BIMI International Medical Inc. (OTC:BIMI) is a diversified healthcare company that has undergone a remarkable transformation over the past few years. Formerly focused on the energy efficiency enhancement sector, the company has now pivoted towards the healthcare industry, positioning itself as a prominent player in retail pharmacy, wholesale pharmaceuticals, wholesale medical devices, and most recently, the distribution of healthcare products.
Company Background and Transition
The company's journey began in 2000 when it was incorporated as Galli Process, Inc. in Delaware. Over the years, it underwent several name changes, including Global Broadcast Group, Inc., Diagnostic Corporation of America, NF Energy Saving Corporation of America, and NF Energy Saving Corporation. From 2007 until October 2019, the company operated in the energy efficiency enhancement business through its NF Group. However, the decline in demand for its products and services due to policy changes by the Chinese government led to significant operating losses, prompting the company to explore alternatives.
In June 2020, BIMI completed the sale of the NF Group for $10 million, marking a decisive shift in its business strategy. The company's transition to the healthcare sector began with the acquisition of Boqi Zhengji, a pharmacy chain business in China, in October 2019. However, the COVID-19 pandemic severely impacted this venture, leading to its divestment in February 2021 for $1.70 million.
Strategic Acquisitions and Expansion
Undeterred by initial setbacks, BIMI continued to expand its healthcare portfolio through a series of strategic acquisitions. In March 2020, the company acquired the Guanzan Group, a distributor of medical devices and pharmaceuticals. BIMI later increased its equity interest in Shude, a subsidiary of Guanzan, from 80% to 95.2% in April 2021.
The company's diversification strategy extended to the acquisition of private hospitals in China. In February 2021, BIMI acquired Guoyitang Hospital and Zhongshan Hospital, followed by the acquisition of Qiangsheng, Eurasia, and Minkang hospitals in May 2021. These acquisitions were part of BIMI's efforts to establish a nationwide hospital chain specializing in obstetrics and gynecology.
However, the ongoing impact of the COVID-19 pandemic and related policies in China significantly affected BIMI's hospital operations. In response, the company entered into agreements in late 2022 to divest majority ownership in the Zhongshan, Qiangsheng, Eurasia, and Minkang hospitals, while retaining minority stakes in these facilities.
BIMI's healthcare-focused strategy also included the acquisition of Chongqing Zhuoda Pharmaceutical Co., Ltd. in September 2021, a distributor of medical devices and pharmaceuticals. However, due to the pandemic's impact on Zhuoda's operations, the company agreed to sell its 100% equity interest back to the former owners in October 2022.
Recent Developments
The company's latest acquisition, Phenix Bio Inc., a developer and distributor of dietary supplements, has presented BIMI with a new avenue for growth. Phenix's products, which include cardiovascular, anti-insomnia, male aphrodisiac, menopausal syndrome, gout, and immunity-enhancing supplements, have the potential to diversify BIMI's revenue streams and capitalize on the growing demand for healthcare products.
Financials
As of the latest reported quarter, BIMI's financial performance has shown signs of improvement. The company's revenue for the nine months ended September 30, 2023, was $11.28 million, up from $10.48 million in the same period of the previous year. The gross profit margin also increased from 15% in the first nine months of 2022 to 42% in the corresponding period of 2023, reflecting the company's efforts to optimize its operations and product mix.
However, BIMI continues to face challenges in its financial position. The company reported a net loss of $1.41 million for the first nine months of 2023, though this represents a significant improvement from the $13.17 million net loss in the same period of the previous year.
For the full fiscal year 2022, BIMI reported revenue of $11.83 million and a net loss of $22.32 million. The company's operating cash flow (OCF) and free cash flow (FCF) for 2022 were both negative $10.26 million.
In the most recent quarter (Q3 2023), BIMI reported revenue of $2.52 million, a net loss of $3.13 million, OCF of negative $1.48 million, and FCF of negative $2.09 million. The company experienced a year-over-year revenue decline of 48.8% in Q3 2023, primarily due to a decrease in sales in the wholesale medical devices and wholesale pharmaceuticals segments, partially offset by the addition of the healthcare products segment from the Phenix acquisition.
Liquidity
BIMI faces challenges in its liquidity and solvency positions. As of September 30, 2023, the company had a current ratio of 1.21 and a quick ratio of 0.86, indicating potential concerns regarding its ability to meet short-term obligations. The company's debt-to-equity ratio stood at 0.15, with cash on hand of $994,130. BIMI has short-term bank loans totaling $1.14 million as of September 30, 2023.
The company's free cash flow for the nine months ended September 30, 2023, was negative $4.13 million, a slight improvement from the negative $4.68 million reported in the same period of 2022. This highlights the need for BIMI to continue optimizing its operations and cash management to improve its long-term sustainability.
Operating Segments
BIMI International Medical Inc. operates through four main segments:
1. Retail Pharmacy Segment: This segment engages in the retail sale of medicine and other healthcare products in China, offering a wide range of products including prescription and over-the-counter (OTC) drugs, nutritional supplements, traditional Chinese medicines, personal and family care products, and medical devices. For the nine months ended September 30, 2023, this segment generated revenues of $467,280, representing 4.14% of the company's total revenues, with a gross profit margin of 93.97%.
2. Wholesale Pharmaceuticals Segment: This segment distributes prescription and OTC medicines, traditional Chinese medicines, healthcare supplies, and sundry items to clinics, third-party pharmacies, hospitals, and other drug vendors. For the nine months ended September 30, 2023, this segment generated revenues of $4.09 million, accounting for 36.25% of total revenues, with a gross profit margin of 5.24%.
3. Wholesale Medical Devices Segment: This segment distributes medical devices, including medical consumables, to private clinics, hospitals, third-party pharmacies, and other medical device dealers. For the nine months ended September 30, 2023, this segment generated revenues of $1.40 million, or 12.41% of total revenues, with a gross profit margin of 4.64%.
4. Healthcare Products Segment: This segment includes the operations of the newly acquired subsidiary, Phenix Bio Inc., which develops and distributes dietary supplements. For the nine months ended September 30, 2023, this segment generated revenues of $5.32 million, accounting for 47.20% of total revenues, with a gross profit margin of 77.19%.
Geographic Markets
BIMI operates primarily in China, with all of its revenue in 2022 and the first nine months of 2023 generated in China and the United States (via the Phenix acquisition).
Future Outlook
Despite the challenges, BIMI's management remains optimistic about the company's future prospects. The successful integration of Phenix and the divestment of the underperforming hospital assets are expected to strengthen the company's financial position and enable it to focus on its core healthcare product distribution business.
Looking ahead, BIMI's ability to navigate the healthcare market and effectively capitalize on the growing demand for its products and services will be crucial to its long-term success. The healthcare industry in China has seen steady growth, with a compound annual growth rate (CAGR) of approximately 8-10% over the past five years, driven by factors such as an aging population, increasing healthcare spending, and government initiatives to improve access to healthcare services. However, the impact of COVID-19 has created significant volatility and uncertainty in the market.
Investors will be closely monitoring the company's progress in executing its diversification strategy, improving its financial metrics, and positioning itself as a viable player in the dynamic healthcare industry. The shift in revenue mix towards the healthcare products segment, now accounting for the largest portion of the company's total revenues, indicates a potentially promising direction for BIMI's future growth. However, the company will need to address its ongoing financial challenges, including negative cash flows and net losses, to ensure long-term sustainability and value creation for shareholders.