MPSC Announces 2017 Annual Results

Shanghai, China – On March 28, MicroPort Scientific Corporation (HK: 853) ("MPSC" or the "Company"), a leading medical technology company focusing on innovation, manufacturing and marketing high-end medical devices globally, announced the audited annual results of the Company and its subsidiaries ("Group") for the 12 months ended December 31, 2017 ("reporting period").
For the year ended December 31, 2017, the Group successfully recorded a revenue of US$444.2 million, representing a growth of 14.7% excluding the foreign exchange impact. The Group recorded a profit attributable to equity shareholders of US$18.8 million (net profit of US$17.0 million) for the year ended December 31, 2017, with an increase of 33.1% as compared with that for the year ended December 31, 2016. The significant increase was primarily attributable to the increase in gross profit driven by revenue growth and manufacturing cost reduction of major products. The increase in gross profit was partially offset by uncontrollable or non-core- business related factors including net foreign exchange loss of US$11 million and loss from investment in Lombard Medical, Inc. of US$6.8 million attributable to equity shareholders for the year ended December 31, 2017.
In 2017, the medical device industry experienced rapid growth with the increase of financial subsidies for urban and rural healthcare, as well as the advancement of the integrated medical system as well as diagnosis and treatment system. The government continues to encourage the development of domestically made medical devices and standardize the regulations of the industry. Meanwhile, measures such as simplifying and optimizing procedures, shortening clinical trial cycles and expediting approvals will vigorously promote the research and innovation of domestic medical devices, hopefully transforming them to a potential competitor to top leaders in the global market. In the international market, the newly issued EU medical device regulations require sufficient clinical data for the registration of new products, resulting in higher requirements for Chinese medical device companies targeting at the EU markets in respect of research and development, manufacturing, quality control and operation capability. Instead of relying on the cost and price advantages, Chinese companies now aims at building "Made in China" brand in the international market with their leading technologies, global vision, and rich experience in international operations. "In 2017, the Group adjusted and refined its business strategies to ensure the steady progress of its research and development projects, the optimization of sales channels, the expansion of emerging markets, and the continued improvement of operating efficiency, so as to achieved fast and healthy revenue growth of various segments," said Dr. Zhaohua Chang, MPSC Chairman and Chief Executive Officer.
The Group's outstanding performance was mainly driven by strong sales performance of key business segments and products. During the year ended December 31, 2017, cardiovascular segment performed strongly and realized a growth of 21.5% (excluding the foreign exchange impact) as compared to the same period of 2016. The drug eluting stent ("DES") business made an outstanding contribution: aside from the continued organic growth in Firebird2® Rapamycin-Eluting Coronary CoCr Stent, our Firehawk® kept the strong growth momentum and delivered impressive result of 61.1% and 53.3% growth rate (excluding the foreign exchange impact) respectively in the domestic and overseas market sales as compared to the corresponding period of 2016. Other China business also grew vigorously and recorded revenue growth of 33.1% (excluding the foreign exchange impact), 39.0% (excluding the foreign exchange impact) and 54.7% (excluding the foreign exchange impact) respectively from our endovascular business, electrophysiology business and neurovascular business. Orthopedics business achieved a growth rate of 7.3% (excluding the foreign exchange impact) as compared to the corresponding period of 2016. The international (non-China) orthopedics business has achieved milestone during the reporting period. Revenue of our international orthopedics business grew by 6.2% (excluding the foreign exchange impact) as compared to last year, far exceeding the market average and also marking the fastest revenue growth for joints products in over a decade. In particular, business in the U.S. realized a growth rate of 10.5% (excluding the foreign exchange impact), far above the average of the local market. Business in Japan experienced a rapid growth rate of 9.3% (excluding the foreign exchange impact), resulting in an even higher factor to the local market trend in a country where we had been experiencing decline over many years. While recording a higher growth in revenue, the international orthopedics business also performed well in terms of profit. During the reporting period, losses of the international orthopedics business narrowed substantially from US$19.4 million in 2016 to US$8.7 million, and breakeven was achieved in the fourth quarter of 2017. Its gross profit margin was also significantly improved. In 2017, the sales revenue of our China orthopedics business grew by 28.3% (excluding the foreign exchange impact) as compared to that of last year. It was mainly due to the significant increase of implants, especially driven by the excellent performance of our premium and Unique product – Evolution™ Medial-Pivot Knee System.
Meanwhile, in 2017 and the first quarter of 2018, the Group has gained substantial advancements of key pipeline products in regulatory and clinical development. For instance, Firehawk® obtained regulatory approvals in four new regions, further expanding our South American and Asian markets. A total of 10 products, including the domestically made Rega™ Family Implantable Pacemakers and Tubridge® Vascular Reconstruction Device ("Tubridge®"), obtained the regulatory approval from China Food and Drug Administration ("CFDA"). As for the orthopedic products, EVOLUTION® Revision Tibial System and Procotyl® Prime Acetabular Cup System gained US FDA approval in 2017. MicroPort® EP's Flashpoint™ Renal Artery RF Ablation Catheter were granted the CFDA Green-Path, a special fast-track procedure for innovative medical devices to gain CFDA approval. Several products are in clinical trial and have achieved remarkable progresses. For example, in post-market clinical trials, we launched Firehawk® TARGET MALAYSIA REGISTR and TARGET CTO clinical trials, and released promising three-month Optical Computerized Tomography ("OCT") data from the Firehawk® TARGET All Comer trial to further demonstrate its safety and efficacy. The result of the primary end point for TARGET AC is expected to be released this year. In pre-market clinical trials, we completed the first patient enrollment of FUTURE II trial for Firesorb® Bioresorbable Rapamycin Target Eluting Coronary Scaffold System ("Firesorb®") in August. Meanwhile, VitaFlow™ Transcatheter Aortic Valve and Delivery System ("VitaFlow™") finished one-year clinical follow-up in 2017 and is expected to gain CFDA approval within this year. In addition, domestically made Knee and Hip products are planned to get CFDA approval by 2018 and 2019 respectively.
In 2017, the Company signed some important financing and acquisition agreements which attracted great attention. These financing and M&A moves not only allow us to optimize the financial structure and support the ongoing development of various business sectors, but also expand our geographic reach and product portfolio, to build MPSC world's leading medical technology company. On November 20, MPSC and LivaNova PLC (NASDAQ:LIVN) ("LivaNova") announced the companies have entered into a binding Letter of Intent ("LOI") under which MPSC will acquire LivaNova's Cardiac Rhythm Management ("CRM") Business Franchise for $190 million in cash. Upon completion of the acquisition, MPSC will become the most advanced domestic company in China with CRM know-how in the global CRM market which is estimated to be $10 billion. With the world's largest treatable patient population as its home market, MPSC can accelerate the development of new CRM products to better serve patients suffering from arrhythmias in China, which will further enhance the Company's competitiveness in the global CRM industry. The transaction is expected to close in second quarter 2018. MicroPort® CardioFlow is our first project to win high recognition around noted investors while still at clinical trial stage. Besides, our subsidiary MicroPort® EP was officially quoted on the National Equities Exchange and Quotations ("NEEQ") on August 15, which is expected to provide a good platform for MicroPort® EP's financing and to reflect the fair value of our EP business.
"In 2018, our pipeline of various businesses continues to progress, with several products expected to gain regulatory approval followed by planned market launch, which will provide strong momentum of sustainable growth for the Company. Looking forward, we will continue to take solid steps on the path towards becoming a leading global medical device company with sound operating strategies, advanced and diversified product pipeline, as well as further improved corporate governance," Dr. Zhaohua Chang said. "We aim to continuously offer innovations, technologies and services to millions of global patients and become a patient-centric global enterprise in minimally invasive and other emerging medical market."