On January 10, 2018, Morgan Stanley issued a report made by a sell-side analyst titled “Underestimated Heart Rhythm Management Business (CRM) and Trans-catheter Aortic Valve Implantation (TAVI)”. The report analyzed the industry dynamics, innovation practices and market competition of Chinese CRM and TAVI, and presented predictions through proprietary models.
In 2016, there were 20 million patients with cardiac arrhythmia, but the penetration rate of the heart rate management operation was far lower than the developed countries. In China, only 44 pace-makers were implanted in every million population, while 1,000 pace-makers were implanted in every million population in USA. Meanwhile, the total number of patients with aortic stenosis in 2016 in China was about 3 million, and TAVI penetration rate was less than 1 PPM, while the American TAVI penetration rate was 65 PPM. The report pointed out that the market growth of CRM and TAVI was mainly driven by the following factors: 1) the increasingly aging of the population; 2) the constantly improved patient’s awareness and diagnostic level; 3) availability of low-cost products of the same quality; 4) technical upgrading; 5) indication extension. At present, imported products occupy 80% of the CRM and TAVI market in China. Morgan Stanley believed that this situation was hard to change in the short run but local companies were likely to surpass in the future. The competition pattern of these two markets was very similar to that of the DES market in China ten years ago where the local producer achieved rapid expansion through import substitution, breaking the monopoly market predominated by transnational corporations.
Among local enterprises, Morgan Stanley highlighted MicroPort?, because they believed it has found its way in these two markets in China. At present, the MicroPort? is transforming to a diversified and international high-end medical device company, focusing on the cardiovascular field. The domestic pace-maker independently developed by the King Innovative? Rhythm Health, a joint venture of MicroPort?, have obtained a registration certificate from CFDA on September 2017. TAVI is expected to be released in 2018. Morgan Stanley raised the stock rating of MicroPort? with a target price of 9.60 Hong Kong dollars, to reflect the potential of MicroPort? in the field of CRM and TAVI.