IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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Global Equity Research Ltd

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Equity Capital Markets

MicroTech Medical Hangzhou / Equity Capital Markets

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<div><a href="https://www.smartkarma.com/entities/microtech-medical-hangzhou-co-ltd" target="_blank" data-smartkarma-citation="entities:33367:1" rel="noopener">MicroTech Medical Hangzhou (2235 HK)</a> is focused on diabetes management, providing both diabetes treatment and diabetes monitoring medical devices to improve diabetes management globally. The core product is Equil which is a semi-disposable patch insulin pump that was commercially launched in 2018 in China.</div>
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At the proposed IPO price range of HK$27.70-31.15 per share, Microtech will have a market cap of HK$11,732-13,193 million ($1.5-1.7 billion). At the mid-point of the IPO price range, the net proceeds are HK$1,750.0 million ($225 million).
Eleven cornerstone investors will purchase $153.5 million worth of the offer shares (63.9% of the offer shares at the mid-point of the IPO price range). Two out of the eleven cornerstones are existing investors. They are LAV Group and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>. The remaining cornerstones which are not existing shareholders are Invesco, UBS AM, Springhill Fund, Hudson Bay, Boyu Capital, Lake Bleu Capital, Octagon Capital, OrbiMed and Sage Partners.
</div>
</div><div>In <a href="https://www.smartkarma.com/insights/microtech-medical-ipo-initiation-fighting-diabetes" target="_blank" data-smartkarma-citation="insights:58570" rel="noopener">MicroTech Medical IPO Initiation: Fighting Diabetes</a>, we opined that Microtech has three categories of commercialised products which are Equil (the core product), BGMS and CGMS. Equil is the only patch insulin pump approved in China. In combination with attractive pricing, Equil has significant headroom to increase its China market share from its 3% share in 2020, in our view. Also, AiDEX G7 CGMS, which is currently in the early stage of marketing, presents a near-term growth opportunity. We concluded that Microtech is worth a closer look.</div><div><div><div class="content-highlight">Our valuation analysis suggests that the IPO price range is full and we would remain on the sidelines awaiting a better entry opportunity. </div></div></div>


MicroTech Medical Hangzhou (2235 HK) is focused on diabetes management, providing both diabetes treatment and diabetes monitoring medical devices to improve diabetes management globally. The core product is Equil which is a semi-disposable patch insulin pump that was commercially launched in 2018 in China.

At the proposed IPO price range of HK$27.70-31.15 per share, Microtech will have a market cap of HK$11,732-13,193 million ($1.5-1.7 billion). At the mid-point of the IPO price range, the net proceeds are HK$1,750.0 million ($225 million).
Eleven cornerstone investors will purchase $153.5 million worth of the offer shares (63.9% of the offer shares at the mid-point of the IPO price range). Two out of the eleven cornerstones are existing investors. They are LAV Group and Tencent (700 HK). The remaining cornerstones which are not existing shareholders are Invesco, UBS AM, Springhill Fund, Hudson Bay, Boyu Capital, Lake Bleu Capital, Octagon Capital, OrbiMed and Sage Partners.

In MicroTech Medical IPO Initiation: Fighting Diabetes, we opined that Microtech has three categories of commercialised products which are Equil (the core product), BGMS and CGMS. Equil is the only patch insulin pump approved in China. In combination with attractive pricing, Equil has significant headroom to increase its China market share from its 3% share in 2020, in our view. Also, AiDEX G7 CGMS, which is currently in the early stage of marketing, presents a near-term growth opportunity. We concluded that Microtech is worth a closer look.Our valuation analysis suggests that the IPO price range is full and we would remain on the sidelines awaiting a better entry opportunity. 

MicroTech Medical IPO: Valuation Insights

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<a href="https://www.smartkarma.com/entities/microtech-medical-hangzhou-co-ltd" target="_blank" data-smartkarma-citation="entities:33367:1" rel="noopener">MicroTech Medical Hangzhou (2235 HK)</a> provides diabetes treatment and diabetes monitoring medical devices in China and globally. The company has announced the terms for its IPO where it plans to issue 63.5m shares (approx. 15.0% of the total outstanding shares) at an indicative price range of HK$27.70-31.15 per share. At the midpoint of the above indicative IPO price range of HK$29.43 per share, MicroTech will raise net proceeds of HK$1.75bn (US$224.7m) at market capitalisation of HK$12.5bn and a post-money enterprise value of HK$10.1bn.<table class="table table-striped"><tbody>
<tr>
<td style="width: 162.0pt;">MicroTech Medical IPO Details</td>
<td style="width: 76.0pt;">@ Low-end HK$27.70</td>
<td style="width: 66.0pt;">@ Midpoint HK$29.43</td>
<td style="width: 71.0pt;">@ Upper-end HK$31.15</td>
</tr>
<tr>
<td style="width: 162.0pt;">No. of Shares Issued (m)</td>
<td style="width: 76.0pt;">63.5</td>
<td style="width: 66.0pt;">63.5</td>
<td style="width: 71.0pt;">63.5</td>
</tr>
<tr>
<td style="width: 162.0pt;">Offer as a % of Outstanding Shares</td>
<td style="width: 76.0pt;">15.0%</td>
<td style="width: 66.0pt;">15.0%</td>
<td style="width: 71.0pt;">15.0%</td>
</tr>
<tr>
<td style="width: 162.0pt;">Total Shares Outstanding</td>
<td style="width: 76.0pt;">423.5</td>
<td style="width: 66.0pt;">423.5</td>
<td style="width: 71.0pt;">423.5</td>
</tr>
<tr>
<td style="width: 162.0pt;">Net Proceeds (HK$m)</td>
<td style="width: 76.0pt;">               1,644.8</td>
<td style="width: 66.0pt;">           1,750.0</td>
<td style="width: 71.0pt;">             1,854.5</td>
</tr>
<tr>
<td style="width: 162.0pt;">Market Capitalisation (HK$m)</td>
<td style="width: 76.0pt;">            11,731.8</td>
<td style="width: 66.0pt;">        12,462.4</td>
<td style="width: 71.0pt;">          13,192.9</td>
</tr>
<tr>
<td style="width: 162.0pt;">Enterprise Value (HK$m)</td>
<td style="width: 76.0pt;">               9,332.7</td>
<td style="width: 66.0pt;">        10,063.2</td>
<td style="width: 71.0pt;">          10,793.8</td>
</tr>
</tbody></table>Source: Company disclosures, LSR The company plans to use about 31.0% and 35.0% of the net IPO proceeds on funding the ongoing and planned clinical trials, commercialisation and expansion of manufacturing facility of its core product Equil and CGMS respectively. MicroTech plans to use around 11.0% of the IPO proceeds on pre-clinical studies, clinical trials, registration and manufacturing of 2nd generation patch insulin pumps and another 8.0% on other product candidates. The remaining net IPO proceeds will be used for working capital and other general corporate purposes.MicroTech has entered into cornerstone investment agreements with a number of investors for an aggregate of US$153.5m (HK$1,194.7m) which represents about 63.9% of the total shares offered at the IPO (at the midpoint of the indicative IPO price range) assuming that the over-allotment option is not exercised. These cornerstone investors include Invesco Advisors (US$35m), UBS AM Singapore (US$25m), LAV Star (US$12.5m), Springhill Fund (US$12.5m), Hudson Bay (US$12.5m), Tencent Mobility (US$10m), Boyu Capital (US$10m), Lake Bleu Prime (US$10m), Octagon Investments (US$10m) and US$8.0m each from OGF, ONH and WWH and Sage Partners.

MicroTech Medical Hangzhou (2235 HK) provides diabetes treatment and diabetes monitoring medical devices in China and globally. The company has announced the terms for its IPO where it plans to issue 63.5m shares (approx. 15.0% of the total outstanding shares) at an indicative price range of HK$27.70-31.15 per share. At the midpoint of the above indicative IPO price range of HK$29.43 per share, MicroTech will raise net proceeds of HK$1.75bn (US$224.7m) at market capitalisation of HK$12.5bn and a post-money enterprise value of HK$10.1bn.

MicroTech Medical IPO Details
@ Low-end HK$27.70
@ Midpoint HK$29.43
@ Upper-end HK$31.15


No. of Shares Issued (m)
63.5
63.5
63.5


Offer as a % of Outstanding Shares
15.0%
15.0%
15.0%


Total Shares Outstanding
423.5
423.5
423.5


Net Proceeds (HK$m)
               1,644.8
           1,750.0
             1,854.5


Market Capitalisation (HK$m)
            11,731.8
        12,462.4
          13,192.9


Enterprise Value (HK$m)
               9,332.7
        10,063.2
          10,793.8

Source: Company disclosures, LSR The company plans to use about 31.0% and 35.0% of the net IPO proceeds on funding the ongoing and planned clinical trials, commercialisation and expansion of manufacturing facility of its core product Equil and CGMS respectively. MicroTech plans to use around 11.0% of the IPO proceeds on pre-clinical studies, clinical trials, registration and manufacturing of 2nd generation patch insulin pumps and another 8.0% on other product candidates. The remaining net IPO proceeds will be used for working capital and other general corporate purposes.MicroTech has entered into cornerstone investment agreements with a number of investors for an aggregate of US$153.5m (HK$1,194.7m) which represents about 63.9% of the total shares offered at the IPO (at the midpoint of the indicative IPO price range) assuming that the over-allotment option is not exercised. These cornerstone investors include Invesco Advisors (US$35m), UBS AM Singapore (US$25m), LAV Star (US$12.5m), Springhill Fund (US$12.5m), Hudson Bay (US$12.5m), Tencent Mobility (US$10m), Boyu Capital (US$10m), Lake Bleu Prime (US$10m), Octagon Investments (US$10m) and US$8.0m each from OGF, ONH and WWH and Sage Partners.

MicroTech Medical IPO: Forecasts and Valuation

<a href="https://www.smartkarma.com/entities/microtech-medical-hangzhou-co-ltd" target="_blank" data-smartkarma-citation="entities:33367:1" rel="noopener">MicroTech Medical Hangzhou (2235 HK)</a> is focused on diabetes management, providing both diabetes treatment and diabetes monitoring medical devices to improve diabetes management globally. The core product is Equil which is a semi-disposable patch insulin pump that was commercially launched in 2018 in China. Microtech has launched an HKEx IPO to raise net proceeds of HK$1,750.0 million ($225 million). Microtech has a credible management team with a commendable track record in developing and commercialising products. Microtech also has several blue-chip backers such as <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, Taikang, Lilly AsiaVentures, Qiming Venture Partners, IDG Capital, 3H Health and CICC Pucheng. <div class="content-highlight">Microtech has three categories of commercialised products which are Equil (the core product), BGMS and CGMS. Equil is the only patch insulin pump approved in China. In combination with attractive pricing, Equil has significant headroom to increase its market share from its 3% market share in 2020, in our view. Also, AiDEX G7 CGMS, which is currently in the early stage of marketing, presents a near-term growth opportunity. Overall, we believe that Microtech is worth a closer look. We will discuss valuation in our next note. </div>

MicroTech Medical Hangzhou (2235 HK) is focused on diabetes management, providing both diabetes treatment and diabetes monitoring medical devices to improve diabetes management globally. The core product is Equil which is a semi-disposable patch insulin pump that was commercially launched in 2018 in China. Microtech has launched an HKEx IPO to raise net proceeds of HK$1,750.0 million ($225 million). Microtech has a credible management team with a commendable track record in developing and commercialising products. Microtech also has several blue-chip backers such as Tencent (700 HK), Taikang, Lilly AsiaVentures, Qiming Venture Partners, IDG Capital, 3H Health and CICC Pucheng. Microtech has three categories of commercialised products which are Equil (the core product), BGMS and CGMS. Equil is the only patch insulin pump approved in China. In combination with attractive pricing, Equil has significant headroom to increase its market share from its 3% market share in 2020, in our view. Also, AiDEX G7 CGMS, which is currently in the early stage of marketing, presents a near-term growth opportunity. Overall, we believe that Microtech is worth a closer look. We will discuss valuation in our next note. 

MicroTech Medical IPO Initiation: Fighting Diabetes

<a href="https://www.smartkarma.com/entities/microtech-medical-hangzhou-co-ltd" target="_blank" data-smartkarma-citation="entities:33367:1" rel="noopener">MicroTech Medical Hangzhou (2235 HK)</a> focuses on managing diabetes by providing diabetes treatment and diabetes monitoring medical devices in China and globally. The company has filed for an IPO on the Hong Kong Stock Exchange and plans to raise gross proceeds of about HK$1.8-1.98bn (US$226-254m) at an indicative price range of HK$27.7-31.1 per share.MicroTech’s core product, a semi-disposable patch insulin pump (known as Equil) is the only patch insulin pump available in China whereas the competitor products are tube insulin pumps. The company is also moving into the CGMS (Continuous Glucose Monitoring System) market which has high margins, and the company is expected to have first-mover advantage in the Chinese diabetic market for CGMS. Equil and CGMS are yet to receive approval for child and adolescent use (currently approved for adult use only) which should expand the company’s target patient population.The monitoring, treatment and management of diabetes via patch insulin pumps and CGMS products is relatively new in China where the diabetic market in China has a variety of treatment options.In this insight, we examine the company’s business model, core products and pipeline, financials and the outlook for its products. We will discuss the company’s valuation in a follow-up insight.

MicroTech Medical Hangzhou (2235 HK) focuses on managing diabetes by providing diabetes treatment and diabetes monitoring medical devices in China and globally. The company has filed for an IPO on the Hong Kong Stock Exchange and plans to raise gross proceeds of about HK$1.8-1.98bn (US$226-254m) at an indicative price range of HK$27.7-31.1 per share.MicroTech’s core product, a semi-disposable patch insulin pump (known as Equil) is the only patch insulin pump available in China whereas the competitor products are tube insulin pumps. The company is also moving into the CGMS (Continuous Glucose Monitoring System) market which has high margins, and the company is expected to have first-mover advantage in the Chinese diabetic market for CGMS. Equil and CGMS are yet to receive approval for child and adolescent use (currently approved for adult use only) which should expand the company’s target patient population.The monitoring, treatment and management of diabetes via patch insulin pumps and CGMS products is relatively new in China where the diabetic market in China has a variety of treatment options.In this insight, we examine the company’s business model, core products and pipeline, financials and the outlook for its products. We will discuss the company’s valuation in a follow-up insight.

MicroTech IPO: Strong Product Portfolio; Small Demand Compared to Other Diabetes Treatment Options

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

MicroTech Medical is a China-based diabetes management medical device company. The company launched book building to raise up to USD 226m via a Hong Kong listing.In our previous note, we discussed that the company's core product insulin patch pump system (Equil) has received NMPA approval in 2018 and EU's CE marking in 2017. It has design features that are more appealing than both the tubed players as well as the patch pump competitors. Having said that, we note that the insulin pump market is competitive and the company's sales data after product launch is far from being ideal. The company's pre-IPO investor is decent. The management team has relevant product development experience but is not considered a superstar team. We also provide a forecast for the company's main products and our thoughts on the pre-money valuation.In this note, we also provided an update for the book building. We will run the deal through our ECM framework and provide an update on the deal.

MicroTech Medical is a China-based diabetes management medical device company. The company launched book building to raise up to USD 226m via a Hong Kong listing.In our previous note, we discussed that the company's core product insulin patch pump system (Equil) has received NMPA approval in 2018 and EU's CE marking in 2017. It has design features that are more appealing than both the tubed players as well as the patch pump competitors. Having said that, we note that the insulin pump market is competitive and the company's sales data after product launch is far from being ideal. The company's pre-IPO investor is decent. The management team has relevant product development experience but is not considered a superstar team. We also provide a forecast for the company's main products and our thoughts on the pre-money valuation.In this note, we also provided an update for the book building. We will run the deal through our ECM framework and provide an update on the deal.

MicroTech (微泰医疗) IPO: Demanding Valuation Despite a Decent Story

China

MicroTech Medical Hangzhou Co Ltd manufactures and distributes medical equipment. The Company produces intelligent insulin pumps, blood glucose monitoring systems, blood glucose meters, protein analysis systems and other equipment. Microtech Medical(hangzhou) also operates import and export businesses.

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MicroTech Medical Hangzhou (2235 HK)

MicroTech Medical IPO: Valuation Insights

Our valuation analysis suggests that the IPO price range is full and we would remain on the sidelines awaiting a better entry opportunity.

Arun George

MicroTech Medical IPO: Forecasts and Valuation

Our DCF and relative valuation suggests that MicroTech's shares are expensive at the IPO price range. Company is also facing intense competition...

Shifara Samsudeen, ACMA, CGMA

MicroTech Medical IPO Initiation: Fighting Diabetes

Microtech has launched an HKEx IPO to raise net proceeds of $225 m. Microtech has three categories of commercialised products and is worth a look at.

Arun George

MicroTech IPO: Strong Product Portfolio; Small Demand Compared to Other Diabetes Treatment Options

The company's core product Equil is priced at a discount to Medtronic's tube insulin pump which should eventually capture market share from...

Shifara Samsudeen, ACMA, CGMA

MicroTech (微泰医疗) IPO: Demanding Valuation Despite a Decent Story

We provided an update for the book building of MicroTech Medical which sells diabetes management products including patch insulin pump (Equil) and...

Ke Yan, CFA, FRM

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