TaiMei Medical received a notice of filing from the China Securities Regulatory Commission for its Hong Kong Stock Exchange IPO, with an issuance of no more than 135 million shares, including shareholders such as Tencent and SoftBank China Holdings. Currently, TaiMei Medical is still in a loss-making state, and its previous application for listing on the Science and Technology Innovation Board was rejected by the Shanghai Stock Exchange due to issues such as the attributes of the Science and Technology Innovation Board and the sustainability of revenue.
On July 17th, 《CIT News》 reported that after the Shanghai Stock Exchange rejected its Science and Technology Innovation Board IPO process, Zhejiang TaiMei Medical Technology Co., Ltd. (referred to as "TaiMei Medical") turned to the Hong Kong Stock Exchange. After submitting documents for more than five months, the company finally received the notice of filing for listing on the Hong Kong Stock Exchange from the China Securities Regulatory Commission, with an issuance of no more than 135 million shares.
As a digital solution provider in the life sciences R&D and marketing field, TaiMei Medical's main business is to design and provide software and digital services for all parties in the industry chain. Its core revenue comes from sales of cloud-based software and digital services, including SaaS products and customized software.
In the first three quarters of 2021, 2022, and 2023, TaiMei Medical achieved revenues of CNY 466 million, 549 million, and 410 million, respectively. Revenue from cloud-based software reached CNY 197 million, 211 million, and 153 million, accounting for 42.3%, 38.4%, and 37.2% of revenue, respectively. Revenue from digital services was CNY 268 million, 338 million, and 256 million, accounting for 57.6%, 61.6%, and 62.6%, respectively.
According to data from Zaks Consulting, TaiMei Medical is the only digital solution provider in China's life sciences industry that can provide one-stop digital solutions from R&D to marketing. Based on 2022 revenue, TaiMei Medical is the largest digital solution provider in this field in China, with a 6.3% market share.
Both Tencent and SoftBank have invested in TaiMei Medical.
Digital solutions are not only the result of the rapid development of the medical industry, but also highly in line with the urgent need of the industry to reduce costs and increase efficiency in recent years.
Zaks Consulting statistics show that, based on the sales output value of pharmaceuticals and medical devices, China's life sciences market has increased from CNY 2.11 trillion in 2018 to CNY 2.73 trillion in 2022, making China the second largest market in the world. This market is expected to reach CNY 4.18 trillion by 2027.
From 2018 to 2022, the number of registered clinical trials in China's innovative drugs and medical devices industry has increased from 2265 to 3410. Against this background, R&D investment by Chinese life sciences companies is expected to reach CNY 239.3 billion in 2022, double the CNY 118.2 billion in 2018. Marketing expenses have also increased from CNY 581.4 billion in 2018 to CNY 787.5 billion in 2022.
During the same period, the market size of digital solutions for R&D and marketing in China's life sciences industry has increased from CNY 1.8 billion in 2018 to CNY 8.8 billion in 2022, and is expected to further increase to CNY 25.9 billion by 2027. However, the overall penetration rate of digital solutions is still low, at 0.9% in 2022, and is expected to increase to 1.7% by 2027.
Benefiting from this, TaiMei Medical has obtained a total of eight rounds of financing, including pre-Series A financing and Series A to F financing, with the highest amount of financing completed in the F round in September 2020, totaling CNY 1.07 billion. Other financing rounds that received a large amount of funding include the D and E rounds, with amounts of CNY 0.3 billion and CNY 345 million, respectively. In addition, TaiMei Medical has undergone multiple equity transfers, introducing heavyweight capital including SoftBank China Holdings and Tencent.
Specifically, in the equity transfer in April 2020, Tencent's venture capital fund acquired CNY 1.0535 million of TaiMei Medical's registered capital through its holding company Linzhi Tencent for a consideration of CNY 0.414 billion. In early September of the same year, Linzhi Tencent purchased TaiMei Medical's registered capital of CNY 0.1447 million and 0.2068 million from Nanjing Kaiyuan and Gongqingcheng Yuanxi at transaction prices of CNY 70 million and CNY 0.1 billion, respectively. At the end of September, Linzhi Tencent subscribed for 1.034 million shares of TaiMei Medical for CNY 50 million.
As of now, Linzhi Tencent directly holds 56.101 million shares of TaiMei Medical's domestic stock, accounting for 10.43% of the total shares, making it the second largest shareholder of TaiMei Medical. At the same time, Suzhou Tencent Phase I Follow-up Fund Partnership (Limited Partnership) also holds 8.7882 million shares of TaiMei Medical's domestic stock through Suzhou Paiyi, accounting for 1.63%.
In addition, through its three investment institutions, Chengdu Softbank, Ningbo Softbank, and Jiaxing Softbank, Softbank China Capital holds a total of 22.0559 million shares of domestic shares of Taimei Medical, with a total shareholding ratio of 4.1%.
◌ Rejected by the Shanghai Stock Exchange
It is worth mentioning that before submitting an IPO application to the Hong Kong Stock Exchange, Taimei Medical had previously submitted a listing application to the Science and Technology Innovation Board. However, after three rounds of inquiries and responses, the Shanghai Stock Exchange believed that Taimei Medical "did not mainly rely on core technology to carry out production and operation, and did not fully disclose important information that is conducive to investors' value judgment and investment decisions", which does not comply with relevant regulations for issuance and listing, and terminated Taimei Medical's listing application on the Science and Technology Innovation Board.
In the inquiry process, the Shanghai Stock Exchange paid close attention to certain content, including the core technology and technological advancement of Taimei Medical's various business applications, whether they conform to the positioning of the Science and Technology Innovation Board, and the sustainability of Taimei Medical's future sales growth while sustaining significant losses.
In the reply to the first round of inquiries, Taimei Medical listed six core technologies that best reflect its scientific and technological attributes, including: low-code development platform technology, life science big data platform technology, clinical research data collection component technology, Taimei platform development framework technology, Chinese medical information extraction technology, and medical intelligent imaging display technology. Among them, only Taimei Medical possesses the low-code development platform technology and life science big data platform technology in the field of digitalization of the domestic pharmaceutical industry.
Taimei Medical stated that the superiority of the low-code development platform technology is mainly reflected in the support of the number of industry scenarios, the improvement of delivery speed, the reduction of innovation cost, and other aspects; the superiority of the life science big data platform technology is reflected in the real-time transmission of data, customized data storage and analysis of complex scenarios, and the improvement of the delivery speed of data products, and so on.
According to the conference draft document on the Science and Technology Innovation Board that year, Taimei Medical has been in a loss for many years, with a net loss of RMB 0.362 billion, RMB 0.499 billion, RMB 0.479 billion, and RMB 0.22 billion for the years 2019 to 2021 and the first half of 2022, respectively, with a rapid decline. The net losses attributable to the non-recurring items, and the parent company for the same periods are RMB 0.153 billion, RMB 0.267 billion, RMB 0.505 billion, and RMB 0.225 billion, respectively.
In the third round of replies, Taimei Medical revealed that as of the end of 2022, it has a total of approximately RMB 1.635 billion in hand orders, with the order amount of the digitized SMO solution being the highest at RMB 0.514 billion. Based on the situation of in-hand orders, Taimei Medical expects the revenue in 2023 to be RMB 0.73 billion, with the revenue of the digitized SMO solution being RMB 0.224 billion, accounting for 30.65%. The main customers of the in-hand orders include Zhejiang Hisun Pharmaceutical, Beigene, Qilu Pharmaceutical, Corning Jerry, Suzhou Jinsheng Pharmaceutical, etc.
Taimei Medical believes that the top five clients of the in-hand orders are downstream well-known domestic and foreign pharmaceutical companies/sponsors, which are all non-related orders. With the further expansion of the company's business scale, the number of newly signed contracts will increase accordingly, and the expected achievable revenue will increase, maintaining the sustainability of sales growth.
