Blue Sail Medical Announces RMB 3.14 Billion Convertible Bond Offering to Accelerate Dual-Core Businesses in Cardiovascular and Protective Products

On the evening of August 2, Bluesail Medical Co., Ltd. (hereinafter referred to as “Bluesail Medical”) disclosed its refinancing plan. The company proposes to publicly issue convertible corporate bonds (hereinafter referred to as “convertible bonds”), with the total amount of funds raised not exceeding RMB 3.144 billion, intended for a series of projects aimed at expanding and deepening the development of its core business.

The announcement indicates that the funds raised will be used to deepen Bluesail Medical’s existing core businesses in its Cardiovascular and Cerebrovascular Division and Protection Division, thereby enhancing their global competitiveness and industry barriers. The funds will be allocated to the following projects: acquisition of 100% equity interest in NVT AG, an interventional aortic valve company, along with capital injection; acquisition of a 6.63% minority stake in CBCH II; Phase III project for annual production of 2 billion units of health protection products (novel gloves); technological transformation project for annual production of 2 billion units of nitrile gloves for health protection; acquisition of 100% equity interest in Wuhan Bicknell; as well as repayment of bank loans and supplementation of working capital.

The company’s current strategic layout, executed through capital operation tools, is both logical and noteworthy.

According to Bluesail Medical’s announcement, the proceeds from this convertible bond issuance will be used to acquire 100% equity interest in NVT (New Valve Technology), a Swiss company engaged in the research, development, and manufacturing of heart valves, and to make additional capital injections into the company, with a total consideration of RMB 1.39 billion. This move aims to enhance its portfolio of high-value cardiovascular consumables and formally enter the field of structural heart disease therapies.

Allegra™ Transcatheter Interventional Aortic Valve Replacement System

NVT’s core product is the TAVR (Transcatheter Aortic Valve Replacement) system, which operates in the cardiovascular sector—a highly favored “golden track” within the industry for minimally invasive interventional therapies for structural heart disease. With advantages such as minimal invasiveness, faster recovery, favorable patient prognosis, and low complication rates, TAVR has become a milestone advancement in the interventional treatment of valvular heart disease. Data shows that the global TAVR market size was approximately USD 3.5 billion in 2018 and is in a period of rapid, explosive growth, indicating vast market prospects.

Currently, there are only five manufacturers of TAVR devices with EU CE certification worldwide: Edwards Lifesciences, Medtronic, Abbott, Boston Scientific, and NVT. As the only CE-certified manufacturer available for acquisition globally, NVT possesses significant scarcity value. Previously, NVT and Biosensors International, a subsidiary of Bluesail Medical, had already intersected in distribution channels; the two parties signed an exclusive distribution agreement in July 2018 for NVT’s core TAVR product, Allegra™, in the UK and Ireland, giving each side a clear understanding of the other’s strengths. This acquisition of NVT will enable Biosensors to rapidly acquire mature TAVR products and technologies, gain access to TAVR products ready for direct sales in the European market and many other countries worldwide, and secure core TAVR technologies in China that are more competitive than other domestically produced alternatives, thereby achieving leapfrog development in the company’s TAVR business.

From the perspective of the entire cardiovascular and cardiac disease treatment landscape, common subsectors include coronary intervention, structural heart disease, electrophysiology, rhythm management, and heart failure. Since acquiring Biosensors International, the world’s fourth-largest cardiac stent manufacturer, in 2018, Bluesail Medical has increasingly clarified its strategic layout in the cardiovascular field. The company has successfully entered three high-growth sectors—coronary intervention, heart failure, and structural heart disease—resulting in a more comprehensive industrial portfolio.

In 2018, Bluesail Medical successfully completed the cross-border acquisition of Biosensors International Group, the world’s fourth-largest coronary stent manufacturer based in Singapore. The deal attracted significant attention in the capital markets and has become a classic M&A case in the history of China’s A-share medical device sector. Biosensors International ranks fourth in global market competition, holding approximately 11% of the total market share across major countries and regions in Europe, Asia-Pacific (excluding Japan and China), and Africa. In the domestic market, JW Medical, a subsidiary of Biosensors International, accounts for more than 20% of China’s market share. Through this acquisition, Bluesail Medical transformed and upgraded into the high-value consumables sector, leveraging percutaneous coronary intervention as its starting point to continuously expand its business footprint in the cardiovascular field.

In June this year, Bluesail Medical announced its equity investment in Suzhou Tongxin Medical Devices Co., Ltd., a developer of fully magnetically levitated artificial hearts, thereby establishing a presence in the artificial heart sector. Tongxin Medical is the only company worldwide, aside from Abbott, that possesses mature technology for fully magnetically levitated artificial hearts. Currently, sales of HeartMate II and HVAD, two mainstream products in the artificial heart market, have reached nearly $1 billion, indicating substantial market potential. This strategic move by Bluesail Medical not only further expands its portfolio in frontier cardiovascular technologies but also positions the company early in the heart failure market, which holds immense growth potential.

Through the acquisition of NVT, Bluesail Medical will rapidly enter the TAVR sector, a market with broad prospects. NVT’s long-accumulated patents, core technologies, and R&D team will be fully retained, synergizing with Biosensors International’s existing global sales channels and customer resources to intensify market penetration in the cardiovascular device segment, thereby creating greater potential for future performance growth.

Going global is aimed at better bringing in advanced resources. Bluesail Medical has also rapidly rolled out its domestic plans for the NVT project. Concurrently with the release of this preliminary plan, the company announced the establishment of a subsidiary in China focused primarily on devices for the treatment of structural heart disease. Upon completion of the transaction, all patented products and core technologies of the Swiss company NVT are expected to be licensed to the Chinese subsidiary. The company will immediately initiate clinical registration, production, and sales activities for the TAVR valve system in China, demonstrating its ambition to capture the burgeoning market opportunities in China’s TAVR sector.

Of greater note, the subsidiary will also engage in the research and development of interventional valve devices, including those for the mitral and tricuspid valves. In China, mitral regurgitation is a more prevalent age-related condition than aortic stenosis, with a larger potential patient population. Currently, interventional therapies for mitral and tricuspid valves are still in their early stages globally; only Abbott’s MitraClip has been approved for mitral valve repair, while other major international companies are either in the R&D or clinical trial phases. By establishing this Chinese subsidiary, Bluesail Medical clearly aims to build upon its entry into the aortic valve market through acquisitions and further expand its portfolio by independently developing interventional devices for mitral and tricuspid valve therapies.

Wang Dan, Vice President and Chief R&D Officer of Bluesail Medical, emphasized, “Strategically, we adopt a dual-drive approach combining in-house R&D with external mergers and acquisitions. In the field of valvular heart disease, we have established strong technical reserves and a capable team for mitral valve repair and replacement devices, giving us full confidence in obtaining regulatory approval through independent R&D. Interventional therapies for mitral and tricuspid valves are still in the early stages of market development, with competitors largely starting from the same baseline; therefore, it is highly appropriate to establish our presence in this area through independent R&D. As for aortic valves, given that markets outside China are already experiencing rapid commercial growth, we prefer to enter through acquisitions to first secure a certain share of the international market and accumulate commercialization experience, thereby accelerating clinical approval in China and capitalizing on the market opportunities arising from China’s expected boom over the next three to five years. Following the acquisition of NVT, we will integrate our technical reserves with those of NVT to continuously upgrade and launch TAVR systems that are simpler to use, repositionable, and retrievable, as well as valve-in-valve TAVR solutions. Subsequently, we will focus on accelerating the R&D of repair and implantation devices for the mitral and tricuspid valves, which offer broader market prospects.”

In the protective products segment, Bluesail Medical has also charted a new upgrade strategy, aiming to further expand profit margins and enhance overall competitiveness by optimizing its product mix, expanding production capacity, and diversifying its product categories.

According to the company’s announcement on its convertible bonds, RMB 600 million of the funds raised are earmarked for expanding production capacity of higher-end nitrile gloves. The plan includes constructing Phase III facilities with an annual capacity of 4 billion units across 16 nitrile glove production lines. Additionally, the company will acquire 100% equity interest in Wuhan Bikair Rescue Supplies Co., Ltd. through a full acquisition.

Nitrile Gloves

Bluesail Medical has been deeply engaged in the health protection sector for many years and is a global leader in the medical gloves and health protective gloves industry. In 2018, its PVC glove production capacity and market share both ranked first worldwide. As consumer demand for diverse protective products continues to expand, Bluesail Medical, while consolidating its leading position in the PVC glove market, has further set its sights on the nitrile glove and first aid kit markets, which offer greater profitability and broader market prospects.

In recent years, due to differences in performance, nitrile gloves have become increasingly popular among users because of their product advantages such as good protective properties, safety and non-toxicity, and high tensile strength. Especially in developed countries and regions like Europe and the United States, they have a very broad market.

In 2018, the Company completed the construction and commenced operations of Phase I (2 billion units/year) and Phase II (2 billion units/year) of its annual 6-billion-unit health protection (novel gloves) production line project. The plant construction for Phase III has also been completed. There is an urgent need to further expand the Company’s existing nitrile glove production capacity through the construction of new production lines, so as to meet the business development needs of its protection segment and safeguard the Company’s future sustainable profitability. By adding an annual nitrile glove production capacity of 4 billion units, Bluesail Medical will become the leading company in China’s nitrile glove market, ranking first. According to the announcement, once the additional 4 billion units of nitrile glove production capacity reaches full output, it will contribute RMB 640 million in operating revenue and nearly RMB 100 million in net profit to Bluesail Medical. Meanwhile, the funds raised from this public issuance of convertible bonds will also be used to further enhance the automation and intelligent configuration of production equipment and lines, thereby improving production efficiency and reducing operational costs.

In addition to upgrading its product structure, the funds raised in this offering will also be used to acquire 100% equity interest in Wuhan Bikail Emergency Rescue Supplies Co., Ltd., helping Bluesail Medical seize industrial opportunities in the emergency care sector and enrich the product portfolio of its Protection Division.

Wuhan B-Kare is the largest manufacturer of vehicle-mounted first aid kits in Asia. The company’s main products include emergency protective first aid kits and bags, various emergency rescue products, and disposable health protective supplies, with an annual production capacity of over 10 million first aid kits. Its vehicle-mounted first aid kits hold a leading position in the European market, particularly in Germany, where its market share exceeds 50%. The company has established long-term strategic partnerships with globally renowned automakers such as Mercedes-Benz, BMW, Audi, and Renault, and its products have received widespread acclaim in the European market. Currently, the company is fully expanding into the new energy vehicle sector and has become the exclusive global supplier of onboard first aid products for Tesla.

This acquisition will enable Bluesail Medical to realize synergies in strategy, management, marketing, R&D, production, and supply chain collaboration, seize industrial opportunities in the emergency care sector, actively expand into the industrial and pre-hospital markets, and scale up its business operations, thereby further enhancing Bluesail Medical’s overall value and profitability while boosting corporate performance.

The dual-drive strategy of low-to-mid-value consumables and high-value consumables, coupled with steady growth, has become the fundamental strategy for Bluesail Medical’s development. The business models of its two medical device subsidiaries are complementary and provide risk hedging, enabling effective synergy that promotes the company’s overall development.

In the low-to-mid-value consumables segment, Bluesail Medical has established a comprehensive portfolio covering examination gloves, nursing gloves, protective gloves, household gloves, and children’s gloves. Its products serve diverse sectors, including medical care, food processing, and electronics manufacturing. The company also participates in the markets for medical and daily care products as well as civilian fire protection, offering items such as home first-aid kits, portable care kits, public first-aid stations, medical and daily care products, and water-based fire extinguishers, thereby forming a rich, multi-tiered product matrix. Anchored in large-scale, automated, intelligent, and highly efficient operations, Bluesail Medical’s health protection business continues to set new industry standards. By driving innovation, creation, and transformation, it achieves robust organic growth while generating a steady stream of free cash flow that supports the company’s accelerated R&D, expansion into new business areas, and external investments and mergers and acquisitions.

Bluesail Medical

In the high-value consumables segment, the development of Bluesail Medical’s Cardiovascular and Cerebrovascular Business Unit has been primarily driven by Biosensors International, which was acquired in 2018. The company has gradually established an industrial layout centered on coronary stents, extending into key therapeutic areas such as coronary intervention, structural heart disease, and heart failure. With an increasingly clear global footprint and differentiated international operational capabilities, Bluesail Medical stands out among medical device companies listed on China’s A-share market.

The parallel advancement of low- and medium-value consumables and high-value consumables, along with the synergistic development of organic growth and external expansion, remains the main theme of Bluesail Medical’s development. It was revealed that the company will establish additional R&D centers in the United States and Shanghai to accelerate research and technological development. R&D has already been initiated for innovative products such as drug-coated balloons (DCB), mitral valve repair/replacement, peripheral interventions, and neurointerventions. Meanwhile, in terms of investment and M&A, the company will expand its layout into consumable products for other departments, including surgery, orthopedics, and drug infusion, to further enhance business coverage and optimize its product portfolio.

Bluesail Medical’s 2018 annual report showed that the company achieved revenue of RMB 2.653 billion, a year-on-year increase of 68.35%. Benefiting from the integration of Biosensors International, this year marked the fastest revenue growth in its history. If the proposed projects related to the convertible bonds are implemented, they will further deepen Bluesail Medical’s dual-drive strategy for both low-to-mid-value and high-value consumables, providing the company with sustained and robust high-growth momentum.