China medical devices manufacturer LavaMed raises $40m

LAV led the angel round and Zhejiang Silk Road led the Series A, according to a statement. Junshang and LAV also took part in the Series A round.

Founded in 2019, LavaMed specialises in neuro-interventional devices typically used to treat cerebral stroke patients. The company claims to have complete independent intellectual property rights to all its products, which are manufactured at a facility comprising 8,500 square metres of office and workshop space.

At present, foreign brands have a 90% share of China's neuro-interventional devices industry. LavaMed is looking to improve production processes and quality standards with a view to making inroads into this market. Domestic substitution is a key theme for private equity investors across multiple sectors.

Neuro-interventional devices are a recent addition to China's centralised procurement scheme. This started with a trial programme in several provinces last year that resulted in price reductions of 50-70%. A proposal was circulated for comment in October to expand the programme to 21 provinces.

AVCJ understands that centralised procurement initially involves one or two specific devices in a category, and some others may never be included in the scheme. While centralised procurement broadens access to products and increases sales, it also focuses on affordability. This can result in prices falling to a point at which they no longer offset R&D expenses. 

Heart stents are a commonly cited example. A combination of abundant supply and high-volume purchasing resulted in a 93% fall in the average sales price in 2020, completely undermining the investment thesis of anyone active in the space.

“They just changed the valuation model for heart stent companies, reclassifying them as metal processing businesses rather than high-end medical device manufacturers [and the valuation difference between the two is enormous],” Minfeng Wu, a managing director at CDH, told AVCJ in a previous interview.

 

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• Topics
• Greater China
• Healthcare
• Early-stage
• China
• medical devices
• Lilly Asia Ventures