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Mindray Medical International Limited (MR - Analyst Report), a leading Chinese medical device manufacturer, recently revealed that it inked an agreement with Novation thereby enabling its over 65,000 members and associates to buy Mindray’s M5 and M7 ultrasound machines.

Novation is the leading supply contracting firm in the health care business. It provides major savings to over 65,000 members and associates of VHA, UHC and Provista. VHA, UHC and Provista participants utilized Novation contracts to buy about $40 billion of goods and services, in 2010.   

Novation stated that the agreement demonstrates its desire to obtain the highest market value for its members. Mindray expressed its desire to work with Novation to deliver modern ultrasound know-how. Mindray’s M5 and M7 offerings may be utilized for a large array of clinical requirements.    

Mindray is a bellwether in the Chinese MedTech industry with a solid international presence. A key distinction with domestic competitors is that the majority of Mindray’s products have CE Mark and/or Food and Drug Administration (“FDA”) clearance.

Mindray maintains a decent product pipeline and brings out several new products each year. New products contribute in a major way to its revenues.

The company has entered the premium segment globally, where its competitive advantage is still unclear. Also, on the negative side, health care reform, in China and the U.S., may reduce demand for Mindray’s products. Competition is fierce and leads to price erosion over time.

Mindray’s competitors, in different niche segments, include General Electric (GE - Analyst Report), Philips (PHG - Analyst Report) and Siemens (SI - Analyst Report). Our Neutral recommendation is supported by a short-term Zacks #3 Rank (Hold).

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