The board (the “Board”) of directors (the “Directors”) of China Medical System Holdings Limited (the “Company”, together with its subsidiaries, the “Group”) is pleased to announce that on 8 December 2021, the Group through a subsidiary of the Company – a dermatology medical aesthetic company (“CMS Aesthetics”) acquired 100% equity interest in Shanghai Xuli Medical Devices Company Limited (上海旭俐醫療器械有限公司, the “Target Company”), a medical aesthetic specialty company, from certain independent third party sellers (the “Sellers”) (the “Acquisition”). Following the Acquisition, the Target Company became a subsidiary of the Company, and the financial results, assets and liabilities of the Target Company will be consolidated into the accounts of the Group.
INFORMATION ABOUT THE TARGET COMPANY
The Target Company focuses on the field of medical aesthetic products and is well established in the middle and upper stream of medical aesthetic industry, integrating R&D, production, sales and customized OEM (original equipment manufacturer), aiming to provide Chinese beauty-loving people with global high-quality medical aesthetic products, equipment and services. The main product of the Target Company is hyaluronic acid originated from South Korea – MONALISA Lidocaine Filler (Vmonalisa), a modified sodium hyaluronate filler for injection (the “Hyaluronic Acid Product” or the “Product”). The Target Company acts as the sole distributor of the Hyaluronic Acid Product in Mainland China. The founding team of the Target Company has more than 10 years of experience in and a deep understanding of the medical aesthetic industry and has accumulated abundant resources in the industry; and the sales team of the Target Company has rich market operation, sales and promotion experience in the medical aesthetic industry. The Target Company has established a sales network covering more than 800 medical aesthetic institutions in Mainland China, including the well-known medical aesthetic institutions.
INFORMATION ABOUT THE HYALURONIC ACID PRODUCT
The Hyaluronic Acid Product is a “painless” medium-to-macro-particle HA injection filling product containing Lidocaine and adopting Hy-BRID crosslinking technology which minimizes the crosslinking agent residue. The Product has the advantages of high safety, good viscoelasticity and natural effect, and its duration period can reach 6 to 12 months (it may differ among individual consumers). The Hyaluronic Acid Product is the only Korean-made hyaluronic acid filler used in Seoul National University Hospital and has obtained the European Union CE certification. It was approved by the National Medical Products Administration of China as a Class III imported medical device in December 2019. At present, Vmonalisa is one of the only four imported South Korean hyaluronic acid product brands approved in Mainland China. Since its launch in Mainland China in April 2020, the accumulative sales volume of the Hyaluronic Acid Product of the Target Company has reached more than 150,000 pieces.
The Hyaluronic Acid Product has a broad prospect. According to Frost & Sullivan statistics, the market size of medical aesthetic hyaluronic acid in Mainland China reached RMB5.77 billion in the year of 2020 from the perspective of factory caliber, with a compound annual growth rate (CAGR) of 24.0% from year 2016 to 2020, and is expected to reach RMB14.71 billion in the year of 2025 with a CAGR of 20.6%.
REASONS FOR AND BENEFITS OF THE ACQUISITION
The Acquisition consists with the Group’s strategy to continuously expand into the medical aesthetic field. The Hyaluronic Acid Product of the Target Company is one of the mainstream and core products in light medical aesthetic (non-surgery medical aesthetic) field which can enrich the Group’s product matrix in medical aesthetic field and at the same time provide the Chinese beauty-loving people with a fashionable and cost effective imported Korean accessible luxury hyaluronic acid product to meet the needs of different beauty-seeking people.
The Acquisition will also bring excellent business management, sales and promotion teams as well as sales channel resources with a wide coverage in the medical aesthetic field to the Group, enabling the Group to extend its sales and promotion abilities and sales channels, continuously strengthen and improve its comprehensive competitiveness and build a good market and brand image in the medical aesthetic field and helping the Group to establish a business platform for global medical aesthetic products, which lays a solid foundation for continuously acquiring and introducing medical aesthetic products.
With the continuous increase of the Chinese consumers’ need for beauty and their continuously rising spending power and consumption willingness, the Group will sustain to utilise the global resources to introduce the world’s first-rate and technologically advanced medical aesthetic products into China and build a product matrix consisting of three categories of medical aesthetic products, namely, the light medical aesthetic products, the medical aesthetic devices, and the dermatology skincare products. Relying on the increasingly mature medical aesthetic sales and promotion system, the Group will effectively facilitate and rapidly develop its product matrix. Meanwhile, the Group will keep enriching the dermatology pipeline and building the sales and promotion system to promote the CMS Aesthetics into a leading dermatology, medical aesthetic and health management company in China.
Having considered the above, the Directors are of the view that the Acquisition is on normal commercial terms, and such terms are fair and reasonable and that the Acquisition is in the interests of the Company and its shareholders as a whole.
LISTING RULES IMPLICATIONS
To the best of the Directors’ knowledge, information and belief after having made all reasonable enquiry, the Sellers are third parties independent of the Company and its connected persons (as defined in the Rules Governing the Listing of the Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”)). Therefore, the Acquisition does not constitute a connected transaction of the Company under Chapter 14A of the Listing Rules. As all relevant applicable percentage ratios (as defined in the Listing Rules) of the Acquisition are less than 5%, the Acquisition does not constitute a notifiable transaction of the Company under Chapter 14 of the Listing Rules.