Micro-Tech Files for an IPO on the STAR Market Amid Patent Allegations
A biopsy needle producer from Nanjing is prepared to be listed on the STAR Market with two significant concerns arose from its prospectus: the company's ongoing patent allegations and low R&D expenses.
Micro-Tech, medical devices and equipment developer from Nanjing, will be amongst the first group of the companies that are going to be publicly traded on the STAR Market.
The biopsy needle producer's prospectus brought about two significant concerns that might seriously hurt the investors who will venture into its stocks: the company's ongoing patent lawsuits and stingy R&D expenses.
As a medical device producer, the company has not given significant weight on research and development in the last three years, Micro-Tech spent around 4.29% of its revenues to R&D in 2016, 5.91% in 2017, and 5.32% in 2018 by a slight decline.
R&D figures of the company are way behind of its STAR market peers as well. SinoMed (赛诺医疗), a Tianjin-based coronary stent developer, accounted for 17.4% of its revenues for R&D expenses in 2018. Notably, global Medtech heavyweights Medtronic, Siemens and Philips respectively spent 7.5%, 9.2% and 12.7% of their incomes for the research and development expenses in 2017.
The other primary concern for the investors is Micro-Tech's ongoing patent cases with two firms. If the company found to have infringed the patent rights, it would be fined between CNY 25 million to CNY 43 million, that is about 12% to 22% of its Net Profit's in 2018; the prospectus revealed.
The case is a timing bomb that has yet to explode for the company's future shareholders.
The biopsy needle producer has a stable market within the mainland, considering 10% of the adult population diagnosed with gastrointestinal conditions in 2018, Kantar Health reported.
Biopsy needles are disposable mass-produced goods that have low barriers to entry. Micro-Tech's logistical capacity, cost-effectiveness and delivery network will be the significant indicators to keep tabs on for the company's long term prospects.