580 million assets acquired, 4.1 billion valuation reported to the science and technology innovation board | Demystifying the first strand of organ transplantation

In 2005, Wu Yunlin, a former surgeon at Shanghai Longhua Hospital, met David Kravitz, the founder of LSI, through Michael Millis, director of liver transplantation at the University of Chicago.

David Kravitz specializes in transplant medicine and was named one of FastCompany's "Global 50 Entrepreneurs/Innovators." The LifePort kidney perfusion infusion infusion box led by him is a medical device with great potential in the field of kidney transplantation.

Promoting the introduction of LifePort kidney perfusion operation box is the purpose of Wu Yunlin's acquaintance with David Kravitz.

At that time, organ donation in China had not yet been legalized, and the market was in the ascendant, not to mention self-developed medical device products. Therefore, Wu Yunlin hopes to reach in-depth cooperation with David Kravitz.

The two sides hit it off. Since 2005, Jiangeng Pharmaceutical, founded by Wu Yunlin, has become the exclusive agent of LSI in China, assisting LSI to complete the registration and marketing of LifePort renal perfusion products in China.

However, what the two sides may not have expected at that time was that Wu Yunlin would "turn against the customer" and become the new owner of LSI in the future. In 2016, Jiangeng Pharma acquired LSI for 580 million yuan, and David Kravitz stepped back into the background.

From distributor to parent company, the legend of Jiangeng Pharma is not limited to this. In November 2022, Jiangeng Pharmaceutical applied for listing on the Science and Technology Innovation Board, with a valuation of more than RMB 4.1 billion.

In just 6 years, LSI's value has increased sevenfold.

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The tens of billions of industrial chain behind organ transplantation

It is not surprising that Wu Yunlin hopes to make a difference in the field of organ transplantation.

At present, organ transplantation is the only effective treatment plan for patients with end-stage renal disease and liver disease, and the market size of the industrial chain behind it is considerable.

Organ transplantation can be divided into three stages, namely preoperative matching, perioperative preservation and repair, postoperative immunosuppressants and regular follow-up.

Each stage requires the use of corresponding medical device products, such as preoperative and postoperative IVD detection products, organ storage/transport device products, etc.

Among them, the most impressive is the diagnostics market, including in vitro diagnostics and immunosuppressant drug monitoring.

According to the BlueWeave Market Report, the global transplant diagnostics market size was $3.9 billion in 2021; According to MarketsandMarkets' market research data, the global therapeutic drug monitoring (TDM) market size was $1.6 billion in 2020.

Jiangeng Pharmaceutical, founded by Wu Yunlin, is also the first to cut into the diagnostic market. Since 2010, Jiangeng Pharmaceutical has begun to develop in vitro diagnostic reagents and drug concentration monitoring reagents in the field of transplantation.

However, in hindsight, Wu Yunlin chose an extremely difficult road to break through.

Due to the late start of domestic enterprises, the domestic transplant diagnosis market share is almost entirely occupied by foreign capital.

Among them, the main market share in the matching and antibody detection field is occupied by ThermoFisher Scientific and Immucor, Inc., and the market share in the TDM testing field is mainly occupied by Abbott, Siemens and Roche.

Moreover, the giants have built an unbreakable moat through the "diagnostic instruments - reagents" bundle model. Until 2021, as a challenger, Jiangeng Pharmaceutical's income from testing reagents did not exceed 40 million yuan.

Obviously, you need to find a different way in the field of organ transplantation. It is in this context that Jiangeng Pharmaceutical embarked on the road of mergers and acquisitions.

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Poor expectations after the identity transition

Before the merger, Jiangeng Pharmaceutical was only an IVD company in the organ transplant industry chain that had not been able to open up the situation; After the completion of the merger and acquisition, Jiangeng Pharmaceutical has become a small "leader" in the subdivision of the industrial chain.

Organ transplantation requires extremely high in all links, especially in transport. The core reason is that ex vivo organs need to be carefully "cared for" to avoid damage.

In the process of kidney transplantation, the traditional means of transporting ex vivo organs is to place them in an organ preservation solution at about 4 °C, which inhibits organ metabolism and enzyme decomposition to reduce organ damage through a low temperature environment.

LSI's LifePort kidney perfusion box is unique in that it is smarter.

First, the system can continuously pump perfusion fluid to the vascular system of the organ, supply nutrients to the organ, remove toxic metabolites and free radicals of cells, and reduce ischemia-reperfusion damage;

Secondly, it maintains hemodynamic stimulation, reduces vasospasm, and can dynamically assess organ viability by monitoring parameters such as vascular resistance, perfusion pressure, and flow rate in real time.

The two major improvements are of great significance to reduce post-transplantation complications and improve the long-term survival rate of transplant patients.

Thanks to the first-mover advantage, the LifePort Kidney Perfusion Tank is now one of the most widely used devices in the world.

At present, 54 of the 57 OPOs in the United States use LifePort renal perfusion operation box for mechanical renal perfusion, with the first market share; Moreover, this product is also the only renal mechanical perfusion product that has obtained a registration certificate in China.

This also means that through acquisition, Jiangeng Medicine can directly cross the process from 0 to 1.

That's true. With the "inclusion" of LSI, Jiangeng Pharmaceutical has now become a company with a revenue scale of 440 million yuan, of which nearly 400 million yuan is contributed by LSI.

As a high-value consumable, the profit margin of organ transplant-related equipment is not low. In 2021, the comprehensive gross profit margin of Jiangeng Pharmaceutical reached 72.59%, and the non-net profit was 71.95 million yuan.

With the entry of LSI, Jiangeng Pharmaceutical was also able to value 4.1 billion yuan (calculated based on the proposed fundraising of 1.023 billion yuan, not exceeding 25% of the market value after issuance) to sprint to the science and technology innovation board.

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The present and future of the first strand of organ transplantation

However, for the first strand of organ transplantation, it may not be enough to limit itself to the field of kidney transplantation.

Kidney transplantation is mainly performed by matching methods, but the lack of kidney sources and the unsuccessful possible matching type determine that the number of kidney transplants is limited and the growth is very slow.

Even in the mature organ transplant market, the annual number of transplants in the United States has not exceeded 20,000, with an annual growth rate of about 5%; After the annual transplantation volume in China has crossed the period of rapid growth, there is also a trend of slowing down. In 2019, in the absence of the pandemic, transplant volumes declined slightly.

The limited amount of transplantation has led to the small scale of mechanical perfusion consumables in the kidney transplant market. In 2019, the market size was only 888 million yuan. Obviously, if Jiangeng Medicine wants to open the ceiling, it urgently needs to expand the circle.

This is also the purpose of Jiangeng Pharmaceutical's IPO. According to the prospectus, the investment direction of the company's raised funds is mainly two: one is to extend vertically to the industrial chain and expand diagnostic products; The second is to extend horizontally to the industrial chain and expand liver transplantation related consumables.

Of course, for Jiangeng Medicine, "expanding the circle" is an opportunity, but it is also a challenge.

As mentioned above, in the field of diagnostic reagents, the "diagnostic instruments - reagents" bundle model built by giants is not easy to break, and the expansion circle in the liver field is also the same.

Although Jiangeng's LifePort liver perfusion operation box and supporting consumables are currently the only liver cryogenic mechanical perfusion equipment and consumables in the FDA registration stage.

However, due to the lack of widely recognized liver perfusion equipment in the field of liver mechanical perfusion, static cold preservation still accounts for the vast majority of clinical practice.

Moreover, even in the field of mechanical perfusion, before Jiangeng Medicine, there are pioneers such as Transmedics and OrganOx. They are also all players that Jiangeng Medicine needs to compete against.

So, can Jiangeng Medicine successfully "expand the circle" as it wishes?