The IPO application of Medicilon on the SSE Star Market was accepted on September 21, which brings the first Contract Research Organization (CRO) from China’s bourgeoning pharmaceutical third party field into the Star Market fold/
Medicilon has long been seeking to raise money on the secondary market. In July 2017, the company intended to go public on the Growth Enterprise Market (GEM) of the Shenzhen Stock Exchange (SZSE), but could not pass the committee assessment.
The company is offering integrated research and pharmaceutical services, outsourcing the drug developer’s discovery process from the initial idea stage to the IND filing phase. The company is headquartered in Zhangjiang High-Tech Park of Shanghai, where it is expanding its business together with tens of other pharmaceutical companies located in the same district.
The Shanghai-based CRO is boasting of its employees’ ‘literacy’, and indeed the company is one of the highest amongst the Star Market applicants, with over 4.75% of employees holding a PhD degree. (Check out this report on China’s STAR Market)
Medicilon has been competing with the giants since its inception. Wuxi AppTec (药明康德) (603259: SH), Pharmaron (康龙化成) (300759: SH) and Joinn Laboratories (昭衍新药) (603127: SH) are the direct competitors of Medicilion in public markets.
Following the ‘4 + 7’ overhaul by the National Medical Products Administration (NMPA), China’s pharmaceutical industry has entered its ‘new normal’. The demand for CROs has soared in China, particularly after the acceptance of overseas clinical data to accelerate the launch of imported novel therapies, as Chinese generic drug developers’ lean towards producing novel drugs.
Yet, the company has to achieve more if it is to take a satisfying share from the appetizing cake of pharmaceutical products. While the gross profit margins of the three rivals from 2016 to 2018 were 40%, 43.6%, and 41.6% respectively, Medicilon maintained its margins at around 35.9%, 33.7%, and 36.1% for the same period – bringing about a massive question for the company’s operational efficiency.