Aier Eye Hospital Reports Strong Q3 2017 Results: Revenue and Net Profit Surpass Full-Year 2016, Market Cap Exceeds RMB 40 Billion

On October 15, Aier Eye Hospital Xi’an officially opened, achieving the goal of operating 200 chain hospitals across mainland China.

VCBeat (WeChat: vcbeat) has learned that on the evening of October 23, Aier Eye Hospital (300015) announced its financial report for the third quarter of 2017. The company achieved an operating revenue of RMB 4.382 billion in the first three quarters, a year-on-year increase of 42.16%; its net profit deducting non-recurring gains and losses amounted to RMB 657 million, a year-on-year increase of 38.86%. Both the revenue scale and the net profit deducting non-recurring gains and losses exceeded the full-year figures of the previous year.

In the third quarter, the company recorded revenue of RMB 1.792 billion, a year-on-year increase of 54.10%, and achieved a net profit attributable to shareholders after deducting non-recurring gains and losses of RMB 292 million, up 45.02% year on year, delivering standout performance. Alongside Aier Eye Hospital’s robust growth, its market capitalization repeatedly hit new highs, surpassing the RMB 40 billion mark and reaching RMB 42.682 billion as of the 23rd.

The third-quarter performance figures were impressive, partly due to the consolidation of the acquired European hospitals. On August 9 this year, Aier Eye Hospital announced that it had completed the share transfer for the tender offer of Clínica Baviera, S.A., and all related payments had been fully settled. The transaction cost €152 million.

This is the largest acquisition since March 2017, when Aier Eye Hospital spent $18 million to acquire a 75% stake in the U.S.-based MING WANG Eye Center.

Following the completion of the closing, the Company holds an aggregate 86.83% equity interest in Clínica Baviera, S.A. through Aier Eye Hospital International (Europe) Co., Ltd. Since then, Aier Eye Hospital has become the only medical group globally with listed companies in both China and Europe, spanning the three major markets of Asia, America, and Europe, and reaching a population of over 2 billion.

Clínica Baviera, S.A. is the largest publicly listed chain of ophthalmic medical institutions in Europe, with decades of development history. It employs nearly 300 ophthalmologists and optometrists, including a core team of renowned specialists such as its founder, Dr. Julio Baviera, who enjoy high prestige in the European ophthalmology community.

It has been learned that Clínica Baviera, S.A. wields extensive influence in the field of ophthalmology and across the broader medical sector in Europe. Currently operating 76 ophthalmic medical facilities in Spain, Germany, Italy, and other countries, it is a specialized chain of eye care institutions whose refractive surgery business holds the leading market share in both Spain and Germany.

It is worth noting that the tender offer for the equity of the acquisition target received a high level of acceptance, while Clínica Baviera’s listed status was retained. Public records show that Clínica Baviera achieved a net profit of €7.945 million in 2016. Aier Eye Hospital anticipates that Clínica Baviera’s profitability will further improve as its market share continues to grow, thereby boosting Aier Eye Hospital’s financial performance.

Following the acquisition, Aier Eye Hospital will be able to integrate global ophthalmic resources and top-tier eye care teams from Europe and the United States, share advanced ophthalmic technologies worldwide, increase the frequency of exchanges between Chinese and international ophthalmology teams, introduce internationally advanced technical standards into China, and enable domestic eye disease patients to access higher-end and superior quality services.

In addition to accelerating the implementation of its internationalization strategy, Aier Eye Hospital has been steadily refining its tiered chain model in recent years, advancing the development of a medical network with a focus on prefecture-level and county/city markets. Multiple provinces and autonomous regions have gradually formed an integrated “cluster” layout, significantly enhancing resource sharing and enabling patients at the grassroots level to access high-quality ophthalmic care closer to home.

Aier Eye Hospital’s distinctive tiered chain model—“central city hospitals–provincial capital hospitals–prefecture-level hospitals–county-level hospitals”—aligns with China’s vigorously promoted hierarchical diagnosis and treatment policy. The company has established strong core competitiveness in technology, services, brand, scale, talent, scientific research, and management, with multiple mature hospitals gradually capturing the largest local market share in terms of outpatient visits, surgical volume, and operating revenue.

The Company actively aligns with the national healthcare reform direction of accelerating tiered diagnosis and treatment and promoting primary care at the grassroots level. It continues to employ a dual-drive strategy of “Corporate Operations + Industrial M&A Funds” to expedite the vertical layout of prefecture- and county-level medical networks across various provinces, while simultaneously exploring horizontal expansion models for optometry services and community eye health services within urban areas.

On October 15, 2017, Aier Eye Hospital in Xi’an officially opened, achieving ahead of schedule the goal set two years earlier to establish 200 specialized chain eye hospitals across mainland China. In addition, Aier Eye Hospital operates nearly 90 ophthalmic medical institutions in Hong Kong (China), the United States, and Europe. By comparison, at the time of its initial public offering eight years ago, Aier Eye Hospital had only 19 chain hospitals.

Chen Bang, Chairman of Aier Eye Hospital Group, stated, “At one of Aier Eye Hospital’s municipal-level central hospitals, there are more than ten secondary specialties. Ophthalmic surgeries are categorized into several major types, including refractive surgery, cataract surgery, anterior segment surgery, and posterior segment surgery. In the past, residents in remote townships struggled to find local ophthalmic care and had to endure arduous journeys to major cities. Today, Aier Eye Hospital has established 200 hospitals across China, with the majority located in prefecture-level and county-level areas, bringing services closer to the public.”

Aier has been continuously strengthening its core competitiveness and forging comprehensive platform advantages: by leveraging the Aier School of Ophthalmology at Central South University, Academician Workstations, and Postdoctoral Collaborative R&D Centers, it has created an “engine” for talent development; through equity incentives and partnership programs, it has established a “new highland” for attracting renowned experts; by cultivating hospitals via merger and acquisition funds, it has built a “reservoir” of high-quality projects; and through a new model of cross-subsidized charity and China’s largest corneal bank, it has crafted a “new namecard” for medical philanthropy.

Equipped with extensive data, Aier Eye Hospital initiated artificial intelligence research in January 2016. Initially, the hospital’s AI-based image reading platform focused on the development of diagnostic capabilities for diabetic retinopathy (DR). From January to August 2016, the system analyzed more than 50,000 fundus photographs; through iterative learning and model optimization, it achieved an accuracy rate of 82%.

In the second phase, the system began to identify AMD (age-related macular degeneration). After further training on more than 40,000 fundus photographs, it achieved an accuracy rate of 93.3% for DR and 93.07% for AMD, whereas the current accuracy of similar international diagnostic systems is approximately 80%.

Currently, Aier Eye Hospital has partnered with Intel to jointly develop an AI-based solution for identifying ophthalmic diseases. In the future, the system will activate an automatic learning module to learn from physicians and improve accuracy, while gradually expanding to diagnose other eye conditions such as glaucoma.

For this ophthalmology group, Aier Eye Hospital has established a cloud service platform on the online front, including the “Mulin” APP and telemedicine platforms. Offline, it relies on local Aier Eye Hospitals as the main body, setting up health stations in districts, counties, communities, and villages. By leveraging internet technology and artificial intelligence, it achieves full-process management from health management to treatment, helping Aier’s prefecture-level and county-level hospitals gradually approach the same diagnostic and treatment standards as central and provincial capital-level major hospitals.