Introduction: On July 18, Harmonicare Medical (01509.hk), a Hong Kong listed company, entered into a strategic cooperation agreement with Research Institute of Fudan University in Ningbo, under which they will have in-depth cooperation in the field of assisted reproduction. In this regard, the 21st Century Business Herald has made in-depth coverage.
Source: This news was reprinted from the 21st Century Business Herald
Recently, Harmonicare Medical and Fudan University Shanghai reached a strategic cooperation in setting up the health care industry fund of RMB 300 million yuan, aimed at investing in the fields of assisted reproduction and women and children health care, and at least 80% of the fund amount will be applied to set up a new hospital specialized in assisted reproduction.
LIN Yuming, Chairman of the Board of Directors, Harmonicare Medical, told the reporter of 21st Century Business Herald that Harmonicare Medical is expanding and extending towards the upstream and downstream of its main business, including gene screening for prenatal and postnatal care, postpartum maternal medical rehabilitation, medical cosmetic surgery, postpartum high-end confinement recuperation services, etc. Among them, an important strategic development direction is the assisted reproduction market.
With the full implementation of the “second child policy” in China, the number of patients requiring test-tube assisted reproduction has showed a blowout growth, and the assisted reproduction is in great demand. According to projections of Huachuang Securities, the potential size of assisted reproduction market is about RMB 107.2 billion yuan.
The simplified procedures of assisted reproduction technology treatment implemented by the National Health and Family Planning Commission has also contributed to the accelerated development of assisted reproduction market, and it is expected that the pharmaceutical companies and medical service enterprises associated with assisted reproduction will benefit therefrom. In fact, many enterprises, in addition to Harmonicare Medical, such as Tasly and TC Medical are arranging for entering the field of assisted reproduction.
Cooperate with Fudan University
Harmonicare Medical and Fudan University signed two specific agreements respectively, one was the medical and health care industry fund cooperation agreement further entered into Furong Investment and Ningbo Huaya and the other was the medical management company cooperation agreement entered into with Fudan Medical Management Co., Ltd.
Among them, Shanghai Furong Investment Co., Ltd. is a science & technology finance and innovation & entrepreneurship platform sponsored by Research Institute of Fudan University in Ningbo and the market-oriented operation body of Fudan University in industrialization.
Under the agreement, the parties will cooperate in the establishment of a medical management company, specializing in the management in the field of assisted reproduction health services, and assisted reproduction hospitals and women & children hospitals will be further established.
As for the reason for choosing Research Institute of Fudan University in Ningbo in this cooperation, Lin Yuming told the reporter of 21st Century Business Herald that Fudan University, as a domestic well-known university and research institution, boasts domestic top research and development level in assisted reproduction technology. “Our cooperation can help to quickly promote the high-end, professional and standardized development of women and children’s medical care industry.”
According to Sun Pengjun, Executive Director of Research Institute of Fudan University in Ningbo, Fudan University will provide supports in medical technology, medical services, personnel training and expert introduction, etc., and promote the transformation of university and local industry, collaborative innovation and industrial development.
Lin Yuming informed the reporter of 21st Century Business Herald that the cooperation with Fudan University would be implemented in the near future, and he did not rule out the possibility of merger and acquisition to promote the parties’ development in the field of assisted reproduction in the future.
In fact, Harmonicare Medical has increased the intensity of merger and acquisition since the beginning of 2016. For example, they set up started to operate Wuxi Harmonicare Women and Children Hospital in October 2016 jointly with Shanghai Medea Hospital Investment Group, the acquisition of 95% shares in Heilongjiang Harmonicare Obstetrics & Gynecology Hospital took place in December 2016, and the acquisition of 51% shares in Nantong Hemeijia Obstetrics & Gynecology Hospital in July 2017.
Snatching RMB 100 billion market share
However, the current assisted reproduction institutions are still dominated by public hospitals. As pointed out by YU Wenxin, analyst of Haitong Securities, by quoting the data published by the National Health and Family Planning Commission and the provincial health departments that the public hospitals currently account for about 95% in the total number of institutions and the number of private institutions does not exceed 20. The public hospitals have many advantages such as market reputation, expert level and equipment conditions, etc.
“But the existing size and medical resources of public hospitals are far from meeting the needs of the market. Under the assumption that each patient has 2 cycles on average and 2 repeated outpatient visits per year on average, less than 5 out of 100 visiting patients can successfully receive surgery”, stated by YU Wenxin.
LIU Hongge, Assistant to Chairman of the Board of Directors of Harmonicare Medical, also told the reporter of 21st Century Business Herald that that the existing assisted reproduction technology institutions were far from meeting the market. Combined with the establishment planning of provinces and cities in assisted reproduction technology and the standard of the National Health and Family Planning Commission that an institution should be set up for every 3 million people, it is estimated that the upper limit of future assisted reproduction center license would not be less than 550, so there is still the space for at least 100 centers approximately.
To this end, Lin Yuming believes that it is difficult for public hospitals to meet the diverse needs so the private medical institutions have obtained a good opportunity to enter the assisted reproduction industry.
SUN Pengjun also admitted that the affiliated hospitals to Fudan University are public hospitals engaged in serving the general public, but the patients’ needs have developed towards a diversified direction for a long time, so public hospitals are clearly unable to meet the needs of all patients, and a certain market space has formed for the high-quality medical services offered by private hospitals.
In fact, the space of assisted reproduction market is large enough.
According to Huachuang Securities’ Special Report on Domestic Assisted Reproduction Industry, the number of newborns in China is about 16 million every year, and with the calculation based on 12.5% -15% infertility rate, theoretically 2-2.4 million newborns cannot be born every year because of infertility.
According to the calculation in the report, assuming that 65% of the parents of these babies are willing to adopt assisted reproduction technology for pregnancy, there will be 1.3-1.56 million couples receiving assisted reproduction surgery every year; the single success rate of domestic assisted reproduction technology is about 30%, so assuming that each couple receive 2.5 assisted reproduction surgeries on average and each assisted reproduction surgery is priced from RMB 20-40 thousand yuan, the potential size of assisted reproduction market is about RMB 107.2 billion yuan. Coupled with the about 20% market expansion brought by the implementation of the second child policy, the potential market of assisted reproduction is about RMB 128 billion yuan.
Therefore, medical institutions including Harmonicare Medical, related online software development companies and auxiliary pharmaceutical enterprises engaged in IVF, etc. intend to seize a piece of cake in the assisted reproduction market, and Livzon Group, Changchun High & New Technology Industries, TC Medical, BGI, Daan Gene, Wondfo Biotech and other enterprises have also entered this field.
At the end of November 2015, Tai’antang announced that it would develop strategic cooperate with Tasly. According to the announcement, Tai’antang and Tasly would carry out cooperation in the field of assisted reproduction, specifically including the acquisition of related genetic testing company and the acquisition of private hospital, and the arrangement of private hospital was mainly designated to carry out IVF business and open the upstream and downstream of reproductive health industry chain.
Non-medical enterprises are also optimistic about the assisted reproduction market. For example, Wintime Energy acquired 42.47% shares in Jinxin Group’s Chengdu Xinan Gynecology Hospital in June 2016 and set up a USD 1 billion assisted reproduction overseas M&A fund with a Cayman assisted reproduction fund management company in November 2016. In July 18 this year, the company also announced the completion of equity acquisition transfer for an assisted reproduction project of US HRC Medical Group.
In the industry view, the existing domestic assisted reproduction technology and institutions cannot meet the market demand in rapid growth, and the assisted reproduction institutions are scarce resources. In addition, upon the open discussions over the planning of assisted reproduction institutions by local governments, the restrictions in this regard may be released in the future. The medical institutions and even non-medical enterprises are distributing in the assisted reproduction industry, and this field may witness further development in the future.