Yinyi Biotech Halts ChiNext IPO Amid Intense Pressure from Volume-Based Procurement

Hit by the centralized procurement, a "unicorn" in drug-coated balloons, Yinyi Biotech, has halted its IPO on the ChiNext Board.

Source of the image: SZSE official website

On the evening of March 21, 2023, the ChiNext Board of the Shenzhen Stock Exchange's official website showed that Liaoning Biomedical Materials R&D Center Co., Ltd. (hereinafter referred to as "Yinyi Biotech") withdrew and terminated its IPO.

Yinyi Biotech's IPO application was accepted by the Growth Enterprise Market on June 27, 2022. It plans to raise 1.6775 billion yuan. The IPO sponsor is Guosen Securities, the accounting firm is Grant Thornton (Special General Partnership), and the legal counsel is Beijing Deheng Law Offices.

Yinyi Biotech's application for this issuance and listing adopts the specific listing standard under Rule 2.1.2 of the Shenzhen Stock Exchange Growth Enterprise Market Listing Rules: The net profits for the last two years have been positive, with a cumulative net profit of no less than 50 million yuan.

Official website information shows that Yinyi Biotech was established in October 2004, listed on the "New Third Board" in December 2015, and delisted in April 2020. Yinyi Biotech is professionally engaged in the research, production, and sales of Class III interventional medical devices such as cardiovascular stents. It is a national high-tech enterprise and a national innovative pilot enterprise. The Polymer-free micro-blind hole drug-eluting cardiac stent and drug-eluting balloon developed by Yinyi Biotech have obtained authorized Chinese invention patents, filling a domestic gap in China. The company is a technological leader in the new generation of drug-eluting stents and coronary drug-eluting balloons in China.

The prospectus shows that all of Yinyi Biotech's approved and marketed products are Class III medical devices, including drug-eluting balloons, balloon dilatation catheters, drug-eluting stents, bare metal stents, angiographic catheters, intracranial balloon dilatation catheters, and PTA balloon dilatation catheters, among which drug-eluting balloons and balloon dilatation catheters are the main sources of revenue.

It is worth noting that Yinyi Biotech's business has been severely impacted by the centralized procurement.

The prospectus shows that based on the realized revenue situation from January to November 2022, Yinyi Biotech comprehensively considered market demand and the impact of the pandemic, and estimated that the total revenue for 2022 would be approximately 401 million to 426 million yuan, representing a decrease of about 30.94% to 34.96% compared with the same period in 2021. This was mainly due to the centralized volume-based procurement of drug-eluting balloons, where the sales volume growth did not offset the price reduction caused by the procurement. Additionally, the adverse impact of the pandemic in some regions also negatively affected the revenue.

Yinyi Biotech, based on the operating costs and gross profit margin from January to November 2022, expects the operating costs for the fiscal year 2022 to increase by 21.49% to 29.26% year-over-year, with gross profit changing between -39.03% to -35.28% year-over-year, and the gross profit margin decreasing by 5.84 to 5.86 percentage points.

Yinyi Biotech's estimated net profit attributable to parent company for the 2022 fiscal year is approximately 175,314,600 to 200,220,600 yuan, with a year-on-year change of about -35.42% to -26.25%. In summary, Yinyi Biotech's net profit for the 2022 fiscal year faces a certain risk of decline.

The prospectus shows that the market for coronary vascular interventional devices faces intense competition, as well as pressure from bidding and centralized volume-based procurement leading to price reductions. Currently, there are many marketed products of coronary balloon dilation catheters, predominantly dominated by foreign brands. Competitors such as Terumo, Medtronic, Abbott, Boston Scientific, Penumbra Medical, and Huitai Medical pose a market competition risk for Yinyi Biotech.

Currently, 11 coronary drug-eluting balloon products have successively entered the Chinese market, with competitors such as B. Braun from Germany, Cardionovum, Shenqi Medical, and Lepu Medical. As more medical device companies in the same industry enter the market, Yinyi Biotech is facing intensified competition.

From January to June in 2019, 2020, 2021, and 2022, Yinyi Biotech's revenue mainly came from coronary drug-eluting balloons and balloon dilation catheters. The combined revenue of these two products accounted for 92.94%, 97.08%, 99.60%, and 99.76% of the company’s main business revenue, respectively. Among them, the revenue from drug-eluting balloons accounted for 68.38%, 82.55%, 93.14%, and 93.36% of the main business revenue, showing an increasing proportion year by year. These products have been largely subject to centralized volume-based procurement across China, resulting in a decrease in product prices and an anticipated increase in product sales.

Financially, Yinyi Biotech's operating income for the years 2019, 2020, 2021, and January-June 2022 were 253 million yuan, 363 million yuan, 617 million yuan, and 239 million yuan, respectively. The net profits were 84 million yuan, 115 million yuan, 272 million yuan, and 109 million yuan.

The prospectus shows that the proceeds from this offering are intended for the following purposes:

The prospectus shows that Ms. Dong Heyan collectively controls 53.33% of Yinyi Biotech's shares, making her the controlling shareholder and actual controller of Yinyi Biotech.

Yinyi Biotech Equity Structure

Source of the image: Company announcement

The prospectus shows that Professor Dong Heyan, born in 1958, is a Chinese national with no permanent residency rights abroad. He is an expert entitled to special subsidies from the State Council, holds a master's degree, and currently serves as the Chairman and General Manager of Yinyi Biotech.

Professor Dong Heyan, the founder, chairman, and R&D leader of Yinyi Biotech, is an authoritative expert in the field of vascular interventional medical devices in China. She is an expert enjoying special subsidies from the State Council, a National Second-Level Professor, the vice-chairman of the China National Technical Committee on Surgical Implants and Orthopedic Devices Standardization, the chairman of the Subcommittee on Cardiovascular Implants of Surgical Implants, the president of the Surgical Implant Specialized Committee of the China Association for Medical Devices Industry, a council member of the Chinese Society of Mathematical Pharmacology, and a member of the 11th Liaoning Provincial Committee of the Chinese People's Political Consultative Conference. She has also served as an associate advisor for doctoral dissertations at Tsinghua University.

Professor Dong Heyan has been dedicated to the research and development of interventional devices such as cardiac stents and balloon catheters since 1995, possessing strong innovative capabilities and extensive industrialization experience in the field of biomedical materials for cardiovascular interventional devices.

Professor Dong Heyan led the team to successively preside over and complete several national key projects, including the "Tenth Five-Year Plan" National Science and Technology Key Project "Development of Catheters and Stents for Interventional Treatment," the 2005 National 863 Program Guiding Project "Development of Tissue Engineering Simulated Skin Technology," the 2005 National High-Tech Industrialization Special Project (First Batch) "High-Tech Industrialization Demonstration Project for Coronary Artery Metal Stents and Delivery Systems," the "Eleventh Five-Year Plan" National Science and Technology Support Program Project "Development of New Vascular Stents," the "Twelfth Five-Year Plan" National Science and Technology Support Program Major Product Development Project "Research and Development of Pulmonary Artery Vascular Stents and Aortic Covered Stents," and the Ministry of Science and Technology's "Science and Technology Supporting Economy 2020" Key Special Project "Intravascular Targeted Drug Delivery System." These projects demonstrate profound technical expertise.

Professor Dong Heyan led her team to adhere to the principle of balancing technological research and application development. They independently developed several cardiovascular interventional medical devices, including coronary metal stents, coronary stent delivery systems, drug-coated coronary stent systems, and drug-eluting balloons, establishing a system for the development of medical device products. Professor Dong Heyan has been awarded the China Patent Excellence Award, the Second Prize of Liaoning Province Patent, the Second Prize of Liaoning Province Science and Technology Progress, the Outstanding Award of Liaoning Province Women Inventors Award, the First Prize of Dalian City Patent Award, and the First Prize of Dalian City Science and Technology Progress Award. She has also received honorary titles such as "Outstanding Entrepreneur of Dalian City for Implementing Invention Achievements."