"Electric Eel Finance" article / Li Bingyao
On September 30, 2023, the IPO of Shenzhen Beixin Life Science and Technology Co., Ltd. (hereinafter referred to as Beixin Life) on the Science and Technology Innovation Board completed the first round of inquiries. On March 31, 2024, the company suspended the listing process due to an update on its financial report.
According to the prospectus, Beixin Life is a national high-tech enterprise focusing on the R&D, production and sales of innovative medical devices for precision diagnosis and treatment of cardiovascular diseases, and the company's core product, intravascular ultrasound (IVUS) diagnostic system, is China's first independent innovative 60MHz high-definition high-speed domestic IVUS product approved by the State Food and Drug Administration.
When reading the listing information provided by the company, "Electric Eel Finance" noticed that in this IPO, Beixin Life plans to use 460 million yuan to raise funds to expand production capacity, while the company's capacity utilization rate is not high in the same period, and the capacity utilization rate of its core products is only about 60%. How to digest the new production capacity? In addition, in the case of performance still loss, the overseas sales unit price of the company's core products continued to decline, can the company's gross profit margin continue to rise in the past few years?
How to digest the 460 million new capacity with low capacity utilization?
According to the prospectus, in this IPO, Beixin Life plans to raise 1.27 billion yuan, of which 460 million yuan will be used for the construction project of the industrialization base of interventional medical devices, 380 million yuan will be used for the research and development project of interventional medical devices, 190 million yuan will be used for the construction project of the marketing network, and 250 million yuan will be used to supplement the working capital.
The prospectus shows that from 2020 to 2022 (hereinafter referred to as the reporting period), the capacity utilization rate of the company's FFR system is 41.11%, 42.67% and 66.14%, and the production and sales rates are 6.93%, 22.5% and 18.67% respectively; During the same period, the capacity utilization rate of the company's FFR pressure microcatheter was 34.84%, 61.32% and 64.83%, and the production and sales rates were 25.59%, 68.54% and 104.45%, respectively.
In addition, the capacity utilization rate and production and sales rate of the two products produced by Beixin Life in 2022 are relatively low. From January to September 2022, the capacity utilization rate and production and sales rate of the company's new product IVUS imaging catheter were 35.89% and 4.22%, respectively; During the same period, the capacity utilization rate and production and sales rate of single-lumen microcatheter and double-lumen microcatheter were 54.43% and 7.15%, respectively.
According to the prospectus, at the end of the reporting period, the book value of Beixin Life's inventory was 3.0825 million yuan, 8.2987 million yuan, 29.1897 million yuan and 41.8303 million yuan respectively, accounting for 8.46%, 6.66%, 4.92% and 6.26% of current assets respectively.
The performance is still in the red, and the unit price of overseas sales of core products continues to decline
According to the prospectus, during the reporting period from 2019 to 2021 and from January to September 2022 (hereinafter referred to as the reporting period), Beixin Life achieved operating income of 29,100 yuan, 1,674,600 yuan, 51,762,100 yuan and 60,913,200 yuan, and net profit of -19,626,500 yuan and -49,934,400 yuan respectively in the same period,- 449.3153 million yuan and -251.8986 million yuan, and the net cash flow from operating activities in the same period was -29.7026 million yuan, -48.6444 million yuan, -165.8408 million yuan and -128.667 million yuan respectively.
It can be seen that Beixin Life has not yet made a profit, and the company's losses are still expanding, whether it is net profit or operating cash flow losses. In this IPO, Beixin Life meets and applies the requirements of Article 2.1.2, Paragraph 1 (5) of the Listing Rules of the Science and Technology Innovation Board: the expected market value is not less than RMB 4 billion. Beixin Life said that its main business or products need to be approved by relevant state departments, and the market space is large, and it has achieved phased results. Enterprises in the pharmaceutical industry need to have at least one core product approved for phase II clinical trials, and other companies that meet the positioning of the Science and Technology Innovation Board must have obvious technical advantages and meet the corresponding conditions.
According to the prospectus, during the reporting period, Beixin Life's revenue from FFR pressure microcatheters accounted for 88.09%, 94.78% and 97.45% respectively, and the revenue from FFR hosts accounted for 11.91%, 5.22% and 1.1% respectively. It can be seen that almost all of Beixin Life's revenue comes from FFR pressure microcatheters, and the proportion continues to rise.
Beixin Life explained in the prospectus that the company's main business income mainly comes from the FFR pressure microcatheter in the core product FFR system, and the sales volume is growing rapidly in the reporting period. In 2022, the company's core products IVUS system, single-lumen microcatheter, and dual-lumen microcatheter, have just started commercialization, and are still in the stage of comprehensive market access, and the revenue contribution has not been fully reflected.
In response to the first round of inquiries, the company disclosed that from 2020 to 2022 and from January to June 2023, the average domestic sales unit price of the company's Beixin Life's FFR pressure microcatheter was 29.3515 million yuan, 29.4702 million yuan, 29.9039 million yuan and 34.5138 million yuan respectively, and the company's average overseas sales unit price was 24.338 million yuan, 23.3304 million yuan, 22.6038 million yuan and 22.1731 million yuan respectively in the same period.
It can be seen that the sales unit price of FFR pressure microcatheter, the core product of Beixin Life, remained strong in China, but continued to decline in overseas markets.
In its reply to the first round of inquiries, Beixin Life said that from the perspective of the average ex-factory unit price of the company's FFR consumables, the average ex-factory price of FFR consumables in China from January to June 2023 is 3322.5 yuan, which is lower than the average ex-factory unit price of the industry. It is expected that in the process of intensifying market competition and large-scale promotion of centralized procurement, the company will rely on the first-mover advantage and cost advantage of products, and the average ex-factory price of the company in the next five years will be slightly lower than the average ex-factory unit price of the industry in the next five years, so as to promote revenue growth and maintain market share. Considering that the average ex-factory price of the industry has fully considered the significant price reduction of centralized procurement price reduction, the average ex-factory price of the company is further lower than the average ex-factory price of the industry, and the ex-factory price calculation takes into account the comprehensive consideration of the industry environment, centralized procurement factors, cost advantages and so on.
From 2020 to 2022 and from January to June 2023, the gross profit margin of Beixin Life is 8.06%, respectively. 58.9%, 63.51% and 64.97%, and the gross profit margins of comparable companies in the same period were 73.83%, 71.39%, 67.66% and 66.79%, respectively. Although the gross profit margin of Beixin Life has continued to increase in the past year, it is still lagging behind comparable companies in the same industry so far.
In the past two years, there have been no invention patents, and the conference fee is high
According to the prospectus, as of the signing date of the prospectus, Beixin Life has 121 domestic and foreign authorized patents, including 50 invention patents, and the company also has 12 PCT international patent applications.
It is worth noting that the most recent invention patent obtained by Beixin Life was in September 2021, and the company has not obtained an invention patent in the two and a half years since.
From 2020 to 2022 and the first half of 2023, the sales expenses of Beixin Life were 16.5801 million yuan, 54.0449 million yuan, 75.8879 million yuan and 49.3393 million yuan respectively, accounting for 990.11%, 104.41%, 82.08% and 53.12% of operating income respectively.
From 2020 to the first half of 2023, the company's conference fees were 2.7715 million yuan, 8.3426 million yuan, 9.2586 million yuan and 8.8292 million yuan, accounting for 16.72%, 15.44%, 12.2% and 17.89% of the sales expenses, respectively. It can be seen that the three-and-a-half-year conference fee of Beixin Life has spent a total of 29.2019 million yuan.
In the first round of inquiry, the Shanghai Stock Exchange asked Beixin Life to explain the reasonableness of sales expenses, the frequency of various publicity and promotion, academic conferences, etc., and the comparison of expenses with the industry average.
Industry analysts believe that conference fees are more sensitive, and behind the high-frequency meetings involve the "compliance" treatment of bribery by pharmaceutical companies, and the frequency of meetings is too high and it is easy to be questioned by regulatory authorities.