Shenzhen Business Daily Reading Client Reporter Li Wei
According to the news on the website of the Beijing Stock Exchange on June 27, the IPO of Wuhan Jiachuang Biotechnology Co., Ltd. (hereinafter referred to as "Jiachuang Biotechnology") has been accepted by the Beijing Stock Exchange on June 27, 2024. This is not the first time that Jiatron Biotech has launched a sprint to IPO. On December 18, 2020, the IPO of Jiatron Biotech Innovation Board was accepted, and after two rounds of review and inquiry, it was held on April 29, 2021, but its first A-share IPO application was "rejected"; On June 8, 2022, Jiatron Biotech submitted listing application materials to the GEM and was accepted, but after updating the first round of inquiry responses, Jiatron Biotech withdrew its IPO application materials, announcing that it had failed for the second time. According to the prospectus, the company's gross profit margin showed a certain degree of decline during the reporting period, and its road to listing may still face many uncertainties.
According to the official website, Wuhan Jiachuang Biotechnology Co., Ltd. was founded in 2011 and is a high-tech enterprise led by Professor Zheng Congyi of the School of Life Sciences of Wuhan University, focusing on providing quality testing of various types of cells (including recombinant cells, viral host cells, stem cells, immune cells), strains, strains and raw and auxiliary materials, virus clearance process verification technical services, and cell library construction and preservation services for manufacturers and R&D institutions. After more than ten years of operation, adhering to the core service concept of high quality, efficiency and transparency, Jiatron Biotech has continuously developed and precipitated, and has successfully established a cell quality detection technology system containing nearly 100 technologies and a unique database system. On this basis, with its own professional team and management capabilities, as well as a good reputation in the industry, it has successfully served more than 800 domestic and foreign enterprises, providing tens of thousands of batches of cell and raw material testing and virus clearance process verification services.
According to the prospectus, during the reporting period (2021-2023), the company achieved revenue of 129.4 million yuan, 146.22 million yuan and 131.71 million yuan, and the change rate of revenue from 2021 to 2023 was 12.99% and -9.92% respectively. As can be seen from the figures, while the company's business is booming, there are also hidden risks.
Source: Jiachuang Biotech prospectus.
The market is weak and operating performance is declining
The prospectus pointed out that in 2023, the financing environment of the biopharmaceutical industry will be weak and the financing of the industry will be tightened. The innovation-driven biopharmaceutical industry is highly dependent on financial support, which affects the advancement of R&D projects of the company's customers. In order to strengthen market competitiveness, consolidate market share, and improve customer service levels, the company sells testing services at a reduced price. In 2023, the number of tests tested by the company will increase year-on-year, but due to the price reduction, the operating income and product gross profit margin will decrease year-on-year, and the company's performance will decline year-on-year. In 2023, the company will achieve operating income of 131.71 million yuan, a year-on-year decrease of 9.92%, and the net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses will be 43.21 million yuan, a year-on-year decrease of 28.70%.
If the financing of the biopharmaceutical industry continues to shrink in the future, it may cause the company's unit price to continue to decline, and it may be difficult to recover some of the payments, resulting in the risk of a decline in operating performance after listing.
Gross profit margin remained at a high level, but showed a downward trend
The prospectus pointed out that the gross profit margin can be used to judge the company's profitability, competitiveness and product bargaining power, and also represents the comprehensive market competitiveness of the company's products. During the reporting period, the gross profit margin of Jiatron's main business was 78.38%, 74.16% and 64.79% respectively. During the reporting period, the company was able to maintain a high level of gross profit margin, which is related to the company's strong testing service capabilities, strong market competitiveness and good cost control. However, the company's gross profit margin is declining year by year, which needs to be paid attention to.
In 2023, the financing environment for the biopharmaceutical industry will be weak and the financing of the industry will be tightened, the company said. The innovation-driven biopharmaceutical industry is highly dependent on financial support, which affects the advancement of R&D projects of the company's customers. In order to strengthen market competitiveness, consolidate market share, and improve customer service levels, the company has reduced the price of testing services. With the rapid development of biological product cell quality control, evaluation and detection technology, and the intensification of domestic competition, service prices may continue to decline in the future, and the company's gross profit margin is at risk of further decline.
At the same time, in order to cultivate a stable and high-quality testing team, the company continues to increase new employees and provide competitive remuneration, and the company's labor cost has increased rapidly; The company's investment in fixed assets has increased a lot, mainly for the expansion of production capacity, business expansion, and improvement of testing environment and testing efficiency. The company's investment in fixed assets mainly revolves around the company's main business, and the amount of depreciation and amortization increases after the conversion of related laboratories and instruments and equipment. Therefore, the increase in labor costs and the increase in depreciation of fixed assets will lead to a decrease in the company's gross profit margin.
The business structure is monolithic and faces fierce competition
The prospectus pointed out that the biological product cell quality control, evaluation and testing service industry, as a strategic emerging industry encouraged by the state, has the characteristics of high technical level and rapid development and change, and the company pays close attention to the technological development of the industry and attaches importance to R&D investment. During the reporting period, the company's R&D expenses were 7.99 million yuan, 10.99 million yuan and 10.19 million yuan respectively, accounting for 6.18%, 7.50% and 7.73% of operating income respectively. In the R&D process, the R&D team, management level, and technical route selection will all affect the success or failure of new projects and new technology R&D. If the company is unable to develop a project or technology with commercial value and meets the market demand after investing a large amount of R&D investment, it will adversely affect the company's profitability. The company's business structure is relatively single, the risk of intensified market competition, the company is in a high-tech service industry, complex technology, fast update and iteration, with the characteristics of high gross profit margin, there may be more competitors in the future, the company's operating income accounted for a large proportion of the cell assay business will face fierce market competition. Although the company has invested a lot of manpower, material and financial resources to deal with it, reserve and develop a large number of core technologies, lay out new products, continuously improve testing efficiency and reduce testing costs, and actively explore potential customers, it still takes a long time for new products and new businesses to generate revenue, and it will not be able to change the risk that the company's business structure is relatively single and industry competition is intensifying in the short term, and will adversely affect the company's ability to continue operations.
Industry insiders pointed out that Jiatron Biotech mainly provides cell identification and virus clearance process verification services for biological product companies and medical institutions, both of which are closely related to the prosperity of the biomedical industry. Since 2020, the investment and financing activities of innovative drug and vaccine companies have been active, and the demand for cell testing has increased significantly. However, with the ebb of the epidemic and the decline in biomedical investment and financing activity, the market demand for cell testing has also shrunk. The prospectus also shows that in 2023, the revenue of cell testing, the core business of Jiatron Biotech, will decline sharply, with a revenue of 119 million yuan in the current period, a year-on-year decrease of 12.62%, accounting for 90.15%.
Source: Jiachuang Biotech prospectus.
Bad debts of accounts receivable are increasing year by year
The company also pointed out that during the reporting period of the prospectus, the company's accounts receivable balance increased year by year. At the end of the reporting period, the balance of the company's accounts receivable was 0.00 yuan, 1.46 million yuan and 14.26 million yuan respectively, and the balance of bad debt provision for accounts receivable was 0.00 yuan, 73,000 yuan and 733,000 yuan respectively. With the continuous and rapid growth of the company's operating income, the scale of the company's accounts receivable has expanded accordingly. The aging of the company's accounts receivable is mainly less than 1 year. If there are adverse changes in the production and operation of major customers in the future, there is a risk of bad debts in accounts receivable, which will adversely affect the company's operating results.