Core Medical IPO: Major clients establish immediate partnerships; promotional vendors' insured count remains zero

Ask AI · IPO inquiry: What’s the deeper meaning behind focusing on sales expenses?

Chinanet reporter Chen Ting Zhao Yi, Shenzhen report

In the artificial heart sector, Shenzhen Core Medical Technology Co., Ltd. (hereinafter referred to as “Core Medical”), as the first innovative medical device company to be accepted after the relaunch of the fifth set of listing standards on the STAR Market, is now making a full push to get listed.

According to the prospectus, Core Medical was established in 2016. To date, it has built a portfolio of 5 implantable and 6 interventional artificial heart products. In June 2023, the company’s first artificial heart product was approved for commercialization.

The website of the Shanghai Stock Exchange shows that Core Medical’s latest review status for its IPO is “asked for inquiry.” The sales model and sales expenses have been key focus areas in this round of inquiries.

According to the prospectus, sales of Core Medical’s first product began to be realized gradually in the second half of 2023. The company’s sales are mainly conducted through a distribution model, accounting for more than 90%. The Shanghai Stock Exchange noted that among them, the platform distributor Shanghai Firrebo Medical Device Co., Ltd. (hereinafter referred to as “Shanghai Firrebo”) was founded for less than one year before becoming one of Core Medical’s top five customers, and that the products of the main distributor company are in question. Therefore, it asked Core Medical to explain the reasonableness of this situation, and whether there is any relationship or arrangement of interests with the company or its related parties.

A reporter from China Business News noticed that, besides Shanghai Firrebo mentioned by the Shanghai Stock Exchange, another major customer of Core Medical, Henan Yaqi Medical Technology Co., Ltd. (hereinafter referred to as “Henan Yaqi”), also started cooperating with Core Medical in the same year it was founded, and became the company’s third-largest customer within less than four months.

In addition, at the request of the Shanghai Stock Exchange, Core Medical disclosed the specific details of paying promotion fees to third parties. According to the reporter’s inquiry of business information, among the four promotion service providers the company cooperates with, the number of insured persons has remained zero since their establishment.

On March 18, when Core Medical was interviewed by a reporter, it said: “Henan Yaqi has no related relationship or any other special relationship or interest arrangement with the company or any related party.” Regarding the four promotion companies with no insured personnel, Core Medical said that during the reporting period, the business dealings between the company and those companies were genuinely in existence, and did not involve any transfer of interests.

More than 80% of revenue tied up with major customers

Core Medical, which is sprinting toward the “first artificial heart IPO,” has its IPO process currently at the stage of responding to the first-round review inquiries.

The prospectus shows that Core Medical mainly engages in the R&D, manufacturing, and sales of innovative medical devices in the artificial heart field. At this stage, its business model is to leverage its own advantages in technology, talent, and so on to develop innovative medical devices and industrialize them, and to obtain revenue through the R&D, manufacturing, and sales of innovative medical devices.

At present, Core Medical only has 1 implantable product that has been commercialized, while 2 interventional products are in the registration and approval stage, and multiple artificial heart products are in the clinical stage. In 2023, 2024, and the first half of 2025, the company’s revenue was RMB 16.5503 million, RMB 93.6884 million, and RMB 70.4776 million, respectively. In the corresponding periods, non-recurring profit/loss net of deductions (“扣非净利润”) was approximately -RMB 139 million, -RMB 134 million, and -RMB 68.1382 million, respectively.

The prospectus shows that Core Medical has established a sales model mainly based on distribution. Under the distribution model, the company adopts a buyout-style sales approach with payment received before shipment. After distributors pay for the goods, the company arranges shipment, and recognizes revenue when the distributors sign for receipt. During the reporting period, the revenue contribution ratio from the platform distributor model increased from 20.25% in 2023 to 69.24%. As of June 2025, Core Medical has 3 existing platform distributors.

In 2023, 2024, and the first half of 2025, Core Medical’s top five customers were platform distributors and ordinary distributors. During the reporting period, the sales revenue contribution ratios of the top five customers were 58.01%, 79.55%, and 80.7%, respectively, showing an upward trend.

Among them, Shanghai Firrebo was Core Medical’s second-largest customer in 2024 and the first half of 2025. The transaction amounts were RMB 11.7274 million and RMB 19.0571 million, accounting for 12.52% and 27.04%, respectively.

Business information shows that Shanghai Firrebo was established on March 19, 2024, with registered capital of RMB 1 million. In its inquiry response, Core Medical said that 2024 was the first year of commercialization when the company officially began sales. Based on its sales strategy, the company planned to screen a partner to undertake the platform distributor functions for the East China region. The actual controller of Shanghai Firrebo had accumulated some capital in other entities within the industry; after that, with the introduction of insiders in the medical device industry, it entered the field of medical device distribution. Seeing the company’s product development potential, it carried out cooperation. Both parties began cooperating in 2024. To facilitate specialized operations and business management, the actual controller of Shanghai Firrebo established Shanghai Firrebo as the operating entity for the medical device business and established a formal business cooperation relationship with the company. Starting from the second half of 2025, Shanghai Firrebo has gradually begun selling other medical device products. “Upon verification, Shanghai Firrebo has no related relationship or any other special relationship or interest arrangement with the company or any related party.”

However, it’s not only Shanghai Firrebo that became a major customer in the year it was established.

The prospectus shows that Henan Yaqi was Core Medical’s third-largest customer in the first half of 2025. The transaction amount was RMB 7.3327 million, accounting for 10.4%. The cooperation agreement between the two parties was signed on March 21, 2025.

Business information shows that Henan Yaqi was established on February 27, 2025, with registered capital of RMB 1 million. That means Henan Yaqi was established for less than one month before it began cooperating with Core Medical, and then quickly became a major customer.

Core Medical denied to reporters that the company has any related relationship or other interest arrangement with Henan Yaqi. It said: “The core criteria the company uses to select platform distributors are that they have legal operating qualifications, strong financial strength, good business reputation, and industry distribution experience. They can maintain good commercial cooperation relationships with the customers that dominate the local market, and have professional sales teams with strong capabilities to serve market customers, among other things.”

It is worth noting that Core Medical implements a “tiered pricing” policy for platform distributors, under which the unit price of products it sells is relatively low. As the platform distribution model’s revenue contribution ratio increases, during the reporting period, the average sales unit price of the company’s commercialized product—the implantable left ventricular assist system—continued to fall from RMB 290,400 per unit to RMB 229,600 per unit.

Sales expenses rising with revenue

As the process of product commercialization advances and business scale expands, in terms of market share, Core Medical told reporters that in 2024 and in the January–May period of 2025, the proportion of implantations of its core product, the implantable artificial heart Corheart 6, were 45.9% and 52.86%, respectively, ranking first in the industry with a rising market share trend.

Meanwhile, Core Medical’s sales expenses during the reporting period showed an increasing trend.

In 2023, 2024, and the first half of 2025, Core Medical’s sales expenses were RMB 13.9169 million, RMB 36.8736 million, and RMB 25.0418 million, respectively. They were mainly comprised of employee compensation, travel expenses, conference fees, and publicity and promotion fees.

Among them, conference fees and publicity and promotion fees are the main expenses incurred by Core Medical to conduct marketing and promotional activities. In 2023, 2024, and the first half of 2025, the amounts of conference fees were RMB 1.2325 million, RMB 5.1071 million, and RMB 3.135 million, respectively. The number of conferences was 18, 68, and 54, respectively. The average amount per conference was RMB 68,500, RMB 75,100, and RMB 58,100, respectively. For the corresponding periods, the company’s publicity and promotion expenses were RMB 1.6813 million, RMB 2.2079 million, and RMB 2.4367 million, respectively, with the number of times being 16, 28, and 39, respectively. The average expenses were RMB 105,100, RMB 78,900, and RMB 62,500, respectively.

During the reporting period, the parties to whom Core Medical paid promotion fees to third parties mainly included conference-fee service providers and publicity/promotion activity service providers. In the first half of 2025, Qingda Xinmei (Beijing) Kechuang Co., Ltd. was the largest payment recipient for the company’s promotion fees, with an amount of RMB 414,500. The company paid RMB 283,000 to its second-largest payment recipient, Botu Mingrui (Beijing) Exhibition and Conference Service Co., Ltd., and paid RMB 265,000 to its fourth-largest payment recipient, Beijing Langjie Technology Co., Ltd. It is worth noting that business information shows that for the three service providers above, the number of insured persons has had no records since their establishment. In addition, Core Medical’s third-largest promotion fee payment recipient in 2023, Beijing Delii Culture & Media Co., Ltd., also has a similar situation.

In response, Core Medical told reporters that the promotion fees it pays to third parties are mainly used to commission third-party service providers to carry out legitimate and compliant marketing activities such as academic conferences, advertising and publicity, and market research. “These companies all have the qualifications to provide related promotion services and can provide promotion services that meet the company’s needs.”

Core Medical further stated that the company is still in the early stage of commercialization. In the future, it will continue to strengthen its core technology platform, support the development of multiple product pipelines, build an innovative medical device commercialization team, work with distributors to actively cover target hospitals and provinces, continuously increase the intensity of academic promotion, and provide clinical technical “on-site support” (technology follow-along support), among other efforts.

Regarding the current situation in which the company has not yet become profitable, Core Medical said that the development cycle and industrialization process of innovative medical devices is a long-cycle, high-risk, continuous-investment endeavor, which is consistent with the stage characteristics of comparable companies in the same industry. “In the future, the company will also take proactive measures, such as consolidating R&D infrastructure and building a global top-tier innovative medical device R&D platform; establishing extensive cooperation relationships to advance the internationalization of products; and building a marketing network to help the company’s products achieve commercialization coverage.”

(Editor: Cao Xueping; Review: Tong Haihua; Proofread: Wan Ling)