Chindex Posts Profit on Product Sales, Health Services

With a pair of small hospitals in Beijing and Shanghai, along with a clinic in Guangzhou, Chindex International sells its well-heeled clientele a more attentive experience than that offered by China's state-run hospitals. Where state-managed hospitals charge patients $10 or $20 per visit, the Western-style clinics and hospitals operated by Chindex charge as much as several hundred dollars.

Last year, the company suffered a financial loss as it waited for government approval to use expensive robotic surgery equipment it had acquired. This year, it appears that the investment may be beginning to pay off.

The Bethesda-based company on Monday reported a profit of $3.3 million in its first fiscal quarter, compared with a loss of $161,000 a year earlier. Revenue increased to $45.3 million, from $32.1 million.

Chindex reported that product sales accounted for most of the firm's increased revenue, bringing in $23.3 million in the recently ended quarter, compared with $12.5 million the previous year. That division experienced losses for years, following delays in product approval from the Chinese government for equipment such as a laser used for cosmetic procedures.

Chindex also reported revenue growth in its other major division, health-care service.

"We were particularly pleased to see growth in both inpatient and outpatient services in Beijing and Shanghai markets," Chindex chief executive Roberta Lipson said in a statement.

Analysts say Lipson's connections in China have helped the company find its footing, but warn that other internationally based health-care companies are also taking aim at the Chinese market.

"[Chindex is] unique in that they were the first ones in China offering Western-style health-care services," said Julie Chen, an analyst with Hudson Securities. "But they're not unique in that medical supply providers are now a dime a dozen in China."

While working as an analyst and conducting research in China, Chen visited the company's hospital in Shanghai as a patient with a respiratory infection. An earlier visit to a state-run hospital didn't improve her condition, but doctors at the Chindex facility, called Shanghai United Family Hospital, cured her. "It was a night-and-day difference," she said.

The company was one of the first Western firms to crack into China's newly opened economy in 1981. For most of its history, the company's facilities have been populated with sick Western expatriates; its Shanghai and Beijing locations each have about 25 beds. As China's upper and middle classes grow, Chindex is beginning to pursue that market. The company plans to open larger, 100-bed hospitals in Beijing and Guangzhou in 2010. While its existing clinics and hospitals hire doctors from the West, the new hospitals will hire local, Chinese-speaking staff.

Chindex has also sought to fashion a competitive edge by making itself the sole distributor of certain types of medical products and services in the regions it serves. The company announced Monday that it has reached new exclusive product distribution agreements with two medical supply companies. For the German-based Biotest AG, Chindex will distribute that firm's blood bank products; for the California-based Cutera, Chindex will distribute its laser systems, used for aesthetic procedures such as hair removal. Both contracts will span multiple years, the company said in a statement.

Chindex has seen its stock share prices climb steadily for much of 2009, after a 52-week low of $3.50 in March. Chindex stock closed at $15.94 Monday, up $2.79, or 21.2 percent.