Mainland oncology group Hygeia Healthcare has filed its initial public offering application to the Hong Kong stock exchange.
It is planning to raise up to US$500 million (HK$3.9 billion) and is expected to go public this quarter, media reports say. The company intends to use the proceeds for upgrading three existing hospitals, establishing new oncology-focused hospitals in Shandong, Jiangsu and Fujian, and acquiring hospitals.
The listing application came as healthcare stocks are under spotlight as the coronavirus pandemic is raging worldwide.
For instance, local brokers have lent nearly HK$166.5 billion margin financing for mainland biotech firm Akeso's IPO in Hong Kong, with the retail tranche more than 639 times oversubscribed, as of April 17.
Also, another biopharmaceutical firm, CanSino Biologics (6185), closed at HK$126.2 on April 17, up by 473.63 percent compared to the initial public offering price of HK$22 a year before.
Hygeia ranked second among all private oncology healthcare groups in China in terms of revenue generated from oncology-related services in 2018, according to a commissioned Frost & Sullivan report.
The company manages a network of 10 hospitals across seven cities in six provinces in China.
Its shareholders include well-known investors such as New York-based private equity firm Warburg Pincus, Chinese private equity firm Boyu Capital, which was founded by the grandson of former Chinese President Jiang Zemin, CITIC Capital and mainland contract medical researcher WuXi AppTec (2359).
Fountain Grass, an affiliate of Warburg Pincus, invested in Hygeia in 2015 and holds 17.47 percent in Hygeia.
Morgan Stanley Asia and Haitong International Capital serve as joint sponsors.
Hygeia said the recent coronavirus pandemic has no material adverse impact on the operation of the in-network hospitals, as the group's two radiotherapy centers in Hubei province only contributed about 1.2 percent of total revenue for the 10 months ended October 31 in 2019.
Full-year revenue increased by 28.4 percent year-on-year to 766.14 million yuan (HK$836.63 million) in 2018, and revenue for the 10 months ended October 31 in 2019 was 889.7 million yuan, up by 44.6 percent from a year before.
In 2018, hospital business accounted for about 82 percent of the total revenue, and nearly 17 percent of revenue was from third-party radiotherapy business.
Among the 11 in-network hospitals in operation, Hygeia's three self-owned hospitals - Shanxian Hygeia Hospital, Suzhou Canglang Hospital and Longyan Boai Hospital - contributed about 72.8 percent of total revenue in 2018.
Gross profit margin increased by 2.8 percentage points year-on-year to 31.2 percent in 2018.
Average spending per inpatient visit for the 10 months ended October 31 last year increased by 14.88 percent to 11,548.70 yuan, compared with the same period a year before.
Selling expenses fell by 55.7 percent to 13.1 million yuan for the 10 months ended October 31 in 2019 from a year before, mainly attributable to lower promotion and marketing spending as the patient base expands, the company says.
Meanwhile, Hygeia recorded a net profit of 2.42 million yuan in 2018, following a net loss of 46.51 million yuan a year before.
Net profit for the first 10 months last year surged by 33 times year-on-year to 27.15 million yuan, from 798,000 yuan during the same period a year earlier.
Hygeia's in-network hospitals derive a significant portion of revenue by providing healthcare services to patients with public medical insurance coverage, and any delayed payment under China's public medical insurance programs could affect results of operations, the company warns.
