviors such as invoices and invoices are greatly improved, and even eliminated; the manufacturer issues a copy to the agent. The invoice, and the agent issues an invoice to the terminal medical institution. For equipment manufacturers using multi-level agents, this greatly reduces the risk of customer churn and regional coverage reduction.

Compared with manufacturers, the equipment agency distribution industry will face enormous challenges. The cooperation mode between future manufacturers and the current ones and second-level agents will change greatly. Some agents need to transform into sales outsourcers. , will also undergo a reshuffle. Because different levels of agents have different advantages and disadvantages in the distribution channels, their future development trend is affected by the two-vote policy. The national total generation relies on its strong financial strength, Regional agents make acquisitions or mergers and acquisitions. Regional agents, with their local separatist forces, can integrate resources through active business strategies and financing, and are expected to become national leading enterprises. Local small businesses and mixed-use enterprises have a poor business status. It is possible to face an acquisition or elimination.

According to "2016-2022 Global Medical Device Market Forecast" released by Evaluate Medtech in September 2016, the global dental medical device market in 2015 was 12.4 billion US dollars, with a current compound annual growth rate of 5.7%, and the global oral cavity by 2022. The medical device market will reach US$18.3 billion. Currently, the global giants of dental medical devices are foreign companies, Danaher (USA), Planmeca (Finland), Dentsply Sirona (USA) and Carestream Health (USA). There are 3M (United States), Midmark (United States), A-dec (United States) and Ivoclar Vivadent (Liechtenstein) and other major players. Currently, Danaher has a market capitalization of $75.7 billion, while Dentsply Sirona has a market capitalization of about $8.46 billion.

In 2016, China's oral medical device market was about 134.6 billion yuan. According to the "2016-2020 China Dental Equipment Market Prospect Analysis and Investment Strategy Research Report" issued by the China Business Researcher, as the population ages, The consumption level of residents is improving. It is estimated that the market size of China's dental medical equipment and related products and services will exceed 400 billion yuan by 2020. At present, China's oral medical device enterprises are still mainly agents, but in recent years, many independent research and development have occurred. The main industry star, taking the oral CBCT industry as an example, Meiya Optoelectronics (002690.SZ), Beijing Langshi, Shenzhen Fusen, Shenzhen Anke, Boen Dent, etc.

From agent to independent research and development, in the domestic medical device industry, Mindray Medical (300760 Announcement, Quotes, Reviews, Financial Report) can be regarded as a myth. Early Mindray through the 'agent sales + independent research and development' model, in many medical devices The company has become the first medical device company listed on the New York Stock Exchange in the United States. Currently, the medical device 'unicorn' Mindray is delisted from the New York Stock Exchange and is listed on the A-share market at 48.8 per share. Yuan/share issue price is honored this year Start a business The board's 'most expensive new stock' throne. Mindray's success depends not only on its founders and technical teams from Tsinghua University, Peking University and China University of Science and Technology, but also from their development route, through the import of products, familiar with the product and its Technology, laying the foundation for their independently developed products

Mindray's success may not be accidental. At present, the company is also ready to launch through the model of 'agent sales + independent research and development'. The company has hired the laser research and development of the former North China Institute of Optoelectronic Technology, the production project leader and the project leader. Mr. Zhang Yufeng is the core R&D personnel and is responsible for organizing the company's independent research and development projects. At present, the company has obtained 15 software copyrights and has a total of 17 patents. At the same time, the company's independent research and development projects are still in progress, but due to various factors As a result, the independent research and development products failed to meet the requirements for review, and the time to market the products remains to be discussed. From the oral medical device dealers to the 'agent distribution + independent research and development', the dental pass may be 'the road slowly repairs its vision'.