Mindray: Heavy Bet on IVD!

On the evening of July 11th, Mindray Medical responded to investor inquiries on its investor relations platform.

Q: Hello, Secretary to the Board. Could you please disclose the proportion of Mindray Medical's revenue derived from one-time sales (e.g., large medical equipment) versus recurring revenue (e.g., consumables)? How strong is the customer stickiness and competitiveness of Mindray's products? In which key aspects does the company's product moat primarily manifest? Is the high gross margin of the products sustainable?

A: Thank you for your interest. Currently, consumables revenue (including IVD reagents, minimally invasive surgery consumables, cardiovascular consumables, etc.) accounts for approximately one-third of the company's total revenue.

The company will continue to expand its layout in the consumables business domain.

Whether viewed from market space, industry growth rate, or Mindray's current market share, the IVD product line undoubtedly takes the lead in long-term growth among the three major business segments. We are actively expanding breakthroughs with high-volume customers both domestically and internationally to continuously increase the proportion of reagent revenue. To achieve this goal, Mindray is tilting resources in R&D, marketing, overseas production, and even M&A towards IVD. The competitiveness of products represented by chemiluminescence immunoassays is expected to reach a world-class level within the next two years. We are also gradually entering new fields such as molecular diagnostics and clinical mass spectrometry to ensure the long-term rapid growth of the IVD product line.

Beyond IVD, Mindray is vigorously cultivating seed businesses in consumables like minimally invasive surgery and cardiovascular. Expanding capabilities into these areas undoubtedly opens up entirely new and vast global addressable markets. These consumables businesses are expected to maintain high-speed growth trends in the long term.

On another front, Mindray is driving the comprehensive transformation of its equipment business towards digital and intelligent solutions. Currently, economic development and population aging are continuously generating stronger medical demand. Although countries are consistently increasing medical investment, this has not effectively solved the problems of scarce and unevenly distributed medical resources. The company believes digital and intelligent solutions are powerful tools to help address these issues. Here, "digital" and "intelligence" respectively represent integrating IT and AI technologies into the original medical equipment hardware and software foundation, aiming to effectively enhance the quality and efficiency of diagnosis and treatment.

Mindray's deep layout in the equipment field, its technological leadership advantages, the scale of its installed base, and the recent strong push for the "Three Rui's" Ecosystem and AI clinical applications uniquely position the company to lead this comprehensive digital and intelligent transformation. In the future, Mindray's competitive advantage will no longer rely solely on a single parameter, a specific technology, or lower product prices. Instead, it will lie in helping hospitals comprehensively elevate their medical service levels while simultaneously improving efficiency and controlling costs. This is expected to significantly increase Mindray's market share in the equipment domain and build a deeper industry moat.

Enhancing the revenue contribution of high-margin businesses and high-margin markets through product premiumization and customer premiumization is a crucial approach for us to maintain stable profit margins in a volatile market environment.

First, Premiumization:

For example, in 2024, the contribution of high-end and ultra-high-end models to domestic ultrasound revenue has further increased to 60%. In 2025, with the support of the ultra-high-end obstetrics and gynecology ultrasound system Nuewa A20, the company's penetration rate in the ultra-high-end ultrasound market is expected to further improve.

Second, Consumables Focus:

In 2024, Tier-3 hospitals already contributed 40% to domestic chemiluminescence revenue. As the installation of key new products like the MT 8000 and MT 8000C automated lab lines accelerates in Tier-3 hospitals, the proportion of IVD reagent revenue is also expected to rebound. Beyond reagents, minimally invasive surgery consumables and cardiovascular consumables will continue to experience high-speed growth. The rapid development of these high-margin businesses will positively contribute to the company's gross margin.

Furthermore, by increasing the proportion of self-produced IVD raw materials through HyTest, the gross margin level of the consumables business is expected to reach an inflection point within the next two to three years.

Having navigated the challenges of recent years, the company's understanding and adaptability to various medical insurance policies like centralized procurement (GPO) and DRG/DIP have strengthened. This ensures the timeliness of our policy interpretation, our proactive cooperation with policies, and our strong execution capability in implementing them.

Simultaneously, the National Healthcare Security Administration (NHSA) is continuously optimizing centralized procurement rules. Current centralized procurement practices ensure reasonable profit levels for enterprises while considering clinical usage needs. The profitability of Mindray's equipment products is influenced by multiple factors, including component prices and the competitive market environment. The impact of centralized procurement projects on profit margins remains within a controllable range.

The gross margins of the company's three major business lines have consistently remained above 60%, demonstrating resilient profitability and market competitiveness.

In the long term, the company is confident in maintaining a high level of profitability through technological innovation and cost optimization. Thank you.

About Mindray Medical International Limited:

Mindray Medical is a leading global provider of medical devices and solutions, primarily engaged in the R&D, manufacturing, marketing, and servicing of medical devices. The company's main products currently cover three major fields: Patient Monitoring & Life Support, In-Vitro Diagnostics (IVD), and Medical Imaging. It possesses the most comprehensive product portfolio within the domestic industry, meeting clinical needs with safe, efficient, easy-to-use "one-stop" products and digital/intelligent solutions. The company is consistently customer-need oriented, committed to providing high-quality products and services to global medical institutions through technological innovation and integrated innovation. This aims to help improve medical conditions and reduce healthcare costs worldwide. The company's products and solutions have been applied in over 190 countries and regions globally.