MR Montage Resources Corporation

Mindray Medical International Limited (MR), a leading Chinese medical devices company, recently forged an agreement to take a controlling stake in Suzhou Hyssen Electronics Co. Ltd ("Hyssen"). The transaction will not affect Mindray’s financial results. The company did not reveal the terms of the deal. Hyssen, based in Suzhou, China, is a leader in automated urine sediment analyzers in the domestic market.

Urine sediment, along with dry chemistry analysis, constitutes urinalysis. Urine sediment analysis is utilized to discover urinary tract and kidney diseases by analyzing bacteria and blood cells in urine samples. Urinalysis, in conjunction with biochemistry analysis and hematology, are the three most frequently used methodologies in the in-vitro diagnostic business.

The urinalysis business, in China, was worth about $155 million in 2010, of which urine sediment analysis constituted approximately 45%, with a growth rate of over 30% per annum.     

Mindray plans to extract synergies from the deal by combining its expertise with Hyssen's capability in urine sediment analysis. The company believes that Hyssen's know-how complements its in-vitro diagnostic franchise in urine dry chemistry, biochemistry and hematology.

Mindray represents one of the highest-quality brands in the Chinese healthcare sector and is a bellwether for the medical device industry in that country. The company’s competitive advantage in its domestic market is its sales infrastructure, which has provided Mindray significantly better access to China’s small and medium-sized hospitals than its competitors.

In this segment comprising Tier II and Tier III hospitals, the company beats global companies, such as General Electric (GE), Philips (PHG), and Siemens (SI), on the basis of price and defeats domestic players on the basis of brand recognition.

Mindray has successfully garnered overseas market business by targeting mid-sized, potentially more price-sensitive, customers who may be looking for medical devices offered at lower prices than global brands. We believe frequent new product launches and brisk demand from international markets will be major growth drivers for the company.

Mindray is still realigning its sales force and re-building its brand image to penetrate the premium market. Since Mindray’s strength is in the mid-market segment, we do not expect an immediate windfall impact from its high-end strategy. Also, sales to Chinese government hospitals via tendering are expected to remain at low levels.

 
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