Recently, Carolot landed on the Hong Kong stock market with over 1347 times oversubscription, rising by 58% on the first day, attracting widespread market attention. Understands from the Zhongtong Finance and Economics APP, after two relatively sluggish years, the Hong Kong stock market IPO market finally turned around this year. According to KPMG data, in the first three quarters of 2024, a total of 45 new companies have been listed on the Hong Kong stock market, raising a total of 55.6 billion Hong Kong dollars, making Hong Kong Exchanges and Clearing Limited's IPO fundraising scale rise to fourth in the world.

Even with the market heating up, there are still mixed reactions. Just recently, despite both having IPO listings, Taimei Medical Technology (02576) has become the 'background board' of the hot IPO market in Hong Kong.

As the first Hong Kong listed company after the National Day holiday, equipped with concepts like 'digital health' and 'SaaS,' Taimei Medical Technology saw a dark market fall of 13.23%, and encountered a large-cap pullback in the Hong Kong stock market on its first trading day, October 8. The company's IPO price was HK$13.00 per share, but the opening price that day was only HK$11.24 per share, closing at HK$9.20 per share, down 29.23% from the issue price.

The company's stock price failed to stabilize and recover on the following day as well. Despite a small uptick in early trading, the stock price continued to fluctuate sharply downward, reaching a maximum decline of 13.04%, with the lowest price dropping to HK$8, down 38.46% from the issue price.

Turning to the Hong Kong stock market after an unsuccessful attempt on the Star Market.

As the largest domestic provider of digital solutions in the field of life sciences, Taimei Medical's path to listing did not start smoothly. The company submitted its prospectus to the Sci-Tech innovation board in December 2021, but its IPO did not pass the hearing in March 2023, leading them to shift their focus to the Hong Kong stock market.

The reason for the lack of smooth progress may be related to the need for market education of its own concepts.

According to the WiseTrust Finance APP, it positions itself as a digital solution provider focusing on the medical science industry, with the core concept being the company playing a pivotal role in connecting all parties in the medical science industry chain (including pharmaceutical companies, hospitals, third-party service providers, patients, and regulatory agencies) through the digital collaboration platforms developed by R&D (TrialOS and PharmaOS). In short, Too美Medical Technology is more like a "technology-based CRO", acting as a "water seller" for innovative drug companies in its business.

According to the information provided by Zhuo Shi Consulting, Tai Mei Medical Technology is the only supplier in China's medical industry that can provide a one-stop digital solution from R&D to marketing.

Due to the lack of market reference companies, Too美Medical Technology encountered significant resistance when it went public on the Star Market, and it was subjected to inquiries in three rounds by the Shanghai Stock Exchange. In the second round of inquiries by the Shanghai Stock Exchange, it was pointed out that the company needed to respond to "the differences and distinctions between the issuer's digital services, Shanghai Shuangfang Technology-based CRO, and traditional CROs".

In its response, Too美Medical Technology mentioned that "the company has built an industry digital collaboration platform with digital technology, supporting online business operations for customers with digital capabilities, and is committed to becoming the infrastructure of the industry's digital era, fundamentally different from traditional CROs seeking digital efficiency. Therefore, although there is overlap in some businesses, there are differences in business models, technological foundations, development directions, and business logic between the two."

As is well known, the concept of digitalization has been popular in various industries in recent years, and Too美Medical Technology's digital technology concept immediately attracted investments from many star companies and investment institutions.

According to the WiseTrust Finance APP, since its establishment, due to filling the domestic clinical trial digital gap, combined with the precise timing of China's drug regulatory reform, Too美Medical Technology has undergone 8 rounds of financing with a total amount exceeding 2 billion yuan. According to the prospectus, in September 2020, Too美Medical completed its final round of financing, led by Tencent, Hillhouse Capital, Yunfeng Fund, with follow-on investments from CMC Capital, Sequoia China, and other institutions. After this round of financing, Too美Medical's valuation reached as high as 8.1 billion.

However, despite receiving endorsements from many renowned institutions, Too美Medical Technology still failed to enter the Star Market. In March last year, the Shanghai Stock Exchange terminated the review of Too美Medical Technology's Star Market IPO. The Listing Review Committee believed that during the reporting period, Too美 Technology did not primarily rely on core technology for production and operation, did not fully disclose important information conducive to investors' value judgment and investment decisions, and did not meet the relevant provisions of Articles 3 and 34 of the Measures for the Administration of Initial Public Offering of Stocks. As a result, Too美Medical Technology ultimately failed to pass the review and the Star Market IPO was terminated.

Since the beginning of this year, the number of medical companies submitting applications to the Hong Kong Stock Exchange has significantly increased. Among them, many companies that were blocked from listing on the A-share market have turned to the Hong Kong stock market, which has lower listing requirements and a higher success rate. Taimei Medical Technology is one of them. However, it seems that the company still has a long way to go to adapt to the investment logic and style of the medical sector in the Hong Kong stock market.

"Concept" Difficult to be "Rations"

Although the Hong Kong stock pharmaceutical and medical equipment sector has rebounded significantly recently due to the interest rate cuts by the Federal Reserve and the bull market in the domestic market, from the perspective of individual stocks, there has been no significant change in investors' risk preferences. Factors such as revenue level, hematopoietic ability, and financial indicators such as debt levels are still important for investors to determine the growth certainty of companies, which is not very favorable for Taimei Medical Technology, whose business is still in the early stages.

According to the Zhitong Finance APP, in terms of revenue performance, with the expansion of the customer base in the past three years, Taimei Medical's revenue has been steadily increasing. According to the prospectus data, the company achieved revenues of approximately 0.466 billion yuan, 0.549 billion yuan, 0.573 billion yuan, and 0.132 billion yuan for the three months ending March 31 in 2021 to 2024, showing year-on-year growth with a compound annual growth rate of 10.88%.

Despite the steady increase in revenue, the company has been struggling on the brink of loss for years. From 2021 to 2023, Taimei Medical incurred a cumulative loss of approximately 1.26 billion yuan in just 3 years. As of March 31, 2024, the company continues its trend of losses, with a net loss of 0.118 billion yuan.

The root cause of the company's perennial losses lies in the high 'three expenses'. During the reporting period, Taimei Medical incurred sales expenses of 0.179 billion yuan, 0.185 billion yuan, 0.15 billion yuan, and 24.35 million yuan, accounting for 38.5%, 33.6%, 26.3%, and 18.4% of total revenue respectively; during the same period, research and development expenses accounted for 40.9%, 37.9%, 29.5%, and 20.6% of revenue.

The company also admits in the prospectus that the main reason for the losses is the rapid development of various businesses, leading to a significant increase in salary and stock payments due to personnel expansion, coupled with various expenses related to business development. Operating income cannot cover the increase in main business costs and expenses during the period, ultimately resulting in a significant net loss for the company during the reporting period. It is clear that due to Taimei Medical Technology being a new business format compared to traditional CROs, its market education costs have increased significantly.

Continuous losses have also led to poor cash flow performance for Taimei Medical. For the three months ending March 31 from 2021 to 2024, the company's cash flow used in operating activities was approximately -0.212 billion yuan, -0.329 billion yuan, -0.351 billion yuan, and -0.113 billion yuan, remaining negative. During the same period, the company's cash and cash equivalents were approximately 1.324 billion yuan, 0.679 billion yuan, 0.668 billion yuan, and 0.578 billion yuan, showing a significant shrinkage.

It is worth noting that Taimei Medical Technology has been caught in a vicious circle of "continuous losses and customer loss" this year. In the first quarter of 2024, while enduring continuous losses, Taimei Technology saw its number of customers decrease from 1,107 at the end of 2023 to 870. It is well known that the current domestic and international medical science industry has a huge demand for digitization, but the company's customer base is decreasing against the trend at this time, a phenomenon that investors should keep a close eye on as it affects the company's revenue expectations.

From a business perspective, Taimei Medical Technology is undoubtedly a leader in the technology-oriented CRO under this new format, but the market value of this new format fundamentally comes from the logic of replacing traditional CRO, which clearly requires the company's solid business data and financial indicators as support to continuously expand the imagination space of this new format. However, judging from the company's current business development, Taimei Medical Technology still has a long way to go.