Shanghai Cell Bank Partners with Financial Institutions to Acquire Customers as It Pursues HKEX Listing

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Reporter of Blue Whale Finance, Shaoyu Ting

On April 30, Shanghai Cell Therapy Group Co., Ltd. ("Shanghai Cell"), an upstream company in cellular immunotherapy that focuses on cell storage services, also known as the "Life Bank," submitted an application for listing on the Main Board of the Hong Kong Stock Exchange, aiming to become the first stock in immune cell storage on the Hong Kong Stock Exchange. CICC and CCB International are the joint sponsors.

As "China's first and only company covering cellHealthcare"A company covering the entire value chain of health," Shanghai Cells mainly relies on binding shareholders such as Pacific Insurance and other financial institutions to acquire customers for its cell storage business. It then conducts cell collection through self-operated collection points and cooperation with third-party collection points. Afterward, the cells are sent to three cell storage banks in Shanghai, Beijing, and Henan for storage. Compared with other cell storage banks, the person in charge of Shanghai Cells' operations in the Beijing area told Blue Whale Finance that Shanghai Cells' advantage over other cell cryopreservation companies in the industry lies in its qualification for cell drug research and development and its clinical trial base (hospital).

Recently, a reporter from Lanjing Finance, acting as a consumer, visited and investigated "Beijing Cell Therapy Group Co., Ltd.," a branch of Shanghai Cell located in Daxing, Beijing. It was found that the claim by Shanghai Cell that their storage facility in Shanghai is "almost full" may involve exaggerated marketing. The affiliated hospital, Eight Places Hospital, also appears unclear about the related cooperation for cell collection, and the immune cell drug product "BZDS1901," which is still in the experimental stage and has not yet recruited volunteers, seems to have already been put into use. Moreover, in the company's promotional materials, the product under research "BZDS1901" was mistakenly printed as "BZD1901."

How Much "Truth" Does the Shanghai Cell Prospectus Contain?

Leading Cell Storage Company Heads to HKEX

In 2013, Shanghai Cell Therapy Group was established. The current Chairman of the Board, Executive Director, and General Manager of Shanghai Cell is Qian Qijun, a student of Academician Wu Mengchao, known as the "Father of Chinese Hepatobiliary Surgery" and an academician of the Chinese Academy of Sciences.

At its inception, Shanghai Cell Therapy focused on the research and development of cell-based drugs. In 2015, it began offering immune cell storage services. By 2020, the company expanded its business into the field of oncology medical services, operating a private hospital named "Mengchao Cancer Hospital Affiliated to Shanghai University." In July 2023, the company launched its "Cheng Huang" series of cell-boosting products, including NMN and PQQ oral health supplements, which were once hyped as "longevity miracle drugs."

Currently, the company's business is divided into four major sectors: cell storage, cancer treatment, cell-based drugs, and cell recharging. It is the first and only company in China to cover the entire value chain of cell-based healthcare.

From 2021 to 2023, the total revenue of Shanghai Cell Therapy was 499 million yuan, 619 million yuan, and 760 million yuan, respectively, with net losses of 465 million yuan, 538 million yuan, and 484 million yuan, and gross profit margins of 56.2%, 49.5%, and 58.0%, respectively.

Among the four business segments, cell storage and related services account for nearly 80% of total revenue, generating a total income of 1.353 billion yuan over the past three years. In 2023, the gross margin for this segment was 79.7%. The revenue from oncology medical services accounted for nearly 20%, but the costs for this segment made up around 60% of the total costs. The cell drug products and services segment generated a total income of 5.999 million yuan over the past three years, while the cell charging products segment generated an income of 9.681 million yuan in 2023 alone.

Cell storage business is the main revenue source of Shanghai Cells, which is also the leader in China's cell storage business. Currently, Shanghai Cells occupies 40% of the cell storage market. According to CIC Consulting, in the past three years, based on the cumulative and incremental number of immune cell storage annually, Shanghai Cell Therapy ranked first in China’s immune cell storage market. In 2023, the company’s cell storage market share was 40.7%, while the second-largest player held only about 7.1%.

Currently, Shanghai Cell Therapy has established three cell storage banks in Shanghai, Henan, and Beijing, with a total storage capacity of 90.60 kiloliters. The Beijing cell storage bank began operations in June 2022 and is available for storing immune cells or autologous pluripotent cells (stem cells).

The prospectus shows that the storage capacity of each liquid nitrogen tank ranges from 500 liters to 800 liters. In 2023, the storage volume of the storage facility in the Shanghai area was 37,100 liters, with a utilization rate of only 66.2%; the total storage volume of the storage facility in the Henan area was 10,300 liters, with a utilization rate of 55.2%; the total storage volume of the storage facility in the Beijing area was 3,200 liters, with a utilization rate of 20.3%.

With utilization still not saturated, the company remains optimistic about the prospects of cell storage and is actively expanding storage centers and equipment. The prospectus shows that the IPO proceeds of Shanghai Cell Therapy Group are intended to be used for establishing new cell storage facilities, including site infrastructure construction, building new regional headquarters, and equipping these headquarters with deep-cold liquid nitrogen tanks, among others.

However, during the visit by Blue Whale Finance, it was found that there were discrepancies between the data Shanghai Cell used to promote its cell storage business and the data in its prospectus, which may involve exaggerated promotion.

On May 10, a reporter from Lanjing Finance visited Beijing Cell Treatment Group as a consumer. The regional business leader in Beijing introduced to the reporter that the company’s cell storage technology mainly utilizes low-temperature liquid nitrogen tanks for storage. Currently, the storage facility in Shanghai is "almost full," while the storage capacity in the Beijing area is 2 million units, with varying capacities per unit making it difficult to calculate.

Customer acquisition relies on financial institutions, and the cooperation with hospitals is "vague".

After the expansion of the storage center, Shanghai Cell faced a surge in "customer acquisition" pressure. As for how to acquire customers, Shanghai Cell also has its own strategies. The sales of Shanghai Cell's cell storage business are heavily reliant on financial companies.

According to the prospectus data, starting from 2019, Shanghai Cell established strategic cooperative relationships with insurance groups such as Pacific Insurance, Ping An Health, and other financial institutions to acquire end customers. During the reporting period, the revenue generated from cooperation with institutional partners accounted for 23.8%, 41.6%, and 42.6%, respectively.

Some clients of Pacific Insurance stated that the insurance company would organize tours for elderly customers to visit the Shanghai Cell Therapy Group and introduce them to purchase cell cryopreservation services. Some insurance companies even claimed that purchasing large insurance policies could come with free cell storage services as a promotion tactic.

On the basis of business cooperation, Pacific Insurance also joined the shareholder ranks of Shanghai Cell in 2021. The D-round financing in 2021 accumulated 610 million yuan, with a post-investment valuation of 7.11 billion yuan. The investors include Legend Capital, Baize Investment, Yuanda Equity Investment, Volcanic Stone Investment, Pacific Insurance, Haier Group, Jiuzhou Venture Capital, CCB International, and Shengshi Capital.

During the cell collection process, the prospectus shows that, apart from the four collection sites independently operated by the company in Beijing, Shanghai, and Henan, it also relies on collaborations with third-party collection sites. As of the end of 2023, the company had selected 27 third-party collection sites (including qualified clinics and hospitals).

The person in charge of the Beijing area said that the cell collection point in Beijing is "Beijing's Eight Great Places Hospital," a cooperative hospital of the company. Regarding this matter, a reporter from Lanjing Finance called the consultation center of Beijing’s Plastic Surgery Hospital of the Chinese Academy of Medical Sciences (Eight Great Places Plastic Surgery Hospital) for inquiry. The hospital responded, “The details of the cooperation project are unclear, but the hospital does have blood collection qualifications.”

The vague response from the collaborating institutions has cast a shadow over the standard practices of cell collection in Shanghai, but more concerning is that after cell collection and storage, Shanghai Cell claims to offer subsequent treatment services. The Beijing regional business head told Lanjing Finance that the company has a cooperative relationship with insurance companies. Purchasing an insurance policy through an insurance company can only offer complimentary cell storage, but purchasing cell cryopreservation directly from the company can include subsequent treatment services and other benefits.

Unapproved CAR-T therapy drugs have been put into use?

Compared with other cell cryopreservation companies in the industry, Shanghai Cell's advantage lies in its qualification for cell drug research and development and its clinical trial base (hospital). This was stated by the business leader in the Beijing area.

Currently, there are no CAR-T cell therapies approved for the treatment of solid tumors in China. The immune cell drug product "BZDS1901" developed by Shanghai Cell is the fastest progressing CAR-T therapy targeting MSLN for the treatment of solid tumors in clinical trials, and it is still in Phase 1 and 2 clinical stages. Shanghai Cell has not generated revenue from cell drug products that are still in the clinical stage (only a small portion of revenue has been generated from providing cell drug development services, mainly including CDMO and CRO services for corporate clients, i.e., contract research and outsourcing services provided to pharmaceutical and biotechnology companies).Medical Device IndustryProvide support).

Blue Whale Finance called the National Medical Products Administration, and the staff stated that if a company completes the filing for drug clinical trials, it can proceed with clinical treatment accordingly. Information from the Drug Clinical Trial Registration and Information Disclosure Platform shows that Shanghai Cell's investigational product "BZDS1901" is still in the experimental stage and has not yet recruited volunteers, with the initial information disclosure date being December 25, 2023.

Simply put, before 2023, Shanghai Cell was not qualified for CAR-T treatment, whether it was recruiting volunteers or directly treating patients. But what is the actual situation?

In the program introduction provided to reporters by Shanghai Cell Therapy, the price of the immune cell cryopreservation program ranges from 68,000 to 176,000 yuan. After purchasing the immune cell cryopreservation service, the company will "gift" two courses of cell therapy and one course of cell energization. The notes state that the cell therapy is for tumor-targeted immune cell treatment (as stipulated in the contract), currently mainly CAR-T therapy.

The Beijing business leader told reporters that in 2016, a Hong Kong director was diagnosed with anaplastic thyroid cancer. After undergoing surgery, chemotherapy, and other treatments without success, the director was introduced to the Shanghai Cell Therapy Group by a friend and received CAR-T treatment. After two courses of infusion, the treatment was successful, and the director has since undergone annual physical examinations at the company without any recurrence of the disease. The leader revealed that, as the director had not previously purchased cryopreservation services, the cost of treatment was 200,000 RMB per injection.

Regarding this matter, the reporter once again confirmed with another person in charge of the Shanghai area, but the person did not respond directly. The person acknowledged that the director indeed received CAR-T treatment and used a CAR-T drug independently developed by the company. However, patients currently storing cells at the company who have developed tumors are receiving free treatment. After the company’s drug is expected to hit the market, its estimated price will be 200,000-300,000 yuan per injection.

In this regard, the reporter consulted the director about the treatment process and corresponding costs of cell therapy in Shanghai. The director did not directly admit to paying for the treatment but only stated that different conditions incur different charges. If the cost in Shanghai is too high, the director can recommend another cell therapy group in Beijing to the reporter. The reporter noticed that in 2022, the director had publicly stated that he had been successfully cured after receiving CAR-T therapy in Shanghai. However, in the same year, the director signed a lifetime health management service agreement with another cell therapy group that he recommended.

Compared with the millions of dollars for CAR-T treatment, Shanghai Cell has offered a "bargain price." It raises doubts whether the CAR-T treatment provided by Shanghai Cell to its clients is a volunteer recruitment experiment or if they have actually put the therapy, which is still in the clinical trial stage, into use.

But it is clear that the sales personnel promoted the purchase of services as offering "free treatment." The promotional materials did not clarify that the CAR-T treatment "given" to customers was actually participation in a clinical trial. Moreover, in the company’s promotional brochure, the product under research, "BZDS1901," was mistakenly printed as "BZD1901."

Did Shanghai Cell conduct clinical trials in advance? Did it charge for the drug clinical trials? Regarding this issue, the reporter sent a letter to Shanghai Cell, but no response was received as of the time of publication.

State-owned Shareholders Endorse, Yaoji Technology Enters and Snatches Up 600 Million

In order to attract more customers, Shanghai Cell not only offers free CAR-T treatments but also gives away medical beauty products.

In the program introduction, the price of autologous pluripotent cell (stem cell) storage programs ranges from 60,000 to 198,000 yuan. For programs above 88,000 yuan, the company offers several medical beauty products as gifts, such as DPL intense pulsed light skin rejuvenation, Rejuran hydrating injection, Hiyato, and Botox-like products for selection. The gifted benefits can be used at the affiliated company "Zhengzhou Baize Medical Beauty Clinic."

Blue Whale Finance found that it was unable to query the specific location and merchant information of the medical aesthetics institution. The person in charge of the Beijing area of Shanghai Cells stated, "Don't worry, the medical aesthetics center is a subsidiary of our (Shanghai Cells) group. Among the top ten shareholders of the group, there are few individuals, and most have state-owned enterprise backgrounds, making it very secure."

The prospectus shows that the main shareholders of Shanghai Cell are Qian Qijun, Qian Qijun's spouse Yuan Xiaonan, Yaoji Technology (002605.SZ), Ningbo Yuanda Equity Investment, and Pacific Life Insurance, among others. As of the latest practicable date, Qian Qijun, the executive director, chairman, and general manager of Shanghai Cell, can exercise approximately 26.43% of the voting rights of Shanghai Cell, while the second largest shareholder, Yaoji Technology, holds 11.16% of the shares.

It is reported that after Shanghai Cell was established in 2013, Yaoji Technology invested 130 million yuan to acquire shares in Shanghai Cell, becoming one of the first investors of Shanghai Cell, holding 22% of the equity.

In 2019, due to the introduction of new strategic investors by Shanghai Cell, the equity held by Yaoji Technology was diluted to 14.2119%. In March 2020, Yaoji Technology stated its decision to no longer participate in the post-investment management of the cell company, withdrawing its director and relinquishing the qualification to appoint a director. By the end of 2020, Yaoji Technology's share of the earnings from its stake in Shanghai Cell had increased to 609 million yuan.

The prospectus shows that Shanghai Cell has received 8 rounds of financing in 9 years, with a total financing amount of nearly 2.08 billion yuan. Shanghai Cell is making a push towards the Hong Kong Stock Exchange with an overall valuation of over 7 billion yuan, but the authenticity of its prospectus seems to be questionable.

       Title: Partnering with Financial Institutions to Attract Customers, Shanghai Cell "Life Bank" Impacts the Hong Kong Stock Market