Amid a regulatory clampdown on overseas listings by Beijing, Chinese medical consumables manufacturer Meihua International Medical Technologies has filed a preliminary prospectus to raise up to $69 million in an initial public offering (IPO) in the US.
In a heavily redacted filing with the US Securities and Exchange Commission, the Yangzhou-based firm did not specify the number or price of American depositary shares (ADSs) it intends to sell. Its prospectus showed that it plans to list on the Nasdaq stock exchange.
Meihua sells disposable medical products such as testing kits, masks, bandages and surgical tapes to hospitals, pharmacies, medical institutions, and medical equipment companies in the local and international markets.
China’s medical disposables market has grown rapidly due to an improvement in living standards and increased demand for healthcare, according to recent data. In 2020, China’s low value-added medical disposables market was worth about $14.9 billion, up 25.97% from 2019.
Proceeds from the listing will be used to construct a new factory, acquire a local disposable medical device manufacturer, boost R&D capabilities, and hire R&D talent and senior executives, the company said in its prospectus.
Meihua posted revenue of $89.1 million in 2020, up by about 12% from a year earlier. Its full-year net income grew 23% to $15.4 million.
If successful, Meihua could become the first Chinese firm to list in the US since the regulatory crackdown began. In recent weeks, several companies including medical data group LinkDoc Technology and bike-sharing operator Hello, both backed by Alibaba Group Holding, have called off their overseas IPOs.
Autonomous driving startup Pony.ai has also put on hold its plans to go public in New York through a merger with a blank-cheque firm at a $12 billion valuation.
Beijing has mandated technology firms listing abroad to seek approval from the Cyberspace Administration of China (CAC), the country’s cybersecurity watchdog, especially if they handle the personal information of more than one million users.
The US Securities and Exchange Commission (SEC) now also requires Chinese IPO applicants to explain their legal structure and convince the regulator that their business is not at risk of interference from the Chinese government.
Without discussing the regulator clampdowns by Beijing and the US, Meihua said US regulatory bodies may be limited in their ability to conduct investigations or inspections of its operations in China.
“There is no guarantee that requests from US federal or state regulators or agencies to investigate or inspect our operations will be honored by us, by entities who provide services to us or with whom we associate, without violating PRC legal requirements, especially as those entities are located in China,” the company said in its prospectus.
The medical products administration of the State Council, China’s top administrative authority, is responsible for developing the classification rules for medical devices and maintaining catalogues of classified devices.
Based on information on the production, distribution, and use of medical devices, the State Council analyzes and evaluates the risk levels of medical devices and adjusts the classification rules and classification catalogues.