‘Made in China 2025’ was dropped as a government slogan three years ago. Yet the underlying desire to achieve self-reliance in essential goods from semiconductors to biomedicine has never waned. The ambition has continued to guide investment into sectors where Beijing is uncomfortable about overdependence on foreign supply.
One such contender is United Imaging, a Shanghai-based diagnostic imaging device manufacturer trying to break the stronghold of GE Medical, Philips and Siemens Medical – a group known by the acronym ‘GPS’ – in equipment sales to Chinese hospitals.
In magnetic resonance imaging (MRI) scanners and computed tomography (CT) scanners, United Imaging has newly competitive products that have become bestsellers in the domestic market, clinching 20% and 25% shares respectively in 2020, according to China Insights Consultancy, a market researcher. In 3-Tesla MRI – the gold standard in the technology – United Imaging is the only Chinese firm in the market, grabbing 17% of sales.
These sales are impressive, considering that China relied on the GPS troika for 90% of its diagnostic imaging equipment a decade ago.
United Imaging didn’t even ship its first product until 2014. Its growth since then, marked by strong state support, has seen the company labelled as “the Huawei of medical devices” in the local media.
Reportedly the company is planning to go public on the Shanghai STAR Market. The Rmb12.5 billion ($2 billion) offering could become the largest A-share IPO this year.
The deal would lift United Imaging’s valuation to more than Rmb100 billion or about three times the level of its Series A fundraising, led by a coterie of state-owned investors including China Life in 2017.
Founded in 2011, United Imaging was created as a national champion from the outset. Its founder Xue Min is a haigui (or ‘returning sea turtle’) who spent a decade in the United States earning his doctorate and starting out his career, before returning to China in 1998. A physicist and biomedical engineer by training, he was credited with developing China’s first 1.5-Tesla MRI system at his first company Mindit, which was partly funded by Siemens until the German firm took full control in a buyout in 2009.
A number of the senior leaders at United Imaging, including Zhang Qiang, who took over from Xue as chairman and CEO in 2020, had work experience at Siemens. The relationship with the German giant also led to lawsuits over patents and sales practices, which ended with rulings in United Imaging’s favour. According to Eastday, a Shanghai-based news portal, United Imaging’s technology was initially priced well below its international counterparts. The strategy helped the brand get traction among top-tier hospitals in Beijing and Shanghai but the company’s big break came in the last two years, when the pandemic sparked an upsurge in demand for CT scans. Between 2019 and 2021, revenues more than doubled to Rmb7.3 billion. United Imaging finally stopped spilling red ink, recording net profits of Rmb903 million and Rmb1.4 billion in the last two years. although a sizable portion of its earnings came with the help of government subsidies, which have topped Rmb1 billion over the last three years.
With funds from the offering, the company is planning to bring its research and development investment closer to international levels. Post-IPO, Xue will stay as the largest shareholder with a 27.6% stake, followed by Shanghai Sasac’s 16.4% ownership.
The deal comes at a time when United Imaging’s rivals are gearing up to raise funds through the public market. Neusoft Medical Systems, for instance, is planning to raise $400 million in a Hong Kong IPO. After a few false starts, Neusoft’s defaces a deadline to complete the IPO by September or the Shenyang-based firm will incur financial penalties from early backers including Hony Capital and Goldman Sachs.
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