After almost a year and a half of listing, Kang Feng Bio-B (06922)'s stock price once again fell to a freezing point.

According to data from the Zhitong Finance App, the intraday collapse hit a record low of HK$5 on May 20, then the stock price decline narrowed. On May 22, the company's stock price declined again, closing at HK$6.21, a sharp drop of 10.9% throughout the day. If you look at it over a long period of time, since the stock price dived in early 2024, Kang Feng Biotech's stock price trend seems to have had ups and downs on a roller coaster. Up to now, in the first five months of 2024, the company's stock price has dropped nearly 70%.

In fact, since the end of last year, good news on the company's fundamentals has been released one after another. The main products have been approved for listing, annual performance, revenue has increased, and losses have narrowed. However, judging from stock price trends, none of this has impressed investors; instead, the company's stock price has fallen to a low point. What exactly is the reason behind this?

Revenue is improving, losses are narrowing

As a leader in the field of cryointerventional intervention, Kang Feng Biotech focuses on the application of cryoablation minimally invasive interventional treatment technology in the cardiovascular field, and has a unique advantage in the field of minimally invasive interventional cryotherapy. Through unique liquid nitrogen cryoablation technology, the company mainly focuses on two major treatment areas, including vascular intervention to treat major cardiovascular diseases, and natural cavities to treat respiratory, urinary, and digestive diseases.

At present, the company has established a comprehensive product portfolio, including 14 cryotherapy products and products under development, mainly for vascular intervention and NOTES, as well as 9 other non-cryotherapy products and products under development. By the end of December 2023, the company had commercialized 8 products.

As new products continue to be launched, the company's revenue has also grown rapidly in recent years. In 2020, 2021, 2022 and 2023, the company's revenue was 9.05 million yuan, 22.43 million yuan, 27.15 million yuan and 40.95 million yuan respectively, with a compound annual growth rate of 65.40%.

As many product developments enter the sprint stage, the company's R&D investment continues to be high in order to achieve commercialization as soon as possible. In 2020, 2021, 2022 and 2023, the company's R&D expenditure was 42.37 million yuan, 89.827 million yuan, 59.933 million yuan and 76.129 million yuan respectively, far exceeding the revenue level for the same period.

Due to high expenses, the company lost money year after year. Thankfully, thanks to the increase in revenue, the company's losses have narrowed in recent years. In 2020, 2021, 2022 and 2023, the company's losses were $159 million, $126 million, $118 million, and $106 million respectively.

The future of the main product is worrying

In order to reverse losses as soon as possible, it is particularly important for Kangfeng Biotech to continue commercializing its products under development.

The Zhitong Finance App noticed that the company's cryotherapy atrial fibrillation system was approved for sale in December 2023. According to Guoyuan Securities analysis, sales of this product are expected to increase rapidly, driving the company's performance growth.

According to information, the number of patients with atrial fibrillation in China has been rising at an accelerated pace in recent years. According to Frost & Sullivan data, the number of people with atrial fibrillation in China increased from 10.8 million in 2016 to 11.6 million in 2020, and is estimated to rise further to 16.6 million in 2030. Among them, cryoablation is one of the common ablation treatments for atrial fibrillation, especially for paroxysmal atrial fibrillation. Compared with other types of ablation treatments, cryoablation has various advantages, such as easy operation, low recurrence rate of atrial fibrillation, and less pain during surgery. In this context, the market size of cryotherapy catheters for atrial fibrillation in China increased from 48.4 million yuan (RMB, same below) in 2016 to 255 million yuan in 2020, with a compound annual growth rate of 51.5%. Driven by the increase in the number of patients with atrial fibrillation and the increase in the penetration rate of cryoablation therapy, Frost & Sullivan estimates that the market size of cryoablation catheters in China is expected to continue to grow to 5.103 billion yuan in 2030.

However, it should be noted that as early as 2016, Arctic Front Advance produced by Medtronic was successfully approved for commercialization in China as a cryoablation device for treating atrial fibrillation, and Kang Feng Biotech has already lost its first-mover advantage. The company then attacked the name “China's first domestically produced cryoablation product approved for commercialization to treat atrial fibrillation,” and this also went bankrupt when minimally invasive icemagic cryoablation equipment was approved for marketing by the State Drug Administration. In this context, it has become unknown how many cups Kang Feng Bio can get.

The high blood pressure cryoablation system is the next product soon to be commercialized, which is highly anticipated by the company.

The Zhitong Finance App learned that the company's Cryofocus cryoablation system is a self-developed cryoablation system designed to treat high blood pressure. Specifically, RDN is a minimally invasive procedure that aims to transfer energy to overactive nerves in the kidneys (whose activity is one of the causes of high blood pressure) to reduce their activity and treat high blood pressure. The Cryofocus cryoablation system transports liquid nitrogen to the target area of the renal artery for cyclic ablation and damage nerve tissue through the formation and reheating of ice balls, thus achieving the goal of treating high blood pressure. Kang Feng Biotech pointed out that frozen balloons melt the sympathetic nerve of the kidney and have the advantages of complete nerve damage, accurate ablation position, low vascular endothelial damage, and difficulty in forming blood clots.

Judging from market demand, there are many cases of hypertension in China, and the incidence rate is showing a continuous upward trend. From 297 million in 2016 to 326 million in 2020, the compound annual growth rate is 2.3%, and it is expected to further increase to 390 million in 2030. Among them, up to 10% to 20% of patients have refractory hypertension, that is, their blood pressure cannot meet the standard after taking three or more antihypertensive drugs. The data shows that in 2021, China's antihypertensive drug market will exceed 100 billion yuan. In the face of such a huge market, alternative treatments for high blood pressure medications are very attractive.

Therefore, there is still a medical need for effective and long-term replacement therapy for the treatment of uncontrolled and intractable hypertension. RDN therapy is one of the few clinically proven treatments to treat intractable hypertension, and has many advantages over other traditional treatments.

In November 2023, America's first percutaneous renal sympathectomy (RDN) product was approved, from Recor Medical's Paradise URdN system to treat high blood pressure. Nine days later, Medtronic's Symplicity Spyral radiofrequency ablation system was also approved by the FDA, becoming the second RDN product approved in the US to be used to medicate patients with uncontrolled hypertension.

However, in the Chinese market, as of June 30, 2023, there are no commercialized RDN products in China. Frost & Sullivan pointed out that by 2030, the size of China's RDN product market is expected to rapidly grow to 1.07 billion yuan, so pioneers with advanced product characteristics in this market will occupy a considerable share of the market.

Kangfeng Biotech's Cryofocus cryoablation system was approved by the State Drug Administration as an innovative medical device in February 2017, and is therefore eligible for the rapid review and approval process. The company completed the feasibility clinical trial of the product under development in July 2018, and carried out confirmatory clinical trials in July 2019. It was certified as a breakthrough device by the US FDA in December 2022. The company emphasized in its annual report that it is committed to making the product under development the world's first cryoablation product specifically aimed at treating high blood pressure, and it is expected that the product will be approved for sale in China in the second half of 2025. However, it should be noted that currently seven Chinese market participants are developing RDN products in clinical trials, and it is still unknown whether Kangfeng Biotech can take the lead.

Overall, although “good news” continues, Kang Feng Biotech's market prospects are still facing a lot of uncertainty. With strong research and development capabilities, Kang Feng Biotech received the title of “the first domestic refrigeration intervention stock”, but under multiple crises such as the main product losing its first-mover advantage and uncertain prospects for key products, the company's development prospects are uncertain, and it is not surprising that its stock price continues to bottom out.