The British High Court rejects Abbott’s lawsuit against Sannuo Biotech for trademark infringement: Domestic brands are rapidly emerging based on price advantages, and a price war in the continuous blood sugar monitoring market has begun

Blue Whale News, February 12 (Reporter Tu Jun)Recently, the British High Court ruled on the trademark infringement and counterfeiting lawsuit between Abbott Diabetes Care Company (hereinafter referred to as Abbott) and Sannuo Biotech. The High Court Mr.“” Justice Richard Smith rejected Abbott’s claim that Sannuo Biotech’s iCan i3 Continuous Glucose Monitoring System (CGM) infringed on its FreeStyle Libre CGM on-body unit (OBU) three-dimensional trademark (white round design); and supported Sannuo Biotech’s counterclaim that Abbott’s trademark was invalid on two independent grounds: first, the trademark lacked salience, and second, the trademark consisted of functional features necessary to achieve technical effects.

Regarding this case, relevant personnel from the Investor Relations Department of Sannuo Biotech told Lanjing Finance that according to the judgment of the British High Court, the relevant white round application parts are not unique. In terms of market, China has started relatively late in the field of Continuous Glucose Monitoring (CGM). Sannuo Biotech currently adopts a two-legged strategy of simultaneously rolling out domestic retail and hospital markets and going to sea. In terms of going overseas, Sannuo Biotech has established subsidiaries in the United States, while Europe has adopted a strategy of cooperating with distributors.

Previously, foreign brands occupied the main market for continuous blood glucose monitoring (CGM), and domestic brands gradually emerged with price advantages.

According to data from the International Diabetes Alliance (IDF)”IDF Diabetes Atlas (10th edition)”, the number of adult diabetes patients worldwide will reach 537 million in 2021, with a prevalence rate of 10.5%, and about one in ten adults are affected. According to IDF estimates, the number of adult diabetics worldwide is expected to rise to 783 million by 2045, and the prevalence rate is expected to increase by 11.3% and 12.2%. During this period, the world population is expected to increase by 20%, while the number of diabetics is expected to increase by 46%.

The “China Clinical Application Guidelines for Blood Glucose Monitoring (2021 Edition)” points out that currently commonly used clinical blood glucose monitoring methods include capillary blood glucose monitoring using blood glucose meters, continuous blood glucose monitoring (CGM), glycosylated albumin (GA) and glycosylated hemoglobin (HbA1C), etc.

Continuous blood sugar monitoring (CGM) can obtain real-time blood sugar levels. Compared with traditional blood sugar monitors (BGM), which can only reflect blood sugar levels at a certain point in time, CGM has no detection blind spots and has the advantages of adjuvant treatment. It can not only better control blood sugar indicators such as glycosylated hemoglobin (HbA1c), reduce the incidence of complications, but also avoid the pain and risk of infection from frequent blood collection at fingertips. It is a consumer-oriented product in the field of diabetes blood sugar monitoring.

In the global CGM market, foreign countries mainly dominate Dexcom, Abbott, and Medtronic. Domestic CGM products are approved later than overseas countries, and will accelerate significantly starting in 2021. Previously, imported brands accounted for more than 80% in my country’s CGM market. The first domestically produced CGM product was officially approved for marketing at the end of 2021. Since Dekang has not yet entered the China market, the market will be dominated by Abbott before 2022, with its market share of 78% in 2021. However, with the rise of companies such as Sannuo Biotech, Yuyue Medical, Weitai Medical, and Shenzhen Silicon, domestic CGM products have been approved one after another, with obvious cost-effective advantages. Domestic substitution is expected to accelerate, and the market structure may face reorganization.

Take Abbott, which previously had the highest market share, as an example. Its third-generation continuous blood glucose monitor (CGM) Freestyle Libre 3 was approved by the FDA in May 2022, but it has not yet been launched in my country. Blue Whale Finance searched the Abbott Medical Equipment Taobao flagship store on February 12 and found that the price of the second generation product currently on the market is about 470 yuan/box, and the price of the first generation product is about 320 yuan/box; while Sannuo flagship store shows that due to the purchase of one get second-class preferential strategy, its single box price has reached 129 yuan/box, which is lower than Abbott’s relevant selling price; for other domestic brands, Yuyue Medical’s single box price is 189 yuan/box; Weitai Medical, the single box price is also around 200 yuan.

In fact, the high price of blood sugar monitors (CGM) as a consumable has always been the main reason and industry pain point that hinders its further expansion of penetration. Sannuo Biotech also told Lanjing Finance that compared with foreign brands, domestic brands still have certain price advantages.

According to the Southwest Securities Research Report, the future development of CGM presents four major trends: trend 1, performance is improved in all aspects, accuracy is improved, life is extended, volume is reduced, and algorithm updates; trend 2, CGM technology is mature, and closed-loop artificial pancreas has become the ultimate goal. Trend 3, from the United States to the world, the decline in CGM product prices and medical insurance coverage in various countries will drive the increase in CGM’s global market penetration. Trend 4: A new generation of OTC products is on the market, and CGM is gradually changing from type 1 diabetes patients to type 2 diabetes patients, and even covering non-diabetic patients for health management.

Profits in the third quarter of 2024 will decline significantly. Can CGM open a second growth curve for Sannuo Biotech?

Sannuo Biotech was established in 2002. It is a company mainly engaged in the production and sales of blood sugar monitoring systems, glycosylated hemoglobin testing systems, blood lipids testing systems, sphygmomanometers, etc. According to its 2024 semi-annual report, the company occupies the domestic blood sugar testing retail market. Nearly 50% market share.

Sannuo Biotech has not announced its 2024 annual report so far, but judging from the third quarterly report, its net profit has dropped significantly. From January to September 2024, Sannuo Biotech’s total operating income was 3.182 billion yuan, an increase of 4.83%, net profit was 255 million yuan, down 19.71% from the same period last year.

In fact, during the period from 2019 to the first three quarters of 2024, except for 2022, all other non-net profits deducted were negative year-on-year growth.

In terms of expense ratios, in 2024Q3, the company’s sales/management/R & D/financial expense ratios were 27.26%, 11.68%, 10.23%, and 1.36%, respectively, which increased by 4.0, 0.9, 2.04, and 1.09 percentage points respectively compared with 2023Q3, of which the sales expense ratio increased significantly. According to the forecast of Hua ‘an Securities pharmaceutical team, the increase in expenses is related to the expansion of the company’s CGM business in domestic online and offline business.

In the first half of 2024, sales of Sannuo Biological Blood Glucose Testing Systems were 1.552 billion yuan, a year-on-year increase of 12.7%, but traditional Blood Glucose Monitoring (BGM) and CGM products were not subdivided.

In April 2023, the first generation of Sannuo Biotech’s CGM products were officially launched, and since then, there has been rapid increase in volume. On December 16 last year, Sannuo Biotech announced that its independently developed second-generation continuous glucose monitoring system (CGM) had completed the registration and obtained The “Medical Device Registration Certificate” issued by the State Drug Administration.

Whether the launch of second-generation products and the seemingly vast market can contribute to its second growth curve and save its declining revenue data still require continued attention. However, from the current point of view, with more and more entrants, the price war in the CGM field has begun.