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IPO Ambition of an Organ Transplantation Enterprise

An organ transplantation enterprise, Genext, applied for the IPO again after the termination two years ago. On November 24, 2022, the IPO of Genext was accepted by the Shanghai Stock Exchange Science and Technology Innovation Board.

Shanghai Genext Pharmaceutical Technology Co., Ltd.(Genext) is a medical device products and services provider in organ transplantation. However, its primary business still relies on the American company Lifeline Scientific, Inc. (hereinafter referred to as LSI), which was acquired in 2016.

The “Ambition” of a 51-Year-old Surgeon

Genext started as a medical distributor in organ transplantation. Before 2016, its main business was to act as a distributor to sell medical devices and immunosuppressants in the field of transplantation. Some products were self-developed, and most of them are in-vitro diagnostic reagents and drug concentration monitoring reagents in organ transplantation.

The founder of Genext, Wu Yunlin, was born in 1971 and graduated from the Shanghai University of Traditional Chinese Medicine. He served as a surgeon at Shanghai Longhua Hospital and as the regional manager of Japanese pharmaceutical giant Fujisawa Pharmaceutical in Hong Kong. It was also during this period that Wu Yunlin met David Kravitz, the founder of LSI. David is a master in the field of transplant medicine. The LifePort kidney perfusion box he led research and development is the most mainstream mechanical perfusion equipment for kidney transplantation in the United States.

Wu Yunlin, born as a surgeon, saw the gap and business opportunities in the Chinese market and became the exclusive agent of LSI in China in 2005. Until now, LifePort Kidney Perfusion is China's only approved Kidney Infusion Product.

It can be seen that although the volume of the organ transplant business is not large, there are fewer participants, which is the main reason why Genext can gain a firm foothold.

87 Million Dollars Acquisition VS 1 Billion IPO Dream

Genext has acquired LSI, turning the former agency relationship into the current holding relationship.

In 2016, under the help of King & Wood Mallesons’ (KWM), Shanghai Genext Pharmaceutical Technology Co., Ltd. successfully acquired Lifeline Scientific, Inc. at 87 million dollars.

According to the King & Wood Mallesons website news release, "The acquisition enabled Genext to expand its overseas market further and strengthen its competence in the field. As the Chinese organ transplant market is growing significantly, Genext reportedly has plans to seek future capital operations in China."

According to the prospectus, from 2017 to January-March 2020, the sales revenue of Genext's organ preservation and repair products were 232.3738 million yuan, 242.2124 million yuan, 327.1462 million yuan, and 86.9672 million yuan, accounting for the proportion of the primary business income. They were 70.53%, 89.10%, 89.35%, and 94.16%, respectively. It can be seen from the above that the sales revenue of organ preservation and repair products was formed by Genext through the acquisition of LSI.

So where does the rest of the primary business income come from?

Genext did not give up its old business and continued to distribute during the reporting period, mainly selling Thermo Fisher Scientific in-vitro diagnostic reagent products in organ transplantation. From 2017 to January-March 2020, the sales revenue of agency products was 93.1316 million yuan, 28.693 million yuan, 38.5768 million yuan, and 5.3862 million yuan, accounting for 28.26%, 10.56%, 10.53%, and 10.53% of the primary business revenue respectively. 5.83%.

According to the research report of Guosen Securities, there is a huge gap between the supply and demand of organ transplants in China. According to estimates, about 300,000 patients are waiting for organ transplants in China annually, while the number of organ transplants is only 20,000 cases annually.

According to the China Transplant Development Report (2019), the number of organ donations and transplant operations in China in 2019 were 5,818 and 26,121, respectively, ranking second in the world.

The outbreak of COVID crushed the global medical system, and the number of living organ donations has reached the lowest level in ten years, a year-on-year decrease of 22.47%.

In addition to the income from the LSI, Genext mainly provides promotion services for Zhejiang Hisun Pharmaceutical Co., Ltd. (stock abbreviation: Hisun Pharmaceutical, stock code: 600267. SH). From 2018 to January-March 2020, Hisun Pharmaceutical is the largest customer of Genext, with sales revenue of 20.2311 million yuan, 31.0597 million yuan, and 6.5421 million yuan. Genext stated that the company was originally the national general distributor of Hisun Pharmaceutical’s immunosuppressant tacrolimus capsules and mycophenolate mofetil capsules.

Will this ambition get a reply from the up? Let's wait and see.


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