A few days ago, Eagle Pupil Technology-B (02251.HK) released its first financial report after listing, and its performance maintained a high growth trend, and the financial report was very eye-catching.
As the first AI medical imaging leader listed on 18A and as a player who obtained the first certificate of the same kind, Eagle Pupil Technology has always attracted the attention of the capital market. The market does not doubt that the future AI medical leader will subvert the competitive landscape and medical imaging technology, but continues to observe when the market will break out.
As the most representative player, Eagle Pupil Technology's development path is the most important observation window.
One or three key financial indicators: indicate a new inflection point in growth
From the financial report, we can judge the stage of development of Eagle Pupil Technology through three key financial indicators:
1. The growth rate of income has reached a new level
According to the annual report, in 2021, Eagle Pupil Technology achieved revenue of 115 million yuan, an increase of 142% year-on-year, and gross profit of 70.24 million yuan, an increase of 141% year-on-year. Behind the explosive growth rate is the acceleration of the commercialization process. Compared with 2020, the number of customers of Eagle Pupil Technology in 2021 nearly tripled to 244, while the number of customers in 2020 increased by nearly 100% compared with 2019 - which means that the growth of the number of customers has repeatedly accelerated. On the basis of rapid customer acquisition, the number of service outlets has also increased significantly. Approximately 2,000 to 3,000 service outlets used Eagle Pupil's SaMD diagnostic products and health risk assessment solutions on a daily basis during the Reporting Period.
It is worth noting that although the calculated average single test charge has increased, according to Eagle Pupil Technology's statement at the performance meeting, the range of the guiding price has not changed, which may only be due to the change in the average price due to the change in the proportion of different types of tests. That is to say, Eagle Pupil Technology did not deliberately raise prices, and the fundamental reason for revenue growth was the accelerated landing of commercialization, which brought about explosive growth in the number of customers and the number of outlets. It can be said that the growth of Eagle Pupil Technology is high-quality and sustainable.
2. Research and development is accelerated, and another certificate is obtained
During the reporting period, Eagle Pupil Technology continued to increase its R&D investment, with R&D expenditure increasing by 52% year-on-year to RMB64.27 million, achieving outstanding results in both software and hardware.
On the software side, Eagle Pupil Technology continues to develop optimized algorithm models, and now has more than 80 self-developed deep learning algorithms for diseases and lesions. Its core product, Airdoc-AIFUNDUS (2.0), has started multi-center clinical trials in November 2021 and plans to apply to the State Food and Drug Administration for registration approval for new indications in the second quarter of 2022. In January this year, its cataract detection SaMD has obtained the Shanghai Municipal Food and Drug Administration's Class II medical device registration certificate. In addition, during the reporting period, Eagle Pupil Technology, together with the Clinical Research Institute of Peking University, the Zhongshan Eye Center of Sun Yat-sen University, and the Beijing Tsinghua Changgeng Hospital, released a number of important research results in Science Bulletin, Lancet, and Nature series of journals Science Report. On the hardware side, its self-developed portable fundus camera was approved as a Class II medical device certificate in March last year, which can be widely used in medical institutions and big health scenarios, which also lays a solid foundation for further improving the penetration rate of its AI software solutions.
3. Sales expenses and projected revenue increased significantly
It is worth noting that another indicator points to the fact that Eagle Pupil Technology is vigorously strengthening its commercialization efforts - in 2021, Eagle Pupil Technology's sales expenditure will be 0.73 billion yuan, a substantial increase of 181% year-on-year. The company has established an internal sales and marketing team of 156 members.
The revenue profile for 2021 does not fully account for the results of commercialization, as under accounting standards, contracts signed recognize revenue in a certain proportion of completion, i.e. not all of it is recognized as revenue in the current year. This indicator in the annual report is more illustrative of the input-output ratio of sales expenses – the total transaction price allocated to unfulfilled performance obligations as of 2021 was 26.21 million yuan, a significant increase of 1.6 times compared with the same period last year. Management expects that the majority of the transaction prices allocated to unexecuted contracts will be recognized within three years from the end of the year.
The author will mention below that standing at the time point of 2021, the business of various sectors has made new breakthroughs, and the marketing team needs to expand to cooperate with the capture of market opportunities. From the sharp rise in marketing expenses, we can expect a drastic attack by Eagle Pupil Technology.
Second, two major growth poles: construct a new growth curve
From the above-mentioned allocation to the transaction price of the uncompleted performance obligation, the future revenue growth of Eagle Pupil Technology is more certain. But this figure represents a contract signed in the past.
How to look at the future of Eagle Pupil Technology from the current point in time?
Looking back at the past year, the main application scenarios of Eagle Pupil Technology are mainly composed of two parts: medical institutions and big health scenarios. Revenue from the big health scene was about 80.4 million yuan, an increase of 241% year-on-year, and still maintained a high growth trend. Revenue from medical institutions increased by 48% year-on-year to CNY 33.8 million. Although the company's core product Airdoc-AIFUNDUS (1.0) will start commercialization in 2021, the time will still be relatively short, mainly sold to medical institutions such as hospitals, community clinics and medical examination centers, and its revenue contribution is relatively small, but its revenue growth rate is very strong and continues to grow.
In 2022, Eagle Pupil Technology will continue to accelerate the penetration rate in the big health scene; the hospital scene has made a key breakthrough; in addition, a new growth pole was born - the strong demand for eye health management has gradually become prominent, and with the strong support of the government, the business will face more business opportunities.
1. The price catalog landed, and the medical scene ushered in a key turning point
2020 Eagle Pupil Technology is a new starting point. In this year, the establishment of relevant standard regulatory processes has officially pointed out a clear path for the commercialization of AI medical devices from the policy and supervision, and removed the biggest obstacle for AI medical imaging products to enter the hospital market. In the same year, Airdoc-AIFUNDUS (1.0), the core product of Eagle Pupil Technology, obtained the Third Class Medical Device Certificate. In addition, the China Guidelines for the Prevention and Treatment of Type 2 Diabetes (2020 Edition) lists AI diabetic retinopathy screening software as an effective solution to assist in the diagnosis of diabetic retinopathy, and recommends the use of AI medical devices approved by the State Food and Drug Administration for early detection and assisted diagnosis.
But for the hospital side, that's not enough. Due to the nature of the medical system, hospital channels are strictly regulated, and a new medical project to enter a public hospital needs to obtain regulatory approval first, and the hospital can charge patients separately for related medical services under pricing guidelines.
To this end, Eagle Pupil Technology continues to assist hospitals in obtaining relevant pricing guidelines and making a breakthrough in 2021 – local government authorities in Hebei, Shandong, Shanxi, Anhui and Jiangsu have issued pricing guidelines for the analysis of a large number of population fundus imaging. Airdoc-AIFUNDUS (1.0) is available as a fee-based item in these locations. According to the annual report, Eagle Pupil Technology is assisting hospitals in Beijing to apply for pricing guidelines and plans to assist hospitals in four other provinces to apply for pricing guidelines in the second quarter of 2022.
In 2021, the number of hospitals covered by Airdoc-AIFUNDUS (1.0) is growing rapidly, including 41 hospitals and 36 community clinics. Although Airdoc-AIFUNDUS (1.0) has not long entered the hospital side, and its revenue contribution in 2021 is relatively small, it has maintained a very rapid momentum in terms of growth rate. In the future, with the pricing guidance landing in more provinces, the penetration rate of the product in the medical scene will gradually increase, and it is believed that this part of the business will continue to achieve solid and stable revenue growth.
2. Extension of application scenarios to develop the business map of eye health management
In the process of commercialization, Eagle Pupil Technology has gradually tapped out a potential application scenario - eye health management.
AI technology has great potential for application to eye health management, and can effectively empower related scenarios to provide more professional eye health services. For example, hospital ophthalmology departments or eye hospitals, optometry centers, pharmaceutical factories and primary medical institutions are very eager to find partners who can provide solutions for the prevention and treatment of myopia in adolescents, which is one of the livelihood projects that many local governments are focusing on. During the reporting period, Eagle Pupil Technology won the Beijing Dongcheng District Project, and the company will assist beijing Dongcheng District to establish a smart eye health management platform to carry out eye health management and continuous monitoring of primary and secondary school students in Dongcheng District.
According to the annual report, Eagle Pupil Technology will upgrade eye health management to a business level juxtaposed with medical institutions and big health scenarios, and in the future, medical scenarios will cover the needs of in-hospital diagnosis, big health scenarios will cover the needs of chronic disease management, and eye health scenarios will cover eye health management and other needs, these three plates together constitute the three core business lines of Eagle Pupil Technology. A new growth curve for Eagle Pupil Technology is taking shape.
A definitive dividend: promote equity in medical resources
As Zhang Dalei, chairman of the board of directors at this performance meeting, said: "The distribution of domestic health service resources is uneven, the number of basic chronic diseases is increasing, and eye health management needs professional empowerment, so we still have a lot of market space to explore and play." ”
In recent years, the industry has frequently ushered in policy dividends, and the AI medical imaging track has entered a golden period of rapid development. The state has issued policies such as the "14th Five-Year Plan for Eye Health". In the "Planning", the diagnosis and treatment of fundus diseases and their long-term management have become a new focus. Combined with the "Thousand Counties Project" policy previously released, the management of the fundus chronic disease system has gradually penetrated to the grass-roots level, which is expected to release the demand for ophthalmic medical imaging AI services from the grass-roots level and open the ceiling of industry growth. In addition, the policy will also provide strong support in terms of talent and funds.
In this context, As an industry leader, Eagle Pupil Technology is likely to become the most beneficial player.
Eagle Pupil Technology's Airdoc-AIFUNDUS (1.0), a SaMD used to assist in the diagnosis of diabetic retinopathy, was approved as a Class III medical device by the State Food and Drug Administration in August 2020, which is the first certificate of its kind. In addition to being approved first, Eagle Pupil Technology also took the lead in commercialization, promoting the exploration and breakthrough of multiple scenarios. Under the first-mover advantage, the market share of Eagle Pupil Technology will exceed 60% in 2020, and the leading position is outstanding.
At present, Eagle Pupil Technology has created a very competitive product pipeline. The core product is the Airdoc-AIFUNDUS series products. In addition to Airdoc-AIFUNDUS (1.0), the 2.0 product is expected to become the first AI-assisted diagnostic SaMD in China that can cover a wide range of approved indications, aiming to assist in the diagnosis of hypertensive retinopathy, retinal vein obstruction and age-related macular degeneration. In addition, 3.0 products are designed to assist in the diagnosis of pathological myopia and retinal detachment during the development process.
The company is also one of the few solution providers in the industry that integrates hardware, software, algorithms and services. The introduction of the fundus camera solution can not only achieve greater compatibility and integration with the software, optimize the software algorithm, but also solve the problem of low equipment output and high price on the current market.
In addition, Eagle Pupil Technology has an industry-leading database. In terms of quantity, Eagle Pupil Technology has accumulated a comprehensive, massive and diversified retinal image database, containing about 3.7 million complete real-world retinal images and corresponding multimodal data; from the perspective of quality, the image data has been marked by senior medical experts, and can be guided by actual clinical needs and treated according to diseases and lesions. The database will become the "fuel" of research and development, and become the basis for more product development and landing.
The greatest value of medical AI is to optimize medical resources and promote medical fairness, so as to alleviate the dilemma of insufficient doctors at the grass-roots level, improve the accuracy and efficiency of testing, and reduce costs and costs. This is highly consistent with the direction of national policy support.
The wind of policy has come, is the spring of the AI medical imaging industry still far away?
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