On October 15, Sinocelltech Group Limited (688520.SH) announced a plan to raise up to 900 million yuan through a private placement to supplement its liquidity. In response to recent inquiries from the Shanghai Stock Exchange regarding the rising sales costs and patient welfare projects, the company provided a report addressing these issues.
Sinocelltech has notably increased product sales by offering subsidies to patients in recent years. In a response to stakeholders on October 15, the company's securities department stated that providing significant subsidies to patients is a common practice in the industry, beneficial for promoting products.
Previously, Sinocelltech faced controversy over alleged medical insurance fraud. The securities department acknowledged the arrest of certain employees but clarified that the company has not been investigated and denies any involvement in insurance fraud. The company reported cumulative unrectified losses of 3.863 billion yuan and a debt-to-asset ratio of 97.03%.
According to the announcement, the capital raised will be completely allocated to enhance liquidity after deducting issuance costs. The new shares will be subscribed by the major shareholder, Lhasa Aierike, which is a holding platform for the firm’s actual controller, Xie Liangzhi, who owns 60% of Sinocelltech through this platform.
Sinocelltech introduced its first commercial product, the recombinant human coagulation factor VIII injection (branded as Anjain®), in 2021, intended for hemophilia treatment. The sales figures for Anjain from 2022 to 2024 were 1 billion yuan, 1.78 billion yuan, and 1.89 billion yuan, respectively, while total revenue for the company during the same period amounted to 1.02 billion yuan, 1.89 billion yuan, and 2.51 billion yuan.
Despite these sales, the company has struggled to return to profitability, posting net losses of 520 million yuan, 400 million yuan, and achieving a profit of 110 million yuan during 2022 to 2024, with an additional loss of 33.77 million yuan in the first half of this year.
High sales expenses and non-operating expenditures have caught the attention of the Shanghai Stock Exchange. From 2022 to the first half of 2025, Sinocelltech’s sales expenses were 260 million yuan, 440 million yuan, 690 million yuan, and 420 million yuan, respectively, while non-operating expenditures were 170 million yuan, 400 million yuan, 460 million yuan, and 130 million yuan, showing a significant increase in relation to total revenue.
On the issue of expanding sales via patient subsidies, the company noted that these expenses also relate to significant drug and cash donations, amounting to 456 million yuan in donations made by the company in 2024, emphasizing that these donations were motivated by charity and aimed at supporting hemophilia patients, unrelated to sales conditions.
Regarding sales expenditures, nearly 40% comprised professional service fees associated with activities focused on 'patient welfare' and 'patient care.' These initiatives involve recruiting members nationally and providing them insurance coverage for specific medicines. The model resembles the 'drug-to-insurance' approach, where the costs of medicines are packaged as short-term health insurance for diagnosed patients.
The announcement also revealed that one collaborating entity, 'Meixin Health,' faced scrutiny as it was previously named by financial regulators in 2023 due to activities linked to the 'drug-to-insurance' model.
In light of these discussions, the securities department explained that many hemophilia patients cannot afford the high costs of medication. Hence, if assistance is not provided, patients may succumb to their conditions, which would ultimately impair drug sales. The department stressed that providing subsidies is a standard industry practice and noted that competitors, including Bayer and Pfizer, have previously provided subsidies for their comparable products.
In August, Sinocelltech's dealings again garnered attention due to allegations of insurance fraud involving agreements with healthcare institutions to administer treatments to patients who did not actually require them. The securities department reiterated that, while some employees have been arrested, the details remain unclear and the company itself has not been implicated in any fraud activities.
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