Chinese Blood Purification Leader Weigao Blood Purification Abandons Hong Kong Listing, Pursues A-Share IPO with Over RMB 1 Billion in Net Profit Over Three Years

Recently, although the secondary market has been flooded with news of IPO withdrawals by numerous medical companies, there have been some “exceptions.”

On December 30, 2023, Shandong Weigao Blood Purification Products Co., Ltd. (hereinafter referred to as “Weigao Blood Purification”) disclosed its prospectus (draft for declaration), officially launching its initial public offering (IPO) with plans to list on the A-share market. Prior to this, Weigao Blood Purification had submitted a prospectus to the Hong Kong Stock Exchange; however, that listing application has since lapsed.

It is reported that Weigao Blood Purification, established in 2004, is a company specializing in the production and sales of blood purification products, and is regarded by the industry as“King of Hemodialysis in China”, with its business primarily covering hemodialysis and hemoperfusion products for the treatment of kidney diseases and other related blood disorders. Its product portfolio includes dialyzers, hemoperfusion cartridges, dialysate, and ancillary dialysate products. The company’s product technologies are industry-leading, with multiple products holding the number one market share.

Figure 1. Weigao Blood Purification’s Revenue Performance (Source: Prospectus)

It is precisely for this reason that its operating performance in recent years has been quite impressive. According to the prospectus,Weigao Blood Purification reported operating revenues of RMB 2.64 billion, RMB 2.91 billion, RMB 3.43 billion, and RMB 1.68 billion in 2020, 2021, 2022, and the first half of 2023, respectively; its net profits attributable to ordinary shareholders of the company were RMB 297 million, RMB 260 million, RMB 315 million, and RMB 229 million, respectively.. Amid the current market winter, delivering such a “report card” is no small feat.

So, what exactly has Weigao Blood Purification done right? When viewed within the broader context of the hemodialysis field, asShanwaishan (officially listed on the STAR Market of the Shanghai Stock Exchange in December 2022)、Weigao Blood PurificationWith successive moves in the secondary market, has this industry reached its harvest phase, and what is the current market landscape? To find key answers, VCBeat will attempt an interpretation based on prospectuses.

According to the prospectus, Weigao Group is the controlling shareholder of Weigao Blood Purification, directly holding 46.39% of its shares.

As one of China’s Top 500 Enterprises, Weigao Group is committed to building a comprehensive healthcare industry ecosystem. It currently comprises 13 industrial groups and more than 100 subsidiaries, among whichWeigao Shares, Huadong CNC, and Weigao Orthopaedics have been successfully listed., and the market capitalizations of both Weigao Co., Ltd. and Weigao Orthopaedics exceeded RMB 10 billion.

As a key subsidiary of the Weigao Group in the hemodialysis sector, Weigao Blood Purification has attracted significant industry attention since its inception. Its most recent financing round raised up to RMB 1.5 billion, securing backing from multiple leading investment firms.

Turning to the company itself, Weigao Blood Purification has focused on the field of blood purification, continuously investing in research and development and accumulating technical expertise. In 2010, it jointly established Weigao Nikkiso (Weihai) Dialysis Equipment Co., Ltd. with Japan’s Nikkiso Co., Ltd., a world-renowned leader in hemodialysis equipment, to specialize in the production of hemodialysis machines. In 2012, it further partnered with Terumo (China) Investment Co., Ltd. to establish Weigao Terumo (Weihai) Medical Products Co., Ltd., focusing on the field of peritoneal dialysis.

Based on this, Weigao Blood Purification has focused on the two strategic directions of hemodialysis and peritoneal dialysis. It has currently achieved full coverage of its main product lines in blood purification, primarily consisting of hemodialyzers, hemodialysis tubing sets, hemodialysis machines, and peritoneal dialysis fluids, complemented by the sales of ancillary dialysis products.has become one of the domestic manufacturers with the most comprehensive product lines of blood purification medical productsI.

Figure 2. Product image of hemodialyzer (Source: Prospectus)

Among the numerous products,Hemodialyzers constitute its most critical product line, with their operating revenue accounting for over 50% of the company's total revenue from 2020 to the first half of 2023.To date, Weigao Blood Purification has established a comprehensive portfolio of hemodialyzers across five major series, featuring hollow-fiber membranes with a full range of pore sizes. This lineup spans from the low-flux F series with the smallest membrane pores, through the medium-flux MF series with larger pores, to the high-flux HF and EH series with the largest pores, as well as the HDF series specifically designed for hemodiafiltration modes, thereby meeting the diverse needs of patients undergoing hemodialysis.

Focusing further on the field of peritoneal dialysis, Weigao Blood Purification has partnered with Terumo, a globally renowned manufacturer of peritoneal dialysis fluids. Their joint venture, Weigao Terumo, is engaged in the development and production of peritoneal dialysis fluids and holds exclusive rights to sell these products in mainland China. Notably, the neutral, low-GDP dual-chamber bag peritoneal dialysis fluid developed and manufactured by Weigao Terumo received approval from the National Medical Products Administration (NMPA) for market launch in 2022. It is indicated for peritoneal dialysis treatment in patients with chronic renal failure.It is the first neutral peritoneal dialysis solution product approved for marketing in China.。

In fact, it is no exaggeration to call Weigao Blood Purification the "King of Hemodialysis in China."

According to Frost & Sullivan data, in 2022, the company held a 32.5% market share in China’s hemodialyzer sector,Ranked No. 1 in the Industry; holds a 32.8% market share in the domestic hemodialysis tubing sector,Also ranked first in the entire industry. In the hemodialysis machine market segment, the Weigao Nikkiso and Nikkiso brand hemodialysis machines, for which the Company was authorized exclusive sales rights in 2022, accounted for a 23.7% share of the domestic hemodialysis machine market.Ranked Second in the Industry。

With such a high market share, its operational performance has also remained strong. According to the prospectus, Weigao Blood Purification reported operating revenues of RMB 2.64 billion, RMB 2.91 billion, RMB 3.43 billion, and RMB 1.68 billion in 2020, 2021, 2022, and the first half of 2023, respectively.with a year-on-year increase of 10.23% in 2021 and 17.87% in 2022. Although complete data for 2023 is not yet available, historical experience indicates that the second half of the year is typically the peak period for product delivery; therefore, it can be projected that its full-year revenue will be slightly higher than that of 2022.

Furthermore, Weigao Blood Purification did not engage in "loss-leading" strategies with respect to its key net profit metric. According to the prospectus, the net profit attributable to ordinary shareholders of the company was RMB 297 million, RMB 260 million, RMB 315 million, and RMB 229 million in 2020, 2021, 2022, and the first half of 2023, respectively, remaining at a relatively high level.

Figure 3. Revenue Performance of Weigao Blood Purification’s Five Core Product Pipelines (Source: Prospectus)

More specifically, regarding segmented products,Hemodialyzers, as its flagship product, account for over 50% of total revenue, with a gross profit margin maintained at approximately 66%.. Additionally, based on data from the first half of 2023, hemodialysis machines, hemodialysis tubing, peritoneal dialysis fluids, and dialysis ancillary products accounted for 20.66%, 11.82%, 4.42%, and 10.57% of total revenue, respectively.

Certainly, Weigao Blood Purification has naturally done some things right to achieve such outstanding performance in its operations. Specifically, first, it benefits from its complete industrial chain, with integrated services capable of meeting various clinical needs; second, its product technologies are also innovative. It is reported that as of June 30, 2023,Weigao Blood Purification and its holding subsidiaries hold 204 domestic patents, including 29 invention patents.。

In addition, marketing is also a key component. According to the prospectus, Weigao Blood Purification adopts a sales model dominated by distribution, supplemented by direct sales. By continuously expanding its distribution channels, the proportion of distribution revenue has continued to rise, increasing from 64.06% in 2020 to 74.76% in the first half of 2023. During the reporting period, its product sales have covered all 31 provinces, municipalities, and autonomous regions in China.Ultimately sold to over 6,000 medical institutions in China, including hospitals and dialysis centers, of which more than 1,000 are tertiary hospitals.。

Certainly, on the flip side of its many highlights, Weigao Blood Purification currently faces considerable “anxiety,” as stated in its prospectus,If the regions implementing volume-based procurement (VBP) for the Company’s relevant products continue to expand in the future, and if the Company fails to win bids or if VBP leads to a significant decline in product prices, there is a risk that revenue and profits from these products will decrease, which would adversely affect the Company’s operating performance.。

In fact, affected by factors such as intensified market competition, the volume-based procurement policy, and fluctuations in raw material prices,Weigao Blood Purification's sales gross profit margin is experiencing varying degrees of decline.. According to the prospectus, from 2020 to 2022, Weigao Blood Purification's comprehensive gross profit margins were 48.92%, 46.45%, and 42.91%, respectively, while the gross profit margins for its core business were 50.13%, 48.06%, and 44.02%, respectively.

In terms of net profit, although no losses were incurred, growth has been unstable; notably, in 2021, Weigao Blood Purification’s net profit decreased by 12.41% year-on-year.

However, Weigao Blood Purification has also devised countermeasures. In its prospectus, the company stated that it will focus on three core areas in the future: first, continuously enhancing production capacity and improving the quality assurance system; second, prioritizing investment in R&D and actively promoting technology commercialization; and third, establishing effective sales channels and strengthening brand building.

In the use of proceeds from this fundraising, it is clearly stated that RMB 342 million will be invested in the Weigao Blood Purification Intelligent Production and Construction Project, RMB 226 million in the Dialyzer (Ganzhou) Production and Construction Project, RMB 285 million in the Weigao New High-Performance Blood Purification Consumables and Equipment R&D Center Construction Project, RMB 98 million in the Weigao Blood Purification Digital Information Technology Platform Construction Project, and RMB 400 million to supplement working capital.

Just five days after Weigao Blood Purification submitted its prospectus, on January 4, 2024, Shanwaishan released its 2023 annual earnings forecast. The report indicated that Shanwaishan expected to achieve revenues of RMB 650 million to RMB 720 million in 2023,Year-on-year growth of 70.15% to 88.48%; net profit attributable to shareholders of the parent company is expected to reach RMB 160 million to RMB 200 million in 2023,Year-on-year growth of 170.10% to 237.63%。

In fact, since its official listing on the STAR Market of the Shanghai Stock Exchange in December 2022, Shanwaishan has delivered impressive financial results each quarter, achieving high growth in both revenue and net profit. Taking the most recent Q3 as an example, its total revenue reached RMB 576 million, a year-on-year increase of 122.02%; net profit attributable to shareholders of the parent company amounted to RMB 182 million, surging 431.16% year on year. Like Weigao Blood Purification, it has made significant strides in business development.

Does this mean that the blood purification market is on the verge of a major boom?

This must be examined from multiple dimensions.First and foremost is the patient population; China has a large and rapidly growing base of patients with end-stage renal disease (ESRD).According to Frost & Sullivan data, the number of patients with end-stage renal disease (ESRD) in China reached 2.7728 million in 2018, accounting for more than 30% of the global ESRD patient population. From 2018 to 2022, the number of ESRD patients in China increased from 2.7728 million to 3.8547 million, representing a compound annual growth rate (CAGR) of 8.58%. The number of ESRD patients in China is projected to rise to 5.0164 million by 2026, with a CAGR of 6.81% from 2022 to 2026, which is higher than the global growth rate during the same period.

Figure 4. Prevalence of ERSD in China (Source: Prospectus)

Furthermore, as the aging trend intensifies, the prevalence of hypertension and diabetes among the elderly in China continues to rise. The number of patients developing end-stage renal disease (ESRD) due to kidney diseases caused by these primary conditions is also showing a sustained growth trend, thereby driving the rapid expansion of the blood purification medical device market.

Secondly, in terms of market penetration. According to Frost & Sullivan data, the number of ESRD patients receiving hemodialysis in China increased from 579,400 in 2018 to 844,300 in 2022,The compound annual growth rate (CAGR) is 9.87%, and the number of patients undergoing hemodialysis is projected to reach 3.1524 million by 2030.; The number of ESRD patients undergoing peritoneal dialysis in China increased from 94,900 in 2018 to 140,500 in 2022, representing a compound annual growth rate (CAGR) of 10.32%, and is projected to further rise to 450,100 by 2030.

Figure 5. Number of Patients Undergoing Hemodialysis and Peritoneal Dialysis in China (Source: Prospectus)

However, based on the total number of ESRD patients in China that year, which stood at 3.3052 million, the dialysis treatment rate for ESRD patients in China was only 24.40% in 2020. This remains at a relatively low level globally, indicating substantial room for multi-fold growth in the future.

Finally, in terms of payment, since the State Council included end-stage renal disease (ESRD) in the critical illness medical insurance scheme in 2012, relevant policies on critical illness insurance coverage have been progressively implemented and extended to urban and rural residents. Bundled pricing for hemodialysis services has been adopted in most regions across China, with medical insurance reimbursement rates reaching 95% or higher in some areas, thereby significantly alleviating the financial burden on ESRD patients. Coupled with advancements in technologies related to blood purification products, treatment penetration rates are expected to continue rising.

 Figure 6. Market Size and Growth Rate of Hemodialysis Medical Devices in China (Source: Prospectus)

Therefore, according to Frost & Sullivan data,From 2018 to 2022, the compound annual growth rate (CAGR) of China's hemodialysis medical device market reached 6.49%, and it is projected to increase to RMB 48.39 billion by 2030.Among these, the market size of hemodialyzers in China reached RMB 5.123 billion in 2022, making it the largest segment within the hemodialysis medical device market. By 2030, the market size for hemodialyzers is projected to reach RMB 19.076 billion, while that for hemodialysis machines is expected to attain RMB 9.855 billion.

However, the flip side of opportunity is competition. In fact, China's blood purification market started relatively late, and there is still a certain gap in technical level compared with developed countries such as the United States, Japan, and Europe. Therefore, for a long period of time, China's hemodialysis market was onceFresenius, Baxter Healthcare, B. Braun MedicalForeign brands dominated the major market, with their share once exceeding 70%.

However, this situation is changing. Currently, the domestic market not only hasWeigao NikkisoSuch joint ventures, meanwhile, as the pace of domestic substitution accelerates, have in recent years includedShanwaishan, Biolight, Sanxin Medical, Jafron BiomedicalAs leading domestic enterprises also begin to emerge, this has directly intensified competition between domestic and foreign brands.

And how to stand out, it is also clearly mentioned in its prospectus—It is expected that, with the gradual implementation of policies such as volume-based procurement, leading enterprises with strong financial resources, R&D capabilities, operational capabilities, and warehousing and logistics capabilities will capture a larger market share, and the concentration of the blood purification industry is poised to further increase.。

Nevertheless, with the approval of various blood purification products from domestic enterprises and the continuous enhancement of their brand competitiveness, the curtain has risen on a major industry transformation. Meanwhile, Chinese hemodialysis companies are entering a new development cycle.

1. "Weigao Blood Purification Prospectus (Application Draft)";

2. “Shanwaishan Prospectus”;

3. “Net Profit Projected to Surge Over 170%! Blood Purification Market Explodes” – Sibailan Medical Devices;

4. “Another Weigao-Group Company Officially Launches IPO” — MedTech Home.