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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
03 Mindray Annual Report 2009
"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
Mindray Annual Report 2009 04
"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
05 Mindray Annual Report 2009
Mindray Annual Report 2009 06
World Class R&D
07 Mindray Annual Report 2009
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
Mindray Annual Report 2009 08
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
Segment revenues in 2009: $155.4 million, 13.2% annual growth
rate, 24.5% of total net segment revenues.
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
Segment revenues in 2009: $162.5 million, 16.9% annual growth
rate, 25.6% of total net segment revenues.
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.
09 Mindray Annual Report 2009
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
Mindray Annual Report 2009 10
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
11 Mindray Annual Report 2009
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
Mindray Annual Report 2009 12
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