Independent Scarce Penetration
It is important to check for omissions and fill in the gaps
Author: Chier
Editor: Cisco
Fashion: Lan Zhan
Source: Luocai—Ruocai Research Institute
No innovation, no future.
As of October 31, 2021, there were 360 listed companies on Science and Technology Innovation Board , with a total market value of 5.39 trillion yuan.
Another box, the IPO threshold is also increasing and the probability of failure is increasing. As of November 25, a total of 169 companies in the GEM and the Science and Technology Innovation Board were terminated, which exceeded the level of the same period last year.
Both boards are clustered areas for IPOs of biomedical enterprises. Taking the Science and Technology Innovation Board as an example, since its opening, 28 biopharmaceutical companies have been listed, accounting for nearly one-fifth of the total. Naturally, the tightening state has a great impact on it. In 2020, 10 biopharmaceutical companies failed their IPOs; 14 companies reached the first ten months of 2021. This has not yet been considered as being suspended and suspended.
strictly controls the threshold for listing and improves the quality of listed companies, which is obviously not empty talk. Is this a good or a bad thing for Heze Pharmaceutical and Weikang Medical?
01
Innovative drug orders are less than 5%
How many scientific and technological innovation attributes are there?
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On November 8, Zhejiang Heze Pharmaceutical Technology Co., Ltd. (hereinafter referred to as "Heze Pharmaceutical") responded to the second round of inquiries on the Science and Technology Innovation Board IPO.
public information shows that Heze Pharmaceutical is a professional CRO enterprise with drug research and development as the core, and its services cover pharmaceutical research, clinical trial services, and technical achievements transformation such as generic drug development, generic drug consistency evaluation, innovative drug development.
June 25, the IPO of the Science and Technology Innovation Board was accepted. It plans to raise 543 million yuan, of which 413 million yuan will be used for pharmaceutical R&D and production projects and 130 million yuan will be used to supplement liquidity.
From 2018 to 2020, the company's revenue increased from 71.27 million yuan to 288 million yuan, with an annual compound growth rate of 100.96%; during the same period, the net profit attributable to shareholders turned losses into profits, from -13.25 million yuan to 65.14 million yuan; the gross profit margin also increased from 27.53% to 51.77%. Strong growth is worthy of recognition.
But the problem is difficult to conceal:
split the business structure. During the reporting period, the product was mainly consistency evaluation and generic drug development, accounting for about 90% of the main business revenue.
As of the end of the first half of 2021, most of Heze Pharmaceutical's orders were generic drugs, and the proportion of innovative drug orders was less than 5%; the revenue share of the first generic drugs of generic drugs was only 12.69%.
2018-2021 first half of the year, the revenue share of innovative drugs and first-generation drugs was 2.44%, 6.8%, 6.63% and 21.98% respectively. Although it has increased, its proportion is still weak.
Naturally, this is not a plus for sprinting to the Science and Technology Innovation Board. In the long run, the high proportion of mid- and low-end generic drugs is not conducive to the development of enterprises.
industry analyst Hao Rui said that improving quality and efficiency, reducing prices and innovation are the general direction of medical reform . Affected by policies such as centralized procurement and consistency evaluation, the industry trend is focusing on innovative drugs and high-end generic drugs. Against the background of the division of labor in medicine, the CRO track is a golden track. Thanks to the booming industry, Heze Pharmaceutical's performance growth rate in recent years is remarkable, but this does not mean that there will be advantages in subsequent competition.
From an industry perspective, compared with leading companies such as WuXi AppTec and Kanglong Huacheng on the same track, there is still a big gap between the scale and market position of Ze Pharmaceutical.
Take 2019 as an example. In the traditional pharmaceutical contract service outsourcing industry, WuXi AppTec has firmly ranked as the leader with a market share of 16.9%, followed by Kanglong Huacheng and WuXi Biotechnology account for 5.2% and 4.6% respectively, while Heze Pharmaceuticals did not squeeze into the top ten. There is also great competition in the big market. The core competitiveness is naturally related to the science and technology innovation attributes emphasized by the Science and Technology Innovation Board.
During the reporting period, Heze Pharmaceutical's high clinical value drugs may have the largest revenue share in research and development services for major diseases, including RMB 46.5661 million, RMB 65.1683 million, RMB 176 million and RMB 120 million, respectively, accounting for 65.76%, 43.22%, 62.10% and 53.72% of the main business revenue. In terms of R&D investment, the R&D amount of this business is only RMB 9.6949 million, RMB 9.9408 million, RMB 6.0311 million and RMB 8.4241 million. Judging from the overall R&D expenses of
, it was 12.76 million yuan in 2018 and 22.54 million yuan in 2020, and the proportion of operating income dropped from 17.91% to 7.83%.
It is better to have a piece of silver than to say a thousand things. Both the size and growth rate need to be increased. What is the scientific and technological innovation attributes of Heze Pharmaceutical?
There is no accident, this is also the focus of supervision. , Shanghai Stock Exchange , the first inquiry, raised questions about Heze Pharmaceutical's current order for innovative drugs and generic drugs.
The second inquiry involved seven issues including Heze Pharmaceutical's representative R&D projects, revenue composition, technological advancement, revenue from technology achievements transfer business, subsidiaries, customers, and suppliers 's stake in . It also directly points out whether it meets the positioning of science and technology innovation attributes, and requires the sponsor to fully verify it and provide the basis and reason for its belief that it is mainly engaged in high-end chemical drugs and related services.
02
Frequent capital increase and transfer, valuation rose sharply
Customers and suppliers have acquired shares and then exited
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compliance level, and there are also considerations.
prospectus shows that from April 2020 to September 2020, Heze Pharmaceutical experienced three growth and three transfers in half a year, and its registered capital increased to 50 million yuan.
Is there any situation where suppliers and customers suddenly invest and hold shares?
Questions are not abrupt. For details, Heze Pharmaceutical's equity transfer in April 2020. In June of the same year, its employees held stakes in platforms Ningbo Yile and Hangzhou Kunbai added new investments, and introduced Huzhou Jingyan, Ningbo Heyan multiple investors at an overall valuation of 600 million yuan.
major customer The key manager of Jincheng Pharmaceutical has a sudden investment, and it is through the management method of Fu Miaoqing, Zhou Baishui and others. Fu Miaoqing is currently the deputy general manager of Jincheng Pharmaceutical.
In 2018, Heze Pharmaceutical's largest customer was Suzhou Dongrui Pharmaceutical Co., Ltd. . At this time, Jincheng Co., Ltd. was the fifth largest customer, with revenue accounting for 5.46. By 2020, Jincheng Pharmaceuticals jumped to the largest customer, with revenue increasing to 11.98%.
Regarding the reasons for the proxy holding, Heze Pharmaceutical explained that the actual equity holder is unwilling to be a prominent shareholder and considers the convenience of industrial and commercial registration, and the nominal holder is adopted after consensus.
Look again in August 2020, Heze Pharmaceutical introduced two external investors, Yunfeng Qitai and Ningbo Chunrui, at a valuation of 1 billion yuan, holding 5.53% and 2.3% of the shares respectively. In just two months, the company's valuation increased significantly from 600 million to 1 billion yuan, with rising by 66.67%.
In this regard, the Shanghai Stock Exchange requires an explanation: the background and reasons for the investment of customers and suppliers, and whether it complies with industry practices.
and Ze Pharmaceutical reply are mainly based on their optimistic view of the industry and the company's future development prospects; agreeing that the above-mentioned related parties invest a small amount of shares is not for the purpose of business binding, and it is reasonable; the related parties of related customers and suppliers have withdrawn from the company before the declaration. There is no dispute or transfer of interests between the transfer parties and the issuer and the actual controller of the issuer.
seems to be reasonable, but as soon as it happened, the valuation rose by 60%. Did the relevant investors behind the magic operation just do Lei Feng?
03
The main business gross profit margin has declined. Growth dilemma
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Weikang Medical, which has just updated its prospectus, has also reviewed the office.
public information shows that Weikang Medical was established in March 2012. Its main business is the research, development, production and sales of disposable medical consumables.The main products are medical polymer materials such as suction tubes, suction tubes, nasal oxygen tubes, drainage bags, (including anti-countercurrent drainage bags, precision drainage bags), etc. Liu Chunliang and Liu Lijie are the actual controllers
In fact, Weikang Medical is also an old IPO.
In June 2015, Weikang Medical was changed to Co., Ltd. , paving the way for listing. In October 2017, Weikang Medical submitted its first statement. The sponsor was Debang Securities , and it planned to log on to the Shanghai Stock Exchange Main Board. However, after the prospectus was updated in May 2018, the following text was gone; in June 2019, Weikang Medical changed to the GEM (approval system), and the sponsor became Zhongyuan Securities , but it still ended in vain. In October this year, Weikang Medical once again launched an impact on the ChiNext (registration system), and the sponsor became Dongwu Securities .
44 years, Weikang Medical is still on the way to go public. Who is the roadblock?
First look at the fundamentals. In the first quarter of 2018-2021 (hereinafter referred to as the "reporting period"), Weikang Medical's revenue was RMB 240 million, RMB 262 million, RMB 254 million and RMB 60.7019 million respectively; net profit attributable to shareholders was RMB 68.8242 million, RMB 69.0439 million, RMB 54.705 million and RMB 13.1872 million respectively during the same period.
performance is not large, and the growth trend is not obvious. Profits in 2020 even declined, so the growth power is really not enough.
0 business point of view, surgical care series products are the first major product, with revenue accounting for about 50%; followed by respiratory series and anesthesia series revenue accounting for about 17% and 12%.
's main business gross profit margin is showing a decreasing trend year by year: from 2018 to 2021, it was 44.67%, 43.42%, 40.90% and 40.54% respectively.
From the perspective of channels, it is mainly divided into overseas markets and domestic markets. The former is mainly produced and sold by OEM; the latter is mainly distributed and direct sales are supplemented.
During the reporting period, direct export revenue was RMB 111.745 million, RMB 135.2664 million, RMB 113.3438 million and RMB 26.0679 million, accounting for 47.58%, 53.18%, 45.92% and 44.19% of the main business revenue, respectively.
export customers are mainly Cardinal, Medline, Intersurgical and HUM, all of which are well-known foreign medical device brand operators. However, during the reporting period, the total proportion of the company's direct export revenue was more than 70%, and there is a risk of concentrated export customers.
prospectus also admitted that if the external policy environment or market changes, or the company cannot meet the needs of export customers in terms of product quality, supply capacity, etc., resulting in a decrease in purchase amount or a stop to cooperate, the company's operating performance will be adversely affected.
worry is necessary. Looking at the business in depth, Weikang medical products belong to the category of medical polymer materials with low-value medical consumables.
industry analyst Li Chen said that my country's low-value medical consumables industry has many competitive entities, market concentration is low, and homogeneous competition is serious. Foreign competition cannot simply compete for prices, highlighting the importance of product quality and quality improvement and innovation.
Of course, from 2018 to the first quarter of 2021, Weikang Medical's R&D expenses were RMB 7.0837 million, RMB 7.9142 million, RMB 6.8119 million and RMB 1.5795 million, respectively, accounting for 2.95%, 3.02%, 2.69% and 2.59% of revenue, respectively.
R&D investment is not large, and the relevant ratio is still showing a downward trend. What is the importance of R&D, the core competitiveness, and the future growth?
ask questions is not demanding. Compared with Weigao Co., Ltd., Conrad, Sanxin Medical, Weili Medical and Gongdong Medical, the average R&D expense ratio is 3.28%, 3.92%, 4.16% and 4.22%, respectively, Weikang Medical is significantly lower than its peers.
From this, it is strange to look at the core technology performance.
prospectus shows that Weikang Medical has 6 core technologies, namely PVC pellet formulation technology, catheter extrusion molding technology, balloon molding and bonding technology, drainage bag welding technology, , catheter tip molding technology and fully automatic accessories assembly technology. Disposable medical consumables produced and processed by core technologies account for 80% of Weikang Medical's revenue.
However, the above core technologies have been carefully evaluated. Except for the drainage bag welding technology, fully automatic accessories assembly technology, and the utility model patent and the invention patent , the other four technologies have not been patented.
Taking PVC pellet formula technology as an example, the prospectus disclosed that during the reporting period, all Weikang Medical's largest customers were overseas customers Cardinal, mainly sales attraction tubes.
suction tube main raw material is PVC pellets. What’s interesting is that Weikang Medical has two sets of standards for purchasing PVC pellets. The raw material PVC pellets for attracting pipes directly exported to Cardinal and other overseas companies are mainly purchased from Changzhou Hengfangda, and does not involve "PVC pellet formula technology"; while the raw material PVC pellets for selling suction pipes in China are mainly produced by Weikang Medical.
two sets of standards, so why?
You should know that purchasing PVC pellets from third parties will naturally have higher costs, which will undoubtedly lower the gross profit margin:
During the reporting period, the gross profit margin of Weikang Medical Attractive Tube's direct export was 34.24%, 32.76%, 33.82% and 30.98%, respectively, while the gross profit margin of domestic related products was as high as 49.41%, 54.70%, 51.68% and 48.13%.
It is worth emphasizing that the prospectus shows that Weikang Medical passed the qualification certification of high-tech enterprises in 2015 and passed the review of high-tech enterprises in 2018, with a validity period of three years. Corporate income tax will be paid at a reduced rate of 15% from 2018 to 2020. In August 2021, it submitted an application for high-tech enterprises to review .
However, from 2018 to 2020, the average R&D expense ratio of Weikang Medical (total R&D expenses in the past three years/total sales revenue in the past three years) was 2.88%. The " High-tech Enterprise Certification Management Measures " stipulates that the proportion of enterprises with sales revenue of more than 200 million yuan in the past year shall not be less than 3%
In other words, Weikang Medical has the risk of high-tech enterprise qualification certification. Once the qualification is lost, the impact of performance must be observed.
04
Quality control troubles. Thoughts on centralized procurement
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Medical enterprises, the professional threshold is very high. Core technical strength determines the core competitiveness of practitioners and is the foundation for enterprise growth and even survival. Basically unstable, the earth is shaking.
Let’s take a look at the troubles of quality control.
November 5, 2014, the disposable medicine change package produced by the subsidiary of Weikang Medical, Suzhou Weikang, was confiscated and fined RMB 6,000 by the Suzhou Food and Drug Administration for the illegal gains and fined RMB 6,000 by the Suzhou Food and Drug Administration for the disposable sputum suction tube produced by Suzhou Weikang did not meet the requirements, and the illegal gains and fined RMB 5,000 by the Suzhou Food and Drug Administration for the disposable tracheal intubation that did not meet the standards for the registered product, and the related products were confiscated and fined RMB 5,000 by the Suzhou Food and Drug Administration.
On May 26, 2016, Suzhou Weikang was warned by the Suzhou Food and Drug Administration and administratively punished by the Suzhou Food and Drug Administration for suspected of not passing the inspection and failing to maintain the effective operation of the quality management system during the production process of medical devices.
September 20, 2017, Weikang Medical reported that because the residual vacuum in the national supervision and sampling did not meet the standards, General Electric Medical Systems (China) Co., Ltd. voluntarily recalled the disposable suction tube (registration number: Suji Note 20142660658) it produced.
On September 20, 2018, State Food and Drug Administration announced that a batch of vacuum control devices produced by Weikang Medical that use sputum suction tubes do not comply with the standards.
On October 26, 2018, Jiang Provincial Drug Administration announced that Weikang Medical would impose a fine of 20,000 yuan for the above-mentioned acts of using the vacuum control device of the disposable suction tube that did not comply with the standards.
On February 25, 2021, Weikang Medical was fined 35,000 yuan by the Jiangsu Provincial Drug Administration for the production of a disposable dressing package that does not meet the registered product standards (the unqualified item is the residual amount of ethylene oxide ) and recalled 818 unqualified products.
On September 30, 2021, he was fined 45,000 yuan for producing 300 nasogastric tubes that did not meet the standards for registering products.
is similar to food and medicine, and medical consumables are related to the physical and mental health of patients. Against the background of improving quality and improving efficiency and benefiting patients, Weikang Medical needs many areas to improve.
Don’t forget that the centralized procurement of medical consumables has begun, and the subsequent inclusion in low-value fields is also the general trend. Is Weikang Medical ready?
05
Investor withdraws investment
Large Dividend VS owed social security
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This is a serious thought question.
What is interesting is that compared with Heze Pharmaceutical's sudden investment, many external strategic investors withdrew their investments before Weikang Medical's IPO.
In December 2019, the original shareholder Sinopharm M&A Fund reduced its investment by 4.9334 million yuan, Fosun Pingyao reduced its investment by 3 million yuan, Yihou Investment reduced its investment by 1 million yuan, and Shengzhong Investment reduced its investment by 66,600 yuan. The company's total share repurchase price was 101 million yuan.
As we all know, Sinopharm and Fosun are both leading companies in the pharmaceutical field, and their investment direction is often the industry's weather vane. Does it mean that Weikang Medical is not optimistic?
Perhaps, it also needs to be seen from the perspective of family governance.
On January 17, 2013, the registered capital of Weikang Co., Ltd. (the predecessor of Weikang Medical) increased from 20 million yuan to 200 million yuan. Among them, Liu Chunliang increased his capital by 108 million yuan and Liu Lijie increased his capital by 72 million yuan, both of which were paid in actual payment.
However, the above funds are sourced from the Shuyang Economic and Technological Development Zone Management Committee, which provided a loan of 198 million yuan on January 17, of which 180 million yuan was used for capital increase. On January 18, Weikang Co., Ltd. returned the above-mentioned 198 million yuan loan to the Shuyang Management Committee, and said it was "repaying on behalf of Liu Chunliang and Liu Lijie". It was not until September 2014 that Weikang Co., Ltd. reduced its registered capital to 20 million yuan.
So, according to the provisions of the " Company Law ", is Liu Chunliang's father and daughter suspected of "escape from capital contribution"? Weikang Medical also admitted that the above-mentioned withdrawal of capital contributions had legal flaws. But it is said that it does not constitute a substantial obstacle because the company has not actually been punished, mainly because the loan from the Shuyang Management Committee has its own specific purpose.
Which is right and wrong, let time answer.
The employee level is also not worried. In 2018, the company's employees who paid social security accounted for only 53% of the total number of employees, fell to 46% in 2019, and less than 60% by 2021.
If social security and provident fund are paid according to the actual salary of employees, the total amounts that Weikang Medical needs to pay in 2018 to 2020 will be RMB 10.5442 million, RMB 10.489 million and RMB 3.6419 million, respectively, accounting for 12.59%, 12.99% and 5.74% of the total profits in the same period.
Liu Chunliang explained that Weikang Medical has new employees all year round, and the employees voluntarily gave up.
It is well known that companies must pay social security regardless of whether employees are voluntarily or not, which obviously violates relevant laws.
guarantees the legitimate rights and interests of employees and is the value basis for the growth and stability of the enterprise. If the foundation is not solid, how can we talk about growth and stability?
What is even more eye-catching is that Weikang Medical's dividends are extremely generous.
In 2020, a total of 150 million yuan of cash dividends were distributed to shareholders, while the net cash flow of operating activities in that year was less than 100 million yuan, and the attributable net profit was only 69.0439 million yuan, and even the net profit from 2018 to 2020 was less than 200 million yuan.
Another decision was made to pay a dividend of 54 million yuan in 2021.
It is worth noting that at present, Liu Chunliang and his daughter have directly and indirectly controlled the company's 100% equity .
While sharing dividends before listing, IPO funds raised will cost money. Is it short of money? How sincere is there to go public?
also has some sincerity considerations. The prospectus shows that on January 2, 2021, the company decided to peel off the wholly-owned subsidiary Yiao Building Materials and rename it Jiangsu Shengfan.
Weikang Medical said that the factory buildings of No. 89, Wangmi Street, High-tech Zone and No. 318 Guxiang Road, Xukou Town, Wuzhong District were basically idle or rented out during the reporting period and were not used for the company's production and operation; the 8th floor of Building 8, Shishan Tianjie Life Plaza, Suzhou High-tech Zone is the office space of the company Suzhou , with a large per capita use area and a low operating utilization rate. In order to improve asset utilization efficiency and focus on main business, Yiao Building Materials has been separated from the body.
playfulness is to focus on its fundraising purposes, and 368 million yuan is used to build a new project for the annual production of 11.5 million ultra-slip antibacterial silicone catheters, an annual production of 48 million suction tubes, a new project for the 10 million drainage bags, a construction project for the medical polymer material R&D center, and a medical device marketing network project. That is, it contains the money to build a factory.
Step back, no matter whether it is idle or rented out, or the office utilization rate is low, it is at least an asset, and even if you collect rent, it is very good. Why should you dive it?
06
There is no market for fishing in troubled waters
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Frankly speaking, IPO is a show of strength and sincerity.
Under the spotlight, there is no market for fishermen who are snatching the waters. Success or failure, there have been a foreshadowing.
can be found that Heze Pharmaceutical and Weikang Medical have both "stumbling blocks" internally and externally, such as insufficient R&D, weak comprehensive competitiveness, and strong enemies.
21 In the first half of 2021, biopharmaceutical listed companies on the Science and Technology Innovation Board continued to increase R&D investment, with a total R&D investment of 5.079 billion yuan, an increase of 50% from 3.387 billion yuan in the same period last year.
In April this year, CSRC revised the "Guidelines for Evaluation of Science and Technology Innovation Attributes (Trial)" to further emphasize the positioning of the Science and Technology Innovation Board, put forward rigid requirements for the application projects of the Science and Technology Innovation Board, and the regulatory requirements have become increasingly strict.
rose to the entire A shares . Tonghuashun data shows that half of the chairman of a company with a market value of more than 400 billion yuan have a doctorate degree.
In addition to the increase in the number of IPO failures, the recent frequent breaks in the big meat lottery is also a clear signal: strictly controlling the listing threshold, strengthening the effect of good currency, advocating scientific content, and value investment are not just a saying.
In other words, whether it is IPO or listing, it is a value marathon and a value ironclad. Tests strength, and more tests sincerity and perseverance. How many more are there in
and Ze Pharmaceutical and Weikang Medical?
This article is original by Luocai
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