Ask AI · Why Most Core Medical Distributors Are New Companies, and How They Rapidly Become Big Customers?

By: Bi Feng; Edited by: Li Li

Over the past three and a half years, Core Medical has accumulated losses of more than 500 million yuan. If it weren’t for ongoing “capital injections” from the primary market and the relaunch of the fifth set of listing standards for the STAR Market, the company would find it difficult to obtain a chance to “break through” and list on the STAR Market. From the first round of questions in the inquiry letter, the company’s products had only obtained short-term treatment approval; the Shanghai Stock Exchange has been paying attention to the potential risk that the company may not obtain long-term treatment approval in the future. In addition, Core Medical’s direct-to-terminal sales price for its products is high; the model of selling to distributors at less than half price has also raised suspicion of improper transfer of benefits. Moreover, the fact that the company’s two testing service providers did not disclose any suspected related relationship suggests there are major flaws in the quality of the company’s prospectus filings. The fact that a partner from a well-known venture capital firm holds shares on behalf of an unrelated natural person further intensifies concerns about improper transfer of benefits. Judging from the specific content, in its replies to the first round of inquiries, Core Medical did not provide an explanation that is convincing.

The only product has not yet obtained long-term medical treatment approval

On February 2, 2026, the Shanghai Stock Exchange website disclosed that Shenzhen Core Medical Technology Co., Ltd. (hereinafter referred to as “Core Medical”) submitted its reply to the first round of inquiry letters. On November 21 last year, Core Medical filed its prospectus for an IPO on the STAR Market. The sponsor was Huatai United Securities. For this IPO, Core Medical plans to raise 1.22B yuan, of which 711.0919 million yuan will be used for a circular support project for R&D of frontier products, 139.3890 million yuan for the construction of an artificial heart industrialization base, 166.0677 million yuan for the marketing network and digitization construction project, and 200.0000 million yuan for replenishing working capital.

The prospectus shows that Core Medical is an innovative medical device company that provides artificial heart products. As of the date the prospectus was signed, Core Medical’s controlling shareholder and actual controller are Yu Shunzhou, jointly controlling 29.14% of Core Medical’s voting rights. On November 6, 2025, Core Medical’s STAR Market IPO was accepted for review. This is also the first innovative medical company to be accepted for review after the relaunch of the fifth set of STAR Market listing standards.

Public information shows that Core Medical’s predecessor was Core Co., Ltd., established in August 2016, with registered capital of 10 million yuan, fully contributed by Yu Shunli. It is understood that when Core Co., Ltd. was established, Yu Shunli served to hold equity in Core Co., Ltd. on behalf of his brother, Yu Shunzhou. Only after the company had been established for two years—when Yu Shunzhou returned to China and joined Core Medical full-time—was the above-mentioned nominee arrangement terminated.

The prospectus discloses that Yu Shunzhou was born in 1978. He successively obtained a bachelor’s degree in mechanical engineering, a master’s degree in mechanical manufacturing and automation, and a PhD in mechanical manufacturing and automation from Harbin Institute of Technology. From September 2008 to March 2011, Yu Shunzhou served as a postdoctoral fellow at the University of California, Davis. Afterwards, Yu Shunzhou worked at top American artificial heart companies including TerumoHeart and Thoratec, and participated in the development of multiple artificial heart products, including the ultra-small fully magnetically levitated artificial heart HeartMate 3, where he served as the team’s main负责人 for motor control and magnetic levitation design.

In 2016, Medtronic acquired HeartWare, the second-ranked company in the artificial heart field, for $1.1 billion, and then launched its third-generation VAD (ventricular assist device) product HVAD. Such huge market potential led Yu Shunzhou to the idea of returning to China to start a business, and Core Co., Ltd. was established as a result. However, it is worth noting that in the first two years after Core Co., Ltd. was established, Yu Shunzhou was still working in the U.S. as a senior software development engineer for the digital surgery service provider VerbSurgicalInc. In April 2018, Yu Shunzhou returned to China and joined Core Medical full-time. In June 2018, Yu Shunli transferred the company’s 10 million yuan registered capital he held to Yu Shunzhou.

At the initial stage of Core Medical’s establishment, Yu Shunzhou—the company’s actual controller—was still employed in the U.S. by the digital surgery service provider, and he had also previously worked at competing companies such as TerumoHeart and Thoratec. In 2016, Yu Shunzhou arranged for his younger brother to hold the shares on a nominee basis. Is there suspicion that this arrangement was used to evade non-compete restrictions with the former employer? Since Core Medical’s magnetic levitation technology route is similar to that of Yu Shunzhou’s former employer, does the above arrangement involve potential legal dispute risk that has attracted public attention?

Starting in 2019, Core Medical began raising external funding. According to Tianyancha information, as of now, Core Medical has completed at least six rounds of financing, with total financing exceeding 1 billion yuan. As of the date the prospectus was signed, shareholders holding more than 5% of the shares include Zhuhai Shaheng (8.93% stake) under the Gaoling Capital venture capital fund, and Shanghai Zhenglimin (8.81% stake) under the Zhixin Gu Capital fund, among other well-known institutions.

Although Core Medical has been favored by institutions in the primary market, the company’s operating performance is not optimistic. Data shows that from 2022 to the first half of 2025, Core Medical achieved operating revenue of approximately 0 yuan, 16.5503 million yuan, 93.6884 million yuan, and 70.4776 million yuan, respectively; net profits attributable to shareholders were approximately -178 million yuan, -170 million yuan, -132 million yuan, and -72.7514 million yuan, respectively. As of June 30, 2025, accumulated undistributed profits were -367 million yuan.

Regarding cash flow, across the report periods, Core Medical’s net cash flow from operating activities was -80.9143 million yuan, -108 million yuan, -88.9481 million yuan, and -84.4121 million yuan, respectively.

It is not hard to see that over the past three and a half years, Core Medical’s cumulative losses have exceeded 500 million yuan, and the company’s operations have mainly relied on financing support. Obviously, without sustained “capital injections” from the primary market and the relaunch of the fifth set of STAR Market listing standards, the company would find it difficult to obtain an opportunity to “pass the gate” and list on the STAR Market.

The only product has not yet been approved for long-term treatment

The prospectus shows that although the company’s only commercially product, Corheart6, has already undergone 1,000 surgeries, the potential risk is that it has currently only been approved for transitional treatment indications and has not obtained long-term treatment approval.

At present in China, all five implanted artificial hearts that have been listed have obtained transitional treatment indications, but only Abbott’s HeartMate 3 and EVAHEART from Chongqing Yongrenxin have both “transitional treatment + long-term treatment” dual indications.

Corheart6’s registered clinical trial was designed and filed using the success rate of device implantation at 3 months after surgery as the primary clinical endpoint. Therefore, when it first entered the market, it received transitional treatment approval, not long-term treatment approval. Core Medical admits in the prospectus that the main reason it did not obtain long-term treatment approval is that long-term clinical data had not yet been accumulated to completion. However, the reply letter discloses that Core Medical is currently conducting two long-term studies: one is an extended follow-up for the registered trial; the 24-month follow-up has already completed data cleaning and statistical analysis, and it will continue to be followed to 5 years, with completion expected in 2027. The other is a real-world long-term cohort.

The reply letter shows that when HeartMate 3 under Abbott was submitted in China, it provided clinical data for 516 HeartMate 3 subjects based on the U.S. MOMENTUM 3 study. Among them, a 6-month composite endpoint was used for the transitional treatment submission, while a 2-year composite endpoint was used for the long-term treatment submission. For EVAHEART, the long-term treatment submission provided 17 overseas real-world long-term clinical cases, with an average assist time of 919 days. These two examples show that to obtain long-term treatment approval, Core Medical not only needs clinical data exceeding 2 years, but may also require a broader number of subjects. Based on international experience, obtaining long-term treatment approval for artificial hearts often takes 4 to 7 years.

New Economic IPO noted that in the reply letter, Core Medical intentionally downplayed the impact of not obtaining long-term treatment approval. It stated, “Except for the requirement that long-term indication approval needs long-term clinical data as the approval condition, there are no substantive differences in the product performance requirements for approval of transitional treatment and long-term treatment indications.”

Are there really no substantive differences? Clearly, there are not. Clinical data from 3 months is completely different from clinical data of more than 2 years, including patients’ quality of survival and complication data. These are hard indicators that concern patients’ life safety, and can only be obtained through long-term accumulation. Whether the medical regulatory authorities grant Core Medical’s artificial heart long-term treatment approval will never rely only on external indicators such as “small volume and light weight,” but mainly evaluate the product’s final safety.

Distributors are mostly newly established companies

The product lineup being single and the limited market space are important reasons for Core Medical’s sustained losses. According to disclosures in the prospectus, as of now, Core Medical has laid out 5 implanted and 6 interventional artificial heart products. However, currently only 1 implanted product has achieved commercialization; 2 interventional products are in the registration and approval stage; and the other multiple artificial heart products are still in the clinical stage.

As the only product the company has commercially sold, Core Medical’s implanted left ventricular assist system, Corheart®6, was approved for commercialization in June 2023. Data shows that from 2023 to 2024 and the first half of 2025, Corheart®6 sales were 57 units, 379 units, and 307 units, respectively. In 2024, Corheart®6’s national market share exceeded 45.9% (calculated by terminal implantation volume), ranking first in the industry. In the first five months of 2025, Corheart®6’s market share further increased to 52.86%.

Although Corheart®6’s market sales have risen rapidly, considering that Core Medical’s operating performance is still in a state of substantial losses, the company still faces profitability challenges in the short term.

In addition, Core Medical’s core products are currently also facing downward pricing pressure. Data shows that in 2023 and 2024, Core Medical Corheart®6’s average unit prices were 290.4k yuan per unit and 247.2k yuan per unit, respectively. In the first half of 2025, the product’s average unit price further decreased to 229.6k yuan per unit. Within one and a half years, the cumulative price drop exceeded 20%.

Although Core Medical’s average unit price for artificial hearts decreases year by year, its gross margin keeps increasing. The reply letter shows that during the reporting periods, Core Medical’s gross margin was 66.25%, 69.66%, and 72.09%, respectively, gradually improving as production and sales scale expanded.

What is striking is that in the reply letter, Core Medical disclosed the unit costs of its artificial hearts. In 2023, 2024, and the first half of 2025, Core Medical’s artificial heart unit costs were 98k yuan, 75k yuan, and 64k yuan, respectively.

The prospectus shows that since Corheart®6 was listed, its terminal pricing has been around 580k yuan. This price is about 9 times the unit cost, and it is 2.5 times the company’s supply price to distributors (around 230k yuan in the first half of 2025).

With such a large difference between distributor prices and terminal prices, does the profit in the middle flow into the hands of distributors? During the process of artificial hearts being sold from distributors to public hospitals, how much say do distributors have? Under exchange inquiry, Core Medical disclosed this hidden part of the industry in its inquiry response. What is especially shocking is that public tertiary class A hospitals directly purchase artificial hearts from Core Medical at a price as high as 500k yuan, yet Core Medical is willing to sell to intermediaries at a cut price, and then the latter resells to public hospitals.

The reply letter shows that during the reporting periods, the Children’s Hospital affiliated with Zhejiang University School of Medicine had purchased 5 artificial hearts from Core Medical in 2023 and 2024 through a direct sales model. This order generated revenue of 290.4k yuan and 247.2k yuan for Core Medical in 2023 and 2024, respectively, with an average price of about 510k yuan per artificial heart. However, starting in August 2024, the Children’s Hospital affiliated with Zhejiang University School of Medicine suddenly began purchasing artificial hearts from Core Medical through distributors.

Another example is the Union Hospital affiliated with Fujian Medical University. In 2023, Sinopharm Holding Fuzhou Co., Ltd. acted as the distributor to purchase one implanted left ventricular assist system and deliver it to the Union Hospital affiliated with Fujian Medical University at a price of 490k yuan. After that, the Union Hospital affiliated with Fujian Medical University changed to purchasing Core Medical’s products from distributors.

The reply letter states that compared with distributors, distributors’ sales prices are the regional terminal price minus a certain proportion of the distribution service fee. The distribution service fee rate is about 4.5%. This means the distributors’ profit is far lower than that of distributors.

The Shanghai Stock Exchange raised questions about the above practice of public hospitals building direct procurement channels and then switching to distributors, and required the company to explain the rationale. The paradox of the above behavior is that Core Medical would rather supply distributors at half price than lower the price for its largest customer—public hospitals.

Why is that? According to Core Medical, its sales strategy is flexible: it adopts “tiered pricing” primarily for in-country platform distributors and in-country ordinary distributors, and in actual implementation it also provides price discounts to different degrees based on the quantity of orders purchased or uses negotiated pricing. However, those public hospitals in direct procurement did not receive the large discounts that distributors did.

It is worth noting that in the inquiry letter, when facing the exchange’s further questioning, Core Medical never answered why it has to sell through distributors and why it only provides distributors with significant discounts.

Do Core Medical’s distributors have any exclusive monopoly advantages compared with direct customers? New Economic IPO noted that among Core Medical’s top five distributors disclosed, most are newly registered companies and have relatively few employees insured, and some even have 0.

The reply letter shows that Core Medical mainly sells through a distributor model. In each reporting period, the company’s top five customers are platform distributors and ordinary distributors. In 2023, 2024, and January to June 2025, the sales revenue share of the company’s top five customers was 58.01%, 79.55%, and 80.70%, respectively, showing an upward trend.

The reply letter shows that among the company’s top five customers in 2024, Jiangsu Hengtong Medical Equipment Sales Co., Ltd., Shanghai Feiruibo Medical Equipment Co., Ltd., and Shanghai Yueda Hui Trading Co., Ltd.’s combined procurement amounts accounted for 58.5% and 58.8%, respectively, indicating a high concentration.

Public information shows that among Core Medical’s top five customers, there are several strange cases where they became major customers shortly after being established and had a small number of employees. Apart from the first largest customer, Jiangsu Hengtong Medical Equipment Sales Co., Ltd., which is a related party of Jiuzhoutong, Shanghai Feiruibo Medical Equipment Co., Ltd. was established on March 19, 2024. Its registered shareholders are Zhang Dongwei (60% stake) and Fan Angshou (40% stake). Its actual controller and main management personnel are both Zhang Dongwei.

In its inquiry letter, the Shanghai Stock Exchange required the company to explain why Shanghai Feiruibo became one of the company’s major customers soon after its establishment. In the reply letter, Core Medical stated that the actual controller of Shanghai Feiruibo had accumulated some capital in other entity industries, and was then introduced to enter the medical device distribution field through medical device industry insiders. Since it was optimistic about the company’s product development, it started cooperation. Both parties began cooperating in 2024.

The reply letter shows that in the year Shanghai Feiruibo was established in 2024, it purchased 11.72 million yuan worth of artificial hearts from Core Medical. Based on the average price of 250k yuan, that is about 47 units. In 2025, Shanghai Feiruibo’s purchase amount was 19.05 million yuan. Based on an average price of 230k yuan, that is about 82 units.

According to the prospectus, the implantation volume of China’s implanted ventricular assist devices was 317 units and 748 units in 2023 and 2024, respectively. Over two years, Shanghai Feiruibo’s sales market share was 15% and 11%. A company that entered the medical industry from other entity industries immediately achieved such excellent artificial heart sales performance—this is astonishing. As is well known, the medical industry has certain entry barriers. In China, public hospitals’ procurement of high-value medical devices generally needs to go through provincial-level sun procurement/online listing/centralized procurement platforms. How does a newly registered company meet the qualification requirements of centralized procurement platforms and secure so many orders? The prospectus provides no explanation.

The same “miraculous” phenomenon also appears in several other major customers.

According to Qichacha, Henan Yaqi Medical Technology Co., Ltd., Shanghai Yueda Hui Trading Co., Ltd., and Beijing Qikang Technology Co., Ltd. are all newly established companies. Henan Yaqi was established in February 2025. In the first half of 2025 over four months, its procurement amount was 7.33 million yuan, and the number of employees insured was only 2.

Shanghai Yueda Hui Trading Co., Ltd. was established in January 2024. Its procurement amount was 9.49 million yuan in 2024 and 4.08 million yuan in the first half of 2025. The number of employees insured was 6. Beijing Qikang Technology Co., Ltd. was established in April 2023. Its procurement amounts were 5.11 million yuan and 4 million yuan in 2024 and 2025, respectively, and the number of employees insured was 0.

From 64k yuan to 230k yuan, and then to 500k yuan, after the artificial heart prices are handled through intermediaries, the scale of the price surge is astonishing. Yet Core Medical refuses to sell to public hospitals at low prices directly, but instead supplies intermediaries at low prices, seemingly indicating that the company intends to work with distributors to maintain high terminal prices in the market. This behavior does not align with the spirit of regulatory oversight from China’s health and medical insurance authorities.

In fact, the issue of excessively high prices for implanted “artificial hearts” has already drawn the regulator’s key attention. In March 2025, the National Healthcare Security Administration (NHSA) issued the “Guidelines for Project Initiation for Medical Service Price Items for Cardiovascular System (Trial),” adding price items for implanted “artificial hearts,” which resolves the pricing and charging valuation for artificial heart medical services. According to public reports released by CCTV News Client, to ensure that more end-stage heart failure patients can use “artificial hearts,” NHSA has communicated one by one with five domestically approved listed production enterprises, both domestic and foreign. It guided production enterprises to actively compress excessive markups in the circulation and appropriately lower the terminal “artificial heart” listings price to directly benefit patients.

Two suppliers suspected to be related parties

The prospectus shows that from 2023 to the first half of 2025, Yinsha (Guangzhou) Medical Technology Co., Ltd. ranked first, fourth, and first among Core Medical’s top five clinical trial and testing service suppliers, respectively, with cumulative transaction amounts of about 10.8 million yuan. In the first half of 2025, Boshi (Guangzhou) Medical Technology Co., Ltd. became the fifth-largest supplier, with an amount of 540k yuan.

The inquiry letter states that the testing service supplier has no related relationship with the company or its related parties. The actual controller of Yinsha (Guangzhou) is Lu Xuan. The shareholders of Boshi (Guangzhou) are Wang Zheng (60%) and Wu Xiaoqing (40%), and the actual controller is Wang Zheng.

However, public information shows that Yinsha (Guangzhou) and Boshi (Guangzhou) are suspected to have a related relationship. In 2022, the two companies used a shared contact mobile phone. And according to information disclosed by Guangdong provincial government departments, the owner of that phone is Wu Xiaoqing, a shareholder of Boshi (Guangzhou).

Besides suppliers that failed to disclose suspected related parties, Core Medical also has suspicious issues related to nominee shareholding.

The prospectus shows that Core Medical has five individual natural person shareholders. Besides the actual controller, the external natural persons include Wang Meiying, Zhu Yin, Huang Yiling, and Chen Zhe. Among them, Zhu Yin is an employee of Lianxin Capital, and shareholder Huang Yiling is an employee of Shiji Asset Management Co., Ltd.

Public information shows that Zhu Yin is a partner and executive director of Lianxin Capital. She has served within the Lianxin Capital system for a long time, focusing mainly on healthcare and technology investment. Previously, she participated in investments and post-investment management of projects such as Ping An Good Doctor, WeDoctor, Pharma-Bio, United Imaging, and Jiuzhoutong, among others. Lianxin Capital was established in 2008 and has cumulatively managed 11 funds with a total capital scale of 15 billion yuan, mainly investing in hard technology and healthcare.

The prospectus shows that in May 2021, Zhu Yin obtained 229.6k yuan of registered capital of a limited company by contributing 2 million yuan through equity transfer and capital increase. Such equity was held by Zhu Yin on behalf of Chen Zhe. In September 2021, Zhu Yin and Chen Zhe signed an equity transfer agreement. Zhu Yin transferred the 98k yuan registered capital she held to Chen Zhe, restoring the nominee arrangement.

The prospectus does not disclose Chen Zhe’s resume background or personal information.

In its inquiry, the Shanghai Stock Exchange expressed concern about the nominee arrangement and required answers to: “the specific channels Chen Zhe learned about Core Limited’s investment opportunity, the reason why it was later than other investors in the same period, the reasonableness of the nominee arrangement formation, details of the capital flows regarding the formation and termination of the nominee arrangement, the relationship between Chen Zhe, Zhu Yin, and the company’s actual controller and main management personnel, and whether there are other benefit arrangements; whether the issuer has other undisclosed instances of nominee shareholding.”

The reply letter states that in May 2021, Core Limited conducted the fourth equity transfer and the fifth capital increase. The overall transaction price for this equity transfer and capital increase was 60.07 yuan per registered capital. Among them, Zhu Yin contributed 2 million yuan, and collectively obtained 75k yuan of registered capital of Core Limited (corresponding to the equity proportion of Core Limited at the time being 0.18%). This portion of equity was held by Zhu Yin on behalf of Chen Zhe.

Since the core terms of this round of financing were basically agreed upon between Core Limited and the lead investor in February 2021, when Chen Zhe learned about this investment opportunity through a friend’s introduction, it was already later than that time point. By the time Chen Zhe became aware of the investment opportunity, Core Limited’s financing plan and major terms were already basically determined. In order not to affect Core Limited’s overall financing timeline arrangement, Chen Zhe entrusted Zhu Yin—who was already listed as a shareholder at the time—to participate in this financing on his behalf. Chen Zhe obtained equity in Core Limited in this round through equity transfer and capital increase at the uniform price set for the financing round. The above total investment amount of 2 million yuan was fully paid into Zhu Yin’s account on May 7, 2021. On May 7, 2021, and May 8, 2021, Zhu Yin completed the capital contribution for this nominee arrangement, respectively.

The reply letter states that there is no related relationship between Chen Zhe, Zhu Yin, and the company’s actual controller or main management personnel, there is no other benefit arrangement, and the issuer has no other undisclosed instances of nominee shareholding.

Core Medical’s answers obviously did not clear up the Shanghai Stock Exchange’s doubts. Would Zhu Yin, as a well-known partner at a well-known venture capital firm, unreasonably hold shares on behalf of a stranger investor without reason? The claim that there is no relationship between Chen Zhe and Zhu Yin is hard to make people believe.

According to public reports, on January 20, 2022, led by the Fuwai Hospital, Chinese Academy of Medical Sciences, and with the participation of 12 national clinical research centers, the Corheart6 implanted left ventricular assist system prospective, multicenter, single-group clinical evaluation trial was formally approved by the National Medical Products Administration (NMPA) to start. By early July, the 12 research centers across the country had completed enrollment of 50 registered patients. In March, Core Medical completed nearly 20 enrollments and created the “Core Speed,” with four surgeries conducted in parallel nationwide on a single day, breaking an industry record.

This round of investment in May 2021 was the last round of financing for Core Medical before its clinical trials, and the timing was rather delicate. As a natural person shareholder, Chen Zhe’s investment amount was not large. After missing the investment timing, why did Core Medical still agree to have him enter the company’s equity through a nominee arrangement? Can the explanation in the reply letter convince the Shanghai Stock Exchange?

This article is original content for New Economic IPO. Unauthorized reproduction is prohibited.

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