Company overview

The history of Xintai Medical can be traced back to 1994. It was first engaged in the development and application of shape memory alloy materials, and was acquired by Le Pu Medical in October 2008 to focus on the development of occluders. At present, the company is committed to the research, development, production and commercialization of interventional medical devices mainly for structural heart disease.

The market share of occluder series products in China in 2021 is 38% (first in market share). The company's product pipeline includes 20 listed occluder products, 9 occluder products under development and 21 major heart valve products under development. As of the date of issue, it has obtained 232 registered patents and 51 patent applications in China, and 14 patent applications in the United States and the European Union.

Xintai Medical income continues to grow. From 2019 to 2021, the company's income was 116 million yuan, 148 million yuan and 223 million yuan respectively. In 2021 and the first half of 2022, the company achieved operating income of 111 million yuan and 125 million yuan respectively, and the gross profit margin remained at a high level.

Industry status and prospects

The market space of structural heart disease intervention in medical devices is growing. The global market for structured cardiac interventional devices increased from $4.8 billion in 2017 to $9.3 billion in 2021 (CAGR 18.0%) and is expected to reach $19.8 billion (CAGR 20.8%) in 2025. The sales revenue of the domestic structured cardiac intervention device market increased from 400 million yuan in 2017 to 2 billion yuan in 2021 (CAGR 48.3%), and is expected to reach 10.4 billion yuan (CAGR 51.0%) in 2025.

There is more room for the development of valvular disease intervention in the market. The global market is expected to reach US $14.5 billion in 2025, and the domestic market is expected to reach 7.9 billion RMB, including 4.86 billion RMB for aortic valve replacement and 1.61 billion RMB for mitral valve replacement.

Advantages and opportunities

The company focuses on the field of structural heart disease and has a complete product layout. The company is the largest manufacturer of congenital heart disease occluders and related surgical products in China, with pipelines covering three major applications of structural heart disease (congenital heart disease, cardiogenic stroke and valvular disease). The market share is 38.0% in terms of sales revenue in 2021.

It has a comprehensive portfolio of heart valve products and has a first-mover advantage in mitral valve research products. The company has a comprehensive pipeline in the field of interventional heart valve (including aortic valve, mitral valve and tricuspid valve). Its mitral valve products are designed for transapical and / or femoral approach, including TMVCRS, TMVr-A system and TMVr-F system, and is one of the pioneers in the research and development of mitral valve disease.

The company has a strong R & D and production support platform, and the controlling shareholder Lepu Medical provides strong support. The company has set up a special internal R & D team, and there are 9 pending patent applications for heart valve products in China. Domestic commercialization depends on high-quality dealer team. by the year 22, H1, the company's products have entered 878 hospitals (503 top three); overseas commercialized Lepu medical team provides strong support.

Weakness and risk

The risk of continuous operating loss; the risk that clinical progress and commercialization progress is not as expected; the risk of regulatory policy driving strict; the product market is not as expected, commercial sales is not as expected, etc.

The purpose of the proceeds from the issue

The company plans to sell 22.455 million H shares worldwide, of which Hong Kong shares account for about 10 per cent and international offerings account for about 90 per cent, with an over-allotment option of 15 per cent. The offering price is HK $29.15 to HK $31.45 per share, or 1000 shares per share, which is expected to be listed on November 8, 2022. Based on the median offer price of HK $30.30, it is estimated that the net proceeds from the global offering will be about HK $592.1 million. The company intends to use the net proceeds from the share sale for the following purposes:

1) of this amount, about 50.7% (about HK $300.2 million) will be spent on research and development for the next five years.

I) about 44.0% (HK $260.5 million) for the development and expansion of product pipelines (clinical and registration):

A) approximately 24.1% (HK $142.7 million) for valvular products (catheter implantable aortic valve system, TMVCRS and TMVr systems)

B) approximately 15.9% (HK $94.1 million) for occluder products and products under development (MemoSorb atrial septal defect occluder IV generation, MemoSorb ventricular septal defect occluder IV generation, MemoSorb patent foramen ovale occluder II generation and left atrial appendage occluder II generation) C) about 3.9% (HK $23.1 million) is used for occluder products and products under development (MemoFlex Plug vascular plug III generation, MemoPart trap II generation, atrial shunt II generation and atrial shunt III generation), etc.

Ii) of which about 6.7% (HK $39.7 million) will be used to recruit about 70 to 100 R & D and registered personnel in the next five years.

2) of this amount, about 24.3% (HK $143.9 million) will be spent on marketing activities in the next five years.

3) of this amount, about 5.0% (HK $29.6 million) will be used to increase manufacturing capacity over the next five years.

4) of this amount, about 10.0% (HK $59.2 million) will be used to finance potential strategic investments and acquisitions over the next five years to complement and expand the company's product portfolio and technology.

5) the remaining 10% (about HK $59.2 million) will be used for working capital and general corporate purposes.

Cornerstone investor

This offering introduces Harvest, Shanghai Lingang (600848.SH) and Kyushu Tong International (600998.SH) as cornerstone investors, with a planned total subscription of US $24.8 million. At the median price of HK $30.30,30.30, cornerstone investors will subscribe for 6423000 shares. It accounts for 28.60% of the total issued share capital, about 1.85% of the total issued share capital immediately after the completion of the global offering (assuming that the over-allotment option has not been exercised), and 1.83% of the total issued share capital immediately following the completion of the global offering and the exercise of the over-allotment right.

Investment suggestion

The company specializes in the field of structural heart disease, and the layout of pipelines covers three major applications of structural heart disease (congenital heart disease, cardiogenic stroke and valvular disease). At present, the company is the largest manufacturer of congenital heart disease occluders in China (20 have been listed and 9 are under research) and related surgical supporting products, with a market share of 38.0%.

Pipelines actively expand heart valve products with larger market space. There are 21 products under development in the pipeline, leading the way in the field of mitral valve repair, as well as aortic valve and tricuspid valve products. Transcatheter implantable aortic valve system is expected to be in clinical trial stage and 23Q4 is expected to submit an application to FDA; transapical mitral valve repair system (TMVCRS) is in clinical trial stage, and 24Q3 is expected to submit application to FDA. Transapical mitral valve clamp repair system (TMVr-A) is in the clinical trial stage and 24Q4 is expected to submit an application to the FDA; transcatheter tricuspid valve repair system (TTVRS) is currently in the design stage and 23Q4 is expected to enter the clinic. In addition, relying on Lepu Medical, a shareholder, can provide commercial and international support.

Lepu Medical Holdings attracts well-known institutional investors to invest. In June 2021, the company received pre-IPO financing of approximately US $95.177 million (including RMB 95.18 million and US $80 million), with investors including Weiwu Capital, Sequoia Capital, CDH Capital, Huaihua Haozhi and Shanghai Biopharmaceuticals, with a post-investment valuation of about US $1.05 billion.

Taking into account the above, based on the IPO professional score of "5.7points".