IVD Medical Holding Limited (IVD Medical or the Group), a leading distributor of In Vitro Diagnostic (IVD(1) products in the PRC, has announced its interim results for the six months ended 30 June 2022 (Period).

During the Period, although hospitals were closed and other quarantines and social distancing measures were put in place in mainland China due to the COVID-19 pandemic, which resulted in a temporary decrease in end customers’ demand for IVD products. With the help of its competitive and diverse product portfolio, extensive distribution network and growing maintenance services business, the Group still recorded revenue of RMB1,176,557,000 (six months ended 30 June 2021: RMB1,186,791,000), a similar level to that in the same period last year. Gross profit increased by 11% year-on-year to RMB266,423,000 and gross profit margin was up 2.4 percentage points year-on-year to 22.6%. The increases were mainly attributable to the decrease in the purchase price of IVD analysers and the increase in maintenance services revenue with relatively stable maintenance costs. Driven by a rising profit margin, the Group’s adjusted profit for the period amounted to RMB96,773,000, 6.7% more year-on-year. The Board resolved to declare the payment of an interim dividend of HK2.729 cents per share for the six months ended 30 June 2022.

Mr. Ho Kuk Sing, Chairman of IVD Medical, said, “In 2022, although the business environment of the medical industry has been tough under the pandemic, we have worked hard to overcome challenges and optimize our business operations. For the distribution business, we signed a five-year exclusive distribution agreement with Sysmex in April this year. We have expanded our distribution network and hospital coverage to consolidate our position in the industry. Furthermore, our maintenance services business has been developing steadily with notable growth in revenue, gross profit and gross profit margin. Looking ahead, we are prepared to capture potential growth opportunities in the industry and committed to bringing better and long-term returns to shareholders.”

Business Review
The Group is a leading distributor of IVD products in the People’s Republic of China (PRC). It has also engaged in research, development, manufacturing and sales of its self-branded IVD products.

Distribution Business
The distribution of IVD products forms the cornerstone of the Group’s business. It primarily involves the trading of IVD analysers, reagents and other consumables to customers such as distributors, hospitals and healthcare institutions and logistics providers. During the Period, revenue from this segment was RMB1,097,468,000, with gross profit up 3.1% to RMB216,907,000.

Through years of operation, the Group has established an expansive distribution network across 29 provinces, municipalities and autonomous regions in the PRC with extensive hospital coverage. As of 30 June 2022, the Group has 204 direct customers, including hospitals and healthcare institutions, and 908 distributors in its established distribution network.

The Group distributes IVD products through its wholly-owned subsidiary Vastec Medical Limited (Vastec). Vastec has been the sole nationwide distributor of Sysmex haemostasis products with exclusive distribution rights in the PRC since 1997, and also procures a diversified portfolio of IVD products from other leading international brands for distribution in the PRC. On 1 April 2022, Vastec signed a five-year distribution agreement of Sysmex haemostasis products with exclusive distribution rights which is valid till 31 March 2027. The agreement has helped to strengthen the long-term and quality cooperation between Vastec and Sysmex.

Moreover, the Group has provided four Thrombotic Markers(2) products manufactured by Sysmex to the market. These products adopt highly sensitive chemiluminescence technology, which may facilitate the early diagnosis of thrombosis and fibrinolysis.

The Group also provides solution services to clinical laboratories of hospitals, as such, it has enabled the Group to establish and maintain direct relationships with local medical practitioners so as to keep the Group close to the frontline of the medical practice and the demand for IVD products. In the first half of 2022, the Group provided solution services to eight Class III hospitals in the PRC.

Maintenance Services
The Group provides maintenance services to end customers of Sysmex’ haemostasis analysers. In 2017, Vastec entered into a maintenance services agreement with Sysmex to provide maintenance services to haemostasis analysers procured by its end customers. The maintenance services provided by Vastec generally include maintenance and repair services, installation services and end customer trainings. And, it primarily provides its maintenance services to hospitals and healthcare institutions. During the Reporting Period, the maintenance services business has been sustainably and steadily developing, with revenue amounting to RMB77,286,000, up by 27.8% from the same period last year. Gross profit of this segment increased by 70.2% to RMB48,388,000 and the gross profit margin was up 15.6 percentage points to 62.6% for the period.

Self-Branded Products Business
The Group has also engaged in the research and development, manufacturing and sales of IVD analysers and reagents under its own brand. The Group’s self-branded IVD reagents were manufactured by Suzhou DiagVita Biotechnology Co., Ltd. and Bazoe Medical Co., Ltd., and the Group’s IVD analysers were produced by its equipment manufacturers, IVD Medical Equipment (Shanghai) Ltd. and Langmai Biotechnology (Shandong) Co., Ltd. In addition, the Group distributes self-developed IVD products under its own brand which includes IVD analysers and reagents primarily under the IVD testing category of Point-of-care testing (“POCT”), mass spectrometry and microbiology.

In the future, the Group will continue to consolidate its leading position in the IVD industry in the PRC. To realise this goal, the Group aims to continuously expand its product portfolio by diversifying product categories, increasing brand coverage, and further expanding the breadth of its distribution network and hospital coverage. In this way, the Group will be able to capitalise on the high growth potential in the IVD market.

Furthermore, the Group will continue to develop its distribution business by enhancing its capacity in providing solution services. By being the general supplier of the clinical laboratory department in such hospitals, the Group participates in the design of laboratory layout, provides centralised procurement of IVD products, conducts real-time inventory monitoring and provides other after-sale services to clinical laboratories. It also plans to hire more sales personnel to promote and market its solution services and to stock sufficient IVD products of various brands to strengthen its advantages in centralized procurement. To enhance brand awareness, it will continuously participate in national and local IVD symposiums, as well as academic conferences.

In addition, the Group believes that strong research and development (“R&D”) capabilities are critical to securing its future development and sustainable growth. It will therefore invest more resources to further improve its R&D capabilities by acquiring equipment, and instruments and hiring experts in the relevant fields. The Group will also engage in research projects to further develop self-branded IVD products that hold promising market potential. The Group is keen to further strengthen product quality management and optimize the performance and applicability of self-developed products to improve market competitiveness.

Mr. Leung King Sun, Chief Operation Officer of the Group, said, “Given the growing medical expenses per capita and government support to the industry pursuing technological development, the Group remains optimistic about the development prospects of the medical market in the PRC, particularly the medical equipment market. Priding competitiveness, a diverse product portfolio, an expansive distribution network and extensive hospital coverage, we are confident of seizing every potential opportunity. Meanwhile, we will continue to strengthen solution services for hospitals and enhance R&D capabilities for our own brands, and ultimately consolidate our leading position in the industry.”

About IVD Medical Holding Limited
IVD Medical Holding Limited (IVD Medical or the Group) is a leading distributor of IVD products in the PRC. Its key subsidiaries include Vastec Medical Limited, Dacheng Medical Equipments (Shanghai) Co., Ltd., IVD China Limited, Suzhou DiagVita Biotechnology Co., Ltd., Langmai Biotechnology (Shandong) Co., Ltd and Bazoe Medical Co., Ltd. The Group’s distribution network covers 29 provinces, municipalities and autonomous regions across the PRC. It is the sole national distributor of Sysmex’ haemostasis products in the PRC and provides maintenance services to its end customers. It also engages in the R&D, manufacturing and sales of self-branded IVD analysers and reagents and provides solution services to clinical laboratories of hospitals for centralised procurement.

(1) IVD, “In Vitro Diagnostic”, which encompasses tests done on samples such as blood or tissue taken from the human body
(2) 4 Thrombotic Markers refer to: 1)TAT: Thrombin-antithrombin complex, 2)PIC: Plasmin – a2-plasmin inhibitor complex, 3)TM: Thrombomodulin, 4)t-PAI-C: Tissue plasminogen activator/plasminogen activator inhibitor-1 complex.

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