Nuohui Health tore off the 'B label', the beginning of China's cancer early screening industry to regain confidence

Ripping off the "B" label has long been seen as a sign of Biotech's success.

The rules are not complicated, but it is not easy for 18A enterprises to achieve the above goals.

Due to the late start, most of the leading domestic biotechnology enterprises are in the business "climbing stage", and it is difficult to pass the "profit test" or "market value/income/cash flow test" at this stage.

The most feasible "market cap/earnings test clause" is also fraught with difficulties:

Hk $500 million revenue means that the company needs to have a highly competitive product pipeline and outstanding commercialization capability. If the market value is above HK $4 billion, it means that the enterprise needs to be recognized by the secondary market for a long time.

Because of this, only Beigene, Xinda Biological, Junshi Biological, Fuhong Hanlin, Kangxinuo, and Zeding Pharmaceutical have successfully removed the B label after the opening of 18A for many years. Only recently will there be a seventh.

On March 13, while announcing high growth results for 2022, Northrop Health announced that its "Pick B" application had been successfully approved.

The enterprise that removes the B label is the "facade" of 18A, which has special significance both for the enterprise itself and for the industry it represents.

Nuohui Health is the only early screening enterprise among the 7 enterprises, the most important significance is that it has proved that if the product, channel, marketing strategy is appropriate, the business logic of China's early screening industry is established.

This is undoubtedly one of the defining events of the early-screening industry. Having a clear consensus is the most important thing for the tumor early screening industry at this moment.

01 /

Start with increasing income and reducing losses

Like most biotechnology segments, the early screening field in China has experienced a boom from scratch and gradually returned to flat.

Everything comes from reality. The path to success that seemed inevitable in the past is not so simple: unlike overseas medical systems, the logic of domestic commercialization seems unclear, and most of the leaders are stuck in a "revenue increase, loss increase" situation.

The biotech market in 2023 is more likely to believe in the logic of "increase revenue, decrease losses" than the loss-for-growth model, which is more accepted for the upcycle. No way, the financing environment has changed, investors' confidence will inevitably be affected.

Of course, the leaders of the early-screening industry are not disheartened and are trying to prove their worth. Nuohui Health was the first to give the "increase in revenue, reduce the loss" answer sheet.

In 2022, Nuohui Health achieved a revenue of 770 million yuan, an increase of 259.5% compared with 2021; Since its listing in 2021, the company has achieved three times growth for two consecutive years, with total revenue growing 10.8 times.

While revenue is growing, the corporate expense ratio is decreasing. In 2022, the ratio of sales and marketing expenses to total revenue of Nuohui decreased significantly from 125.9% in 2021 to 70.5%; The ratio of administrative expenditure to total revenue fell sharply from 43.7 percent in 2021 to 14.8 percent.

Then there is the scale effect that increases profit margins. In 2022, the company's gross margin climbed to 84.5% from 72.7% in 2021.

Thanks to the above, the adjusted net loss of Nuohui Health narrowed to 100 million yuan from 260 million yuan in 2021.

It only took two years for Nuohui Health to successfully select B, which crossed the revenue threshold of HK $500 million. To some extent, it shows that the demand of China's cancer early screening industry is not missing due to the lack of medical insurance coverage.

Northrop's declining expense ratio suggests that marketing education is not so hard. This means that the growth of enterprises does not need to be "increased losses" as a cost for a long time.

And, by controlling costs and expenses, continuing to reduce losses is a certainty for Northrop Health. In its annual report, the company reiterated its goal of breaking even by 2024.

If Nuohui Health achieves this goal, it may become a landmark event for the cancer early screening industry to be fully recognized.

/ 02 /

The two most important things

Every move of the industry leaders can always teach us important lessons.

Nuohui Health in how to break through the limitations of the battle of self and The Times, to find a way to break through. Compliance and brand are the two most important things that Nuohui Health does in the process of Fali commercialization.

Specifically, looking back over the past year, it is not difficult to find that its performance growth is partly due to compliance advantages.

For the serious medical industry such as early screening, the internal driving force of consumer growth comes from clinical and C-end channel resonance.

Clinical approval is the first requirement. Only on the basis of clinical channels can cognition of C-end users be established and "amplification effect" of several or even tens of times can be formed at C-end.

And compliance, that is, certification of regulatory "compliance" through large-scale prospective clinical practice, is the "last mile" to open the clinical path.

Nuohui Health is the first to realize the importance of compliance early screening enterprises. Up to now, Chang Weiqing is the only approved cancer screening product in China, and its exclusive patent for multi-target fecal FIT-DNA detection is also the only molecular screening technology for colorectal cancer recommended by national guidelines.

Today, the compliance advantage has become the core barrier in the in-hospital clinical market and out-of-hospital consumer healthcare marketing.

In 2022, the hospital channel has become the largest source of revenue and the fastest growing channel for Nuohui Health. Thanks to this, the revenue scale of Changweiqing reached 360 million yuan last year, with a year-on-year growth of 266.2%, becoming one of its pillar products and growth engines.

And most IVD enterprises fail to realize the "brand building" strategy, so that Nuohui health category expansion strategy to be realized, more such as Chang Weiqing home early screening products, can quickly get volume.

The sales revenue of Pupu Tube was 200 million yuan, with a year-on-year growth of 73.7%; More noteworthy is that Nuohui Health launched the Youyouguan last year, the first year on the market to achieve 210 million yuan of revenue, gross margin as high as 90.7%, become one of the classic cases of the IVD field to create a burst.

As the saying goes, those who do not plan for the overall situation will not be able to plan for a region. Compliance and brand advantage resonance, for Nuohui Health opened the early screening business situation. And this also tells us again, based on the accumulation of technology, resources, experience, early screening industry ashore is bound to surface.

03 /

Finished and unfinished

Any 18A enterprise needs to go through the development stage of "from zero to one, and then from one to ten". At this stage, companies that have successfully removed the "B tag" have only completed the first phase of the task: zero to one.

Their next challenge is to "go from one to 10", and Northrop is no exception. Despite its strong commercial performance, in the view of Zhu Yeqing, CEO of Nuo Health, the past year's performance is better described as "making progress" and the company still has a long way to go on the road to commercialization.

To be sure, Northrop has significant advantages in expanding its pipeline. At present, the company has also launched large-scale prospective multi-center clinical trials of the HPV cervical cancer screening products Gong Zhengqing and Pancancer early screening PANDA research project.

But expanding the pipeline strategy also has a hard reality to overcome: time. From clinical to certificate, often 3-5 years cycle, no one can take a shortcut.

Nuohui Health is also trying to go to the sea, the first stop is Hong Kong, and reached exclusive cooperation with local leading consumer medical high-tech brands, to jointly carry out international marketing.

Chang Weiqing and Youyouguan's respective approved "only" compliance barriers will be a key advantage for the internationalisation of the two products. However, the road to the sea has just started. For Nuohui Health at this stage, the domestic market is the main battlefield.

Looking back at Northrop's existing commercial pipeline, Northrop Health is trying to take full advantage of Chang Weiqing and Youyouguan to establish its position in the clinical market.

Chang Weiqing's key work is to do the education of doctors, so that his advantages in the clinical end are further highlighted; The work of the ghost tube is to become one of the clinical diagnosis and treatment standards, and complete the clinical end from 0 to 1.

C-end commercialization also has unfinished business. How to continue to promote user education, and how to use the existing users' portraits to more accurately match the needs of consumers, will be the future focus of Nuohui Health.

In Zhu's vision, Chang Weiqing will be among the 1 billion items by 2024. And the progress of the following work is undoubtedly the key to determining whether Northrop Health can continue its high growth in the future performance.

For now, the biotech industry has entered a new phase where every company needs to focus on more quality growth. As Zhu Yeqing says, 8-year-old Nuo Hui still has a long way to go on this road.

Similarly, the young Chinese early screening industry, there is still a lot of room for exploration.