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Edited Transcript of 853.HK earnings conference call or presentation 30-Aug-19 12:00pm GMT

Half Year 2019 Microport Scientific Corp Earnings Call

Shanghai Sep 6, 2019 (Thomson StreetEvents) -- Edited Transcript of MicroPort Scientific Corp earnings conference call or presentation Friday, August 30, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Hongbin Sun

MicroPort Scientific Corporation - CFO

* Jonathan H. Chen

MicroPort Scientific Corporation - Chief International Business Officer

* Leanne Li

* Qiyi Luo

MicroPort Scientific Corporation - CTO

* Zhaohua Chang

MicroPort Scientific Corporation - Founder, Chairman & CEO

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Conference Call Participants

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* Cui Cui

Citigroup Inc, Research Division - Associate

* Shannen Lin

Macquarie Research - Analyst

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Presentation

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Operator [1]

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Good morning, good afternoon and good evening, ladies and gentlemen, and welcome to the conference call. Our Chairperson today is Cui Cui. Cui Cui, please begin your call, and I'll be standing by for the Q&A. Thank you.

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Cui Cui, Citigroup Inc, Research Division - Associate [2]

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Thank you. Thanks for joining MicroPort 1 Half '19 Results Conference Call. This is Cui Cui from Citi Healthcare. It's our great honor to invite senior management team of MicroPort, Mr. Martin Sun, CFO; Dr. Qiyi Luo, Chief Technology Officer; Mr. Jonathan Chen, Chief International Business Officer; and Ms. Leanne Li, Board Secretary and Vice President.

Now I pass to Mr. Jonathan Chen to give us a brief introduction of 1 Half results. Thank you.

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Jonathan H. Chen, MicroPort Scientific Corporation - Chief International Business Officer [3]

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Thank you, Cui Cui. During the next hour, Martin and I will provide comments on the interim results for our fiscal year 2019, which ended June 30. After our prepared remarks, we will be happy to take your questions.

First, unless I say otherwise, reference to our 2019 interim results increasing or decreasing are comparison to corresponding period of year 2018 and all year-over-year revenue growth ranges are given on a constant currency basis, which adjust for impact of foreign currency translation. The growth range details before constant currency adjustments are available in our interim result announcement, which was published earlier today.

The highlight of our 2019 interim results are as follows: The company further expanded its business and its key business segments, and our core products continue to achieve robust growth. Revenue of the company reached $393 million, up 33.9% year-on-year, among which the financial results of the acquired CRM business were fully consolidated into group's financial statements from January to June 2019, with an increase of 4 months revenue compared to 2018. As a result, revenue of our CRM business grew substantially by 162.5% year-on-year with very strong growth from our domestic pacemaker business. Meanwhile, revenue of our cardiovascular business increased by 27.8% year-on-year and sales of our Firehawk stents increased by 58.7%.

Revenue of endovascular and neurovascular business recorded 41.6% and 57.9% revenue growth, respectively. For our orthopedics business, due to short-term fluctuations of our international non-China orthopedics business, revenue of the whole segment decreased by 4.8% compared with the same period from previous year, but the revenue for our China orthopedics business increased by 53.3%, among which revenue was from imported knees increased by 45%.

Our gross profit increased by 28.4% with gross profit margin reaching 71.7%, up by 0.9 percentage points, mainly attributable to better product mix. In addition, during the reporting period, the group completed the transfer of shares of EP business, resulting in a onetime gain of approximately $56 million. As a result, our profit attributable to equity shareholders of the company was $65.5 million, up by 175.5%.

One additional item to highlight is that for our endovascular business called Shanghai MicroPort Endovascular MedTech Company was officially listed on the sci-tech innovation board of the Shanghai Stock Exchange on July 22, 2019. It's been the first company spun off from a Hong Kong listed company and successfully listed on the sci-tech innovation board and was also one of the first badge companies to land on this board.

Now I'll briefly review some of the R&D achievements in the first half of 2019. The company had made great achievements in R&D and clinical affairs, which laid the foundation for the company's sustainable development. In the first half of 2019, we've had 7 products that gained NMPA approval with many of the products receiving clearance in overseas market.

In our cardiovascular device business, our Firehawk Nova Coronary Rapamycin Target-Eluting Stent with improvements in the delivery system obtained NMPA approval, which diversify the existing product portfolio for our cardiovascular business. In our overseas market, the group obtained 14 initial registration approvals in 6 countries or regions outside of China, amongst which the new generation Firehawk Liberty Coronary TES and Firefighter NC PTCA Balloon Catheter received CE mark. Currently, the group has 4 stent products and 4 balloon products that are being sold in the international markets.

For our orthopedics business R&D, in our China market, the domestically made Aspiration and SoSuperior Medial-Stability Total Knee Replacement Systems both obtained NMPA approval in January of 2019 and have completed first implantation. Also, obtaining NMPA approval were the hip implant components for the wedge-shape femoral stem and metal femoral head. In March of 2019, the group self-absorbed ARBORES, Kyphoplastic Balloon Catheter gained NMPA approval. The domestically made hip product is expected to gain NMPA approval before the end of this year 2019.

The introduction of the above-mentioned domestically made knee and hip products will mark a milestone in the process of our domestic production capabilities and enrich the product line and thus build competitive strength for our China orthopedic business.

In the international market, the Evolution CS Stemmed Femer, a significant component of the Evolution Revision Knee System, has obtained approval and was launched in North America. The new generation of Evolution NitrX Medial-Pivot Knee and our Knee Tensioner Instrument system gained FDA approval and was launched in the U.S. Other products that have received clearance include the Prime Acetabular system and Slo-Con Total Knee instrument system in Japan and the Biolox Delta Options System in Europe. Those products further expanded the product portfolio for MPO's global orthopedic business.

For our endovascular business, Minos, which is our AAA stent delivery system, obtained NMPA approval in March of 2019. Minos is currently the only domestic produced product and independent IP rights that reduced the outer diameter of the delivery sheath to 14 French.

In our heart valve business, our VitaFlow Transcatheter Aortic System obtained NMPA approval and the production license in July of 2019, becoming the group's sixth product to successfully obtain NMPA approval after entering the Green Path fast track designation. On August 28 of this year, VitaFlow completed its first implantation since NMPA approval and followed by another 3 implantations on the same day.

For our neurovascular business, we recently received NMPA approval for our fast track micro catheter system.

And then lastly, for our surgical robot business, the group's self-developed 3D Electrical Laparoscopic system was granted Green Path channel that is becoming the group's 16th product for MicroPort to achieve this fast track status designation.

During the reporting period, we also made significant progress in clinical trials. In March at the CIT Conference, the group released a 3-year follow-up results of Future-I, which is the research study for our Firesorb Bioresorbable Target-Eluting Scaffold for the treatment of coronary artery disease. It show that the target lesion failure rate, also known as TLF rate, and stent thrombosis rate were both 0%. It proved that the Firesorb stent based on the PLLA materials with thinner wall is one of the most viable, safe and effective solutions for patients with single de novo coronary artery lesions as compared with first generation biodegradable stents.

In May, at the EuroPCR Conference in 2019, the company released our 2-year data from our TARGET All-Comers trial. The data was simultaneously published online by the Journal of the American College of Cardiology, a well-known international medical journal. It further prove that the Firehawk stent with our innovative target-eluting technology can achieve the same clinical efficacy as the internationally recognized stent with most efficient clinical statistics and increase the potential safety of our stent.

In terms of the incident rates of our advanced stent thrombosis and target lesion vascular rate, the 24-month follow-up clinical results of the Firehawk stent were better than those of the control group.

After giving a big picture of the R&D progress, I'll give more details on the progress of each business during the first half of 2019, starting with our cardiovascular business. The revenue for our cardiovascular business maintained rapid growth and increased by 27.8% year-over-year, mainly driven by the core products of Firehawk and Firebird2.

During the reporting period, the revenue for Firehawk grew by 58.7% and sales volume grew by 84.4% year-on-year. Revenue and sales volume for Firebird2, which has been on the market for over 10 years, grew by 8% and 16.1%, respectively. Revenue for our Firehawk, as a percentage of total DES sales, increased from 32% in 2018 to 42% in 2019, while the sales volume increased from 23% to 33%.

Revenue for our balloon products maintained robust growth at 66.4% year-over-year. During the reporting period, while maintaining existing market share, the group also actively expanded into new markets.

As of June 30, 2019, the group's DES covered more than 1,700 hospitals nationwide. The number of hospitals covered by Firebird2 reached 1,708 and realized a 600 -- a 16% year-on-year increase, while those covered by Firehawk reached 783 hospitals and realized a year-on-year increase of 44%.

The balloon products cover more than 500 hospitals, representing an increase of 13% compared with the same period last year. And the group has also made achievements in penetrating the county level market. During the reporting period, the group nearly penetrated into 52 county level hospitals and 17 provinces in China.

For our international market, in the first half of 2019, revenue from the international drug stent business increased by 65.3% year-on-year. Firehawk's nearly gained approval in 3 countries or regions and are now being sold in 28 countries globally. Besides -- based on the TARGET AC's clinical trial results, the Firehawk stent was approved to be included in the French medical insurance reimbursement list. The first implant surgery was completed in July in France, and this was further promoted by the Firehawk stent in the French coronary stent market, a leading market in Europe.

For our CRM business, in the first half of 2019, recorded revenue of $106.6 million. The group actively adjusted our market strategy investing in R&D for long-term development and promoted domestically manufactured pacemakers in China and which -- whose sales growth really exceeded our expectations. In the first half of 2019, the revenue from the international non-China CRM device business was $103.1 million. The group continued to invest in R&D and diversified its product portfolio to enhance its overall strength.

In respect to new products, the world's smallest 1.5 Tesla and 3 Tesla magnetic resonance conditional pacemakers, called the OTO, the ENO and TEO series, were officially launched in Europe and rapidly gaining hospital usage. The new Smart Touch tablet program controller for implantable ECG devices was also launched in Europe, and the group also had several lead pacemakers and Bluetooth function and other products that are under development, which are expected to improve the existing product portfolio in the coming years.

In our Japan market, the group's sales team has shifted from the original distributor model to building a direct sales network in laying the foundation for sustainable development for the Japan's CRM market.

For our CRM China business, which was previously our joint venture, called Microport Sorin CRM, the company continued to launch various branding campaigns and expanded academic promotion, which led to an increased recognition of the domestic brand and accelerated the process of our domestic manufacturing production.

During the reporting period, the revenue for CRM China business recorded revenue of $3.5 million and achieved robust growth in sales volume, grew by 245%. As of June 30, 2019, the pacemaker products cover 264 hospitals, representing an increase of 89% compared to last year. The BEFLEX active pacing lead, which was -- attained approval in 2018, also commenced clinical applications throughout China. In the future, we will propel the effective integration of these internal resources to introduce more cutting-edge technologies from our overseas business to the China CRM market.

In our orthopedic business, the first half of 2019, the orthopedic grew to promote its unique product concepts, sales force and gradually upgraded its products. With our 2 domestically made knee products gaining approval, the group further added its presence in China market and made substantial progress in the process of the domestic production. However, due to short-term impact of our international non-China orthopedics business, during the reporting period, our global orthopedic business achieved sales of $113 million, a decrease of approximately 4.8% over the same period last year.

For our international non-China orthopedic business, the revenue decrease was 8.9% year-on-year, mainly attributable to the influence of loss of a major U.S. distributor in 2018, coupled with some pricing pressure in some of the -- our international markets. Regionally, the revenue from the U.S. business decreased by 11.5%, while revenue from Japan achieved an increase of 3.9%, maintaining an upward momentum.

During the reporting period, the company actively explored potential markets in North America. We're able to find 4 new distributors, which is expected to bring substantial growth to surgery cases for the second half of 2019 and beyond. We believe we will see the U.S. core business return to growth in the second half of 2019. In addition, the group expanded academic promotion, strengthened the training of our physicians, upgraded our existing products and launched the new generation of Evolution NitrX Medial-Pivot Knee. The group's medial-pivot knee now stands at over 20 years of clinical demonstrated success with over 600,000 cases of implantation globally. The NitrX knee builds upon the same medial pivot philosophy, but features a titanium nitride coating, which is applicable for patients with allergies to certain metallic ions. And besides the launch of our Evolution CS Stemmed Femur, a significant component of the revision system, this will also help to expand the sales of the Evolution knee.

For our China orthopedic business, we recorded revenue growth of 53.3%, mainly due to the joints business rapid sales growth of 55.8%, among which the sales of the imported knees and hips grew by 45% and 78%, respectively, far exceeding market average. In the first half, the company's joint products nearly entered over 150 hospitals and now are available in almost 400 hospitals nationwide.

During the reporting period, the domestically made Aspiration and SoSuperior Medial-Stability Total Knee Replacement System obtained NMPA approval. Besides the domestically made hip product is expected to gain NMPA approval before the end of this year, which will further enrich our product line for our China orthopedics business. The diversified product portfolio with both domestic and import products, the overall competitiveness of the China orthopedics business will be enhanced.

And during the reporting period, the spine and trauma business recorded a significant increase in revenue and gross profit margin, mainly through expansion of our sales platforms, clinical promotion and various marketing activities and successful new product launches.

The orthopedic instrument business aimed also to reduce the cost of the developing tools by increasing our commercial scale. And during the reporting period, the bulk production of the domestic ICE Evolution knee instruments have initially completed for supply to the China market and will enter the U.S. market before year-end.

For our endovascular business, recorded a rapid year-on-year growth of 41.6%, far exceeding the market average growth. This was mainly driven by the sales growth of all the major product lines for endovascular. Revenue for our TAA products grew by 41.1% and, in particular, the Castor single-branched thoracic aortic stent has been applied by over 230 hospitals in China. And to date, Castor has been implanted in more than 1,000 cases and has continuously driven the growth of the endovascular device segment.

Our Hercules Low Profile Thoracic system also was well accepted in the market and increased the competitiveness of our TAA products, and revenue of our AAA products grew by 34.5%. Our Minos AAA system obtained NMPA approval and we'll bring an extra catalyst to this segment in the second half of the year. With the high-quality innovative products and well-established sales team, the group now covers 36 hospitals during the first half of 2019.

For our other business segments, the group also had great performance in regards to sales and R&D. Our neurovascular business achieved robust growth of 57.9% and specifically, our APOLLO Intracranial Stent System and our Tubridge Vascular Reconstruction Device launched last year and achieved strong revenue growth. The first diverting -- flow-diverting stent approved in China, Tubridge nearly entered into 90 hospitals and contributed 33.7% of the segment revenue, up from 3.3% for the same period in 2018.

For our heart valve business, our VitaFlow TAVI system obtained NMPA approval in July, and VitaFlow has released 2-year of follow-up results, which show solid competitive strength of VitaFlow compared to other TAVI devices. Our VitaFlow II has entered the Green Path and kicked off the clinical trial in China with enrolling 66 patients. In our international market, VitaFlow II has enrolled 11 patients in the premarketing clinical research project called VITALE, which is a clinical trial in Europe.

For our surgical robot business, our research progress are progressing steadily. The laparoscopical surgical instrument control system has initiated the type testing process for NMPA approval, and the group's self-developed 3D electrical laparoscopic was granted Green Path. And since there is no domestic 3D laparoscopic product currently in China, the grant of the Green Path will assist in popularizing this cutting-edge technology and boost the development of the connected industries.

For our EP business, we would like to remind investors that during the reporting period, the company completed its transfer of the shares of Shanghai MicroPort EP MedTech Company and the equity interest held by the company in MicroPort EP dropped from 81.9% on December 31, 2018 to 45.1%. The financial report of MicroPort EP is no longer consolidated into the company's results.

That's all for the operating performance in the first half. I will now turn it over to Martin to provide you with further financial details for 2019 interim results.

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Hongbin Sun, MicroPort Scientific Corporation - CFO [4]

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Okay. Thanks, Jonathan, and hello, everyone. Now I'm going to spend next few minutes taking you through our interim financial performance as well as update our guidance for the full year.

For the revenue, during the first half year, MicroPort generated total revenue of $392.6 million, achieving growth rate of 33.9% at constant currency rate basis. Excluding our CRM consolidation, the revenue of our base business increased by 12.3%, mainly driven by our strong cardiovascular business growth which is at 27.8%, offsetting by the decline of orthopedics -- global orthopedics business and declined by 4%.

As Jonathan mentioned earlier, all of our major business segment in China, including endo and neuro achieved more than 30% growth.

Our gross profit increased by 28.4% during the first half year with the gross margin at 71.7%, up by 90 bps, basis points, from the 70.8% last year. This was driven by favorable sales mix, especially from the continued strong DES growth with better margins.

Our total operating expenses relatively to revenue ratio went up 670 basis point to 63.5% for the first half year. This mainly driven by the consolidation of our CRM business. For the CRM business, they had much higher operating expenses to revenue ratio. For the first half year, the ratio is 78.7%, including the sales marketing 44.4%, R&D 23.4% and G&A 10.9%. That compared to the last year, that ratio also grow very fast is driven by the 2 factors. The first one is our continue increased R&D spending for the product portfolio improvement, especially on the MRI compatible leads and -- for tachy products developed. The second factor is the new -- our new investment to build our own Japan commercial foundation for the sake of business model change from the exclusive distribution to go direct. With the additional headcount hired in penetration of -- for transition in September in Japan market, we believe this transition in the business foundation in Japan will drive our future strong growth.

The other operating expenses of non-CRM segments, it still keep quite stable percentage. That is for the first half year, that percentage is at 58%, is only just increased by 170 basis points, mostly due to increased R&D spending on several major projects in China. For example is heart valves and surgical robotics.

For the other major P&L account, I'd like to share 2 other major P&L items movement that contribute to our increased net profits. The first one is gain on disposal of shares of EP business. During the reporting period, we completed the transaction for our capital increase of EP business and share transfer of EP to the other investors. The MicroPort EP had a capital injection of RMB 200 million and the MicroPort group received a total cash consideration of RMB 223.9 million for share transfer. That transaction was accounted for as a disposal of EP business with a gain of USD 63.1 million, recognizing our P&L for the first half year. At the same time, we also recognized additional income tax of $7.3 million, which attributed to the significant increase of income tax in the first half year reporting. Therefore, the net impact of that transaction for the first half year was a net gain of $55.8 million.

Upon the completion of EP disposal, the group's equity interest in the MP, MicroPort and EP decreased from 81.9% to the 45.1%. The other major P&L account is the other net income, which increased by $4.3 million compared to the last period -- last year same period. It is mainly driven by our increased government grant by $8 million, which is primarily linked towards the substantial R&D input of the group.

The bottom line was 2019, the interim results close at net profit of $60.8 million, up 151.4% year-on-year. Profits attributed to the shareholders of $65.5 million, up to 175.5% year-on-year. EPS also increased by 153% to USD 4.15.

So for the balance sheet-wise, we see we maintained a healthy strong balance sheet for the first half year. Our cash flow was continue, we see the spin-off of the EP business, brought cash received of RMB 222.9 million. In addition, as Jonathan mentioned earlier, our endovascular business IPO and listed on the Scientific Technology Innovation Board of Shanghai Stock Exchange in July 2019, MicroPort endo business issued a total of 18 million A shares and received total cash proceeds of RMB 832 million. This will also help enhance our capital structure significantly and improve our cash liquidity.

Now I will turn to our guidance update. Based on our first half year financial performance and our best estimation for the second half year, we'd like to give you our some change of 2019 guidance. First one is revenue. We'd like to change our previous guidance of overall sales growth at 20% now to 21%. That means that we will lift up 1% on total consolidated revenue growth guidance. This mainly attributed to the continued robust growth of the cardiovascular business.

I will highlight some key segments here. First one, of course, the cardiovascular. We expected this cardiovascular business for the whole year growth will change from the original growth rate 20% to 22% to above 25%. This would still be driven by the strong momentum of Firehawk and Firebird2 in China market as well as the international market.

For the domestic sales, we don't anticipate that the GPO rollout in Gansu province will bring down our DES revenue. We expect that volume will definitely increase more than our original budget, especially for the Firehawk by winning the mandatory group tender. Despite a significant retail price cut, our ex-factory price will not expected to decline so much. In the international market, sales growth will still benefit from the entrance into new emerging economic countries, and we also expect to strengthen our position in the EU market with leverage from our CRM European sales force in countries like French and Italian.

The Firehawk stents inclusion in French medical insurance reimbursement will also help further promote penetration in the French market, which is a leading market in European.

Our guidance for the orthopedics business is expect to change from the original 5% growth down to 2% to 3% growth range.

With regard to the international orthopedics, non-China orthopedics business for the full year guidance, we anticipate a marginal decrease by 1% to 3% compared to previous guidance of flat. However, that change in forecast is driven by the first half year decline of 8.9% year-on-year, but we believe that this revenue will start to pick up in second half year. The key drivers of second half year pickup will be new accounts subscribed in the North American market.

For the -- our China orthopedics business, we expect to maintain the robust momentum and grew at approximately 45%. So regarding the revenue of the CRM business, we keep and no change to our previous guidance. Compared to the first -- compared to the 8 months of 2018, our guidance remain with the increase of 40% in 2019. The remaining key segments will continue to grow high double digits. We still keep above 30% growth rate for annualized sales.

The second section is the gross margin. We anticipated the full year gross margin to be flat, maybe approximately 71%. This would be as a result of the combined effect of following the 4 factors. First one, CRM margins at above 60% normal standard level, reflecting our significant increase over 2018 at 54%. The orthopedics decreased about less than 1%, due to a price erosion unfavorable mix and the volume. Other segments dropping about 2%. This is due to manufacturing capacity expansion with lower utilizations.

For the OpEx expenses, including R&D, distribution and administrative expenses, compared to our previous guidance, total expenses as a percentage of revenue will be better off by 100% -- 100 basis point to 62% to 68% of the revenue.

For the second half year, our other income P&L account still we expect we will receive a compensation of at least $12 million from LivaNova as an adjustment on the working capital for the acquired CRM business. So this will have a potential favorable impact on our both P&L and cash flow.

So that's all for the update to our full year guidance. Thank you for listening, and I will now hand over to Citi colleagues.

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Questions and Answers

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Cui Cui, Citigroup Inc, Research Division - Associate [1]

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Thank you, Martin, and thank you, Jonathan. So before we move on to the Q&A session, I will ask a few questions on behalf of investors.

So firstly, congratulations on the Endo MedTech successful listing on the science and technology board. So may I ask the management team to share with us the future strategy of the Endo segment? And how to leverage on the new financing platform?

My second question is on TAVI. It's good to know that we have already finished the first patient procedure. And could you please comment on our sales target and also the competitive landscape of TAVI?

And my last question is on Firehawk. After listed on French reimbursement list, would you help us understand the future growth driver and also the market potential in EU market?

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Qiyi Luo, MicroPort Scientific Corporation - CTO [2]

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Okay. Cui Cui, I think I will take the TAVI question first and Martin will do the endo and Jonathan will do the French growth. And for TAVI, yes, we get our first case 2 days ago. Actually as a matter of fact, we had 5 cases all done so far, so which is a very, very good. We just needed to make more because everything we will do the ramping up, we need to take a step-by-step to make all the product quality safely and to promoting used by qualified physicians.

We all know in the U.S. and Europe, this is already very, very true market for TAVI. As of last year, there are already in total 130 TAVI cases being performed worldwide, but China is only having 2,000 by the -- for the year of 2018. So we have a long way to grow. But we have enough patients. We have very, very enthusiasm doctors who wanted to do this. I think the bottleneck in China now is with the hospital as well as fully trained physicians. And right now, we think only less than 10 centers can do it independently for this procedure. Although they have almost 100 hospitals being performed TAVI, but they need to have proctors. So most hospitals still needed to do this with a good proctor either from some top centers in China or some international centers.

So for us -- for the industry, I mean, our biggest task in next few years is to -- we train more physicians and more hospitals who can do it independently. Only by this bottleneck been broke through, the case will grow tremendously. So that is, I think, the situation in China. We know the market is huge and big, but we will still needed to step-by-step do a lot of trainings to get all in that stage to that level of the procedures. So is that answer to your question?

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Cui Cui, Citigroup Inc, Research Division - Associate [3]

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Yes.

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Hongbin Sun, MicroPort Scientific Corporation - CFO [4]

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Okay. And let me try to answer your -- the question about endovascular business. And as we mentioned this after the endovascular business spinoff and successfully IPO listed in the Shanghai Stock Exchange, and they received over $120 million, the proceeds. So -- and as they also published their -- the strategy to the Chinese investors, it's -- they are very consistent. First one is keeping leading position in the endo market of China. And because of they have quite strong pipeline for the TAA and AAA product portfolio and also several new products that are on the approval process. The second one is they will use the proceeds to invest their R&D for the peripheral for the pipeline. So in the future, we will see the endo business will build the 2 robust segments and endo and the peripheral for the pipeline. And the third one is they are still seeking -- actively looking for the expansion of their business from the China market to the overseas market. That is their strategy. That's all.

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Jonathan H. Chen, MicroPort Scientific Corporation - Chief International Business Officer [5]

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And Cui Cui, your last question about the Firehawk in France, I will answer. So obviously, we are leveraging our European CRM sales team to help us commercialize Firehawk in France. It just so happens that France is the strongest sales force that we have for our CRM business. In fact, the good news is we -- in our international business, the first half stent growth was 60-something-percent and that did not include a good portion of our French contribution because our French reimbursement was only received in May of this year, May of 2019. So we do believe we have some more upside there for -- to grow our Firehawk business for France and other European countries.

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Cui Cui, Citigroup Inc, Research Division - Associate [6]

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So operator, please open up the line for Q&A.

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Operator [7]

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(Operator Instructions) Our first question comes from [Michael Wong] with CSOP in Hong Kong.

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Unidentified Analyst, [8]

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I just have a very simple question on your M&A plan. So what's your M&A plan in maybe next 3 to 5 years?

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Hongbin Sun, MicroPort Scientific Corporation - CFO [9]

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Michael, this is Martin, CFO of the group. I have to say, answer that question in short. So far for the next 2 or 3 years, we don't have a big M&A acquisition plan or target on the radar. So as you know, we just -- last year, we just completed a material acquisition to -- for the CRM business. So we will focus on this transition and keeping that business turnaround during -- within the next 2 or 3 years.

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Unidentified Analyst, [10]

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Okay. Okay. I understand. Sorry. Hello?

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Hongbin Sun, MicroPort Scientific Corporation - CFO [11]

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Yes. We can hear.

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Unidentified Analyst, [12]

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Okay. So how is your pacemaker? I just want to know the sales volume of your pacemaker in first half '19?

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Hongbin Sun, MicroPort Scientific Corporation - CFO [13]

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Michael, your question is for pacemaker in China or our whole pacemaker global business?

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Unidentified Analyst, [14]

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Both, I think, China and the global.

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Hongbin Sun, MicroPort Scientific Corporation - CFO [15]

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Okay. First one is our pacemaker business in China, we grow very fast and then for the case was -- for the 9 months, right, during the 9 months, we launched that pacemaker, we have 900 cases, and the revenue achieved to $3.5 million, the growth rate is about 270%. So this is very strong growth. Thanks to this pacemaker domestic manufacturing approval. For our global CRM business, we -- revenue for the first half year record over $100 million, $103.1 million. That growth is 153% and that has also included this -- that's not -- that excluded our China pacemaker business.

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Operator [16]

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(Operator Instructions) Our next question comes from Shannen Lin with Macquarie in Taiwan.

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Shannen Lin, Macquarie Research - Analyst [17]

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So my first one is on the domestically made joint. So how much did they contribute to sales in the first half and what's your expectation for the second half next year and in 2021? And then the second one is on the Firesorb. When do we expect a grant approval in China?

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Hongbin Sun, MicroPort Scientific Corporation - CFO [18]

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Excuse me. For the first question, you mean the domestic...

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Shannen Lin, Macquarie Research - Analyst [19]

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Yes, because we -- yes, domestically made joint because we just got 2 knees approved in China, right, domestically made.

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Hongbin Sun, MicroPort Scientific Corporation - CFO [20]

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Okay. There is no disclosure in our earnings, but I just give you some -- just -- it is, how to say, RMB 15 million we expected, but that's the estimation.

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Shannen Lin, Macquarie Research - Analyst [21]

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So that's for the first half, right?

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Hongbin Sun, MicroPort Scientific Corporation - CFO [22]

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For the 2019 this year.

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Shannen Lin, Macquarie Research - Analyst [23]

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For the full year?

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Hongbin Sun, MicroPort Scientific Corporation - CFO [24]

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Yes.

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Shannen Lin, Macquarie Research - Analyst [25]

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Then, do you have like guidance for the 2020 and 2021?

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Hongbin Sun, MicroPort Scientific Corporation - CFO [26]

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No. Well, until the March next year, we will give you -- we're happy to give you that guidance, but I will share that another information for your just reference. When we look at the Chinese joint market and high growth and look at the domestic players' growth, they all -- average growth is over 40% to 50%. So considering our -- just launched our Made in China knees for us this year, so next year we expect that definitely higher than this industry growth, which is much higher than 50%. I cannot give you the exact guidance for next year Made in China joints.

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Qiyi Luo, MicroPort Scientific Corporation - CTO [27]

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For the first half, I think we are still in the randomized trial stage. We believe if the regulation don't change too much, you don't -- remember in the China, this regulation is changing quite a bit every year, which last year, they said needed a 2 years' data. Now there's talk about they need a 3 years of following -- follow-up data. So (inaudible) was lucky, so they just get the data approved. Now they're changing regulation. So if they need 3 years, we look at the end of 2023 to 2024. It depends on if this -- we change our gear. So that's about the time line because now we are all starting to we have to increase one year by following up time.

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Shannen Lin, Macquarie Research - Analyst [28]

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I see. So you will be like 2023 to 2024 for the 3-year clinical data needed now?

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Qiyi Luo, MicroPort Scientific Corporation - CTO [29]

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Yes. So we think about that time to get approved.

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Operator [30]

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(Operator Instructions) Our next question comes from [Doris Chen with Chen Yu Capital] in Hong Kong.

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Unidentified Analyst, [31]

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My question is about there is a possibility that the national rollout of centralized procurement on the high-value consumables. So wondering what's your view on that? And can you share with us more details on the Gansu tender?

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Leanne Li, [32]

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This is Board of Secretary, Leanne. I'm going to answer your question in regarding the centralized procurement in Gansu province and its impact. So first stage is quickly review of this policy in Gansu province. So on July 24, Gansu province's healthcare security bureau issued the announcement on the centralized procurement of the medical consumables by the alliance of 55 public hospitals in Gansu, which involves stent products and dual chamber pacemakers and bundling 70% of the total procurement quantity by the 55 hospitals during the previous year.

And then on July 31, price negotiations were completed and our Firebird2 and Firehawk stents and domestic pacemaker were selected. And then on August 16, 9 manufacturers signed purchase agreements with the alliance of 55 public hospitals, which specified the quantity and the price. And the procurement will be executed starting from October. So this is a quick review of this process going on so far.

And impact on the company just in Martin's section, he already give the estimation of the second half of the year. And during that session, he mentioned the impact. Basically, this centralized procurement will bring down the retail price, but our ex-factory price will decline less compared to the retail price, while we expected a substantial growth in the sales volume. And -- but the specific impact on the companies still depend on the execution results, so that we will have a clear picture at the end of this year. Above all, we expect to increase our market share in Gansu province. In general, we believe that the centralized procurement this time is a pilot program by Gansu province by Gansu Provincial Health care Security Bureau under the guidance of the National Healthcare Security Administration. Such program may be followed by other provinces in China or extended nationwide, but it will depend on the execution results in Gansu province.

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Operator [33]

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(Operator Instructions) So as there are no more questions, so let's welcome Ms. Leanne to give us a closing speech. Thank you, Leanne.

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Leanne Li, [34]

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Jonathan?

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Jonathan H. Chen, MicroPort Scientific Corporation - Chief International Business Officer [35]

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This is Jonathan. So thank you, everyone, for participating in the First Half 2019 MicroPort Earnings Results Call. We look forward to visiting with our investors in the coming weeks in Hong Kong and New York, and thank you for your participation and I wish everyone a good day. Thank you.

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Zhaohua Chang, MicroPort Scientific Corporation - Founder, Chairman & CEO [36]

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Thank you.

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Leanne Li, [37]

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Thank you.

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Operator [38]

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Thank you for participation. This concludes the conference.