Tianxing Medical Pivots to Hong Kong IPO: Pillar Product Procurement Policy Aftereffects Emerge Amid Overseas Dependency and Related Party Transaction Risks

Deep News
09/26

Recently, sports medicine company Tianxing Medical officially submitted its main board listing application to the Hong Kong Stock Exchange, with CITIC Securities and CCB International serving as joint sponsors. This marks the company's second listing attempt in nearly two years. Previously, Tianxing Medical applied for a STAR Market listing in September 2023, but failed in June 2025 when sponsor CICC unilaterally withdrew its sponsorship.

Tianxing Medical's initial STAR Market IPO application planned to raise 1.093 billion yuan for smart factory construction, new product R&D, and marketing network development. At that time, CICC served as the sponsor and Galaxy Securities as the lead underwriter. During the inquiry review phase, Tianxing Medical adjusted its fundraising plan in March 2024, reducing the total amount from 1.093 billion yuan to 880 million yuan and canceling the "marketing network development" project, but ultimately still failed to go public.

**Pillar Product Procurement Policy Aftereffects Gradually Emerge, Overseas Dependency and Related Party Transaction Risks Intertwined**

Financial data shows Tianxing Medical has maintained growth momentum in recent years. From 2022 to 2024, company revenue grew from 147 million yuan to 327 million yuan, with net profit rising from 40.34 million yuan to 95.38 million yuan. In the first five months of 2025, the company achieved revenue of 111 million yuan and net profit of 32.6 million yuan, representing 142% year-over-year growth.

However, behind these impressive growth figures, the company's product structure risks are becoming increasingly apparent. Tianxing Medical's revenue is highly dependent on implant products, which accounted for 79.8%, 78.2%, and 76.4% of revenue from 2022 to 2024 respectively. Despite the slight decline in proportion, these products still constitute the absolute mainstay of company revenue.

In September 2023, sports medicine consumables were officially included in the fourth batch of national high-value medical consumables volume-based procurement catalog, which began implementation in May 2024. The average price reduction for selected products in this procurement reached 60%. Although Tianxing Medical had 14 products selected, it also had to accept significant price reductions.

The direct impact of the procurement policy has already been reflected in the company's financial statements. In 2024, the company's gross margin was 69.6%, down 4.7 percentage points from 74.3% in 2023. The company acknowledged that the gross margin decline was mainly due to price reductions caused by implant products being included in the volume-based procurement program.

While the volume-based procurement policy helped the company maintain revenue growth in the short term through a "price-for-volume" strategy, in the long run, if volume growth cannot fully offset the impact of price declines, the company's overall profitability will face continued pressure. In the first five months of 2025, the company's implant revenue was 80.88 million yuan. Based on this calculation, annual revenue would be approximately 194 million yuan, potentially declining about 22.35% compared to 2024's full-year implant revenue of 250 million yuan, indicating the marginal effect of the price-for-volume strategy is weakening.

Meanwhile, Tianxing Medical also faces supply chain challenges. On one hand, the company has high dependence on overseas suppliers; on the other hand, ongoing transactions with former shareholders' affiliated companies raise transparency concerns.

The company's main products, PEEK suture anchors and loop titanium plates, require procurement of core raw material ultra-high molecular weight polyethylene fiber during production. According to the prospectus, this raw material mainly relies on overseas supplier DSM Biomedical. From 2021 to the first three quarters of 2024, the company's procurement from DSM increased from 6.436 million yuan to 14.915 million yuan, showing a continuous upward trend.

The procurement contract signed between the two parties in November 2017 stipulates validity until the end of 2033, but this cooperative relationship showed cracks on the eve of the listing. DSM Biomedical issued a statement saying: "Tianxing Medical disclosed agreement details without prior communication with our company and without our permission." DSM clearly stated it disagreed with content related to its materials in the prospectus and reserved the right to pursue legal action.

On the other hand, the company's related party transactions with former shareholder Chen Hao's family enterprises are also noteworthy. Although Chen Hao exited Tianxing Medical in 2019, Guangzhou Tianying Precision Tools Co., Ltd., controlled by his family, still maintains close business relations with Tianxing Medical.

Data shows that from 2020 to 2023, Guangzhou Tianying was Tianxing Medical's largest supplier for four consecutive years. In the first three quarters of 2024, Guangzhou Tianying remained the company's second-largest supplier, accounting for 15.80% of procurement. In November 2024, the two parties signed another five-year procurement contract, stipulating supply of cutting head components and inserter components. Although Guangzhou Tianying is no longer considered a related party after the equity transfer, this continued close cooperation still raises market concerns about transaction fairness.

**Founder Has Cashed Out and Left, CICC's Withdrawal as Shareholder-Sponsor Remains Mysterious**

Regarding corporate history, Tianxing Medical was established in July 2017, jointly founded by Harbin Institute of Technology PhD Dong Wenxing, former Kanghui Medical executive Nie Hongxin, and Chen Hao. Initially, their shareholding ratios were 35%, 55%, and 10% respectively, with Nie Hongxin as the actual controller.

As the company developed and valuation increased, the equity structure underwent major changes. In October 2019, Chen Hao completely exited the company by transferring his 10% stake to Nie Hongxin for 6.364 million yuan. Subsequently, Nie Hongxin also began gradually reducing his holdings. According to public data, Nie Hongxin cumulatively cashed out approximately 490 million yuan through multiple transfers of Tianxing Medical shares via entities he controlled, including Anji Lianen and Anji Jintian. By the time of the STAR Market IPO application, his shareholding had decreased from the initial 55% to only 4.9%.

More noteworthy are some special arrangements in the equity transfers. In 2022, Nie Hongxin transferred 37.53% of shares to Dong Wenxing at a nominal price of 14.2599 million yuan, then unconditionally waived this transfer payment through a "Waiver Agreement," effectively gifting this portion of shares to Dong Wenxing.

Meanwhile, Dong Wenxing also conducted partial equity transfers through his controlled shareholding platform Tianjin Yunkang, obtaining cash consideration of 56.4706 million yuan. By the time of the STAR Market application, the company's actual controller had changed from Nie Hongxin to Dong Wenxing, who collectively controlled 41.47% of the company's voting rights.

The founders' substantial cash-out and change of actual controller inevitably raise questions about management's confidence in the company's long-term development. Especially the equity structure adjustments on the eve of the IPO, while possibly intended to optimize corporate governance structure, combined with the subsequent termination of the STAR Market IPO, inevitably raise market concerns about the company's stability.

Additionally noteworthy is that STAR Market IPO sponsor CICC was not only Tianxing Medical's STAR Market sponsor but also indirectly controlled 27.09% of partnership shares in Tianxing Medical shareholder Yahui Jinlin through its subsidiaries CICC Qiyuan and Kechuang Fund, while Yahui Jinlin held 4.04% of Tianxing Medical shares. This dual identity makes its unilateral withdrawal of sponsorship even more thought-provoking.

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