On November 13th, DRGEM published its audited financial results for Q3 2020. These show that sales continued to grow at an explosive pace during the quarter. Total sales reached ₩16.0 bn during the quarter, compared with ₩13.4 bn in Q3 2019, an increase of approximately +19% year-on-year. This took cumulative 2020 sales to ₩82.3 bn, compared with ₩40.5 bn during 2019, an increase of approximately +100% year-on-year.
The sales growth during the quarter and first nine months of 2020 was driven by higher sales from customers based both domestically within the Republic of Korea as well as internationally. Sales from overseas customers grew substantially thanks to a number of higher-value orders from Europe and North America. The companies largest export markets have historically been the United States, Turkey and Iran, with China becoming increasingly significant. In recent periods, DRGEM has been focused upon evolving its distribution within China in order to strengthen future sales pipeline. At present, the company adopts an indirect sales method through its subsidiary, Weihai DRGEM Medical Equipment Co Ltd, which provides local manufacturing to the region. The company reports plans to operate both direct sales through this local subsidiary as well as indirect sales through regional distributors.
From a product mix perspective, sales growth during the first nine months was driven by higher sales across all product segments, excluding fixed diagnostic x-ray systems for human medicine, which declined by approximately -14% compared with the same period during 2019.
Explosive sales growth from mobile DR systems
The company reported explosive sales growth from mobile DR systems which were approximately +320% higher during the quarter and approximately +2,000% higher on a cumulative basis, relative to 2019. Sales included larger value orders from overseas clients including a $5.2m order from UK-based MIS Healthcare as well as a $2.8m order from a U.S. based distributor. The companies portfolio of mobile x-ray systems encompasses the TOPAZ system, a “premium” motorised digital solution and the JADE system, a highly compact, non-motorised “value” solution with both digital and analogue configurations. Both products are available within the United States with FDA approvals occurring during 2019. The TOPAZ system received FDA 510(k) clearance during May 2019 and the JADE system received FDA 510(k) clearance during February 2019. The companies digital upgrade or retrofit solution is branded RADMAX within the U.S. and received FDA 510(k) clearance during March 2019.
Sales contraction from fixed DR systems
The companies portfolio of fixed DR systems, which encompasses the GXR and the Diamond systems, accounted for approximately 30% of total sales during the first nine months of 2020. Both the GXR and Diamond imaging systems are available within the United States, which has historically been a strong export market for the company. The GXR series received FDA 510(k) clearance during September 2019 and the Diamond system received FDA 510(k) clearance in October 2019. Both are approved to utilise flat-panel detectors by Varex Imaging to offer wireless digital configurations.
Growth from strategic partnerships
One of the factors helping drive sustained growth is the companies strategic partnerships with FujiFilm Corporation and Samsung Electronics, which are both investors, customers and distributors of DRGEM x-systems and components. These strategic partnerships have materially contributed toward the companies favourable historic sales revenue CAGR:
The 2019 full-year financial statements indicate that FujiFilm Corporation remains the second-largest shareholder, with 14.25% equity ownership. Samsung was reported as the third-largest shareholder with ownership through Samsung Venture Co., Ltd. The partnership agreement with FujiFilm Corporation means that DRGEM benefits through leveraging FujiFilm’s worldwide sales distribution network which helps to deliver a stable sales pipeline. FujiFilm also provides support with product development and R&D to help ensure new product launches reflect customer requirements and maintain market competitiveness. For example, the G-XR series of fully automated ceiling suspended x-ray systems were originally proposed by FujiFilm in response to global product trends within developed international markets. The G-XR series of systems are expected to contribute toward continued sales growth as the firm seeks to capture additional market share from the large incumbent OEM’s through a combination of pricing and technological product competitiveness. One of the core benefits for FujiFilm and Samsung Electronics is the continuous supply of high-quality x-ray generators which DRGEM has been producing on-mass since 2008. The firm has developed a strategic advantage through its know-how in high voltage insulation technology, high power conversion technology, and high voltage control technology which enables it to compete with other generator manufacturers such as CPI and EMD. Theses Canadian firms are still generally recognised as having the best x-ray generator technologies in the world, although DRGEM has made significant progress to achieve recognition for its prowess in x-ray generator technology. Its generators are particularly suitable for small hospitals and small clinics where high power supply is difficult, as well as developing countries with poorer power supply.
The DRGEM Group
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