Healthcare Equipment in China - Surgical Robots

Minimally invasive surgery has become increasingly popular due to its benefits for both patients and surgeons. For patients, these procedures cause less trauma than traditional open surgeries, leading to reduced pain, shorter hospital stays, and faster recovery times. Surgeons also benefit from minimally invasive surgery, as it allows them to operate with greater precision and control, reducing the risk of complications and improving patient outcomes.

In minimally invasive orthopedic surgery, doctors typically use tools such as arthroscopes, foraminal scopes, high-resolution x-ray machines, and specialized puncture needles to assist with the procedure. Incisions average around 1cm, with surgery times typically under an hour and hospital stays ranging from 1 to 3 days. Some patients can even be discharged the same evening.

With robotic assistance, the flexibility and accuracy of surgery performed by doctors is higher, better conforming to ergonomics, solving the pain points of doctors who often need to operate in unnatural positions for extended periods, eliminating hand tremors, and providing high value to surgeons and hospitals.

The surgical robots concept first appeared in 1985. The da Vinci Si and da Vinci Xi robots, developed by Intuitive Surgical (ISRG), launched in 2009 and 2014, respectively, received FDA approval and became the first commercially successful minimally invasive surgical robot products. For over a decade, da Vinci surgical robots have held a dominant market position, with a global market share exceeding 50%.

The global surgical robot market in China in 2021 was $10.8bn and accounted for over 17% of the global minimally invasive surgery market ($63 billion). This figure is estimated to reach $44.7 billion by 2028, a CAGR of 20%, and account for more than 50% of the total minimally invasive surgery market.

In China, due to the high technology barriers that have been set, the imported da Vinci Si and da Vinci Xi surgical systems were the only laparoscopic surgical robot system approved by the National Medical Products Administration before 2022.

With an imported price of about $4m, local governments had to implement total quantity control of hospital procurement. If hospitals wanted to purchase the da Vinci system, they needed to obtain a configuration certificate issued in advance by the central government. As a result, the penetration rate of the surgical robot industry in China is low. Only about 200 da Vinci systems have been installed over the last 10 years. For example, the penetration rates of domestic laparoscopic surgical robots and joint replacement surgical robots are only 0.5% and 0.1%, respectively, while the corresponding penetration rates in the United States are 13.3% and 7.6%.

With several domestic companies launching clinical products over the coming years, the da Vinci-dominated market should change. We expect the development of the minimally invasive surgical robots industry in China to enter a fast growth phase over this decade.

We estimate the market size could grow from $640m in 2021 to a $10.8bn market in 2030. At that time, 30% of minimally invasive surgery expenses should be related to surgical robots, up from 9% in 2021.

As the No.1 local player in the minimally invasive surgical consumables industry, Kangji Medical (9997.HK) has seen this trend in the development of minimally invasive surgery in China. In February 2022, Kangji completed a RMB 363m investment in Weijing Medical for a 35% controlling interest. The Weijing surgical robot has completed the clinical data filing for its three-arm product and the type testing for its four-arm product. Kangji’s extensive resources in the minimally invasive surgical market should benefit and accelerate Weijing’s clinical, registration, and commercialization process. We expect the products to be approved for launch in the second half of next year. The Weijing surgical robot is one of the most promising to become China's "da Vinci".

With the launch of domestic products, including Weijing’s, we expect the price of surgical robots to decrease significantly. This should lead to an increase in hospital procurement and increased imported substitution. The "da Vinci" robot has an imported price of circa $4,000,000 (imported tax is about 40%). There is strong domestic demand and the waiting list for the da Vinci system exceeds 2,000 vs an installed base in China of circa 200 units.

The development of clinical surgery in China is about to enter the 3.0 era. The penetration rate of surgical robots is expected to significantly increase in the coming years. Domestic companies with vision have seen this trend and are actively expanding in this field. We expect that in the near future, China will launch its own "da Vinci". 

In future articles, we will comment on the technical capabilities and price of domestic surgical robots vs the da Vinci system. We will also look at the penetration in hospitals in Tier 1 cities and the potential penetration in Tier 2, 3, and 4 cities.