China’s New Nasdaq Approves Three Firms, All Profitable
China approves first three companies for new tech board, from biomedicine, semiconductor, and manufacturing. These companies found the process less simple than expected, which took them approximately 67 days to get the approvals.
China’s new Nasdaq-style board, also known as Science and Technology Innovation Board, approved the first batch of applicants to make it onto the new board on June 5, out of the 119 firms that file with Shanghai Stock Exchange.
The exact initial public offering date for the newborn to-be-STIB-listed Shenzhen Chipscreen Biosciences Co., Ltd. (微芯生物), Anji Microelectronics Technology (Shanghai) Co., Ltd.( 安集科技) and Suzhou TZTEK Technology Co., Ltd. (天准科技) remains unknown.
The companies must now file a listing registration with the China Securities Regulatory Commission. The regulator will decide whether to accept it within 20 working days.
These companies found the process less simple than expected, which took them approximately 67 days to get the approvals. Though the new board allows loss-making firms as long as they meet certain criteria such as sufficient revenues and a steady cash flow, it shows concerns and focuses on profit, R&D expenses and high dependency on a single client, according to opinions towards the three companies.
Chipscreen Biosciences is an integrated biotech company specialized in discovery and development of novel small molecule pharmaceuticals with a primary focus in oncology, metabolic disease, and autoimmune disease. Considering net profit attributable to equity holders of the company after deduction of non-recurring profit or loss was CNY 5.03, 11.3, 18.98 million, in 2016, 2017, 2018, respectively, the company should disclose whether there are loss possibilities in future and related sufficient appropriate disclosures about the investment’s risks, regulators commented.
Per the filing, Chipscreen Biosciences obtained 59 domestic and foreign patent authorizations, 42 trademarks and three software copyright certifications. In addition, the company has 14 research programs ongoing.
“The firm started to sell its proprietary medicine and generated profits. It is not a common thing (for innovative biomedicine companies),” an early investor of the company said.
Chipscreen Biosciences received China Chinese Food and Drug Administration (CFDA) approval for treatment of Chidamide (Epidaza) for PTCLs in December 2014. A successful and popular drug, Chidamide was then included in China's Category B medical insurance list in July 2017. More than 4,000 patients with PTCL have been treated with Chidamide as of June 2018. Another two types of innovative medicine are queuing for a clinical trial or waiting to be approved. The firm spent more than 55% of revenues in R&D yearly, with 60.52%, 62.01%, and 55.85% in 2016, 2017 and 2018.
Aside from its promising product line, the company proved its ability to earn money as well. The firm registered revenues of CNY 85 million, 111 million, and 148 million from 2016 to 2018, respectively, with a more than 30% of CAGR growth. It recorded CNY 5.40 million, 25.91 million, 31.28 million net profit during the same period.
The third tech fund of Vertex Ventures, the venture capital arm of Singapore’s Temasek Holdings, closed at USD 210 million in 2017. The fund is one of the biggest investors of the company, with 6.63% of shares.
Anji Microelectronics specializes in advanced semiconductor materials development, contract R&D and manufacturing, qualification, and volume production. According the company’s prospectus, chemical mechanical polishing, one of the company’s main products, grabbed 2.42%, 2.57% and 2.44% market share globally from 2016 to 2018, respectively. Its sales accounted for 82.78% of total revenue in 2018.
Compared with Chipscreen Biosciences, Anji spent less in R&D regarding the proportion of revenues, with an average yearly 22% of revenues investing in the sector in the reported years.
The company possesses 190 granted patents around the world, covering China mainland, China Taiwan, the U.S., Singapore, Korea and so on. Anji is looking to raise CNY 303 million in the offering.
The board questioned whether the high depreciation and amortization of R&D should have been calculated as the depreciation and amortization of production equipment and whether that’s the reason for the high gross profit of the company.
Founded in 2005, headquartered in Suzhou, TZTEK Technology designs and manufactures video measuring and machine vision instruments for precision manufacturing industries, leveraged by computer vision technology. It produces precision measuring instruments, intelligent detection equipment, intelligent manufacturing equipment, and autonomous logistics vehicles. The company went public in ChiNext under the code of 833231 in August 2015 and was delisted in Jan 2018.
Since 2016, the company has been in green, with net profit to shareholders coming at CNY 9.45 billion in the year ended Dec.31, 2018. The company posted CNY 79.6 million R&D expenses in 2018, accounting for 15.66% of the total revenues. It obtained 65 patent authorizations and 68 software copyright certifications, the company claims.
Apple became TZTEK Technology’s biggest client since 2017, generating 29.46% of the company's total sales in 2017 and 28.51% in 2018. In addition, some of TZTEK Technology’s main clients are Apple’s suppliers. The board, thus, concerned on the company is highly depending on Apple.