Mindray Medical International Limited. Third Quarter 2007

Transcription

1 Mindray Medical International Limited Third Quarter 2007

2 Disclaimer This material contains forward-looking statements with respect to the company's outlook regarding drivers, developments, and trends affecting its worldwide markets, opening of international offices, new product development and commercial launch dates, projected revenues, net income margins, earnings per share, revenue growth targets, net income growth targets, sales force and distributor targets, projections of the size of China's healthcare market, estimated government expenditures, research and development expenditure targets, the company's manufacturing development plan, and the anticipated results of its product development activities. These statements are based on information available at the time they are made and are subject to a number of risks and uncertainties. Actual results could differ materially from those anticipated by these forward-looking statements as a result of a number of factors, some of which may be beyond the company's control. Factors that affect the Company's business operations and product development, as well as a further list and description of risks and uncertainties associated with Mindray's business, are discussed in its reports filed with the Securities and Exchange Commission, including its most recent annual report on Form 20-F. Mindray disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. 1

3 Mission and Vision MISSION To improve the health and wellbeing of the world s people by providing the highest quality medical equipment and services at the most competitive prices VISION To be a worldclass medical equipment solutions provider by increasing accessibility to affordable quality health care while creating value for customers, employees, shareholders and society 2

4 Company Snapshot Founded in in 1991 in in Shenzhen, China offices in in China, international offices More than 3,700 employees worldwide World-class R&D platform with largest R&D team in in China and and a research center in in Seattle, USA Leading market position in in China sales sales and and service offices in in major major cities cities throughout China China sales sales and and sales sales support staff staff Over Over 2,000 2,000 distributors including nearly exclusive distributors Established and and rapidly growing presence abroad Sales Sales in in more more than than countries More More than than 1,200 1,200 international distributors 3

5 Product Lines Patient monitoring & life support products Patient monitoring devices Anesthesia Machines Defibrillators 20+ models In-Vitro diagnostic products 3 part hematology Biochemistry 5 part hematology 10+ models 30 hematology reagents and 35 biochemistry reagent Diagnostic imaging systems B/W ultrasound Color Ultrasound Digital radiography 10+ models 4

6 Solid Financial Profile Net Revenue 1 (US$mm) CAGR = 49% 54.3% 54.3% 54.3% % E Gross margin 100% 75% 50% 25% 0% Revenue Breakdown Jan-Sep07 Geographic Breakdown North America 8.0% Europe 17.0% Other 11.6% China 49.8% Net Income 1,2 (US$mm) % % CAGR = 58% % % % E Net Margin 100% 75% 50% 25% 0% Ultrasound 29.1% Other Asia 13.5% Jan-Sep07 Segment Breakdown Diagnostic 30.8% 1 Foreign exchange rate: using the noon buying rate of the Federal Reserve of New York at the quarter/year end 2 Non-GAAP net income excluding impact from share-based compensation, amortization/expense of acquired intangibles (net of tax impact) Other 1.5% PMD 38.6% 5

7 2007 Achievements Achieved robust top- top-and bottom-line growth Net Net revenues in in the the range range of of RMB2,180 to to 2,200 2,200 million, a 43.9% 43.9% or or 45.2% 45.2% YoY YoY growth Net Net income in in the the range range of of RMB RMB to to million, a 53.6% 53.6% or or 58.3% 58.3% YoY YoY growth Leveraged our our leading market position in in China Expanded No. No. 1 market share share position in in existing product segments No. No. 1 domestic player player in in 5-part 5-part hematology analyzers and and color color ultrasound imaging systems Enhanced international presence Achieved more more than than 50% 50% growth rate rate (60%+ in in constant dollar dollar terms) terms) in in international markets Opened six six more more international offices offices in in Expanded current product offerings to to broaden market reach Launched seven seven new new products Entered into into a new new product segment Digital Digital Radiography Maintained a disciplined cost focus 6

8 Leading Market Position in China More than 80% of our sales are through distributors Urumchi Lanzhou Chengdu Kunming Chongqing Xi an Guiyang Nanning Taiyuan Zhengzhou Beijing Wuhan Changsha Guangzhou Shijiazhuang Shenyang Jinan Nanjing Hefei Dalian Qingdao Nanchang Shenzhen Hong Kong Shanghai Hangzhou Fuzhou Changchun Competitive Price Price to to Performance Ratio Ratio Around Around 30% 30% discount discount vs. vs. international international players players 20% 20% premium premium vs. vs. domestic domestic players players Extensive Sales Sales Network sales sales and and sales sales support support offices offices sales sales and and service service staff staff 2,000+ 2,000+ distributors distributors (incl. (incl. over over exclusive exclusive distributors distributors Sales Sales Force Force Management Low Low employee employee turnover turnover rate rate experienced experienced sales sales employees employees Strong Brand Brand Recognition Brand Brand loyalty loyalty recognized recognized domestic domestic hospitals hospitals across across China China High-quality High-quality products products and and customer customer support support services services 7

9 Growth Catalysts in China---Macro Environment Chinese public health market Forecast incremental demand by RMB billion CAGR 12.7% CAGR 20.1% Healthcare spending (US$ bn) Spending Incremental Demand by By 2020 $US776 bn of incremental demand will come from China Source: Goldman Sachs Research, Gao Hua Securities Research estimates 1914 India China U K Germany Japan U S Healthcare expenditures as % GDP Government Bugdetary Expenditure Resident Individual Expenditure E2005 E2006 E2007 E2008 Social Expenditure E2009 E , % 5,711 1, % 2,428 1, % 2, % 7.6% 1, GDP(US$ billion) Healthcare expenditure per capita(us$) % of GDP used for healthcare expenditure 5.6% 4.1% 3.1% US UK FR CN TR IN RU ID Source: China Statistical Yearbook 2006, Bear Sterns Asia Ltd. estimates Source: WHO and National Bureau of Statistics of China,

10 2008 Growth Strategy in China Gain market share share in in high-end markets Further Further penetrate penetrate high-end high-end patient patient monitoring monitoring market market with with Beneview Beneview Series Series products products 5-Part 5-Part Hematology Hematology Analyzer Analyzer newly newly released, released, significant significant market market potential potential Target rural rural area area hospitals and and community clinics DC3 DC3 Color Color Ultrasound Ultrasound First First color color ultrasound ultrasound targeted targeted rural rural hospitals hospitals Strong Strong government government tender tender potential potential BS-120: BS-120: Replacement Replacement for for semi-auto semi-auto bio-chemistry bio-chemistry analyzer analyzer Introduce new new products to to penetrate new new markets Anesthesia Anesthesia Machine Machine new new product product segment, segment, significant significant market market potential potential Digital Digital Radiography Radiography Biochemistry Biochemistry analyzers analyzers with with speed speed of of tests tests per per hour hour Generate more more recurring revenue from from reagents Wide Wide installation installation base base of of 3-part 3-part hematology hematology analyzers analyzers More More biochemistry biochemistry reagents reagents launched launched into into market market Enhance brand brand recognition Differentiate Differentiate from from domestic domestic peers peers by by branding branding 9

11 Rapidly Expanding International Presence Revenue Breakdown by Region CAGR 112.9% 103.8% 87.3% 50.5% 31.0% 48.8% Other Asia Europe Other North China Total America North America 7.7% Europe 6.7% Other Asia 7.3% Other 3.1% China 75.2% Other 11.6% North America 8.0% Eur ope 17.0% Other Asia 13.5% China 49.8% 2003 Total Revenues: RMB 460million (US$56mm) Jan-Sept / 2007 Total Revenues: RMB 1,557 million (US$208mm) 10

12 Growth Catalysts in International Markets Aging Population (More Patients) Developed Countries (North America, Western Europe and Japan) Cost-cutting healthcare reform Doctor/Nursing --staff staff shortages Expansion in in clinical application Emerging Markets (BRICs, VISTA, Eastern Europe, Mexico) Increased disease awareness Better affordability Expansion to to other product areas such as as DR DRand defibrillators 11

13 Strategy for International Expansion Vancouver Toronto London Amsterdam Moscow Seattle Boston France Istanbul 30 Offices in China AMERICA EUROPE AFRICA ASIA-PACIFIC in Mexico City Mumbai Global HQ Shenzhen Indonesia Current Offices Opening Soon Sao Paulo Open more overseas offices Localization Expand and optimize distribution and service network Enhance brand awareness 12

14 Proven R&D Capabilities R&D Team Size PMD Diagnostic Ultrasound R&D Headcount Over 1,000 staff Over 1,000 staff R&D Investment (US$mm) 30.0 % of sales (%) 8.1% 8.6% 8.8% 9.8% 9.8% % 10.6% 10.0% 8.0% Others % % R&D Structure E Note: GAAP R&D investment as percentage of sales is 8.8% in 2004, 9.6% in 2005 and 9.4% in 2006 Patents 4.0% 2.0% 0.0% Degree Functionality Master 47.6% Others 7.4% PhD 2.8% Bachelor 42.2% Testing 8.0% Mechanic 11.0% Others 8.0% Software 33.0% Patents Authorized (in China): 212 Pending (in China): 484 System 16.0% Total: 1,036 Engineers Hardware 24.0% Pending (in USA): 107 Note: As of April 30,

15 New Product Pipeline Patient Monitoring & Life Support Products In-Vitro Diagnostic Products Diagnostic Imaging Systems Addressable Market Defibrillator & Surgical beds and lights Anesthesia Machines Patient 3-part Monitoring Hematolog Devices y Addressable Market 3-Part Hematology Immunoassay 5-Part Hematology Biochemistry Addressable Market Digital Radiography Color Ultrasound B/W Ultrasound Other Imaging Products Time New Products in 2008 ipm Monitor (4Q, 2008) Time BC-5300/ Part Hematology Analyzer (1Q, 2008) Time DC-3 Ultrasound (1Q 2008) DC-7 Ultrasound (4Q 2008) Defibrillator (4Q 2008) BS-380 Biochemistry Analyzer (4Q 2008) DR-50 Digital Radiography (2Q 2008) 6 Reagents (1Q 2008) DR-51 (4Q 2008) 14

16 Maintain Sustainable Cost Advantage Consolidated Gross Margin * (%) 58% Maintain a consistent gross margin of 54~56% during the past 4 years 57% 56% 55% 54% 54.3% 54.3% 54.3% 54.7% 55.0% 56.7% R&D lowers costs and pushes products up the value chain R&D working together with manufacturing to deliver competitive cost advantage 53% 52% / /2007 Further increase our operational efficiencies as we build economies of scale * Non- GAAP 15

17 Summary Mindray s mission to provide high-quality medical devices at affordable prices has proven to deliver high-growth in both developed and developing markets Pragmatic positioning in each market and segment optimizes earnings by striking a balance between profit and market share World-class R&D capabilities and operational efficiency ensures quality consistency, pricing competitiveness and abundant cash flow Diversified product portfolio and geographic distribution reduces earnings fluctuations and maximizes exposure to growth opportunities across segments and geographies 16

18 Thank you! Q&A 17

19 And Leading Market Positions in China Other Imported 8.6% Source: Company Estimates Patient Monitor Devices BLT 1.6% Other Imported 2.9% GE 13.5% Philips 18.1% Other Domestic 5.6% Sysmex 14.2% Procan 2.1% Botest 5.6% Gotom 2.7% Tecom 11.2% Goldway 3.3% SpacelabsDrager NK 2.0% 3.7% 3.5% Other Domestic 5.9% SH Likang 3.2% Biote NK 3.4% 3.9% Perlong 3.0% Mindray 39.9% 3-Part Hematology Analyzer RMB 1,025mm Mindray 42.4% RMB 465mm 200~400 T/H Biochemistry Analyzer Olympus 11.3% Hitachi 16.0% Hitachi 1.9% Aloka 9.0% Medison 2.3% Siemens 4.5% GE 14.3% Other 15.3% Toshiba 8.2% Toshiba 5.3% Other 4.8% Teknova 3.5% Sinnowa 1.7% Vitalab 3.2% B/W Ultrasound Glamour 3% Zhonghui 6.2% Emperor 4.5% SIUI Chinson5.6% 4.0% Transasia 3.0% Sysmex Beckman4.1% 5.4% Landwind 3.3% Well 2.7% Mindray 28.4% Mindray 28.1% RMB 590mm RMB: 693mm 18

20 New Growth Areas in China 5-Part Hematology Analyzer Sysmex 33.9% Other 5.0% Bayer 3.7% ABX 7.6% Anesthesia Machine NK 8.9% Abbott 8.6% Mindray 14.0% Coulter 18.3% RMB 301mm Color Ultrasound Toshiba 5.4% Aloka 9.1% Siemens 10.4% Esaote 5.9% Medison 4.3% Hitachi 4.0% Philips 20.3% Biochemistry Analyzer SonoScape 1.4% Neusoft 1.7% Tearson 1.0% Other 2.5% Mindray 4.7% GE 29.7% RMB 2,560mm 航天长峰 6.4% 百思 8.8% 无锡中原 5.7% 江苏凯泰 5.7% 晨伟 2.8% Other 4.3% Mindray 4.0% GE 22.8% Sinnowa 4.3% Roche 6.5% Sysmex 2.1% Abbott 3.3% Other 19.0% Mindray 14.8% Source: Company Estimates 谊安 18.2% Drager 21.3% RMB 703mm Toshiba 6.9% Beckman 10.9% Olympus 14.5% Hitachi 17.7% RMB 1,078mm 19

21 Appendix: Excellent Financial Trajectory Revenue Growth Growth of Income before Taxes & MI* 60% 50% 40% 30% 50% 52% 55% 41% 50% 60% 50% 40% 30% 50% 52% 55% 41% 50% 20% 20% 10% 10% 0% YTD EPS* 0% YTD Free Cash Flow E YTD * Non-GAAP; 2007YTD using unaudited data as of September 30, 2007; 2007E data using mid-point of the latest 2007 guidance (RMB) (RMB millions) 20

22 Prudent Working Capital Management (Days) Accounts Receivable Q07 (Days) Inventory Days Q07 (Days) Accounts Payable (RMB mm) Operating Cash Flow Q YTD 21

23 Financials -- 3Q2007 Results Highlights (in millions) 3Q07 2Q07 3Q06 (RMB) ( US$) (RMB) (RMB) Q/Q (%) Y/Y (%) Net Revenues % 59% Gross Profit % 60% Operating Income % 63% Net Income % 72% Cash and Cash Equivalents 1, ,620 Account Receivables Inventories Total Liabilities Total Shareholder s Equity 2, ,389 A/R Days Inventory Days A/P Days Non-GAAP figures excluding impact from share-based compensation expenses and amortization of intangibles 22

24 Financials 3Q07 Results Highlights Summary Net sales increased 58.9% YOY Non-GAAP gross margin was 56.0% in 3Q07 compared to 57% in 2Q % increase YOY in net income (71.5% YOY increase in non- GAAP net income) Cash & cash equivalents was US$232 million as of Sep. 30, 2007 Accounts receivable, 22 days and inventory, 64 days 23

25 Stable Margins and Disciplined Investment Gross Margin (%) Q07 3Q06 2Q Stable margins New products drive slight gross margin expansion R&D % of Sales (%) Q07 3Q06 2Q Goal to invest 10% of sales in R&D activities Selling % of Sales (%) Increasing investment in overseas sales & distribution networks G&A % of Sales (%) Likely to be lower than 4% in Q07 3Q06 2Q Q07 3Q06 2Q ** Non-GAAP margins excluding impact from share-based compensation, amortization/expense of acquired intangibles (net of tax impact) 24

26 Manufacturing Expansion Plans Facility Location Square Meters Products Role and Configuration Hong Hua Ling Bai Wang Xin Long Gang NanJing JiangNing 21,000 75, ,000E 240,000E Reagents (Hematology, Bio-chemistry Radioactive Immures) Primary Products (Patient Monitors, Hematology Analyzers, etc), medical consumables and key accessories Mechanical Machining, Plate Metal Machining, Plastic module and PCBA Operation Lighting, Tables and Medical Imaging Operational in 2H 2008,Focused on Producing Reagents Operational in 2008(Product assembly, Mechanical Machining, PCBA and Medical Accessories) Focus on Product Assembly and Medical Accessories after 2009 Operational in 2009,Focused on Producing Fundamental Parts for Products Operational in