China IVD and Clinical Laboratories: Pricing reform may bring a new round of uncertainty

Overview

This report focuses on China’s diagnostics and clinical laboratory industry, discussing the growth inflection and profitability pressure facing IVD under volume-based procurement, DRG, and diagnostics service pricing reform. Goldman Sachs points out that before 2022, the IVD industry grew faster than the overall healthcare market for a long time, but after the 2023 volume-based procurement of biochemical reagents, the 2024 volume-based procurement of chemiluminescence reagents, and the 2025 impact of VBP and DRG, industry growth turned negative. As the high-base effect fades, the industry may briefly return to positive growth in 2H26; however, the draft diagnostics service pricing item guideline released in March 2026 may set reimbursement ceilings for all testing items and create a new price shock for the industry starting in 1H27.

Core views

The key conclusions are: first, the IVD industry may be near the end of its worst short-term phase, but pricing reform means the recovery path will not be linear; second, lower testing fee caps in high-price provinces will compress the hospital-side diagnostics market and transmit along the industry chain to reagents, equipment, and third-party labs; third, oncology companion diagnostics have relatively strong pricing resilience because of lower exposure to Medicare and volume-based procurement; fourth, ICL leaders may still see earnings repair in 2026, but while benefiting from rising outsourcing rates, they must also absorb gross margin pressure from falling testing prices.

Analysis framework

The report analyzes policy timelines, company feedback, provincial differences in testing item prices, changes in hospital billing caps, target-price valuation models, and company risk disclosures. At the industry level, VBP, DRG, and the diagnostics service pricing guideline are the main policy variables; at the company level, the report discusses the target prices, valuation methods, and key risks for Mindray, SNIBE, AmoyDx, Kingmed, and Dian Diagnostics.

Methodology notes

• Valuation methodstwo-stage DCF

  two-stage DCF valuation

  Mindray's Rmb247 target price is based on a two-stage DCF, with a 2% terminal growth rate and a 9.5% WACC; AmoyDx's Rmb30 target price is also based on a two-stage DCF, with a 10.5% discount rate and a 3% terminal growth rate.

• Valuation methodsDCF plus M&A value

  DCF plus theoretical M&A value

  SNIBE's Rmb72 target price is composed of 85% DCF value of Rmb65 and 15% theoretical M&A value of Rmb114, the latter based on 35x 2026E earnings.

• Valuation methodsexit P/E

  exit P/E valuation

  Kingmed's Rmb38 target price is based on a 5-year exit P/E method, with a 9.5% discount rate and a global peer P/E of 21.8x.

• Valuation methodsSOTP

  sum-of-the-parts valuation

  Dian Diagnostics's Rmb19 target price uses an SOTP valuation, applying a 5-year exit P/E to mature ICL and IVD businesses and a two-stage DCF to the AI business.

• factor_frameworkGS Factor Profile

  Goldman Sachs factor profile

  The Goldman Sachs factor profile compares stocks relative to the market and industry peers across four dimensions: growth, financial returns, valuation multiples, and composite percentile.

• corporate_actionM&A Rank

  M&A probability score

  Goldman Sachs uses an M&A Rank from 1 to 3 to assess the probability of a company becoming an acquisition target, where 1 indicates a high probability of 30%-50%, 2 indicates a medium probability of 15%-30%, and 3 indicates a low probability of 0%-15%.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Mindray (300760.SZ)

  An IVD and medical device leader affected by chemiluminescence volume-based procurement and diagnostics service pricing reform

  Strengths

  Target price of Rmb247, valued on a two-stage DCF; the company has long-term growth potential in high-end hospitals and overseas markets.

  Weaknesses

  Some product ex-factory prices may face further pressure from VBP, and there is uncertainty around high-end hospital penetration, entry into European and U.S. markets, and patent litigation.

  Comparison

  Compared with smaller industry players, Mindray has scale and product-platform advantages, but it is also more exposed to policy-driven price pressure and changes in international trade policy.

  Risks

  Further VBP-driven ex-factory price cuts, lower-than-expected penetration in high-end hospitals, difficulties expanding into European and U.S. markets, patent litigation, and trade policy changes.

• SNIBE (300832.SZ)

  A chemiluminescence IVD company affected by import substitution, VBP, and DRG/DIP policies

  Strengths

  Buy rating, 12-month target price of Rmb72; valuation incorporates both DCF and theoretical M&A value.

  Weaknesses

  The pace of import substitution, distributor model, and upgrades in new technologies may all affect growth quality.

  Comparison

  In chemiluminescence, it is among the leading companies mentioned in company feedback alongside Mindray, but the rollout pace in different provinces will affect near-term revenue.

  Risks

  Slower import substitution, VBP and DRG/DIP policy risks, intensifying competition, distributor model risks, and new technology evolution.

• AmoyDx (300685.SZ)

  An oncology companion diagnostics company with relatively limited exposure to Medicare and VBP

  Strengths

  Buy rating, target price of Rmb30; its hospital-sales focus benefits from tighter regulation of off-hospital channels, with relatively limited price pressure.

  Weaknesses

  The business still faces industry competition, regulatory changes in China and overseas, and the risk of future VBP implementation.

  Comparison

  Compared with traditional IVD testing, oncology companion diagnostics are more independent and have limited Medicare coverage, so near-term price-cut pressure is lower than for routine testing items.

  Risks

  Intensifying industry competition, regulatory changes in mainland China and overseas, and VBP implementation.

• Kingmed (603882.SS)

  A leading independent clinical laboratory, influenced by both outsourcing rates and testing prices

  Strengths

  Buy rating, target price of Rmb38; expected to benefit from industry consolidation and the end of the pandemic-era accounts receivable impairment impact.

  Weaknesses

  If testing service prices fall sharply, gross margins may be eroded.

  Comparison

  It is an ICL leader alongside Dian Diagnostics; the recovery thesis comes from higher industry concentration and easing impairment pressure, but it is sensitive to pricing policy.

  Risks

  Slower-than-expected recovery in outsourcing demand, persistent weakness in high-end testing demand, intensified price pressure under VBP and local procurement policies, and slower-than-expected industry consolidation.

• Dian Diagnostics (300244.SZ)

  A company with ICL and IVD businesses, plus valuation for its AI business

  Strengths

  Target price of Rmb19; the SOTP valuation covers mature ICL and IVD businesses as well as the AI business, and earnings repair may come from rising concentration and easing accounts receivable impairments.

  Weaknesses

  The target price is close to the disclosed current price of Rmb19.20, implying limited upside; price declines and accounts receivable impairments remain the main pressure points.

  Comparison

  Like Kingmed, it benefits from rising ICL concentration, but its valuation also includes an AI business DCF, making the business mix more diversified.

  Risks

  Intensifying competition, a sharp decline in testing item prices, higher-than-expected accounts receivable impairments, and implementation of VBP in the IVD industry; upside risks include stronger-than-expected self-developed product sales and lower-than-expected accounts receivable impairments.

Key data

• Release date of the diagnostics service pricing guideline2026-03-11The National Healthcare Security Administration released a draft for public comment on the diagnostics service pricing item guideline.
• TEG testing price capRmb170The previous highest-charging province was Liaoning, with a price of Rmb360.
• HbA1c chromatographic testing price capRmb30The previous highest-charging province was Gansu, with a price of Rmb88.
• BNP testing price capRmb180The previous highest-charging province was Shandong, with a price of Rmb345.
• Average price reduction in high-price regionsabout 50%The chart estimates that average prices in high-price regions will fall by about 50% after the guideline.
• Share of the China market represented by high-price regionsabout 30%The chart estimates that high-price regions account for about 30% of the China market.
• Market contraction on a hospital billing basisabout 15%Estimated impact on the overall market size from price cuts in high-price regions.
• Mindray target priceRmb247Based on a two-stage DCF, with 2% terminal growth and 9.5% WACC.
• SNIBE target priceRmb72Buy rating; weighted average of 85% DCF value and 15% theoretical M&A value.
• AmoyDx target priceRmb30Buy rating; based on a two-stage DCF, 10.5% discount rate, and 3% terminal growth.
• Kingmed target priceRmb38Buy rating; based on a 5-year exit P/E method.
• Dian Diagnostics target priceRmb19Based on SOTP, with separate valuation for mature ICL and IVD businesses plus AI business.

Impact & implications

The direct impact of the pricing guideline is to lower testing service fees in high-price provinces and potentially shrink the hospital-side diagnostics service market; the indirect impact depends on price transmission among hospitals, distributors, IVD manufacturers, and ICLs. For IVD manufacturers, volume-based procurement and service price caps may continue to compress ex-factory prices and growth rates; for ICLs, lower testing prices may boost outsourcing rates and test volumes, but gross margins will be squeezed if price declines outweigh scale effects. From an investment perspective, the report maintains positive ratings on some leading and niche companies, but emphasizes that policy implementation timing, the magnitude of price cuts, and demand elasticity are the key factors determining the quality of industry recovery in 2026-2028.

Risks

• The final version of the diagnostics service pricing guideline may cut prices more deeply or cover a broader scope than expected.
• VBP, DRG/DIP, and local procurement policies may continue to suppress IVD manufacturers' ex-factory prices and hospital billing prices.
• Lower testing prices may erode ICL gross margins, offsetting the volume growth from higher outsourcing rates.
• Recovery in high-end testing demand may be slower than expected, and outsourcing demand in the industry may repair less than expected.
• Intensifying industry competition, slower-than-expected import substitution, or new technology iteration may change the competitive landscape.
• Accounts receivable impairments may exceed expectations, especially affecting ICL company earnings recovery.
• Overseas regulation, trade policy, patent litigation, and changes in international market access may affect the long-term growth of related companies.

What to watch

• The release date, price caps, and implementation details of the final diagnostics service pricing item guideline.
• The rollout pace of chemiluminescence volume-based procurement and diagnostics service pricing reform across provinces.
• Whether the IVD industry will return to positive growth in 2H26 as expected.
• The extent of pass-through to hospital fees, IVD ex-factory prices, and ICL gross margins after the guideline takes effect in 1H27.
• The elasticity of test volumes and changes in outsourcing rates after price cuts in high-price provinces.
• Whether accounts receivable impairments at Kingmed and Dian Diagnostics continue to decline.
• Whether oncology companion diagnostics can still maintain relatively low pressure from volume-based procurement and Medicare cost control.