Risks Or Hidden Variables Of "Two Vote System" Of Kangtuo Medical Science And Technology Innovation Board

Recently, the IPO application of Xi'an Kangtuo Medical Technology Co., Ltd. (hereinafter referred to as "Kangtuo medical") was accepted and entered the inquiry stage.

Founded in 2005, Kangtuo Medical Co., Ltd. is a leading enterprise in orthopedics, focusing on the research, development, production and sales of three types of implantable medical devices. Its main products include titanium skull repair and fixation products for neurosurgery implantation and peek skull repair and fixation products, as well as sternum fixation products, neurospinal products, supporting implant tools and other products.

The company has obtained 12 class III implantable medical device registration certificates, involving a number of pioneering products in a number of subdivision fields, and occupies the largest domestic market share in PEEK material skull repair and fixation product market.

In the IPO of the science and technology innovation board, Kangtuo medical intends to raise 523 million yuan, invest 423 million yuan for three kinds of implanted medical device product industry and R & D base project, and 100 million yuan to supplement working capital.

Orthopedics division leader makes "domestic substitution"

As a leading enterprise in orthopedics, Kangtuo medical's main revenue source is highly concentrated.

According to the prospectus, the company's main business income comes from skull repair and fixation products. From 2017 to 2019, the proportions of skull repair and fixation products in the main business income were 94.77%, 95.52% and 94.77%, respectively, accounting for a relatively high proportion. The products are concentrated, and the proportion of other products is relatively small. "If there are significant adverse changes in the market of skull repair and fixation products in the future, or the market demand will drop sharply due to the emergence of alternative products, or the company can not complete the marketing of the existing main products as expected, which will lead to the decline of the company's existing main products revenue and the unsalability of inventory goods, which will have an adverse impact on the company's profitability." He said frankly.

In terms of products, peek neurosurgery products and titanium neurosurgery products contributed nearly 95% of the main business income.

Among them, the proportion of PEEK product line in revenue increased year by year, while the proportion of titanium product line decreased year by year. From 2017 to 2019, the operating revenue of PEEK product line was 17.42 million yuan, 36.17 million yuan and 63.93 million yuan, accounting for 24.28%, 34.71% and 44.66%, respectively; while that of titanium product line was 50.59 million yuan, 63.39 million yuan and 71.73 million yuan, accounting for 70.49%, 60.81% and 50.11%.

PEEK material is still in the popularization period, the domestic market application rate is low, and its price is higher than that of titanium material products. However, Kangtuo medical is very optimistic about its future.

"In fact, the performance of PEEK repair products is better than that of titanium repair products. In recent years, the market scale has grown rapidly. From 2017 to 2019, the compound growth rate of market scale exceeded 80%, and the penetration rate increased rapidly. At present, the clinical popularization rate is low in the future. PEEK material skull repair plate is the first domestic PEEK material skull repair product of the company. In recent years, it has occupied the largest domestic market share of this product, and realized the import substitution. At the same time, PEEK material skull fixed connector is the company's first creation and the only approved similar product in China. During the reporting period, the compound growth rate of PEEK material skull repair and fixation products reached 91.55%, occupying the largest domestic market share of PEEK skull repair and fixation products. " Kangtuo medical replied to the 21st century economic report.

"Two vote system" as an important variable

The 21st century economic reporter learned that the "two vote system" implemented by the industry in recent years has become a major obstacle in the IPO process of medical device enterprises. In the past, many medical enterprises were rejected by the regulatory authorities, and the impact of the "two vote system" on Kangtuo medical IPO can not be ignored.

"Two tickets system" refers to the pharmaceutical consumables manufacturing enterprises to the circulation enterprises to issue a purchase and sales invoice, and the circulation enterprises to the medical institutions to issue a purchase and sales invoice. The "two vote system" has replaced the previous common seven tickets and eight tickets, reducing the exploitation of circulation links, and the number of first-class distributors of each variety should not exceed two. Since 2016, the "two ticket system" for medical consumables has been gradually launched nationwide.

Since 2017, the two ticket system for orthopedic implant consumables has been gradually implemented in Shaanxi Province (starting from 2017), Anhui Province (starting from 2018) and Fujian Province (starting from 2019).

Industry insiders believe that the implementation of the "two vote system" will accelerate the reshuffle of small and medium-sized pharmaceutical dealers.

The prospectus shows that the sales of Kangtuo medical mainly depends on the distribution mode, and its dealer lineup is mostly small and medium-sized dealers.

According to the prospectus, from 2017 to 2019, the sales revenue of the dealer model was 70.8033 million yuan, 98.5595 million yuan and 133 million yuan respectively, accounting for 98.66%, 94.56% and 92.56% of the total revenue. The data of Sanyou were 69.44% and 14.31% in the same period.

According to the prospectus, during the reporting period, its main customers included Jiangxi pingkang Medical Equipment Co., Ltd., Jiangxi changxinhe medical device Co., Ltd., Shanghai Lijian trading firm, Shanghai Yuanyi Industrial Co., Ltd., Jinan Pincheng Trading Co., Ltd., and Jinan chijun Biotechnology Co., Ltd.

On July 27, the reporter of the 21st century economic report inspected qixinbao and found that the highest registered capital of these companies was no more than 2 million yuan. Among them, Shanghai Lijian trader was a sole proprietorship, and Shanghai Yuanyi Industrial Co., Ltd. and Jiangxi pingkang Medical Equipment Co., Ltd. were "cancelled".

The impact of the implementation of "two tickets" on medical consumables has gradually appeared.

On the evening of July 24, Dabo medical (002901. SZ), the same industry company of Kangtuo Medical Co., Ltd., said in the reply to the inquiry letter of Shenzhen stock exchange that the implementation of the two vote system promoted the transformation of the company's business model and became the main reason for the structural change of part of the company's financial data in 2019.

It said that in the implementation area of the two ticket system for consumables, the company mainly adopts the distribution mode, that is, the company sells directly to the distributors, and the third-party service providers provide professional services such as logistics assistance, academic training, and operation follow-up. In addition to the implementation area of the two ticket system, the company adopts the distribution mode, that is, sales are realized through distributors, and the distributors undertake specific market development and technical service functions. With the gradual implementation of the two ticket system, the number of customers of the company's distributors has increased significantly, and the sales scale has increased rapidly. The change of sales mode also brings a series of changes in financial data structure, such as inventory turnover, cost expense, sales price, gross profit, accounts receivable period, etc. in the above two different sales modes, the company's product cost has no difference, but the sales unit price is different.

Kangtuo medical prospectus disclosed that if the two vote system is fully implemented in the field of medical devices, it will have a certain impact on the issuer's sales mode, sales expenses, gross profit rate, sales expense rate, etc. If the company can not formulate effective response measures according to the two vote system in time, the company's operation may be adversely affected.

How will the company respond to this?

According to the current report, Kangtuo mainly adopts the mode of high-value distribution to local distributors in the 21st century. Under the mode of distributor, the company selects distributors with qualified qualification, strong service ability and in line with the relevant policies and requirements of the local two ticket system, and the distribution expenses and rights and obligations are strictly implemented in accordance with the relevant policies and regulations of the local two ticket system. The company is in the process of rapid growth, and we will follow the market development trend to further improve the company's marketing system construction and layout. "