On March 29, 2023 Broncus Medical (02216.HK), a leader in precise interventional diagnosis and therapy of lung diseases in China, reported its annual results for the year ended December 31, 2022 (Press release, Broncus Technologies, MAR 29, 2023, View Source [SID1234629514]). During the period, despite the disturbance of external adverse factors such as global instability, repeated overlap of the COVID-19 pandemic in China and periodic downward trend of industry prosperity, the company steadfastly focused on the development strategy of providing innovative interventional diagnosis and treatment solutions for lung diseases worldwide, actively boosted the innovative R&D on diagnostic and therapeutic consumables products and the upgrades of lung navigation products. Moreover, the company accelerated the pace of channel underlaying and commercialization empowerment, and promoted its business to fulfill an integrated development in multiple categories. As a result, the company achieved positive product sales growth in 2022.
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In 2022, Broncus Medical earned product sales of US$9.41 million, an increase of 8% compared to the same period in 2021. Of which, total revenue from Mainland China was US$5.81 million, a significant increase of 50% compared to the same period in 2021. Gross profit was US$7.32 million, with the gross margin at 78%. US$19.17 million was spent on Broncus Medical R&D in fiscal 2022, an increase of 14% compared to the same period in 2021.
Innovative products accessing to global markets are processing smoothly
As of December 31, 2022, the company had 18 major product candidates under various development stages, of which, several products made breakthroughs in global market access and commercialization, including:
(1) In March 2022, the company’s InterVapor was approved by the National Medical Products Administration of China (NMPA), denoting the official commercialization in China;
(2) BioStarNeedle, a disposable endoscope suction biopsy needle, was approved in the European Union in September 2022.
(3) In October 2022, "Mist Fountain", the company’s disposable nebulizing micro-catheter for endoscope, was approved for marketing in China;
(4) In March 2023, our six products, namely LungPoint, Archimedes, Lungpoint Plus, and Arhchimedes Access Kit (Flexneedle, Sheath and Balloon), were officially approved for marketing by MD-15 regulations of the India authorities.
Specifically, the "Mist Fountain" nebulizing micro-catheter is used in conjunction with the endoscope. Under the guidance of the navigation system, it can accurately reach the lesion site, atomize and administer the drug, and directly deliver the drug to the lung lesion tissue. The product has strong compatibility and multiple indications. It is compatible with many kinds of drugs and is mainly used for accurate anti-inflammation, local hemostasis, phlegm reduction and elimination, staining location, local anesthesia, etc. In the future, the company will cooperate with clinical experts and biopharmaceutical enterprises to promote, amongst others, the possible application of the nebulizing micro-catheter in the anesthesia of bronchoscopy surgery, tuberculosis treatment, targeted drug delivery for oncology. In addition, the company will continue to explore possible usage scenarios of the Product to cover a wider range of lung disease treatments in order to consolidate leading advantages of the company in the field of precision interventional diagnosis and treatment of pulmonary diseases.
Based on the progress in the global access sector, the company relied on experiences of marketed products to comprehensively integrate the sales channels of diversified product lines, so as to continuously empower the commercialization of the company’s products at various stages.
Leading advantages of the company’s lung disease treatment products continue to consolidate, while product commercialization is steadily advancing.
Navigation products
The company currently has three marketed navigation products, including LungPoint, LungPoint Plus (known as "Archimedes Lite" outside Asia) and LungPro (known as "Archimedes" outside China). As the only global provider of enhanced reality navigation technology for the whole lung through the bronchus, Broncus Medical has provided real-time navigation in the airway for lung surgeries, thereby more accurately and effectively planning the path to the lesion. The commercialization of navigation products has been steadily promoted via a combination of direct sales and distribution. Although constantly impacted by the pandemic, navigation products ranked first in China’s installed market share in 2022 according to market public information.
InterVapor
InterVapor is the world’s first and only Thermal Vapor Treatment System to treat COPD. In March 2022, InterVapor was approved by NMPA. In July, the first clinical applications of InterVapor were completed in Guangdong Province and Shaanxi Province after the approval for marketing in China, and the clinical applications were quickly carried out in Liaoning Province, Beijing City and other places, thus significantly benefiting the patients. Currently, the Product is steadily implemented in pricing, procurement and admission processes in China, while being applied for marketing in the US, the Philippines and Malaysia.
RF-II
RF-II is a radiofrequency ablation system used in conjunction with a disposable lung radiofrequency ablation catheter. The company completed enrollment for registered clinical trial for RF-II radiofrequency ablation system in December 2021. The data related to its main clinical endpoints are currently being evaluated, and the product is scheduled to be submitted to NMPA for a registration approval. In addition, the corresponding doctor training and an application for the US 510K license as well as the European CE Mark related to the product are also in the preparation process.
TLD
TLD, a Targeted Lung Denervation product, is the first product independently developed by China for the treatment of COPD by transbronchial radiofrequency ablation, which can be used for up to 51.6% of the patients with COPD. In July 2022, the company completed the enrollment of all subjects for the clinical trial of the first application of the TLD radiofrequency ablation system in the human body. All subject follow-up visits will be completed in July 2023. The clinical trial report for the study is expected to be published by the end of 2023. The company successfully held a meeting to discuss the clinical trial investigator protocol for the project in November 2022, and the clinical study was reviewed by the Ethics Committee of West China Hospital in February 2023, signifying an official launch of its registered clinical study, which is a prospective, randomized, single-blind, sham-operated group-controlled multicenter clinical trial.
The company remains in the industry’s leading position in technical advantages of its core therapeutic products. In the future, the company aims to develop more therapeutic products based on the navigation platform, in a bid to unswervingly provide "Broncus Solution" targeting respiratory intervention therapies for lung diseases worldwide.
Product R&D capability advance at an equal pace with patent protection
In terms of R&D, Broncus Medical focuses on developing innovative technologies and products for lung navigation and diagnosis and treatment. Its R&D mode that combines international leading technology advantages with local R&D cost advantages has greatly supported the company’s product innovation.
As of December 31, 2022, we obtained 748 patents and patent applications which consisted of 359 issued patents (including pending announcements) and 198 patent applications in China and 105 issued patents and 86 patent applications overseas including key markets such as the U.S. and the EU. Among the patents obtained, 117 and 50 of them are related to InterVapor and RF-II, respectively.
As of December 31, 2022, the company had 18 major product candidates under various development stages, which were jointly researched, developed and updated by the R&D center teams from China and the U.S. Meanwhile, the company supported its intellectual property portfolio and product iteration by participating in government scientific research projects, such as the 2022 "Leading Goose" R&D Program in Zhejiang Province.
Diversified strategic cooperation enables the company’s business to achieve healthy and sustainable development
In February 2022, Broncus Medical entered into a strategic cooperation agreement with Healium Medical Ltd. ("Healium"), an Israeli company specializing in the development of ultrasound energy therapy and imaging monitoring. The cooperation aims to integrate energy ablation and ultrasound technology, so that the operator can realize real-time monitoring of the state of ablated tissues without frequently changing devices, thus effectively avoiding insufficiency or excess of energy in the treatment process, promoting the predictability of treatment results, simplifying the operation, improving the safety and effectiveness of the operation, and the popularization of interventional surgery in the treatment of lung diseases. The cooperation was approved by Israel IIA and the input and output confirmation of R&D design was officially initiated in May 2022.
In July 2022, Broncus Medical and Shanghai United Family Healthcare jointly established the "MultiDisciplinary Diagnostics of Pulmonary Nodules", to cover the population with high-end commercial insurance. This is the first step in the strategic cooperation between the parties. In the future, the parties will continue to jointly explore new models of respiratory intervention diagnosis and treatment services as well as other cutting-edge technologies for groups with high-end medical needs.
In November 2022, Broncus Medical entered into a strategic partnership with Eternal Asia, a leading enterprise in supply chain services in China, so as to give full play to the core advantages of the parties, integrate resources through a cooperation platform, complement each other’s advantages, and enhance competitiveness. Eternal Asia will use its professional supply chain services to facilitate the coverage of Broncus pulmonary intervention diagnosis and treatment products over a wider market.
In December 2022, Broncus Medical signed a strategic cooperation agreement on medical-engineering integration, with Guangzhou Institute of Respiratory Health with regard to the lung radio frequency ablation system project & the adjustable and bendable bronchoscope sheath project. Based on their respective advantages in medical resources and technology platforms, the parties will establish a comprehensive, wide-coverage and diversified cooperation system, to actively promote the deep integration and technological innovation of medicine and engineering, and usher in a new era of interventional therapy for lung cancer.
Since December 2022, Broncus Medical signed a partnership agreement for the digital medical innovation center with AstraZeneca. During the cooperation, the integrated diagnosis and treatment products can be displayed in the digital medical innovation center of AstraZeneca in Hangzhou. The parties will also jointly participate in a series of training activities of the Respiratory Intervention Training College.
Localized production enhances gross profit margin and commercialization
Three navigation products released by Broncus Medical were all produced by a factory in San Jose, California in the U.S. The domestic LungPoint, received a correction notice from NMPA in October 2022, is expected to be approved for marketing in May 2023. The domestic LungPro is expected to obtain an approval in September 2023.
Since 2021, Broncus Medical’s plant in Hangzhou has gradually become a key site to produce the company’s entire range of products, including InterVapor . The move will promote the company to achieve localized production, reduce costs and increase efficiency, further expand the gross profit margin of its products, and penetrate its products into more hospitals based on aligning with the company’s product promotion strategy and policy guidance.
International sales layout and continuous surgery-oriented popularization
Adopting a combination of direct sales and distribution, Broncus Medical sold its products to 33 countries and regions all over the world, including the United States, the United Kingdom, Germany, France, Japan, etc. By leveraging its more established experience in marketing of its navigation system, Broncus Medical plans to expand its sales of products worldwide.
In terms of the surgical popularization, Broncus Medical plans to provide more doctor training and patient education services. Through the proprietary Bronchoscopic Transparenchymal Nodule Access (BTPNA) technology, the company will enhance the understanding of hospitals, doctors and patients about the navigation platform as an indispensable tool for respiratory interventional disease diagnosis and treatment. Superimposing the R&D and commercialization of a range of therapeutic products, the company aims to penetrate its products to into more hospitals, offering continuous impetus for the growth of its sales.
Under the overlapped heavy pressures like demand shrinking, the epidemic impact and tensioned international relations, Broncus Medical made full use of market functions to fully promote the product pricing, cost control and R&D investment, achieving a growth in product sales and demonstrating strong business resilience and growth potential in 2022.