Haier’s Biotech Arm Prepares for IPO on the Shanghai Stock Exchange Star Market

Financials, Healthcare Author: Ivan Platonov Sep 24, 2019 02:35 PM (GMT+8)

Haier Biomedical’s IPO registration process is drawing to a close. The firm gained nearly CNY 30 million (USD 4.22 million) in net profit over the last three years.

Haier biomedical freezers. Image credit: Haier

As the healthcare industry begins to make itself felt in immense China’s market, numerous pharma, medical equipment and healthcare services startups get mature enough to go public. Haier, a well-known Chinese consumer electronics corporation, has consigned its medical equipment subsidiary to the Shanghai bourse, examining by taste the results of the country’s recent financial reform.

After two months of regular trading, the Shanghai Stock Exchange Star Market is picking up momentum with more companies joining the race. As of September 24, 156 firms have filed for an IPO on the board. Eight tech enterprises have passed the whole registration process and now are in the queue for a roadshow and the consequent share allocation procedure. Haier Biomedical (A19065:SH) is one of them.

The Qingdao-based company is the second representative of eastern China’s Shandong province in the new trading venue. Its predecessor – electrical equipment producer Raytron (688002:SH) – made its debut two months before with the first batch of stocks in the new marketplace. Haier Biomedical might also become the second biotech firm after Chipscreen (688321:SH) to have its shares circulating in Shanghai.

The firm develops, manufactures and markets low-temperature storage equipment for biomedical samples. It provides a wide gamut of solutions for biological sample banks and other adjacent services. A 2B company, Haier Biomedical has received revenues of CNY 481.98 million (USD 67.73 million), CNY 621.41 million (USD 87.32 million) and CNY 841.67 million (USD 118.27 million) in 2016, 2017 and 2018 respectively.

The research and development cost jumped by 153% in two years from CNY 35.67 million (USD 5.02 million) in 2016 to CNY 90.35 million (USD 12.7 million) in 2018. According to the firm’s IPO materials, 213 employees, or over 23% of total personnel, are directly involved in various R&D-related activities at the moment.

Despite being exposed to regulatory risks, Haier Biomedical has to address ambiguities in its core business model. One example is supply chain uncertainties: five biggest upstream partners of the company account for more than a third of all its operating costs. Complex relations within Haier Group is another possible source of troubles. The trademark, which definitely matters in the medical equipment industry, might become the next hindrance.

According to KPMG, the global medical device market will grow at a 5.2% CAGR in the next decade, reaching USD 795 billion by 2030. The global management consultancy stated that “these projections reflect increasing demand for innovative new devices and services, as lifestyle diseases become more prevalent, and economic development unlocks the huge potential in emerging markets – particularly China and India."