(Report Producer/Author: Huatai Securities, Dai Wen, Shen Luqing)
The interventional cardiovascular device market will see strong growth
Interventional therapies for chronic diseases in China are still in their early stages of development. We expect a significant increase in the penetration of interventional equipment for chronic disease management in China, driven by structural changes in 1) an aging population and lifestyle changes that lead to an increase in the incidence of chronic diseases, 2) a gradual increase in patient affordability and medical expenditure, 3) rapid technological development and upgrading, and 4) government policy support.
Coronary artery disease (CAD)
Coronary artery disease: one of the main classifications of cardiovascular disease.
There are four main categories of CVD: 1) coronary heart disease (CHD, also known as coronary artery disease CAD); 2) stroke and transient ischemic attack (TIAS); 3) peripheral arterial disease (PAD); and 4) aortic disease. According to Frost & Sullivan, coronary arteries characterized by narrowing or blocking of the coronary arteries are the most common type of disease caused by atherosclerosis, which has a high incidence and mortality rate. The dynamic nature of CAD-based results in different clinical presentations and can also be divided into two subcategories: acute coronary syndrome (ACS) or chronic coronary syndrome (CCS).
The pool of CAD patients in China is large. According to Frost & Sullivan, the number of CAD patients in China increased from 22 million to 24.6 million (CAGR: 2.8%) between 2015 and 2019, and the patient pool is expected to expand to 28 million by 2024E.
Percutaneous coronary interventional surgery (PCI): Currently the dominant treatment for coronary artery disease. Among the four main treatments for CAD, drug therapy, coronary artery bypass grafting (CABG), percutaneous coronary intervention (PCI) and stem cell transplantation, PCI is currently the mainstream treatment recommended by doctors because: 1) patients have a short hospital stay and fast postoperative recovery; 2) they are relatively low in price and cost-effective; and 3) they can prevent CAD from progressing to a severe stage. Compared with China and other developed countries, the penetration rate of PCI surgery is quite different. According to Frost & Sullivan, in 2019, approximately 2,951 PCI procedures per million people were performed in the United States, compared to only 729 PCI procedures per million people in China. Therefore, we believe there is ample market potential for stents used in PCI surgery in China, and we expect to maintain a 1.6% CAGR in this market revenue in 2020E-2030E(compared to 11.2% CAGR 2016-2020E) taking into account the nationwide collection of drug-eluted stents in 2021.
The Evolution of PCI Therapies: Technology Upgrades Gradually Eliminate Product Drawbacks. PCI development in China has gone through four stages, from the early percutaneous angioplasty balloon (PTA balloon) to the latest biodegradable stent. The world's first biodegradable support began commercialization in 2019 and offers significant advantages over previous stents used in PCI surgeries.
BRS: PCI Therapy's next opportunity product. Frost & Sullivan expects the Chinese BRS market to reach RMB6.6 billion by 2030E (CAGR 37.4% from 2020 to 2030E) because: 1) there is sufficient radial support after surgery; 2) no interference with X-rays, CT and MRI; 3) it can be absorbed by the body within 2-3 years; and 4) it does not require long-term anticoagulant drug therapy.
hypertension
Hypertension is a high-risk factor for cardiovascular disease and is an important cause of the onset and death of cardiovascular disease (complications can include stroke, heart attack, heart failure, kidney damage, etc.). There are three subtypes of hypertension: controllable hypertension, uncontrolled hypertension (UH), and refractory hypertension (RH). While most cases of hypertension can be controlled through medication and lifestyle changes, people with stubborn hypertension (according to Frost & Sullivan, 15/13% of the entire Chinese/Japanese hypertensive population in 2020E) are in dire need of medical advances because their blood pressure cannot be effectively controlled even with maximum medical treatment.
The number of patients in China and Japan is relatively large. According to Frost & Sullivan, the number of people with hypertension in China steadily rose from 2.899 million to 3.174 million (CAGR: 2.3%) between 2015 and 2019, and is expected to reach 388 million by 2030. In Japan, the number of people with hypertension rose from 37.7 million to 40.1 million (CAGR: 1.7%) between 2015 and 2019, and is expected to reach 42.4 million by 2030. In these hypertensive cases in both countries, the prevalence of RH did not fluctuate over time, but was heavily influenced by age and genetic factors. At the same time, due to the improvement of diagnosis rates, lifestyle changes and other reasons, the prevalence of UH is also gradually increasing.
The main treatment for high blood pressure. According to the Chinese Hypertension Health Management Code (2019 Edition) and the China Guidelines for the Prevention and Treatment of Hypertension (2018 Edition), there are three main therapies for the management of hypertension in blood group: lifestyle interventions, medications, and intervention therapies (such as RDNs).
Advantages of RDN over traditional pharmacotherapy. At present, drug therapy is still the main treatment for uncontrolled hypertension, but it has many disadvantages, such as the need for long-term medication, many side effects, poor patient compliance with doctor's prescriptions, and inability to cure refractory hypertension. According to Frost & Sullivan, about half of UH/RH patients stop taking their medications within a year without doctor's permission, while about 20 percent of UH/RH patients don't follow prescriptions from the start. RDN has the following advantages in alternative traditional drug therapy: 1) there is no patient medication compliance problem; 2) it is safer, avoids side effects on liver and kidney function, and does not harm women who are trying to conceive; 3) is long-term effective, no drug resistance problems; 4) reduces blood pressure throughout the day, and there is no fluctuation in drug concentration.
The development of RDN is entering a golden window. Medtronic began the development of the RDN following the acquisition of Ardian, a private company. Two earlier proof-of-concept trials (HTN-1 and HTN-2) have shown preliminary safety and efficacy demonstrations, while Symplicity HTN-3 has failed to meet its primary and secondary efficacy endpoints.
After disappointing trial results, the major RDN market players at the time suspended their RDN development. However, Medtronic failed primarily due to the design of clinical trials, rather than to the RDN technology itself (according to PubMed). Medtronic has since improved the design of the experiment and has now disclosed encouraging efficacy and safety data from the OFF-MED prospective trial: the trial achieved the primary endpoint for changes in flow systolic blood pressure (SBP) at three months, with a 4.7 mmHg decrease in 24-hour SBP compared to baseline. In addition, the latest 3-year data from the Global Symplicity Registry (GSR) showed a clinically significant decrease in blood pressure in patients with concurrency hypertension: -16.7 mmHg, P<0.05 compared to baseline.
Medtronics' Symplicity Spyral RDN system received "Breakthrough Device Certification" from the U.S. Food and Drug Administration (FDA) in March 2020, and in December 2020, two other manufacturers' RDN products (Recor Medical's Paradise Ultrasound Renal Nerve Blocking System and SoniVie's Therapeutic Intra-Vascular). Ultrasound Systems) also received this certification. All of this has prompted the market to rekindle confidence in the technology.
Good market pattern, high barriers to entry
We are optimistic about the domestic BRS and RDN tracks, considering their high barriers to entry and limited market participants. High barriers to entry can bring potential benefits in the future, such as less likely national pooling risk and higher pricing power.
1) The successful rollout and commercialization of BRS requires: 1) accumulated industry expertise and advanced technology in product design and manufacturing; 2) the ability to conduct effective market education and promotion; 3) to provide a one-stop solution that covers all steps in the operation (such as PCI); and 4) strict government regulation and policy. Among these requirements that will have an impact on the successful marketing of BRS, we believe that longer follow-up periods and large patient data in clinical trials are the most important factors in establishing high barriers to entry in this track. Stringent regulatory and clinical requirements make the entire R&D process expensive in time and capital, making it impossible for potential entrants to easily enter this market.
2) Successful launch of RDN products requires: 1) accumulated industry technology and expertise; 2) correct clinical trial design and smooth progress; 3) the ability to conduct effective market education and promotion. Among the above requirements for successful commercialization of RDNs, we believe that the design of RDN products is the most important.
In summary, brs and RDN development requires not only talent with interdisciplinary knowledge, but also ongoing, significant capital and time investment. Therefore, we are optimistic that BRS and RDN products will enjoy relatively good market prospects after they are officially launched.
The risk of collection is small
We believe that the impact of national collection on B&S BRS and RDN products is limited. The collection is a continuous medical reform policy launched by the Chinese government, and the government will pilot the collection policy for high-value consumables with large clinical consumption, high procurement amount, mature clinical use, and mature market pattern (with multiple market participants). However, we believe that BRS and RDN are less likely to be targeted for national procurement in the short term, mainly because: 1) both products still need complex and lengthy clinical trial/follow-up periods for validation; 2) their product technologies are more advanced globally; 3) the number of industry players is small; and 4) the development of both products is still at a relatively early stage globally. As a result, we believe that the impact of national collection on BRS and RDN products is limited. (Source: Future Think Tank)
BaiXinan: A leading provider of interventional cardiovascular equipment
Bai Xin An: China's leading innovative interventional cardiovascular device company. Founded in 2014, B&P&N is an innovative medical device company focused on developing BRS and RDN-related products to address unmet medical needs in the markets for coronary artery disease and uncontrolled/refractory high blood pressure. The company's mission is to lead high-quality medical care through innovation. The company does not currently have commercial products, but there are two candidates with great potential in its R&D pipeline, both of which we expect to achieve commercialization in 2023: brs bioheart®, a second-generation fully degradable scaffold product, and Iberis® 2nd, a second-generation RDN product, both of which were developed independently by Bioshin.
Pipeline: A comprehensive portfolio of interventional cardiovascular devices. Baixinan's current product line covers BRS, RDN and balloon catheters to meet the unmet treatment needs of Chinese patients and the clinical needs of doctors. Among the BRS products, the company's products under development include the Bioheart® BRS system (for coronary artery disease), the Bio-LeapTM sub-knee BRS system (for peripheral vascular disease) and the bioheart UltraTM (for coronary artery disease) with an ultra-thin stent wall. The company currently has an RDN product under development: the Iberis® 2nd RND system. However, the development of RDNs is still in its early stages on a global scale. The company also has a balloon dilation catheter product line (including 5 varieties under development), which complements the current BRS product pipeline.
Strategy: Facilitate further imagination. At this stage, B&S's strategy focuses on developing and expanding its R&D pipeline, production capabilities and commercialization capabilities. In the future, the company will implement a more detailed strategy, including: 1) rapidly promote the clinical development and commercialization of late-stage clinical products; 2) further improve R&D capabilities and expand product portfolio; 3) expand production capabilities and establish its own commercialization team; 4) expand geographical coverage and global bases; and 5) actively seek external cooperation, strategic investment and acquisition opportunities. Based on the above strategy, we are optimistic that the company will soon enter the fast lane of development, releasing more possibilities in terms of pipeline expansion and acquisitions. (Source: Future Think Tank)
Biodegradable stents: Benefit from a complete portfolio of alternative trends towards drug-eluting stents
We expect that by 2030, Bioxinan's biodegradable pipeline will contribute approximately RMB1.3 billion in sales, contributed by its three candidates: 1) The Bioheart® BRS system (which we expect to launch on 3Q23 and the 2030E is expected to contribute more than RMB430 million in sales revenue); 2) the Bio-LeapTM Under-the-Knee (BTK) BRS system ,which we expect to launch and contribute to sales revenue in 2025E-2026E, and forecast to over-contribute in 2030 $280 million in revenue; and 3) Bioheart UltraTM BRS system (which we expect to be available in 2027E-2028E and may contribute more than $570 million in sales revenue in 2030).
Bioheart® BRS system: or the first second-generation biodegradable scaffold product listed in China
The Bioheart® BRS system was approved for a single-center feasibility clinical trial in July 2016 and has now collected 30-day, 6-month, 1-year, and 2-year follow-up data, with 3-year follow-up data being collected (some of which are already available for reading). The Bioheart® BRS system is currently undergoing randomized controlled trials (RCTs) and we expect it to be available in 3Q23 and contribute more than RMB 430 million in sales revenue by 2030, based on:
1) Due to the degradability of biodegradable scaffolds, which has a significant substitution effect on drug-eluting scaffolds, we expect the proportion of BRS use to increase to 30% in 2030 year by year;
2) Due to the thinner wall of the stent, the second generation of biodegradable stent has obvious product advantages over the first generation of products;
3) Based on the domestic market has sufficient experience in PCI surgery, and Baixinan is also actively building its own commercialization team, considering the company or launching the first second-generation RDN product listed in China, we have a positive attitude towards the Bioheart® BRS system in terms of hospital access and assume that the market share will increase year by year until Bioheart UltraTM is listed in 2027;
4) We assume that Bioheart® enters Medicare in 2026 three years after going public (the average selling price/ASP decreases by 20% in 2026), and then as the competitive landscape matures, ASP will reduce its price by 5% year on year.
Biodegradable stents have obvious substitution effects on traditional stent products. We expect that by 2025, bio-fully degradable stents will replace the use of drug-eluting stents in PCI surgery and achieve an overall market share of about 25% in China. The significant substitution effect of BRS on DES is driven by the following ADVANTAGES BRS products: 1) patients do not need to take anticoagulants for life; 2) with subsequent degradation of stents, the occurrence of later adverse events will decrease; 3) it is easier to facilitate secondary intervention and surgical coronary artery bypass grafting; 4) coronary blood vessel recovery; 5) does not interfere with X-ray, CT, MRI examination; and 6) the company predicts that stent thickness is expected to reach the thickness of metal stents in the future.
Compared with the domestic counterparts of the biodegradable stent, the thinner Bioheart® BRS system has stronger comprehensive advantages. Compared with other domestic BRS products, Baixinan's second-generation biodegradable stent products have more comprehensive advantages in terms of efficacy and safety, including: 1) thinner stents while maintaining stronger radial support after surgery (Bioheart® BRS system: 125-145μm, 1.4N/mm; Lepu NeoVas: 170μm, 1.4N/mm; Huaan Xinsorb, 160μm, 1.1N/mm) 2) Ultrasonic directional spray technology controls the precise distribution of drugs for 90 days; 3) unique radiopaque marking ensures better visibility under X-rays after stent implantation; and 4) Balloon thin, low compliance, and efficient delivery system that transmits deployed thrust.
Current clinical data: Baixinan has more advantages over overseas products. Compared to Abbott's ABSORB data, the Bioheart® Biocompatible Scaffold System exhibited better efficacy and safety. According to the results of Abbott's THREE-year FOLLOW-up with ABSORB (Kereiakes DJ, Ellis SG, Metzger C, et al: the 3⁃year clinical outcomes with everolimus⁃eluting bioresorbable coronary scaffolds: the ABSORB III. trial in 2017), Abbott The candidates had a lesion failure rate (TLF) of 11.6%, compared to 8.70% in the three-year trial.
The first-mover advantage pushes Bioheart's Bioheart® to grab a considerable market share by 2030. With its significant first-mover advantage, we expect ThatB&S to occupy approximately 7% of the BRS market share in China in 2030 due to: 1) compared to the clinical progress of its second-generation BRS competitors, we believe that P&S is expected to become one of the first commercialized products in China, enabling it to enjoy and maintain a significant market share; 2) the market education for PCI surgery has matured, so it will accelerate the promotion of the product after the commercialization of Bioheart® BRS; and 3) The company is focusing on building a commercialization team and accumulating KOL resources in the industry.
Bioheart UltraTM: Uses ultra-thin brackets to form a competitive product pipeline
In addition to the Bioheart® Bio-Degradable Scaffold System, Bioheart UltraTM has also developed bioheart UltraTM, which is expected to be one of the thinnest biodegradable scaffolds on the market, complementing bioheart® BRS. Bioheart UltraTM is a second-generation BRS with very thin stents, less than 85 microns, but similar in structure, function, and surgical procedures to Bioheart®. The company has completed the product design of Bioheart UltraTM, which we expect to enter clinical trials in 2023 and begin commercialization in 2027E-2028E. We believe the successful launch of Bioheart UltraTM will help the company maintain its long-term market leadership in brs as BRS technology continues to evolve." We expect the product to contribute more than $570 million in sales revenue by 2030, mainly due to: 1) Bioheart UltraTM's market share gradually climbing to 6% in 2030; 2) the product will not be under the assumption of medical insurance by 2030, so as the ASP will remain stable.
Bio-LeapTM Biodegradable Scaffold System: Unlock new markets with indication expansion
Bio-LeapTM is a candidate for peripheral biodegradable stents developed in-house by the company, which combines BRS technology with drug spraying technology for peripheral arterial disease (LEAD) of the lower extremities. We expect the Bio-LeapTM BRS system to be available in 2025E-2026E and contribute more than $280 million in sales revenue in 2030 because: 1) China's PAD/LEAD patient pool is huge; 2) BRS is expected to gradually become lead's next hope therapy (market penetration is increasing year by year to 35% level in 2030); 3) because there is no commercial product under this indication, so the market competition pattern for this indication is relatively large Ideal (we assume that it captures 50% of the market share in the year of launch, and then gradually declines to 30% level in 2030 as the market competition intensifies; and 4) we assume that the product will enter Medicare in 2028 three years after it is on the market (ASP will drop by 20%).
Pad/LEAD patient populations are large and still have plenty of room for penetration. According to Frost & Sullivan, the prevalence of peripheral arterial disease (PAD) in China has increased from 44.8 million in 2015 to 49.5 million in 2019 (CAGR: 2.5%). Approximately 80% of patients with PAD are LED patients. In addition, the number of PAD patients is expected to reach 62.3 million (2020-2030E CAGR: 2.1%) in 2030.
BRS is expected to be the next promising treatment for LEAD. There are four main treatments for LEAD: lifestyle changes, medication, minimally invasive treatment, and open surgery. Among them, percutaneous intraluminal angioplasty (PTA) has become one of the mainstream interventional treatments; however, it has some disadvantages, such as high postoperative restenosis due to retraction and hyperplasia, and limited effectiveness in the treatment of hard plaque. As a result, these shortcomings leave a lot of room for the development of innovative therapies such as BRS. Although clinical data supporting BRS treatment is limited as it is still in its early stages of development, some potential benefits of BRS are expected to support it as the next mainstream therapy, including: 1) strong support to avoid re-narrowing; 2) drug coating to inhibit proliferation; 3) suitable for treating calcified lesions and arterial dissection; and 4) biodegradability, which does not leave anything in the patient after degradation.
The market pattern is ideal, and there are no commercial products in the domestic market. The development of BRS for LEAD indications is still in its early stages. According to Frost & Sullivan, there is no commercial BRS for the LEAD indication in the Chinese market, and Baixinan is one of the few companies with a candidate for a biodegradable scaffold system for the LEAD indication. In our view, there are only two foreseeable competitors under the LEAD indication (according to the company prospectus): Abbott (RCT is underway) and LifeTech (the first human feasibility test is underway), which gives Baixinan great potential to become a domestic pioneer for the LEAD indication (animal research is underway and we expect its launch date to be 2025-2026).
RDN: The forerunner of the Blue Ocean market in China and Japan
Iberis® 2nd promises to address the unmet treatment needs of patients with hypertension. We expect Iberis® 2nd (China, RCT in progress; Japan, feasibility study completed to launch RCT) to be available in 2Q23, with the product contributing more than RMB 3 billion in sales revenue in 2030, driven by:
1) Compared with other manufacturers' research renal artery ablation products, Iberis® 2nd has significant product design advantages (multiple electrodes and allows both transfemoral and transcoidial intervention methods);
2) In the new RDN era promoted by Medtronic RDN, the company faces a good competitive landscape and leading clinical progress;
3) The use of relatively simple doctor and market education and Terumo cooperation, so that product sales are expected to climb rapidly;
4) Due to the innovation of RDN and the large patient base of UH/RH, we predict that the domestic penetration rate of RDN will be only 0.002% in 2023, and then gradually climb to 0.6% in 2030, while the Japanese market, with Medtronic's market preparation and Terumo's strong sales capabilities, we expect this market penetration to be 0.05% in 2025 (compared to 0.02% in China in the same period) and 0.55% by 2030 (slightly lower than 0.6% in China in the same period). Mainly due to the market education of many manufacturers in China in the later period, we expect China's long-term penetration rate to climb slightly faster than Japan'); and we predict that Iberis® 2nd is expected to gain 90% market share in China in 2023 with its first-mover advantage, and gradually decrease to 30% in 2030 as the market competition intensifies; and in the Japanese market, due to non-first-market products but with unique product design and Terumo as a strong backing, we predict that its market share will gradually increase from 15% in 2025 to 15% in 2025. Climb to 25% by 2030;
And 5) We expect Iberis® 2nd to enter Medicare three years after listing in China, and ASP to reduce its price by 30% in 2026; in the Japanese market, we expect it to remain at the same price as in China after the 2025E listing.
Create a competitive advantage through unique product design
Compared to other renal artery ablation products under investigation, Iberis® 2nd has clear design advantages. The Iberis® 2nd is the only RDN product in the world with multiple electrodes that allows transfemoral and transrelateral interventions. Key features of the Iberis® 2nd include: 1) a spiral-shaped ablation catheter tip to ensure a fit to the blood vessels; 2) 6F catheter sheath size to better fit the different openings of the renal artery; 3) ablation of the aortic artery and its branches; and 4) multi-electrode design (4 electrodes).
Among these features, the multi-electrode design makes ablation more efficient (the total treatment time per kidney is less than 20 minutes), reducing the time doctor and patient are exposed to radiation during surgery. In addition, the multi-electrode design makes the ablation position uniform, reducing the influence of single electrodes on the final surgical outcome due to the doctor's reliance on experience and feel. For patients, RDN surgery is more minimally invasive, meaning fewer complications and faster postoperative recovery. Iberis® 2nd also allows doctors to choose between transfemoral and transvascular intervention (most currently RDNs are femoral arterial interventions, and the radial approach, although longer in the path, is less invasive and recovers faster after surgery), which gives doctors more flexibility to determine a more appropriate solution for the patient.
RDN gained recognition and achieved a first-mover advantage in China and Japan
RDN's global R&D opens a window of hope. The failure of Medtronic's HTN-3 trial has affected the confidence of researchers and physicians in RDN technology. However, as trial designs improve, Medtronic's key trials have received encouraging data and FDA certification as "breakthrough therapies," reigniting market attention. RDN has become a rising star in the treatment of hypertension.
There is no good market structure for commercial counterparts. Currently, there are no commercial RDN products in both markets, and there are currently four/three RF ablation candidates in the clinical stage in each of the Chinese and Japanese markets. We expect the Iberis® 2nd to be the first to be commercialized among only four RF ablation products under development in the country. In China, major contenders include Medtronic (ON-MED: RCT in progress), Megley Wesleyan (RCT in progress) and Shinmai (RCT in progress). In Japan, major contenders include Medtronic and Otsuka-ReCor (RCT in progress). Although Iberis® 2nd's brand awareness is not comparable to that of global giant Medtronic, the design advantages of Iberis® 2nd and the support of Terumo will ensure its share of the global market.
Market education is much easier due to the simple surgical steps. Based on easier market education than other highly innovative procedures such as transcatheter aortic valve replacement TAVR, we expect Iberis® 2nd to achieve approximately 30%/25% market share in China and Japan by 2030E. RDN is one of the most cutting-edge treatments in the world, but the surgical steps are relatively simple, the surgical steps are similar to the traditional percutaneous coronary interventional surgery, and the doctor can operate independently after three times of guidance, which means that the doctor's learning curve will improve more quickly.
Enter the global marketplace with a strategic alliance with Terumo
Commercialization alliances are good for global penetration, and we believe that by 2030E we can account for a significant position in global sales. B&S will leverage Terumo's proven platform for global distribution after the launch of Iberis® 2nd. Terumo (ticker code: 4543 JP) is a medical device manufacturer listed on the Tokyo Stock Exchange. It has a broad portfolio of products covering cardiovascular solutions, blood transfusions and cell therapies. Terumo currently controls approximately 24.31 percent of Anton, a subsidiary of Baixinan Holdings. With its global distribution network in more than 160 countries, Terumo will be responsible for Iberis® 2nd's overseas sales and overseas registrations, primarily in Japan (preparing to launch randomized controlled trials) and Europe (ceblazoned).
Balloon catheter product candidate
Biocenter's R&D pipeline also includes five candidate balloon catheters that will provide a complete solution for the implantation of biodegradable stents. These candidates include: 1) Bioheart® balloon dilation catheter and Bioheart® high-pressure balloon dilation catheter designed for stent unfolding during pre- and post-dilation (we expect it to be available in 2022E-2023E, exempt from clinical trials), and 2) three Bioheart® pulse balloon dilation catheters (animal testing) for removal of coronary artery calcification (CAC), peripheral vascular calcification (PVC) and aortic valve calcification (AVC). We think these three products are likely to be one of the first to be launched in China.
Balloon dilation catheter: synergistic with fully degradable stent lines. Two balloon dilation catheters (which we expect to be available in 2022-2023, exempt from clinical trials) are Class III medical devices that are used to expand narrow openings or pathways in patients to increase blood flow through the myocardium. It is also used in PCI surgery to ensure successful stent implantation, thus forming synergy with fully degradable stent products.
Pulse balloon expansion catheter: a potential first-tier player in the domestic market vacancy. The Ongoing Development of the Permain Pulse Balloon Dilation Catheter is the use of sound pressure waves in endovascular lithotripsy (IVL) to remove vascular calcification (VC). Since there is currently no recognized standard for the treatment of VC, current primary treatments include aneurysm resection and endovascular lithotripsy. Pulsed balloon catheter therapy IVL has several advantages over other VC treatments: it is safer, more effective, and easier to use. We expect pulse balloon expansion candidates (all in animal trials) for CAC, PVC and AVC indications to be available in 2025, 2025-2026 and 2027-2028, respectively, with great potential to become a domestic market pioneer. Since pulse balloon catheters have not yet entered the clinical trial stage in China, the competition pattern in China is good. This leaves Baixinan with an untapped market and a large space for growth.
Visionary management
Led by Founder and CEO Li Wang, who has over 25 years of experience in the cardiovascular interventional medical device industry, B&S has a visionary and experienced management team with over 10 years of industry expertise and a proven entrepreneurial and technical background. The team includes: 1) CEO Mr. Wang Li, who has served as the senior manager of other leading medical device companies, including MicroPort, Yisheng Technology, and Shanghai 300326. SZ); 2) Chief Financial Officer Mr. Wang Yunling, with over 15 years of accounting, finance and investment experience in the healthcare industry and capital markets, and 3) Chief Medical Officer Bradley Stewart Hubbard, with over 25 years of experience in the medical device industry, has served at Gateway Medical, Lychron and Guidant Corporation.
Boutique R&D team empowers future innovation
We are optimistic that B&Ard's R&D team has in-depth industry knowledge and a global perspective. Tao Xiansheng Cai, Head of Full Degradation Stent Technology, is an expert in the field of 3D printing with more than 8 years of industry experience. Mr. Chenchao Zhang, Head of Technology at RDN, is a catheter technology expert with over 10 years of industry experience. B&S currently holds 11 Bioheart® patents and 9 Iberis® 2nd patents. In addition, he has published academic research in prestigious journals such as Circulation: Cardiovascular Interventions and Journal of Advanced Therapies and Medical Innovation Sciences.
Production planning: Laying a solid foundation for commercialization
Before the core products are commercialized, the production capacity is ready to go. By the end of 2021, Baixinan completed the renovation and construction of its new plant in the Zhangjiang High-Tech Park in Shanghai's Pudong District. A two-storey purification workshop in the plant (3,600 m² of workshop space) is already in use to ensure post-market production (annual capacity: RDN 90,000 pieces, BRS 280,000 pieces). Considering the core products to be launched in 2023, the company may consider adopting a hybrid production model, outsourcing part of the production to CMOs (contract production organizations) to ensure product supply.
In order to ensure the launch of products, commercialization preparations have been gradually implemented
The current commercialization preparations set P&S apart from its unprofitable peers: P&S does not yet have an internal sales and marketing team due to a lack of commercial products. However, Baixinan will implement a number of commercialization strategies to ensure the successful launch of its core products. In the domestic market, the company's commercialization efforts include: 1) establishing an internal marketing team covering most provinces and cities in China; 2) accumulating KOL and hospital resources at the clinical stage, actively discussing product candidates in research, conducting product demonstrations and training doctors; and 3) continuously participating in industry-related academic conferences. In the global market, the company will use its partnership with Telmo to expand its sales network.
Internal team building superimposes external academic accumulation to ensure the smooth implementation of products after domestic listing. We expect the company to establish an internal sales and marketing team in early 2022E, followed by the launch of its core products BRS and RDN in 2023. The KOLs and hospital resources accumulated from the clinical stage also indicate a successful market launch. Bio-heart is working with leading cardiovascular hospitals such as Beijing Fuwai Hospital, Beijing Anzhen Hospital and Shanghai Ruijin Hospital to conduct clinical trials of BRS and RDN products.
The company maintains close working relationships with renowned physicians to obtain relevant critical feedback on the research pipeline and to build a reputation in the academic field. The company also actively participates in academic conferences in the industry, such as the Coronary Multidisciplinary and Interventional Therapeutics Conference and the China Society of Inter-therapeutic Therapy. These will help improve the learning curve of doctors after the product is launched, and accumulate a certain brand awareness before the product is officially launched.
Work with strong partners to expand your overseas footprint. In overseas markets, B&S will also use its partnership with Terumo to ensure the commercialization of RDN. Terumo has a complete and mature sales network worldwide. This helps B&S to better understand the local market in foreign markets and alleviate some of the pressure of commercialization, so that it can focus more on production and research and development. In addition, the company is actively pursuing opportunities for external collaborations, strategic investments and acquisitions.
Build long-term shareholder relationships with reputable healthcare investors
Recognized by well-known medical investors. Baixinan went through four rounds of financing before the IPO. Key investors include specialty medical funds such as OrbiMed, Legend Capital, TPG and Loyal Valley Capital.
Financials and Forecasts
Revenue: Driven by the commercialization of Bioheart® and Iberis® 2nd
Considering that Bioheart Balloon Expansion Catheter and Bioheart High Pressure Balloon Expansion Catheter will be available in 2022, we are forecasting that the company will not produce any sales revenue in 2022. We predict that Byshin Will Achieve Revenue of RMB0/0.28/207 Million in 2021/2022/2023, mainly due to the Company's two core revenue contribution products to be listed on 2023E. We forecast that P&S' revenue growth will be driven by the following factors: 1) continued market penetration of second-generation BRS products and RDN products used in surgery; 2) successful launch of the company's Bioheart® and Iberis® second-generation products; and 3) maintaining market share after commercialization of major products.
Cost: R&D and sales expenses
R&D expenses: R&D expenses are the main expenditure of B&D, and we expect that R&D expenses will continue to grow based on the company's strategy of focusing on in-house development of products. The current R&D expenses mainly include testing expenses, employee welfare expenses, costs of raw materials and consumables used, depreciation expenses and others; R&D expenses in 2019/2020 are 0.22/246 million yuan, and we expect to grow steadily after that, reaching 2.65/2.79/284 million yuan in 2021E/2022E/2023E, respectively. In addition, the company's equity incentive expenses will be amortized between 2020 and 2023, so we expect a significant decline in R&D expenses in 2024.
Marketing expenses: The company does not have any sales and marketing expenses at this stage. However, we believe the company needs to build its internal sales and marketing teams at least a year before core products such as Bioheart® BRS and Iberis® 2nd go live, and needs to ramp up marketing efforts to ensure more market share. As a result, we expect the company to start incurring sales and marketing expenses in 2022 (0.00/0.25/0.43 million for 2021E/2022E/2023E).
In summary, we expect that Baixinan will achieve a net profit loss of 3.11/3.29/251 million yuan in 2021E-2023E, mainly due to marketing expenses and research and development expenses incurred before the product is launched. We expect that due to the increasing scale of the blockbuster BRS/RDN products after the launch, Baixinan will break even in 2025.
(This article is for informational purposes only and does not represent any of our investment advice.) For usage information, see the original report. ）
Featured report source: [Future Think Tank]. Future Think Tank - Official website