Biotech firm Tests heart valve product

Peijia Medical, a mainland medical device maker, is aiming to raise up to HK$2.34 billion through an initial public offering in Hong Kong.

The biotech company, scheduled to debut on Friday, focuses on the interventional procedural medical device market in mainland China, including transcatheter valve therapeutic medical devices and neurointerventional procedural medical devices.

The company had attracted Hillhouse Capital as one of its shareholders in Series C financing, holding 9.33 percent of its shares.

Its retail tranche was 423 times oversubscribed as of Friday, freezing a total of over HK$99 billion.

It has invited 14 cornerstone investors, which have subscribed to around 50 percent of the issuance worth US$151 million (HK$1.18 billion), among which, Fidelity International has invested US$50 million.

Peijia has developed six registered products and has 20 product candidates in various stages of development, including its core candidate, TaurusOne, a first-generation transcatheter aortic valve replacement, or TAVR product in the clinical trial stage.

The company expects to receive the National Medical Products Administration's approval and launch the product in the first or second quarter of 2021.

Peijia intends to use 65 percent of the net proceeds raised for the development and commercialization of TaurusOne, as well as other major product candidates.

Peijia is one of the only four domestic players in the mainland market with TAVR products at or above the clinical trial stage, and in the neurointerventional field, it ranked first among domestic players in terms of the total number of commercialized products and candidates in the clinical trial stage, according to Frost & Sullivan.

China's TAVR product market is estimated to grow from 196.6 million yuan (HK$215.86 million) in 2018 to 6.33 billion yuan in 2025, a compound annual growth rate of 64.2 percent, according to F&S.

Also, only around 1,000 TAVR surgeries were conducted in China in 2018, a penetration rate of only 0.1 percent and indicating huge unmet demand. It is estimated that the penetration rate will reach 4.7 percent in 2025, says the company.

Peijia started recognizing revenue after its acquisition of Shanghai-based Achieva Medical in March 2019. Revenue last year was 18.7 million yuan.

Its net loss last year expanded by 5.4 times from a year ago to around 532 million yuan, as a result of a fair value loss in financial instruments issued to investors worth 308.2 million yuan, as well as an increase in administrative expenses of 127.7 million yuan.

The issuer had net liabilities of 558.2 million yuan ended 2019, mainly due to the financial instruments it issued, primarily preferred shares, that were recorded as non-current liabilities, while it warns fair value changes in those instruments may continue to materially affect its financial condition.

Meanwhile, Peijia says the coronavirus pandemic has impacted the demand for its commercialized neurointerventional procedural products, as many surgeries, which were not emergency in nature, were postponed or canceled, and some of its distributors reduced their purchases.

Production in Shanghai and Suzhou was postponed amid the pandemic and it plans to increase the overtime pay of production workers under applicable law once the virus is contained.

The company does not expect its supply chain to be heavily impacted as all its domestic suppliers had resumed operations and none of its overseas suppliers had reported being affected, it says in the prospectus.

The company plans to spend 10 percent of the raised funds for studies, clinical trials, registration and commercial launches of other product candidates, while another 10 percent is for potential strategic acquisitions and investments. The rest 15 percent is for research and development, working capital and other general corporate purposes.