Gaush Meditech Files IPO Prospectus, Offering Comprehensive Solutions Across Seven Ophthalmic Subspecialties

On November 28, Gaush Meditech formally submitted its IPO application to the Hong Kong Stock Exchange. As a leading provider of comprehensive solutions for ophthalmic medical devices, Gaush Meditech boasts an extensive product portfolio covering seven major ophthalmic subspecialties: fundus diseases, cataracts, refractive errors, glaucoma, ocular surface diseases, optometry, and pediatric ophthalmology. According to the prospectus, Gaush Meditech ranked as the third-largest company in China’s ophthalmic medical device market by revenue in 2020. Currently, Gaush Meditech provides one-stop, top-tier ophthalmic medical device solutions—including diagnostic equipment, surgical and therapeutic devices, consumables, and after-sales technical services—to over 4,000 end customers in China, including more than 1,000 tertiary hospitals, across all provincial-level administrative regions.

Gaush Meditech Product Portfolio

The proceeds from this fundraising will be primarily used to enhance R&D capabilities and accelerate the commercialization of patented technologies; improve production capacity and strengthen manufacturing capabilities; hire sales and marketing personnel specializing in ophthalmic medical devices; fund potential strategic investments and acquisitions over the next five years; and serve as working capital and for general corporate purposes.

According to a Frost & Sullivan report, the number of people aged 65 or older in China reached 190 million in 2020, accounting for 13.5% of the total population. This figure is projected to reach 247 million by 2025, representing a compound annual growth rate (CAGR) of 5.4% from 2020 to 2025. The prevalence of age-related ophthalmic diseases, such as cataracts, glaucoma, and fundus diseases, will expand the patient population and stimulate demand for ophthalmic diagnosis and treatment. Consequently, the aging population will create a substantial market for ophthalmic medical services in China.

Currently, the Chinese ophthalmic medical device market has grown from RMB 7.8 billion in 2016 to RMB 12.9 billion in 2020, with a compound annual growth rate (CAGR) of 13.3%, demonstrating a growth rate higher than that of the global medical device market. The market is expected to experience even higher growth over the next five years, projected to reach RMB 28.3 billion by 2025 and RMB 49.2 billion by 2030. Established 23 years ago, Gaush Meditech is currently the only ophthalmic medical device group in China capable of providing best-selling products covering equipment and consumables for seven major ophthalmic subspecialties nationwide.

A review of the development history of Gaush Meditech dates back to the 1990s. In August 1998, Gao Tieta, the controlling shareholder and executive director of Gaush Meditech, together with his family, founded Gaush Yuanwang, through which the company commenced its business operations, focusing on ophthalmic medical devices in China. Over the past two decades, Gaush Meditech has undergone multiple acquisitions and introduced high-quality investors into its equity structure.

Since its establishment, Gaush Meditech has received investments from renowned institutions such as OrbiMed, Warburg Pincus, DFC Capital, Honghui Capital, and Credit Suisse.

Prior to the IPO, OrbiMed and Warburg Pincus held 12.83% and 12.14% of the shares, respectively, while DCF Capital, Honghui Capital, and Credit Suisse held 5.03%, 3.02%, and 0.95%, respectively. Guo Wangwei, Partner and Senior Managing Director of OrbiMed Asia, and Shi Long, Managing Director of Warburg Pincus, served as non-executive directors.

 Several Milestones in the Development of Gaush Meditech

Gaush Meditech’s product portfolio comprises 128 products, covering medical device categories across seven major ophthalmic subspecialties: fundus diseases, cataracts, refractive errors, glaucoma, ocular surface diseases, optometry, and pediatric ophthalmology. According to Frost & Sullivan, Gaush Meditech is the only ophthalmic medical device group in China that offers best-selling products encompassing equipment and consumables for all seven major ophthalmic subspecialties on a nationwide basis, and it serves as a one-stop platform providing the most comprehensive full-spectrum solutions for ophthalmic medical devices in China.

From a product category perspective, Gaush Meditech’s products can be divided into distributed products from brand partners and proprietary products developed and manufactured in-house.

Currently, Gaush Meditech has partnered with 19 global brand partners, 17 of which have signed exclusive distribution agreements with the company for their products, including Heidelberg, Schwind, and Optos. Furthermore, following its acquisitions of Roland Consult and Tekia in 2020 and 2021, respectively—with Tekia primarily manufacturing intraocular lenses and Roland Consult specializing in electrophysiology products—Gaush Meditech is accelerating its overseas business expansion.

According to the prospectus, Gaush Meditech has already secured over 4,000 end customers, including more than 1,000 tertiary hospitals, with coverage across all provincial-level administrative regions in China.

In terms of financials, the prospectus shows that revenue and profit remained stable during the track record period, with gross profit margin steadily increasing. From 2018 to 2020, Gaush Meditech’s revenue was approximately RMB 926 million, RMB 1.106 billion, and RMB 962 million, respectively. In 2020 and the first half of 2021, revenue amounted to RMB 348 million and RMB 579 million, respectively. Gross profit for the same periods was RMB 379 million, RMB 463 million, RMB 436 million, RMB 156 million, and RMB 270 million, respectively. The corresponding gross profit margins were 40.9%, 41.9%, 45.3%, 44.9%, and 46.6%.

Revenue of Gaush Meditech by Segment and Product Type for the Periods Shown

From 2018 to 2020, Gaush Meditech’s net profits were RMB -38.606 million, RMB -38.036 million, and RMB 98.538 million, respectively. The net profit for the first half of 2020 was RMB 12.92 million, while it turned from profit to loss in the first half of 2021, reaching RMB -34.585 million. In other words, Gaush Meditech achieved positive net profit only in 2020 and the first half of that year.

Gaush Meditech generates revenue from the sale of ophthalmic medical devices and consumables, as well as the provision of technical services; however, the vast majority of its revenue is derived from the sale of ophthalmic medical devices. During the reporting period, revenue from product sales accounted for 90.9%, 90.1%, 85%, 81.7%, and 85.1% of total revenue, respectively.

Gaush Meditech’s product portfolio comprises both distributed products and proprietary products, with distributed products (i.e., agency products) accounting for the majority. Through supply and distribution agreements, Gaush Meditech purchases ophthalmic medical devices from its brand partners, who serve as suppliers, and resells them to distributors under its management, generating revenue from these sales. In essence, Gaush Meditech operates as a medical device intermediary, earning profits from the price differential. Therefore, the importance of suppliers is self-evident.

Gaush Meditech Business Model

Reliance on suppliers is precisely the aspect most frequently highlighted by Gaush Meditech in its risk disclosures. “Our success is closely tied to our ability to retain and attract brand partners, as well as to the success of these brand partners and their distributed products.” Gaush Meditech repeatedly emphasized the importance of suppliers in its risk warning section. The company stated that it relies on a limited number of brand partners for its main products. If it fails to maintain the sales volume, pricing levels, and profit margins of its key distributed products, its revenue and profitability may be materially and adversely affected.

Perhaps to reduce its reliance on suppliers, Gaush Meditech has intensified its R&D efforts in recent years, actively developing new proprietary products and striving to cover all major ophthalmic product lines.

Currently, Gaush Meditech has 25 R&D personnel, with an average of over ten years of industry experience. From 2018 to 2020, its total R&D expenditures were RMB 2.4 million, RMB 2.7 million, and RMB 3.1 million, respectively; for the first half of 2020 and the first half of 2021, they amounted to RMB 1.5 million and RMB 9.4 million, respectively. It is evident that in 2021, Gaush Meditech’s R&D spending increased significantly, reaching more than five times the level of the same period in the previous year. However, this amount of R&D expenditure remains low compared to other similar companies. For Gaush Meditech to achieve profitability through its proprietary products, sustained long-term investment may still be required.

However, a closer look reveals that the improvement in Gaush Meditech’s gross profit margin was primarily driven by an increase in the gross margin of ophthalmic medical equipment sales. Although the acquisitions of Taijing and Roland contributed to revenue growth, the gross margin of ophthalmic medical consumables actually declined rather than increased.

Under this model, Gaush Meditech’s irreplaceability across the entire industry chain is not particularly high. The company also issued risk warnings in its prospectus, noting that if the brands it distributes choose to partner with other distributors or establish their own direct sales channels in the future, it would have a significant impact on the company.

Moreover, under the “Two-Invoice System” and other related policies, how Gaush Meditech can seize opportunities amid policy pressures will also be a key focus for its future strategic considerations.