Changes and Development Opportunities in the Medical Device Industry Post-Pandemic

Under the COVID-19 pandemic, all industries have been severely affected. Some say that the medical device industry has benefited against the trend. Is this really the case? How will our medical device industry develop after the epidemic?

 

Overall industry status and demand at home and abroad

 

1. Analysis of the current situation of China's medical industry

 

In the short term, the epidemic has made the pharmaceutical industry very popular. After the Spring Festival, pharmaceutical stocks hit the daily limit 201 times in 5 days, and the medical device sub-sector rose by as much as 10.61%, while the medical service sub-sector, which had a smaller increase, also rose by 3.92%. With the amplified demand for related pharmaceutical products, the demand suppressed by the epidemic in the short term will also be gradually released. In 2020, China's medical and health industry may usher in a new round of investment boom.

 

In the long run, this epidemic will change people's concept of pharmaceutical consumption, and the demand for pharmaceuticals will be amplified to a certain extent, and the overall growth rate of the industry may continue to be higher than the GDP growth rate. In addition, the pharmaceutical industry has undergone multi-level reforms, which will also drive the continuous optimization and upgrading of the pharmaceutical industry, promote continuous innovation in pharmaceutical technology, and enable a considerable number of pharmaceutical companies and related industries to continue to benefit.

 

2. Soaring medical demand abroad

 

Currently, the global epidemic is becoming increasingly severe. From the perspective of developed countries, it may be basically possible to meet the needs of treating critically ill patients. However, in middle- and low-income countries, the degree of dependence on medical resources from abroad is high, and there is an urgent need to import medical resources to meet the epidemic needs of a large population. In the face of the spread of COVID-19, low-income countries find it difficult to independently solve the surging medical needs and urgently need imports from overseas to meet the needs of epidemic prevention. Therefore, this is also an opportunity for Chinese companies to enter the foreign market.

 

3. Products with short-term demand surge will usher in a "turning point" after the epidemic

 

▪ Medical equipment: urgently needed during the epidemic

 

According to the press conference held by the Ministry of Industry and Information Technology on February 2, the demand for these medical supplies has surged but is severely short: mainly including five categories of more than 100 varieties of medical protective supplies, disinfection supplies, testing and inspection instruments and equipment, medical drugs and medical devices.

 

These varieties mainly include:

Monitors, ventilators, anesthetics, electrocardiographs, CRP, disinfectant product lines, nebulizers, oximeters, masks, gloves, sprays, and COVID-19 diagnostic test kits.

 

The medical industry is a frontline industry in fighting the epidemic and also the main battlefield of the battle. The demand for these medical devices has surged, and related products will usher in development in the short term. The fact that enterprises are working overtime to produce and the State Drug Administration has opened an emergency channel for the production-before-approval of epidemic prevention medical devices will inevitably increase the production capacity and market share of these medical devices. It is reported that nearly 60 hospitals in more than 20 provinces across the country are building or preparing to build separate isolation wards. After the epidemic, ICU will become the focus of construction of secondary and above hospitals across the country. The large demand for related medical equipment, such as monitors, ventilators, nebulizers, oxygen generators, mobile DR, and portable ultrasound, will accelerate the expansion of the medical equipment market and its penetration into the grassroots level.

 

Therefore, in the short term, the demand for these medical devices has exploded by at least ten times. Even after the epidemic subsides, a large number of medical institutions will still stockpile and purchase, so the relevant product companies will enjoy high prosperity for at least one to one and a half years.

 

However, if we extend the timeline, there will inevitably be a new market turning point, which is a cliff period about a year later. This is because the strong demand in the early stage will inevitably induce continued capital investment driven by interests, and production capacity will increase sharply within half a year, especially in some low-threshold sub-sectors, and then it is very likely to usher in overcapacity.

 

▪ Diagnostic reagents: POCT may usher in an explosion

 

Since the National Medical Products Administration launched the "Emergency Approval Procedure for Medical Devices," COVID-19 virus test kits have "emerged in large numbers".

So far, more than 100 companies have developed diagnostic test kits for COVID-19 virus. Among them, 10 products have been approved by the National Medical Products Administration, and the fastest can detect COVID-19 virus within 15 minutes.

 

January 26,Zhejiang Bio, Berger Medical, Jeno Bio, and BGIFluorescence PCR reagent was approved;

 

January 28,Sansure Biotech, Da An GeneFluorescence PCR reagent was approved;

 

February 2,BGIJoint probe anchoring polymerase sequencing reagent was approved;

 

February 22,Guangzhou Wanfu Bio, InnovitaColloidal gold antibody test reagents, andBoao BioIsothermal amplification chip nucleic acid detection reagent was approved.

 

Besides,Lizhu Reagent, Novizan, Kang Hua Bio, Shanghai Xinchao Bio, Dahong BioAnd many other companies have announced that they have developed rapid detection kits for COVID-19 virus POCT (point-of-care testing), but they have not yet officially obtained product registration certificates.

In the face of emergency epidemics, rapid diagnostic capabilities are a basic requirement. Convenient, miniaturized, and suitable for rapid diagnosis, POCT products are likely to become the next explosion point in the field of IVD in the fever clinic construction boom after the epidemic.

 

4. High-value consumables: significantly affected during the epidemic

 

Surgical high-value consumables are the most severely affected in-hospital medical device sector in the short term.

 

During the epidemic, except for emergency and critically ill patients, the number of patients who need surgical treatment has been greatly reduced. A number of sub-sectors have been significantly affected, such as orthopedics, cardiovascular stents and pacemakers, and endoscopy.

 

However, these patients still exist, and most surgeries will eventually be performed. It's just that the short-term impact is huge, resulting in increased cost pressure and inventory backlog. Large enterprises can use their scale to resolve short-term pressure, while the situation of small and medium-sized enterprises with limited cash flow is more severe.

 

On February 18, the giants of orthopedics and cardiovascular consumables,MedtronicCEO Omar Ishrak said: China accounts for about 7% of Medtronic's overall business, and the changes in the focus of the medical system caused by the raging novel coronavirus may affect its Achievements.

 

However, these needs have not disappeared. After the end of the epidemic, the needs of patients will inevitably lead to a significant rebound in the demand for high-value medical consumables by hospitals. We will wait and see.

 

5. Low-value consumables: Short-term shortage, long-term surplus

 

The most obvious materials in the epidemic, and also closely related to life, are includingMasks, forehead thermometersAmong other low-value consumables. Relevant companies received a large number of orders, production capacity was saturated, and the market even experienced a phenomenon of "one mask is hard to find".

 

According to Tianyancha data, since 2020, more than 3,000 companies nationwide have added masks, protective clothing, and thermometers to their business scope. Cross-industry players such as Sinopec, Foxconn, BYD, and OPPO quickly obtained licenses and invested in production.

 

For such low-value consumables, due to the tenfold or more surge in demand in a short period of time, even after the epidemic subsides, a large number of medical institutions will still stockpile and purchase them, so the relevant product companies will enjoy at least one year of high prosperity.

Moreover, due to the relatively low threshold, production capacity will increase sharply within half a year, but excessive investment induced by strong demand may lead to a period of cliff decline later, followed by oversupply!

 

Six major changes in the medical device industry after the epidemic

 

The outbreak of the novel coronavirus pneumonia epidemic is both a major development opportunity and a major test for the medical device industry, especially the challenge of epidemic prevention and control to the intelligence of medical devices, which will prompt the industry to rethink its development direction. Liao Zhihong believes that after the epidemic is controlled, the external environment facing the medical device industry will also undergo the following changes:

 

• The government will pay more attention to the medical device, biopharmaceutical, and intelligent medical industries.
• Medical device companies will increase investment in product research and development, and competition among similar products will become more intense. 
• The product demand in the medical device sub-sectors will be more accurate.
• Public awareness of home health protection has generally improved. 
• Some medical device companies will adjust and improve their development strategies.
• The status of intelligent medical care will become more prominent.

 

Opportunities brought by the epidemic to the development of medical devices

 

The occurrence, continuous development, and spread of the epidemic will bring changes and innovations to society. As an industry on the front line of the fight against the epidemic, the medical device industry will inevitably have to prepare more fully for future challenges with higher standards.

 

From the perspective of medical device sub-sectors, for example, high-tech prevention and control products such as ward robots, virus isolation systems, air virus purification systems, operating room ward information systems, and rapid temperature detection systems, which played a significant role during the epidemic; AI medical devices, whose demand was not very strong, but the introduction of AI technology during the epidemic can solve the workload of laboratory, pathology, and imaging doctors under the super-heavy load during the epidemic, reduce the workload of laboratory doctors, improve the efficiency of diagnosis, and improve the accuracy of testing and diagnosis.

 

In addition, clinical testing equipment and reagents, home diagnostic and monitoring equipment, and rehabilitation equipment will all usher in great market opportunities after the epidemic.

 

1. The POCT field will usher in significant development

 

Accurate and rapid diagnosis of the condition is crucial for disease treatment, while the confirmation of cases was a major challenge in the early stages of the epidemic. This time, the IVD industry demonstrated its unique advantages in the face of the epidemic. When the government officially announced that the epidemic was serious, several IVD companies quickly launched test kits and were included in the government's designated list in a short period of time; then, various equipment companies successively put equipment and instruments into designated institutions for use. More than 100 companies, including Wanfu Bio, Antu Bio, Daan Gene, New Industry, Mike, Meican Bio, Jidan Bio, Kanghua Bio, and Urit, successively launched test kits and various rapid detection methods, among which POCT products, due to their portability and rapidity, made significant contributions to the prevention and control of the epidemic. In addition, molecular diagnostics, gene testing, PCR, microfluidics, and other technologies played an important role in epidemic prevention and control and detection.

 

Of course, from another perspective, the prevention and control of the novel coronavirus epidemic exposed the lack of rapid diagnostic capabilities in the fever clinics of many hospitals. In the future, the demand for convenient, miniaturized, and suitable for rapid diagnosis POCT testing products, small biochemical analyzers, blood cell analyzers, small closed automated PCR equipment, microfluidic devices, and gene sequencing equipment will become increasingly prominent, or become the next explosion point.

 

The importance of third-party medical laboratories has become prominent. During the epidemic prevention and control, some representative enterprises of third-party testing, such as KingMed Diagnostics and Dian Diagnostics, fought on the front line and played an important role, showing unique advantages over hospital testing. On February 4, Premier Li Keqiang pointed out at the meeting on responding to the novel coronavirus pneumonia epidemic that qualified third-party testing institutions are allowed to conduct nucleic acid testing. Thus, the importance of independent third-party medical laboratories has once again been highlighted. In the future, with the continuous opening of medical institutions, it will greatly promote the exponential growth of third-party laboratories, including testing, pathology, imaging, and hemodialysis.

 

2. Masks, protective clothing, and other emergency prevention and control consumables will become standing emergency supplies

 

For a long time, medical cost control and drugs have been the focus of attention of the public and the medical industry, and there has been more research and practice in the supply chain; however, there has been much less research and practice on consumables, especially low-value consumables.

 

However, in the practice of frontline medical care, the importance of all medical products is the same. In an operation, the quality or quantity of low-value consumables, such as gauze, not meeting the requirements may also lead to surgical failure. During the fight against the epidemic, medical masks, protective glasses, and protective clothing became a severely short-supplied link, not only causing large-scale spread of the epidemic in various places, but also causing many medical workers and their families to be infected. It is believed that in the future, the country will increase its attention to low-value medical consumables, especially as important emergency medical supplies, some medical consumables may be included in the country's long-term strategic reserves to ensure social needs.

 

3. The epidemic allows AI, robots, and other intelligent medical technologies to show their talents

 

AI intelligent medical products. In epidemic control, as a hot spot in the industry in recent years, AI imaging, AI electrocardiogram machines, and other equipment can effectively solve the processing of massive amounts of disease data, screening of disease markers, and simulation of treatment plans during the epidemic, comprehensively improving the efficiency and accuracy of diagnosis. At the same time, it reduces the workload and intensity of laboratory, pathology, and imaging doctors. iFLYTEK developed artificial voice products, intelligent outbound calls, and online customer service, and epidemic prevention robots; InferVision and Alibaba DAMO Academy developed novel coronavirus AI film reading software. It is believed that in the future, AI-based medical process optimization, tiered diagnosis and treatment, health management and patient follow-up, and regional health information sharing platforms will all help to achieve interconnection and interoperability of medical resources and improve the efficiency of diagnosis and treatment.

 

Various medical robots. This epidemic has given robots used for disinfection, food delivery, medication dispensing, temperature measurement, diagnosis, nursing, companionship, transportation, and ultrasound a chance to join the frontline defense, playing an important role in a world of contactless interaction. This not only reduces the workload of medical staff to a certain extent, but also reduces the chance of cross-infection.

 

For example, more than 30 intelligent disinfection robots from Shanghai Titmi Robot were used in Wuhan hospitals, achieving human-machine separation and ensuring personnel safety. Guangdong Provincial People's Hospital introduced a drug delivery robot to deliver medicine to patients' wards, greatly reducing the frequency of medical staff entering the isolation area. Huntington's medical service robots from Cheetah Mobile were put into use at Wuhan Huoshenshan Hospital. A hospital ward in Washington, USA used robots for treatment, enabling the recovery of COVID-19 patients and reducing the risk of additional infection. The Guangzhou Nansha Wanda Plaza launched a 5G patrol and temperature-measuring robot that can accurately measure the temperature of up to 10 people's heads within a five-meter range.

 

In fact, it's not just the various robots that participated in this epidemic. After this epidemic prevention and control war, various surgical robots, rehabilitation robots, and other robots in various fields will be widely used in the medical field in the future. At the same time, high technologies represented by AI, robots, 5G, big data, gene technology, VR, and cloud medical care will be applied beyond expectations to multiple fields such as medical diagnosis, treatment, and disease prevention.

 

4. The epidemic has brought a larger market for disinfection and infection control and health protection products

 

Disinfection and infection control products. The outbreak of the epidemic made the word "disinfection" an instant hot search term. It is reported that as of February 11, Lao Ken Medical has received orders for 27,350 sets of disinfection equipment. Yu Yue Medical, which had consecutive daily price limits, announced on the evening of February 3 that due to the spread of the epidemic, the demand for epidemic prevention and control products has surged, and the company's disinfection and infection control, temperature measurement, oximeters, and masks are completely sold out.

 

Emergency protection medical supplies. The nationwide shortage of masks, thermometers, and related consumable production equipment after this epidemic fully exposed the shortcomings of the country in the construction of the emergency medical system. Recently, the Ministry of Industry and Information Technology issued a list of key guaranteed materials (medical emergencies) for epidemic prevention and control. The 15 systems, 9 mechanisms, and 4 systems mentioned in the "Twelfth Meeting of the Comprehensive Deepening Reform Committee" convened by the central government on February 14 also fully reflect the country's high attention to the emergency medical field in the future.

 

Household health protection products. Needless to say, masks, thermometers, gloves, and antiviral products related to the epidemic were sold out. The demand for household diagnostic and monitoring medical devices and wearable medical devices, such as sphygmomanometers, glucometers, oximeters, electronic stethoscopes, and smart bracelets, has surged. It is reported that during the epidemic, JD.com sold 130 million masks in three days. E-commerce O2O platforms represented by JD.com and Taobao will usher in more business opportunities in the future.

 

After this epidemic, people will pay more and more attention to health. Various chronic disease management systems based on household diagnostic and monitoring equipment and health science education software will have a large market in the future. At the same time, health care, preventive care, and medical and sports integration household products will become increasingly rigid demand for people.

 

Rehabilitation, physiotherapy, and TCM products. In recent years, the TCM concept of treating diseases before they occur has gradually gained popularity. The efficacy of TCM treatment during the epidemic prevention and control period is remarkable, becoming the first choice for many people to prevent the epidemic. It is believed that after the epidemic is under control, TCM will still be a focus of attention.

 

Undoubtedly, the rehabilitation and follow-up treatment of patients with the epidemic is also very important. It is expected that the innovative applications of related products such as lung capacity meters, home ventilators, oxygen generators, nebulizers, rehabilitation training instruments, and psychological rehabilitation assessments will become increasingly active.

 

In addition, under the epidemic, we have seen the full display of the cluster advantages of some Brands in the industry. Whether it is the regional industrial cluster Brands of Henan Changyuan, Hubei Xiantao, or Jiangxi Jinxian, their influence in China has been further enhanced, and the advantages of cluster development will be more prominent in the future.

 

5. Integration of medical device industry logistics and channels will be more valued after the epidemic

 

During the epidemic, the demand for medical supplies in severely affected areas such as Wuhan surged sharply, and insufficient reserves made it crucial to deliver necessary medical supplies to the front line in a timely manner. In addition, the public also needs to purchase protective supplies such as masks from retail pharmacies. These haveled to a sharp increase in the sales of a large number of pharmaceuticals, medical devices, and protective supplies, and a sharp increase in the pressure on logistics and transportation.

 

Before the epidemic is effectively controlled, logistics capacity will mainly be used for medical supplies distribution,whether it can ensure a continuous and sufficient capacity is the key. During the epidemic, logistics companies represented by Jiuzhoutong have attracted special attention from the industry for their efficient delivery of medical supplies to the front line.

 

For logistics and distribution companies, pharmacies (including online pharmacies) and hospitals are the main end users. Currently, because the storage, transportation, and distribution of drugs must comply with the standards of the "Good Supply Practice for Drug Operation", the logistics and transportation costs have increased.

 

Hospital-end demand is generally rigid demand; for rigid demand from the hospital-end, it is expected that logistics and distribution services will be further improved after the epidemic. In the long run, this epidemic has conducted a "test" of logistics and distribution: after high-intensity and intensive transportation, logistics companies have further improved their understanding and management of various aspects such as the storage and transportation of drugs and medical devices.In the future, industry players will further optimize their logistics systems, establish more scientific and reasonable management mechanisms, and emergency response mechanisms for epidemics.

 

Channel integration continues to advance.In terms of channels, pharmaceutical production enterprises and distributors who have completed vertical mergers and acquisitions in the upstream, midstream, and downstream of the industrial chain have an advantage in material supply and demand allocation because they can effectively reduce costs from procurement to transportation and distribution. Vertical mergers include:Upstream production enterprises merge with midstream distributors to optimize channels; large midstream channel enterprises merge with small upstream producers to achieve self-production; midstream channel enterprises merge with downstream medical service providers to optimize services.No matter what form of merger and acquisition, it can faster match the supply and demand upstream and downstream. In the future,industry integration will continue.

 

The epidemic has led to a surge in the atmosphere of innovation and entrepreneurship in the industry

 

As one of the most important sub-fields of the life health industry, medical devices require a high threshold for product listing, which requires multiple stages, including registration testing, clinical evaluation, and technical review. During this epidemic, with the encouragement of government policies, many scientific and technological personnel in the industry have invested in the development of innovative products, such as virus isolation beds, isolation cabins, and new coronavirus detection kits, which have quickly obtained registration certificates, and some innovative medical devices have been quickly used in clinical practice.

 

In addition, other industries such as electronics and traditional manufacturing will be affected by the epidemic and quickly switch to the production of medical protective products and online diagnosis and treatment services. The addition of these technical talents will strongly promote the development of the medical device industry.

 

Meanwhile, at a meeting held on February 3, the Central Committee of the Communist Party of China proposed increasing efforts in scientific research and development and encouraging innovation. In the "Notice on Work Related to Helping Small and Medium-sized Enterprises Resume Work and Production and Overcome Difficulties Together in Response to the Novel Coronavirus Pneumonia Epidemic", issued by the Ministry of Industry and Information Technology on February 9, Item 12 mentions organizing and carrying out innovation in technologies and products related to epidemic prevention and control, encouraging "specialized, refined, and innovative" small giant enterprises and "specialized, refined, and innovative" small and medium-sized enterprises to carry out technological breakthroughs and production innovation in areas such as detection technology, drugs and vaccines, medical devices, and protective equipment for the prevention and control of COVID-19. Small and medium-sized enterprises that make significant breakthroughs will be given priority consideration when applying for "specialized, refined, and innovative" small giant enterprises.

 

It is believed that after the epidemic, the country will further optimize the supervision and innovation and entrepreneurship of medical devices, and more favorable policies encouraging industry innovation will be introduced in the future.

 

How should medical device companies prepare for the post-epidemic period?

 

1. The needs of medical institutions affect upstream enterprise production

 

Hospitals have communicated their needs formedicines and consumablesandequipmenthave been significantly impacted by the epidemic, affecting upstream enterprises in different ways.

 

Since we are currently in a critical stage of fighting the epidemic, hospitals across the country have invested their main resources in epidemic detection and treatment. Therefore, the demand for medical consumables and equipment related to virus detection and diagnosis has almost become an urgent need for current hospitals. From a yearly perspective, due to the unconventional demand generated by the epidemic, the output and sales volume of upstream production enterprises in the first half of the year will be significantly higher than in the second half. Since it is still unclear when the epidemic will end, this type of demand will continue.

 

After the epidemic, hospitals at all levels will further strengthen their ability to respond to major infectious diseases. Therefore, while the overall downward trend in procurement demand continues, some hospitals will still continue to release a certain amount of demand for the procurement of medicines and equipment. Compared with the procurement materials during the epidemic, after the epidemic, hospital procurement needs will focus on important medical reserve supplies such as blood products.For upstream manufacturers, it is necessary to scientifically formulate product production plans and inventory management, and try to avoid situations where excessive production or mismatched demand lead to inventory pressure that is difficult to release after the epidemic.

 

Currently, because most hospitals are directing their main resources to epidemic prevention and control, and in order to prevent cross-infection in hospitals, some ordinary outpatient clinics have been temporarily closed, and some flexible medical needs (such as medical beauty, dentistry, ophthalmology, etc.) have also been postponed due to the need to avoid the epidemic, which has also led to a temporary decrease in the demand for related medicines and equipment.

 

2. Transformation of the offline + online marketing combination model

 

The current epidemic is the most serious predicament, and it also brings new challenges to enterprise marketing. Many medical device companies choose offline exhibitions or direct customer visits for marketing. However, exhibitions are currently postponed and customer visits are inconvenient. Should online marketing be strengthened in the pre-exhibition period? Managers should consider how to upgrade marketing at this critical moment, how to use effective online marketing methods to reach the most accurate customer groups, how to inform target customers of news at the first moment of new product launches, and how to build a high-quality corporate image through online marketing platforms. At the same time, consider how to lay the groundwork for exhibition and customer visits after the epidemic to enhance their effectiveness.

 

In short, the impact of this "black swan" event brought by the epidemic on the national economy, society, and culture is still ongoing, and the epidemic will also bring major or minor changes and impacts to the reform of the entire Chinese medical system, including medicine, medical care, and medical insurance. However, no matter what, we firmly believe that the medical device industry, as one of the important indicators to measure a country's scientific and technological progress and the modernization level of its national economy, will increasingly become a pillar industry of the national economy in the future, and will shoulder more responsibilities and play a greater role in safeguarding human health.