Analysis of Cost Control Logic for Puyon Medical's Insulin Pen Needle Business

Based on the collected data, I will conduct an in-depth analysis of the cost control logic for Puyon Medical’s insulin pen needle business.

Puyon (Hangzhou) Medical Technology Co., Ltd. was founded in 2013 and is a company specializing in the R&D, production, and sales of diabetes care, general drug delivery infusion, and minimally invasive interventional medical devices [1]. Its main product is insulin pen needles, and it is applying for listing on the Beijing Stock Exchange, planning to raise approximately 395 million yuan for projects such as the construction of an intelligent manufacturing production line for puncture interventional medical devices [1].

The company adopts an overseas ODM-focused business model. According to the prospectus data, the revenue share from ODM/OEM customers reached 94.4%, 95.8%, and 97.3% respectively [2]. Its customers mainly include international brand owners and their procurement service providers, with products covering more than 70 countries and regions worldwide [3].

According to the prospectus data disclosed by the company, the average unit price of conventional insulin pen needle IPN products shows a downward trend:

• Domestic Market
  : From 23.45 yuan per 100 pieces in 2022 to 16.56 yuan per 100 pieces in H1 2025, a cumulative drop of 29.4% [3]
• Overall Average Unit Price
  : From 16.94 yuan per 100 pieces in 2022 to 13.95 yuan per 100 pieces in H1 2025 [1]

Despite the continuous decline in unit price, the company’s comprehensive gross margin shows an upward trend:

• 2022: 44.56%
• 2023: 47.20%
• 2024: 49.44%
• H1 2025: 52.50% [1]

This ‘volume-price divergence’ phenomenon has attracted market attention, requiring a multi-dimensional拆解 of its cost control logic.

Puyon Medical has achieved significant scale effects through continuous capacity construction. As sales scale expands, fixed costs are分摊 across more products:

The decline in the unit price of the company’s domestic IPN products is mainly based on two factors: first, the decline in the unit cost of IPN; second, the fierce competition in the domestic market, and the appropriate reduction of prices to maintain high-quality customer relationships [1]. This indicates that the company’s cost optimization speed actually exceeds the price decline speed.

In H1 2025, the overseas sales share of IPN products reached 73.57% [3]. The overseas market has the following characteristics:

• Higher Unit Price Than Domestic Market
  : The unit price in the overseas market is generally higher than the domestic sales price [3]
• Relatively Stable Competitive Pattern
  : The brand pattern in overseas markets is relatively固化, with less price competition pressure
• Strong Customer Stickiness
  : Establish long-term stable cooperative relationships with international brand owners

The company explains the reasons for the high unit price include: claiming to be the first among domestic manufacturers in market share, high domestic sales share, high own brand sales share (25.41%), and better raw material use (such as PE material for needle tip sheath instead of PP material) [3]. Although the sustainability of these explanations needs to be verified, it does reflect the differentiation strategy in product structure.

The company’s main suppliers are metal and plastic raw materials, components, and accessories suppliers. The procurement share of the top five suppliers in each reporting year was 18.2%, 22.4%, and 18.3% respectively [2]. Through centralized procurement and supplier management, the company has achieved:

• Procurement Cost Optimization
  : Establish long-term cooperative relationships with major suppliers to obtain more favorable procurement prices
• Raw Material Quality Control
  : Select higher-quality raw materials (such as PE material instead of PP material) to control costs while ensuring quality

The company continuously promotes lean production and automation transformation to improve production efficiency:

• Integrate production lines to reduce waste in the production process
• Optimize production processes to improve equipment utilization
• Implement lean inventory management to reduce inventory costs

The company’s comprehensive gross margin is higher than that of peer companies in the same industry whose main business focuses on general drug delivery infusion products or other diabetes care products [1]. This indicates:

• Increase in Sales Share of High Gross Margin Products
  : The sales share of products with higher gross margins such as safety insulin pen needles has increased
• Product Iteration and Upgrade
  : Launch iterative products (such as SPN), although the scale declines initially, it is expected to improve the overall gross margin in the long term

The company retains 25.41% of its own brand sales [3], selling its own brand products directly to end consumers through e-commerce platforms (Amazon, JD.com, Tmall, Pinduoduo), and this part of the business usually has higher gross margins.

1. Growth in Global Diabetes Patients
   : The insulin pen needle market continues to expand, with a projected CAGR of 6.58% from 2025 to 2031 [4]
2. First-Mover Advantage in Overseas Markets
   : The company has established a stable customer base and brand awareness in overseas markets
3. Continuous R&D Investment
   : The company continuously launches new products to optimize product portfolio

1. Domestic Market Price War Pressure
   : The domestic market competition is fierce, and the unit price may continue to decline in the future
2. High Customer Concentration
   : The revenue share of the top five customers increased from 62.4% to 77.9% [2], with customer dependency risk
3. Limited Contribution from New Products
   : The sales scale of the iterative product SPN declined, and new products contributed limitedly for the time being [3]

The cost control logic of Puyon Medical’s insulin pen needle business can be summarized as

1. Scale Effect
   is the foundation: Capacity expansion分摊 fixed costs, and the unit cost reduction exceeds the unit price drop
2. Overseas ODM Model
   is the key: High overseas sales share ensures a relatively high overall gross margin level
3. Supply Chain Optimization
   is the guarantee: Centralized procurement and production efficiency improvement continuously compress costs

This model has strong sustainability in the short term, but in the long term, the company needs to应对 potential price competition pressure through product upgrading, market expansion, and customer diversification.

[1] Puyon Medical caught in price war under ‘needle’ competition: Unit price keeps dropping, sales expenses keep rising (https://news.qq.com/rain/a/20251219A0787W00)

[2] Puyon Medical Hong Kong Prospectus (https://www.hkexnews.hk/listedco/listconews/sehk/2025/0617/2025061700044_c.pdf)

[3] Puyon Medical Second Inquiry Reply Letter: One hit product lasts 12 years and continues (https://finance.sina.com.cn/stock/marketresearch/2025-12-24/doc-inhcwhpt4645966.shtml)

[4] 2025 Medical Device and Supply Chain Annual Innovation White Paper (https://m.sohu.com/a/969694598_116132)