Hemo Bioscience Files for Hong Kong IPO Again with Full-Range Neurovascular Interventional Portfolio Amid Over RMB 1 Billion in Cumulative Losses

Due to the failure to pass the hearing within six months, leading to the expiration of the prospectus, it is not uncommon for companies to re-file their applications. HEMO is such an example.

According to Zhitong Finance APP, on February 25, HEMO made another attempt to list on the Hong Kong Stock Exchange, with Morgan Stanley, CICC, and Credit Suisse as its joint sponsors. It is reported that the company had previously submitted an application to the Hong Kong Stock Exchange on July 30, 2021.

The prospectus shows that HEMO was established in 2017 as a platform enterprise focused on innovative solutions in the vascular interventional field.

Currently, HEMO has established a full range of innovative interventional medical devices for neurovascular and peripheral diseases in China and across the broader Asia-Pacific region. Among these, the comprehensive product portfolio for neurointerventional devices covers all areas of ischemic stroke, hemorrhagic stroke, and neurovascular access.

Currently, the company has six products that have been commercialized, two products that have been approved by the National Medical Products Administration or its local counterparts, and 14 products in the development stage.

In recent years, 18A biopharmaceutical companies have been highly favored by the capital market. Most of these companies secured substantial financing shortly after their establishment, with relatively high valuations. According to the prospectus, since its inception, HEMO has completed four rounds of financing, raising approximately $138 million. Its investors include heavyweight pharmaceutical investors such as Hillhouse Capital, Lilly, Legend Capital, 3H Health, LAV, and OrbiMed. After the final round of Series C financing, HEMO's valuation reached $456 million.

Six Products Commercialized, Accumulated Losses Exceed 1 Billion

Despite the commercialization of several products, the company is still in a loss-making state.

The prospectus shows that the company started generating revenue in April 2020. In the first nine months of 2020 and 2021, HEMO's operating income reached 2.839 million yuan and 8.434 million yuan respectively. In April 2020, the company's TracLine® Vascular Access Catheter began sales. In April, July, and September 2021, the company’s FocuStar® Neuroballoon Catheter, Afentta® Aspiration Catheter, as well as aspiration accessory tubes and Mountix® microcatheters, gradually began sales. These products are all neurointerventional medical devices. In December 2021, the company's first peripheral interventional medical device, Privi Hemorrhoid Cooling Balloon, was commercialized. This also indicates that the company’s performance will further improve in 2022.

In terms of net profit, the company continued to incur losses during the performance period, with losses of 121 million yuan, 615 million yuan, and 334 million yuan, respectively, accumulating to over 1 billion yuan in total. However, these losses were mainly due to changes in the fair value of financial liabilities. As is well known, many companies on the Hong Kong stock market face similar situations where such fair values are generated from a series of financing rounds like Series A and Series B. After going public, there will no longer be such financial liability-related losses.

Excluding the fair value changes of financial liabilities, the company still incurred losses, with losses of 76 million yuan, 39 million yuan, and 58 million yuan realized during the performance period.

In terms of gross margin, the Company's gross margin decreased from 73.5% for the nine months ended September 30, 2020 to 69.1% for the same period in 2021, mainly due to the expansion of the Company's production capacity, which led to an increase in the number of production staff.

In terms of R&D investment, the company's R&D expenditures were 59.698 million yuan, 18.065 million yuan, and 21.606 million yuan, respectively. HEMO stated that it has a strong intellectual property portfolio. As of the latest practicable date, the company owns nine issued patents and 17 pending patent applications.

Notably, the company had five clients during the track record period, with revenue from its largest client amounting to RMB 2.6 million and RMB 8.3 million in 2020 and the first three quarters of 2021, accounting for 92.4% and 98.6%, respectively. According to the prospectus, the company has five distributors and 103 sub-distributors distributing its six commercialized products. Currently, the company’s distributors collectively cover 306 hospitals across 24 provinces and municipalities in China. However, in terms of revenue structure, only one distributor has achieved substantial sales results, while the other four have relatively low shipment volumes.

A Rich and Detailed Pipeline, Fully Seizing the Field of Neurointervention

The prospectus shows that the products commercialized by HEMO include TracLine Vascular Access Catheter, FocuStar Neuroballoon Catheter-Rx, Afentta Intracranial Thrombus Aspiration Catheter, Aspiration Accessories Tube, Mountix® Microcatheter, and Privi Hemorrhoids Cooling Balloon.

Although the company has commercialized multiple products, the market competition is relatively fierce. Moreover, many of the company's products are more akin to "small components," resulting in low market penetration and relatively high promotion difficulty.

Specifically, the TracLine vascular access catheter is mainly used for neurointerventional procedures and is typically used in conjunction with specific neurointerventional devices, such as stent retrievers, balloon catheters, coils, and flow diverters.

The number of neurointerventional surgeries for intracranial artery stenosis in China is not small. According to Frost & Sullivan, the number of such surgeries in China was 27,300 in 2020 and is expected to grow to 109,900 by 2025, with a compound annual growth rate (CAGR) of 32.1% from 2020 to 2025. Despite the large number of surgeries, the market size is not very large, with the market size of neurointerventional access devices in China being only 400 million yuan in 2020, and reaching only 1.6 billion yuan by 2025.

Not only that, but in 2020, the penetration rate of intermediate catheters (including the company's TracLine® vascular access catheter) was only 0.3%, and by 2025, it will still be just 1.1%. This shows that as an auxiliary product, the market promotion pressure is not small.

Besides, the market competition pressure for this kind of product is also very intense. As of the latest practicable date, the National Medical Products Administration has approved 27 intermediate catheters, of which 9 are from international manufacturers and 18 are from domestic manufacturers in China. Therefore, if the product is to be scaled up, it will naturally not avoid the risk of centralized procurement.

Looking at the company's thrombus aspiration catheter, this product is mainly used as an aspiration catheter for treating acute ischemic stroke. In 2017, the company received technology and patents from ICI to develop its main products, Afentta® Intracranial Thrombus Aspiration Catheter and HMC1-NAS Intracranial Thrombus Aspiration Catheter. Its primary Afentta® Intracranial Thrombus Aspiration Catheter (with an inner diameter of 0.071 inches or smaller) received approval from the National Medical Products Administration in May 2021 and was commercialized in China in July 2021.

There are two main types of stroke: ischemic stroke and hemorrhagic stroke. Acute ischemic stroke (AIS) refers to the condition that occurs when blood flow through the cerebral arteries is blocked by an embolus (i.e., thickened blood). AIS accounts for 69.6% to 70.8% of stroke events in China. With population growth and aging, the number of new AIS cases continues to rise.

Intravenous thrombolysis (IVT) and mechanical thrombectomy (MT) are the main methods for treating intracranial vascular diseases. Several studies have confirmed that ADAPT (a direct aspiration first pass technique) is a simple and rapid method to achieve good angiographic and clinical outcomes.

In the United States, the ADAPT procedure alone accounted for 41.3% of the total number of AIS MT surgeries in 2019. The use of SR technology alone and the combined use of aspiration and SR technology accounted for 29.3% and 29.3% of the total number of AIS MT surgeries in the same year, respectively. In contrast, the development of ADAPT in China is still in its infancy. From 2017 to 2019, the number of ADAPT procedures performed in China was only one-eleventh of the number of stent retriever thrombectomy procedures.

According to Frost & Sullivan, the incidence of acute ischemic stroke in China increased from 2.9 million in 2016 to 3.6 million in 2020, and is expected to further increase to 4.6 million by 2025 and 5.8 million by 2030. As more doctors receive training on the use of ADAPT technology and accumulate extensive clinical experience, the ADAPT therapy is expected to develop rapidly in China. The thrombus aspiration catheter shows significant potential as a treatment method for acute ischemic stroke.

As of the latest practicable date, the National Medical Products Administration (NMPA) has approved the registration certificates for four types of aspiration catheters from five manufacturers.

In addition, four other aspiration catheters are undergoing clinical trials, and one is under registration review by the National Medical Products Administration.

According to Frost & Sullivan, as of the latest practicable date, Afentta® Intracranial Thrombus Aspiration Catheter is the first aspiration catheter in China to receive approval from the National Medical Products Administration (NMPA) for commercial use in treating acute ischemic stroke in China. It also includes the model with the largest distal inner diameter approved by the NMPA.

In addition, HEMO's HMC1-NAS intracranial thrombus aspiration catheter is also in the clinical stage. According to Frost & Sullivan, once HEMO's 088 model of the HMC1-NAS intracranial thrombus aspiration catheter is approved, it may possess the globally largest distal inner diameter among aspiration catheters on the market. The clinical trial for this product is expected to be completed in the first quarter of 2022.

In addition, the HMSR-NAS intracranial thrombus aspiration catheter, internally developed by the company, is currently undergoing CE registration review. It has several functions that differ from Afentta® and the HMC1-NAS intracranial aspiration catheter, and the product is expected to be commercialized in 2023.

In the context of emphasizing the substitution of domestically produced medical devices, HEMO's competitive situation may be relatively clear.

As mentioned above, another means of treating occlusive thrombi in intracranial vessels of patients with acute ischemic stroke is the thrombectomy stent. As a device for mechanical thrombectomy, the thrombectomy stent can be used alone or as an alternative to ADAPT therapy when aspiration is unsuccessful.

From this perspective, HEMO's product pipeline is very rich and detailed in the treatment of acute ischemic stroke. The company expects to complete the clinical trial of the thrombectomy stent in the second quarter of 2022 and proceed with commercialization after obtaining approval from the National Medical Products Administration in 2023.

Stent retrievers are the primary devices used in mechanical thrombectomy for endovascular treatment of acute ischemic stroke, and their efficacy has been widely proven through comprehensive evidence-based clinical applications globally. The Chinese market for stent retrievers is relatively in the early stages of development, but clinical application in China has grown rapidly since 2015.

According to Frost & Sullivan, as of the latest practicable date, the National Medical Products Administration (NMPA) has approved 16 thrombectomy stents, nine of which are manufactured by international companies and seven by Chinese companies. In addition, as of the latest practicable date, there are three additional thrombectomy stents made in China, including HEMO’s thrombectomy stent, currently undergoing clinical trials or in the preparation stage for market launch.

This shows that after HEMO's thrombectomy stent is launched, it may face relatively intense competitive pressure. However, fortunately, the company already has other complementary products on the market. If these products are promoted successfully, the launch of the company’s thrombectomy stent can also achieve scale through the channels of these already marketed products.

Overall, although the company has already commercialized several products, its commercialization system is not yet complete, so the progress of commercialization is still in its early stages. Compared with competitor companies that obtained product approval as early as 2018, the slower marketization progress of its products is obvious, making it difficult to achieve substantial performance results in the short term. Additionally, the company’s product pipeline is mainly focused on neuro-intervention, where, despite the considerable market potential, competition is relatively fierce. Therefore, whether the company can stand out remains to be seen.