Taimei Medical Technology Visual China data map
After failing to pass the Science and Technology Innovation Board last year and invalidating the Hong Kong stock prospectus at the beginning of this year, Zhejiang Taimei Medical Technology Co., Ltd. (hereinafter referred to as "Taimei Medical Technology"), a leading domestic pharmaceutical SaaS (software operation service), continued to promote the pace of listing on the Hong Kong stock market.
On July 30, Taimei Medical Technology updated its prospectus and continued to promote the listing process on the main board of the Hong Kong Stock Exchange, with Morgan Stanley and CICC as joint sponsors. Founded in 2013, Taimei Medical Technology is a digital solutions provider focusing on the medical science industry in China, designing and providing industry-specific software and digital services to accelerate the development and marketing of innovative drugs and medical devices.
According to CIC, in terms of revenue in 2023, Taimei Medical Technology is the largest digital solution provider in the field of medical science R&D and marketing in China, and is currently the only supplier in China that can provide one-stop digital solutions from R&D to marketing for the life science industry. As of March 31, 2024, it has provided services to more than 1,400 pharmaceutical companies and entrusted research institutions, covering 21 of the world's top 25 pharmaceutical companies and 90 of China's top 100 pharmaceutical innovation enterprises.
Taimei Medical Technology's financial performance
In terms of financial data, Taimei Medical Technology's annual revenue from 2021 to 2023 will be 466 million yuan, 549 million yuan and 573 million yuan respectively. In the first quarter of 2024, the company's revenue was 132 million yuan, a year-on-year increase of 2.2%. At the same time as the revenue growth, Taimei Medical Technology has not yet achieved profitability, with losses of 479 million yuan, 423 million yuan, and 356 million yuan from 2021 to 2023, respectively, and a loss of 118 million yuan in the first quarter of this year.
Taimei Medical Technology said that the loss was mainly due to the company's cost of sales, administrative expenses, research and development expenses and sales expenses. The Company has been in the red since its inception in 2013 and will continue to be in the red for the foreseeable future, including 2024, but the Company has implemented a series of new initiatives and streamlining plans that we believe will help to manage operating expenses adequately and effectively.
At the business level, the products and services provided by Taimei Medical Technology are mainly cloud software and digital services. Among them, cloud software revenue accounted for 42.3%, 38.4%, 35.2% and 34.3% of the total revenue in 2021, 2022 and 2023 and the first quarter of 2024, respectively. During the same period, digital services revenue accounted for 57.6%, 61.6%, 64.5% and 65.7% of total revenue respectively.
Taimei Medical Technology's gross profit and gross margin data
In terms of gross profit margin, it showed a downward trend from 2021 to 2023, with 35.3%, 33.8%, and 31.2%, respectively, and reached 37.5% in the first quarter of 2024. Regarding the reasons for the above-mentioned decline in gross profit margin, Taimei Medical Technology said in the latest Hong Kong stock prospectus that while expanding the digital service category, the expenses incurred (mainly related to clinical research) increased. The increase in gross margin in the first quarter of this year was mainly due to the increase in revenue from digital services and SaaS products in the first three months of 2024 due to continued business expansion. In addition, the company's streamlining of the personnel structure in 2023 has led to a significant reduction in employee costs.
For the future development prospects, Taimei Medical Technology emphasized the core customer retention data in the prospectus: from 2021 to 2023, the retention rates of core customers (referring to customers who have contributed revenue of 500,000 yuan or more in the past 12 months) are 91.2%, 94.7% and 87.3% respectively. During the same period, the overall customer retention rates were 82.0%, 82.8% and 77.8% respectively. In addition, as of March 31, 2024, the company had more than 1.6 billion yuan of orders in hand, involving about 3,500 cloud software products and digital service projects. The company is able to offer more than 40 software products and digital services, and customers who purchase three or more products or services will contribute more than 77% of revenue in 2023.
It is worth noting that Taimei Medical Technology has experienced three rounds of review inquiries when it was listed on the Science and Technology Innovation Board. In the third round of audit inquiry letter, the company mentioned that as of December 31, 2022, Taimei Medical Technology had a total of about 1.635 billion yuan of orders in hand. Taimei Medical Technology said in this reply letter that the company's orders in hand are sufficient, and the main revenue time is in 2023, which provides a guarantee for the realization of future performance, and the top five customers of orders in hand are all well-known domestic and foreign pharmaceutical companies/sponsors in the downstream, all of which are orders from non-related parties, and the gross profit margin of various solutions for orders in hand has remained stable or increased to varying degrees, so sales growth is sustainable.
Taimei Medical Technology's equity situation
Since its establishment more than 10 years ago, Taimei Medical Technology has experienced many financings, including Tencent, Matrix Partners, Kaifeng Ventures, etc., with a cumulative investment of more than 2 billion yuan. As of the latest practicable date, the founder Zhao Lu held 17.29% of the shares, and at the same time, Zhao Lu held about 16% of the company's total share capital through the shareholding platform, and controlled about 33% of the shares of Taimei Medical Technology in total, and was a member of the company's single largest shareholder group. In addition, Tencent and Matrix Partners both hold more than 10% of the shares of Taimei Medical Technology, and are the top two institutional investors.
According to the prospectus, Zhao Lu, 46 years old, serves as the chairman, executive director and general manager of Taimei Medical Technology, and has more than 23 years of experience in the pharmaceutical and medical science industry. Prior to Taimei Medical Technology, Zhao Lu worked in sales at pharmaceutical companies such as Shanghai Xinyi Pharmaceutical Co., Ltd. and Schering-Plough (China) Co., Ltd.
As for the use of the funds raised in the IPO, Taimei Medical Technology said in the prospectus that about 35% will be used to optimize and upgrade the TrialOS platform and PharmaOS platform and their respective cloud software and digital services; About 30% will improve core technology and R&D capabilities; Strengthen sales and marketing capabilities; Selectively pursue strategic investments and acquisitions that expand its existing product and service offerings, expand its customer base and enhance its technological capabilities, as well as for working capital and general corporate purposes.