"China Economic Weekly" reporter Sun Tingyang |Reporting from Beijing.
In 2023, the number of companies that failed in initial public offerings** (IPOs) and the amount of funds to be raised exceeded those in 2022.
According to the reporter of "China Economic Weekly", from the beginning of 2023 to December 25, 2023, a total of 244 companies failed in IPOs, and they planned to go public to raise 230.1 billion yuan. In 2022, 211 IPOs will fail, with a total of 144.8 billion yuan to be raised.
In the past five years, the success rate of enterprises listed has gradually declined.
In the past five years, the number of IPO failed companies has increased.
In 2019, 2020 and 2021, the number of IPO failures was 32, 38 and 156, respectively, and in 2022 and 2023, both above 200. The number of new listings during the same period has not changed so much. In the past five years, the number of listed companies that have successfully landed on the A-share market was 203, 432, 524, 428 and 309 respectively. If the number of successful listed companies is taken as the numerator, and the sum of the number of successful listed companies and the number of losing companies is used as the denominator, the success rate of enterprises listed in the past five years is simply calculated, which is % and 56% respectively. Judging from the data, the success rate of listed companies has gradually decreased in the past five years, and the success rate of listed companies in 2023 will drop to the lowest. The 56% listing success rate means that there will be 1 successful listing in 2023, which basically corresponds to the failure of 1 company to go public.
In 2023, the China Securities Regulatory Commission has repeatedly stated that it will strictly control the "entry gate". In response to the recommendations of the National People's Congress on February 24, the China Securities Regulatory Commission said that it would increase the transparency of the review and continuously improve the predictability of issuance and listing. On the basis of strict control of the "entry gate", we will build an open, transparent and predictable review and registration mechanism, and implement "sunshine audit" to further win the trust of the market. In May, the relevant leaders of the China Securities Regulatory Commission said at the annual meeting of the Association of Listed Companies that it is necessary to promote the full implementation of the first-class issuance registration system, strictly control the market entrance, continuously enhance the adaptability of the system, and guide market resources to be more inclined to scientific and technological innovation enterprises, so as to better serve the national innovation-driven development strategy. In November, the China Securities Regulatory Commission said in the study and promotion of the implementation of the spirit of the first financial work conference that it is necessary to continuously improve and improve the whole chain of supervision of the first-class issuance registration system, continue to promote the transformation of the issuance supervision of the CSRC organs, exchanges and dispatched agencies, consolidate the audit responsibilities of the exchange, strengthen the exercise of public power checks and balances, supervision and constraints, and resolutely control the "entrance gate" of the capital market.
The number of failed companies planning to be listed on the Shanghai Stock Exchange increased the most. Of these 244 companies, the number of companies to be listed on the Shenzhen Stock Exchange, the Shanghai Stock Exchange and the Beijing Stock Exchange is 120, 85 and 39 respectively. Compared with 2022, the number of companies to be listed on the Shanghai Stock Exchange has increased by 39, and the number of companies that have failed to be listed on the Shenzhen Stock Exchange and the Beijing Stock Exchange has increased by 4 and decreased by 2 respectively.
In terms of industries, the top two industries in terms of the number of losing enterprises were computer communications, software and information technology, with 45 and 22 respectively. Pharmaceutical manufacturing and chemical raw material manufacturing tied for third place, both with 19. Compared with 2022, the changes in the number of losing companies in these four industries increased by 41%, decreased by 24%, increased by 73%, and increased by 36% respectively. The pharmaceutical manufacturing industry has the highest increase in the number of losing companies.
Under the registration system, the steps for an enterprise to go public are to submit a listing application, be accepted by the exchange, inquire and review by the exchange, register with the CSRC after passing the review, and issue ** to raise funds and go public after successful registration.
Among the 244 companies that failed to issue in 2023, from the perspective of listing steps, some withdrew their issuance applications on their own, and some cancelled the review and failed the review by the exchange, including the termination of registration by the China Securities Regulatory Commission.
Among the companies that fail to pass the exchange, the pharmaceutical and medical related industries are the most. Of the 244 companies that failed to go public, 9 of them were rejected by the exchange, and two of them were related to medicine and medical care, namely Zhejiang Taimei Medical Technology Co., Ltd. (hereinafter referred to as "Taimei Technology") and Beijing Noconda Pharmaceutical Technology Co., Ltd. (hereinafter referred to as "Noconda").
Taimei Technology and Noconda stopped at the exchange review.
The listing steps of Taimei Technology and Noconda have stopped at the review stage of the exchange.
Taimei Technology mainly sells software and service products in the fields of pharmaceutical clinical research, pharmacovigilance, pharmaceutical marketing, and customized software.
Taimei Technology has lost money for 4 consecutive years. From 2018 to 2021, they lost 1800 million yuan, 3900 million yuan, 5200 million yuan and 4800 million yuan. During the same period, the company's annual cash flow from operating activities was a net outflow, with a total net outflow of nearly 500 million yuan from 2018 to 2021. In 2022, this situation has not been reversed, and business activities continue to outflow1700 million yuan.
Taimei Technology's prospectus disclosed that the four projects to be invested with 2 billion yuan have no office space and need to spend 700 million yuan to buy 260,000 square meters of office building. The exchange asked the company about the "necessity and reasonableness of buying the office building, and whether it is a disguised investment in the real estate sector".
In the review stage of Taimei Technology, the Shanghai Stock Exchange focuses on the reasons for the company's continuous large losses, the impact on the company's ability to continue operations, changes in factors affecting profitability, and the sustainability of future sales growth. The Shanghai Stock Exchange considered that during the reporting period, the company did not mainly rely on core technologies to carry out production and operation, and did not fully disclose important information that is conducive to investors' value judgments and investment decisions, which did not comply with relevant regulations, and terminated the review.
Let's look at Noconda's road to listing. The company is a comprehensive R&D service enterprise for pharmaceutical preparations, pharmaceutical research, and clinical research, and has failed to hit the market three times.
For the first time, Noconda applied for listing on the Science and Technology Innovation Board of the Shanghai Stock Exchange in April 2019, and in June of this year, the Shanghai Stock Exchange launched on-site supervision. In July of the same year, the company withdrew its listing application.
Noconda has also been warned by exchange regulators. In April 2020, the exchange found that Noconda's second largest customer had an affiliated relationship with it, and that the customer contributed 18% of Noconda's sales revenue from 2017 to 2018, and the contract signed by the two parties constituted a connected transaction. Neither the related party relationship nor the related party transaction was disclosed in the company's prospectus, which was an irregular act of information disclosure and a violation of relevant regulations. In view of the fact that the company has withdrawn its issuance and listing application documents and the issuance and listing review process has been terminated, the relevant adverse effects have been mitigated to a certain extent, and the SSE has given a regulatory warning as appropriate.
The second time, in August 2021, Noconda plans to be listed on the main board of the Shanghai Stock Exchange. The intermediary believes that there is still room for improvement in the company's governance system, financial management system and other standards for listed companies.
For the third time, that is, in June 2022, Noconda's application to be listed on the Shenzhen Growth Enterprise Market was accepted, and the company planned to raise 7500 million yuan.
When Noconda hit the Science and Technology Innovation Board, the reporting period was from 2016 to 2018, and the net profit of each year was 6.02 million yuan, 35.04 million yuan and 77.58 million yuan respectively. Profits are rising year by year. When the company hit the GEM, the net profit from 2019 to 2022 was 25.61 million yuan, 22.5 million yuan, 59.22 million yuan and 84.14 million yuan respectively. It is worth noting that between the two shocks, the company's net profit in 2018 was 77.58 million yuan, and in 2019, the net profit was 25.61 million yuan, a significant decrease of 67%.
The Shenzhen Stock Exchange requires Noconda to explain the reasons and reasonableness of the sharp decline and then sharp increase in performance after the withdrawal of the application materials in combination with customer changes and contract performance, and whether there is any adjustment of profits or false performance.
On July 20, 2023, the Shenzhen Stock Exchange reviewed Noconda, and the issues included the main differences and reasons between the two declarations, the main problems and rectifications existing in the previous declaration, and whether the relevant internal control system was sound and effective. According to the deliberation, the company did not fully explain the reasons and reasonableness of the large fluctuations in performance, and the commercial reasonableness of transactions with some customers. The Shenzhen Stock Exchange held that the company's application did not comply with the relevant regulations and terminated the review.
Exchange reminder: focus on the legality and compliance of pharmaceutical companies' promotion activities.
Noconda was given a regulatory warning by the Shanghai Stock Exchange, and the lawyer in charge of the intermediary agency at the time of the company's first listing was also warned by the Shanghai Stock Exchange.
For intermediaries, the SSE also gives guidance.
On July 28, 2023, the Shanghai Stock Exchange reminded intermediaries in the review that the proportion of sales expenses in operating income of medical enterprises is often high, and the authenticity and compliance of sales promotion activities have attracted much attention from the market. For the sales and promotion activities of pharmaceutical and medical device companies, the legal compliance of various promotion activities should be focused.
From 2019 to 2022, the ratio of sales expenses to operating income in the pharmaceutical manufacturing industry was the highest among the 31 industries of listed companies in the manufacturing industry, between 21% and 25%.
Of the 19 listed pharmaceutical companies that withdrew their listing applications in 2023, 9 of them exceeded the average of the pharmaceutical manufacturing industry in 2021 as a ratio of sales expenses to operating income. Four companies withdrew their listing applications before and after the SSE prompted them.
On July 28, the day the Shanghai Stock Exchange issued a reminder, Rongsheng Pharmaceutical withdrew its listing application from the Shanghai Stock ExchangeThe day before, on July 27, two companies withdrew their applications, namely Lijiexun withdrew its listing application from the Shenzhen Stock Exchange and Qihui Pharmaceutical withdrew its application from the Shanghai Stock ExchangeThirteen days earlier, on July 14, Hanwang Pharmaceutical withdrew its listing application from the Shanghai Stock Exchange.
Among these 4 companies, Hanwang Pharmaceutical has the highest sales expenses, as high as 29.2 billion yuan, which is higher than the total value of the other three. The company's operating income in 2021 is only 60% of the combined value of the other three companies.
Hanwang Pharmaceutical's sales expenses accounted for 40% of operating income in 2021, far exceeding the average of listed companies in the same industry (21% to 25%). Among the company's sales expenses, market development expenses account for the absolute majority, reaching more than 80%. From 2020 to 2022, the company's market development fees were 22.8 billion yuan, 24.2 billion and 24.5 billion yuan.
According to Hanwang Pharmaceutical, the company's product demand mainly depends on the awareness of medical workers and patients on the efficacy and safety characteristics of the corresponding products, and the company needs to carry out promotional activities to medical workers and patients to introduce the characteristics and advantages of the products and strengthen the awareness of relevant personnel on the company's products. The company hires promotion service providers to assist in product promotion and pay market development costs.
More than 75% of Hanwang Pharmaceutical's market development expenses are promotion conference fees. In 2020, 2021 and 2022, the company's expenses were 1700 million yuan, 2100 million and 2100 million yuan.
Hanwang Pharmaceutical said that the promotion meeting was divided into regional promotion meetings and department promotion. The regional promotion will be divided into provinces, cities and counties, and the medical staff and pharmacy staff of medical institutions in the region will popularize and explain the productsThe promotion of the department is mainly linked by the hospital department, introducing the characteristics of the company's products to the medical staff, and guiding them to correctly grasp the dosage, indications and treatment process of the products, so as to use the company's products correctly.
According to Hanwang Pharmaceutical, 2,149 regional promotion meetings will be held in 2022, with an average number of 43 people per game and an average cost of 0220,000 yuan, a total of 20.4 billion yuan. 331 department meetings were held, with an average of 14 people per game, and the per capita cost was 0090,000 yuan, a total of 4.04 million yuan.
Hanwang Pharmaceutical said that in terms of the frequency, average number of participants and average cost of the meeting, it is within the reasonable index range of listed or to-be-listed pharmaceutical companies in the same industry.
Hanwang Pharmaceutical listed Yuekang Pharmaceutical (688658SH), Huiyu Pharmaceutical (688553SH) is equivalent to the promotion meeting of companies in the same industry. Yuekang Pharmaceutical held 5,033 academic meetings in 2019, with an average of 83 people and a cost of 125.4 billion yuan;There were 2,768 department meetings, with an average of 34 people per session, and the cost was 18.5 billion yuan. In 2020, Huiyu Pharmaceutical will hold a total of 1 departmental meetings, city meetings, regional meetings and large-scale meetings31.04 million games, a total of 30860,000 people attended.
The reporter of China Economic Weekly checked the data of Yuekang Pharmaceutical's prospectus, which was consistent with the data stated by Hanwang Pharmaceutical. Yuekang Pharmaceutical Co., Ltd. landed on the Shanghai Science and Technology Innovation Board in December 2020, and the ratio of sales expenses to operating income from 2019 to 2022 is between 43% and 47%.
The reporter of China Economic Weekly checked the reply to the second round of inquiry documents released by Huiyu Pharmaceutical in March 2021, which is consistent with the data released by Hanwang Pharmaceutical. Huiyu Pharmaceutical holds an average of 36 meetings per day throughout the year. Huiyu Pharmaceutical landed on the Shanghai Science and Technology Innovation Board in December 2021, and the ratio of sales expenses to operating income from 2019 to 2022 was between 47% and 52%.
Editor-in-charge: Guo Jiyao.