Yunkang Group Limited Announces Proposed Listing on the Main Board of the Hong Kong Stock Exchange

Thursday, 5 May 2022, 10:36 HKT/SGT

Offer Price HK$7.89 per Share To Raise Proceeds Up to HK$1,253.8 million
The Only Execution Partner of CLSI*'s Healthcare Business, and The Only Branch Office of CLSI in China

HONG KONG, May 5, 2022 - (ACN Newswire) - A medical operation services provider in China - Yunkang Group Limited ("Yunkang Group" or the "Company", stock code: 2325.HK, together with its subsidiaries, collectively as the "Group"), today announced the proposed listing of its Shares on the Main Board of Hong Kong Exchanges and Clearing Limited ("Hong Kong Stock Exchange").

Yunkang Group plans to offer 138,188,000 Shares (subject to the Over-allotment Option), of which 124,369,000 Shares will be International Placing Shares (subject to reallocation and the Over-allotment Option), representing 90% of the initial Offer Shares; the remaining 13,819,000 Shares will be Hong Kong Offer Shares (subject to reallocation), representing 10% of the initial Offer Shares. Offer Price is HK$7.89 per Share. Yunkang Group will open for Hong Kong Public Offering in Hong Kong at 9 a.m., May 5, 2022 (Thursday), and close at 12:00 noon, May 11, 2022 (Wednesday). Dealings in Shares of Yunkang Group on the Main Board of the Hong Kong Stock Exchange is expected to commence on May 18, 2022 (Wednesday). The Shares will be traded in board lot of 500 Shares each. The Company's stock code is 2325.HK.

CMB International Capital Limited and SPDB International Capital Limited are the Joint Sponsors, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers, China Merchants Securities (HK) Co., Limited is the Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager, CCB International Capital Limited, CRIC Securities Company Limited and Futu Securities International (Hong Kong) Limited are the Joint Bookrunners and Joint Lead Managers, Blackwell Global Securities Limited and Livermore Holdings Limited are the Joint Lead Managers,and Guosen Securities (HK) Capital Company Limited is Exclusive Financial Advisor.

Yunkang Group is a medical operation service provider in China offering a full suite of diagnostic testing services to medical institutions, which can be divided into diagnostic outsourcing services and diagnostic testing services for medical institution alliances, in its six independent clinical laboratories ("ICL") and over 320 on-site diagnostic centers in medical institutions. To a lesser extent, Yunkang Group also provides diagnostic testing services to non-medical institutions via an outpatient clinic. In terms of revenue in 2020, Yunkang Group had a market share of 3.7% in China's medical operation service market, according to Frost & Sullivan. Yunkang Group is also a major market player with a market share of 12.5% in China's diagnostic testing services for medical institution alliances market in terms of revenue in 2020. As of the Latest Practicable Date, the Company's network covered over 3,600 customers, primarily consisting of hospitals and other medical institutions, and provided services to over 320 medical institution alliances / on-site diagnostic centers. In 2021, the Company had a growing menu of over 2,000 tests and over 50 million diagnostic tests performed.

Diagnostic expertise and standardized testing capabilities are crucial to the Company's success. Yunkang Group is constantly adopting new technologies for diagnostic testing, encompassing all major clinical laboratory technology platforms, including immunological detection, mass spectrometry, PCR, high-throughput sequencing, liquid chip, ultra-micro pathological morphology and digital pathology remote diagnosis. The Company is also committed to bringing international standards and guidelines to medical institutions in China. As the only execution partner of CLSI's healthcare business and the only branch office of CLSI in China, the Company is able to enhance the diagnostic capability in accordance with international standards and demonstrating the recognition of diagnostic testing capabilities.

Strategically Focused on Diagnostic Testing to Capture Significant Market Opportunities

Yunkang Group is one of the first movers in providing medical operation services for medical institutions in China to assist them under the backdrop of the medical reforms on the hierarchical diagnosis and treatment systems ("HDTS") in China, according to Frost & Sullivan. The Company has participated in key projects, such as collaborating with CLSI to improve the capabilities, quality and sustainability of clinical laboratories in China and assisting in the development of medical institution alliances, regional associations of hospitals, community healthcare centers, clinics and other medical institutions aimed at optimizing the allocation of medical resources and building the health-focused HDTS in China.

As a platform of medical operation services in China, the Company's diagnostic tests cover major medical specialties of pathology, infectious diseases and genetic diseases with a growing menu of over 2,000 tests, which covered over 70% of major diagnostic testing categories in the medical operation service market in 2020, according to Frost & Sullivan. The Company has developed a deep and broad network of over 270 on-site diagnostic centers covered and conducted an aggregate of over 50 million diagnostic tests in 2021 through ICLs and on-site diagnostic centers.

An Expertise-Driven Platform in China, Empowering Hospitals to Build Up International Standard Testing Systems

Yunkang Group is an expertise-driven platform in China with the ability to empower hospitals to build up international-standard testing systems by offering a high level of comprehensive expertise in diagnostic technologies, standards and operations. Leveraging six ICLs and an outpatient clinic, the Company has successfully built an expertise-driven platform with a testing menu of over 2,000 tests. Since the inception in 2008, the Company has focused on applying the latest technologies in the medical operation services industry and developing a full suite of diagnostic capabilities to provide omni-scenario and customized solutions for customers. In addition, the Company collaborates with a number of renowned healthcare organizations and academic institutions in China and globally, such as Fudan University and the American Telemedicine Association ("ATA").

By helping hospitals establish international quality standards in diagnostic testing, Yunkang Group empowers hospitals with high caliber standardized testing capabilities. Yunkang Group has also obtained accreditation from the American Society for Clinical Pathology, the leading organization for pathology globally. Besides, according to Frost & Sullivan, the Company's operations meet ISO quality standards with the largest number of ICLs in China that hold both ISO15189 and CAP certifications.

Diagnostic testing services for medical institution alliances Enabling Scalable and Rapid Business Growth

Leveraging the standardized diagnostic services, Yunkang Group is able to apply international quality and technical standards in areas of clinical laboratory testing and telepathology to the on-site diagnostic centers in medical institutions. The services are supported by six operating modules, namely, overall business planning, quality control, hierarchical diagnosis and treatment, marketing, smart logistics and supply chain.

The Company has achieved scalability with the number of on-site diagnostic centers increasing from 79 as of year-end 2018 to 275 as of year-end 2021, growing at a CAGR of 51.6%. The Company is gradually expanding the presence in smaller cities and regions to cover more grassroot medical institutions and has established representative offices with specialized personnels to rapidly respond to customer needs in 11 cities nationwide.

Loyal Customer Network with Broad Nationwide Coverage

Through the self-operated ICLs and on-site diagnostic centers, the Company can provide services to and cover a broad network of medical institution customers in China. As of December 31, 2021, the hospitals with which the Company collaborated were located across 31 provinces and municipalities in China, with a majority of such hospitals located in Guangdong Province where the headquarter is located. The Company had also assisted in establishing and operating 322 on-site diagnostic centers as of the Latest Practicable Date.

By offering standardized and high caliber services to and closely collaborating with the customers, the Company has enjoyed strong customer loyalty and stickiness. As of the Latest Practicable Date, over 60% of major diagnostic outsourcing service customers have been doing business with the Company for five years or more. Through Yunkang intelligent technology systems, which are specifically designed for the operations of on-site diagnostic centers, the Company is able to track the active users of the services in real time and provide timely services, especially by connecting directly with the customers' test equipment, which has also enhanced customer loyalty in some way.

Experienced Senior Management and High Caliber Team

Yunkang Group is led by a senior management team with some of them having over 20 years of experience in the medical operation services industry. These dedicated industry veterans have complementary skill sets in management, finance, business operations, human resources and administration to successfully manage and operate the Company's business. In addition, technical personnel are the foundation of the Company's success. In 2016, the Company cooperated with Sun Yat-sen University and established Yunkang Medical and Health Management College program ("Yunkang College") to provide training on clinical and pathological diagnostics. At Yunkang College, the employees will provide practical courses to its students from time to time and the Company may offer internship or full-time job opportunities to its students and graduates.

Going forward, the Company will continue to expand and deepen the medical institution alliance network.

Over the next few years, the Company plans to primarily focus on pathology, genetic and infectious disease laboratories for medical institution alliance and further improve their precision medicine capability. Meanwhile, the Company plans to establish more sales and customer service representative offices to better understand customer needs, also design and provide solutions to meet those needs. In addition, the Company will be committed to continuous upgrade and enhancement of the Company's operational capabilities to improve customer experience and focus on the following areas: 1) Enhancing local service capabilities, 2) Digitalizing diagnostic testing, 3) Pursuing potential acquisition and investment opportunities, and 4) Upgrading headquarters in Guangzhou.

Meanwhile, the Company plans to expand the portfolio of diagnostic capabilities, particularly for tumors, genetic diseases, infectious diseases and pharmacogenetics, enhancing the diagnostic testing technologies and upgrade the equipment. The Company also plans to market the services to more non-medical institution customers, such as corporations and government agencies. Last, the Company plans to continue to attract and train up talented and experienced personnel, particularly focusing on technical and medical personnel, as well as management personnel.

The Chairman, Executive Director and Chief Executive Officer of Yunkang Group Limited, Mr. Zhang Yong said, "In the past decade, instead of simply outsourcing diagnostic testing services to ICLs, many medical institutions started to form alliances to improve their overall diagnostic testing capacities and capabilities, and establish diagnostic centers at their sites, especially at those lead hospitals. Observing these emerging medical needs, we started to provide diagnostic testing services for medical institution alliances at on-site diagnostic centers in different medical specialties such as pathology, infectious disease and genetic disease in 2013. As a medical operation service provider in China, the Company has been able to achieve sustainable growth through its diagnostic expertise and strong standardization capabilities, a broad and loyal customer base, and an experienced management team. We believe these competitive strengths are difficult to replicate and we are well positioned to capture the significant growth potential of China's medical operation service market. We will be able to identify future trends and direction of this industry and capitalize on our strengths to increase our market share, striving for the best for our shareholders and investors."

Note*: Clinical and Laboratory Standards Institute

Topic: Press release summary Sectors: Healthcare & Pharm
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