Producer: Sina Finance Listed Company Research Institute
Author: Tianli
Recently, Mirxes Holding Company Limited (hereinafter referred to as "Mirui Group") submitted its report to the Hong Kong Stock Exchange again, with CICC and CCB International as its joint sponsors.
MiRX Group is a microribonucleic acid (miRNA) technology company that originated in Singapore. As of April 22, 2024, MiRX Group has three commercial products, including GASTROClear™, which uses blood for gastric cancer screening, LungClear™ for lung cancer screening, and Fortitude™, a COVID-19 diagnostic kit.
Among them, GASTROClear™ has obtained the Class C IVD certificate from the Health Sciences Authority of Singapore, and Fortitude™ has obtained the IVD certificate in Singapore, Europe, and other Southeast Asian regions, while LungClear™ has only started LDT in Singapore and other Southeast Asian regions and Japan in the second half of 2022 using Singapore's diagnostic laboratory, and has not yet started clinical trials, and there is still a considerable distance from obtaining the IVD certificate.
IVD stands for in vitro diagnosis, and genetic testing companies make a profit by developing supporting kits for genetic testing of tumor drugs, and then selling these kits to hospitals to become routine examination items in hospitals. The kit iteration is fast, there are many varieties, and the R&D and certification cycle is long, which requires the company to have very strong R&D strength and sufficient financial support.
Different from IVD, the LDT model usually refers to the detection method developed, verified and used by the medical laboratory department, which mainly solves the problem of rigid clinical needs, but is limited by the difficulty of sample acquisition and verification, and cannot obtain certified IVD products in the short term.
Since the LDT model entered the Chinese market, the lack of systematic policy regulation has created uncertainties for its safety and operability, and the domestic market size of the LDT business has been slow to expand because the national medical insurance providers are usually focused on improving the quality of care and reducing costs, and the national medical insurance is more likely to cover IVDs approved by the China NMPA rather than LDT.
At present, among the three commercial products of Mirui Group, only the COVID-19 diagnostic kit Fortitude™ has entered the Chinese market, and the LDT business of GASTROClear™ and LungClear™ has not been carried out in China. Therefore, Mirui Group's revenue mainly comes from Southeast Asian countries such as Singapore, Indonesia, and the Philippines.
From the perspective of financial data, Mirui Group has continued to lose money in recent years, with losses of US$3.0811 million, US$56.2027 million, and US$69.5693 million from 2021 to 2023, respectively. Even if the financial costs and income tax expenses are excluded and only the operating part is considered, the company is also in a loss-making state and the loss will expand year-on-year in 2023. Among them, the losses from operating activities in 2022 and 2023 will be US$47.1839 million and US$58.6791 million, respectively.
In terms of business, COVID-19 diagnostic-related products and services have been one of the company's important revenue sources in recent years, accounting for 42.2% and 27.7% of revenue in 2022 and 2023, respectively.
In addition, according to the previous version of the prospectus, in 2021, the revenue of the infectious disease business segment will be 54.324 million US dollars, accounting for 89.6% of the total revenue, and the company's loss will be significantly narrowed in the same year. As the pandemic became a thing of the past, Fortitude's™ product and service revenue plummeted, and the company's losses widened again. Looking ahead, the relevant revenue may decline further and continue to weigh on the company's performance.
Therefore, Mirui Group urgently needs to find new performance growth points. Limited by domestic policies and regulatory environment, it is difficult for the company's LDT business to make achievements in the domestic market in the short term. From the perspective of product research and development progress, GASTROClear™ is expected to land in the Chinese market relatively clearly, and the landing will be strong in the short term, which may be one of the main directions for its breakthrough. According to the prospectus, the company has completed clinical trials in November 2023 and submitted an IVD registration application to the China NMPA in December 2023, which is expected to be approved by the China NMPA in the fourth quarter of 2024.
However, combined with the domestic medical insurance payment policy and the market competitiveness of similar products, there is great uncertainty about whether GASTROClear™ can succeed in the domestic market.
At present, gastroscopy is still the gold standard for gastric cancer screening and diagnosis, and the price is low. However, molecular diagnostic IVD products such as GASTROClear™ and new detection products such as capsule gastroscopy can only play a complementary and auxiliary role, and gastroscopy is often still required after the problem is found, and the price is relatively high. Under the current medical insurance payment system in mainland China, whether the market is willing to pay for it remains to be examined.
MiRX Group also stated in the prospectus that one of the main obstacles to GASTROClear's™ market recognition is the difficulty of ensuring that it is reimbursable by both public and private health insurance providers. As of the Latest Practicable Date, GASTROClear™ is not covered by any medical or commercial health insurance plan in the jurisdiction in which it has commercialized.
In addition, the company has no previous experience in commercializing similar products in the domestic market, which also leads to a further weakening of the volume forecast. However, time may be running out for Mirui Group.
Prior to the IPO, Mirui Group had received a lot of investment, including sponsors CCB International, Fupu Investment, China Resources CP Life Science Fund, American healthcare fund Rock Springs Capital, EDBI, Gaorong Capital, Nuohui Venture Capital, etc., and received a total of about US$167 million in financing.
A large part of the relevant financing is obtained through the issuance of convertible redeemable preferred shares, and if the company fails to list as scheduled, it will be required to bear redemption obligations and pay interest. As of 2023, the Company's convertible redeemable preferred shares totaled $197 million, and the interest on convertible redeemable preferred shares for the year amounted to $10,148,300. The large amount of convertible redeemable preferred shares also led to the company's net debt, which was US$61.762 million in 2022 and US$132 million in 2023.
Due to the continuous losses and high financial costs, Mirui Group suffered serious blood loss, continued cash outflow, and net current assets decreased year by year. In 2022, 2023 and as of the first three months of 2024, the company's current net assets will be US$62.0265 million, US$53.503 million, and US$41.2741 million, respectively. Cash assets are even more stretched, with the company's cash and cash equivalents balance of only $4,068,800 as of February 29, 2024.
It is worth noting that accounts receivable account for a considerable proportion of current assets. As of February 29, 2024, the company's trade and other receivables were US$23.2103 million, accounting for 56.24% of all current assets. From the perspective of aging structure, accounts receivable over 90 days account for nearly 6 percent. According to the credit policy of the prospectus, Mirui Group will generally grant a credit period of up to one month, which shows that most of the accounts receivable are overdue.
In the case of serious lack of funds, the company's expenses during the period remain high, and the proportion of sales expenses, R&D expenses, and administrative expenses to revenue in 2023 will be as high as 71.09%, 93.49%, and 132.28% respectively.
Its own hematopoietic capacity is obviously insufficient, cash is seriously insufficient, the loss has expanded year after year, and the financing has also been carried out to the D round. It can be seen that seeking a secondary market listing is imminent for Mirui Group.