Source:Shanghai Securities News
After being blocked from listing in a shell three years ago, Shandong Weigao Orthopaedic Materials Co. As a leading domestic orthopaedic materials company, Weigao Orthopaedics intends to issue 41,414,200 shares to raise funds to enhance the production capacity of the company's existing orthopaedic implantable medical devices for spine, trauma and joints, to break through the production capacity bottleneck, to improve the product line, and to enhance the ability of import substitution.
The company said, will continue to plough into the field of orthopaedic medical devices, continue to focus on technology and product innovation and research, adhere to the continuous updating of the product iteration, consolidate the industry position in the domestic market, enhance the influence of the domestic brand, and gradually narrow the gap with the international giants and realize beyond, and is committed to becoming a first-class orthopaedic innovative enterprises.
Layout of orthopedic gold track
The prospectus shows that in the field of domestic orthopedic implantable medical devices, Weigao Orthopaedics is one of the leading enterprises with a complete product line, a leading scale, and strong market competitiveness.
Since its establishment in 2005, the company has been located in the field of orthopedics. In 2019, the company's sports medicine product "non-absorbable wire anchor system" obtained the product registration certificate, further comprehensive coverage of orthopaedic implantation segments.
According to the relevant research report of Point Information, there are currently about 370 manufacturers in the domestic orthopedic medical device market, of which about 270 are domestic enterprises, and the overall competition pattern is relatively decentralized. Large multinationals from Europe, the US and other developed countries dominate the domestic market, with a market share of more than 60%.
Weigao Orthopaedics is the only domestic manufacturer among the top five companies in the orthopaedic implantable medical device market, with a market share of 4.61% in 2019, and the gap between it and some foreign giants in terms of market share is relatively small. In terms of segmentation, in the spine implantable medical device market, Weigao Orthopaedics has a market share of 7.92% in 2019, ranking third among all manufacturers, completing the overtaking of some foreign giants; in the trauma implantable medical device market, Weigao Orthopaedics has a market share of 4.66%, ranking fifth among all manufacturers; in the joint implantable medical device market, the company has a market share of 3.53%, the ranked seventh among all manufacturers.
Orthopedics, as a key segment in the medical device field, has always been the focus of various capitals. Due to the high correlation between the incidence of orthopedic diseases and age, based on China's large population base, accelerated aging process and rising medical demand, China's orthopedic implantable medical device market sales revenue from 2015 to 2019 CAGR of 17.03%. According to the relevant research report of Scale Point Information, based on 30.8 billion yuan in 2019, China's orthopedic implantable medical devices market is expected to be around 60.7 billion yuan by 2024, with a CAGR of around 14.51% over the next five years.
High growth meets capacity ceiling
Weigao Orthopaedics is a subsidiary of Hong Kong-listed Weigao Corporation, which directly holds 56.47% of the company's shares and controls 81.8% of the company's shares. As such, the listing of Vigor Orthopaedics on the SGX-ST constitutes a spin-off.
The company said, Hong Kong listed companies spin off subsidiaries listed need to obtain the approval of the Hong Kong Stock Exchange, has submitted to the Hong Kong Stock Exchange application documents for the spin-off, has not yet obtained the approval of the Hong Kong Stock Exchange, there may be a risk that the company's spin-off listing can not be approved by the Hong Kong Stock Exchange.
In fact, Weigao Orthopaedics as early as 2016 had launched a spin-off return to A-share action, when Weigao Orthopaedics 100% equity priced at 6.06 billion yuan to be placed in Henderson Daxin, the relevant parties committed Weigao Orthopaedics 2016, 2017, 2018 net profit of not less than 308 million yuan, 374 million yuan and 469 million yuan respectively. However, it was eventually terminated in 2017 due to the unclear policy of returning overseas assets to the market through shelling.
The financial data disclosed in the prospectus, from 2017 to 2019, the company realized operating income of 906 million yuan, 1.211 billion yuan and 1.574 billion yuan, respectively, and net profit attributable to the owners of the parent company of 203 million yuan, 324 million yuan and 442 million yuan, respectively, with a compound growth rate of 31.83% and 47.6% for revenue and net profit, respectively; During the same period, the gross profit margin of the company's main business was 74.22%, 79.55% and 82.54% respectively, maintaining a high level and continuous growth.
The company is currently facing the problem that production has reached saturation, the main products of the capacity utilization rate is high, including spine, trauma and joint products in 2019 capacity utilization rate reached 104.9%, 89.84% and 93.7%, respectively, the lack of production capacity has become one of the main factors limiting the expansion of the company's future scale. The orthopedic implant production expansion project in this fundraising project will increase the production capacity of spinal, trauma and joint products by 2.97 million, 3.45 million and 250,000 respectively, and it is expected that the company's production capacity will be gradually released after the fundraising project is put into operation, and profitability will be further enhanced.
Facing the challenges of "two-invoice system" and volume purchasing
Orthopaedic implantable medical devices are high-value and single-use, and are usually categorized as high-value consumables in the market. In recent years, the state has made frequent moves in the field of high-value consumables to govern and reorganize the industry.
In June 2016, the National Health Planning Commission, the National Development and Reform Commission and other nine ministries and commissions proposed the trial implementation of the "two-invoice system" in the field of medical device circulation; in March 2018, the National Health Planning Commission and other six ministries and commissions further clarified the gradual implementation of the purchase and sale of high-value medical consumables "two-invoice system". At present, Fujian, Shaanxi, Shanxi, Anhui, Zhejiang and other provinces are gradually implementing the "two-invoice system" in the field of orthopedic medical devices.In July 2019, the General Office of the State Council issued the "Notice on the Reform Program of the Governance of High-Value Medical Consumables", which explores the band purchasing in the field of high-value medical consumables. Currently, some areas in Jiangsu, Anhui, Fujian and other provinces are implementing band purchasing for some orthopedic medical device products.
For this challenge, Weigao Orthopaedics said that the reform of orthopaedic medical device circulation prompted the company to change the sales model to comply with the regulatory requirements, which affects the company's main business gross margin and sales expense ratio. 2017 to 2019, the company's sales expense ratio maintains a higher level and continues to climb, respectively 33.93%, 37.74% and 40.25%.
For volume purchasing, the company said, the core of volume purchasing is "volume for price", the current volume purchasing of high-value medical consumables is still in the state of a few provinces first, from the bidding practice, in the volume purchasing of the selection, the industry rankings of the top, the larger scale of operation of the manufacturers to win the bid proportion is higher, the head of the industry manufacturers have more obvious advantages. The head manufacturers of the industry have more obvious advantages. The Company will make preparations to actively participate in banded purchasing, carefully sort out the Company's product lines, coordinate planning, reasonably allocate the types of products to be placed in various provinces and cities and bidding, and strive to provide competitive quotations, and maintain and enhance the market share of the Company's products by winning the bidding of banded purchasing; at the same time, under the premise of guaranteeing the quality of the Company's products, the Company will reduce the cost of production of the products, as well as the selling expenses and other daily expenses, etc., in order to actively participate in banded purchasing in the long term. At the same time, under the premise of ensuring the quality of the company's products, we can reduce the production cost of our products, as well as the selling costs and other daily expenses, so as to provide sufficient price space for the long-term active participation in volume purchasing.