20 October 2025 Global Medical Technologies Global Medtech: The Long View on China... slides and transcript from our webinar Lisa Bedell Clive +44 207 676 7256 lisa.clive@bernsteinsg.com Susannah Ludwig +41 582 723 127 susannah.ludwig@bernsteinsg.com Delphine Le Louet +33 1 42 13 92 93 delphine.le-louet@bernsteinsg.com Lee Hambright +1 917 344 8429 lee.hambright@bernsteinsg.com Estelle Pang +44 207 676 7646 estelle.pang@bernsteinsg.com Richard Hombach +44 207 762 1858 richard.hombach@bernsteinsg.com Deeksha ...

Summary of Conference Call Notes Industry Overview - **Industry**: Healthcare Services and Medical Devices - **Period**: 1H25 - **Key Challenges**: Ongoing policy headwinds including DRG/DIP reforms, reimbursement controls, and VBP impacting revenue and profitability across the sector [1][2][3][7] Core Insights - **Mixed Results**: The Medtech & Services sector reported soft results in 1H25, aligning with expectations due to policy challenges, but investor sentiment is improving due to a more favorable policy outlook [1][2] - **Recovery Expectations**: A clearer recovery is anticipated in 2H25, driven by easier comparisons and normalization of hospital activities [2] - **Reimbursement Pressures**: Reimbursement controls and DRG/DIP pressures are expected to persist, but an increase in patient visits may lead to top-line recovery [2][7] Company-Specific Highlights - **AngelAlign**: - Positive outlook with raised full-year case volume guidance to 490k-500k, indicating a growth of +36% to +39% year-on-year [11] - Overseas case volume growth of +103% year-on-year, but near-term profitability is under pressure due to increased investments [8][11] - **Kangji Medical**: - Reported +8.3% year-on-year sales growth, supported by new product ramp-up and overseas expansion (+27.7% year-on-year) [3] - Anticipates volume recovery as VBP coverage expands [8] - **AK Medical**: - Flat operating profit with modest revenue growth (+5.6% year-on-year) due to margin pressure from VBP-affected products [3] - Unchanged FY25 earnings guidance [11] - **Shandong Weigao**: - Missed expectations with flat revenue (+0.1% year-on-year) and a 9% year-on-year decline in net profit due to VBP impact [3] - **Hygeia**: - Experienced a 34.5% year-on-year decline in adjusted net profit, driven by DRG/DIP reforms [7] - Focus on operational efficiency and cash flow resilience [10] - **Jinxin Fertility**: - Significant net loss in 1H25 due to one-off impairments, but expects a sequential recovery in cycles supported by increased volumes in July/August [9][11] Market Dynamics - **Pricing Pressure**: VBP continues to exert pressure on margins, but is seen as manageable for leading domestic players [8] - **Global Expansion**: Companies are increasingly focusing on global expansion, with varying success across the sector [8] - **Surgical Robots**: Moderate recovery in domestic procurement with increased globalization efforts from domestic players [8] Financial Performance Metrics - **Kangji Medical**: Net profit declined 18.5% year-on-year due to lower interest income and losses from its surgical robot unit [3] - **Hygeia**: Improved operating cash flow by 29.9% year-on-year [10] - **Gushengtang**: Delivered resilient margins and doubled operating cash flow, guiding for 10-15% revenue growth for FY25 [10] M&A Activity - **Divergent Attitudes**: Companies exhibit varied attitudes towards M&A, with some like Hygeia actively seeking acquisitions while others remain cautious [10] Guidance and Future Outlook - **Overall Sector Guidance**: A more sustainable valuation recovery will require fundamental improvements across the Medtech and Services sectors [2] - **Key Risks**: Include pricing pressure from weak macro consumption trends, regulatory headwinds, and competition in the domestic market [13][15][19] This summary encapsulates the key points from the conference call, highlighting the challenges and opportunities within the healthcare services and medical devices industry.

Summary of Key Points from the Conference Call Industry Overview - **Industry Focus**: The conference call primarily discusses the healthcare sector in China, particularly the medical technology (Medtech), in vitro diagnostics (IVD), retail pharmacies, hospitals, vaccines, and insulin markets [1][2]. Core Insights and Arguments Medtech - **Key Areas of Focus**: 1. Progress of capital equipment value-based procurement (VBP) and the trade-in policy [1] 2. Channel destocking trends [1] 3. Import substitution trends post-VBP, including intraocular lenses (IOLs) and IVD [1] - **VBP Impact**: The June bidding value data showed a year-on-year growth rate of 49%, but a month-on-month decline of 3%, indicating lower unit prices due to VBP [10]. IVD Market - **Weak Demand**: The IVD sector continues to face challenges, with a projected 20% year-on-year decline in the CLIA reagent market size for 2025 [19]. - **AmoyDx Performance**: AmoyDx is expected to grow against the trend due to its strong presence in compliant in-hospital sales channels, benefiting from the anti-corruption campaign [21]. Insulin Market - **Domestic Substitution**: The insulin industry has seen significant growth, particularly for insulin analogs from companies like Gan & Lee and THDB, which reported rapid revenue growth in 1Q25 [22]. Retail Pharmacies - **Market Pressure**: Retail pharmacies are under pressure due to strict reimbursement policies and weak consumer spending. However, there is a potential market-clearing trend expected by year-end [31]. Hospitals - **New Product Feedback**: Hospitals are seeing new product introductions, such as the new version of SMILE surgery and new PIOL products, which are expected to drive consumption recovery [1]. Vaccine Market - **Anti-Corruption Campaign**: The ongoing anti-corruption campaign within the CDC system is impacting vaccine demand and distribution channels [1]. Financial Performance and Estimates Earnings Revisions - **Mindray**: Annual earnings estimates revised down by 2.1% to 5.0% for 2025E-27E due to industry headwinds in medical equipment and IVD [2][37]. - **United Imaging**: Revenue and earnings forecasts adjusted down to reflect lower-than-expected bidding data [39]. - **SNIBE**: Earnings estimates revised down by 1.4% to 7.1% for 2025E-27E due to policy headwinds in the IVD sector [40]. Revenue Growth Expectations - **High Growth Companies**: THDB and Gan & Lee are expected to achieve the highest revenue growth due to a low base from VBP renewal in 2Q24 [6]. - **Mindray's Decline**: Mindray's China business is expected to decline by 26% year-on-year in 2Q25 due to IVD weakness [9]. Other Important Insights - **Trade-in Policy Concerns**: The trade-in stimulus fund is expected to run out, leading to a decline in applications and a reduced stimulus effect in the second half of 2025 [10]. - **Market Dynamics**: The healthcare market is experiencing a shift with increasing government support for procurement and a focus on innovative products [47][48]. Conclusion - The healthcare sector in China is facing various challenges, including policy headwinds, weak demand in certain segments, and the impact of ongoing reforms. However, there are also opportunities for growth, particularly in innovative products and domestic substitution trends. Companies like AmoyDx, Gan & Lee, and THDB are positioned to benefit from these trends, while others like Mindray and SNIBE are facing headwinds that may impact their performance in the near term.