Recently, Weitai Medical Devices (Hangzhou) Co., Ltd (hereinafter referred to as "Weitai Medical") submitted a prospectus to the Hong Kong Stock Exchange, intending to be listed on the main board of Hong Kong.
Founded in 2011, Microtek is a high-tech enterprise engaged in the research and development of medical devices for the diabetes industry, aiming to reshape the monitoring, treatment and management of diabetes through a closed-loop solution that dynamically monitors and controls blood glucose levels. According to Scorchlight Consulting, Microtek is the only company in the world that has both a patch insulin pump and a calibration-free continuous glucose monitoring system approved for marketing.
The prospectus shows that Microtek Medical's operating revenues for 2019 and 2020 will be $51.863 million and $75.277 million, respectively, with corresponding R&D expenditures of $500.60 million and $82.009 million, respectively, and corresponding losses for the year of $78.614 million and $121 million, respectively.
Like many innovative biotech companies, Microtek Medical is not profitable, and its losses are mainly due to the financial treatment of equity incentive payments.
Diabetes is one of the most prevalent chronic diseases in the world, and as a populous country, the number of diabetic patients has been growing in recent years.
According to a Scorch Consulting report, the global prevalence of diabetes was 486.9 million in 2019 and is expected to reach 607.6 million in 2030. According to the same source, the prevalence of diabetes in China will be 119 million in 2019 and is expected to reach 143 million in 2030.
>>>> Patch Insulin Pump Product Layout
As early as the 1960s, attempts were made to mimic physiologic insulin secretion with continuous insulin subcutaneous infusion, and in the late 1970s mechanical insulin delivery devices began to be used, which was the The prototype of the insulin pump.
Since then, two main types of insulin pumps have been developed: the line-type and the tubeless patch-type, of which the patch-type insulin pump not only has the advantages of smaller device size and easier portability, but also avoids the many problems associated with catheters and increases patient adherence to the treatment regimen.
Traditional in-line insulin pumps are equipped with a pumping mechanism and insulin reservoir that delivers insulin through a long tube to a body-worn infusion device. They are usually large and have a high-dose button that allows the user to correct blood glucose levels by injecting a large dose of insulin during meals or when blood glucose is high, or to set a basal rate of insulin infusion, or to hold off on insulin infusion if necessary. Products such as Medtronic and SOOIL are designed with in-line insulin pumps.
Patch-type insulin pumps are more compact, eliminating the inconvenience of external tubing in traditional line-type insulin pumps and reducing the therapeutic risks associated with kinking, bending, and pulling of external tubing.
However, due to the high barriers to the comprehensiveness of patch insulin pumps, involving mechanical, electronic, software, materials, sensors, total integration and other fields, and the product is a therapeutic device, the reliability and safety requirements are very high. In recent years, a number of companies and teams at home and abroad have made attempts in this regard, but frequently faltered.
In the layout of diabetes management, Microtek Medical has long been targeting the research and development of patch-type insulin pumps, focusing on breaking through the difficulties in the development of this insulin pump, and successfully developed the core product Equil and achieved commercialization. It is understood that Equil is the world's second commercialized semi-throwing use of patch insulin pumps, and is also the first domestic patch insulin pump approved in China and the EU at the same time.
The first patch insulin pump on the market today is the Omnipod series from Insulet. Unlike the Omnipod, which has a disposable design, the Microtek Equil has a semi-disposable design.
>>>> Blood Glucose Monitoring Product Layout
From the perspective of Microtek's vision to reshape the management of diabetes, it is clear that the Microtek medical layout is not limited to a single diabetes control, but that blood glucose monitoring systems, as an important means of blood glucose management for diabetic patients, are also part of the product portfolio of Microtek. The product layout is also within the microtech medical product layout.
In fact, as early as 2013, Microtek launched a blood glucose monitoring system, but this product is not very different from the existing blood glucose system systems on the market. With the concept of continuous glucose monitoring (CGM) hot, Microtech Medical also began to layout in this direction, and in 2018 officially launched the clinical trial of calibration-free, real-time continuous glucose monitoring product AiDEX G7.
Compared to traditional glucose monitoring products, continuous glucose monitoring system (CGMS) can continuously and dynamically monitor glucose changes throughout the day, providing reliable and comprehensive glucose information. In terms of usage, CGMS improves diabetic patients' adherence to their treatment regimen to a certain extent by simplifying the blood glucose monitoring and management process and making the entire process painless.
The AiDEX G7 is known to be the world's second commercially available calibration-free, real-time continuous glucose monitoring system. Since its launch, AiDEX G7 has demonstrated various advantages over traditional glucose monitoring systems, including real-time monitoring, reduced risk of hyper/hypoglycemia, and improved adherence to treatment regimens (without the need for routine finger-prick blood measurements).
Although the AiDEX G7 is not approved in China at this stage, the product received CE marking in September 2020 due to its excellent performance and effectiveness, and the application for a domestic registration certificate is currently underway.
In view of the blood glucose meter market for the red sea market, so the microtech medical only continuous glucose monitoring system as one of the all-round management of diabetes; In contrast, the patch insulin pump is microtech medical more important products, which overcame some of the drawbacks of the conventional injection method, and compared with the traditional tubing pump with more convenient, more accurate infusion and other advantages, and semi-throwing insulin pump in the domestic also The half-throw insulin pump is still a blue ocean market in China.
In December last year, Microtek Medical announced the completion of 575 million yuan of Series D financing, led by Taikang Investment's Taikang Qianzhen Fund, jointly led by Tencent and IDG Capital, followed by Everbright Holdings, CICC Pucheng, Sanzheng Health, etc., and the original shareholders Qiming Venture Capital, Eli Lilly and Company Asia Fund, Tatsuo Takashi, and China Fang Mothers Fund continue to participate in the investment.
According to the prospectus information, previously, Microtek Medical had completed three rounds of financing in 2016, 2017 and 2018, with financing amounts of 31 million yuan, 120 million yuan and 136 million yuan in A, B and C rounds.
The fact that Weitai Medical can continue to get the favor of capital is obviously inseparable from its excellent research and development capabilities and the successful development of high-quality products.
As for the team, the founders and core R&D members of Microtech have many years of R&D experience in the industry, and the R&D team is a collection of interdisciplinary talents from the fields of mechanical engineering, electrical engineering, software engineering, biomedical engineering, and artificial intelligence.
From the perspective of R&D investment, Microtek Medical's R&D expenditures in FY2019 and FY2020 are 5,060,000 yuan and 82,009,000 yuan, respectively, which are both more than 35% of the total expenditures, and this figure is still rising.
In terms of product coverage, over the past decade, Microtek Medical has developed a strong and comprehensive product portfolio covering multiple product lines such as patch insulin pumps and continuous glucose monitoring systems (which provide the foundation for a closed-loop artificial pancreas) IVD devices such as glucose monitoring systems and instant testing devices.
In addition to the already launched Equil and AiDEX G7 products, Microtek Medical is also working on an improved product pipeline, with plans to expand the range of products to include a closed-loop artificial pancreas, a second-generation applanation insulin pump, AiDEX X, and IVD devices.
For the development of artificial pancreas, Microtek Medical has completed the relevant market and feasibility studies in the first quarter of 2021 and expects to complete the engineering validation of the artificial pancreas in the first half of 2022.
In addition to its diversified product portfolio, Microtek Medical has also developed a series of diabetes management solutions and endeavors to establish a cloud-based big data diabetes management platform, integrating the Company's products using big data and artificial intelligence as a means.
At this stage, Microtek Medical's revenue growth is mainly due to the sales growth of its core product, Equil. Since its launch in 2018, Equil has been sold or distributed to 747 hospitals in the PRC. revenues derived from the sales of Equil account for 47.6% and 46.2% of Microtech Medical's total revenues in 2019 and 2020, respectively.
Equil's catheter-free, lightweight design allows users to manage their diabetes privately, conveniently and safely compared to traditional in-line pumps. Other features include a user-sensible vibration alarm under clothing, and the pump's own insulin infusion high-dose button that can be activated for easy infusion even when the wireless PDA is not present. Additionally, Equil offers comparable or superior performance to its major counterparts due to its increased safety, superior accuracy, and semi-disposable use.
In September 2017, Equil was granted marketing authorization for adult use by the State Drug Administration in China and CE marking in the European Union in the same year. As of the last practicable date (May 5, 2021), Equil has been successfully marketed in more than 15 countries in Asia Pacific, Europe, the Middle East, Africa, and Latin America.In February 2021, Microtech Medical submitted a 510(k) premarket notification to the FDA, and expects to receive FDA approval in 2022.
In the meantime, Microtech Medical is embarking on the development of a second-generation stick-on insulin pump, which will be fully optimized in terms of product size, water resistance, adaptability to different sizes of insulin reservoirs, and user experience. It is believed that sales of Equil will continue to be a significant driver of Microtech's revenue growth over the next period of time.
In addition, the AiDEX G7 is a significant component of the Company's revenue.
As a company with commercially available products in both patch insulin pumps and calibration-free continuous monitoring systems, this portfolio of products provides patients with an integrated model of diabetes management that combines monitoring and treatment, and creates the foundation for the company's subsequent development of a closed-loop artificial pancreas.
The artificial pancreas has long been recognized as one of the disruptive solutions for diabetes monitoring, treatment, and management, effectively combining an insulin pump with a continuous glucose monitoring system through a series of control algorithms to enable continuous monitoring, treatment, and management of blood glucose levels.
During application, the artificial pancreas can automatically adjust insulin delivery based on continuous monitoring of blood glucose levels, reducing the risk of hyperglycemia or hypoglycemia and minimizing manual handling by the patient. If Microtek Medical can successfully launch the artificial pancreas product in the future, it will definitely usher in a greater development space for the company.
As can be seen from Microtek Medical's 2019 and 2020 revenue data, although R&D investment accounts for most of the company's total expenditures, the company has also invested a large amount of resources in sales layout, and the investment is increasing.
As of December 30, 2020, Microtech Medical had 370 distributors, according to the prospectus. As at the Latest Practicable Date, the Company had 120 internal sales and marketing staff covering product sales in 30 provinces, municipalities and autonomous regions in China and 60 countries overseas. With a strong network of distributors, Microtek Medical has a global presence, including the Asia Pacific region, Europe, the Middle East, Africa and Latin America.
In terms of sales, Microtech Medical uses distribution as an important sales model. For the years ending December 30, 2019 and 2020, Microtech Medical's total sales to distributor customers were $51,251,000 and $73,277,000, respectively, accounting for 98.8% and 97.3% of revenue, and the Company's five largest customers are distributors.
At this stage, Microtek Medical is in the early stages of marketing and promoting the stick-on insulin pump and continuous glucose monitoring system. According to the prospectus information, Microtek Medical is also making new attempts in sales path expansion.
Currently, Microtek is actively building communication channels with product users and implementing a user-centered and clinical data-based sales strategy, which also helps Microtek to develop more products based on patient experience.
In addition, Microtek Medical is actively building partnerships with commercial insurance companies to help Microtek Medical's products enter the market more efficiently in terms of broadening promotional channels, and to further increase product penetration in the diabetes community.
In terms of revenue figures, although Microtek Medical is still not profitable at this stage, it has achieved a 45% year-on-year growth in revenue between 2019 and 2020, and has been increasing its investment in research and development. In the long run, when more products are subsequently landed, the company's R&D investment towards the payback period, with a strong sales network, Microtech Medical has the ability to occupy the high ground in the future market.