Concord Medical IPO Coming This Week

Dec. 6.09 | About: Concord Medical (CCM)

Concord Medical Services Holdings Ltd. (NYSE: CCM), a company that operates radiation therapy and diagnostic imaging centers in China, plans to raise $126 million for its IPO on December 10. The company claims to be the largest provider of radiotherapy and diagnostic imaging services in China. It currently operates 83 centers in 55 hospitals, located in 36 cities across China. In the first nine months of 2009, Concord produced $30 million of revenue and $13 million of net income. At $11 per share, Concord would have a market capitalization of $516 million.

Although ChinaBio® Today does not usually cover China’s healthcare delivery companies, an IPO of this size is a major event, and a look at the company provides some insight into the greater life science business in China.

Proving once again that investors are embracing China life science/healthcare IPOs, the underwriters have moved the price up twice. Originally, the IPO was expected to price between $9 and $11, though now the official range is from $10 to $12.

With the new capital, Concord will allocate $50 million to $80 million to expand its diagnostic and imaging center network. The company also plans to begin building dedicated cancer hospitals. It will spend between $20 million to $25 million to develop a cancer center in Saanxi Province, and between $25 million to $30 million for a proton beam radiation center in Beijing.

Concord says China is relatively underserved in terms of radiotherapy and diagnostic imaging centers.

Concord signs long-term leases and management service contracts with 3A hospitals. It receives a percentage of each center’s revenue, net of specified operating expenses. The centers are equipped with a primary advanced radiotherapy or diagnostic imaging machine, such as a linear accelerator, head gamma knife system, body gamma knife system, PET-CT scanner, or MRI scanner.

Concord recruits and determines the compensation of doctors and other personnel in the centers; it is in charge of most of the non-clinical aspects of the centers’ daily operations, including marketing, training and administrative duties. The hospital is responsible for the centers’ clinical activities, the medical decisions made by doctors, and the employment of the doctors.

The official date expected for the IPO is December 10.

Disclosure: none