Minsheng Securities: CGM real-time blood glucose monitoring has obvious advantages and outstanding clinical value.

Minsheng Securities released a research report stating that the large base of diabetes patients and the increasing aging population have further exacerbated the situation. Continuous Glucose Monitoring (CGM) has obvious advantages in real-time blood glucose monitoring and outstanding clinical value. In terms of application, combining CGM with insulin pumps and GLP drugs can expand the imagination space. Moreover, in terms of payment, Europe and the United States continue to expand the coverage of diabetes patients, leading to a continuous increase in diagnosis and treatment volume. The CGM industry is in a period of vigorous development, with the estimated global market size reaching 36.4 billion USD by 2030. With factors such as deepening global population aging, increasing demand for diabetes patient diagnosis and treatment, and the gradual improvement of medical insurance systems driving growth, the CGM industry will continue to grow. The European and American markets are highly prosperous and are competitive locations for CGM manufacturers. In terms of market size, the European and American regions account for approximately 70% of the global market capacity in 2023 due to the high base of diabetes patients and the well-developed commercial insurance payment systems. Domestic manufacturers are actively entering the European and American markets, where the FDA and CE approval standards differ, with the core being whether the product detection performance, such as the MARD value, meets the requirements of the corresponding market, as well as the establishment of sales channels. CGM has high technological barriers and intense patent competition. CGM can be divided into hardware and software parts, with the sensor directly affecting the sensitivity and accuracy of glucose concentration detection in the tissue, which is the core of CGM technology. The calibration technology of the software algorithm needs to be continuously iterated through a large amount of clinical data. Globally, there is intense patent competition for these two aspects, with Dexcom obtaining a total of 938 CGM-related patents from 2000 to 2022, while Abbott has 304 patents. Overall, there is cross-penetration of CGM patents between companies, with many litigations but no resolution yet. Differentiation through structural improvements or technological path choices can avoid patent disputes. Lessons from others: Dexcom Medical: A global leader in the CGM industry, after twenty years of technological accumulation, has transformed into a butterfly. Since its listing in 2012, the company's market value has grown 70 times in 12 years, mainly attributed to three factors: 1) product end: continuous updates leading global CGM technology development; 2) registration end: actively promoting product access in major global markets; 3) marketing end: expanding global sales system. From 2006 to 2023, the company's operating income increased from $2.17 million to $3.622 billion, with a 17-year CAGR of 55%. Domestic blood glucose monitoring manufacturers are entering the CGM market, which is in a period of rapid growth. 1) Sinocare Inc.: The world's first CGM manufacturer to adopt third-generation technology path and has been approved. The company currently has a complete chronic disease testing product line and a global marketing network system; 2) Microport Medical: Combines CGM and insulin pumps, ready to set sail; 3) Jiangsu Yuyue Medical Equipment & Supply: Acquired Kailit, entering the blood glucose monitoring track. Investment recommendations: Recommend Sinocare Inc. (300298.SZ), Microport Medical (02235), and pay attention to Jiangsu Yuyue Medical Equipment & Supply (002223.SZ). 1) Sinocare Inc. is the leading domestic blood glucose monitoring company. It is expected that the company's operating income will reach 4.86/5.58/6.42 billion yuan and the net profit attributable to the mother will reach 360/460/550 million yuan from 2024 to 2026, with the corresponding current PE ratios of 40/31/27 times; 2) Microport Medical is one of the first domestic companies to develop and commercialize CGM products. It is expected that revenue will reach 350/560/940 million yuan from 2024 to 2026, with a net loss of 100/-40/180 million yuan, and a PE ratio of 14 times for 2026 based on the current stock price. Risk warning: Market expansion and competitive risks; product quality control risks; risks of R&D personnel turnover; risks of changes in domestic support policies; risks of fluctuations in industry terminal demand.