Medical laboratory diagnostics giants are facing a new round of expansions

Medical laboratory diagnostics giants are facing a new round of expansions

KingMed Diagnostics, Guangzhou based medical laboratory diagnostics giant, has officially listed in the Shanghai Stock Exchange on September 8th, marking the beginning of the Chinese third-party medical diagnostics industry holding hands with the capital market.

KingMed Diagnostics, established in 2003, is an independent medical laboratory specializing in third-party medical testings and pathological diagnoses. Its main business is to provide outsourcing services to medical institutions, including hospitals, community clinics, etc. After years of development, it has already become the leader of the Chinese third-party diagnostics industry.

Currently, it has a total of 34 offices offering medical testings and pathological diagnoses, along with a number of other subsidiary businesses, including diagnosis reagent production, sales, cold chain logistics, etc.

KingMed’s Main Businesses
KingMed’s businesses are largely distributed among 6 major areas, including mass spectrometry analysis, genome testing, pathological diagnosis, biochemical and luminescence detection, immunological measurement, and other comprehensive exams, amount to a total of more than 2,300 medical diagnostic tests.

This is only a part of the story. On the other side, it also carries out a range of non-medical and pathological diagnosis outsourcing services — food hygiene monitoring, clinical trial research, forensic and health examination, testing reagents sales, etc., and is gradually transitioning from an independent medical laboratory into an integrated medical service provider.

Worth noting is that in addition to its thriving Mainland China business, KingMed is also stepping up efforts to expand its Hong Kong and overseas territories through a series of diversification and M&A moves, including the establishment of the Hong Kong KingMed office and the acquisition of Zhenqiu Medicine.

Undoubtedly, third-party medical testings and pathological diagnoses are still KingMed’s main business. In 2016, it alone has bagged more than $400 million for KingMed, accounted for larger than 94% of its total revenue.

KingMed’s Future development
In the next three years, KingMed will primarily focus on the following goals.

1. Accelerate the construction of the network of level four laboratories, continue to explore new territories and fields, and enter overseas markets
2. Vigorously expand medical laboratory detection services to promote the platform construction and strengthen clinical disease diagnosis capabilities
3. Improve the organizational structure reconstruction and advance the development of large customer market strategically
4. Deepen international collaborations and enhance the quality of high-end detection services and customization capabilities
5. Actively explore the B2C business model and mine the values of medical big data
6. Accelerate the construction of biological sample banks and examine third-party biological sample and information management services

Fueled by these goals, the major purposes of KingMed’s recent IPO is to expand its laboratory capabilities, develop and upgrade the marketing and logistics network, and establish new R&D centers.

The competition and future market trends
Although still in its initial stage, the Chinese third-party medical laboratory detection market has maintained a relatively high growth rate, about 35% annually. At present, its total market value amounts to around $1.5 to $2 billion, accounting for only 5% to 7% of the medical detection market. Compared to that of 35% in the US, China has lagged behind the world leading countries. In the wake of Chinese healthcare system reform and the support of national policies, it is predicted that the market will continue to maintain its 35% to 40% rapid growth rate from 2014 to 2020, accounting for 7% to 9% market share; the market potential is huge.

On another note, in an effort to support and develop domestic and local businesses, the Chinese medical service industry is protected from competitions abroad. This means that foreign large-scale third-party medical detection institutions, such as Quest and Labcorp from the United States, although dominating the market in its own country and armed with more advanced technologies and a mature business system, will not threaten the development of the domestic medical service industry in China.

As of May 2017, China has a total of 342 regional medical imaging centers, 689 regional medical laboratories, and 185 regional pathological diagnosis centers. Among them, four players, implemented the national chain management model and equipped with large-scale integrated independent medical laboratories, dominate the market, including KingMed, AdiCon, Zhejiang DIAN Diagnostics, and Da An Gene, accounted for more than 70% of the total market share. Others are small scale, regional, and subdivision focused local medical detection companies.

In the light of China’s national policies to promote the development of the third-party medical detection services, along with the influx of capital, the market is gradually gaining steam. Undoubtedly, a slew of companies will jump on board in the future, and we have already begun to experience this trend. Although KingMed has been winning out the competition and has established itself at the forefront of the market, it still faces a range of challenges from the late comers.

The success of KingMed’s recent IPO suggests that the relative single financing channel problem, which has long been bothering KingMed and curbing its expansion, has been greatly alleviated; KingMed will soon embrace a new round of developments.

KingMed is only a representative of the rapid development of the Chinese third-party medical detection industry. Fueled by the support of Chinese national policies, as well as promising market potentials and the influx of capital, we can predict that the golden age of China’s third-party medical detection industry is coming.

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