B-One Ortho Completes Hundreds of Millions RMB Series B Financing to Advance Digital Orthopedics and Novel Biomaterials R&D

VCBeat (WeChat ID: Vcbeat) has learned that on April 2, 2021, Kuanyue Medical Biotechnology Co., Ltd. (hereinafter referred to as “Kuanyue Orthopedics”), an innovative company specializing in artificial joints, successfully completed a Series B financing round amounting to hundreds of millions of RMB. This marks the largest RMB-denominated financing deal in China’s joint replacement sector in recent years.

This round of financing was led by the Huatai Zijin–Alibaba Health Cooperation Fund, Zijin Hongyun (hereinafter referred to as “Huatai Zijin”), with participation from Agricultural Bank of China Financial Asset Investment Co., Ltd. (hereinafter referred to as “ABC Investment”) and Hubei Provincial High Technology Industry Investment Co., Ltd. (hereinafter referred to as “Hubei GaoTou”). Existing shareholder SDO Capital continued to increase its investment. This fully demonstrates institutional investors’ confidence in the future development of Kuanyue Orthopedics amid the volume-based procurement environment. CEC CAPITAL served as the exclusive financial advisor to Kuanyue Orthopedics in this transaction.

KuanYue Orthopedics is one of the few orthopedic joint companies with global DNA. Since its establishment in 2015, the company has set up a research and development center in the United States, dedicated to the innovative design of joint prostheses and instruments, the R&D of novel orthopedic materials, and the construction of next-generation digital orthopedics. Leveraging its strong R&D capabilities, KuanYue Orthopedics has achieved frequent breakthroughs in the six years since its founding.

Currently, Kuanyue Orthopedics is the only Chinese joint company, aside from minimally invasive orthopedic specialists, to have simultaneously obtained FDA and NMPA approvals for both hip and knee prostheses. Furthermore, Kuanyue Orthopedics’ products have received regulatory clearance in Southeast Asian regions including Singapore, New Zealand, Vietnam, Thailand, and Hong Kong, China. On April 2, 2021, Kuanyue Orthopedics’ flagship new product, the Kosmo Hip System, just received FDA approval for market launch. The Kosmo system competes with the world’s current best-selling hip prosthesis, which holds the number one market share. This product marks the fourth artificial joint system approved by Kuanyue within four years of entering the U.S. market, representing a significant milestone in the company’s product R&D and commercialization. Kuanyue Orthopedics is among the few Chinese joint companies capable of “overseas R&D, manufacturing in China, and global sales.”

Since the General Office of the State Council issued the "Notice on the Plan for Reforming the Governance of High-Value Medical Consumables" in July 2019, multiple categories of high-value medical consumables, including cardiovascular, orthopedic, and IVD products, have entered a phase characterized by "provincial and municipal volume-based procurement pilots combined with national centralized procurement." Following the implementation of volume-based procurement for medical consumables, industry concentration is rapidly shifting towards enterprises with strong R&D capabilities and lower costs, providing companies with innovative R&D capacities the opportunity for accelerated development and overtaking competitors. To date, six provinces, including Jiangsu, Anhui, Fujian, Zhejiang, Shandong, and Qinghai, have implemented volume-based procurement pilots for certain orthopedic medical device products. Kuanyue Orthopedics has achieved outstanding results in four of these provinces: Jiangsu, Fujian, Shandong, and Qinghai. This fully demonstrates Kuanyue Orthopedics' world-leading capabilities in R&D innovation, cost control, and manufacturing processes, while also enabling the company to compete on a level playing field with top-tier international orthopedic brands and listed orthopedic companies, thereby accelerating hospital market entry and achieving leapfrog development.

As of March 2021, Kuanyue’s orthopedic products had entered 381 hospitals in China, with overseas sales accounting for nearly 40%. Over the past six months, the company achieved a year-on-year monthly sales growth rate of 314%. In March 2021, the volume of surgical implants reached a new historical high, and the implant volume in the first quarter of 2021 had already exceeded 50% of the total implant volume for the entire year of 2020.

Upon the completion of this round of financing, Kuanyue Orthopedics will continue to increase its R&D investment, focusing on novel orthopedic materials and next-generation digital orthopedics, thereby enriching and refining its product portfolio with continuous innovation. Meanwhile, Kuanyue Orthopedics will further expand into both domestic and international markets to drive product sales. Additionally, Kuanyue will undertake the expansion and renovation of its manufacturing facilities by introducing automated production lines to boost production capacity, in preparation for the anticipated surge in future product sales.

Amid the national policy environment vigorously promoting volume-based procurement, the company has successfully completed its Series B financing. Ms. Wang Junwen, CEO and Co-founder, stated, “Since Kuanyue Orthopedics commenced commercial sales in February 2019, we have navigated the opportunities and challenges brought by the COVID-19 pandemic and volume-based procurement over the past two years. Against this backdrop, Kuanyue has remained true to its original aspiration of ‘building a Chinese orthopedic enterprise with global influence,’ continuously strengthening internal capabilities and increasing investment in R&D for materials, implant designs, and surgical instruments. These efforts have proven worthwhile, as evidenced by Kuanyue’s remarkable achievements over the past two years. I am confident that Kuanyue will emerge as a global innovator in the orthopedic field. We also extend our sincere gratitude to the investors in this round for their trust. We are committed to forging a path for a technology-driven orthopedic enterprise that is ‘rooted in China and oriented toward the world.’”

Lead Investor in This RoundCao Qun, Chairman of Huatai Zijinstated, “Kuanyue Orthopedics is a company with a global perspective. Although it was established relatively recently, its product quality rivals that of international brands. The company has demonstrated outstanding performance in R&D, marketing, sales, and production, and is at the forefront of the industry in terms of international expansion. Multiple products have received FDA certification. Against the backdrop of centralized volume-based procurement for orthopedic products in China, we are optimistic about the company’s overseas market strategy. Kuanyue’s products have achieved sales not only in Southeast Asian countries such as Vietnam but also in the U.S. market, placing its international layout at the industry’s leading edge. Meanwhile, the company has made relatively comprehensive strides in the development of new materials and digital orthopedics. We look forward to seeing Kuanyue establish a prominent Chinese brand in the orthopedic industry in the future.”

Mr. Huang Wei, General Manager of the Investment Banking Department, Agricultural Bank of China, Suzhou Branch“He stated, ‘Kuanyue Orthopedics has made substantial investments in prosthesis design, novel materials, and digital orthopedics, making it a rare enterprise in the orthopedic industry with strong sci-tech innovation attributes. Agricultural Bank of China Investment’s current investment in Kuanyue Orthopedics marks the first instance within the nationwide ABC system of embedding equity subscription options into credit customer cooperation relationships, representing ABC’s proactive effort to support the development of sci-tech innovative companies preparing for public listing. The Suzhou Branch of Agricultural Bank of China hopes to comprehensively launch investment-loan linkage with Kuanyue Orthopedics in the future, thereby facilitating the company’s robust growth. We look forward to the company’s continued product innovation, aiming to become an influential Chinese orthopedic enterprise on the global stage.’”

Dr. Shi Lei, Executive Director of Sidao Capitalstated, “We are honored to have accompanied and witnessed the growth of Kuanyue Orthopedics along its journey. Sida Capital remains firmly optimistic about the ability of Chinese enterprises to catch up and surpass their global counterparts in the high-end medical device sector. We are committed to identifying and supporting high-quality companies that possess independent innovation capabilities, unique competitive advantages, and an international perspective. With the continuous enhancement of domestic R&D and technical capabilities, as well as the increasingly improved policy environment, we believe that high-quality Chinese-made medical device companies like Kuanyue Orthopedics will usher in a period of greater opportunities.”

Li Gang, Partner at CEC CAPITAL“He stated, ‘The volume-based procurement policy for medical consumables not only effectively reduces the burden on the national healthcare insurance fund but also creates development opportunities for domestic enterprises with innovation capabilities and a global perspective. We are honored to partner with Kuanyue Orthopedics to complete this round of financing in such an environment, which fully demonstrates Kuanyue Orthopedics’ product innovation and cost control capabilities. Meanwhile, Kuanyue Orthopedics is one of the few domestic orthopedic companies with an international vision, particularly possessing sales capabilities in the United States and Southeast Asia. The ramp-up of international sales will help Kuanyue Orthopedics achieve economies of scale, facilitating the implementation of automated production lines and further reducing costs. With the support of outstanding investment institutions in this round, we look forward to the company’s continued product innovation and expanded sales domestically and internationally. CEC CAPITAL also hopes to continue serving the company and witnessing its growth and expansion side by side.’”

Founded in 2015, Kuanyue Orthopedics established its global R&D center in the United States at inception. Within just four and a half years, it achieved product sales across multiple regions, including China, the United States, and Southeast Asia. In the Chinese market, Kuanyue’s products are sold in nearly 30 provinces. In the U.S. market, it achieved a breakthrough for self-developed joint products from a Chinese company, marking their first entry into the American market. Kuanyue Orthopedics’ independently developed primary total hip replacement system and primary total knee replacement system have both received regulatory approval and commercialization clearance from the medical device regulatory authorities in China and the United States—the world’s two largest orthopedic markets. Kuanyue Orthopedics is committed to becoming a leading orthopedic brand in China and ultimately a globally influential orthopedic company that represents China’s strength.

Huatai Zijin is the private equity subsidiary of Huatai Securities (601688.SH), specializing in private equity investment. Leveraging the full business chain advantages of Huatai Securities and adhering to the investment philosophy of “growing together with entrepreneurs,” the company provides comprehensive capital services to partners by drawing on its extensive financial and industrial resources. With a registered capital of RMB 6 billion and assets under management nearing RMB 50 billion, Huatai Zijin manages multiple funds, including PE, M&A, FOF, and industry-specific funds. Committed to its industry positioning and grounded in robust sector research, Huatai Zijin has deeply cultivated strategic emerging industries such as healthcare and TMT, accumulating rich industry experience and resources.

Zijin Hongyun Fund is a specialized fund for the big health industry, established in 2019 through a strategic partnership between Huatai Zijin (Jiangsu) Equity Investment Fund, Alibaba Health, and several other institutions. The fund primarily invests in the big health sector, including biopharmaceuticals, medical devices, in vitro diagnostics, and consumer healthcare. To date, the fund has completed investments in multiple enterprises.

ABC Investment was established on August 1, 2017. As a wholly-owned subsidiary of Agricultural Bank of China, it is one of the first batch of bank-affiliated market-oriented debt-to-equity swap implementation institutions in China, with cumulative investments nearing RMB 200 billion. Guided by its mission to serve supply-side structural reform, the real economy, and Agricultural Bank of China, the company implements the national innovation-driven development strategy and provides comprehensive financial service solutions for enterprises.

Hubei High-Tech Investment is a provincial-level Class I investment and financing enterprise in Hubei Province. It serves as an important vehicle for the Hubei Provincial Committee of the Communist Party of China and the Hubei Provincial People’s Government to aggregate various forms of capital, promote technological innovation, and develop strategic emerging industries, acting as the primary investment and financing platform to support the innovation-driven strategy and foster the growth of high-tech and emerging industries. The company currently has 13 wholly-owned, holding, or controlled subsidiaries and equity interests in nearly 50 companies. It has established more than 50 equity investment funds with diverse strategic focuses, cumulatively investing in and supporting over 300 startups, among which more than 20 portfolio companies have completed initial public offerings (IPOs). The company has been ranked among the “Top 50 Venture Capital Institutions in China” by Zero2IPO Group for eight consecutive years and was honored as the “Best PE Institution of the Year” by Securities Times in May 2019.

Fidelity International is a global proprietary investment firm backed by Fidelity. Leveraging its unique capital structure, Fidelity International can deploy capital flexibly to support innovative companies in disrupting or leading their markets, helping entrepreneurs realize their ambitions. Currently, together with affiliated funds under Fidelity, Fidelity International ranks among the top ten venture capital firms globally. Our global ecosystem continuously provides portfolio companies with access to an extensive talent pool and deep local expertise, supporting their business growth. With over 25 years of venture capital experience in China, Fidelity International has invested in more than 110 companies in the healthcare and technology innovation sectors. Over the past decade, we have invested nearly $6 billion in startups worldwide.

CEC Capital is a leading new-economy investment bank in China, focusing on three major sectors globally: TMT, consumer, and healthcare. In addition to its investment banking services, CEC Capital manages one RMB-denominated fund and one US dollar-denominated fund. The firm has offices in Beijing, Shanghai, Los Angeles, and San Francisco, and holds licenses for the U.S. securities market. Healthcare is a key focus area where CEC Capital possesses deep expertise; it has been ranked as the new-economy investment bank with the highest number of healthcare industry transactions in China for four consecutive years. Moreover, CEC Capital boasts the largest, most professional, and most comprehensively integrated healthcare investment banking team in China.