Galaxy Biotech Accelerates Evaluation of Investment Value in Proposed Acquisition of Remote CardioWorld

On the evening of January 15, 2018, Galaxy Bio issued an announcement stating that it was unable to disclose the restructuring plan for its major asset reorganization within the prescribed timeframe. The company intends to apply for the resumption of trading in its shares starting from the market opening on January 18, 2018, and has simultaneously decided to continue advancing the restructuring process.

The announcement stated that the target assets for the major asset restructuring currently being planned by Galaxy Bio were no less than 66.776% of the equity interest in Beijing Yuancheng Xinjie Hospital Management Co., Ltd. (hereinafter referred to as “Yuancheng Xinjie”).

Subsequently, the resolutions of the eighth meeting of the ninth Board of Directors, released on January 16, indicated that due to the innovative nature of the business model of Beijing Yuancheng Xinjie Hospital Management Co., Ltd. (hereinafter referred to as “Yuancheng Xinjie” or the “Target Company”), a relatively aggressive sales policy was adopted in the early stages of development to rapidly capture market share. While this strategy significantly increased market share, it also led to a rapid rise in accounts receivable.

To further advance this transaction and in consideration of the prudence and standardization requirements of the listed company’s accounting policies, Yuancheng Xinjie, after full consultation with its controlling shareholder, Yuancheng Shijie Group, began to adjust and optimize its original business model in late November 2017. It has since expanded its business in accordance with the new sales policy to avoid large-scale accounts receivable arising from new businesses, while actively collecting outstanding accounts receivable.

To date, the adjustment and optimization of the relevant business model have achieved certain positive progress. However, due to the short duration of the adjustment and optimization process and the large number of entities involved, this work has not yet been completed, and it remains uncertain whether such adjustments will have a material impact on the target company’s performance. To more objectively assess the investment value of Remote Heart Boundary (Yuan Cheng Xin Jie) and mitigate investment risks, Galaxy Biology intends to conduct audits and valuations, and execute a formal restructuring agreement, only after the effects of the target company’s business model adjustment and optimization become clear.

Yuan Cheng Xin Jie is one of the largest operators of specialized cardiovascular medical consortiums in China. Leveraging the National Center for Cardiovascular Diseases—Fuwai Hospital, Chinese Academy of Medical Sciences—it establishes “Telemedicine Centers for Cardiovascular Diseases” for public Grade II Class A and above hospitals at the county and municipal levels across China.

Meanwhile, supporting cardiovascular disease regional ECG and regional imaging equipment is provided to the “Cardiovascular Disease Remote Consultation Centers” at each base hospital. This enables cardiovascular patients, after their initial consultation at a base hospital, to upload their ECG and imaging data to the base hospital’s information data center, depending on the severity and urgency of their condition.

Additionally, remote consultations with experts from Fuwai Hospital can be conducted upon patient request, with diagnostic and treatment results promptly communicated to the patient, thereby establishing a two-way linkage between the base hospital and the Cardiovascular Remote Consultation Center of Fuwai Hospital, Chinese Academy of Medical Sciences.

Industry insiders note that as the base’s remote consultation center expands its operations, an increasing number of patients are gradually embracing the convenience offered by this telemedicine service.

Remote Heart World was among the early movers in China to establish a presence in tiered diagnosis and treatment systems and medical consortiums. Currently, it has become one of the largest operators of primary healthcare service platforms in China. Adhering to the core strategy of building medical consortium (including medical community) platforms, it focuses on service innovation for primary healthcare institutions. By empowering these institutions through its platform, Remote Heart World has pioneered a novel pathway for the comprehensive development of primary healthcare in China.

Thanks to the vigorous promotion of tiered diagnosis and treatment, the role of medical consortia in optimizing the allocation of medical resources, enhancing primary healthcare capabilities, and providing convenient medical services to patients in remote areas has gained industry consensus in recent years. Notably, Yuancheng Xinjie is centering its development on resource sharing, initiating the construction of specialized disease-focused medical consortia. By facilitating the transition of patients from online consultations to offline care, it enables the practical implementation of remote consultations and surgeries, integrating health management, health insurance, and medical services.

Galaxy Biopharma believes that the target of this acquisition belongs to the pharmaceutical and healthcare industry, has experienced rapid business expansion in recent years, and has significantly increased its market share. This aligns with the company’s strategic development plan and is conducive to promptly enhancing the performance of the listed company. The business model and industry position of Yuancheng Xinjie constitute an important foundation for the company’s development and growth.

Analysts have pointed out that the implementation of policies promoting medical consortiums will greatly benefit companies deeply engaged in inter-hospital medical collaboration. Once the window for institutional dividends opens, these enterprises will enjoy a first-mover advantage and usher in a period of rapid growth.

Furthermore, guided by the spirit of relevant national policies, Tele-CardioScope aims to leverage the expert technical resources and outreach support of renowned domestic public tertiary hospitals. Using the organizational development of the Medical Consortium Station Master Alliance as a link, and establishing “Telemedicine + Workstation” co-construction as its fundamental foothold, it builds upon Health Huts, centers on specialized chronic disease management models, and employs family doctor contract-based services as its primary means. Focusing on four key terminal institutions—county-level hospitals, community health service centers, township health centers, and village clinics—it fully establishes a tiered management and risk prevention mechanism for cardiovascular specialties and chronic diseases, thereby providing authoritative health management services to the grassroots population.

Similarly, to better serve patients within the jurisdiction, the “County-Level Medical Community” platform, in collaboration with its operator, Remote Heart World, will provide member institutions at all levels with services including specialty development, personnel training, equipment upgrades, and pharmaceutical-medical coordination. Building on initiatives such as health lecture series and grassroots patient screening, and leveraging technical support from experts in top-tier specialty academic alliances, the platform will actively conduct health education for the prevention and control of cardiovascular diseases at the grassroots level, establish standardized health records for identified patients, and deliver comprehensive chronic disease management services.

Meanwhile, by effectively integrating initiatives such as special-purpose public welfare funds and mutual medical aid insurance, and leveraging family doctor contract-based services as a key mechanism, we are actively establishing patient safeguard measures under the coordinated model linking pharmaceuticals, health insurance, and healthcare delivery. This approach effectively controls medical costs, tangibly reduces the financial burden of primary care on households, mitigates the risks of poverty caused or exacerbated by illness, and genuinely addresses the challenges of difficult and expensive access to medical care for the general public.

Over the three years since Galaxy Bio established its strategic transformation goals, the macroeconomic policy and industry regulatory environment have undergone positive changes. The state and relevant departments have introduced multiple policies to support the development of the biopharmaceutical industry, bringing valuable development opportunities to the sector, particularly in the field of cell therapy, which is at the international forefront.

Practice has proven that the decision to pursue strategic transformation and the choice of product direction were correct. Meanwhile, the Company also recognizes that, due to insufficient understanding of the new industry and inadequate assessment of difficulties and risks, it is necessary to conduct a thorough review and make improvements:

(1) Focus on the treatment of major diseases such as cancer, and strive to promote the clinical development and market launch of drugs with relatively mature conditions. The company should timely adjust its original strategy of full-industry-chain layout in response to changes in the industry and its own conditions, focus on the treatment of major diseases such as cancer, and promote the clinical development and market launch of CAR-T drugs, third-generation EGFR inhibitors (small-molecule targeted drugs), monoclonal antibody drugs, stem cell drugs, and oncolytic virus drugs.

(2) Focus on M&A opportunities in mature and high-growth enterprises with strong market prospects and performance expectations, optimize the industrial structure, and enhance the listed company’s operational performance and profitability.

(3) Adhere to the dual-core business strategy of existing manufacturing and pharmaceutical/medical sectors, jointly enhancing corporate profitability

(4) Strengthen the construction of the company’s management team and corporate operating mechanisms, improve the investment management system, and strictly control investment risks for listed companies.

Some market observers believe that if Yuancheng Xinjie can leverage the Galaxy Biological platform to access the capital markets, the company’s development will reach a new level. This move would not only enhance its commercial competitiveness but also provide strong support for domestic medical consortia and tiered diagnosis and treatment systems.

Source: Galaxy Bio's Announcement, Guangming Online, Health News