Question-and-Answer Session
Operator
(Operator Instructions) And our first question will come from the line of Ben Lee with Morgan Stanley.
Ben Lee - Morgan Stanley
Thanks for taking my call. I have a few questions. First, can you tell us how profitable was the HIFU business historically and what’s the outlook for the HIFU business this year and next year, so we can understand the profitability for HIFU going forward?
Sam Tsang
You probably will notice from the past few quarters the HIFU results or the growth from the HIFU has been decelerating. You can see the growth rate of HIFU. It is about 5.5% on a year-over-year basis. And you know the gross margin from the HIFU is about 70%, and so with the decreasing or lower growth rate from the HIFU business, you can see that the contribution to our company, China Medical, is decreasing. And also at the same time, you can see that contribution from our IVD business, ECLIA and FISH are increasing in terms of the revenue contribution as well as the gross margin improvement.
And you can also understand the business nature of the HIFU is the sales of high-priced HIFU equipment. This is basically materially the sales of equipment without consumables. And also you understand that recent conditions in the financial market and the credit market and we see that there is increasing business risk in these kind of sales of expensive equipment business. And so we expect that the outlook for the HIFU, actually the business increasing and also the possibility to experience negative growth in HIFU is very likely in the near future.
Ben Lee - Morgan Stanley
So if I can try to reframe my question a little bit -- in terms of if we look at operating profit for HIFU, is it fair to say your operating profit for HIFU is substantially lower than the corporate operating profit?
Sam Tsang
First, we don’t divide each business to the operating margin level because we share certain of the operating expenses by all the three businesses, HIFU, ECLIA, and FISH. But I can tell you for the major expense items, for example, G&A is equally allocated in general among the three businesses. For the selling expenses, because we are using distributors and so the selling expenses for HIFU is lower compared to FISH, and also ECLIA. But the R&D expenses, the portion of the HIFU business is pretty high because of the U.S. FDA clinical trials, and we expect the investment in the R&D expenses will be substantially higher in the next two to three years. We proceed on the U.S. clinical trial and also the E.U. clinical trial, so we continue investing in the HIFU clinical trial, the R&D expenses will be substantially higher than the current level.
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