Shanghai Shengsheng Pharmaceutical Cold Chain Technology Co., Ltée. (hereinafter referred to as “Shanghai Shengsheng”) is a professional cold chain service provider for biopharmaceuticals and a pioneer in China’s biopharmaceutical cold chain service industry. Since its establishment, the company has been focusing on providing full-chain integrated cold chain services for customers in drug research and development, life sciences, biotechnology, and commercial finished pharmaceuticals. With over a decade of professional experience and technical accumulation, Shanghai Shengsheng continuously innovates, leading and shaping the industry’s practice models and service standards.
On June 30th of this year, Shanghai Shengsheng submitted its listing materials and received acceptance, aiming for an IPO on the main board of the Shanghai Stock Exchange. On July 28th, it received the first round of inquiries, but as of now, the company has not yet responded. The company’s listing sponsor is China International Capital Corporation (CICC).
On September 30, 2023, due to the financial information recorded in the application documents for issuance and listing having expired, supplementary submissions were required. According to Article 60 of the Shanghai Stock Exchange Stock Issuance and Listing Review Rules, the review of Shanghai Shengsheng’s issuance and listing has been suspended.
According to the data in the prospectus, Shanghai Shengsheng’s revenue in 2022 was 630 millions de yuans. The company plans to raise 900 million yuan this time, with an estimated market value of about 6 billion yuan after listing.
Biopharmaceutical cold chain service refers to the full-chain cold chain solutions provided for the temperature safety of biopharmaceutical products during research, production, and circulation, based on temperature control technology and professional operating schemes.
With self-developed and produced VIP insulation boxes, PCM ice packs, and other cold chain equipment, combined with professional refrigerated trucks and liquid nitrogen tanks, Shanghai Shengsheng provides safe, professional, and efficient door-to-door cold chain services for various biopharmaceutical products, including clinical trial medicines, biological samples, medical devices, and commercial finished pharmaceuticals. Based on the long-term cooperative relationships established with clients and a deep understanding of the supply chain needs for innovative drug research, the company further offers services such as temperature-controlled storage management, labeling and secondary packaging, recovery and destruction of clinical trial medicines and biological samples, and temperature-controlled storage management of biological samples throughout the innovative drug development lifecycle, covering pharmaceutical research, preclinical research, and clinical research.
Basée à Shanghai, Shanghai Shengsheng has over 40 regional cold chain operation centers in cities such as Beijing and Guangzhou, with a service network covering 99% of prefecture-level cities nationwide. En plus, the company has three overseas subsidiaries in the United States, Belgium, and Australia, and its partner resources cover more than 50 countries worldwide, supporting the globalization of Chinese pharmaceutical enterprises.
The company has obtained WHO-standard GDP, GMP certifications, and ISO9001 quality system certification. With extensive practical experience, a comprehensive service network, professional cold chain equipment, intelligent information systems, and a strict quality control system, the company has built a professional biopharmaceutical cold chain service capability, receiving high recognition from over 7,000 clients in the biopharmaceutical industry, including long-term partnerships with renowned companies such as Hengrui Group, Fosun Group, Chia Tai Tianqing, Junshi Group, WuXi AppTec, and Kingmed Diagnostics.
Before this issuance, the total share capital was 340 million shares, with this issuance not exceeding 60.01 million shares, accounting for no less than 15% of the total share capital after issuance.
As of the date of signing this prospectus, Ju Jibing directly holds 67.128893 million shares, comptabilité 19.7438% of the company’s total shares, making him the controlling shareholder of the company.
Ju Jibing and Xiao Zhongmei jointly and indirectly control 42.6249% of the shares, making them the actual controllers of the issuer.
Many of the executives at Shengsheng Logistics are relatives of Ju Jibing. The prospectus shows that Ju Jibing’s wife, Xiao Zhongmei, serves as the deputy director of the settlement department; Xiao Zhongmei’s brother, Xiao Zhonghai, serves as the deputy director of sales; and Xiao Zhongmei’s sister-in-law, Pan Xiaxuan, serves as the senior quality manager.
As of the date of signing this prospectus, the company’s directors, supervisors, senior management personnel, and their immediate family members indirectly hold shares in the company as follows:
It is worth noting that Shanghai Shengsheng Logistics boasts a prestigious lineup of shareholders in both the pharmaceutical and logistics industries.
Among them, Hillhouse Capital and Legend Capital are top-tier biopharmaceutical investment institutions, while Zhongding Capital and Deppon Ventures are known as the “Kings of Domestic Logistics Investment” and the wholly-owned investment platform of Deppon Logistics, respectivement. Junding Xieli represents state-owned shareholders.
It is understood that before its financing in 2018, Shengsheng Cold Chain had contact with the strategic investment department of SF Express, which wanted to collaborate with Shengsheng Cold Chain through a combination of logistics business and capital investment. Cependant, Shengsheng Cold Chain chose to forgo this opportunity, opting for pure capital financing instead to ensure its future development independence.
Shanghai Shengsheng plans to raise approximately 900 million yuan this time, to be invested in the headquarters R&D base and R&D center construction project, the biopharmaceutical cold chain service capability upgrade project, the intelligent information system R&D construction project, and the working capital supplement project.
Au cours de la période de référence, Shanghai Shengsheng achieved revenues of 269 millions de yuans, 525 millions de yuans, and 634 millions de yuans, with net profits attributable to the parent company after deducting non-recurring gains and losses of 45.7688 millions de yuans, 73.7676 millions de yuans, and 77.3619 millions de yuans, respectivement.
According to the “Shanghai Shengsheng Pharmaceutical Cold Chain Technology Co., Ltée. Initial Public Offering and Listing on the Main Board Application Report,” the issuer has chosen the specific listing standards stipulated in item (1) of Article 3.1.2 of the Shanghai Stock Exchange Stock Listing Rules, namely, “(1) The net profit in the most recent three years is positive, and the cumulative net profit in the most recent three years is not less than 150 millions de yuans, the net profit in the most recent year is not less than 60 millions de yuans, and the cumulative net cash flow from operating activities in the most recent three years is not less than 100 millions de yuans, or the cumulative operating income in the most recent three years is not less than 1 billion yuan.”
1. Divergence Between Revenue and Net Profit Changes, Continuous Decline in Gross Profit Margin
The prospectus shows that from 2020 à 2022, the company’s revenue was 269 millions de yuans, 525 millions de yuans, and 634 millions de yuans, respectivement, with revenue growth rates of 95.23% and 20.92% in 2021 and 2022. During the same period, net profits were 49.6911 millions de yuans, 86.4515 millions de yuans, and 78.6582 millions de yuans, with year-on-year growth rates of 73.98% and -9.01% in 2021 and 2022, respectivement.
Regarding the decline in net profit in 2022, Shanghai Shengsheng explained that in 2021, there was an investment income of 13.0681 million yuan from the disposal of Taikun Pharmaceutical equity. It should be noted that there was a divergence between changes in revenue and net profit. Au cours de la période de référence, revenue increased by 20.92% année après année, while net profit decreased by 9.01% année après année.
The prospectus shows that from 2020 à 2022, the company’s main business gross profit margins were 35.24%, 29.08%, and 27.95%, respectivement. By 2022, the gross profit margin continued to decline, with a year-on-year decrease of 1.13%, and a decrease of 7.29% par rapport à 2020.
Specifically, the gross profit margins for the core business of innovative drug research and development and life sciences cold chain services were 37.71%, 33.75%, and 31.93%, respectivement. The company stated that the reasons for the year-on-year decline were mainly: (i) increased investment in equipment and facilities such as vehicles, cold storage, and VIP insulation boxes in recent years, leading to higher fixed asset depreciation costs; (ii) in 2022, due to external environmental impacts, the growth rate of income slowed down, and factors such as emergency material procurement and logistics disruptions led to increased operating costs.
Notably, the gross profit margins for international pharmaceutical cold chain services were 22.85%, 21.60%, and 11.32%, respectivement, with a significant decline of 10.28% in 2022. The year-on-year decline was mainly due to: (i) efforts to further enhance brand awareness in this segment and strengthen penetration into the mid-to-low-end market; (ii) high initial costs for Medilange, acquired in 2020, and YanJia Cold Chain, established in the second half of 2021.
Au cours de la période de référence, the gross profit margins for international pharmaceutical cold chain services were 22.85%, 21.60%, and 11.32%, respectivement, with a slight decline in 2021 and a significant decline in 2022. The main reasons were: (i) the international pharmaceutical cold chain services were still in the investment and business expansion stages, with increased expenses for labor, venues, etc.. In 2022, the establishment of Shengsheng International further increased investment in this segment; (ii) due to external environmental impacts, rising transportation agency fees led to increased operating costs.
Au cours de la période de référence, the gross profit margins for cell therapy cold chain services were 29.11%, 34.47%, and 33.65%, respectivement, showing some fluctuations. The gross profit margin increased in 2021 par rapport à 2020, mainly because 2020 was still in the early stage of new business development, and with the rapid business growth in 2021, economies of scale were gradually realized. The gross profit margin slightly decreased in 2022 par rapport à 2021, mainly due to external environmental impacts, slower revenue growth, and increased operating costs.
Au cours de la période de référence, the gross profit margins for new materials and cold chain equipment sales were 15.02%, 11.60%, and 23.99%, respectivement. The gross profit margin decreased in 2021 and rebounded in 2022, mainly because in 2021, the gross profit margin for vacuum insulation panel sales to overseas customers was relatively low and accounted for a large proportion of revenue, lowering the overall gross profit. In 2022, with reduced business cooperation with this customer, the gross profit margin rebounded.
Compared to peers engaged in SMO business and CRO services, such as Prevalence and Northreg, the company’s main business gross profit margin in 2020 was higher than the average, while in 2021 and 2022, it was lower than the average.
Shanghai Shengsheng stated that if future market demand in the biopharmaceutical industry declines or strong competitors emerge, intensifying industry competition, or if the company’s future sales prices decrease and costs rise, this could lead to a decline in gross profit margin, thereby affecting profitability.
2. Slowdown in Order Growth
Au cours de la période de référence, Shanghai Shengsheng’s main business includes five segments: innovative drug research and development and life sciences cold chain services, commercial circulation cold chain logistics for pharmaceuticals and medical devices, international pharmaceutical cold chain services, cell therapy cold chain services, and new materials and cold chain equipment sales. Among these, innovative drug research and development and life sciences cold chain services are the core businesses, with revenues of 211.9386 millions de yuans, 344.8025 millions de yuans, and 441.5211 millions de yuans, comptabilité 79.01%, 65.77%, and 69.64% of total revenue, respectivement, with a proportion generally exceeding 70%.
The second-largest business segment, commercial circulation cold chain logistics for pharmaceuticals and medical devices, accounted for less than 15% of total revenue, and the remaining three segments accounted for even smaller proportions, indicating a certain dependence on innovative drug research and development and life sciences cold chain services.
For cold chain logistics companies, the volume of logistics orders is an important indicator. Shanghai Shengsheng stated that changes in this indicator have a strong predictive effect on performance. Au cours de la période de référence, the company’s order volumes were 361,900 orders, 601,200 orders, and 662,200 orders, respectivement, showing a growth trend. Cependant, the growth rates of 66.13% and 10.14% in 2021 and 2022, respectivement, indicate a significant slowdown, which is a worrying signal for Shanghai Shengsheng.
3. Risks of Leasing Defects, Operational Qualification Renewals, and Traffic Violations
As of the end of the reporting period, the company and its subsidiaries used a total of 6,152.57 square meters of leased operating or office space, comptabilité 7.68% of the company’s total operating or office space in China. These properties had issues such as lack of property ownership certificates, being located on collective land, or allocated land. If these properties are deemed illegal constructions and require demolition, or if there are disputes over property ownership between landlords and other parties, the company or its subsidiaries may not be able to use these properties normally, posing a relocation risk.
The company’s provision of biopharmaceutical cold chain services involves multiple steps requiring operational qualifications, including customs registration certificates, medical device business licenses or filings, and road transportation business licenses. These qualifications need to be renewed or updated periodically. If the company fails to obtain or renew these qualifications, it may face certain legal risks.
As of the end of the reporting period, the company had 324 self-owned vehicles, with traffic violations and penalties for reasons such as passenger vehicles carrying goods and violations of traffic restrictions amounting to 314,100 yuan, 395,700 yuan, and 510,600 yuan in each reporting period. With the increase in the number of vehicles and potential expansion of traffic restrictions in major cities, traffic violation-related expenses may increase, adversely affecting the company’s operations.
4. Risks of Fundraising Project Implementation and Increased Fixed Asset Depreciation
The company plans to use the funds raised for the “Headquarters R&D Base and R&D Center Construction Project,” “Biopharmaceutical Cold Chain Service Capability Upgrade Project,” “Intelligent Information System R&D Construction Project,” and “Supplementary Working Capital Project.” These investments revolve around the company’s main business. Although the company has conducted thorough feasibility studies and formulated specific countermeasures for each stage of the projects, issues such as delayed fund allocation and project execution may still arise. Upon project completion, changes in policy environments, customer demands, and market conditions may hinder smooth implementation, adversely affecting the project’s actual returns and the company’s performance. As of the signing date of this prospectus, the company has signed an “Investment Agreement” for the land needed for the “Headquarters R&D Base and Innovation Drug Clinical Supply Chain Asia Center Project (tentative name)” in Minhang District, Huacao Town, with the Minhang District Nanhongqiao Management Committee Office and Huacao Town People’s Government. The company has obtained a “Project Review Opinion” (2022-006) from the Minhang District Economic Committee and an “Explanation on the Land Use of Shengsheng Cold Chain Fundraising Project” from the Minhang District Nanhongqiao Management Committee Office, but has not yet obtained land use rights. Failure to obtain the corresponding land use rights may hinder the smooth implementation of the fundraising projects.
Among the fundraising projects, the “Headquarters R&D Base and R&D Center Construction Project,” “Biopharmaceutical Cold Chain Service Capability Upgrade Project,” and “Intelligent Information System R&D Construction Project” have a combined planned investment of 1.001 billion yuan, with an estimated new investment of approximately 764 million yuan in fixed assets such as equipment, buildings, and cold storage. Upon completion, the substantial increase in fixed assets and depreciation expenses may not be offset by immediate revenue gains, posing a risk of profit decline.
