• By lukez
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• Posted May 27 , 2018

Which One is Stronger among the 16 Companies of A-Share Listed in IVD Industry?

Source: Pharmaceutical Merger and Acquisition Cicle

Note: Content may be edited for style and length

With the driving factors of aging population and income growth，in vitro diagnostic （IVD）industry has become one of the world’s most active and fast developed one. It is playing an increasingly important role in the disease prevention, disease diagnosis and prognosis judgment, personalised medicine testing, health evaluation and genetic prediction etc.

Allied Market Research’s report has shown that it is estimated that the global IVD market will reach 74.65 billion US dollars and the compound annual growth rate (CAGR) will be 5.34% in 2020. In terms of global distributions, the developed countries are the main global market of IVD. The market is relatively mature with a more balanced development among the developed countries. While per capita expenditure on IVD is still low in China and other developing countries. IVD industry in these countries is rapidly developed with the improvement of living standards.  A market demand is expected to grow with a growth rate of about 10% and is a main driving force for the development of the global IVD industry.

The IVD industry in China started in the 80s of the last century and it is from disorderly competition at the early stage to industry consolidation in recent year. Today the market tends to be stable, the industry concentration ratio has gradually increased, the demand in IVD continues to grow and the IVD industry has entered a period of rapid development. It is expected that the market size of IVD products will reach 72.3 billion Yuan (RMB) in 2019 and the average CAGR will reach 18.7%. In terms of the principles and applications of diagnostic methods, IVD products can be divided into immunodiagnosis, biochemical diagnosis, molecular diagnosis, bedside diagnosis, blood and microbial testing. Immunodiagnosis occupies the largest market among them and the market potential of molecular and bedside diagnosis is huge.

The IVD industry is more competitive and the competition in the major IVD subdivision industry including biochemical, immune- and molecular diagnosis are described as below:

1. Competitions in biochemical diagnosis

Biochemical diagnosis is the earliest and most mature IVD industry in China. The maturity of this field is manifested in three aspects: market scale, manufacturer and product. At present, IVD reagents made in China account for more than 50% of the market of the biochemical diagnosis in China. In the domestic market of biochemical reagents, except Beijing Strong Biotechnologies, major market participants include Fosun Pharmaceutical, Shanghai Runda Medical, Shanghai Kehua Bio-Engineering Co. Ltd, Da An Gene Co. Ltd, Dian Diagnostics Group, Beijing Leadman Biochemis, Dirui Industrial Co, MedicalSystem Biotechnology Co. Ltd, Maccura Biotechnology Co. Ltd, Biosino Bio-Technology and Science Inc., Autobio Diagnostics Co, etc.

2. Market scale and competition pattern of immunodiagnosis

Immunodiagnosis in China is one of the fastest growing area in recent years with a growth rate of more than 15%. The current domestic market size of immunodiagnosis is close to the market size of biochemical diagnosis. Manufactures outside of China have obvious advantages in this market. The main domestic enterprises in ELISA sector include Shanghai Kehua Bio-Engineering Co. Ltd., Beijing Wantai Biology Pharmaceutical Industry Limited Company, Shanghai Rongsheng Biological Pharmaceutical Co., Ltd, Autobio Diagnostics Co. and Yingke Xinchuang （Xiamen） Technology Co. Ltd. etc. Products are mainly for hepatitis, AIDS and other infectious diseases as well as reproductive immune series products. Chemiluminescence immunoassay has developed rapidly in recent years, but the domestic enterprises have not been in the advantages.

3. Competition in molecular diagnosis

Molecular diagnosis market in China starts late, but it has a high technical starting point. It is the fastest growing field in recent years because of a small base of market size. Molecular diagnosis integrates a variety of sophisticated technology with a higher threshold for companies to enter this field. Molecular diagnostic products have high sensitivity and specificity, give results in a short period of time and also have advantages of qualitative and quantitative detection. However, its operation is more complicated and restricted environmental conditions for testing are required. Therefore, it is not conducive to use at basic level hospitals and it is difficult to be developed due to high costs of reagent and equipment.

Furthermore, the critical core technology has patent protection overseas and only a few of domestic enterprises is involved in the production of molecular diagnosis at a small scale. These domestic enterprises include Da An Gene Co. Ltd, Shanghai Kehua Bio-Engineering Co. Ltd., Sansure Biotech Inc., etc.

In summary, China has approximately IVD enterprises of 300-400 and industry concentration ratio is low at present. IVD enterprises with large scales include Shanghai Kehua Bio-Engineering Co. Ltd., Da An Gene Co. Ltd., Beijing Strong Biotechnologies, Maccura Biotechnology Co. Ltd., Shenzhen Mindray, MedicalSystem Biotechnology Co. Ltd., Beijing Leadman Biochemis, Shanghai Fosun Medical Science Co. Ltd., Biosino Bio-technology etc. The rest of IVD enterprises are in small-scales, majority of them has low production and is less intensive and quality of production is uneven. At the same time, the new entrants continue to appear and the pressure of competition in the industry is becoming more and more intense.

Since 2017, several companies in the industry have completed IPO to become listed companies including Beijing Genomics Institute, Jidan Biotechnology, Tellgen, Thalys, etc. At the same time, Shenzhen Mindray, the leading enterprise in the domestic medical equipment, has also completed the return of the US stock market, and has entered the A-share listing process. More and more service providers of laboratory overall procurement have transformed from the advanced dealers who have completed listing of IPOs and have entered the capital market and rapidly developed their business with the power of capital markets. At the same time, they expand their business into the upstream production with their channel advantages and their expansion further intensified the competition. Shanghai Runda and Thalys with some others belong to this type of enterprises.

The number of listed companies in the domestic IVD industry is increasing gradually.  Although the areas of subdivision are different, the overall competition is becoming increasingly fierce. In recent years, the market demand for IVD in China is rapidly growing, some domestic enterprises with a large-scale have caught this opportunity and continuously seized market shares with cost-effective products and advantages that is closer to the local market. As a result, imported products as a leading market pattern are gradually broken. With the increase of R & D investment and the improvement of product quality, a number of strong local businesses has emerged in the IVD industry in China and gradually have the strength of competition with international giants in some product areas.

In general, the number of the strong comprehensive enterprises in China is still smaller, and the enterprises at the top ranking are mainly competitive in a certain field. At present the domestic leading enterprises in various fields are actively carry out diversified development and mainly have the following five characteristics: 1. enterprises at top ranking in one subdivision industry of IVD use their competitive advantages to develop their business and to penetrate their business to other subdivisions in order to enrich their product categories; 2. reagent manufacturers are increasing their ability to produce instrument and provide the auxiliary items (Equipment supporting capacity); while instrument manufacturers are increasing the reagent production capacity to enhance their market competitiveness; 3. to actively explore overseas markets; 4. enterprises which provide third party testing laboratory emerge in the industry; 5. a number of non IVD production enterprises quickly has seized market share through purchasing consumables by entrusting hospital and integrating sales channels. With the improvement of technology R & D strength and the expansion of business scale, it is estimated that the market concentration ratio of the IVD industry in China will be further improved. Meanwhile, the competitiveness between domestic leading enterprises and overseas enterprises in the high-end market will also increase rapidly.

 Comparison of financial data between 16 companies of A-share listed in IVD industry

Source: Wind;      Note: Arranged by the size of the market value;                          Closing date: 29th Jan 2018

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