China VBP expansion may intensify price and share pressure on European MedTech companies

Overview

This report discusses the notice from China's National Health Commission and other regulators on further improving volume-based procurement of medical equipment by public medical institutions. UBS believes that if implemented, the policy will expand VBP from its historically limited coverage of capital equipment to large-scale or high-value devices such as radiotherapy, PET-CT, PET-MR, surgical robots, CT, MRI, and ultrasound, thereby increasing pricing pressure and market share loss risk for multinational MedTech companies.

Core views

The core view is that the expansion of China's VBP is negative for Western radiotherapy and imaging vendors. Elekta, with a high share of revenue from China, strong strategic dependence, and about 40% share in the conventional radiotherapy market, could become a major loser of market share; GE HealthCare faces the highest risk in imaging because of its China exposure and product comparability with United Imaging and Mindray; Siemens Healthineers still has some innovation buffer; Philips, while competing with domestic vendors in areas such as ultrasound, has lower overall revenue exposure and some differentiation in parts of its imaging portfolio.

Analysis framework

The report starts with interpretation of the policy event, breaks down the VBP coverage at the national, provincial, and municipal levels, and evaluates revenue exposure, whether products fall within procurement scope, the intensity of domestic competition, and potential pricing impact across the radiotherapy and imaging product lines. The valuation section uses a DCF framework.

Methodology notes

• Valuation methodologyDCF

  Discounted cash flow valuation

  UBS states that its price targets are derived from DCF; Elekta uses a 9.4% WACC and 1.5% terminal growth rate, Siemens Healthineers uses an 8.2% WACC and 1.75% terminal growth rate, GE Healthcare uses a 9.0% WACC and 1.5% terminal growth rate, and Philips uses a 7.5% WACC and 1.5% terminal growth rate.

• Policy analysisVolume-Based Procurement

  Expansion of volume-based procurement

  Based on China's proposed three-tier VBP framework, the report assesses the impact of expanded national, provincial, and municipal procurement scope on pricing, transparency, and market share for large medical equipment.

Asset mapping & comparison

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

• Elekta

  Radiotherapy equipment supplier, rated Sell in the report.

  Strengths

  High share in China's conventional radiotherapy market, with less local competition for high-end products such as Unity.

  Weaknesses

  China accounts for 13% of group revenue, and expansion in China is a strategic focus; most products may be covered by national or provincial VBP.

  Comparison

  Relative to other covered companies, UBS believes Elekta has the most prominent risk in radiotherapy.

  Risks

  Sharp price cuts, erosion of Unity's high profitability, competition for products such as Evo from United Imaging, and loss of market share.

• GE Healthcare

  Imaging equipment supplier, rated Neutral in the report.

  Strengths

  Core imaging and ultrasound businesses have potential support from new product launches.

  Weaknesses

  High China revenue exposure, with a product portfolio more comparable to United Imaging and Mindray.

  Comparison

  Among imaging vendors, UBS believes GE Healthcare faces the highest risk.

  Risks

  VBP expansion depressing prices, domestic vendors gaining international and domestic market share, and weaker hospital capital spending.

• Siemens Healthineers

  Imaging and diagnostic equipment supplier, rated Neutral in the report; Varian is a related business asset.

  Strengths

  Innovation capability provides some buffer.

  Weaknesses

  The business portfolio is more exposed to the medical capital spending cycle, and some Varian platforms may be included in provincial VBP.

  Comparison

  Imaging risk is lower than GE Healthcare but higher than Philips.

  Risks

  Price pressure, the capital spending cycle, diagnostic business transformation falling short of expectations, customer integration, and innovation execution risk.

• Philips

  MedTech supplier in imaging, ultrasound, and related areas, rated Buy in the report.

  Strengths

  Relatively low overall China revenue exposure, with some differentiation in parts of its imaging portfolio such as Image Guided Therapy.

  Weaknesses

  Direct competition with Mindray and United Imaging in categories such as ultrasound.

  Comparison

  UBS believes it is less affected than the other relevant companies.

  Risks

  VBP expansion, regional growth below expectations, regulatory changes, and raw material and foreign exchange volatility.

• Varian

  Radiotherapy platform related to Siemens Healthineers.

  Strengths

  China revenue accounts for less than 10% of segment revenue, and recent and future growth is mainly driven by the U.S.

  Weaknesses

  Truebeam and Halcyon may fall under provincial VBP.

  Comparison

  The report judges the impact as neutral to negative, lower than for Elekta.

  Risks

  Provincial VBP pricing pressure and competition from United Imaging's similar O-ring linac.

Key data

• Elekta China revenue share13%Management guides for mid-single-digit growth in China revenue during FY26-FY29 and lists “Expand in China” as a key strategic pillar.
• Elekta China conventional radiotherapy market shareAbout 40%UBS believes it could become a key donor of market share amid intensifying domestic competition.
• Varian China revenue shareBelow 10% of segment revenueUBS believes its Truebeam and Halcyon may fall under provincial VBP, but growth is still mainly driven by the U.S.
• CT procurement price-cut reference45%The report cites a case of about a 45% CT price cut in provincial procurement of other large medical equipment in Q1 as a reference for pricing pressure.
• Equipment covered by provincial VBPPET-CT, PET-MR, laparoscopic surgical robots, conventional radiotherapy equipment, etc.The notice proposes that high-value medical equipment will gradually be added in the future.
• VBP implementation timelineBy the end of 2026All provinces are required to complete one round of VBP.

Impact & implications

If the policy advances in line with the notice, multinational medical device companies in China may simultaneously face price cuts, inclusion of maintenance and consumable costs in bid evaluation, rising market share for domestic suppliers, and margin pressure on high-end equipment. From an investment perspective, companies with greater dependence on China revenue and products that are more substitutable by domestic vendors face greater risk.

Risks

• China VBP expands further from consumables and low-end equipment into capital equipment, leading to greater-than-expected pricing pressure.
• Domestic vendors such as United Imaging and Mindray gain share through price and localization advantages.
• Bid evaluation will take maintenance and consumable costs into account, potentially compressing lifecycle profits for multinational vendors.
• A weakening hospital capital spending cycle could amplify pressure on equipment procurement.
• Regulation, foreign exchange, reimbursement policy, product innovation, and changes in alternative therapies may all affect MedTech company valuations.

What to watch

• The final scope and specific catalog of VBP implementation at the national, provincial, and municipal levels.
• Progress by each province toward completing one round of VBP by the end of 2026 and the magnitude of price cuts.
• Whether equipment such as MR-linac, Cyberknife, Truebeam, Halcyon, Evo, PET-CT, PET-MR, CT, MRI, and ultrasound will be included in procurement.
• Winning bids and market share changes for United Imaging and Mindray in radiotherapy and imaging categories.
• Elekta's China growth guidance, GE Healthcare's China revenue performance, and the resilience of differentiated products at Siemens Healthineers and Philips.