mindray annual report 2009 - corporate-ir.net · mindray annual report 2009 02 dear fellow...

Mindray Annual Report 2009

Contents

Who We Are 01

CEO Letter 02

World Class R&D 06

Global Supply Chain 08

Our Products 08

Core Values 10

Milestones 11

Corporate Information 12

Mindray is a leading developer, manufacturer and marketer of

medical devices worldwide. Our three primary business segments

are patient monitoring and life support products, in-vitro diagnostic

products and medical imaging systems. Through both our main

manufacturing and engineering base in China and worldwide

distribution network, we supply high-quality, sophisticated and

cost-effective products to customers around the world.

CHINA OPERATIONAL HEADQUARTERS, GLOBAL FOOTPRINT

With global operational headquarters in Shenzhen, China, Mindray's

multiple offices manage a comprehensive distribution network

around the world that are complemented by direct sales channels

in several developed countries. Through its China-based

engineering and manufacturing infrastructure, Mindray supplies

its high performance-to-price ratio products to an ever-expanding

distribution and direct network around the world.

COMMITMENT TO QUALITY

Year after year, Mindray continues to develop and deliver the

highest quality medical devices at the most competitive prices.

We employ in-process quality control throughout our entire

production process as we pursue the goal of a zero-defect ratio

of our products. Our vertically integrated operating model

complements this process, and enables us to efficiently develop,

manufacture and market high-quality products.

FOCUS ON R&D - A DRIVER FOR GROWTH & PROFITABILITY

With almost more than 1,400 engineers based primarily in China,

complemented by teams of engineers in the U.S. and Europe,

Mindray has established a powerful R&D platform that continues

to drive high growth and profitability. We are particularly proud

of our R&D team, which not only continually looks for ways to

innovate and bring to market high-quality products specific to the

needs of our customers, but is also dedicated to reducing product

costs. As a result, we have a large and growing patent portfolio,

a strong product pipeline and the industry's leading growth and

profitability record.

UNIQUE VERTICAL INTEGRATION MODEL

Having operated for 19 years, Mindray has developed a unique

vertically integrated operating model where all of our key

components are made in-house. This model enables us to enjoy

competitive cost and efficiency advantages, shorter lead-time,

prompt response to demand, better control testing process and

quality, as well as cost savings that are passed on to our customers.

Who We Are

01 Mindray Annual Report 2009

Mindray Annual Report 2009 02

Dear Fellow Shareholders,

In a challenging global environment we delivered strong financial

results while maintaining our focus on operational excellence

and innovation. We continued to invest in R&D, increased our

investment in the international delivery channel and enhanced

our promotional activities worldwide. Additionally, our well-

positioned product portfolio enabled us to benefit from

healthcare reform in our domestic China market. As a result, we

launched ten new products while driving solid top and bottom-

line growth as well as excellent cash generation.

We also forged ahead with the seamless integration of acquired

Datascope's patient monitoring business and achieved synergies

that have improved our gross margins. Mindray China operation

achieved strong tender sales performance in 2009 as we benefited

from domestic healthcare reform; we believe increased Chinese

government spending will continue to favor our company over

the long term. Additionally, our Shenzhen subsidiary received

the nationwide key software enterprise status for the 2009

calendar year, which grants Mindray a 10% corporate income

tax rate for the Shenzhen subsidiary in 2009.

In 2009, we also generated a strong cash flow improvement,

partially resulting from improved working capital management

toward the end of the year. This has helped to increase our cash

reserve and strengthen Mindray's ability to further develop its

business.

CEO Letter

We are proud to present ourfourth annual report as a publiccompany. 2009 marked anotheryear of excellent progress forMindray, despite broadeconomic crisis anduncertainties around the world.

Net RevenueUS$ million

CAGR= 49%

2003 2004 2005 2006 2007 2008 2009

59 85132

194

294

548

634


"Poised for Growth: Recovering from market slowdown"

As a result of the economic crisis, hospital spending, financing

and reimbursement were the main factors that impacted our

business in 2008; however, since the middle of 2009, the macro

environment has begun to show signs of recovery and we have

seen improvement in our international performance, especially

within emerging markets.

Particularly, we have seen hospital spending start to stabilize as

previously frozen capital expenditure budgets begin to thaw in

developed markets. The rebound in the vast majority of Mindray's

emerging markets, including Latin America, Asia Pacific, Africa

and the Middle East, are also indicative of a continuously

improving market environment.

"A strong R&D focus enables us to exceed our product

development target and expand our addressable market"

In 2009, we successfully launched 10 new products across our

three main product lines, including 2 jointly-developed products

by our Shenzhen and Mahwah engineering teams. As a result

of our R&D team's efforts and dedication, we now have over 70

products on the market. Going forward, we are confident that

our ongoing commitment to R&D will allow us to continually

deliver a significant number of new products to the market each

year while maintaining a healthy margin level.

Net IncomeUS$ million

CAGR= 51%

2003 2004 2005 2006 2007 2008 2009

13 2335

53

89

133

156

6%Others

DevelopedMarket26%

22%

EmergingMarket

46%China

Geographic as a Percentage ofTotal 2009 Revenue

International Domestic

Intl CAGR 70%Domestic CAGR 37%

International & Domestic Sales

2003 2004 2005 2006 2007 2008 200914

29

235

293

45 56 5577

94 100

149 145

313342

(US$ million)

* This Non-GAAP net income represents net income reported inaccordance with GAAP, adjusted for the effects of share-basedcompensation expense and acquired intangible assets amortizationexpense, in-progress research and development expenses, realignmentcosts - post acquisition, as well as income from early termination ofcontract, as described in our SEC filings included within this letter.

Gross Margin Net Margin

Gross & *Net Margin (%)

2003 2004 2005 2006 2007 2008 2009

54.3

24.2 23.222.8 26.0 25.5

54.7

27.5

55.8

30.1

56.0 56.854.3 54.3


"Our well-established saleschannels allow us to continueto gain market share acrossmarkets"

We achieved strong domestic growth in 2009 based on our solid sales

channel. In China, we have 30 sales offices that manage a network

of over 2,400 distributors, which comprises one of the largest sales

networks of any medical device manufacturer in the country. Going

forward, we will continue to optimize our distribution network to

ensure continuous and excellent execution of our domestic sales and

marketing strategies.

Internationally, we use our integrated sales network to continue to

gain market share from competitors in both developed and emerging

markets. We have effectively leveraged Mindray USA operation's direct

sales channel to continue our efforts in penetrating developed markets

and have introduced a new brand, 'DPM', which has helped to broaden

our target market and provide more options to our customers. Going

forward, we will continue to strengthen our market presence in the

international market through our 13 international sales and service

offices, over 1,500 international distributors and over 150 direct sales

force based in the U.S., the United Kingdom, France and Germany.

"The Chinese government continues its focus on improving

healthcare"

The Chinese government continues with its efforts to improve

healthcare in rural hospitals and community clinics. In 2009, the

government announced a RMB850 billion three-year healthcare

reform proposal that Mindray, as a leading domestic medical

equipment provider, is poised to benefit from. The reform plan makes

us even more confident in our ability to continue our high-growth

trajectory in the domestic Chinese market into the future.

"Continued contribution and well-balanced growth across all

three product lines"

Mindray offers a diversified sales mix resulting from strong product

offerings across each of its three primary business segments as well

as an expansive geographic reach across developed and emerging

markets alike. These factors combine to create unique opportunities

for the Company in the patient monitoring and life support products,

in-vitro diagnostic products and medical imaging systems device

markets, both in China and internationally. In 2009, all three of our

product lines continued to contribute to our strong growth, with our

medical imaging systems division leading as the primary driver of

organic growth.

Sincerely yours,

Xu Hang

Chairman & Co-CEO

Mindray Medical

International Limited

Li Xiting

President & Co-CEO

Mindray Medical

International Limited

A closer look at our three product lines:

With around 10% market share, Mindray is the third largest player

in the global patient monitoring device market. Mindray plans to

grow this position while further expanding our market share

through bundled sales focused on total operating room solutions.

Currently, an estimated 43.9% of our total revenues stem from our

patient monitoring and life support products.

Our medical imaging systems product line contributes

approximately 25.6% to total revenues and is our fastest growing

segment. With the launch of our 4D image color ultrasound DC

7, we believe we will better penetrate into higher-end markets in

2010.

Our in-vitro diagnostics product line contributes approximately

24.5% to total revenues and competes in the largest addressable

market for Mindray. We have enriched our product portfolio in this

product line by launching a new five-part hematology analyzer

and several new reagents.

"Excellent employees drive future growth"

As of March 31, 2010, Mindray employs more than 5,800 employees

globally. As we have stated in the past, our employees are our

most valuable asset and our performance-based culture is designed

to reward talent and the results that are a byproduct of hard work.

We have consistently created ownership incentives for our

employees by granting options to purchase our shares. Currently,

over one-third of Mindray's employees have a direct, vested interest

in our ongoing success. We have great people at every level,

including strong leaders who have the experience and strategic

insight to turn the opportunities that lie ahead of us into even

greater success in the future.

"Looking ahead - strengthening Mindray's international

presence and maintaining Mindray's leading domestic

position"

We are excited about our future as we look to further broaden our

international presence and strengthen our foothold in China. We

will continue to build our international sales and support

infrastructure by further localizing our international sales staff and

investing in expansion into new market segments. We will also

continue our investment into international sales channels to better

position the company in a recovering market. As a leading domestic

player, Mindray is well-positioned to benefit from tender sales and

the Chinese healthcare reform.

Our ongoing commitment to investing in R&D helps us build upon

our existing product lines in the effort to expand our addressable

markets while maintaining a leading market share in China.

We thank you all for your continued support.

Segment Revenuesas a Percentage ofTotal 2009 Revenue

IVD

24.5%

25.6%MIS

6%Others

43.9%PMD


World Class R&D


Mindray possesses a strong and experienced R&D team. Driven by market needs, the team is dedicated to new product design, continuously

upgrading and re-engineering existing products through advanced and popular technologies. In 2009 we focused on improving R&D efficiency

through the realignment of our R&D teams within each operating region, this helped us expedite product launches and exceed our preliminary

goals. In 2010, we aim to launch additional 7 to 9 new products.

Our Products


Global Supply Chain

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

700

600

500

400

300

200

100

0

ModularPatient Monitor;EconomicalPatient Monitor

Mid-endBiochemistry Analyzer

Multi-parameterPatient Monitor

3-part diff.HematologyAnalyzer

B/WUltrasound;Semi-automaticBiochemistryAnalyzer

FullyAutomaticBiochemistryAnalyzer

Surgical Light & Bed;Ceiling Pendent System;High-end ColorUltrasound

Hand-carriedColor Ultrasound;Digital Radiography;Defibrillator

5-part diff. Hematology Analyzer ;Color Ultrasound;High-Value Patient Monitor;Anesthesia Machine

Commitment to product innovation and quality drives rapid growthPatient Monitoring & Life Support Products

Total Revenue USD mm

Medical Imaging SystemsIn-Vitro Diagnostic Products

In China we maintain our global base for product development, engineering and manufacturing, and we employ a vertically integrated operating

model that enables us to enjoy distinct cost and efficiency advantages. Additionally, our nationwide distribution network in China is the most

comprehensive in the industry, while our fast growing distributor network in international markets is complemented by a direct sales and service

infrastructure in the U.S., U.K., France and Germany.

Anesthesia PatientMonitor;SpO2 & BloodPatient Monitor

Portable B/WUltrasound;Portable CRTScreen PatientMonitor

RawMaterials

CustomerDemand

NewTechnology

Product Design

Manufacturing

Market Coverage Good RecordCustomer SatisfactionMarket CoverageProduct Realization

Global Supply Chain

Expanding Suite of Products Fuels Growth

Over the past 19 years, Mindray has vertically and horizontally

enriched its product portfolio from that of a single product model

provider to one covering three major product lines with more

than 70 models. Because Mindray has continued to launch new

high-value products, Mindray's net revenue has maintained a

rapid growth pace and the Company's addressable markets have

expanded dramatically.

Patient Monitoring & Life Support Products

Segment revenues in 2009: $278.1 million, 14.0% annual growth

rate, 43.9% of total net segment revenues.

Net revenues in our patient monitoring and life support products

segment grew at an annual rate of 14.0% to $278.1 million in

2009, inclusive of 4 months' revenues from Datascope's Patient

Monitoring Business, which we acquired in May of 2008. Organic

growth was primarily driven by further penetration into China's

tier-three hospitals, led by our higher-valued BeneView monitor

series, robust demand for anesthesia machines, and strong

contribution from jointly developed Datascope branded

monitoring devices.

Our patient monitoring devices track the physiological parameters

of patients, such as heart rate, blood pressure, respiration and

temperature. We currently offer around 30 different patient

monitoring devices that are suitable for adults, pediatric and

neonatal patients, and are used principally in hospital intensive

care units, operating rooms and emergency rooms. Our patient

monitoring device portfolio can be categorized into single- and

multiple-parameter monitors, mobile and portable multifunction

monitors, central stations that can collect and display multiple

patient data on a single screen, and electro-cardiogram

monitoring devices. To further expand this product line, we set

our sights on becoming a total solutions provider for operating

rooms and changed the original name of our patient monitoring

product line to patient monitoring and life support products.

Additionally, we have added to this product line 6 anesthesia

machines, a defibrillator, a surgical light, a surgical bed and a

ceiling pendent system.

In-vitro Diagnostic Products



Net revenues in our in-vitro diagnostic products segment grew

at an annual rate of 13.2% to $155.4 million in 2009. This growth

resulted primarily from increased sales of Mindray's biochemistry

and hematology analyzers, the introduction of high-end market

targeted BC-5800 five-part hematology analyzers, and accelerated

reagent business.

Our current product portfolio consists of 20 in-vitro diagnostic

products in two primary categories: hematology analyzers and

biochemistry analyzers. And we offer more than 110 reagents

that are used by laboratories, clinics and hospitals to perform

analyses to detect and quantify various substances in patient

samples from blood, urine and other bodily fluids.

These reagents can be used in conjunction with Mindray's

products as well as with those manufactured by other companies.

Reagent sales create a recurring revenue stream for Mindray and

accounted for 21% of our in-vitro diagnostic products segment

revenue in 2009.

Additionally, Mindray has three immunoassay products, which

also fall under our in-vitro diagnostic line, that contribute to our

revenue. These consist of a urinalysis product and complementary

reagents, a microplate reader and a microplate washer.

Medical Imaging Systems



Net revenues in our medical imaging systems product segment

grew at an annual rate of 16.9% to $162.5 million in 2009. This

growth resulted primarily from continued increase in sales of our

existing ultrasound systems, and especially from strong growth

in color ultrasound.

Our product line includes 11 portable and mobile grayscale and

5 color ultrasound imaging systems as well as a broad range of

transducers. Additionally, in 2008, we introduced our first digital

radiography system, the DigiEye 560T.


Core Values

ACCESSIBLE: Easy to use, affordable to own and

reliable to operate

INSIGHTFUL: Thoroughly understand and quickly

respond to the needs of the medical community

INNOVATIVE: Adopt and advance key technologies and

make them more relevant to the market


VisionWe will make better healthcare solutions more accessible to humanity.

MissionImprove healthcare by optimizing and sharing medical technologies with the world.

ValuesTo earn the respect and trust of our customers worldwide by continuously finding better solutions across all aspects of our business and to create a

performance-driven culture that values integrity and constant improvement.

Innovative

Accessible

Insightful


Milestones1991: Founded in Shenzhen, China

1993: Developed China's first multi-parameter patient monitor

1995: ISO 9001 certified by TUV

1998: Developed China's first three-part differential hematology analyzer

2000: Received first CE Mark clearance, began exporting products

2001: Developed China's first digital diagnostic ultrasound imaging system

2003: Developed China's first automatic chemistry analyzer

2004: Received first FDA 510(k) clearance; first product exported to US Market

2006: Developed China's first 5-part hematology analyzer

2006: Listed on the New York Stock Exchange (NYSE) under symbol MR

2007: Revenues generated in international markets exceed revenues generated in domestic markets for the first time in operating history

2008: Acquired Datascope's patient monitoring device business

2008: Developed China's first color Doppler laptop-size ultrasound system

2009: Shenzhen subsidiary received key software enterprise status award by the government of China


Global Operational Headquarters

Mindray Building, Keji 12th Road SouthHigh-tech Industrial Park, NanshanShenzhen 518057, P.R. China

NYSE Symbol: MR

Contact InformationIndependent Accountants

PricewaterhouseCoopers33/F Cheung Kong Center2 Queen's RoadCentral, Hong Kong

BNY Mellon Shareowner Services

P.O. Box 11258Church Street StationNew York, NY 10286-1258United States of America

Investor Relations Contact

Tel: +86-755-2658-2518Fax: +86-755-2658-2680Email: [email protected]://ir.mindray.com

www.mindray.com

Corporate Information

Xu HangChairman and Co-Chief Executive OfficerMindray Medical International Limited

Li XitingPresident, Director and Co-Chief Executive OfficerMindray Medical International Limited

Ronald EdeDirector, Chief Financial OfficerMindray Medical International Limited

Joyce I-Yin HsuDirector

Chen QingtaiIndependent Director

Peter WanIndependent DirectorFellow of Hong Kong Institute of Certified Public Accountants, the Association of CharteredCertified Accountants, U.K. and the Hong Kong Institute of Directors

Kern LimIndependent DirectorPresident and CEO of Asia Strategic Consulting

Wu QiyaoIndependent DirectorProfessor at Beijing Institute of Technology

Lin JixunIndependent DirectorFounder and Chief Executive Officer of ACON Laboratories

Board of DirectorsCorporate OfficerXu HangChairman and Co-Chief Executive Officer

Li XitingPresident and Co-Chief Executive Officer

Ronald EdeDirector, Chief Financial Officer

Liu JieChief Operating Officer

Cheng MingheSenior Vice President of Strategic Development

David GibsonPresident, Mindray DS USA Inc.

Tim FitzpatrickGeneral Counsel

mindray annual report 2009 - corporate-ir.net · mindray annual report 2009 02 dear fellow...

Documents