Image source@Visual China
文 | 创业最前线，作者 | 段楠楠，编辑 | 冯羽
With the decline in the number of newborns year by year, the state has also begun to encourage and support childbirth. Assisted reproduction has been included in the "medical insurance" system in various places, and the industry has ushered in development opportunities.
In this context, on December 22, the assisted reproduction company Ivy Hospital Management Group Co., Ltd. (hereinafter referred to as "Aviave") submitted a prospectus to the Stock Exchange, planning to be listed on the main board of the Hong Kong Stock Exchange.
For Aviaf, in the context of not obtaining a third-generation license, the company's four hospitals can bring a stable income of about 400 million yuan to Avieve every year. But under the pressure of public hospitals, it is not easy for Avieve to expand.
This IPO is related to whether Aviaf can obtain a third-generation license. However, after the first two years of crazy speculation, capital is no longer keen on assisted reproduction companies, and the market value of Jinxin Reproduction, the "first stock of assisted reproduction", has fallen by more than 85% from the highest point. It remains to be seen whether the lessons learned from the industry's first stock will affect Aviaf's prospects.
The founder used to be an accountant, and Shenzhen Capital made a big bet
The essence of the so-called assisted reproduction is to allow infertile families to conceive normally and successfully give birth to a fetus. Assisted reproduction in China can be traced back to 1987, when Zheng Guizhen, a rural female teacher, was difficult to conceive because of blocked fallopian tubes.
With the help of obstetric expert Zhang Lizhu, Zheng Guizhen successfully cultivated the first test-tube baby in China, and Zhang Lizhu is also known as China's "mother of test-tube baby".
Avieve made it clear that in the process of the company's development, he was inspired and helped by Professor Zhang Lizhu. According to the prospectus, Aviaf was founded in 2006, and its founder, Ren Jizhong, did not work in the medical industry at first.
In 1988, Ren Jizhong graduated from Tianjin University of Finance and Economics (now known as Tianjin University of Finance and Economics) in China, majoring in accounting, and from 1992 to 1994, he worked in accounting and financial management in a construction company in Shenzhen. After resigning from the company, Ren served as general manager of an audio company until August 2006.
In September 2006, just one month after resigning from the audio company, Ren Jizhong founded Shenzhen Avi (the predecessor of Aviave).
Judging from Ren Jizhong's experience, he has not engaged in any medical-related work before engaging in assisted reproductive medicine. After resigning from the audio company, he suddenly founded an assisted reproductive medical company, and the change was not small.
After years of development, Aviaf has 4 hospitals, namely Zhanjiang Jiuhe Hospital, Tianjin Avi Hospital, Kunming Avi Hospital, and Jieyang Avi Hospital. These four hospitals can bring stable profitability and operating cash flow to the company every year.
Stable profitability has also attracted well-known investment institutions. On December 10, 2019, Shenzhen Capital Group, Nanshan Laterite Fund and Futian Laterite Fund controlled by Shenzhen Capital Group subscribed for a total of 5% of the registered capital of AVIEF, with a subscription amount of RMB 147 million. If this is calculated, the valuation of Avieve at this time is nearly 3 billion yuan.
After the subsequent capital reduction and reorganization, the shareholding ratio of Nanshan Laterite and Futian Laterite controlled by Shenzhen Capital Group has increased. Before the IPO, Shenzhen Capital Group directly held 1.92% of the equity of Aviaf, Nanshan Laterite held 4.60% of the equity of Ive, and Futian Laterite held 1.92% of the equity of Ive, with a total of 8.19% of the equity of Ive.
(Photo / Company structure after restructuring)
If the company can obtain a higher price in the capital market, it will undoubtedly be a greater benefit to Shenzhen Capital Group and its holding fund companies.
The growth of the market scale has stagnated, and "assisted reproduction" has been abandoned by capital
However, it is a little regrettable that after 2022, the assisted reproduction industry is no longer favored by capital. Assisted reproduction companies, including Aviaf, are showing signs of weakness, and it is unclear whether they will be able to obtain higher valuations.
Taking Jinxin Reproduction, the "first share of assisted reproduction", as an example, public information shows that Jinxin Reproduction was listed on the Hong Kong Stock Exchange on June 25, 2019, with a stock issue price of HK$8.54 per share and an issue market value of HK$24 billion.
In 2020, under the stimulus of the policy, the share price of Jinxin Fertility rose sharply. In 2021, Jinxin Fertility's share price hit a maximum of HK$24.29 per share, with a market value of more than HK$66 billion.
The good times did not last long, after 2021, the share price of Jinxin Fertility fell all the way, and as of December 29, 2023, the share price of Jinxin Fertility closed at HK$3.35 per share. In addition to the poor performance of the capital market, the net profit attributable to the parent of Jinxin Fertility in 2022 will also drop sharply by 64.36%.
Like Jinxin Reproduction, Aviave's performance will also decline in 2022.
According to the data, in 2022, the company will achieve revenue of 407 million yuan, a year-on-year decrease of 3.10%. In the same period, Avieve achieved a profit of 64.517 million yuan, a year-on-year decrease of 31.77%.
(Figure / Summary of Consolidated Income Statement)
As for the decline in the company's revenue, the explanation given by Avieve is that in 2022, under the influence of the epidemic, the number of outpatient visits will decrease, resulting in a decline in the company's revenue. In addition, due to the impact of administrative expenses and income tax deferral, Aviave's profit in 2022 fell by 31.77% year-on-year.
In the first half of 2023, as the epidemic subsided, Aviave's revenue and profit began to grow again. However, due to the shrinking scale of the industry, Aviaf's growth space may be limited.
Due to the accelerated pace of life, the number of infertility cases in the country has risen. According to Frost & Sullivan, the number of infertile couples in China increased from 55.4 million in 2018 to 56.7 million in 2022, and it is expected that the number of infertility cases in China will increase to 64.8 million by 2023.
It is worth noting that although the number of infertility patients in China is rising, the market penetration rate of assisted reproductive technology services is not high. According to the data, the penetration rate of ART (assisted reproductive technology) in China in 2022 will only be 9.2%, far lower than the 33% in Europe and the United States.
In this regard, Aviaf said in the prospectus that due to cultural differences, compared with Europe and the United States, China's willingness to accept ART services is low, resulting in a much lower penetration rate of ART in China than in Europe and the United States.
Because of this, in the context of the increase in the number of infertile population, the scale of the domestic ART market has almost stagnated in recent years. According to the data, the domestic ART service market size was 2.52 billion yuan in 2018, and the domestic ART market size will only increase slightly to 2.79 billion yuan in 2022.
(Photo / Ivy Prospectus)
For Aviaf, due to the market's negative attitude towards the paramedical industry, even if it is successfully listed, it is difficult for Aviave to gain the favor of capital. Coupled with the stagnant growth of the ART industry in the past two years, it is not easy for Shenzhen Capital Group and its controlled fund companies to obtain excess returns.
There is no third-generation license, which is obviously inferior to public hospitals
In addition, in the field of assisted reproduction, Aviaf, as a private institution, does not have an advantage. Unlike other industries, the barrier to entry into the field of assisted reproduction is relatively high, and a license is required to enter.
According to public information, after years of development, assisted reproduction has gone through three generations of iterative development. The first generation solves the infertility problem of female patients through in vitro fertilization and embryo transfer, which is also the main source of income for Aviaf.
The second-generation technology solution mainly solves the problem of infertility in male patients, while the third-generation technology is upgraded on the basis of the previous two generations of technology, which improves the success rate and reduces the miscarriage rate.
At present, the implementation of these three generations of technology requires a special license. Avieve has only obtained a license for the first and second generation technical solutions.
In this IPO, the purpose of Aviaf is to help its Zhanjiang Jiuhe Hospital obtain the qualification of a tertiary specialist hospital in order to obtain the third-generation (PGT) license.
In the context of the lack of third-generation licenses, Avieve is at a clear disadvantage when it comes to competing with its peers.
According to the data, by the end of 2022, there were 559 medical institutions in China with first-generation licenses and 93 with third-generation licenses, most of which were in the hands of public hospitals. In the absence of a third-generation license, Aviaf had to compete with more than 500 other medical institutions.
In addition, compared with the previous two generations of technical solutions, the average cost per cycle of the third generation is significantly higher. Data shows that the cost of the third generation IVF cycle (test tube cycle) is as high as 100,000 yuan.
In contrast, the average treatment cost of Aviaf, which has only obtained the first-generation and second-generation licenses, is only about 60,000 yuan per cycle, and the inability to obtain the third-generation license is also an important reason for the improvement of the profitability of Aviave.
Large public hospitals, on the other hand, do not have the problems that Avieve faces. Relying on the advantages of licenses and their own medical resources, public hospitals attract a large number of infertility patients.
Gu Yifan, director of the embryology laboratory of CITIC Xiangya Fertility and Genetics Hospital, said in an interview with the media that in 2019, there should be nearly 30,000 IVF cycles in his hospital, and now it is stable at more than 20,000 cases per year, and the success rate remains above 66%.
In comparison, in 2022, there will be only 6,706 IVF cycles carried out by Aviave, with an average success rate of 58.2%, which is significantly lower than that of leading public hospitals.
In the field of private hospitals, Avieve also faces a large number of competitors. According to the prospectus, Avi ranks 4th among private ART service institutions, with a market share of 0.9%, and the market size is relatively small.
Taking Jinxin Reproduction, the second largest private ART service provider in China, as an example, the number of IVF cycles carried out by Jinxin Reproduction in 2022 exceeded 26,000, which is more than three times that of Aviave.
With the increase in infertility patients, coupled with the gradual inclusion of assisted reproduction in medical insurance, this will stimulate the demand of patients to a certain extent, and the assisted reproduction industry may usher in development opportunities.
However, the expansion of the market scale will also promote more fierce competition in the industry. Senior medical investor Lin Zhangbao once told the media that after the inclusion of medical insurance, the competition in the industry will become more intense, and medical institutions will change from competing for licenses to competing for experts and operating teams.
Mr. Lin also said that since most private institutions cannot use medical insurance, public hospitals have a medical insurance advance time window, which will make public hospitals more competitive advantage.
For Aviaf, under the pressure of public hospitals, the company will have less room to expand. In this IPO, it is very important to obtain financing to build its hospital into a tertiary specialty hospital and obtain a third-generation license.
If it is successfully listed and successfully obtains the third-generation license, the profitability of Avieve will be further improved. If the listing fails, the company may have to stick to the "base camp" and wait for the "encirclement and interception" of public hospitals.