According to the disclosure of the Hong Kong Stock Exchange on July 26, iFLYTEK Medical Technology Co., Ltd. submitted to the main board of the Hong Kong Stock Exchange, with Hua Thailand, GF Capital (Hong Kong) and CCB International as joint sponsors.
Previously, iFLYTEK Medical has completed the filing of the Hong Kong stock listing and obtained the pre-requirements for a Hong Kong listing hearing, or a listing hearing on the Hong Kong Stock Exchange soon.
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iFLYTEK Medical is an AI-enabled medical solution provider. The company's products and solutions cover the entire medical service cycle from health risk warning, early screening, diagnosis, treatment and treatment effect evaluation to post-discharge management and chronic disease management, and independently developed artificial intelligence technology to support the company's products and solutions.
Specifically, the Company provides primary medical services to assist doctors in primary medical institutions to improve their service capabilities and enable regional management agencies to achieve more effective monitoring; hospital services to improve the efficiency of diagnosis and treatment of grade hospitals and doctors; Patient services to improve the convenience and quality of access to medical services for patients and residents; and regional healthcare solutions to assist regional healthcare authorities in their data-driven integrated management and to facilitate the efficient use of healthcare funds.
According to Frost & Sullivan, iFLYTEK's revenue scale in 2023 ranks first in China's medical AI industry, with a market share of 5.9%. iFLYTEK, a leading AI company focusing on core AI technology research, is the controlling shareholder of the company.
Many of iFLYTEK's products and solutions are based on the same core technologies, such as models, medical knowledge graphs, speech recognition, medical reasoning, etc., but are provided to different natural language processing ("NLP") target users in different application scenarios.
The Company's revenue is derived from project-based project implementation fees and the benefits of the ongoing provision of products and services, including the provision of maintenance and operation services, smart outbound call services, patient service packages, imaging cloud and medical devices. The company's project cycle is usually one to five years, during which the company provides maintenance and other services free of charge. After the expiration of the maintenance period, the company will charge maintenance and operation service fees as needed.
Based on a deep understanding of the medical industry, iFLYTEK has independently built technology. The company has established a core technology framework around deep neural networks, deep learning and medical knowledge graphs, as well as proprietary core technologies for speech recognition, image recognition and natural language understanding ("natural language understanding") in the medical field.
The continuous progress of the Company's artificial intelligence technology and the continuous expansion of the medical knowledge graph will contribute to the development of the Company's proprietary medical model (the "Big Model"), the iFLYTEK Xinghuo Medical Large Model, enabling the Company to continuously enrich the Company's products and services.
Based on these basic functions, iFLYTEK has created modular medical plug-ins, such as the ability to recommend rational medication, analyze medical reports, control EMR quality, create patient files, and mark medical terms. By integrating these medical plugins, the company has developed specific features such as CDSS, drug recommendations, smart triage, and patient-oriented applications (including iFLYTEK App and Mini Program). These are complex applications that are similar to the mental processes of medical professionals when making decisions.
iFLYTEK is the only company that participated in the formulation of the "Technical Evaluation System and Standard Specification for Large Language Models in the Medical Field". According to Frost & Sullivan, the system is one of the first batch of relevant medical AI technology use specifications based on industry standards in China to evaluate the application of AI technology in the medical industry.
According to Frost & Sullivan, the company was one of the earliest market participants in promoting and implementing large-scale models in China's healthcare industry. Large models are trained on a large number of excellent datasets to continuously understand, summarize, generate, and predict new content.
According to the tests conducted by the Theil System Laboratory of the China Academy of Information and Communications Technology ("CTTL"), which is part of the China Academy of Information and Communications Technology ("CAICT"), the iFLYTEK Xinghuo medical model is used in expert-level medical knowledge graph Q&A, clinical language understanding, medical document generation, disease diagnosis and treatment recommendations, multi-round medical dialogue generation, Six dimensions of medical-related NLP tasks, such as multimodal interaction in medical scenarios, surpass GPT-4Turbo.
The company's research department is committed to the progress of basic technology and the construction of industrial ecosystem, and has been recognized as the key laboratory of medical artificial intelligence research and application in Anhui Province. The company's research work lays the foundation for the company's technological advancements to further advance the development of medical AI to meet the systemic needs of the medical industry.
The market size of China's medical AI industry has grown significantly. According to Frost & Sullivan, the market size of China's healthcare AI industry increased from RMB2.7 billion in 2019 to RMB8.8 billion in 2023, at a CAGR of 33.8%, and is expected to reach RMB315.7 billion by 2033, at a CAGR of 43.1% from 2023 to 2033.
iFLYTEK has gained a competitive advantage in China's medical AI industry. According to Frost & Sullivan, the company ranked first in China's medical AI industry in terms of revenue in 2023, with a market share of 5.9%. According to Frost & Sullivan, the company's intelligent medical assistants ranked first in the CDSS market of primary medical institutions in China in 2023 in terms of revenue, with a market share of 61.5%.
China's healthcare AI industry is highly fragmented and highly competitive. According to Frost & Sullivan, the main barriers to entry in the medical AI industry include industry awareness, financial resources, interdisciplinary talent, and regulatory requirements. The company expects that the medical AI market will continue to grow, driven by the advancement of AI technology, favorable policies, demand for medical resources and the development of the digital economy. Companies must constantly innovate to remain competitive.
In terms of financial data, iFLYTEK's revenue increased by 26.7% from RMB373 million in 2021 to RMB472 million in 2022 and further increased by 17.9% to RMB556 million in 2023. The Company's revenue increased by 65.6% from RMB61.6 million for the three months ended March 31, 2023 to RMB102 million for the three months ended March 31, 2024.
The above increase was mainly attributable to the Company's successful expansion of the customer base served by hospitals; The company's successful launch and sale of premium hearing aids in 2023 resulted in an increase in sales of medical devices; The implementation of the company's smart hospital patient service and post-diagnosis management and imaging cloud platform projects has increased; and the expansion of the customer base and the increase in project implementation related to the company's smart health solutions.
As of March 31, 2024, more than 200 customers have purchased at least two products or services. As of December 31, 2021, 2022 and 2023 and March 31, 2024, the Company's primary medical service products covered more than 30,000, 44,000, 52,000 and 52,000 primary medical institutions in 278, 360, 430 and 490 districts and counties in 63, 90, 112 and 119 cities, respectively.
As of December 31, 2021, 2022 and 2023 and March 31, 2024, the Company provided hospital services to 121, 154, 221 and 228 tertiary hospitals and 15, 31, 41 and 42 secondary hospitals in the PRC, respectively.
The overall gross profit margin of iFLYTEK is largely affected by the company's business mix. The Company's gross profit increased by 22.9% from RMB188 million in 2021 to RMB231 million in 2022 and increased by 36.4% to RMB315 million in 2023. The Company's gross profit increased by 32.1% from RMB39.6 million for the three months ended March 31, 2023 to RMB52.3 million for the three months ended March 31, 2024.
The Company's gross profit margin remained relatively stable, at 50.4% and 48.9% in 2021 and 2022, respectively, and increased to 56.6% in 2023, mainly reflecting the increase in gross profit margin of primary medical services, which was significantly offset by lower gross profit margins for hospital services, patient services and regional management platform solutions. The Company's gross profit margin decreased from 64.3% for the three months ended March 31, 2023 to 51.3% for the three months ended March 31, 2024.
In 2021, 2022, 2023 and the three months ended March 31, 2023 and 2024, the Company recorded net losses of RMB89.4 million, RMB209 million, RMB154 million, RMB57.5 million and RMB70.9 million, accounting for 24.0%, 44.2%, 27.7%, 93.4% and 69.5% of the total revenue for the same period, respectively. The net loss recorded by the Company during the Track Record Period was mainly related to the Company's early efforts to launch new products, increase market acceptance and penetrate markets in economically developing regions and the Company's substantial investment in research and development activities.
The funds raised from the IPO in Hong Kong will be used for research and development to continuously strengthen the company's core capabilities, specifically: continue to upgrade the iFLYTEK Xinghuo medical model; Continuously optimize the company's algorithms and strengthen core technologies such as machine learning; and building the company's overseas R&D centers and attracting top overseas AI talents.
It will also be used to further enrich the company's products and services by upgrading existing products and developing new products; strengthening commercialization capabilities and expanding the Company's service network; Acquisition of companies that may create synergies with the Company's existing production capacity, such as medical device manufacturers; and for working capital and other general corporate purposes.