The operating comments of the Board of Directors of Xinmai Medical in 2023 are as follows:
I. Discussion and analysis of business conditions
The company is a leading enterprise in the field of aortic and peripheral vascular intervention in China. In 2021, Tuomai Medical was established to engage in tumor intervention through human peripheral vascular intervention. In recent years, thanks to the policy support and the increase of per capita medical expenditure, endovascular interventional medical devices in China are in a high-speed development stage. With the aging of our population, the continuous development of aortic disease screening technology, the continuous improvement of clinical experience and the continuous improvement of people’s health awareness, the detection rate of aortic and peripheral vascular diseases has gradually increased, and the amount of surgery has shown a rapid growth trend.
While further maintaining the influence of the company’s products, the company firmly implements the sales strategy of channel sinking, further expands the sales team, strengthens the expansion of sales channels, and increases the medical education and training of innovative products approved in recent years, fully promotes market development, and further develops international market business. On the other hand, the company has always focused on the continuous innovation of products, continuously increased investment in research and development, and constantly promoted the effective transformation of innovative achievements. The market acceptance of innovative products has been continuously improved, which has promoted the sustained and rapid growth of the company’s sales performance.
(1) The overall financial situation during the reporting period
During the reporting period, the company achieved a total operating income of 1,187,204,500 yuan, an increase of 32.43% over the same period of last year; The operating cost was 279,578,000 yuan, an increase of 25.65% over the same period of last year; Compared with the same period of last year, sales expenses, management expenses and R&D expenses increased by 25.14%, 19.58% and 25.70% respectively. The operating profit was 573,854,300 yuan, an increase of 38.21% over the same period of last year, and the net profit attributable to the parent company was 492,432,000 yuan, an increase of 37.98% over the same period of last year. The company’s innovative products Castor branched aortic stent-graft and delivery system, Minos abdominal aortic stent-graft and delivery system, and ReewarmPTX drug balloon dilation catheter continued to exert their efforts. The number of new products Taos straight thoracic aortic stent-graft system and Fontus branched stent-graft system in operation increased rapidly, which promoted the steady growth of the company’s sales revenue and profits, further improved the company’s competitiveness in the aortic and peripheral vascular intervention market, and the above products continued to grow rapidly during the reporting period.
(two) adhere to technological innovation, product development and registration in an orderly manner.
During the reporting period, the company invested a total of 260,437,500 yuan in R&D, accounting for 21.94% of the company’s operating income in the same period.
In 2023, the company made significant progress in all R&D pipelines, and submitted registration materials for six products to National Medical Products Administration. The registration information of the occlusion balloon has been submitted to National Medical Products Administration. Cratos branched aortic covered stent and delivery system have been submitted for registration.
AegisII abdominal aortic covered stent system is in the pre-marketing clinical trial stage. The thoracic multi-branch covered stent system is in the single center clinical follow-up stage, and its clinical performance is excellent. Aortic flow-limiting rupture stent is in the follow-up stage of single-center clinical trial. In the peripheral business field, in terms of vein, the registration materials of Vfower vein stent and delivery system have been submitted, and the Vewatch vena cava filter and Fishhawk mechanical thrombectomy catheter have been implanted before marketing; On the arterial side, the new generation of peripheral bare balloon catheter and embolic coil with fiber wool are in the registration stage, and the below-knee drug balloon dilation catheter is in the pre-marketing clinical trial stage. In terms of tumor intervention, the microsphere products are in the pre-marketing clinical implantation stage, and the HepaFowTIPS covered stent system has been approved to enter () the special device review procedure ("green channel"), and is currently in the clinical follow-up stage. At the same time, the company explored the development of customized medical devices for the first time at home and abroad, obtained the first domestic customized thoracic aorta covered stent filing certificate and completed the first clinical application, realizing the customized sales of products overseas.
The company attaches great importance to the intellectual property rights and patent protection of products. By December 31st, 2023, a total of 693 patent applications had been submitted, and a total of 310 domestic and foreign patents had been authorized, including 205 domestic patents (including 62 invention patents, 134 utility model patents and 9 design patents) and 105 overseas patents (all invention patents). During the reporting period, 66 new patents were granted.
(3) Deepen market innovation and promote the market in an orderly manner.
The company continues to focus on the distribution of marketing channels in second-,third-and fourth-tier cities and some populous counties, intensifying the market sinking and deepening the market coverage of the company’s products. Build an academic exchange platform to contribute to the development of the industry. Xinmai Medical independently initiated the establishment of the "Xinmai Biomedical Micro Lecture Hall" to promote academic and technical exchanges between high-tech enterprises in the fields of biology, pharmacy and medical care, and between enterprises and institutions, scientific research institutes and medical institutions, and create a high-level academic exchange atmosphere. The company is committed to building a professional academic platform to promote the exchange of excellent clinical experience at home and abroad. Organize a number of activities around innovative products and hundreds of "star products" that have been listed, combine academic sharing with clinical treatment, provide a platform for more young and middle-aged clinicians to interact and learn, and continuously expand the market influence of cardiac artery and peripheral products.
As of the disclosure date of this report, the market coverage of the company’s products has been further improved. Among them, Castor branched aortic stent-graft and delivery system have covered more than 1,000 terminal hospitals, Minos abdominal aortic stent-graft and delivery system have covered more than 800 terminal hospitals, and ReewarmPTX drug balloon dilation catheter has covered more than 900 terminal hospitals.
In terms of international business, the company further promoted the development of the aforementioned innovative products in the international business market. During the reporting period, the overseas sales revenue increased by more than 55% compared with the same period of last year. By the end of the reporting period, the company has sold in 31 countries and expanded its business to Europe, Latin America and other countries and regions in Asia-Pacific. Among them, Castor branched covered stent and delivery system was first implanted in Singapore and several European countries, and has entered 16 countries in total; Minos abdominal aorta covered stent and delivery system was implanted for the first time in Turkey and other countries, and has entered 19 countries. HercuesLowProfie straight-tube covered stent and delivery system were implanted for the first time in Singapore and several European countries, and have entered 21 countries in total; ReewarmPTX drug balloon dilation catheter was implanted for the first time in Brazil.
(D) Pay attention to the construction of the staff, and the talent team is constantly improving.
During the reporting period, the company’s business scale still maintained a good growth, and the scale of employees was also expanding. By the end of the reporting period, the total number of employees in the company reached 908, with a net increase of 122 during the reporting period, with a growth rate of 15.52%. Among them, the recruitment of R&D personnel in the company was further strengthened, and the number of R&D personnel increased to 266 during the reporting period, accounting for 29.30% of the total number of R&D personnel, and there were 152 R&D personnel with a master’s degree or above, accounting for 57.14% of the total number of R&D personnel.
By gradually optimizing the human resource management system, the company has now formed a core professional team with multiple disciplines and subdivisions. By continuously gathering outstanding talents and strengthening the absorption and integration of human resources, it will provide a strong talent guarantee for the company’s long-term stable and sustainable development in the future.
(E) Strengthen internal control and improve the management level of enterprises.
The company has always adhered to the values of "quality, integrity, responsibility, efficiency, innovation, striving for the first place, dedication and cooperation". During the reporting period, the company strictly implemented the management concept of "controlling costs, grasping quality and improving efficiency", continuously improved the level of internal control management, continuously optimized the business processes of procurement, production, R&D and sales services and related internal controls, established and improved internal governance and organizational structure, and formed scientific decision-making and implementation.
During the reporting period, the company was rated as the National Enterprise Technology Center, the National Technology Innovation Demonstration Enterprise, and the two-in-one management system was rated as AA. Four projects, namely "Branched Intraoperative Stent System" and "Straight Thoracic Aorta Covered Stent System", were rated as the Shanghai High-tech Achievements Transformation Project, and "Design of an Aortic Stent Proximal’ Bird’s Mouth’" were selected as the innovation achievements of Pudong workers in 2023. In addition, Dr. Yuan Zhenyu was selected as the top-notch industrial platform of the Oriental Talents Program, Xu Huijun was awarded as the chief technician in Shanghai, and Zhu Yongfeng, Liwen Wang and Guo Fang were awarded as Pearl Engineers in Pudong New Area. The above honors fully reflect that the company has achieved remarkable quality, economic and social benefits in the work of enterprise operation, innovation ability, quality management and social responsibility.
II. Description of the company’s main business, business model, industry and R&D during the reporting period.
(a) the main business, main products or services.
Xinmai Medical is mainly engaged in the research, development, production and sales of interventional medical devices for aorta and peripheral blood vessels. In the field of aortic interventional medical devices, the company is a domestic enterprise with complete product range, leading scale and competitive market. The main product of the company in this field is aortic covered stent system; In the field of peripheral vascular interventional medical devices, the company has been deeply involved for many years, and now has products such as peripheral drug balloon dilatation catheter and peripheral vascular stent system; In addition, the company has the only intraoperative stent system that can be used in thoracic aortic dissection surgery in China. The company adheres to the mission of "providing accessible, true, good and beautiful medical solutions for the treatment of blood circulation diseases" and is committed to becoming the world’s leading high-tech company in the field of interventional therapy of aorta and peripheral blood vessels.
The company always adheres to the product and technology orientation, insists on the research and development and innovation of products with independent intellectual property rights, and gradually realizes the role transformation from technology following to technology leading. After years of painstaking research and development, the company has mastered the core design and manufacturing technology of the covered stent system for treating aortic diseases, and successfully developed the first domestic covered stent for abdominal aorta and the only intraoperative stent system approved for marketing in China that can be used in thoracic aortic dissection surgery. Castor branched aortic covered stent independently developed by the company extends TEVAR surgical indications to aortic arch lesions for the first time, and is the first branched aortic stent approved for marketing in the world.
In 2014, the former china food and drug administration issued the "Special Approval Procedure for Innovative Medical Devices (Trial)", which set up a special approval channel for medical devices with China’s invention patents, domestic pioneering technology and international leading level, and significant clinical application value; At present, there are 8 products in the company’s listed and under research products entering the above channels, and the number of products entering the special approval channels ranks in the leading position among domestic medical device enterprises.
During the reporting period, there were no major changes in the company’s main business.
2. Main products of the company
(II) Main business models
The business model adopted by the company in the medical device industry is determined according to the characteristics of the industry. At present, the company has an independent and complete procurement, production, research and development, sales and service system. The company’s main business models are as follows:
1. Purchase mode:
The company sets up purchasing department to implement purchasing management, and uses information system to control and supervise the purchasing process. The production department and R&D department of the company are responsible for providing the purchase application of the required items. The purchasing department is mainly responsible for the procurement management of raw materials, consumables, fixed assets and outsourced services required for product production and R&D, the quality department is responsible for the inspection of purchased goods and services, and the financial department is responsible for reviewing and supervising the procurement budget and fund payment. The purchasing department regularly reevaluates qualified suppliers.
2. Production mode:
The company’s production mainly adopts the principle of fixed production by sales and proper stocking to guide the formulation of production plan. The production department makes a monthly production plan according to the monthly sales forecast and the current inventory situation, and ensures that the production plan is completed on time with the cooperation of all departments. The production department formulates the weekly production plan of each workshop according to the delivery speed, current finished product inventory, semi-finished product inventory, production capacity and R&D verification. According to different types of products, the inventory of finished products is kept at a reasonable level, generally 1 to 3 months. In the production process, the company has formulated and implemented relevant production and quality inspection systems in strict accordance with YY/T0287-2017 Requirements for Medical Device Quality Management System Used in Laws and Regulations, GB/T19001 Requirements for Quality Management System, Production Management Specification for Sterile Medical Devices, Quality Management System Specification for Medical Device Manufacturers-Implementation Rules for Implantable Medical Devices and other policy documents.
3. Sales mode:
The company mainly adopts the distribution model for sales, that is, the company sells products to dealers, and then the dealers sell them to hospitals and other medical institutions. By organizing or participating in academic promotion meetings, academic seminars, industry exhibitions, etc., the company introduces the principles, characteristics, usage methods and application effects of the company’s products, and promotes the products. The cooperation mode between the company and dealers is buyout distribution. After purchasing the company’s products, dealers sell them to hospitals directly or through distributors. Under normal circumstances, the hospital does not stock up. After the patient is admitted to the hospital, the hospital puts forward the product purchase demand, and the dealer or distributor transports the product to the hospital. In order to concentrate the sales force and strengthen the marketing function, the company established the marketing department and the sales department respectively. The marketing department is mainly responsible for brand promotion, academic promotion, product training and bidding. The sales department is mainly responsible for dealer management and providing product technical support.
4. R&D mode:
Due to the strict access system imposed by the industry authorities on the listing of Class III medical devices, the period from planning and design to final marketing of a new product may be as long as 5 to 10 years. The company rationally plans the short-term and long-term scientific research direction, rationally allocates the capital investment arrangement of each stage of the project, establishes a "market demand-oriented" R&D mechanism, determines the product R&D direction through market feedback and suggestions, and controls technical risks such as technology update iteration by combining R&D management systems such as "product life cycle management" and "milestone management", and effectively controls the R&D and registration process of new products through annual R&D budget and regular pre-analysis.
Through "product life cycle management", the company has established a forward-looking R&D system, combined with different life cycle stages of different products, timely grasped market demand, and ensured continuous product innovation capability and efficient new product iteration speed. Based on "milestone management", the company can effectively decompose the research and development objectives, and ensure the progress and quality of the project development process through the assessment and supervision of the roles and responsibilities of each person at each stage.
During the reporting period, there was no significant change in the company’s business model.
(3) the industry situation
1. The development stage, basic characteristics and main technical threshold of the industry.
(1) The industry and basic characteristics of the company
According to the Guidelines for Industry Classification of Listed Companies (revised in 2012) issued by China Securities Regulatory Commission, the company belongs to the special equipment manufacturing industry (classification code C35); According to the National Economic Industry Classification (GB/T4754-2017), the company belongs to the medical equipment and equipment manufacturing (classification code C358) in the special equipment manufacturing (classification code C35). According to the Classification of Strategic Emerging Industries (2018) (Order No.23 of the National Bureau of Statistics), the company belongs to "4.2.2 Implantation in Biomedical Materials and Equipment Manufacturing" in "4.2 Biomedical Engineering Industry". The medical device industry is closely related to life and health, the demand for medical devices is rigid, and the industry has strong anti-risk ability, so the cyclical characteristics of the industry are not obvious.
(2) Global medical device market
According to F. Jost Sullivan’s analysis, the global medical device market grew from $405 billion to $533.5 billion from 2017 to 2021, with a compound annual growth rate of 7.1%. Driven by the global aging population and the increasing medical expenditure, the global medical device market is expected to grow to 699.9 billion US dollars in 2025 and 916.7 billion US dollars in 2030, with compound annual growth rates of 7.0% and 5.5% respectively.
(3) Development of China’s medical device market
Compared with the global medical device market, the medical device market in China is developing relatively faster. On the one hand, with the aging of the population and the improvement of residents’ living standards and health awareness, the market demand for medical device products in China continues to grow; On the other hand, under the influence of the national medical device industry support policy, the domestic medical device industry as a whole has entered a stage of rapid growth.
According to Jost Sullivan’s analysis, from 2017 to 2021, the market size of medical devices in China increased from 440.3 billion yuan to 843.8 billion yuan, with a compound annual growth rate of 17.7%. With the continuous growth of the per capita disposable income of domestic residents and the strong support of government policies for domestic and innovative medical devices, the medical device market in China is expected to maintain a good momentum of rapid growth, and there is a vast room for future growth. The medical device market in China is expected to grow to 1,244.2 billion yuan in 2025 and 1,660.6 billion yuan in 2030, with compound annual growth rates of 10.2% and 5.9% respectively.
(4) The development of cardiovascular interventional devices market.
① Definition and classification of cardiovascular interventional instruments
Interventional therapy is a new treatment method in the field of cardiovascular diseases. In the field of cardiovascular diseases, interventional therapy has achieved minimally invasive, closed and digital in the process of disease diagnosis and treatment, and has gradually become the three pillar clinical disciplines alongside traditional internal medicine and surgery. At present, in clinical application, cardiovascular interventional instruments are mainly divided into the following categories according to the location where interventional products are used:
② Market size of cardiovascular interventional devices in China.
Because of the high mortality and disability rate of cardiovascular diseases, the unmet clinical needs have greatly promoted the development of related medical devices, and because of the advantages of minimally invasive and rapid recovery, interventional therapy for cardiovascular diseases has gradually become one of the preferred clinical methods, and the market of cardiovascular interventional devices in China has also been growing.
China is in the initial stage of development in some cardiovascular interventional medical devices, especially in the field of aortic and peripheral vascular interventional devices. With the technological innovation and the rise of domestic enterprises, China’s aortic and peripheral vascular interventional devices market has great development potential and space, and will gradually reach the international leading level.
According to Jost Sullivan’s analysis, according to the ex-factory price of products, the market size of cardiovascular interventional devices in China will be 37.2 billion yuan in 2021, and it is expected to reach 140.2 billion yuan in 2030, with a compound annual growth rate of 15.9% from 2021 to 2030.
(5) Market development of aortic interventional medical devices.
Aortic diseases mainly include aortic dissection and aortic aneurysm. Among them, aortic dissection means that the blood flow in the aortic lumen enters the aortic media from the tear of the aortic intima, which separates the media and expands along the long axis of the aorta to form the true and false chambers of the aortic wall. After the blood flows between the true and false chambers or forms a thrombus, it usually causes persistent unbearable chest pain, heart failure or cardiogenic shock, and the mortality rate is extremely high. Aortic aneurysm refers to the damage to the normal structure of the thoracic aorta wall caused by various reasons, which is manifested as local or diffuse expansion of the aorta, and the inner diameter reaches more than 1.5 times before expansion. It can be secondary to aortic dissection, trauma and infection. Blood pressure and blood flow shear force in thoracic aorta are extremely high. If rupture occurs after tumor formation, the bleeding speed and amount are very large and the mortality rate is extremely high.
At present, the clinical schemes for the treatment of aortic diseases in China are mainly conservative drug treatment, open surgical treatment and endovascular intervention. Endovascular interventional therapy is a rapidly developing clinical treatment technology in recent years, which is a combination of diagnosis and treatment by using a series of interventional instruments and materials and modern digital diagnosis and treatment equipment.
In recent years, intra-aortic interventional therapy has been highly recognized by clinicians and patients because of its advantages of less trauma, fewer complications, high safety and less pain for patients. According to F. Jost Sullivan’s analysis, the global market size of endovascular stent will reach $1.78 billion in 2021. Driven by the continuous technological innovation and accelerated product iteration of large medical device companies around the world, it is estimated that the global market size of endovascular stent will grow to $3.23 billion in 2030.
Due to the relatively low screening rate and medical treatment rate of diseases related to aortic intervention in China, there is still a big gap between China and developed countries such as the United States and Japan in terms of the proportion of aortic intervention operations to the corresponding total population, and the overall market size is also relatively large compared with mature foreign markets. According to F. Jost Sullivan’s analysis, China’s endovascular stent is still in the early stage of development. According to the ex-factory price of products, the market size of endovascular stent in China will be 2.4 billion yuan in 2021.
With the continuous development of screening technology for aortic diseases in China, the continuous improvement of clinical experience and the continuous improvement of residents’ health awareness, the market scale of aortic interventional medical devices in China will continue to increase in the future, and with the acceleration of research and development of medical device manufacturers, the iteration of product renewal will gradually accelerate, and the marketing and training of enterprises will go deep into hospitals, and the product penetration rate and market scale will continue to increase. According to Jost Sullivan’s analysis, it is estimated that by 2030, according to the ex-factory price of products, the overall market size of endovascular stent in China will grow to 4.31 billion yuan, and the compound annual growth rate of the overall market will be 6.7% from 2021 to 2030, in which the market size of thoracic aortic stent will grow to 2.29 billion yuan, abdominal aortic stent will grow to 2.02 billion yuan, and the market size of thoracic and abdominal aortic stent will grow to 6.7%.
According to F. Jost Sullivan’s analysis, in 2021, there will be 49,217 intra-aortic interventional operations in China, including 32,526 thoracic aortic operations and 16,691 abdominal aortic operations, with the ratio of operation volume being about 2:1. With the increasing number of patients with aortic diseases in China, it is predicted that the number of intra-aortic interventional operations will continue to increase in the future, and the overall aortic compound growth rate is expected to be 20.6% from 2021 to 2025.
(6) Market development of peripheral vascular interventional medical devices
Peripheral vascular diseases mainly include peripheral arterial diseases and venous diseases. Peripheral artery disease refers to the disease of ischemia caused by local stenosis or occlusion of peripheral artery. After stenosis or occlusion of lower extremity artery, it will cause intermittent claudication, leg or foot skin chills, chronic pain and gangrene. Venous diseases mainly include varicose veins, deep venous thrombosis and venous compression, which cause blood flow obstruction and limb swelling.
At present, the treatment methods of peripheral vascular diseases mainly include drug therapy, surgical treatment and interventional therapy. Among them, interventional therapy can open blocked blood vessels and restore smooth blood flow through the application of related interventional instruments, which has the advantages of less trauma and rapid recovery of patients. The products mainly include balloons, stents, plaque removal, embolectomy catheters and CTO opening instruments.
① Market analysis of peripheral arterial interventional therapy instruments in China.
Balloon angioplasty and peripheral artery stent implantation are two main non-surgical treatments for peripheral artery occlusion at present. Interventional instruments used in peripheral artery mainly include peripheral artery stent, balloon dilation catheter, distal protector, guide wire and guide catheter.
With the improvement of living standards of residents in China and the increasing emphasis on health, the number of interventional procedures for peripheral arteries in China will continue to increase in the future. With the increasing amount of peripheral artery interventional surgery abroad, the market of peripheral artery interventional stent and balloon abroad will also expand. According to F. Jost Sullivan’s analysis, according to the manufacturer’s shipment and ex-factory price, it is estimated that the market of interventional stents and balloons for peripheral arteries in China will grow to 6.80 billion yuan by 2030.
② Market analysis of peripheral vein interventional therapy instruments in China.
Compared with aortic diseases, the development of interventional therapy for venous diseases in China is at an earlier stage. The instruments used in interventional treatment of venous diseases are mainly imported manufacturers, and in clinical application, traditional surgical procedures such as vein stripping are still the most important treatment schemes for common venous diseases such as varicose veins and deep vein thrombosis.
At present, the market of interventional instruments for intravenous therapy in China is relatively limited, but the overall market shows a rapid growth trend. According to F. Jost Sullivan’s analysis, the market size of peripheral venous interventional devices in China will be about 1.01 billion yuan by 2021, with a compound annual growth rate of about 18.2% from 2017 to 2021, and this rapid growth trend will further increase rapidly with the growth of venous interventional surgery in clinical application, and the market size will reach 4.99 billion yuan by 2030, with a compound annual growth rate of 19.5% from 2021 to 2030.
(7) Market development of tumor interventional medical devices.
According to the forecast of Yiou think tank, from 2021 to 2025, the market size of tumor interventional devices in China will increase from 10.91 billion to 17.57 billion, with a compound annual growth rate of 12.7%.
(8) Main technical thresholds
The medical device industry in which the company is engaged in aortic and peripheral vascular intervention belongs to the field of high-value consumables for medical devices, and it is a high-tech industry with interdisciplinary, knowledge-intensive and capital-intensive. The products integrate many disciplines and technologies, such as medicine, materials science, biomechanics, machinery manufacturing, etc. The company’s main business corresponds to Class III medical device products, which have strict industry access standards and management regulations. It takes a long period from research and development to obtaining market access permits at home and abroad, usually 5-10 years. At the same time, in the process of product production, the requirements for production environment and product manufacturing technology are extremely high, and it is necessary to continuously optimize and improve product equipment in the long-term production process. It is difficult for enterprises that lack qualified process equipment and long-term experience in technology to produce qualified products with stable quality. Therefore, it is difficult for new entrants to quickly form competitiveness in a short time, and the barriers to entry in the industry are high.
2. Analysis of the industry position of the company and its changes.
At present, China’s aortic and peripheral vascular interventional medical device industry is still in a high-speed development stage. With the support of national policies and the continuous increase of R&D investment of enterprises, the performance of independent core products of some domestic manufacturers, such as Xinmai Medical, has partially reached the international advanced level, has strong market competitiveness, and has gradually realized import substitution.
Since its establishment, the company has been deeply involved in the field of aortic and peripheral vascular interventional medical devices. Through years of experience accumulation, the company has developed into a leading enterprise of aortic vascular interventional medical devices in China. In 2023, in the market of aortic interventional therapy in China, Cardiac Pulse Medical still has an absolute dominant market share. Except for the head enterprises, other competitors in the market are small in size and quantity, and the market competition pattern is clear.
In the field of peripheral vascular intervention, at present, the domestic market is basically occupied by international advanced enterprises such as Medtronic, Boston Science and Abbott. The company has been deployed in the field of peripheral vascular intervention earlier. CROWNUS of Xinmai Medical is the first approved peripheral arterial stent in China, and the company has successfully developed a series of related products including ReewarmPTX drug balloon dilation catheter. Vfower vein stent and delivery system, Vewatch vena cava filter, Fishhawk mechanical thrombectomy catheter, a new generation of peripheral bare balloon catheter, embolic spring coil with fiber wool, and below-knee drug balloon dilation catheter are in the research and development stage, and a complete product line layout has been gradually formed, but the overall competitiveness still lags behind that of international advanced enterprises.
3. The development of new technologies, (), new formats and new models during the reporting period and the future development trend.
In the field of aortic intervention, at present, the problems such as the lesions involving the arch and ascending aorta, the lesions involving the important branches of abdominal aorta, the extremely narrow and twisted approach, and the treatment of the distal stent rupture have not been completely solved. Therefore, the technical direction of aortic interventional medical device industry mainly focuses on developing products such as multi-branch stent system and ultra-fine stent system with external diameter, which can solve bow lesions and adapt to more patients. Castor branched covered stent system independently developed by the company is the first branched aortic stent approved for the treatment of aortic arch lesions in the world. Minos abdominal aortic stent approved in 2019 is one of the abdominal aortic stent products with the smallest outer sheath diameter in the domestic market. At the same time, the multi-branch thoracic aortic covered stent system independently developed by the company is in the single-center clinical follow-up stage, and has successfully completed the first overseas clinical application in Switzerland, and more research and development projects are progressing steadily.
In the field of peripheral arteries, lower extremity vascular diseases are characterized by long lesion length, tortuous lower extremity blood vessels and easy to be affected by the movement of muscle tissue. Therefore, after the bare stent of lower extremity artery is implanted, the stress on the stent is complicated and the long-term fracture rate is high, which leads to vascular restenosis. Therefore, for peripheral arterial diseases, the development trend of minimally invasive interventional instruments is how to better solve the problems of difficulty in opening lower extremity vascular diseases and high restenosis rate after operation. ReewarmPTX drug balloon dilation catheter independently developed by the company can effectively reduce the restenosis after the expansion of lower extremity stenosis. At present, ReewarmPTX drug balloon dilation catheter, high pressure balloon dilation catheter and other products have been marketed. At the same time, the company’s new generation of peripheral bare balloon catheter, embolic coil and below-knee drug balloon dilation catheter and a series of peripheral artery products are also steadily advancing.
In the field of peripheral veins, the obstruction of blood return caused by occlusion, stenosis or venous valve insufficiency of lower limbs and thrombus shedding may lead to pulmonary embolism, which is the main clinical problem at present. At present, venous embolectomy, iliac vein stent and venous valve repair are commonly used, all of which are new technologies introduced in recent years. At present, the company has started the research and development of many products, such as vena cava filter and vein embolectomy device. Among them, the iliac vein stent system has been submitted for registration, and the vena cava filter and mechanical thrombus removal catheter have been successfully implanted for the first time before the market. It is expected that the company’s related products in the peripheral vein field will obtain product registration certificates in the next two years, and the company will basically complete the layout of related products in the peripheral vein field.
In the field of tumor intervention, the company focuses on the research, development, production and sales of products used for tumor treatment through human peripheral vascular intervention. At present, the main products under research include TIPS covered stent, transjugular intrahepatic puncture system and various microsphere products. The TIPS covered stent system of our company adopts the design of covered cutting stent combined with braided stent, which has good radial supporting force and flexibility, can maintain good stent shape and patency, and reduces the risk of stenosis or occlusion of stent implants and damage to blood vessels. It is the first and only TIPS covered stent system with the combined design of covered cutting stent and braided bare stent in China.
(IV) Core technologies and R&D progress
1. Core technologies and their advanced features and changes during the reporting period.
The company has always been product-oriented and technology-oriented, adhered to the research and development and innovation of products with independent intellectual property rights, gradually realized the role transformation from technology following to technology leading, and committed to becoming the world’s leading high-tech company in the field of interventional therapy for aorta and peripheral blood vessels.
2. R&D achievements obtained during the reporting period
The company’s self-developed blocking balloon has submitted the registration information to National Medical Products Administration. Cratos branched aortic covered stent and delivery system have been submitted for registration. AegisII abdominal aortic covered stent system is in the pre-marketing clinical trial stage. The thoracic multi-branch covered stent system is in the single center clinical follow-up stage, and its clinical performance is excellent. Aortic flow-limiting rupture stent is in the follow-up stage of single-center clinical trial. In the peripheral business field, in terms of vein, the registration materials of Vfower vein stent and delivery system have been submitted, and the Vewatch vena cava filter and Fishhawk mechanical thrombectomy catheter have been implanted before marketing; On the arterial side, the new generation of peripheral bare balloon catheter and embolic coil with fiber wool are in the registration stage, and the below-knee drug balloon dilation catheter is in the pre-marketing clinical trial stage. In terms of tumor intervention, the microsphere products are in the pre-marketing clinical implantation stage, and the HepaFowTIPS covered stent system has been approved to enter the special review procedure of innovative medical devices ("green channel"), and is currently in the clinical follow-up stage.
By December 31st, 2023, a total of 693 patent applications had been submitted, and a total of 310 domestic and foreign patents had been authorized, including 205 domestic patents (including 62 invention patents, 134 utility model patents and 9 design patents) and 105 overseas patents (all invention patents). During the reporting period, 66 new patents were granted.
3. R&D investment table
Reasons for the significant changes in total R&D investment compared with the previous year.
During the reporting period, the Group’s R&D investment totaled 260,437,511.11 yuan, accounting for 21.94% of the operating income, up 51.18% over the same period of last year. The increase in R&D investment is mainly due to the company’s efforts in project R&D and the recruitment of R&D personnel at all levels, and further increase in R&D investment in peripheral vascular intervention and tumor intervention.
Reasons for the great change in the capitalization proportion of R&D investment and its rationality
In 2023, a number of R&D projects of the Group successfully completed the first human clinical trial and entered the clinical stage. Therefore, the capitalization proportion of R&D investment increased in this reporting period, up by 152.10% compared with the same period of last year.
4. Research projects
5. R&D personnel
6. Other explanations
Iii. Analysis of core competitiveness during the reporting period
(A) analysis of core competitiveness
1. A stable and professional management team
The company has a professional, innovative and excellent management team with common values. The company’s main management personnel have more than 10 years’ experience in the medical device industry. Besides having a good technical foundation, they also have rich management experience in the medical device industry, have a deep understanding and comprehensive grasp of the medical device industry policy and future development trend, and have very rich experience in product research and development, production management, and marketing network construction and layout.
2. Excellent technical research and development capabilities
The company attaches great importance to the construction of R&D team, and continuously expands the talent pool by combining independent training with external introduction. At present, it has set up a highly competitive R&D team in the industry, and has a group of professional and technical personnel with rich R&D experience, strong innovation ability and diverse professional composition in the research and development of aortic and peripheral vascular interventional medical devices. In 2023, the company continued to increase the talent pool of R&D personnel and increase the recruitment of R&D personnel. By the end of 2023, the company had 266 R&D personnel, an increase of 43 compared with 2022, accounting for 29.30% of the total number of employees. Among the R&D personnel, there were 152 R&D personnel with master’s degree or above, accounting for 57.14% of all R&D personnel. The professional background of R&D personnel covers many disciplines such as materials science, mechanical design and manufacturing, automation, pharmacy, pharmaceutical preparations, textile engineering, etc. The multi-disciplinary staffing can meet the R&D needs of different core technologies of the company.
The company established a mature project evaluation system, regularly tracked and collected all kinds of industry data information, and timely evaluated the company’s existing technology and patient needs through classified analysis, providing a basis for the company to formulate short-term and medium-and long-term product development strategies. The company regularly evaluates the new technologies under development, conducts technical exchanges, product stage reviews and other activities, actively listens to the clinical needs of doctors and patients, deeply digs the clinical pain points of doctors, and develops innovative products that meet clinical needs through comprehensive analysis of patient needs, technology, registered clinic, production and other factors.
3. Leading product innovation ability
The company has mastered the core design and key manufacturing technology of the stent-graft system for aortic diseases. Relying on its excellent technical research and development capabilities, the company took the lead in developing aortic interventional medical devices with completely independent intellectual property rights in China and reached the international advanced level, and successfully realized large-scale industrialization, breaking the monopoly of foreign products and laying the foundation for the localization of medical devices in sub-fields.
In 2014, the former china food and drug administration issued the "Special Approval Procedure for Innovative Medical Devices (Trial)", which set up a special approval channel for medical devices with China’s invention patents, domestic pioneering technology and international leading level, and significant clinical application value. Up to now, there are 8 products listed and under research in the company that have entered the above channels, and the number of products entering the special approval channel ranks in the leading position among domestic medical device enterprises.
4. Marketing network with deep coverage
After years of development, the company’s products have covered 31 provinces, autonomous regions and municipalities directly under the central government, and are widely used in major terminal hospitals in China. The company has strong competitiveness in the number of dealers, terminal hospitals and sales area coverage. In addition, the company has laid out marketing channels in many second-,third-and fourth-tier cities. With the continuous improvement of residents’ living standards and medical consumption in China, the penetration rate of minimally invasive interventional therapy in these areas will be further improved, and the company can take the lead in benefiting from market expansion. By the end of the reporting period, the company’s products have entered more than 2,100 hospitals nationwide, and the domestic market share of aortic products has ranked first among domestic brands for many years.
In terms of international business, the company further promoted the development of the above innovative products in the international business market. By the end of the reporting period, the company has sold in 31 countries and expanded its business to Europe, Latin America and other countries and regions in Asia-Pacific. Among them, Castor branched covered stent and delivery system was first implanted in Singapore and several European countries, and has entered 16 countries in total; Minos abdominal aorta covered stent and delivery system was implanted for the first time in Turkey and other countries, and has entered 19 countries. HercuesLowProfie straight-tube covered stent and delivery system were implanted for the first time in Singapore and several European countries, and have entered 21 countries in total; ReewarmPTX drug balloon dilation catheter was implanted for the first time in Brazil.
5. Advanced quality management and manufacturing level
The company has established a complete quality management system in strict accordance with YY/T0287-2017 Requirements of Medical Device Quality Management System for Laws and Regulations, ENISO13485:2016 Medical Device Quality Management System, Medical Device Production Quality Management Specification (formerly china food and drug administration Announcement No.64 in 2014) and other standards, and has established a complete quality management system in research and development, clinical registration, procurement, production, sales and after-sales service. In 2017, the company passed the ENISO13485:2016 quality management system certification of German TV Sü ddeutsche Group.
After years of painstaking research and development, the company has mastered the core design and manufacturing technology of aortic covered stent system. The company has introduced the advanced international production equipment for manufacturing stents and balloon catheters, forming a large-scale domestic production capacity of minimally invasive interventional medical products with reliable and stable product quality.
(II) Events that have seriously affected the core competitiveness of the company during the reporting period, impact analysis and countermeasures.
Fourth, risk factors
(A) Not yet profitable risk
(2) Risk of sharp decline in performance or loss
(C) core competitiveness risks
1, new product development and registration risk
Aortic and peripheral vascular interventional medical device industry is a technology-intensive industry, which requires high product research and development and technological innovation ability and has a long research and development cycle. In order to ensure that the company continues to maintain its core competitiveness in R&D and innovation, the company needs to independently develop new technologies and new products on the basis of accurately and timely grasping market demand and industry technology development trends. In the process of new product research and development, the company may face the risk of deviation in research and development direction, high investment cost of new product research and development, slow research and development process and even failure of research and development. New product research and development must go through design verification, registration testing, clinical trials, registration approval and other stages, and obtain the product registration certificate issued by relevant domestic and foreign regulatory agencies before it can be put on the market for sale. Due to the large number of pre-registration procedures and long period of aortic and peripheral vascular interventional medical devices, the company may have the risk that the newly developed products cannot be registered in time, thus delaying the product marketing process and adversely affecting the company’s operating performance.
2. Iterative risk of technology update.
Aortic and peripheral vascular interventional medical device industry is a technology-intensive industry. With the continuous increase of R&D investment of enterprises in the industry, innovative products and technologies may emerge in the future. Although the company has established an industry-leading R&D team, it will have a negative impact on the issuer’s business if it can’t keep track of the development trend of industry technology and update the existing products in time in the future.
3. Risk of loss of core technical personnel
Aortic and peripheral vascular interventional medical device industry is a multidisciplinary and knowledge-intensive industry, which requires a large number of technical personnel. The company’s past development benefited from having a group of professional and technical personnel with rich experience, strong innovation ability, reasonable professional structure and relatively stable personnel composition. However, due to the late start of domestic related industries and the relative lack of compound talents, whether the existing R&D team can be maintained stable and outstanding technicians can be continuously attracted is related to whether the company can continue to maintain its technological leading edge in the industry and the stability and durability of production and operation. If the company’s talent training and introduction can’t meet the needs of the company’s business development, or even the loss of core technical personnel, it may lead to the risk of product technology leakage, the slowdown or termination of the research and development process, which will adversely affect the company’s sustainable development.
(4) Operational risks
1, the market competition risk
In recent years, with the rapid development of domestic aortic and peripheral vascular interventional medical device industry, many domestic and foreign manufacturers have been attracted to join the competition, and the competition in the industry has become increasingly fierce. Among them, multinational medical device companies such as Medtronic, Boco and other competitors occupy a relatively high market share in the Chinese market as a whole. At the same time, aortic and peripheral vascular interventional medical devices are one of the rapidly developing fields in the domestic medical device industry. Its broad market space and good economic returns may attract more enterprises to join this field, and the market competition may be further intensified. If the company can’t maintain its competitive advantage in product research and development, quality management and marketing channels in the future, or the above-mentioned multinational medical device companies change their market strategies and take measures such as price reduction and acquisition to seize the market, it may have an adverse impact on the company’s market share and gross profit margin.
2, the risk of product price decline
At present, domestic hospitals mainly purchase through provincial procurement platforms. The provincial procurement platform is responsible for accepting the product declaration or direct bidding of domestic medical consumables manufacturers and domestic general agents of imported medical consumables, and conducting qualification review or product review on them, and finally determining the variety and price of the net hanging (or winning the bid) in the procurement platform. The company set its own ex-factory sales price on the basis of referring to the terminal price, and the product sales price was relatively stable during the reporting period. If the company fails to keep up with the development of the industry in the future, continue to carry out technological innovation and product upgrading, and maintain its leading position in the industry, or the relevant national policies and market competition environment undergo major changes, the company may face risks such as falling product market prices and gross profit margins, which will adversely affect the company’s future profitability.
On March 13th, 2023, the Office of Medical Consumables Purchasing Alliance of Public Medical Institutions in Henan Province issued the "Notice on Establishing Medical Consumables Purchasing Alliance of Public Medical Institutions in Henan Province" to centrally purchase medical consumables of neurological intervention and peripheral intervention. On April 28th, 2023, Hebei Province Centralized Purchasing Center for Medical Medicines and Devices issued the Notice on Offering Quotations for 19 Kinds of Centralized Purchasing Medical Consumables, and collected 19 kinds of products including disposable sterile peripheral intravascular drug coated balloons, and the company was successfully selected. The centralized procurement policy being implemented by the state will also have a significant impact on price changes.
3, the risk of dealer sales model
During the reporting period, the company mainly adopted the distribution model for sales. Distribution mode is a common sales mode adopted by medical device manufacturers, which plays a positive role in improving product marketing efficiency and brand and market influence. If the company can’t improve the management ability of dealers in time, some dealers’ marketing activities may be inconsistent with the company’s brand purpose and business objectives, or dealers may have their own management confusion, violate laws and regulations, or even have disputes with dealers, which may lead to the damage of the company’s brand and reputation or the decline of regional sales of products, which will have an adverse impact on the company’s marketing.
4. Procurement risks of important raw materials
The raw materials required for the company’s production mainly include medical nickel-titanium metal, PET polymer materials and alloy developing points. In view of the fact that the company’s main products are strictly supervised medical devices, in order to ensure the quality and performance of products and the stability of procurement sources, some raw materials of the company are imported from Europe, America and other countries or regions. Some of the raw materials needed by the company have high requirements on production technology and product quality, and the number of domestic suppliers that can meet the company’s raw material procurement needs is small. If domestic suppliers encounter difficulties in production and operation in the future and cannot provide raw materials to the company, the company needs to purchase related raw materials from overseas suppliers. Because the price of imported raw materials is generally higher than that of domestic raw materials, the purchase price may rise and the purchase cycle may become longer, which will adversely affect the company’s production and operation. At the same time, if there is a trade friction between the countries where overseas suppliers are located and China in the future, the company may also face the situation that the purchase price will increase, the supply will not be timely, and even the supply will be cut off, thus adversely affecting the company’s production and operation.
(V) Financial risks
1. Risk of asset impairment
The intangible assets of the company are mainly composed of non-patented technology and software, in addition to land use rights. At the end of 2020, 2021, 2022 and December 2023, the book value of intangible assets of the company was 60,621,500 yuan, 76,074,800 yuan, 219,293,500 yuan and 207,627,000 yuan, respectively, accounting for 4.41%, 4.34% and 207,627,000 yuan of total assets. If the intangible assets such as non-patented technology are impaired due to changes in the market environment and technological upgrading, it will adversely affect the company’s profitability.
The company’s development expenditure is formed by capitalization of R&D investment after the product under research successfully completed the first human clinical trial. The relevant R&D investment will stop capitalization when the product is applied for clinical termination and the medical device registration certificate is obtained, and the development expenditure will be transferred to intangible assets and amortized. At the end of 2020, 2021, 2022 and December 2023, the company’s development expenditure was 41,513,100 yuan, 40,103,700 yuan, 51,093,400 yuan and 138,646,600 yuan respectively, accounting for 3.02%, 2.29% and 2.29% of the total assets. If the market environment changes, technological upgrading and other factors lead to impairment of development expenditure, it will adversely affect the company’s profitability.
As of December 31, 2023, the book value of the company’s long-term equity investment was 121,863,900 yuan, mainly for
OptimumMedicaDeviceInc invested, and the company holds 27.63% of its shares, which constitutes a joint venture and is accounted for by the equity method. If OptimumMedical Device Inc’s future business situation deteriorates or development fails to meet expectations, the company’s long-term equity investment in OptimumMedical Device Inc will be impaired, which will adversely affect the company’s assets and profitability.
2. Risk of fluctuation of gross profit margin
In 2020, 2021, 2022 and 2023, the gross profit margin of the company’s main business was 79.78%, 78.05%, 75.18% and 76.45% respectively, and the gross profit margin fluctuated. During the reporting period, the change of gross profit margin of the company’s main business was mainly affected by factors such as product structure change brought about by the continuous introduction of new products, fluctuation of raw material prices, and phased output reduction caused by site relocation.
If the macro-economy, relevant national policies and market competition change significantly in the future, resulting in a significant adverse impact on the sales price of the company’s products or the purchase price of raw materials, and the company fails to reduce production costs by improving production efficiency, technological innovation and expanding production scale, and fails to continuously carry out technological innovation and product upgrading, the company may face the risk that the gross profit margin of its main business will fluctuate greatly and its profitability will decline.
3. Tax preference risk
According to the Enterprise Income Tax Law of People’s Republic of China (PRC), the recognized high-tech enterprises enjoy the preferential tax rate of 15%. On November 2, 2018 and November 18, 2021, the company obtained high-tech enterprise certificates with numbers GR201831001199 and GR202131002383, respectively, with a validity period of three years. The company enjoys a preferential income tax rate of 15% from the year when it first obtained the high-tech enterprise certificate to 2023.
If the company can’t pass the qualification re-certification of high-tech enterprises in the future, or the state cancels the preferential corporate income tax policy for high-tech enterprises, the company can’t continue to enjoy the preferential tax rate for high-tech enterprises, and then it faces the risk of declining performance.
(VI) Industry risks
1. Risk of changes in industry policies or standards
The company is a medical device manufacturer, and the products it produces and sells are closely related to human health, so it is strictly supervised by National Medical Products Administration and other competent departments. In recent years, with the further deepening of the reform of medical and health system in China, relevant government departments have successively promulgated many laws and policies in terms of industry standards, bidding, centralized procurement, circulation system, etc., including two-vote system, centralized procurement of high-value medical consumables, DRGs payment policy, etc., which has a profound and extensive impact on the development of the industry. On June 4th, 2021, the National Medical Insurance Bureau and other eight departments issued the Guiding Opinions on Organizing the Centralized Procurement and Use of High-value Medical Consumables by the State (No.31 [2021] of Medical Insurance), which provided the overall norms and requirements for the centralized procurement of high-value medical consumables. On March 13th, 2023, the Office of Medical Consumables Purchasing Alliance of Public Medical Institutions in Henan Province issued the "Notice on Establishing Medical Consumables Purchasing Alliance of Public Medical Institutions in Henan Province" to centrally purchase medical consumables of neurological intervention and peripheral intervention. On April 28th, 2023, Hebei Province Centralized Purchasing Center for Medical Medicines and Devices issued the Notice on Offering Quotations for 19 Kinds of Centralized Purchasing Medical Consumables, and collected 19 kinds of products including disposable sterile peripheral intravascular drug coated balloons, and the company was successfully selected. The company has always closely followed the state regulatory trends, adjusted its business strategy in a timely manner, thoroughly studied domestic and foreign quality standards and constantly improved its products.However, if the relevant policies are implemented in the company’s field or the standards undergo unexpected major changes, the company’s products or business model need to be significantly adjusted, or the company fails to formulate effective countermeasures in time, which may adversely affect the company’s operating performance.
2. Product quality and liability risk of medical disputes
The company’s products are used in the field of interventional therapy of aorta and peripheral blood vessels, and belong to the national key medical device products. The safety and stability of the products are very important to the life and health of patients. The company has established a relatively complete quality management system and formulated and implemented strict quality control measures to ensure the safety and stability of product quality as much as possible. The company’s products are mainly used for interventional therapy of aorta and peripheral blood vessels. Many factors may affect the success or failure of the operation, such as product quality, appropriateness of product selection, doctor’s technical level, patient’s disease status, etc. If there is a problem in the operation using the company’s products, and the reasons and responsibility attribution are not clearly defined, it cannot be ruled out that the company may face litigation, arbitration, compensation or negative news reports, which will damage the company’s market reputation and adversely affect the company’s product sales and business performance.
(VII) Macro-environmental risks
Risk of exchange rate fluctuation
Some of the company’s product sales and raw material purchases are settled in foreign currency. With the continuous expansion of the company’s overseas sales and purchases in the future, if the RMB exchange rate changes greatly, it will cause fluctuations in the company’s product sales price or raw material purchase price denominated in foreign currency, and foreign exchange receipts and payments will generate exchange gains and losses accordingly, which will have an impact on the company’s operating performance.
(8) Risks related to depositary receipts
(9) Other major risks.
V. Main operations during the reporting period
During the reporting period, the company achieved a total operating income of 1,187,204,500 yuan, an increase of 32.43% over the same period of last year; The operating cost was 279,578,000 yuan, an increase of 25.65% over the same period of last year; Compared with the same period of last year, sales expenses, management expenses and R&D expenses increased by 25.14%, 19.58% and 25.70% respectively. The operating profit was 573,854,300 yuan, an increase of 38.21% over the same period of last year, and the net profit attributable to the parent company was 492,432,000 yuan, an increase of 37.98% over the same period of last year.
VI. The Company’s Discussion and Analysis on the Company’s Future Development
(A) the industry pattern and trends
At present, China’s aortic and peripheral vascular interventional medical device industry is still in a high-speed development stage. Foreign medical device companies represented by Medtronic and Gore have occupied a high market share in the domestic aortic and peripheral vascular interventional medical device market by virtue of their relatively complete product lines, leading technology and strong research and development capabilities. However, with the support of national policies and the increasing investment in R&D of enterprises, the performance of independent core products of some domestic production enterprises, such as Xinmai Medical, has partially reached the international advanced level, has strong market competitiveness, and has gradually realized import substitution. With the technical progress of medical device enterprises in China, the maturity of supporting industrial chain and the deepening of government support policies, the relevant medical needs will be released continuously, thus promoting the continuous expansion of the aortic and peripheral vascular intervention market.
(1) Industry policies are continuously introduced, and domestic substitution is gradually accelerated.
The development of China’s medical device industry, as an important part of our people’s life and health and medical and health undertakings, has been highly valued by the state. "Healthy China 2030" Planning Outline and "Made in China 2025" both promoted the development of medical devices to the strategic position of national development.
At the national level, policy dividends are frequently released to the medical device industry, which brings important development opportunities for excellent domestic brands with high cost performance and high technology content, including grading diagnosis and treatment system to divert patients to primary medical institutions, policies to encourage domestic devices to purchase first, select excellent products to establish benchmarks, etc., and the competitive advantages of domestic brands with high cost performance are gradually highlighted.
At the R&D level, the state has launched a green approval channel for innovative products to encourage the improvement of innovation and R&D capabilities in the medical device industry. With the continuous improvement of the technological innovation ability of domestic medical device manufacturers and the increasing brand awareness, the development potential of domestic medical devices is huge, and the import substitution process is expected to speed up.
(2) The detection rate and permeability of aortic and peripheral vascular diseases have increased, and the market capacity has expanded rapidly.
With the implementation of the "Healthy China" strategy, the reform of medical service system in China has been deepened, the level of diagnosis and treatment in medical and health institutions has been gradually improved, the awareness of health examination of the whole people has been continuously improved, the detection rate of aortic and peripheral vascular diseases has been gradually improved, and the amount of surgery has increased rapidly.
At present, the detection rate and treatment penetration rate of aortic and peripheral vascular diseases in China are still low compared with the mature international market. Under the background of increasingly rich medical resources, constantly improving the technical level of clinicians, and continuously improving the technology and safety of domestic brands, the detection rate of aortic and peripheral vascular diseases in China will continue to increase, the treatment penetration rate will be close to the international mature market, and there is huge room for market capacity improvement.
(3) The aging of population, the increase of medical expenditure, the deepening of medical insurance reform and the increase of medical demand.
The National Bureau of Statistics released the latest data in 2023 on January 17th. At the end of 2023, the population aged 60 and over was 296.97 million, accounting for 21.1%, of which the population aged 65 and over was 216.76 million, accounting for 15.4%. Compared with 2022, it has greatly improved. On September 20, 2022, the National Health and Wellness Commission held a press conference on the progress and effectiveness of the aging work since the 18th National Congress of the Communist Party of China. At the meeting, Wang Haidong, director of the Department of Aging of the National Health and Wellness Commission, said that it is estimated that the number of elderly people aged 60 and above will exceed 400 million around 2035, accounting for more than 30% of the total population, and they will enter a stage of severe aging. At the same time, due to the accelerated aging process of the population and the change of people’s lifestyle, the disease spectrum of Chinese residents is gradually changing, with hypertension, The trend of population aging and the change of disease spectrum make the market demand of medical device products in China expand continuously.
(II) Company development strategy
Xinmai Medical always pays attention to the personal feelings of every user, takes "providing accessible, true, good and beautiful medical solutions for treating circulatory diseases" as its mission, takes building a people-oriented global leading emerging high-tech medical group as its long-term vision, always puts technology research and development and innovation capacity building at the top of the company’s development, and insists on continuous investment in product research and development and production technology innovation. While maintaining and consolidating the competitive advantage in the field of aortic vascular intervention, We will continue to develop and improve the product line layout in the fields of peripheral vascular intervention and tumor intervention, further reduce the domestic medical costs in related fields by developing more new products with competitive technology and price, and continuously enhance the market influence of the company’s brand, and finally become the world-leading high-tech company in the field of aortic and peripheral vascular intervention.
(3) Business plan
In the future, the company will seize the historical opportunity of the rapid development of medical device industry at home and abroad, continue to be guided by customer demand, and constantly improve and give play to the company’s operating advantages in research and development, technology, manufacturing, quality, products, markets, channels and services through independent research and development and technological innovation, and continuously strengthen the company’s core competitiveness and profitability in order to achieve sustained and healthy growth.
The company will continue to focus on its main business, promote its strategic planning and business layout in an orderly manner, further strengthen its comprehensive capabilities in product research and development, market expansion and other aspects, and optimize production and management efficiency, with a view to maintaining a good growth trend in operating income and performance. The overall business plan of the company in 2024 is as follows:
1, innovation and research and development plan
The company will continue to keep up with the clinical market demand, continue to increase investment in research and development, and accelerate the improvement of product line layout. The company rapidly promotes the reserve of other new technologies and R&D projects. In the aortic business, the blocking balloon plan is approved for listing, Cratos will complete the registration and submission within the year, and other aortic products will be actively promoted as planned; In terms of peripheral intervention and tumor intervention, many products such as vena cava filter, vein stent, new generation naked balloon and puncture kit are planned to be listed and approved during the year.
In the future, the company will invest more human resources and funds in the field of peripheral vascular intervention and tumor intervention, and start with high-end products through independent research and development, investment mergers and acquisitions, and focus on research and development of products with good market prospects and effective solutions to clinical pain points, so as to build a competitive product portfolio in the peripheral vascular field as soon as possible.
2. Market development plan
The company will give full play to the existing customer resources and marketing network, and on the basis of consolidating the existing market, increase the coverage of marketing network, enhance the regional radiation ability, academic promotion ability and regional competitive advantage of marketing network, actively expand market share, improve product penetration rate, and provide effective support for the growth of the company’s operating performance.
In the domestic market, in order to cope with the continuous sinking of national medical resources, vigorously develop the county-level hospital market, and at the same time, combine the listing planning of several new products in the next few years, recruit and train excellent technical and sales personnel, provide a strong guarantee for the company to expand product sales scale, carry out market promotion and doctor training, enhance the company’s comprehensive service ability, and comprehensively strengthen the company’s brand promotion and enhance the company’s brand image.
In the international market, the company will continue to strengthen cooperation with leading customers in regional industries around the world, and promote the market access and promotion of some existing aortic and peripheral interventional products in Europe, Latin America, Asia Pacific and other countries. At the same time, the company will focus on collecting and analyzing the clinical data of listed products in the European market, and actively promote the pre-marketing clinical trials of innovative products in Europe and Japan. In addition, the company will also devote itself to the doctor education exchange, promote the interaction and academic sharing between overseas doctors and domestic doctors, so as to enhance the brand awareness and recognition in the international market and promote the promotion and sales of the company’s products in more countries and regions.
3, expand production capacity and reduce cost plan
With the rapid growth of product sales, the company will further expand the production scale to better meet the growing market demand and lay a solid foundation for the company’s future development and market expansion. At the same time, the company will pay more attention to product details, optimize production technology, further improve product quality and effectively reduce product costs.
In the future, the company will further devote itself to the development and application of intelligent manufacturing technology in the production process, further strengthen the company’s large-scale production capacity and improve production efficiency, so as to effectively cope with the unfavorable factors such as the increase of labor costs, production sites and management expenses.
4. Human resource planning
In order to achieve the company’s development goals, the company will continue to strengthen the introduction and training of talents, and continue to introduce specialized talents in marketing and academic promotion, research and development, clinical, production and comprehensive management on the basis of the existing talent team. The company will help the sustainable cultivation of internal talents by establishing a management mechanism for talent echelon construction, and establish an effective incentive mechanism and a salary system with market competitiveness to retain talents, further improve the training, evaluation and supervision mechanism of human resources, cultivate a talent echelon with outstanding business ability and reasonable knowledge age structure, and build a talent base for the company’s long-term sustainable development. At the same time, by establishing a high-quality talent team, the connotation of corporate culture will be further enriched, and corporate culture will become the internal driving force for the company’s sustainable growth in the future.
5. Investment and merger plan
According to the long-term development strategy and planning, combined with specific operational needs, the company will fully consider its own advantages and disadvantages in capital, technology and management, actively learn from the experience of overseas benchmark enterprises, and, based on the basic principle of being responsible to shareholders and beneficial to the company’s long-term development, when conditions are ripe, timely select asset targets related to the development of the company’s main business as investment and M&A targets, with a view to integrating cutting-edge technologies in the industry around the world, consolidating and upgrading existing businesses, further enriching and perfecting the company’s product line layout, and providing the company with.
6. Corporate governance
The Company will continue to strictly follow the Company Law, Securities Law and other relevant laws, regulations and normative documents, constantly improve the corporate governance structure, establish a scientific and effective decision-making mechanism and internal management mechanism, give full play to the roles of the board of directors, the board of supervisors and independent directors, and realize scientific decision-making and standardized operation. At the same time, the company will continue to optimize the existing business processes, sort out the new business management processes, achieve efficient management goals with the help of information tools, promote the sustained, healthy and stable development of the company, and earnestly safeguard the interests of listed companies and minority shareholders.
(4) Others
I. Description of corporate governance.
During the reporting period, the company continuously improved and optimized its corporate governance structure, established and improved its internal management and control system, and standardized its behavior in strict accordance with the requirements of the Company Law of People’s Republic of China (PRC), the Securities Law of People’s Republic of China (PRC), the Rules for the Listing of science and technology innovation board Stocks on Shanghai Stock Exchange, the Self-regulatory Guidance No.1 of science and technology innovation board Listed Companies on Shanghai Stock Exchange, and other relevant laws, regulations and departmental rules of China Securities Regulatory Commission and Shanghai Stock Exchange. The shareholders’ meeting, the board of directors (including special committees), the board of supervisors and the management of the company actively perform their respective duties according to the authority, responsibilities and obligations stipulated in the Articles of Association and various systems within the company, earnestly safeguard the interests of the company and all shareholders, and promote the long-term healthy development of the company. By the end of the reporting period, the responsibilities of the company’s "three meetings and one floor" were clear, and the actual situation of corporate governance met the requirements of the China Securities Regulatory Commission and the Shanghai Stock Exchange. The details of corporate governance are as follows:
(1) About shareholders and shareholders’ general meeting: The Company strictly follows the Company Law, Securities Law, Articles of Association and Rules of Procedure for Shareholders’ General Meeting, regulates the convening, convening and voting procedures of shareholders’ general meeting, treats all shareholders equally, and ensures that shareholders can fully exercise their rights. During the reporting period, the Company held an annual general meeting and three extraordinary general meetings, namely the first extraordinary general meeting in 2023, the second extraordinary general meeting in 2022, and the third extraordinary general meeting in 2023.
(2) About the company and the controlling shareholder: The company has independent business and independent operation ability, and the company and the controlling shareholder are independent in terms of assets, personnel, finance, institutions and business. The company has a complete and independent business system and the ability to open up business for the market, and an independent raw material procurement and product sales system. The board of directors, the board of supervisors and internal institutions of the company operate independently, exercise their management authority independently, and make major decisions according to the Articles of Association and other relevant laws and regulations.
(3) Regarding directors and the board of directors: The company elects directors in strict accordance with the procedures stipulated in the Company Law, the Securities Law and the Articles of Association, and the number and composition of directors of the company meet the requirements of laws and regulations. During the reporting period, the Company revised the Rules of Procedure of the Board of Directors and the Work System for Independent Directors. All directors of the Company can conscientiously carry out their work in accordance with the requirements of laws and regulations and perform their duties and obligations diligently. When it comes to matters that need to be avoided from voting, all related directors avoid voting, and the decision-making procedures are reasonable, legal, compliant and objective. Independent directors can perform their duties independently, express independent opinions on major issues of the company, safeguard the overall interests of the company, and pay special attention to the legitimate rights and interests of minority shareholders. Directors shall be elected or replaced by the shareholders’ meeting, and the appointment of directors shall conform to the statutory procedures. The Board of Directors consists of a Strategy and Development Committee, an Audit Committee, a Nomination Committee and a Remuneration and Appraisal Committee. All members of the special committees are directors. Each committee gives full play to its professional advantages and makes use of its own expertise to make scientific and reasonable suggestions on major issues. As of the end of the reporting period, the company held nine board meetings throughout the year, all of which were convened and convened by the chairman.
(4) About the supervisors and the board of supervisors: The company operates in strict accordance with the Company Law, the Securities Law, the Articles of Association and the Rules of Procedure of the Board of Supervisors. The company has a board of supervisors, consisting of three supervisors. The board of supervisors shall have one chairman. All supervisors earnestly exercise their supervisory functions and safeguard the legitimate rights and interests of the company and shareholders. By the end of the reporting period, the Company held nine meetings of the Board of Supervisors throughout the year, all of which were convened and convened by the Chairman of the Board of Supervisors.
(5) Performance evaluation and incentive and restraint mechanism: The company has established a complete performance evaluation and incentive and restraint mechanism for directors, supervisors, senior managers, management and employees of the company. The procedures for the appointment of the company’s senior management personnel are open and transparent, and comply with the provisions of relevant laws and regulations.
(6) Information disclosure and transparency: The company strictly follows the provisions of the Information Disclosure Affairs Management System, Insider Information Management System and Investor Relations Management System to ensure the true, accurate, complete, timely and fair disclosure of company-related information. And through the designated media, china securities journal, shanghai securities news, Securities Times, Securities Daily and the official website of Shanghai Stock Exchange (http://www.sse.com.cn), we will make regular announcements and temporary announcements, and do a good job of confidentiality before information disclosure and registration of insiders of major events, earnestly fulfill the information disclosure obligations of listed companies and actively safeguard the legitimate rights and interests of companies and investors.
(7) Investor relations: During the reporting period, the company revised the Investor Relations Management System. Under the provisions of the system, the company strengthened the management of investor relations and actively broadened the channels of communication with investors. Through the interactive platform of investor relations, investor hotline, fax, e-mail, performance briefing, strategic meetings of major securities firms and on-site investigation of investors, the company responded to investors’ questions, actively contacted investors, strengthened information communication, promoted benign interaction with investors and improved the transparency of the company.
