Mindray leads the Chinese market in the monitoring devices that track patients' heart rates and other vital signs.
Its other main offerings are in diagnostic lab instruments and ultrasound imaging.
In some ways, the offering looks a bit like China Medical Technologies, which debuted a little over a year ago and almost tripled in price before coming down to more modest levels. A key difference, however, is that China Medical's ultrasound technology is approved only in China, while a large and growing portion of Mindray's business comes from other countries.
The field in which these two companies operate has expanded in recent years. The industry's total assets grew 33% just in the fourth quarter of last year, while full-year profits grew 18%. The Chinese industry is expected to grow faster than the world device industry as a whole, reaching a total value of $10.1 billion by the end of this year.
As usual, though, investing in Chinese firms takes a certain tolerance for risk. Mindray is dealing with changes in regulations, taxes and technology, the outcome of which is by no means settled.
Mindray's predecessor was founded in 1991. The current operating company, Shenzhen Mindray, was born in 1999. Last year, the firm prepared for the current offering by forming a holding company based in the Cayman Islands.
The company now offers about 40 products. In the first half of this year, about 40.5% of revenue came from patient-monitoring devices, 28% from lab instruments, 30% from ultrasound systems, and the rest from various minor items. Since last year patient monitoring provided 52% of the money, representing some diversification.
The company's geographic markets have also become more diverse. The percentage of sales coming from China fell from 61% to 56%, while the contribution of European sales more than doubled to 17%. Overall, the firm sells in more than 120 countries.
More than three-quarters of revenue comes from the firm's network of almost 2,000 distributors, who then resell the items. The rest of the money comes from direct sales.
RISKS/CHALLENGES
The medical device industry is highly competitive and depends on keeping up with technological advances, and sometimes Mindray finds itself behind the curve. The company admits in its prospectus that it will not have a five-part hematology analyzer out until the fourth quarter of this year, although some firms have had them out for several years now.
Mindray depends on its distributors for most of its income, but it has little control over them, especially since it does not make long-term contracts.
A new Chinese law that went into effect on Sept. 8 requires prior approval for some offerings on foreign stock exchanges. Mindray's counsel has decided that the firm doesn't need this approval, so it's gone ahead with the offering anyway. But the law is so new that there's no guarantee what will happen.
Other Chinese legal changes have affected the company. The firm says a recent anti-bribery crackdown in the domestic medical industry has affected its customers' buying habits, and exposes Mindray to liability if its distributors misbehave. The repeal of a tax refund dinged Mindray's gross profit this year. Changes in the approval process have also delayed some products coming to market.
Some 13% of revenue comes from Mindray's top-selling product, and about 38% comes from the top five. This is an improvement over past years but still enough concentration to make the firm vulnerable.
Source:佚名