Business Overview and History
BIMI International Medical Inc. (NASDAQ:BIMI) is a diversified healthcare company that has undergone a remarkable transformation in recent years. With a focus on retail pharmacy operations, wholesale pharmaceutical and medical device distribution, and the development and distribution of healthcare products, BIMI has carved out a unique niche in the dynamic healthcare industry.
BIMI was originally incorporated in 2000 as Galli Process, Inc. and has since undergone several name changes, reflecting the company's evolving business focus. In 2002, the company changed its name to Global Broadcast Group, Inc., and then to Diagnostic Corporation of America in 2004. In 2007, BIMI shifted its focus to the energy saving industry, changing its name to NF Energy Saving Corporation of America.
From 2007 until October 2019, BIMI, through its NF Group, was engaged in the energy efficiency enhancement business. However, as the demand for its products and services declined due to policy changes by the Chinese government, BIMI's energy efficiency enhancement business began incurring operating losses, culminating in a net loss of $16.79 million in 2018 and $2.18 million in 2019. After exploring various alternatives to revive this business, BIMI determined that it was not sustainable and committed to a plan to dispose of the NF Group in late 2019.
In 2019, the company made a strategic shift towards the healthcare industry, acquiring Boqi Zhengji, a pharmacy chain operator in China. This acquisition marked the beginning of BIMI's foray into the healthcare sector. However, Boqi Zhengji suffered significant setbacks during 2020 due to the COVID-19 pandemic, prompting BIMI to divest the pharmacy chain business in December 2020.
In the ensuing years, BIMI continued to expand its healthcare portfolio through a series of strategic acquisitions. In 2020, the company acquired Chongqing Guanzan Technology Co., Ltd., a medical device distributor, and in 2021, it added several private hospitals to its network, including Guoyitang, Zhongshan, Qiangsheng, Eurasia, and Minkang. These acquisitions were aimed at building a comprehensive healthcare ecosystem that could cater to a wide range of medical needs.
However, the COVID-19 pandemic had a significant impact on BIMI's hospital operations, leading the company to divest its majority interests in the Zhongshan, Qiangsheng, Eurasia, and Minkang hospitals in 2022. This strategic move was designed to streamline the company's focus and improve its financial performance.
In 2022, BIMI further diversified its business by acquiring Phenix Bio Inc., a distributor of dietary supplements. This acquisition marked the company's entry into the healthcare products segment, expanding its product portfolio and revenue streams.
Financial Performance and Liquidity
BIMI's financial performance has been mixed in recent years, with the company reporting net losses in 2021 and 2022 due to the challenges posed by the COVID-19 pandemic and the divestment of its hospital operations. In 2021, the company reported a net loss of $34.92 million, while in 2022, the net loss stood at $22.32 million.
However, the company's liquidity position has remained a concern, with BIMI reporting a negative working capital of $326.67 thousand as of December 31, 2022. This has raised questions about the company's ability to fund its ongoing operations and future growth initiatives.
To address its liquidity challenges, BIMI has sought external financing through equity and convertible debt transactions. In 2020 and 2021, the company raised funds through the issuance of convertible notes, while in 2022, it issued a convertible promissory note to its Chairman, Mr. Oudom. Additionally, in 2023, the company entered into a stock purchase agreement with Mr. Oudom, whereby it agreed to sell 2 million shares of its common stock for $3 million in cash.
The company's most recent quarterly financials show continued challenges. For the most recent quarter, BIMI reported revenue of $2,523,193, with a net loss of $3,129,245. Operating cash flow was negative at $1,483,715, and free cash flow was also negative at $2,087,607. The company's liquidity metrics indicate some financial stress, with a debt-to-equity ratio of 1.35, cash on hand of $994,130, a current ratio of 1.21, and a quick ratio of 0.61.
Quarterly Performance and Segment Analysis
BIMI's most recent quarterly results, as reported in its Q3 2023 10-Q filing, showed a mixed performance. The company's revenues for the nine-month period ended September 30, 2023, increased by 8% to $11.28 million, compared to $10.48 million in the same period of the previous year. However, the company continued to report a net loss of $1.41 million during this period.
BIMI operates in four reportable segments: retail pharmacy, wholesale pharmaceuticals, wholesale medical devices, and healthcare products.
The retail pharmacy segment sells prescription and over-the-counter (OTC) medicines, traditional Chinese medicines (TCM), healthcare supplies, and sundry items to retail customers through its directly owned pharmacies and authorized retail stores. For the nine months ended September 30, 2023, this segment generated revenues of $467,280, with an impressive gross profit margin of 93.97%.
The wholesale pharmaceuticals segment, which supplies prescription and OTC medicines, TCM, healthcare supplies, and sundry items to clinics, third-party pharmacies, hospitals, and other drug wholesalers, reported revenues of $4.09 million for the nine-month period, with a gross profit margin of 5.24%.
The wholesale medical devices segment, which distributes medical devices and consumables to private clinics, hospitals, third-party pharmacies, and other medical device dealers, generated $1.40 million in revenues for the first nine months of 2023, with a gross profit margin of 4.64%.
The newly acquired healthcare products segment, which includes the Phenix Bio Inc. business, contributed $5.32 million in revenues during the nine-month period, with a strong gross profit margin of 77.19%. Phenix currently offers six categories of dietary supplements, including cardiovascular, anti-insomnia and depression, male aphrodisiac, women's menopausal syndrome, gout, and immunity enhancement products.
Overall, BIMI achieved a gross profit margin of 42% during this period, up significantly from 15% in the prior-year period, driven by the strong performance of the healthcare products segment. The improvement in gross margins was also supported by the company's efforts to shift towards online sales in the wholesale medical devices and pharmaceuticals segments, which helped to improve profitability.
Risks and Challenges
BIMI faces several risks and challenges that could impact its long-term growth and financial performance. The company's reliance on a limited number of large customers, particularly in its healthcare products segment, poses a significant risk. The loss of or a material reduction in orders from these customers could have a material adverse effect on BIMI's results of operations and financial condition.
Additionally, the company's liquidity concerns and its ability to fund its ongoing operations and future growth initiatives remain a significant challenge. BIMI's continued reliance on external financing and its ability to secure additional funding could be critical to its long-term sustainability.
The competitive landscape in the healthcare industry is another risk factor for BIMI. The company faces competition from larger, more established players in the retail pharmacy, wholesale pharmaceutical, and healthcare products segments, which could impact its market share and pricing power.
Conclusion
BIMI International Medical Inc. has undergone a significant transformation in recent years, transitioning from its roots in the energy efficiency industry to become a diversified healthcare company. Despite the challenges posed by the COVID-19 pandemic and its liquidity concerns, BIMI has demonstrated its resilience by pivoting its business strategy and expanding into new healthcare segments, such as the distribution of dietary supplements.
As BIMI continues to navigate the evolving healthcare landscape, it will need to address its liquidity issues, streamline its operations, and leverage its diversified healthcare portfolio to drive sustainable growth and profitability. The company's ability to execute on its strategic initiatives and effectively manage the risks it faces will be crucial in determining its long-term success. The strong performance of its healthcare products segment, particularly the high-margin dietary supplements business, offers a potential bright spot for future growth. However, the company must continue to work on improving the profitability of its other segments and achieving overall positive cash flow to ensure long-term viability.