60s-born Professor-Led Domestic Implantable Medical Device Company Baoduoan Files for STAR Market IPO

Source: MedDevice Home. Reproduction without permission is prohibited, and may only be reposted after 24 hours.

Recently, MedTech Home learned that Shandong Branden Medical Devices Co., Ltd. (hereinafter referred to as “Branden”) has entered the “inquiry” stage of its proposed initial public offering (IPO) on the STAR Market of the Shanghai Stock Exchange.The company plans to raise RMB 760 million, primarily for the industrialization upgrade project of medical catheters, the construction of a research and development center, the establishment of a marketing service network and information technology infrastructure, as well as supplementing working capital.

It is understood that Branden, established in 2003, is dedicated to applying medical material modification technology to implantable and interventional medical devices,It is the first company in China to obtain the Class III medical device registration certificate for domestically produced PICC products, and currently offers products in surgery, neurosurgery, and oncology intervention.Notably, the prospectus reveals that Zhang Haijun and Guo Haihong, the company’s actual controllers, are married and collectively hold more than 60% of the company’s shares directly and indirectly. Additionally, Branden distributed substantial dividends prior to its initial public offering (IPO).

01

Professor Born in the 1960s Launches Startup, Couple Holds Over 60% Stake

Branden, established in 2003, is a national high-tech enterprise dedicated to applying medical material modification technologies to implantable and interventional medical devices. Through independent research and development and continuous innovation, the company has formed core technological platforms centered on medical material modification, precision machining, and digital diagnosis and treatment of vascular access. Its current product portfolio includes offerings for general surgery, neurosurgery, and oncology intervention. The company’s sales network covers more than 3,000 hospitals across 32 provinces, municipalities, and autonomous regions in China, with exports to numerous countries and regions overseas.

Professor Entrepreneurship

It is worth mentioning that Professor Zhang Haijun, the founder of Branden, graduated from Shanghai Medical College of Fudan University (formerly Shanghai Medical University) with a major in medicine.From July 1992 to August 1994, served as an attending physician at Beijing Jishuitan Hospital; subsequently held positions at the Beijing Liaison Office of Bayer AG and Fresenius Kabi (Beijing) Pharmaceutical Co., Ltd., engaged in the sales of pharmaceutical products.In 1999, he enrolled in an Executive MBA (EMBA) program at a public university in California, USA. Upon completion of his studies, he declined lucrative offers from several multinational corporations in the United States and returned to China to launch his own venture. In 2003, Shandong Branden Medical Devices Co., Ltd. was established in Qihe.

Prior to launching its IPO, Branden had completed multiple rounds of financing.including a strategic investment of RMB 98 million by Guoke Investment and Jifeng Capital on December 1, 2016; the introduction of Xichen Investment as an investor on June 30, 2017, with the transaction amount undisclosed; and a further strategic investment by Jifeng Capital on October 19, 2018, with the transaction amount also undisclosed.

Previously Changed IPO Tutoring Agency

In 2019, Branden completed its corporate restructuring, changing its name from “Shandong Branden Medical Devices Co., Ltd.” to “Shandong Branden Medical Devices Joint Stock Limited Company.” Subsequently, in August 2020, the company entered into an agreement with Orient Securities for pre-IPO tutoring services in preparation for its initial public offering and listing.However, on October 12, 2021, Orient Securities suddenly announced the termination of its tutoring services for Branden Medical’s initial public offering (IPO) and listing. Subsequently, Branden Medical replaced its sponsoring institution with Guojin Securities.

The couple holds over 60% of the shares

On October 19, 2022, the initial public offering (IPO) application of Shandong Branden Medical Devices Co., Ltd. (hereinafter referred to as “Branden Medical”) for listing on the STAR Market of the Shanghai Stock Exchange was accepted by the China Securities Regulatory Commission, with Guojin Securities serving as the sponsor and lead underwriter.

As disclosed in the prospectus,The actual controllers of Branden, Zhang Haijun and Guo Haihong, are a married couple. As of the end of the reporting period, they collectively controlled 61.49% of the company’s shares directly and indirectly through Qihe Branden. In addition, they respectively held 78.15% and 66.36% of the equity interests in the company’s employee stock ownership platforms, Qihe Hengyi and Qihe Tengbo, which in turn held 4.62% and 2.45% of the company’s shares, respectively.

In this IPO, Branden plans to raise RMB 760 million, with the primary use of proceeds allocated to the following projects: industrialization and upgrading of medical catheters, construction of a research and development center, establishment of a marketing service network and information technology infrastructure, and supplementation of working capital.

02

Product Portfolio

At its inception, Branden’s main products were medical consumables such as silicone urinary catheters, silicone gastric tubes, and silicone drainage tubes.Since 2007, the company has leveraged its technological expertise in medical material modification to develop PICCs, obtaining the first registration certificate for a domestically produced PICC medical device in 2011. Subsequently, it has secured registration certificates for various product lines, including cranial external drainage products.The main products currently sold are divided into three major categories: vascular access, neurosurgery, and other polymer material products.

Vascular Access Products

Branden's main products in the vascular access category are PICC and color Doppler ultrasound diagnostic systems.PICC is a peripherally inserted central catheter with its tip positioned in the middle to lower third of the superior vena cava, specifically at the junction of the superior vena cava and the right atrium. It is used to provide medium- to long-term intravenous infusion therapy for patients, particularly for administering medications that are irritating to peripheral veins.

The optimal position for the tip of a central venous access catheter is at the junction of the superior vena cava and the right atrium, where the higher blood flow velocity can mitigate drug-induced irritation to the vessel wall and reduce the incidence of mechanical, chemical, and thrombotic phlebitis.

Its PICC catheter addresses clinical issues associated with traditional PICC products, such as difficult puncture, significant positioning errors, and high complication rates, by employing material modification technology to enhance the catheter’s breaking strength and impart electrical conductivity.Combined with the company’s independently developed color Doppler ultrasound diagnostic system, which features technologies such as precise intravascular bioelectrical navigation, it facilitates clinical operations and reduces the incidence of catheter-related complications.

Extracranial Drainage System

Cerebrospinal Fluid External Drainage is one of the most commonly used therapeutic techniques in neurosurgery, employed to drain bloody or infected cerebrospinal fluid to outside the cranium, as well as to control and monitor intracranial pressure and administer medications into the central nervous system.Branden’s cranial external drainage system mainly includes the continuous lumbar drainage system, ventricular external drainage system, epidural drainage system, and minimally invasive intracranial drainage system.

Advanced Polymer Material Products

Surgical Drainage System: Used to drain pus, accumulated blood, and postoperative exudate from body cavities (such as the abdominal and thoracic cavities) or tissue spaces to the exterior, thereby preventing postoperative infection and promoting wound healing.

Other Medical Consumables:

03

H1 Revenue Hits RMB 100 Million; Substantial Dividends Distributed Prior to IPO

According to care statistics, Branden respectively in 2019 to 2021 and the first half of 2022,Achieved operating revenues of RMB 177 million, RMB 237 million, RMB 210 million, and RMB 100 million; net profits of RMB 31.3172 million, RMB 41.5551 million, RMB 42.8973 million, and RMB 18.4578 million.

However, in 2019, 2021, and the first half of 2022, Branden's cash dividend amounts were RMB 30 million, RMB 45.39 million, and RMB 20.3148 million, respectively.In other words, except for 2020 when no dividends were distributed, the total amount of dividends paid by the company over these three years reached RMB 95.7 million. In 2019, the dividend payout ratio accounted for as high as 93% of net profit, and in both 2021 and the first half of this year, the dividend amounts far exceeded the net profits for the respective periods.

Additionally, during the reporting period, Branden’s net other income amounted to RMB 9.6386 million, RMB 17.3469 million, RMB 11.3327 million, and RMB 0.8877 million, respectively, primarily consisting of government grants. Government grants accounted for 31%, 42%, and 26% of the company’s net profit, respectively, representing a relatively high proportion.

In terms of gross profit margin, the figures during the reporting period were 77.02%, 65.42%, 75.97%, and 75.48%, respectively. The decline in the overall gross profit margin in 2020 was primarily due to the sale of a larger volume of low-margin epidemic prevention supplies. Additionally, the gross profit margins for the company’s core business were 77.08%, 77.16%, 76.16%, and 75.56%, respectively. Despite appearing relatively high, these gross profit margins still differ significantly from the average of comparable industry peers.

In addition, in terms of R&D investment, during the reporting period, Branden's R&D expenses were RMB 18.3138 million, RMB 21.1157 million, RMB 15.8313 million, and RMB 6.8861 million, respectively. The R&D expenses mainly consisted of direct labor and direct material inputs.

It can be seen that Branden’s R&D investment in 2021 decreased compared to 2020, and the R&D investment in the first half of 2022 was also relatively low. Compared with the average value of comparable companies during the same period, Branden was significantly weaker than its peers for most of the time. During the reporting period, the R&D expense ratios of comparable companies were 9.65%, 10.31%, 11.72%, and 9.95%, respectively, while Branden’s figures were 10.37%, 8.92%, 7.53%, and 6.88%.

In this regard, the company stated that its R&D expense ratio differs from those of comparable companies in the same industry due to variations in development stages, operational scale, and project phases. As R&D projects such as the bionic skull repair system progressively enter clinical trials, the company’s R&D expenses are expected to increase.

04

Market Continues to Grow

In recent years, driven by factors such as continuous global population growth, deepening population aging, and economic growth in developing countries, the global medical device market size has continued to expand, exceeding USD 440 billion in 2020.The global medical device market is projected to exceed USD 800 billion by 2030, with a compound annual growth rate (CAGR) of 6.3% from 2020 to 2030.

From a domestic perspective, the market size of medical devices in China has grown from RMB 312.55 billion in 2015 to RMB 778.93 billion in 2020, with a compound annual growth rate (CAGR) of approximately 20.0%. In the future, driven by the rising healthcare affordability of residents, state support for the medical industry, and industrial upgrading fueled by technological advancements, China’s medical device industry is expected to maintain robust high-speed growth.The market size of China's medical device industry is expected to exceed RMB 2.2 trillion by 2030, with a projected compound annual growth rate (CAGR) of 11.2% from 2020 to 2030.

PICC can be widely used in tumor chemotherapy, parenteral nutrition, intensive care, and other scenarios requiring medium to long-term intravenous therapy.

According to the data published by GLOBOCAN,In 2020, there were 2.28 million new cancer cases in the United States; according to iData Research statistics, the current annual number of PICC insertions in the United States is approximately 2.7 million, exceeding the number of cancer patients.

In China, there were 4.57 million new cancer patients in 2020, with only approximately 600,000 PICC insertions performed, indicating a significant gap in PICC penetration rate compared to the United States.With the improvement of medical technology in China, the growth of per capita income, the continuous enrichment of healthcare professionals' experience in PICC insertion and maintenance, and the increased success rate of catheterization assisted by navigation and positioning methods such as EDUG, the clinical use of PICC will become more widespread.

Currently, there are few manufacturers of PICC. According to the statistics based on publicly available information from the National Medical Products Administration (NMPA) website, as of the end of the reporting period, a total of 6 domestic manufacturers and 9 imported manufacturers' PICC products have received NMPA registration approval, including Branden.Going forward, continuous product innovation and the gradual development of industrialization will drive import substitution, leading to sustained growth in the corresponding market size.

——

As the first domestic enterprise to obtain the Class III medical device registration certificate for a Chinese-made PICC, Branden has broken the monopoly of imported products in China's PICC market. Its products, paired with its independently developed color Doppler ultrasound diagnostic system, offer multiple advantages. However, risk factors exist, including over 60% shareholding held by the founding couple, resulting in highly concentrated ownership, as well as substantial dividends distributed prior to the IPO. "MedTech Home" will continue to monitor the company's developments.