Weitai Medical has not turned its technological advantages into market advantages

Editor’s note: This article is from the WeChat public account “deepatom” (ID: deepatom), author: deep dive atomer.

With the improvement of the economic level, the “three highs” have become a common problem in the lives of people all over the world. Although the direct harm is not high, the complications caused by them often make patients suffer. As the most populous country in the world, my country is also plagued by the “three highs”, with more than 300 million users with high blood pressure and more than 100 million users with high blood sugar.

In order to solve the “three highs” problem, a series of enterprises and products were born. Weitai Medical is a vertical player in the field of blood glucose management. The sticky insulin pump and the blood glucose monitoring system based on continuous blood glucose monitoring (CGM) are the two leading products of Weitai Medical in this track.

Recently, Weitai Medical has submitted a prospectus to the Hong Kong Stock Exchange and intends to be listed on the Hong Kong Main Board. Prior to this, at the end of 2020, Weitai Medical also signed a listing guidance material on A shares. On April 30, 2021, CICC also submitted the second phase of guidance work progress report to the Zhejiang Securities Regulatory Bureau. . However, in this red sea, the single product has caused Weitai Medical to continue to lose money. It is still unclear whether the dual-share listing can save it from the predicament.

△Weitai Medical Counseling Report

01 Single product, insufficient competitiveness, Weitai Medical’s prospects are worrying

Weitai Medical, established in 2011, started from hardware and has achieved a certain degree of advantage in hardware. According to the Critical Consultation Report, Weitai Medical is the only company in the world that has both an approved application-type insulin pump and a calibration-free continuous glucose monitoring system. Reshape the monitoring, treatment and management mode of diabetes through closed-loop solutions that can dynamically monitor and control blood glucose levels. However, Weitai Medical has not transformed its technological advantages into market advantages.

In the 1960s, medical scientists have studiedThrough subcutaneous injection of insulin, mechanical insulin pumps began to be widely used in the late 1970s. Today, many diabetics are very familiar with insulin injection, and the two main types of insulin pumps are the tube type and the tubeless application type. Weitai Medical has developed the target patch insulin pump Equil. Compared with the pipeline insulin pump, the patch insulin pump has a smaller body size, which eliminates the inconvenience caused by the external pipeline and reduces the damage caused by the external pipeline. Treatment risks caused by kinking, bending, and pulling.

Since its launch in 2018, Equil has been sold or distributed to 747 hospitals in China. In 2019 and 2020, sales revenue from Equil only accounted for 47.6% and 46.2% of Weitai Medical’s total revenue. As the only mature product among the main products of Weitai Medical, Equil’s expected sales are not excellent, and its domestic market share is only 3%. Weitai Medical did not take advantage of this advantage. Transform into sales performance.

△Insulin pump

CGM is a monitoring technology that indirectly reflects the blood glucose level by monitoring the glucose concentration of the subcutaneous interstitial fluid through a glucose sensor. Compared with fingertip blood detection, it is more complicated. It does not require blood sampling needles and test papers. It scans the sensor attached to the arm. It can obtain the patient’s 24-hour subcutaneous glucose concentration monitoring data, which is more scientific and reliable. With the maturity of hardware products, CGM has the opportunity to change the traditional management of diabetes management and improve the personalized management of patients with type 1 and type 2 diabetes, which is of great help to the treatment of diabetes. Former British Prime Minister Theresa May is also using CGM products to monitor her blood sugar.

△Leisha May

With the explosion of the CGM concept, Weitai Medical has chosen to focus on this field and enter the broad market of diabetes management with this. In 2018, it officially launched calibration-free, real-time continuous blood glucose monitoring. Although the clinical trial of AiDEX G7 is claimed to be the world’s second commercialized calibration-free, real-time continuous glucose monitoring system, it has not been approved by the National Food and Drug Administration in China, and it is difficult to conduct large-scale trials. Commercialization will not be of great help to the commercialization of Weitai Medical in a short period of time. And compared with the main competitors, although its service life is up to four years, far better than other products, but the accuracy of 9.1% is not excellent.

After completing the research and development of insulin pumps and CGM products, Weitai Medical has set its sights on the treatment of diabetes. It is developing an artificial pancreas, which can automatically monitor blood glucose levels. Adjusting the amount of insulin administered reduces the risk of hyperglycemia or hypoglycemia and minimizes the manual operation of patients. However, the development and approval of clinical products takes a lot of time, and there is huge uncertainty. This product will be on the market indefinitely.

At present, it seems that the product is covered by the whole chain, but if it is digging deep, either its market share is insufficient or it is not listed, it will provide little help to the commercialization of Weitai Medical.

02 Continued losses, Weitai Medical’s A+H shares are listed to survive

The prospectus shows that the operating income of Weitai Medical in 2019 and 2020 was 51.863 million yuan and 75.277 million yuan, respectively, and the corresponding losses for the year were 78.614 million yuan and 121 million yuan respectively. The biggest dilemma that Weitai Medical faces is that it has no control over sales performance. On December 30, 2019 and 2020, its total sales to distributor customers were 51.251 million yuan. And 73.277 million yuan, accounting for 98.8% and 97.3% of revenue, respectively.

In 2019 and 2020, the cost of sales of Weitai Medical will be 27.78 million and 38.733 million respectively, which is not a big investment. However, under the continuous investment of a large amount of resources, the gain is almost zero. The top five customers are all distributors, with almost no sales channels of their own. It is ironic that Weitai Medical, which is struggling to go public, has entrusted its destiny to others.

△Comprehensive income statement

Although Weitai Medical is currently facing huge commercialization challenges, the capital market has not given up its recognition. Weitai Medical has completed three rounds of financing of 31 million yuan, 120 million yuan, 136 million yuan in A, B, and C in 2016, 2017, and 2018. In 2020, it has obtained more than 500 million yuan. Single financing. Based on this calculation, Weitai Medical has received a total of about 800 million yuan in financing, and the valuation after the D round of financing is about 4 billion yuan.

As a start-up company, R&D investment is the biggest cost of Weitai Medical. In 2019 and 2020, Weitai Medical’s R&D expenditures are RMB 50.06 million and RMB 82.009 million respectively. As of the end of 2020, its net current assets have reached 639 million. The large amount of financing in 2020 has greatly eased the cash pressure of Weitai Medical and has become its life-saving straw.

△Consolidated Financial Report Form

The latest CGM market forecast report released by Research and Markets shows that the global CGMS market was valued at US$878 million in 2016 and is expected to reach US$1.3672 billion by 2025, with a compound annual growth rate of 36.7%. In the product system of Weitai Medical, although insulin pump is a more important product, the products that can enhance the imagination of Weitai Medical are still CGM and artificial pancreas. However, both products currently need a lot of effort and resources to continue to improve.

For example, The rapid development of CGM has also exposed some of its problems. First, a special machine is needed to read the data of CGM products, the operation process was complicated in the past; second is the data processing, the current CGM products can read long-term blood glucose data, but how to intervene is a huge challenge, behind the need The supporting integrated services of diet and health management are extremely cumbersome; the third is cost-effectiveness and feasibility. The working time of each probe is limited. With Abbott’s 14-day monitoring time, it is almost the leader of all CGM monitoring products, but a single The probe is nearly 500 yuan and is not universal, and it is not cost-effective for users who need to continuously monitor blood sugar.

It is difficult for CGM and artificial pancreas to generate large-scale positive feedback to Weitai Medical in a short period of time, which means that Weitai Medical still needs more funds to complete product research and development. For this reason, Hong Kong stocks and A-shares have become Weitai medical financing channels.

In addition, with a huge loss of 121 million, Weitai Medical I would rather lose money to motivate employees. In 2020, its revenue is only more than 70 million, but it spent 111 million on incentives. Reward expenses for employees. It is the dream of many employees of startups to go public and get financial freedom. However, this premise is that the company can develop rapidly and be able to go public. At present, Weitai Medical has not shown any temperament and determination to stand out in terms of products and mentality. .

03 Although the diabetes management market is large, it won’t be a thousand miles if you don’t accumulate steps

In 2019, the number of people with diabetes in China was 119 million, and it is expected to reach 143 million in 2030. The scale of China’s diabetes management medical device market will also grow rapidly at a compound growth rate of 14.7 per year, from US$2.4 billion in 2020 to US$9.5 billion in 2030, leaving enough market space for innovative medical devices.

This was originally a huge benefit for Weitai Medical. However, Equil’s applause was not popular, and clinical products such as artificial pancreas were too expensive and the cycle was too long, and there were huge R&D and commercialization uncertainties. Sex, so that Weitai Medical no longer believes in pure hardware.

Weitai Medical, which started from hardware, had to incorporate software to enter the diabetes management market, and continuously monitor a person’s health. It requires rigorous and perfect products, not a year or two, it may take ten years or even longer. Time polishing, marketing and patient education also require time accumulation. In addition, diabetes health management is more competitive in the Red Sea market. Diabetes digital management companies have sprung up from 2015 to 2016, with more than 500 at the peak, which is almost a must for Internet medical and chronic disease management companies. place. dataIt shows that in 2025, the diabetes management market is expected to reach 135 billion, but Weitai Medical, which lacks medical service capabilities, has no advantage.

△Continuous blood glucose monitoring product

Currently, Weitai Medical has 120 internal sales and marketing personnel, covering product sales in 30 provinces, municipalities, autonomous regions and 60 overseas countries in China. As a boxer product of Weitai Medical, the sticky insulin pump is competitive. However, without the slightest discount on sales staff and sales costs, Weitai Medical is not confident that it can sell well. Perhaps the 120 sales jobs are more about connecting with agents and insurance agencies, losing the soul and wolfishness of sales. Once a product with a better price/performance ratio appears, Weitai Medical, which has no barriers, can easily be kicked out.

If you don’t accumulate steps, you can’t reach thousands of miles. The model based on distributors, although it can be used in a short time and quickly, but for All in distributors, Weitai Medical’s move is tantamount to drinking poison to quench thirst. Deep into the front line, you can control the dominance of the market, and this process cannot be accomplished overnight, but can only move forward step by step, starting with the patch insulin pump to build its own market position and market barriers.