Mindray to Become Third-Largest Player in Patient Monitoring Devices

Mindray Medical International Limited (NYSE: MR), the Shenzhen-based medical device and in-vitro diagnostic test company, announced its first quarter financial results, reporting substantial increases in revenues and profits. The results were not only ahead of last year, but they beat the numbers projected by Wall Street analysts.

Here are the numbers:

• Revenues – up 48% year-over-year at 626 million RMB ($89.3 million),
• Net income - non-GAAP – climbed 43% to199 million RMB ($28.4 million),
• Net income - GAAP – rose 47% to 179.4 million RMB ($25.6 million),
• Earnings per share - non-GAAP – 25 cents, up from 16 cents,
• Earnings per share - GAAP – 23 cents per share.

Interestingly, Mindray’s international business and its domestic China business grew at almost the same rate. Both produced gains in the high-forty percent range. In the past, the international business has posted a higher rate of growth than the China segment.

Mindray splits its business into three segments, each of which performed well during the first quarter, though, comparatively speaking, Patient Monitoring and Life Support was the laggard of the three:

• Patient Monitoring & Life Support Products: revenues increased 30% to 209 million RMB ($29.8 million), contributing 34% of total revenues.
• In-Vitro Diagnostic Products: revenues jumped 56% to 209 million RMB ($29.8 million), contributing 33.9% of total revenues.
• Medical Imaging Systems: revenues increased 61% to 189.1 million RMB ($27.0 million), contributing 30.7% of total revenues.

To solidify its position in the patient monitoring business, Mindray struck a deal in Q1 to pay $202 million to acquire Datascope Corporation’s (NSDQ: DSCP) patient monitoring division. Upon completion of the transaction, Mindray will become the third-largest player worldwide in the patient monitoring device industry. Mindray projects the Datascope acquisition will have a neutral impact on its 2008 non-GAAP EPS.

At the end of the quarter, Mindray listed its cash level at 2,145 million RMB ($305.9 million) (including cash equivalents and short-term investments). The company generated 219 million RMB ($31.2 million) in net cash from operating activities, and its capital expenditures totaled 69 million RMB ($9.8 million) during the first quarter.

Assuming the deal to acquire Datascope’s patient monitoring business is closed on May 1, 2008 and the two company’s finances are consolidated at that point, Mindray projects full-year 2008 net revenue in a range of $560 million to $580 million. 2008 non-GAAP net income is estimated to be in a range of $132 million to $135 million, assuming a 15% income tax rate. The non-GAAP net income figure excludes share-based compensation expenses and amortization of intangible assets resulting from acquisitions. Non-GAAP EPS is expected to be in the range of $1.16 to $1.18 per fully diluted share.

Investors are impressed with Mindray. It boasts a strong PE ratio of 52, and unlike many China-based companies, the company is trading nearer its 52-week high than its 52-week low. Over the past year, Mindray has had a range of $23.36 to $45.19. Currently it is listed at $38.84. Mindray completed its IPO on the NYSE in September of 2006 at a price of $13 per share.

Disclosure: none.