Jianshi Technology plans to issue 8.0764 million H shares worldwide, of which about 10% of the Hong Kong offering, about 90% of the international offering, and another 15% of the over-allotment equity.

picture is from Visual China

A few days ago, Jianshi Technology-B (09877.HK) passed the Hong Kong Stock Exchange's hearing and updated its prospectus to prepare for listing on the Hong Kong Stock Exchange. CICC and Citi are joint sponsors.

Jianshi Technology plans to issue 8.0764 million H shares worldwide, of which about 10% of the Hong Kong offering, about 90% of the international offering, and another 15% of the over-allotment equity. Jianshi Technology's IPO was launched from September 23 to 29, with an offering price of HK$28.80 per share, which is the upper end of the issue price guidance range. It is expected that the stock will start trading on October 10.

Jianshi Technology was founded in November 2011 and is a medical device company that develops interventional products for the treatment of structural heart disease (including tricuspid valve disease, aortic valve disease, mitral valve disease and heart failure ). I have submitted , Hong Kong stock three times, but now I have finally successfully obtained the entry ticket. As early as June and December 2021, Jianshi Technology had twice sprinted to Hong Kong stocks, but both failed. Regarding the reasons for the failure of the previous two listings, Jianshi Technology did not respond to Titanium Media App.

It is worth noting that the prospectus of Jianshi Technology shows that the company will list A shares at an appropriate time. It has submitted a registration application for pre-listing guidance for A-shares, and was accepted by the Ningbo Securities Regulatory Bureau of the China Securities Regulatory Commission in July 2022. Hong Kong stocks are still following the process, and the A-share IPO plan has been put on the agenda. Is Jianshi Technology not enough money to spend?

lost 870 million yuan in two and a half years, and the days when they were not making money were not over yet

According to the prospectus, Jianshi Technology's other income and income in 2020 and 2021 were RMB 3.07 million and RMB 8.91 million respectively, with net losses of RMB 300 million and RMB 501 million each. By the first half of 2022, the company had revenue of 38.346 million yuan and a net loss of 73.529 million yuan.

In two and a half years, Jianshi Technology's cumulative loss reached 874 million yuan, of which 500 million yuan was lost in 2021 alone. Jianshi Technology is a biotech stock listed on the Hong Kong 18A system. It is reasonable to lose money because before the self-developed products obtain sales revenue, large-scale R&D investment in the early stage is indispensable. Jianshi Technology has also distributed share remuneration generously for two consecutive years. As of press time, the Titanium Media App has not received a reply.

In 2020, 2021 and the first half of 2022, Jianshi Technology's R&D expenditure was RMB 171 million, RMB 265 million and RMB 84.541 million, respectively, accounting for 56.4%, 51.9% and 67.4% of the total cost and expenditure, respectively. The corresponding administrative expenses are RMB 131 million, RMB 239 million and RMB 40.534 million, of which the share remuneration expenses are high, reaching RMB 123 million, RMB 182 million and RMB 16.9 million respectively.

Specifically by 2021, the company's R&D expenditure will increase by 94 million yuan compared with the previous year, of which 55.5 million yuan is the share remuneration plan, 21.5 million yuan is the increase in the labor costs of R&D personnel, and 13.3 million yuan is the increase in the cost of raw materials and consumables for the promotion of clinical practice by core products. This year, Jianshi Technology is conducting a confirmatory clinical trial of its core product LuX-Valve and a feasibility clinical trial and a confirmatory clinical trial of its Ken-Valve.

LuX-Valve is the first generation of transcatheter tricuspid valve replacement system independently developed by the company. It is specially designed for patients with severe tricuspid valve regurgitation and high surgical risks. It is expected to be commercialized in the second half of 2023; Ken-Valve is the first generation of transcatheter aortic valve replacement system, designed for the treatment of severe aortic valve regurgitation (or combined with aortic valve stenosis), and is expected to be commercialized in the first half of 2024.

Although there is no approved transcatheter tricuspid valve replacement product worldwide, eight products are in the clinical trial stage, of which 3 products have entered the confirmatory clinical trial stage, two are from Jianshi Technology and one from Edward Life Sciences. Jianshi Technology has the first-mover advantage, but in terms of the domestic market, Qiming Medical (02500.HK), Xintong Medical (02160.HK), and Peijia Medical (0996.HK) all have preclinical layouts for this product, and the competitive pressure is also considerable.

has a fierce competition in the field of transcatheter aortic valve replacement products for the treatment of aortic valve regurgitation. 25 products around the world have been approved for commercialization, and 9 of China have been approved for commercialization. Among them, J-Valve from Jiecheng Medical has been commercialized for 7 years and has also included aortic valve regurgitation as an indication. Ken-Valve of Jianshi Technology has been at a disadvantage in time.

On the one hand, it takes at least one year to make money by relying on the fastest-driving product, and potential competition is about to break out. On the other hand, Jianshi Technology's R&D investment cannot be stopped, and it cannot make money but cannot delay spending money.

At present, in the R&D pipeline of Jianshi Technology, the above two core products are in the conclusive clinical trial stage, and two other products are in the feasible clinical trial stage, three are in the feasible clinical trial preparation stage, and three are in the preclinical stage.

Figure originated from the prospectus

The company also bluntly stated in its prospectus that it is expected that R&D expenditure will continue to account for the majority of the total operating expenditure in the future, because the company has promoted the products under development that are currently in the early stage of clinical stage to advanced clinical trials and the promotion of preclinical projects to clinical trials, as well as continuous clinical development of products under development.

According to Jianshi Technology's own assessment, including cash and bank balances, internal funds, etc., its working capital can cope with 125% of the costs and expenses in the next 12 months. In other words, ideally, Jianshi Technology's money can only be spent 15 months on .

Judging from the data disclosed in the prospectus, Jianshi Technology's spending speed has soared in recent years. In the four years from 2018 to 2021, the company completed seven rounds of financing and received approximately 1.69 billion yuan. As of June 30, 2022, Jianshi Technology's cash and cash equivalent was only 396 million yuan, and nearly 1.3 billion yuan has been invested in the company's operations.

Some industry investors previously predicted that by the fourth quarter of 2022 and the beginning of next year, a number of companies may go bankrupt one after another, and pointed out that if there is neither product listing nor product authorization income, then considering the duration of existence becomes the most important and pragmatic issue, and the direct indicator is cash balance reserve.

For the foreseeable future, Jianshi Technology will not only have to bear high R&D expenses, but also pay marketing and promotion costs for the commercialization of potential new products. It is imminent to reserve working capital through listing before making money, and the last round of financing before Jianshi Technology's IPO has greatly boosted the company's valuation, which makes it difficult for companies to "find money" in the primary market. Before the first delivery of

, Jianshi Technology launched a C round of financing of 164 million yuan in April 2021 and completed a C round of financing of 164 million yuan in May, invested by institutions such as Hillhouse Capital, Chunhua Capital and China Life Health Fund. This time, it generously took action to send Hillhouse to the position of the largest institutional shareholder of Jianshi Technology, holding 9.87% of the shares. At the same time, it also sent Jianshi Technology to the ranks of "unicorns". In the

C round of financing, Jianshi Technology's cost per share was US$3.33, approximately RMB 23.74, and its valuation reached US$1.364 billion, approximately RMB 9.723 billion. In the last round of equity financing (January 2021), Jianshi Technology's cost per share was only RMB 6.87, with a valuation of RMB 2.25 billion. In just 3 months, Jianshi Technology's valuation rose by 432%.

Picture is derived from the prospectus

Among the companies on the same track, Jianshi Technology can be said to be the "most expensive". Lepu Xintai, which previously submitted a statement on Hong Kong stocks, also has a heart valve product under development pipeline. At the same time, the company itself has other cardiac interventional products on sale, with a certain revenue and profit scale. The valuation of the last round of financing before listing was 6.6 billion yuan.

price focus is on the secondary market. Currently, the market value of Xintong Medical, Qiming Medical and Peijia Medical is HK$5.7 billion, HK$4.4 billion and HK$3.8 billion each. In comparison, Jianshi Technology's current valuation can be regarded as the first in the industry. Even among all 47 Hong Kong stocks currently, Jianshi Technology's valuation is among the top 10. Jianshi Technology, which entered the market with high valuation

, once caused market concerns whether the primary and secondary markets would be inverted. After all, in February this year, Lepu Bio-B (02157.HK) was listed on the market at a discount, becoming the only biopharmaceutical company with a listing price lower than the cost price of the Series C financing in the four years since the implementation of the 18A system in Hong Kong.

With the announcement of the issuance pricing of Jianshi Technology, the above doubts have been dispelled. However, since the launch of the 18A system in Hong Kong, the overall B-class stocks have opened high and closed low and are currently sliding into a low trough. Futu Biopharma's Class B stock index hit a record low on September 23. . Under the bad environment of , there are still many uncertainties in the future trend of Jianshi Technology.

(This article was first published on Titanium Media App Author丨Yang Yaru Editor丨Sun Cheng)