MicroPort MedBot Lists on HKEX with HK$43.7 Billion Valuation Despite Accumulated Losses of RMB 390 Million Over Two Years

Author | Jian En Editor | Gao Ge

Zhidx reported on November 2 that Shanghai MicroPort MedBot (Group) Co., Ltd. was listed on the Main Board of the Hong Kong Stock Exchange today. In this IPO, MedBot issued a total of 36.2 million shares, raising net proceeds of HK$1.457 billion, with a stock code of 2252.

According to data from renowned market research firm Frost & Sullivan, MedBot is the only company in the global industry with a product portfolio covering five major and rapidly growing surgical specialties (namely laparoscopic, orthopedic, pan-vascular, natural orifice, and percutaneous surgeries).

At today's market open, MedBot's opening price was HK$39.8, down 7.9% from its IPO price of HK$43.2. Subsequently, the stock price rebounded. As of today's close, MedBotQuoted at HK$45.8 per share, with a market capitalization of approximately HK$43.7 billion.

MedBot originated from an internal incubation project within MicroPort Medical Group in 2014, and has a seven-year history to date.The prospectus indicates that since the establishment of MedBot, it has not generated any revenue nor incurred any cost of sales to date. Currently, its products remain under development, with no commercial products available for sale.

MedBot's flagship products, the Toumai laparoscopic surgical robot, the Dragonfly Eye 3D electronic laparoscope, and the Honghu orthopedic surgical robot, have all been included in the National Medical Products Administration (NMPA)'s Special Review Procedure for Innovative Medical Devices. Among them, Dragonfly Eye has already obtained NMPA approval, Toumai has completed clinical trials for urological surgery, and Honghu is expected to complete clinical trials for total knee arthroplasty registration in the second half of 2021.

MedBot incurred losses of RMB 69.801 million and RMB 209 million in 2019 and 2020, respectively. Its loss in the first quarter of 2021 was approximately RMB 111.5 million, with the loss from that single quarter alone exceeding half of the total loss for the full year of 2020. According to its prospectus, these losses were primarily attributable to its research and development costs and administrative expenses.

The prospectus shows that Shanghai Mohua holds a 52.76% stake in MedBot, and its acting-in-concert party, Shanghai Qingzhen, holds a 1.85% stake. Together, they hold a combined 54.61% stake in MedBot, serving as its controlling shareholder.

In addition,MicroPort Investment holds 100% of the shares of Shanghai Mohua, and MicroPort holds 100% of the shares of MicroPort Investment; therefore, both MicroPort Investment and MicroPort are also controlling shareholders of MedBot.

I. Losses of RMB 390 Million Over Two Years, with R&D Costs Accounting for Approximately 80%

According to the prospectus, MedBot incurred a net loss of RMB 69.801 million in 2019, a net loss of approximately RMB 209 million in 2020, and a net loss of approximately RMB 115 million in the first quarter of 2021. Over a period of more than two years, MedBot's cumulative net loss amounted to approximately RMB 390 million. Additionally, as its products remained under development, it generated no sales revenue or cost of sales during the reporting period.

In its prospectus, MedBot stated that the losses were primarily attributable to R&D costs and administrative expenses, and as it will continue to conduct R&D, clinical trials, and regulatory registration, its expected expenses and operating losses are anticipated to continue increasing.

In 2019, 2020, and the first quarter of 2021, MedBot's R&D expenditures were RMB 61.881 million, RMB 135 million, and RMB 90.067 million, respectively, accounting for 88.65%, 64.59%, and 78.48% of its net losses for the corresponding periods.

MedBot's primary procurement items include raw materials, mechanical components, automated control tools and equipment, and related services (such as animal studies and patent application agency services).

In 2019, 2020, and the first quarter of 2021, its procurement amounts from its top five suppliers were RMB 17.8 million, RMB 23.6 million, and RMB 19.4 million, respectively, accounting for 49.3%, 23.9%, and 26.2% of its total procurement amount for the corresponding periods.

According to the prospectus, apart from MicroPort Medical Group, the principal suppliers of MedBot are all independent third parties; however, it does not disclose the specific companies involved.

II. Key products approach industry-leading standards, with 102 patents held in China.

According to the prospectus, MedBot currently features three flagship products: the Toumai laparoscopic surgical robot, the Dragonfly Eye 3D electronic laparoscope, and the Honghu orthopedic surgical robot, all of which have been included in the NMPA's Special Review Program for Innovative Medical Devices. Among them, Toumai and Honghu are at or approaching the registration approval stage, while Dragonfly Eye has already been approved by the NMPA.

The Toumai laparoscopic surgical robot performs complex surgeries using a minimally invasive approach and is designed for a wide range of surgical procedures. Currently, Toumai has been successfully deployed to complete urological surgeries such as radical prostatectomy and nephrectomy.

Honghu is an orthopedic surgical robot specifically designed for joint replacement surgery and will complete the registration clinical trials for total knee arthroplasty in the second half of this year.

The "Dragonfly Eye" is a 3D electronic laparoscope designed for examining organs in the abdominal, thoracic, and pelvic regions, capable of providing surgeons with 3D imagery featuring natural depth perception. The product will be trialed in several hospitals in China in the near future.

According to the results of the parallel controlled trial, Toumai, the core product of MedBot, is slightly inferior to the internationally leading da Vinci Si in terms of efficacy, with no statistically significant differences between the two in other aspects.

As disclosed in the prospectus, MedBot currently holds a total of 102 patents in China, including 56 invention patents. Additionally, it holds 14 patents overseas.

The prospectus also mentioned that MedBot currently employs 230 R&D personnel, accounting for 43% of its total workforce. However, it has not yet disclosed details regarding its core technical personnel.

III. MicroPort is the controlling shareholder, with Hillhouse holding an 8.05% stake.

According to the prospectus, Shanghai Mohua Artificial Intelligence Technology Co., Ltd. holds 52.76% of the shares in MedBot. Additionally, Shanghai Qingzhen, a party acting in concert with Shanghai Mohua, holds 1.85% of the shares in MedBot. Collectively, they hold 54.61% of the shares, making them the controlling shareholder.

Furthermore, MicroPort Investment holds 100% of the shares in Shanghai Mohua, and MicroPort Medical holds 100% of the shares in MicroPort Investment. Therefore, in accordance with the Listing Rules, Shanghai Mohua, Shanghai Qingzhen, MicroPort Investment, and MicroPort Medical constitute a group of controlling shareholders of MedBot.

Shanghai Qingmin serves as the employee shareholding platform for MedBot, holding a 10.47% stake in the company and ranking as its second-largest shareholder. He Chao, Executive Director and President of MedBot, holds an approximately 83.5% equity interest in Shanghai Qingmin.

Additionally, Shenzhen Hillhouse holds an 8.05% stake in MedBot, making it the third-largest shareholder.

Conclusion: When MedBot will achieve profitability remains unknown.

In recent years, the global surgical robotics market has experienced rapid growth. According to research data from Frost & Sullivan, the market size increased from USD 3 billion in 2015 to USD 8.3 billion in 2020, representing a compound annual growth rate (CAGR) of 22.6%. In 2020, the United States accounted for 55.1% of the global market, making it the world's largest surgical robotics market. In contrast, China's surgical robotics market accounted for only 5.1% of the global share, significantly lower than that of the United States.

However, given China's large population and substantial patient base, the surgical robotics market holds significant growth potential. As one of the earliest domestic manufacturers to enter the surgical robotics sector, MedBot is poised for promising development prospects in the future.

However, it is also evident that MedBot has yet to achieve profitability, with its losses widening year after year. Substantial R&D expenditures will continue to be incurred, and it remains uncertain when the company will achieve profitability.