On August 31, 2023, Peijia Medical Co., Ltd. (9996.HK) (the 'Company') released its interim results for the period ended June 30, 2023 (the 'Reporting Period').
During the reporting period, the company achieved operating income of 224.9 million yuan (RMB, the same below), a year-on-year increase of 89.3%. Revenue growth mainly comes from: (i) The commercialization of transcatheter aortic valve replacement ('TAVR') products has accelerated and market share has further expanded, including the first-generation product TaurusOne and the second-generation recyclable product TaurusElite; (ii) Existing neurointerventional products continue to increase in volume, including Tethys intermediate guidance catheter, SacSpeed balloon dilation catheter, Jasper intracranial electrodetachable coil and Syphonet thrombectomy stent, etc. and (iii) The commercialization of new ischemic products such as Fastunnel delivery balloon dilatation catheter will contribute to the increase in revenue.
During the reporting period, the company recorded an adjusted gross profit of 178.8 million yuan, a year-on-year increase of 104.2%. Due to continued cost optimization measures and the continuous increase in volume of ischemic products with higher gross profit margins, the company's adjusted gross profit margin has steadily increased to 79.5%, a year-on-year increase of 5.8 percentage points[1][2].
Transcatheter valve therapy business: rapid increase in share and steady clinical advancement
During the reporting period, the transcatheter valve treatment business recorded revenue of 107.7 million yuan, a year-on-year increase of 106.8%; thanks to effective cost optimization measures, the segment's gross profit margin significantly increased to 87.1%, a year-on-year increase of 8.9 percentage points. Gross profit was 93.8 million yuan. With the expansion of revenue scale, segment sales and administrative expense ratios dropped significantly, down 11.4 and 35.5 percentage points respectively year-on-year.
With the recovery of surgical volume in the market and the improvement of sales team's unit output, the company's first- and second-generation TAVR product terminal implantation volume has increased significantly, and the market share has further increased. During the reporting period, Peijia Medical's products were implanted in more than 120 newly admitted hospitals, covering a total of more than 410 hospitals. The effective coverage of completed hospital admissions is comparable to its peers. In the first half of the year, nearly 1,250 units of the company's first-generation and second-generation product terminals were implanted, and the market share is estimated to exceed 20%, which is a substantial increase compared with last year. The ever-increasing number of hospitals covered and market share have once again verified the excellent performance of the company's products and the effectiveness of its commercialization strategy. In the future, Peijia Medical's professional marketing and sales team will continue to carry out market education and provide surgeons with compliant, high-quality services to promote the further popularization and penetration of surgical procedures and improve patient benefits.
In terms of pipeline layout, the Trilogy TM heart valve system, a TAVR product for aortic regurgitation ('AR') indications introduced by the company exclusively authorized by JenaValve Technology Inc. of the United States, successfully achieved multiple milestones. In May 2023, the company took the lead in completing the first commercial implantation of Trilogy TM in Hong Kong. At the same time, the company has completed the product technology transfer at the Peijia production facility in mainland China, realized the self-production of the TaurusTrio TM TAVR system, and realized the technology with Trilogy TM consistency. In July 2023 , the company officially launched the multi-center clinical registration of the product in mainland China. Up to now, no TAVR product with transfemoral approach AR indication has been approved for marketing by NMPA in China, and a large number of patients with aortic regurgitation have not been effectively treated.
So far, the next-generation core pipeline of the company's transcatheter valve therapy business has all entered human clinical practice. Among them, TaurusNXT 'non-aldehyde cross-linked' dry valve TAVR products, TaurusTrio TM AR indication TAVR products, GeminiOne mitral valve edge-to-edge repair products and HighLife transseptal mitral valve replacement products have all registered in the multi-center clinic. Steadily advancing, leading the industry. As of the release date of the interim results announcement, the company's transcatheter valve therapy business has five commercialized products and nine products under research at different stages of research and development; among them, five products have entered the NMPA green channel for special review of innovative medical devices.
Neuro-interventional business: revenue growth exceeded expectations, segment losses narrowed significantly
During the reporting period, the neurointerventional business recorded revenue of 117.1 million yuan, a year-on-year increase of 75.6%, which was better than expected. Among them, hemorrhage, ischemia and access products accounted for 27.3%, 39.1% and 33.1% of segment revenue respectively (same period in 2022: 44.2%, 25.0% and 30.6%). With the continuous increase in volume of ischemic products with relatively high gross profit margins, the segment's adjusted gross profit margin has steadily increased to 72.6%, a year-on-year increase of 2.4 percentage points [3]. Due to the substantial growth in operating income and gross profit and the company's efforts in controlling various expenses, segment losses narrowed significantly by 82.0% year-on-year.
In terms of commercialization, as of June 30, 2023, Peijia Medical's dealer network covers approximately 2,100 hospitals in 31 provinces and cities across the country. In addition to relying on a huge dealer network, based on the excellent design and performance of products and unmet clinical needs and pain points, the company has cooperated with doctors to develop many innovative technologies for neurointerventional surgeries, such as BASIS technology based on Syphonet thrombectomy stent, Zero exchange technology based on Fastunnel delivery balloon dilatation catheter and TRUST technology based on Tethys intermediate guidance catheter, etc. The application of innovative technology has greatly improved the surgeon's operating experience and surgical results, bringing higher patient benefits. At the same time, the company actively responds to national and local centralized procurement efforts. The company's spring coil products have won bids for mass procurement in multiple provinces and inter-provincial alliances. Among them, Jasper intracranial electrodetachable spring coil was selected as the third place in Group A in the Jilin 21-province alliance centralized procurement, which will accelerate the admission and volume expansion of this product in the alliance provinces and cities.
Dr. Zhang Yi , Chairman and CEO of Peijia Medical, said: 'In the first half of this year, the company relied on efficient product research and development, stable and strong team execution, and seized opportunities to achieve substantial growth in performance. In the future, we will improve the company's performance in all aspects efficiency, improve our R&D and production platforms, enhance operational capabilities, and benefit more patients with more high-quality and affordable products. At the same time, we will persist in developing innovative products with significant clinical value, further enrich our product portfolio, and use The highly competitive products vigorously promote the process of going overseas.'
The adjusted gross profit and gross profit margin in this article refer to the gross profit and gross profit margin after return of the merger consideration apportionment. Merger consideration allocation refers to the allocation of acquisition costs of identifiable assets, liabilities and contingent liabilities for business combinations not under common control, originating from the acquisition of Gachi Biotech in 2019, unless otherwise stated.
Without adjustments to the merger consideration allocation, during the reporting period, the group recorded a gross profit of 173.0 million yuan, a year-on-year increase of 107.9%; the gross profit margin was 76.9%, a year-on-year increase of 6.9 percentage points.
Without adjustments to the merger consideration allocation, during the reporting period, the neural intervention business recorded a gross profit of 79.2 million yuan, a year-on-year increase of 86.4%; the segment gross profit margin was 67.6%, a year-on-year increase of 3.9 percentage points.
Contact:
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Email: info@peijiamedical.com
PEIJIA MEDICAL LIMITED 
