Earnings Call: H2 2020

Mar 31, 2021

Good day, and thank you for standing by. Welcome to the MicroPort 2020 Annual Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press the star zero key. I would now like to hand the conference over to our first speaker today, Ms. Yolanda Hu. Please take over, ma'am. Thanks, Operator. Good evening and good morning, everyone. Welcome to MicroPort 2020 Annual Results Call. I am Yolanda Hu, China Healthcare Analyst at Bernstein. With us today we have the following management from MicroPort, Mr. Martin Sun, our Chief Financial Officer, Dr. Ti Lord, Chief Technology Officer, Mr. Jonathan Chen, Chief International Business Officer, and Mr. Yuan Li, Vice President and Board Secretary. I will now hand over to Jonathan to give us a brief introduction of results. Jonathan, please. Thank you, Yolanda. Welcome everyone to the 2020 Annual Results Conference Call for MicroPort Scientific Corporation. This is Jonathan Chen. During the next hour, Martin and I will provide comments on our annual results for the fiscal year of 2020, which ended on December 31, 2020. After our prepared remarks, we will be happy to take your questions. Unless otherwise mentioned, reference to the 2020 annual results increasing or decreasing are in comparison to the year of 2019. All year-over-year revenue growth ranges are given on a constant currency basis, adjusted for the impact of foreign currency translation. The growth range details before constant currency adjustment are available in our annual result announcement, which was published yesterday. I first give a highlight of our 2020 annual results. During the year of 2020, the group recorded revenue of $648 million, down by 18.8% year-on-year, mainly resulted from the postponement of surgeries due to the COVID-19 pandemic. In facing the challenging environment worldwide, we optimized the allocation of global resources and took safe, efficient, and innovative measures to maintain. As well as our neurovascular business managed to achieve decent revenue growth of 383.4%, 40.9% and 17.5%, respectively. The group had net loss attributed to shareholders of $191.3 million, mainly affected by revenue decline due to impact of the COVID-19 pandemic and the centralized procurement policy of our coronary stent products. Two, increased investment in R&D projects, and three, cost of incentive shares granted to certain employees, and four, the lack of one-time gain on a partial disposal of a stake in MicroPort EP MedTech in 2019. In 2020, the group disposed partial stakes of MicroPort CardioFlow and MicroPort MedBot while retaining control over the two companies, which resulted in net gains after tax of $73.7 million from such transactions were recognized in capital reserve. We also made progress of external financing. In 2020, the group and associated companies completed a series of capital market financings from a number of well-known institutional investors, which generated sufficient cash flow to support our business expansion and long-term development of various segments. A total of approximately $1 billion was raised during the period, comprising of the following seven transactions. Approximately HKD 1.54 billion from share placement of MPSC parent company. Number two, approximately CNY 3 billion from the surgical robot business, and after completion of new capital contribution and transfer of existing shares, the post-money valuation was approximately CNY 25 billion. Three, around $130 million from our heart valve business. Four, approximately $75 million from our CRM business, with a post-money valuation of approximately $400 million. Five, around CNY 580 million from orthopedics business, with a post-money valuation of approximately CNY 3.9 billion. Six, approximately CNY 300 million from associated EP business, with a post-investment valuation of approximately CNY 4.8 billion. And seven, approximately CNY 90 million from associated assisted reproduction technology business, with a post-investment valuation of approximately CNY 460 million. As a subsequent event, our heart valve business or CardioFlow was successfully listed on the main board of Hong Kong Stock Exchange on February 4, 2021, with net IPO proceeds of approximately HKD 2.7 billion. Now a brief review of our R&D achievements in the year 2020. As a growing global company that focuses on innovative high-end medical device, the group has always been committed to R&D and clinical practice. The overall R&D expenses accounted for nearly 30% of the group's revenue in 2020, laying a solid foundation for the sustainable development of the company. In 2020, we had 30 medical devices approved by NMPA and two products that entered the Green Path. By the end of 2020, the group had a total of 20 products that have entered the Green Path. Meanwhile, we had a large group of products obtaining clearance in overseas markets, including 14 products with CE mark and four approved by the FDA. In our cardiovascular device business, the Firehawk rapamycin-eluting stent system was upgraded on the basis of our Firebird2 Stent and obtained NMPA approval in July 2020. In our overseas market, the cardiovascular segment obtained 14 first registration approvals in 10 countries or regions for DES products, among which Firehawk 8 millimeter and Firehawk Liberty 8 millimeter obtained CE mark. For balloon products, we got 24 first registration approvals in 13 countries in 2020. In our orthopedics business in China, the group had three orthopedic products approved by NMPA, namely the Made in China Aural total hip replacement system, our Made in China Bipolar Easy Hemiarthroplasty system, and new generation of minimum invasive shoulder rotator cuff repair device, OmniCuff, in the field of sports medicine. The Bipolar Easy system is our first hemiarthroplasty product complementing our primary hip replacement product portfolio. In the field of spine and trauma, our Pisces 2 interbody fusion system and Taken 2 cannulated spine minimally invasive system were launched during the year. In the overseas market, the group had four products approved by FDA, including the Gladiator HA Collared Stem and the Profemur Gladiator Cemented Collared Stem. Six products obtained CE marks, including the Procotyl P acetabular cup and Evolution NitrX Knee System. The group launched domestic ICE instruments for the Evolution Knee System, which effectively reduced the cost of some orthopedic instruments. For new product registration, we submitted four FDA applications during the year, including the constrained minor and multi-hole versions of Prime acetabular cups, Dynasty Dual Mobility acetabular cup, and additive manufactured Prime acetabular cup. In addition, the Profemur Xm Cemented Hip Stem has been submitted for CE mark. In our CRM business in China, the group submitted NMPA registration for the Kora 100 MRI compatible pacemaker. The first patient has been enrolled in the clinical trials of our BonaFire pacing lead. We have completed the type testing for ENO pacemaker and VEGA lead and plan to initiate the 1.5 and 3.0 Tesla full body MRI compatibility clinical test before the product launch. The first leadless pacemaker prototype has been developed after four months of technical discussion among the talents from the CRM R&D teams in China and France. In our overseas market, the new family of ALIZEA, BOREA, and CELEA pacemakers equipped with Bluetooth connectivity and associated to the SmartView Connect Home Monitor have been filed for approval in Europe, the U.S., and Japan respectively, and have obtained the CE mark in January 2021. In addition, the group released results of our preclinical study on the Axone innovative ultra-thin lead, showing good results in terms of stability, electrical performance, and biotolerance. Besides, we have also initiated the clinical validation for Axone, and the first implantation was successfully performed as part of the Astral-4LV study. In our endovascular business in China, the Reewarm PTA balloon dilatation catheter obtained NMPA approval, which is our third approved endovascular product of the five products in the Green Path. Our Fontus single-branch stent graft system is currently under registration review by NMPA, while Talos thoracic stent graft system has submitted registration of application to NMPA. The Vflower venous stent is currently under clinical trials. In overseas markets, our Reewarm PTA balloon dilatation catheter and the Hercules low-profile thoracic stent graft system obtained CE mark, enriching the endovascular portfolio in the European market. For our neurovascular business, the group had four neurovascular products approved by NMPA in 2020, namely the Numen coil embolization system, our Bridge vertebral drug-eluting stent, and U-track intracranial support catheter. Additionally, the Tigertriever clot retriever has entered the Green Path. Meanwhile, our neurovascular products obtained six registration approvals from four overseas markets. In our heart valve business in 2020, the group submitted VitaFlow II transcatheter aortic valve and delivery system for NMPA registration. It is also the only made-in-China TAVI product that has launched clinical trials in Europe. Meanwhile, VitaFlow I obtained the first two overseas registrations in Argentina and Thailand, making our first steps of global penetration. For our surgical robot business, in the field of surgical robots, the group has established a multi-category product pipeline that covers five promising sub-sectors, including endoscopy, orthopedics, vascular intervention, natural cavity, and percutaneous puncture. Our in-house developed Toumai endoscopic robot has completed patient enrollment for clinical trials in January 2021, and being China's first domestically manufactured endoscopic robot that has completed multi-center clinical trials in the field of urology. The SkyWalker orthopedic surgical robot entered the Green Path in 2020 and has completed patient enrollment for its clinical trial in January 2021. Additionally, the DFVision 3D electronic laparoscope and medical endoscope cold light source were exempted from clinical practice and were submitted for NMPA registration during the year. For our surgical device business, in 2020, the group's in-house developed new generation of a membrane oxygenator successfully completed the first clinical trial with satisfactory results. The product has completed patient enrollment by the end of 2020. For our electrophysiology business, in the reporting period, three EP products received NMPA approvals, including the Columbus 3D EP navigation system, the EasyLoop 3D circular mapping catheter, and the PathBuilder IceMagic steerable introducer. The PathBuilder intracardiac guidance sheath group attained CE mark, and the remaining EP products received a total of 56 registrations in seven countries in 2020. For our assisted reproductive technology business, the group's Daylily single-use sterile embryo transfer catheter was approved in China in 2020. After briefing the big picture, I will give more details on the annual performance of each business segment now, starting with our cardiovascular business. The group has built a multilayer and diversified product portfolio, and currently with four stents and four balloons. We have maintained our leading position in China market and continue to enhance our competitiveness and market share in the global market. Our product strategy and operation execution has best positioned MicroPort to manage through the GPO, which Martin will share later some promising early results that we are seeing in Q1 of this year. In the reporting period, the revenue for our cardiovascular business reached $144.8 million, down by 44.6%, mainly due to the year-on-year decrease of DES implantation, with significant decline in the number of clinical consultations and surgeries amid the COVID-19 pandemic. As a result, the impact of our centralized procurement policy also had a significant impact. During the year, the group continued new market penetration, and by the end of 2020, our DES have covered more than 2,400 hospitals nationwide, including 1,212 hospitals for Firehawk, up 27% year-over-year, and 2,149 hospitals for Firebird2, which was up 14% year-over-year. In terms of GPO, Firebird2 and Firehawk successfully won the National Heart Stents GPO bidding in November 2020. We are the only domestic supplier with two selected products for the GPO. Besides, our total guaranteed volume is the highest among all players, which will further enhance our leading position in the domestic market. Meanwhile, we expect Firehawk to gain more market share in the non-GPO market, leveraging on its exceptional quality and performance. In our overseas markets, due to the COVID-19 pandemic, revenue from the international DES business decreased by 31.3% year-over-year. Fortunately, we saw demand recover since the fourth quarter of 2020, along with the pandemic alleviation, and particularly in countries like India. The group actively pursued market access in various regions globally during the year, and by the end of 2020, our DES products have been sold in 30 countries, which newly covered 300 hospitals. We continue to focus on promoting our Firehawk stents in the overseas markets, and sales of Firehawk and Firehawk Liberty stents increased steadily in Europe, where Firehawk has been included in medical reimbursement list in 9 countries including France, Belgium, and Spain. In addition, Firehawk Liberty was successfully launched in Thailand and achieved fast sales growth, and we established a joint venture in India aiming to penetrate Indian market through local direct channel going forward. The global revenue of our balloon products registered at $10.6 billion, increased by 4%, and attributed it to the intense market penetration and hospital coverage expansion. In the China market, our balloon products have covered over 800 hospitals, among which Firefighter received extensive positive feedback after its launch and newly penetrated over 100 hospitals in 2020. In 2020, our cardiovascular segment also made significant progress in clinical trials. We released the latest three-year follow-up data for the TARGET AC clinical trial and two-year data for DAPT subgroup for the Firehawk stent. The results prove that Firehawk can achieve identical clinical efficacy and safety to the first-in-class DES with proven large body of medical evidence in the world. In addition, the TARGET-IV NA clinical trial was officially initiated with the first patient enrolled. The TARGET-IV NA clinical program is anticipated to enroll approximately 1,616 patients at up to 100 sites in the U.S., Canada, Europe, and Japan. Patients enrolled will be followed for 5 years, and such the clinical trial is designed to assess the safety and effectiveness of the Firehawk stent to support the approvals from FDA, Canadian, and Japanese regulators for the treatment of atherosclerotic coronary lesions. Besides, the group also launched the FUTURE III clinical trial for the Firesorb bioresorbable stent, with the first patient enrolled. We also achieved significant R&D progress for multiple products, including our coronary intravascular lithotripsy balloon and drug-coated balloons. Moreover, we are making efforts on the development of accessory products, including micro catheters, coronary atherectomy catheters, to further enrich our product portfolio. Meanwhile, we also partnered with a well-known international device company to develop domestic digital subtraction angiography systems in order to accelerate the penetration to county hospitals in China. We aim to provide integrated solutions for the treatment of our cardiovascular disease. For our orthopedics business, was affected by the COVID-19 pandemic. The group's revenue of our orthopedic business declined by 13.7% year-over-year to $201.6 million in 2020. Despite the challenges, our group actively coordinated resources and further implemented localization strategies to enrich our orthopedic product portfolio in the global market. Our revenue of our overseas orthopedics business declined 16.8% year-on-year to $171.7 million in 2020, mainly due to the postponement of elective surgeries. Encouragingly, our Japan market delivered a mild year-on-year increase in sales despite the outbreak, mainly from product implant growth supported by customized instruments and surgical training, as well as our strong bipolar sales in the fourth quarter. Sales in our overseas regions have also declined due to the pandemic, but our direct sales business units performed quite well. On the cost side, the group effectively reduced the cost of certain orthopedic instruments through the cooperation between our domestic and overseas teams, our raw materials optimization, and also automation upgrade. The revenue of our China orthopedics business remarkably increased by 10.1% year-on-year to $29.9 million, thanks to the strong recovery procedure volume in the second half of 2020. The revenue of our joint products grew by 9.5% year-on-year to $26.6 million, driven by the strong made-in-China joint product sales growth of 93.3%. The made-in-China products newly penetrated 265 hospitals in 2020, up 314% year-on-year. The two made-in-China knee products achieved implantation growth of 374% year-on-year. The Goral hip system has entered 178 hospitals since its launch in April. Together with the newly approved Bipolar Easy™ hemiarthroplasty system, we have completed the domestic primary joint replacement product line, which will significantly improve our competitiveness in the orthopedics market in China. Meanwhile, the gross margin of domestic joint products expanded significantly by 9.2 percentage points year-on-year. In the field of spinal and trauma, our revenue increased by 17.3% to $3.3 million, contributed by new products. The gross margin of our spine and trauma products expanded 10.5 percentage points year-on-year. For our CRM business, in 2020, we recorded revenue of $180.3 million, down by 16.2% year-on-year, mainly affected by COVID-19. In spite of that, our China and overseas teams have actively engaged in our R&D projects. Our domestic pacemakers maintain strong momentum and have become a significant growth engine of the segment. Our non-China CRM business recorded revenue of $172.2 million, down by 16.9% year-on-year. Notably, our sales in Japan surged by 117.8% year-on-year and bearing fruit from our direct sales business model. Although overall sales was affected, the group made solid R&D achievements. Our CRM China business realized revenue of $8.1 million, with a slight increase year-on-year, despite the impact of COVID-19. In particular, our second half 2020 revenue rose by 15.5% year-on-year, mainly attributable to the fast sales growth of our made-in-China pacemakers. In 2020, overall, our made-in-China pacemaker revenue climbed by 24.7% year-on-year and maintained a solid growth and leading position amongst all domestic players. Within the reporting period, the group also completed the production of the 10,000th made-in-China pacemaker. Since the first implantation in 2018, our made-in-China pacemaker has achieved a three-year survival rate of 100%. By the end of 2020, the group's made-in-China pacemaker has covered 480 hospitals, up 54% year-on-year. The active leads have also covered 331 hospitals, up 82% year-on-year. For our endovascular business, we recorded record revenue of RMB 68.5 million, with strong year-on-year growth of 40.9%. Our net profit attributed to equity shareholders significantly elevated 51.4% year-on-year. As the world's first thoracic branch stent, our Castor has been applied by over 550 domestic hospitals with impressive clinical performance, leading to rapid sales growth in 2020. Our Minos has covered over 150 hospitals in China, with revenue spikes during the year. Our Reewarm paclitaxel drug-balloon dilatation catheter also started to make meaningful revenue contributions since the registration in April, with fast vetting process and hospital penetration. Meanwhile, the group completed capital injection of our Shanghai Lanmai and established a wholly-owned subsidiary, Shanghai Houmai, to further intensify the R&D input in peripheral arteries and venous areas. In 2020, our venous stent initiated a clinical trial, and our thrombectomy catheter and vena cava filter are at verification for type testing. In overseas market, after obtaining our CE mark in 2019, Minos has penetrated 9 countries and completed first implantations in several European countries in 2020. Our Hercules obtained the CE mark during this year and completed the first clinical implantation in Germany. Our neurovascular business revenue was up 17.5% year-on-year to $32.9 million, and mainly contributed by 16.6% sales of growth from Tubridge. It is the first domestic commercialized vascular reconstruction device, which has covered 277 hospitals by the end of 2020, up 56.5% year-on-year. Meanwhile, our Apollo resumed sales growth in the second half of 2020, resulting in annual growth of 3.2%. The newly approved Numen Coil Occlusion and Detachment System, our Bridge Vertebral Artery Stent, and the U-track supported our sales growth for our neurovascular business. For our heart valve business, the revenue increased sharply by 383.4% to $15.2 million, and was underpinned by the VitaFlow sales volume, which hiked 377% year-on-year to 1,293 units. Our VitaFlow has widely been recognized by surgeons for its excellent clinical results. By the end of March 2021, our VitaFlow had covered 165 hospitals, including 18 of the top 20 TAVI hospitals, and acquired leading market share in several key hospitals. Our VitaFlow's four-year follow-up study proved safety and efficacy. In terms of profitability, the gross margin expanded by 14.4 percentage points to 43.7%. In addition, the group also continued to build a diversified product pipeline for our structural heart business, which includes covering aortic valve, mitral valve, tricuspid valve, surgical valve, and surgical ancillary products. Currently, we have 5 TMV products under development. Among them, our in-house developed TMV replacement product has shown satisfactory results from animal study. Partnered with Valcare, we are developing a TMV repair product named Amend, which has completed the first phase human MRCT in Israel and Europe, as well as a TMV replacement product called Corona, which is under animal study. We also collaborate with 4C Medical for the development of our AltaValve, a TMV replacement product which is under early human feasibility studies in the U.S. Lastly, in our surgical robot business in 2020, our Toumai endoscopic robot has completed patient enrollment for clinical trials and successfully assisted surgeons to perform a number of milestone procedures, including the first robot-assisted partial nephrectomy, our extraperitoneal radical prostatectomy, our partial nephrectomy for complete endophytic renal tumor, combined with intraoperative ultrasound, as well as the first robot-assisted single port procedure, which proved that the Toumai robot is capable of assisting surgeons in complex surgeries in a narrow anatomical space. Moreover, our in-house developed SkyWalker orthopedic robot system has entered green path in 2020 and performed the 100th clinical surgery in January 2021. Given that SkyWalker is a total knee replacement robot designed and developed in China that has completed case enrollment for pre-marketing multi-center clinical trial. Moreover, the group has also made an investment in Robocath, a vascular interventional robot company, NDR Medical, a percutaneous navigation robot company, and Biobot, a prostate biopsy system supplier, in order to accelerate the development of our vascular and percutaneous interventional robotic systems. In particular, the vascular robotic system of Robocath has initiated type testing in China. in December 2020, the group announced a proposed spin-off and listing of our surgical robot business. That is all for the operating performance in 2020. I will now turn it over to CFO, Martin Sun, to provide you with further financial details for our annual results. All right. Thanks, Jonathan. Good morning and good evening, everyone. This is Martin Sun, the CFO for MicroPort Group. Now I will take you through our performance in 2020, as well as the guidance for 2021. The first one, the revenue. During 2020, MicroPort generates total revenue of $649.7 million, down 18.8% year-on-year. It was driven by the COVID-19 disruption and the GPO impact on the cardiovascular business in China. As Mr. Jonathan Chen already gave a very detailed introduction early on each segment, I will not repeat here again. So move to the gross profit and margins. As a result of the sales decline, our gross profit for 2020 also decreased by 22.7%. The gross margin fell 400 basis points to 67.2%. It was driven by volume downside due to COVID-19 and also the product mix because for the GPO price rebate made by cardiovascular business. Now move to the operating expenses. The first one, the distribution cost. It was decreased by 7.7%, driven by the decrease in marketing activities and sales commissions as a result of the COVID-19 impact. In 2020, 30% of our group revenue was devoted to the R&D spending. Despite the unfavorable macroenvironment in 2020, we did not compress but increased our R&D spending as planned. It was increased by 27.2%. Because we aim for the sustainable growth and believe innovation is the key to the long-term success, the increase in R&D expenditures was mainly attributed to the accelerated investment in our surgical robotics, the cardiovascular, including the overseas trials, the neurovascular R&D, and some new pipeline development. Our administrative expenses increased by 42.5% in 2020. It mainly attributable to the impact of incentive share granted to certain employees, including one executive directors, pursuant to the share award scheme of the group. The group also recorded other net income of $32.9 million as compared to $19 million in 2019. The increase was mainly attributable to increase the government grant and the refund of $16.4 million in arbitration over the purchase price consideration for the acquisition of our CRM business from LivaNova. The amount has been fully received by the group in the first half of 2020. The net loss as a result above, the group made a net loss of $223.3 million for 2020. On top of the P&L account, we also made a substantial gain from equity transaction during the year, especially an after-tax profit of $164 million from our partial disposal of investment in the surgical robotics business and an after-tax profit of $9.7 million from the same in the structure of CardioFlow business. Because we remain the controlling shareholder of the two business from an accounting perspective, such gain will not record through the income statement, but in the capital reserve in the balance sheet. Lastly, for our balance sheet, I also want to highlight some major events in 2020, which helped significantly strengthen our balance sheet in terms of the capital structure and the cash liquidity. The first one is in February 2020, all our outstanding convertible bond of the group, which amounted to $84.4 million, were fully converted to the ordinary shares of the company. The second one is, subsequently, we completed a series of equity financing transaction, raising a net proceeds up to approximately $1 billion, which Jonathan already mentioned. The three is given the improved liquidity position, we use partially of this proceeds to repay the group bank loan totally $127 million during the year. As a result of the above activities, our cash balance surged from $280 million on the opening of 2020 to $1 billion at the end of 2020. The group's gearing ratio decreased significantly from 61.7% in 2019 to just 17.4% in 2020, benefiting from the loan repayment and a much stronger equity position. I think that was the quickly financial review of 2020. Now I will provide some guidance for 2021. First one, the revenue. As Jonathan also mentioned, our revenue is down 18.8% in 2020. But for the management, we're looking forward into 2021, and despite the continued uncertainty around the COVID-19 in the international market and the GPO policy implementation in China, the management of group still take a very optimistic view of this year's perspective and anticipate a double-digit year-on-year growth in group revenue. It will be the 20%-25% year-on-year growth. Even compared to 2019, pre-COVID-19 impact, it will be still a high single-digit increase compared to 2019. With regard to the COVID-19 uncertainty, those assumptions we made for 2021, the guidance for revenue, we should pay attention to this. There are three assumptions. The first one is a rebounded in procedures volume in 2021. As we believe and observe with the increasing rollout of the vaccine, the situation will keep improving month-on-month. It has been assumed that more patients who deferred their procedures are willing to return to the hospital, which is evident from the actual volume ramping I've seen in the Q4 of 2020 and the first quarter this year. The second assumption is we also believe that demand will be volatile based on the spread of the COVID-19, and any meaningful return is not likely until the second half of 2020, as effective vaccination will take time. The third assumption is it is a mixed picture indeed, but from our Q1 sales data, we have seen revenue of some major international overseas market return to roughly 90% of pre-COVID-19 level. Therefore, assume a steady ramping up quarter-on-quarter throughout 2021 and no major outbreaks. Our best estimate based on the information currently available to the management is mild revenue growth in the overseas market compared to 2019. Our overseas sales are mainly from the segment of orthopedics and the CRM, which primarily operate in the U.S. and the E.U. market. I will share more details on each key segment. First one, for the orthopedics business. We estimate the global revenue will grow by 25%-30% year-on-year. If we compare to 2019 pre-COVID-19 impact, it still will keep around 10% growth. As mentioned early, our overseas orthopedics business is expected to see steady volume ramping up quarter-on-quarter. Our China orthopedics business pulled through 2020 relatively unaffected, managing to achieve top-line growth by 10%. The management remains optimistic about its 2021 outlook and expects its revenue to further grow rapidly by 40%-45% year-on-year. This will be driven by the two factors. The first one, of course, the newly launched Made in China hips and knees pipeline, which have become a new growth point. The second one, existing import joints business will continue double-digit growth through the rapid market penetration. One thing please note that those assumptions have not considered the potential impact of the China GPO tender for orthopedics products, as detailed rules have not been officially announced. The orthopedics management will proactively cooperate with the government to help lower healthy cost of China, and it is also a very positive opportunity for our orthopedics business to seize the greater market shares in China. We will closely monitor that development of the policy rollout and provide a further update to the investor at appropriate time. Regarding our CRM business, we estimate its 2021 revenue will grow approximately 20% year-on-year. It also compared to 2019 revenue, we will also keep around 10%. By geographic region, our overseas CRM business is expected to show steady recovery quarter-on-quarter with a year-on-year growth by 15%-20%. It is also surpassing our 2019 revenue. Our China CRM business is expected to sustain the robotics momentum in 2021 with year-on-year growth for approximately 50%. It also keeps the same or a little bit higher growth compared to 2019. This will be, of course, driven by the rapid market penetration of the newly launched Made in China product line, such as the Rega pacemaker and the leads. Now, let's talk about cardiovascular business. It experienced a significant revenue decline in 2020 driven by the GPO impact, including both price subsidy accrual and a Q4 volume step-down after the tender results was published. But looking forward into the 2021, as the execution of the GPO tender begin on January 1, the price erosion will continue to affect the revenue and the profitability for our China stent sales. However, on the flip side, we expect to see a very significant increase in volume to mitigate the price erosion. Just give you a little bit more information on our organic growth of China overall stent market. The group expected organic growth in China is about 13%-15% for the past five years. We still believe in 2021, we still will maintain this organic growth for the stent market. The second, the volume also increased in China non-GPO market from the growing shares of Firehawk and the Firebird2. The first one, if we look at our Q1 Firebird2 as additional volumes, we say it is very positive volume increase favored by our GPO tender execution. Firebird2, our Q1 volumes has consumed the majority of the annual guarantee volumes. It amounted to 210K units for our Q1. It is compared to 2019, our one-quarter volumes is just 100K. In order to fulfill the overwhelming orders of our cardiovascular plant, has been working additional shifts and expanding manufacturing capacity in anticipation for more busy quarters. As a result, on the top of guarantee volumes, our management team are very confident that there is a further upside potential in the non-GPO volumes for our Firebird2. Overall, the volumes favorably will help us strengthen our market leader position in the China stent market. For our Firehawk volumes, we believe that because Firehawk is our non-selected premier products, it is deployed to the target market, China non-GPO market. In the Q1, as the hospitals prioritize this to fulfill the guarantee volume for the selected products, orders for the non-selected products like Firehawk has temporarily a little bit slowed down to some extent. But we expect Firehawk volumes will grow quickly in the Q2 and the second half year. The third driving factor we see for our cardiovascular business is rapid growth in the overseas cardiovascular market. Our international DES market has grown rapidly over the years, realizing revenue growth of 72% in 2019 year-on-year, pre-COVID-19 impact. Our Firehawk is now selling over 30 countries or regions, and with a very high gross margin on par with the pre-GPO level in China. With the recovery of the global market post-COVID-19, we expect the cardiovascular business will benefit from our global footprint and the groundwork has been laid in the recent years, which will be helpful in the maintain a very solid growth in 2021. The last one, but not least, is we see a very rapid growth of our PTCA accessories and the balloon products. Our PTCA and balloon products are expected to grow very rapidly by double digits, which will also help mitigate this GPO price cut for our cardiovascular business. Based on the above assumption and the rationale, we made those estimation for our global cardiovascular revenue will keep mild growth in 2021 compared to the 2020. Apart from these three major segments, orthopedic, CRM, and cardiovascular, we also remained a very high double-digit growth for our other business segments, such as the endovascular, neurovascular business in 2021. The growth should be underprinting by the excellent market recognition of our existing portfolio as well as the take of new product sales. Especially for our Tubridge business, which realized the first sales in the second half year 2019, recording just only $3 million of revenue with four months and achieve a $16 million revenue in 2020. We expect that in 2021, our Tubridge business will maintain the strong momentum and become the China market leader with market share in excess of 40%. For more detailed information for Tubridge, please refer to a separate announcement and the guidance provided by the Tubridge team. Now we move to the gross margin and profit. In terms of the guidance on the gross margin. The group, we anticipate a slight decrease by 200 basis points from 67% in 2020 to 65% in 2021. That is slightly due to the price erosion from the cardiovascular GPO impact. We also expect those price cuts impact will be partially offset by the favorable from, one, significant volume upside from the Firebird2. The second is continued improvement of our production efficiency. Third, our sales mix is expected to improve from the fast growth of a high-margin segment like endovascular and neurovascular. Now let's move to our operating expenses. With regard to the operating expenses, we expect no significant changes in the distribution cost. It approximately 38% of the revenue. As the COVID-19 situation stabilize, we believe that the marketing activities and the conferences will resume to the normal level. For our administrative expenses, it will be around 22%-24% to the revenue, representing a better efficiency compared to 2020, that percentage is 26% of the revenue. For our R&D expenditures, we are expected to continue increase significantly. It is about 40% increase. This R&D spending account for 34% of the group revenue, compared to 30% in 2020. Within the overall increase, our largest portion of R&D will be devoted to the surgical robotics business segment. Now it is turning to our number one R&D spender. The second-largest R&D spending will be on the heart valve business for the development of their second-generation product line, as well as the overseas clinical trials. Next follow is our cardiovascular segment to support the overseas trials and also the remaining is for our other R&D in new areas. That's all for our guidance for the 2021. The management team remain optimistic about the outlook. We believe the group's innovative business model, heavy investment in the R&D, and the robust momentum in the business put us in a good position moving forward. Despite the uncertainty ahead, our long-term mission remains unchanged, and we are determined to be on long-term path to sustainable growth. Thank you for your listening, and now I will hand over to Yolanda for the Q&A session. Thank you, everyone. Thanks, Martin and Jonathan, Sherry. Operator, we're ready for Q&A. Can you go ahead and remind me how to raise questions? Certainly. As a reminder, to ask questions, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Once again, it is star 1 to ask a question. We have a question coming from the line of JJC Liu from Iron Bull Capital. Please go ahead. Hello. I have three questions. The first question is, what can we see in terms of timelines for IPOs, especially for the robotic surgery IPO? That is the first question. My second question is, could you give a little bit more detail on what exactly these products are for the MP Vision? You guys just announced financing for that company, I think just today. My last question is, could you repeat the R&D guidance for 2021 again? Thank you. Okay. This is Martin. Let me try to answer those questions. Let me answer your third question first. You need a repeat of our R&D guidance for 2021. Yes. Yeah. Our R&D spending in 2021, we think that account for 34% of the group revenue compared to 30% in 2020. Year-on-year growth compare, I think it will increase by 40%-42%. That is the guidance for the R&D spending. Back to your first question, IPO for our subsidiaries. Right now we cannot give you a very concrete IPO timeline. But if you notice some public information. For our surgical robotics, we already announced by last year-end, we are intend to go IPO. I think it probably maybe take times maybe 1 year for that IPO. We also, it is not our subsidiary, but it is not consolidated business, but EP business. Also, they are entering into China scientific boards and some training and reviewing process. It also on the plan for the IPO. But again, it cannot give you a detailed timeline because part of the approval process is out of our control. Your question two, could you repeat it again? Sorry, I did not get your point. My last question is about the MP Vision. It says it is about ophthalmology products, related equipment. Could you give us a little bit more detail on what exactly these products are that will be under MP Vision? Sorry, what is the products you mentioned? MP Vision. Under your- Oh, MP Vision. Yeah. MP Vision. Maybe I talk to our CTO. Yeah. She give you a little bit because we just started those area of the R&D work. We are going to work at a few things, include the OK lens. This also we are going to do, but the most needs for the for the, what is that? Is a disease. That is right. Yeah. For that disease, we are going to do the equipment and as well as, yeah, it is cataract. I think it is called cataract disease. We are going to do this equipment as well as disposables. We have a team of over 20 people on R&D. We are going to do a very advanced replacement or treatment for this disease. I think it is still in the early stage of the R&D, and we will keep our investors updated as we progress and have some milestone achieved. Okay. You said cataracts, right? Yeah. Cataracts. Yeah, cataracts. Okay. I would imagine you guys maybe something about myopia as well. Is that in the pipeline? The implantable contact lenses ICL. Yes. We just wanted to have a full line for the vision care, but it is all going to one by one. We are going to gradually get into this area as a whole. When can we expect more information on the pipeline for the vision care? Sure. I think as time goes by, because once we only starting this not long ago. As time goes by, we have more solid progress. We are going to announce different product schedules or portfolios. Okay, great. Thank you very much. Okay, thanks. I don't have any more questions. Thank you. Once again, it is star followed by one to ask a question. Given the time limits, we'll probably Is there any call on the queue? Pardon me. We do not have any questions at this moment, ma'am. Sure. Given time limits, we probably have to conclude tonight's call. Thanks, management, for joining, and thanks, everybody, for dialing in. Have a good day. Thank you, everyone. Thank you, everyone. Take care, everyone. Okay. Bye-bye. Bye. Thank you. Ladies and gentlemen, that concludes our conference for today. Thank you all for your participation. You may disconnect now.