Recently, Baird (Suzhou) Medical Co., Ltd., the substantial controlling company Baird Medical Investment Holdings Limited, officially listed on the Nasdaq through a SPAC (Special Purpose Acquisition Company) ExcelFin Acquisition (XFIN) in the USA.

Previously, the listing process of Baird Medical (BDMD.US) has been quite tortuous. The company had planned to have a hearing on the Hong Kong Stock Exchange in September 2022, but due to regulatory policies, the continued downturn in the Hong Kong biomedical market, among other reasons, the company later announced the postponement of the Hong Kong IPO.

In June 2023, the company reached a final merger agreement with the Special Purpose Acquisition Company (SPAC) ExcelFin Acquisition Corp. (“ExcelFin”). After the completion of the transaction, it will operate as Baird Medical Investment Holdings Limited. According to the merger agreement, the pre-merger equity value is at 0.3 billion US dollars, and the implied estimated enterprise value of the merged company is approximately 0.37 billion US dollars. Betters shareholders will convert their existing Betters shares 100% into Baird Medical's common stock.

Compared to traditional IPOs, SPAC listings require less time, and Nasdaq's enthusiasm and valuation level for biotechnology companies are relatively high, providing more flexible listing options for biomedical companies. However, from the market trend perspective, since its listing, Baird Medical's stock price has been declining all the way, dropping by 62% since October, apparently not being favored by market investors.

Declining product sales volume dragging down performance.

Public information shows that Baird Medical traces back to June 2012, as a leading developer and provider of microwave ablation medical instruments for minimally invasive tumor treatment in China. The company's proprietary microwave ablation medical instruments are used to treat benign and malignant tumors (including thyroid nodules, liver cancer, lung cancer, and breast lumps).

Microwave ablation is a technique that destroys cells and tissues by heat through microwave energy, which can be applied to diseases such as thyroid nodules, breast nodules, liver cancer, lung cancer, etc., with high safety and good efficacy, promoting the enhancement of various immune cell activities in the human body.

According to the Zhitong Finance and Economics APP, the company's revenue in 2023 was $31.5 million, a year-on-year decrease of 10.35%, with a net income of $27.23 million, a year-on-year decrease of 2.86%; it is expected that the revenue in 2024 will be approximately $42.2 million, and the adjusted EBITDA is expected to be around $20.1 million.

The company disclosed that changes in selling prices resulted in a decrease in revenue of about $1.1 million, while changes in product sales volume led to a decrease in revenue of about $4 million.

The prospectus shows that Baird Medical has a total of 8 products, of which 3 have obtained market approval, namely the microwave ablation therapy device and microwave ablation needles for treating liver cancer and thyroid nodules, as well as the long microwave ablation needle and precision microwave ablation needle.

At the end of November 2023, Baird Medical's subsidiary, Baird (Suzhou) Medical Co., Ltd., officially entered the US market with its microwave ablation system and disposable product combination microwave ablation needle, being sold as a Class II regulated device.

In terms of revenue structure, up to the first 5 months of 2022, the company's revenue in the microwave ablation needle field reached 545.2 billion yuan, accounting for as high as 85.5% of total revenue, indicating a significant reliance on the microwave ablation needle business.

In 2023, the company's cost of income decreased by approximately $2.8 million year-on-year, and the gross profit also decreased from $28 million in the 2022 fiscal year to $27.2 million in the 2023 fiscal year. The company stated that in order to better meet customer demand, they added two additional lines to the previous Microwave Ablation (MWA) needle configuration, leading to increased costs. The company mentioned that compared to the previous year, the cost structure in 2023 is more reflective of the true core business operation.

In terms of sales and marketing expenses, the company's strategic shift from direct sales to sales through distributors led to a reduction in the number of employees in the internal sales and marketing departments from 79 to 32. Sales and marketing expenses in 2023 decreased by $1 million to $2.5 million. In the 2022 and 2023 fiscal years, the company's sales expenses accounted for 10.2% and 8.1% of total revenue, respectively. The company anticipates steady progress in US sales operations in 2024, which may result in an increase in sales expenses.

In the fiscal year 2023, the company's research and development expenses were $4.3 million, an increase of $0.4 million compared to the fiscal year 2022, accounting for 13.6% and 11.0% of the total revenue in fiscal years 2023 and 2022, respectively. The increase in research and development expenses is mainly due to the increase in FDA certification costs, CE Marking costs, endoscopic ultrasound system costs, and AI ablation system and equipment research and development costs.

According to Foster Sullivan data in the prospectus, based on the sales revenue and sales volume of microwave ablation needles in 2022, Baidai Medical ranks first among suppliers of microwave ablation medical equipment for treating thyroid nodules and breast lumps in China; based on 2022 sales revenue, the company is the third largest microwave ablation medical instrument supplier in China.

Cancer incidence in China is showing a continuous upward trend.

Public information shows that ablation technology is a common method for treating tumors, it can destroy cancer cells through high temperature, low temperature, or chemical substances. Common ablation technologies include radiofrequency ablation, laser ablation, high-intensity focused ultrasound ablation, microwave ablation, and cryoablation.

For tumor diagnosis, it is necessary to first determine the location and size of the tumor through imaging examinations, and obtain pathological tissue samples for further diagnosis and classification. Although both microwave ablation and radiofrequency ablation use thermal effects to kill cancer cells, there are certain differences in principles, indications, advantages and disadvantages, and safety.

From the indications perspective, microwave ablation is suitable for treating tumors in solid organs such as the liver, kidney, and lung, especially for larger or multiple tumors with better treatment effects; while radiofrequency ablation is suitable for treating malignant tumors such as liver cancer, kidney cancer, and lung cancer, especially for smaller or solitary tumors with better treatment effects.

The China Industry Research Institute released a report titled '2022-2027 China Tumor Radiotherapy Industry Market Outlook and Future Development Trends', which indicates that the Chinese microwave ablation market is experiencing rapid growth due to the increasing popularity of minimally invasive surgeries, the promotion of microwave ablation therapy in different hospitals, and the expansion of indications for microwave ablation therapy. The size of the Chinese microwave ablation market in 2023 is 3.87 billion yuan, a year-on-year increase of 29.87%; analysts at the China Industry Research Institute predict that the size of the Chinese microwave ablation market will reach 5.07 billion yuan in 2024.

In the first half of this year, the National Cancer Center, based on the latest data from national tumor registration and follow-up monitoring, published the burden of malignant tumors in China in 2022 in the top global journal 'JNCC', and updated the trends in cancer incidence and mortality rates in China from 2000 to 2018. The data shows that in 2022, there were 4.82 million new cancer cases in China, nearly 0.53 million more than in 2015, an increase of over 12%; there were approximately 2.57 million new cancer deaths, with lung cancer still being the leading cancer in China, ranking first in incidence and mortality rates.

Data shows that among newly diagnosed cases, the top five cancer types are lung cancer, colorectal cancer, thyroid cancer, liver cancer, and stomach cancer, accounting for 57.42% of new cancer cases. In the 0-74 age group, the cumulative cancer incidence rate in the Chinese population is 21.42%, equivalent to 1 in 5 people developing cancer in their lifetime.

Data shows that influenced by market conditions and a series of policy bullish factors, the enthusiasm for US listings has significantly increased this year. From January to October 2024, a total of 50 Chinese concept stocks successfully landed on the US stock market through IPOs, raising approximately $2.42 billion in total funding. In addition, two Chinese concept stocks successfully went public in October through SPAC.

The financing environment is becoming more favorable, which is expected to drive overall valuation recovery for Chinese concept stocks. From a fundamental perspective, Baide Medical lacks significant advantages in terms of revenue scale and market share, and its financial performance has been poor, leading to continued pressure on the company's stock price. To restore market investors' confidence, Baide Medical will face many challenges in the future.