On average, a "guinea pig" sells more than 200, and the set of medicine Kang Chong Science and Technology Innovation Board, which has only been established for 4 years, has a high gross profit margin, and Hillhouse, Sequoia, and CDH have entered the shares

Reporter | Liu Xiaohan

Laboratory animals are the cornerstone of the development of modern life science research and play the role of human substitutes. Mice are the second mammal after humans to complete whole genome sequencing, its genome is highly homologous with humans, the regulatory mechanism of physiological biochemistry and growth and development is basically the same as that of humans, and it has the characteristics of strong reproductive ability, short generation cycle and low feeding cost, which is currently the most widely used experimental animal.

Not long ago, Jicui Pharmaceutical Kang, which sells experimental animals "guinea pigs", submitted a prospectus to the Shanghai Stock Exchange and applied for listing on the Science and Technology Innovation Board. Jicui Pharmaceutical Kang intends to issue 50 million shares, not exceeding 10% of the total share capital, and plans to raise 820 million yuan to expand the mouse breeding platform, according to this calculation, the valuation of the issue will reach 8.2 billion yuan.

Jicui Pharmaceutical Kang selected the first set of listing criteria for the Science and Technology Innovation Board: "The expected market value is not less than RMB1 billion, the net profit in the last two years is positive and the cumulative net profit is not less than RMB50 million, or the expected market value is not less than RMB 1 billion, and the net profit in the most recent year is positive and the operating income is not less than RMB 100 million." ”

The interface news reporter found that the mouse breeding industry of Jicui Pharmaceutical Kang, which was established in 2017, has an ultra-high gross profit margin, and the gross profit margin in 2020 has reached 71.46%, far exceeding most of its peers and even established businesses such as Nanmo Biology and Zhaoyan New Drugs. The revenue of Jicui Pharmaceutical Kang in 2020 reached 260 million yuan, an increase of 136.13% year-on-year.

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On the eve of the listing, a number of institutions invested in the shares, and the valuation doubled in 1 month

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Jicui Yaokang is a high-tech enterprise specializing in the research and development, production, sales and related technical services of experimental animal mouse models, and is a member of the Asian Mouse Mutation and Resource Alliance and a joint unit of the National Genetic Engineering Mouse Resource Bank recognized by the Ministry of Science and Technology.

The actual controller of the company, named Gao Xiang, is a doctor of developmental biology and anatomy at Thomas Jefferson University in the United States, which controls a total of 57.24% of the voting rights of the issuer's shares, and has a significant influence on matters such as the shareholders' meeting of Jicui Yaokang, the business policy involved in the board of directors, major decisions and the selection of major management.

Jicui Yaokang, which was only established in 2017, was jointly funded by Nanjing Laoyan, Biomedical Valley and Jiangsu Provincial Institute of Industry and Research, and both Biomedical Valley and Jiangsu Provincial Institute of Industry and Research are state-owned shares, with a total capital contribution ratio of 20% at the time of establishment. After several rounds of financing, the shareholder lineup of Jicui Pharmaceutical Kang not only includes state-owned shareholders such as Biomedical Valley, Jiangsu Provincial Institute of Industry and Research, Jiangbei New Area State-owned Assets and Industrial Fund (holding a total of 13.16%), but also favored by well-known institutions such as Sequoia Capital (holding 1.28%), CDH Capital (holding 6.27%), Hillhouse Capital (holding 3.49%).

Before the listing, in August 2020, seven institutional companies of Zhuhai Xunheng, Xi'an Taiming, Huibian Kanglai, Shanghai Yaocui, Chuangding Minghe, Shanghai Season and Industrial Fund increased their capital into Jicui Kangtai, and subscribed for the capital increase of Jicui Yaokang for a total of 313 million yuan of 1.16 million yuan, corresponding to 269.83 yuan per 1 yuan of registered capital, corresponding to a valuation of 3.130 billion yuan.

The listing of Jicui Pharmaceutical Kang intends to raise 820 million yuan and issue 50 million shares, not exceeding 10% of the total share capital, according to this estimate, the valuation has reached 8.2 billion yuan, more than two times.

According to the prospectus, from July to August 2020, Jicui Pharmaceutical Kang carried out a total of four equity transfers. On July 22, 2020, Biomedical Valley and State-owned Assets of Jiangbei New Area signed the Equity Transfer Agreement, stipulating that Biomedical Valley would transfer its 3.72% equity in Jicui Limited (corresponding to the capital contribution of 431,500 yuan of Jicui Limited) to State-owned Assets of Jiangbei New District at a price of 48.4273 million yuan, corresponding to 112.22 yuan per 1 yuan of registered capital, at this time the registered capital of a total of 11.6 million yuan, so as to estimate the valuation of 1.302 billion yuan at this time.

On August 7, 2020, jiangsu provincial institute of industry and research and Qingdao Sinopharm signed the "State-owned Property Rights Transfer Contract", stipulating that Jiangsu Provincial Institute of Industry and Research will transfer its 3.72% equity interest in Jicui Limited (corresponding to the capital contribution of 431,500 yuan of Jicui Limited) to Qingdao Sinopharm at a price of 116 million yuan, corresponding to 269.73 yuan per 1 yuan of registered capital, at this time the valuation is 3.129 billion yuan. After a month of difference, the valuation of Jicui Pharmaceutical Kang doubled.

<h3>Gross profit margin is unusually high, beyond the distance of peers</h3>

According to Frost &amp; Sullivan data, in the field of mouse model customization services, the domestic market size in 2019 was 430 million yuan; the four leading companies accounted for about 30.0% of the market share. Jicui Yaokang ranked third, with a model customization business revenue of 29.51 million yuan in 2019, accounting for 6.8% of the market.

In the field of customized breeding service market, the domestic market size in 2019 was 600 million yuan; the three head mouse enterprises of Bai O'Saytu, Nanmo Bio and Saiye Bio occupied about 22.9% of the market share. Among them, in 2019, the revenue scale of the business of Nanmo Bio was 0.61 billion yuan, accounting for 10.1% of the market, including breeding business and breeding business, ranking first; in 2019, the revenue scale of the customized breeding business of Jicui Yaokang was 45.38 million yuan, accounting for 7.5% of the market, all of which were customized breeding-related services, ranking second.

The sales customers of domestic laboratory mouse products and services are mainly divided into scientific research customers and industrial customers. Scientific research customers mainly include scientific research institutions and top three hospitals, and industrial customers mainly include innovative pharmaceutical companies and CRO research and development enterprises. For example, in 2020, the five major customers of Jicui Yaokang include Sun Yat-sen University, Nanjing University, Zhejiang University and other well-known universities, as well as Sino-US Crown Biotechnology (Taicang) Co., Ltd. and BeiGene (Beijing) Biotechnology Co., Ltd. During the reporting period, the sales proportion of the five major customers of Jicui Pharmaceutical Kang was not high, 31.51%, 23.40% and 18.93% respectively.

But surprisingly, there is a staggering gross margin behind a mouse model. According to the prospectus, from 2018 to 2020 (reporting period), the operating income of Jicui Yaokang was 53.2906 million yuan, 191 million yuan and 260 million yuan respectively, and after excluding the share payment, the sales gross profit margin of Jicui Yaokang in the reporting period reached the level of 68.24%, 66.62% and 74.16%.

The prospectus shows that the average unit price of each mouse model in the reporting period reached about 200 yuan, of which the average price of spotted mice exceeded 10,000, and the unit price of humanized mice in 2020 was nearly 2,000.

With Nanmo Bio (A20669.SH), Zhaoyan New Drug (603127. SH) and Charles River (CRL.N) had an average gross margin of 44.81%, 46.40% and 44.05% in the reporting period. At the same time, according to reports, the "Spotted Rat Plan" that began to be carried out on a large scale in 2019, and the gross profit margin of the product sales exceeded 90%.

The interface news reporter checked the 2020 financial report of Zhaoyan New Drug and found that the gross profit margin of Zhaoyan New Drug 51.38% includes three categories of drug preclinical research services, clinical services and other and experimental animal supply, while the gross profit margin of the experimental animal supply business is actually only 28.49%, and it is also down 49.33% from the previous year.

In contrast, how did Jicui Pharmaceutical Kang achieve a rising gross profit margin? The prospectus explains this as follows: the company's commercialized mouse model sales business is mainly invested in the creation and development of the early research and development stage, the relevant expenses are included in the research and development expenses, after the completion of the research and development of the strain, it is usually preserved in the form of live seed preservation or frozen genetic material, and the subsequent breeding and breeding costs are relatively low, so the gross profit margin level is relatively high, and the company's business revenue accounts for the largest proportion, making the company's main business gross profit margin higher than that of comparable companies in the same industry.

In addition, Jicui Pharmaceutical Kang included breeding rats and stock rats in productive biological assets and expendable biological assets respectively, included the expenditure on productive biological assets in management expenses, and included the impairment of expendable biological assets in asset impairment losses, which were not included in operating costs.

<h3>Government subsidies account for more than half of the net profit, what is the benefit of large-scale expansion? </h3>

According to the prospectus, at the end of each reporting period, the balance of the deferred income of Jicui Pharmaceutical Was 14.95 million yuan, 23.11 million yuan and 70.4036 million yuan respectively, and the cumulative amount accounted for 54.27% of the total profit during the reporting period, accounting for 100.00%, 95.55% and 92.05% of the non-current liabilities at the end of each period, all of which were composed of government subsidies. After deducting government subsidies, the net profit of Jicui Pharmaceutical Kang in the reporting period was -15.5855 million yuan, 8.3875 million yuan and 33.7556 million yuan, respectively.

The business structure of Jicui Pharmaceutical Co., Ltd. includes mouse model sales, customized breeding, functional efficacy, model customization and agent import and export business. According to the prospectus, the annual sales volume of mouse models is about 600,000, mainly involving immunodeficient mice, humanized mice that can be used for tumor efficacy research, and mouse disease models such as diabetes, atherosclerosis, and Alzheimer's disease.

However, it is worth noting that the experimental mice are live animals, and their production is mainly affected by the natural breeding of breeding rats, which is relatively rigid, and it is difficult to adjust the yield in real time according to the changes in the sales end. In 2020, the yield rate of Jicui Medicine and Health decreased from 82.89% to 75.18%.

In order to expand the industry, 820 million yuan of funds raised by Jicui Yaokang will be used to invest in the construction of the mouse breeding platform base. From this point of view, the breeding environment of mice is an extremely expensive thing, and the cost of decoration and equipment purchase alone is 259 million yuan. In addition, Jicui Yaokang also spent 258 million yuan on civil engineering, with a total investment of 517 million yuan, equivalent to nearly twice the revenue of Jicui Yaokang in 2020.

After the investment, it remains to be seen whether Jicui Pharmaceutical Kang can double its revenue. The prospectus discloses that the Nanjing Jiangbei New Area Health Office has proposed to provide the company with about 60 mu of industrial land as project land, and is expected to issue an announcement on the public transfer of state-owned land use rights for project land before December 2021.