(Yicai Global) Sept. 6 -- Shares of Chinese medical device makers ended lower in the main despite earlier gains prompted by expectations of wider profit margins after a healthcare authority said innovative medical instruments would no longer be included in the state’s bulk-buying program.

Lepu Medical Technology [SHE: 300003], which makes cardiovascular intervention products, closed 1 percent down at CNY20.01 (USD2.90), after rising 1.3 percent intraday. Coronary stent manufacturer MicroPort Scientific [HKG: 0853] slid 2.3 percent to finish at HKD15.20. It had gained 2.2 percent earlier in the day.

China's centralized bulk procurement program, which costs about CNY1 trillion (USD144.1 billion) a year, will include some common medical consumables in clinical use, but not innovative medical devices any more, the National Healthcare Security Administration wrote in a document published yesterday. The agency said it was excluding them to enable the market to grow based on clinical use, competition, and other factors.

From 2020 to 2021, the main novel medical devices covered by the cost-cutting program were coronary stents and artificial joints. But the list also included items such as coronary balloons, intraocular lenses, and harmonic scalpels.

The program has cut costs, but has also eaten into the profit margins of participating firms. MicroPort lost over USD250 million in the first half of this year, the Shanghai-based company said in its latest earnings report. The firm's business of cardiovascular interventions had USD60 million of revenue, a 10 percent drop from a year ago.

First-half profit at Beijing-based Lepu slumped nearly 27 percent, with income from its medical instruments business dropping 27 percent.  

The NHSA’s decision should encourage the market, sparking a share price rally and potentially restoring confidence among medical device makers to invest in new products, though there is still much that needs clarifying, an industry insider told Yicai Global.

It is unclear for how long the exemption would last and how big the sector is permitted to grow, the person added. 

Shares of Venus MedTech [HKG: 2500], which makes heart valves, bucked today’s trend, ending 2.9 percent up at HKD12.10 (USD1.50). The stock had gained as much as 5.3 percent earlier in the day.

Editor: Emmi Laine, Xiao Yi