One week after the release of the 2023 earnings report,WEGO ORTHOThe chairman resigned voluntarily.

On the evening of March 8,WEGO ORTHOSudden Disclosure: On March 8, the Board received a written resignation application from Gong Jianbo, Chairman of the company. Also submitting resignation applications were Yan Xia, Director, and Qiu Guoping, Director and Deputy General Manager.

Since its listing on the Sci-Tech Innovation Board on June 30, 2021,WEGO ORTHOPerformance has declined for two consecutive years. In 2022, the company's revenue fell by nearly 30%, and net profit dropped by more than 70%; entering 2023, the trend of dual declines in revenue and performance has not been curbed.

In 2023, due to the implementation of national volume-based procurement of high-value orthopedic consumables leading to a decrease in product ex-factory prices, as well as inventory price adjustments and purchase discounts provided to distributors, WEGO ORTHO's operating revenue declined by 37.61% year-on-year to 1.284 billion yuan, while the net profit attributable to shareholders of the listed company decreased by 81.29% year-on-year to 112 million yuan.

At the same time that Gōng Jiànbō and two other directors submitted their resignation reports, WEGO ORTHO swiftly nominated three new directors, including a former [name/title] who joined WEGO ORTHO in March 2023.Johnson & JohnsonChen Min, General Manager of WEGO ORTHO China, is expected to take over the leadership.

March 11, WEGO ORTHOSecuritiesA company representative responded to a reporter who called in as an investor, stating: "After Mr. Gong's resignation, he will no longer hold any position in the company but will continue to communicate with the company as a shareholder and advisor. After Mr. Chen Min takes office, he will also communicate with the public at an appropriate time and make arrangements for the company’s subsequent business plans."

Gong Jianbo, who has actively tendered his resignation, is a "veteran" of WEGO ORTHO, having worked for the company since its establishment in 2005.

Data shows that Jianbo Gong served as the General Manager of WEGO ORTHO from April 2005 to September 2019; and from 2013 to December 2020, he served as...WEGODirector; Chairman of WEGO ORTHO from June 2019 to present, leading WEGO ORTHO to grow stronger and successfully list on the STAR Market.

Since 2020, Gōng Jiànbō has received from listed companiesSalaries can reach up to tens of millions of yuan.

The prospectus and annual report data show that in 2020, 2021, and 2022, GONG Jianbo received total pre-tax compensation from the company of RMB 11.9561 million, RMB 11.9274 million, and RMB 10.9249 million, respectively.

During this period, WEGO ORTHO conducted multipleEquity Incentive, among which, before the listing of WEGO ORTHO (2020), the company launched a performance appraisal period from 2020 to 2023.Equity Incentive, stipulating that the company's net profit growth rate for each assessment period shall be no less than 25% compared to the previous year.

ButIn 2022 and 2023, WEGO ORTHO's performance declined.

According to the foregoingSecuritiesIntroduction by a department insider, this timeEquity IncentiveThe shares involved will only be granted by half, and "Mr. Gong is not on the incentive list."

In July 2019, the General Office of the State Council issued the "Reform Plan for the Governance of High-value Medical Consumables." Various provinces, cities, and regions in China have successively begun exploring volume-based procurement of high-value orthopedic consumables, involving spinal, trauma, and joint类产品.

Since then, multiple batches of centralized volume-based procurement of high-value medical consumables have been organized successively, led by the National Healthcare Security Administration, provincial alliances, and other entities.Among them, the national spinal product group procurement implemented in September 2022 directly hit WEGO ORTHO's "Achilles' heel."

Data shows,In 2021, WEGO ORTHO's spinal product revenue reached 1.02 billion yuan.(Accounting for nearly half of the company's total revenue, it is the largest source of business income), with a gross profit margin as high as 89.86%. WEGO ORTHO holds approximately 10% of the market share in the spinal field in China.Market share among other domestic manufacturers, second only toJohnson & Johnson、Medtronic, ranking third in China.

In this round of spinal product procurement, although WEGO ORTHO successfully secured a 24.3% share, according to the procurement agreement, the first-year intended procurement volume is 1.09 million sets, accounting for 90% of the total demand from medical institutions in China. Based on this, WEGO ORTHO's market share may increase from approximately 10% to about 22.87%.But due to the average price reduction of 84%, the market space has also been significantly compressed.

From 2021 to 2023,WEGO ORTHO's second largest business source —— trauma products have also been included in multiple rounds of centralized procurement., including the 2021 Henan Twelve-Provinces Alliance (YU-Jin-Gan-E-Hu-Qian-Dian-Gui-Ning-Qing-Xiang-Ji) and the 2022Beijing-Tianjin-HebeiIn the 3+N Alliance centralized procurement, the average price reduction for trauma products was 88.65% and 83.48%, respectively.

WEGO

As WEGO ORTHO's performance declines, the major shareholderWEGO ORTHOSeems to start "panic".

On January 30, 2024, WEGO ORTHO released its full-year performance forecast for 2023. The announcement shows that the estimated revenue (including consolidated companies) during the reporting period will decrease by 2% to 5% compared to the same period last year, while net profit will decrease by 25%-30% year-on-year, marking the largest decline in net profit since 2013.

It frankly stated in the announcement that the reason for the poor performance was due to different businesses.Medical DeviceAnd consumable products, the unit selling price has been reduced due to bulk procurement across China or in various regions. Among them, the orthopedic business has been particularly affected.

In 2021, the revenue from WEGO ORTHO products (i.e., the revenue contributed by WEGO ORTHO) accounted for 16.2% of the total revenue, making it the company's second-largest business. However, by the first half of 2023, this figure had dropped to 11.56%, with orthopedic revenue falling below interventional products and pharmaceutical packaging businesses, ranking fourth.

To alleviate performance and financial pressures, after WEGO ORTHO, WEGO Holdings has begun attempting to spin off another subsidiary, Shandong Weigao Blood Purification (WEGO Blood Purification). In December 2023, the IPO application of WEGO Blood Purification was accepted by the STAR Market Main Board, and on January 29, 2024, the status was updated to "under inquiry."

However, in the eyes of market participants, since the second half of 2023, with the adjustment of the IPO rhythm and the ongoing impact of the medical anti-corruption campaign, it remains uncertain whether WEGO Blood Purification can successfully pass the test.

During the reporting period, which includes the years 2020, 2021, 2022, and the first half of 2023 (January to June), WEGO Blood Purification achieved revenues of 2.642 billion yuan, 2.911 billion yuan, 3.426 billion yuan, and 1.685 billion yuan respectively. The year-on-year growth rates for 2021 and 2022 were 10.15% and 17.71%, respectively. During the same period, the company's net profits reached 297 million yuan, 260 million yuan, 315 million yuan, and 229 million yuan, with year-on-year growth rates of -12.41% and 21.22% for 2021 and 2022, respectively.

At the same time, WEGO Blood Purification has a high proportion of related-party transactions. During the reporting periods, the amounts for purchasing goods/receiving services from related parties were 4,875.789 million yuan, 6,311.925 million yuan, 7,838.775 million yuan, and 4,211.287 million yuan, respectively, accounting for 36.13%, 40.50%, 40.07%, and 44.19% of the operating costs in the respective periods, showing an increasing proportion year by year.

During the reporting period, WEGO Blood Purification's accounts receivable balance from related parties continued to rise year by year. As of June 2023, there was still 120 million yuan in accounts receivable, accounting for 12.11% of the total accounts receivable.

"Related-party transactions have always been a key point in IPO reviews. It's not that a high proportion of related-party transactions will necessarily fail the review; what regulators mainly focus on is the fairness of the pricing of related-party transactions, whether they involve any transfer of benefits, and whether the issuer has independent operating capabilities," said a senior investment banking professional from a medium-sized brokerage in South China.

WEGO Blood Purification IPO on the Horizon, WEGO Group Sets Sights on Already Listed WEGO ORTHO.

Following the release of the 2023 earnings report, WEGO ORTHO's 19-year "veteran" Gong Jianbo was hastily asked to resign.The company simultaneously elected Chen Min and two others as directors.。

Data shows that Chen Min holds a bachelor's degree from Shanghai Jiao Tong University School of Medicine and...Guo HuaMaster of Business Administration (MBA) from Washington University Olin Business School. Served Zimmer China from 1999 to 2007; served Johnson & Johnson Diversey Asia-Pacific Marketing Department from 2008 to 2009.2009-2023 Served at Johnson & Johnson Medical (Shanghai) Ltd., holding various positions in the orthopedics department.EducationIncluding the Deputy Director of Marketing Services, Director of Joint Business of the Orthopedics Division, Director of Trauma Business of the Orthopedics Division, and several key management positions in the Ethicon Surgical Division, etc.，From 2018 to 2023, served as the General Manager of the Orthopaedics Division in China for Johnson & Johnson Medical (Shanghai) Co., Ltd., responsible for the business development strategy, innovative market growth, and product line management of the Orthopaedics Division, and was one of the members of the Board of Directors for Johnson & Johnson Medical (Shanghai) Co., Ltd. in China.He is also a member of the orthopedic leadership team in the Asia-Pacific region and serves as the standing director of the Advanced Medical Technology Association in China.

In the eyes of some market participants, Chen Min, who has an impressive track record with multinational pharmaceutical companies,WEGO ORTHO may focus on "going overseas" as the next strategic step.

In fact, the impact of centralized procurement affects the entire orthopedic industry.Besides WEGO ORTHO,CHUNLI MEDICAL、Dabo MedicalOrthopedic medical device manufacturers in China have all experienced a decline in performance.

In 2023,CHUNLI MEDICALAchieved total operating revenue of 1.209 billion yuan, an increase of 0.58% compared to the same period last year; achieved a net profit attributable to the parent company's owners of 278 million yuan, a decrease of 9.72% compared to the same period last year.Dabo MedicalRevenue in the first three quarters of 2023 decreased by 8.86% year-on-year; net profit attributable to shareholders decreased by 54.03% year-on-year.

To address the performance pressure brought by centralized procurement, major orthopedic companies are actively seeking changes, including expanding overseas markets and exploring new fields.

Public information shows,WEGO ORTHO currently has 28 overseas distributor clients, with products sold in multiple countries including Malaysia, Russia, Australia, and Brazil.Previously, the parent company WEGO ORTHO signed a business cooperation agreement with the Saudi TIJAN Group, aiming to strengthen cooperation in Egypt and Saudi Arabia.Medical Device、Medical ServicesStrategic cooperation in key medical application areas such as overall solutions for healthcare systems.

Regarding the strategic planning for 2024, WEGO ORTHO stated, "The company will further advance the transformation of its sales model, strengthen meticulous performance management, and comprehensively enhance the market share of its products. It will increase R&D investment in key development product lines such as spinal, trauma, joints, sports medicine, bone repair materials, and tissue repair materials, while further accelerating...New Materials, New surgical techniques,3D Printing, ActiveMedical Device, Orthopedic Rehabilitation, Pain Management, OrthopedicsRobotThe advancement speed of strategic layout projects such as these; continuously promoting the digital transformation and cost reduction at the production end, making the production end transparent and visualizable to achieve rapid delivery expectations; establishing an agile and efficient organizational system, simplifying business models and internal processes, improving overall employee efficiency and per capita output, and building an orthopedic medical device national brand with continuous innovation capabilities and highly efficient operational abilities."