Mindray continues scouting for M&A with strong cash position; COVID-19 enhances global customers – IR

27 April 2020 - 07:09 am UTC

by Jane He and Neal Zhang

  • CNY 14.3bn cash reserve at hand for M&A
  • Auctions delayed till 4Q20 at the earliest
  • Explosion of overseas ICU-equipment demand

China’s largest medical equipment manufacturer Shenzhen Mindray Bio-Medical Electronics, will be actively scouting for M&A targets throughout the next three to five years with its strong cash reserves at hand, the company’s IR official told Mergermarket.


The company reported CNY 14.3bn (USD 1.9bn) cash reserves at hand as of 2019, growing 24% YoY, according to its 2019 annual report.


Mindray’s CEO Cheng Minghe stated in an investor call held on 2 April that, as it may have difficulties in achieving M&As in the US due to the growing political disputes with China, Europe will be the preferred destination. Generally speaking, the virus crisis, potentially with adjustment in valuation, would bring economic benefits to acquirers, Cheng said.


Currently most of the overseas deal auctions have been delayed during the virus outbreak till the fourth quarter at the earliest, he added.


Patient monitoring & life support, in-vitro diagnosis, and medical imaging system, which are the three business units of Mindray, will continue to be the major focuses in M&A, the IR said.


Targets with established sales network in overseas market or niche technologies will be on its radar, the IR noted.


The company takes M&A as a key development strategy to become a global medical equipment player in the near future. It aims to improve its high-end products through integrating advanced technologies in matured businesses such as that of patient monitors, while expanding market share in growing-stage businesses such as ventilators, infusion pumps, AED, chemiluminescence immunodiagnosis, point-of-care ultrasound imaging system, medical rigid endoscope and veterinary medical equipment, through M&A, according to its 2019 annual report. It will also consider targets with localized operating platform that can rapidly adapt to local regulation changes and market trend, the report noted.


Mindray has been growing with both technology innovation and M&As in the past years. It has acquired the patient monitor business from US-based Datascope in 2008, gaining market access to US hospitals with the target's comprehensive direct sales channels. It also acquired California-based advanced ultrasound equipment maker Zonare Medical Systems in 2013 and developed its high-end ultrasound product based on Zonare’s technology.


ICU-equipment export surges on account of pandemic


The global delivery of patient monitor equipment, invasive ventilators and portable ultrasound used in ICU centers have surged from March and is expected to continue during the second quarter, according to another investor brief on 7 April.


Mindray has made substantial breakthroughs into new customer base in 1Q20, which would otherwise have taken it years to accomplish, said the IR.


Mindray has received explosive orders from over 100 countries, especially the UK, Italy, Russia and Brazil, and delivered over 40,000 medical equipment overseas since January, according to a local media report citing vice president Chang Hao.


The company’s manufacturing plants are running at three to four times of its normal capacity, as reported.


Meanwhile the virus outbreak provides the company with opportunities to expand high-end hospital clients and improve brand recognition. Large hospital groups, lab chain operators and hospital alliances are becoming Mindray’s clients, according to the company’s April 2’s investor brief.


Mindray has received Emergency Use Authorization (EUA) license from US FDA in the end of March for its invasive ventilators, as announced.


It has the leading position in patient monitoring and anesthesia machines in the US market and is looking forward to its ventilators market expansion in the US, according to its April 2 investor brief. The pandemic significantly advanced its global expansion plan for ventilators, especially in developed countries, the company said.


The global shortage of ICU equipment also benefited other Chinese players such as Yuyue Medical and Edan Instruments, improving the M&A willingness of those companies to expand overseas sales network, according to reports by this news service. 


Financial highlights in 1Q20


Mindray has posted CNY 16.5bn in sales revenue and CNY 4.68bn net profit in 2019, growing 20.38% and 25.85% YoY respectively, according to its 2019 annual report.


The company released its earnings guidance for 1Q20 on April 9, predicting a 15%-25% growth in sales revenue and 25%-35% growth in net profit during the first quarter, due to the surge in ICU equipment demand during the pandemic.


Mindray's cash ratio has been significantly improved  from 2017 to 2019. 


 (Source: Mindray 2019 annual report)