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after being suspended for 165 days, nouva healthcare (6606.hk), which was mired in suspicion of "financial fraud", suffered another heavy blow.

novecare health announced on september 9 that its chief financial officer gao yu and joint company secretary mo minghui had resigned; on the same day, auditing firm deloitte also resigned as auditor.

in the announcement, nouva health and deloitte faced off head-on. nouva accused deloitte of not committing to the tentative timetable for completing the 2023 audit, resulting in uncertainty about when the 2023 audit would be completed and when the annual results would be published. deloitte believed that nouva's completion of an independent forensic investigation into audit issues was a prerequisite for its assessment of the 2023 audit completion time, and pointed out that the audit would not be completed as originally planned after the change of auditors.

affected by this,many institutions have lowered the valuation of nouva health.the day before the suspension (march 27), the share price of nouva health closed at hk$14.14 per share. since september 10, hft investments, everbright asset management, and robeco berman have announced valuation adjustments for their holdings in nouva health, with the adjusted valuation prices being hk$6.06 per share, hk$5.7 per share, and hk$9.00 per share, respectively.

on september 13, dacheng fund lowered the valuation of its holdings in novecare health to hk$3.54 per share, a decrease of nearly 75% from before the suspension.

according to the hong kong stock exchange listing rules, the stock exchange may delist any securities that have been suspended from trading for 18 consecutive months.the deadline is september 27, 2025before that, if the company fails to comply with the resumption of trading guidelines and resume trading of its shares, it will face delisting.

with the halos of "china's first certificate for early cancer screening" and "china's first stock for early cancer screening", novecare health has not only had the frequent support of experts from the "national team" of tumor diagnosis and treatment in the past few years, but has also gained huge media attention. after its listing, its performance has increased against the trend year after year and it has successfully achieved a dream start with a b-list ranking, making it the talk of the town.

with the successive attacks by short-selling institutions, the defection of auditing institutions, and the suspension of trading by the hong kong stock exchange, nouva health has been deeply involved in rumors of financial fraud. a senior researcher in the capital market pointed out thatfor stocks that have been suspended by the hong kong stock exchange, there is a high probability that they have committed financial fraud. replacing institutions or individuals with supervisory and auditing functions is also a sign of financial fraud.

regarding deloitte's resignation, zhu jiang, ceo of capitalwatch, who first triggered the financial fraud storm of nouva health, said on social media that "the pressure came from the hong kong independent commission against corruption (icac). icac went to deloitte's hong kong office twice to request the audit records and took away a bunch of documents. perhaps before they could reach a conclusion, deloitte took the initiative to refuse to sign the 2023 annual report of nouva health."

it is reported that zhu jiang mailed materials to icac in september 2023 to report deloitte, reporting that there may be misconduct by deloitte in the audit process of novecare health.

to date, nearly one-third of the 18-month suspension period has passed, the progress bar has not moved, and the company is facing an audit, the cfo resigns and is temporarily vacant. it is foreseeable thatthe company will still be unable to determine the completion time of the audit for some time, and the completion of the resumption of trading guidelines may be a long way off.

there is really not much time left for nouva health.

if the financial fraud is proven, nouva health will not only face delisting, but the company and the relevant responsible persons may also faceadministrative, civil, criminalvarious penalties including.

in terms of penalties imposed by relevant mainland authorities, referring to luckin coffee (listed on nasdaq), which was also listed overseas and then delisted, from april 2019 to the end of 2019, luckin coffee’s revenue was falsely inflated by rmb 2.119 billion.

in response to luckin coffee’s false advertising behavior of “widely promoting the use of false marketing data to deceive and mislead the relevant public”, the state administration for market regulation and the market supervision departments of shanghai and beijing made administrative penalty decisions on luckin coffee and 45 other companies involved in the case, with a total penalty amount of 61 million yuan.

this is just the first fine luckin coffee received for its financial fraud. in response to the financial fraud, the ministry of finance imposed additional penalties in accordance with the provisions of the accounting law. luckin coffee was slightly lucky because the original accounting law stipulated that the maximum penalty for companies that commit financial fraud was only 100,000 yuan.

however, starting from july 1 this year,with the formal implementation of the new accounting law, the maximum fine for companies that commit financial fraud has been changed from 100,000 yuan to "more than one times and less than ten times the illegal income", companies that commit financial fraud and their relevant responsible persons will face more severe penalties.

recently, the ministry of finance issued a document naming kangmei pharmaceutical, luckin coffee, evergrande real estate and other domestic and overseas listed companies for financial fraud, which seriously disrupted the socialist market economic order and caused significant losses to investors. it also pointed out that "the original accounting law's penalty standards for financial fraud parties were obviously too low, and the cost of violations was significantly mismatched with the profits from fraud, making it difficult to form an effective deterrent", and once again reiterated the severity of penalties in the new accounting law.

then onceif the financial fraud is confirmed, novecare health will face more severe fines from the ministry of finance.

in addition to administrative fines, the company may also face huge civil compensation due to the huge losses that may be caused to investors. for example, luckin coffee reached a settlement with the u.s. securities and exchange commission (sec) and paid a civil fine of us$180 million; at the same time, it finally reached a settlement of us$175 million in a shareholder class action lawsuit.

in the hong kong stock exchange, referring to the classic "honliang international case" in 2012, the taiwanese company honliang international was searched by the hong kong independent commission against corruption and ordered to suspend trading by the securities and futures commission in the second year after its listing (2010) due to fraud in prospectus information and exaggeration of financial data. its assets worth nearly hk$1 billion were frozen by the court. in june 2012, the court ordered honliang international to repurchase shares from 7,700 public shareholders at hk$2.06 per share before the suspension, accounting for approximately 25% of the shares, totaling hk$1.03 billion.

if we calculate based on the 25% equity share of public shareholders, based on the 14.14 hong kong dollars per share and the total share capital of 458 million before the suspension of nouva health, thenthe repurchase amount may be as high as hk$1.6 billion。

in terms of criminal liability, according to the securities and futures ordinance of hong kong law, for market misconduct such as disclosing false information to induce transactions,the maximum criminal liability is 10 years’ imprisonment and a fine of hk$10 million.

of course, deloitte, which has provided audit services to nova health in the past few years, cannot escape blame. recently, in the case of evergrande real estate's financial fraud, the auditing agency behind it, pricewaterhousecoopers, was fined the maximum amount of 441 million yuan by the china securities regulatory commission and the ministry of finance.

it is worth noting that the company's stock has been suspended due to financial fraud.it will also have a serious negative impact on the company's reputation.unlike luckin coffee, which mainly faces the c-end consumer goods market, negative events in the capital market have relatively little impact on its business. for a company that relies heavily on channels, customers, partners and suppliers may reduce cooperation as a result, and the losses caused by this will be difficult to measure.

back to february 8, 2021, the first working day of the lunar new year of the ox, novecare health was officially listed on the hong kong stock exchange with an issue price of hk$26.66 per share.

in the past 2020, the hong kong stock ipo market ushered in a golden age：setting the most active record for new stock issuance, 130 stocks on the main board doubled in value within the year, and the yield rate of new hong kong stocks reached 111.3%, setting a new record; at the same time, benefiting from the 18a policy of the hong kong stock exchange, 14 unprofitable pharmaceutical stocks went public in hong kong that year, with an average increase of 28.89% on the first day...

novecare health seized the last wave of the favorable conditions and opened at hk$76 per share, soaring 185.07%. the highest price on the day was hk$80 per share, an increase of more than 200%.

then,the hong kong stock market suddenly cooled since the second half of 2021.as the boom fades, affected by force majeure factors such as the epidemic and anti-corruption in the medical field, many pharmaceutical companies are still faced with a situation where their business models have not been fully implemented and their profitability is unclear. whether in the primary or secondary market, capital has begun to enter a cooling-off period.

in contrast, although the stock price has dropped significantly from the issue price,novecare health continues to respond to the expectations of investors and the industry with impressive financial report data.

since its listing, novahealth's performance has soared, with revenue climbing by more than 200% in 2021.210 million yuan; revenue growth of 260% in 2022770 million yuan, and successfully obtained approval for b; the revenue in the first half of 2023 will exceed the full-year revenue in 2022, reaching820 million yuan, and achieved break-even one year ahead of schedule.

such a strong performance growth momentum is enough to make a group of 18a pharmaceutical companies that have not yet seen the dawn of profitability look up to it.

nouva health is also willing to spend money to buy publicity. new medical and health forces learned that nouva health is willing to invest in market and brand strategies, and its ceo is also willing to cooperate in public appearances. the nodes of information disclosure and media communication are grasped very timely and accurately, which was once the envy of other corporate brand marketing departments in the industry and often became their benchmark for comparison.

however, brand communication is the icing on the cake after all. novahealth's excellent financial data is not without its own doubts. against the backdrop of the decline in offline diagnosis and treatment during the epidemic and anti-corruption efforts in the medical field,"why is it that noveon is able to increase its business instead of decreasing it, and even increase it several times?", but everyone in the circle tacitly chose to remain silent.

“other manufacturers in the industry were shocked by the doubling of sales in nova’s financial report.in fact, everyone knows very well how the sales have been in recent years."many salespeople have privately questioned nouva health's sales data.

there are also financial people who make fun of nouva health“it’s too big a step”"if the annual growth is one or two hundred million, it's fine, but if it grows by more than ten or twenty hundred million at once, it's hard not to be suspicious."

at the beginning of 2024, nouva health, which had been accused of financial fraud, released a profit report for fiscal year 2023 as it did on the eve of previous financial reports:the total annual revenue exceeded 2 billion, and the company achieved after-tax profit in the first year.

in january 2024, zhu yeqing, chairman and ceo of novahealth, disclosed in advance at the 42nd jpmorgan healthcare conference that the company's revenue in 2023 will increase 25 times compared to 2020.

unfortunately, this black and white information, which should have been included in the official annual report, has not been released until today.

on march 27, the day before nouva health originally planned to release its 2023 annual results, zhu jiang announced again:“capitalwatch will soon release an investigation report on the fraud of nouva health’s 2023 financial data.", novua health's stock price fell by more than 20% during the day. deloitte also sent a letter of concern to novua health, questioning the authenticity of its sales and related financial issues.

on march 28, nova health announced the suspension of trading and delayed the publication of its 2023 annual performance announcement. of course, the new investigation report announced by zhu jiang had to be shelved.

with the resignation of deloitte, it is still uncertain which audit firm will dare to take over and when the audit will be completed. the publication date of this financial report remains unknown.

novahealth focuses on early screening of common cancers at home. its product portfolio mainly includes three single-cancer early screening products, namely,colorectal cancer early screening product coloclearthe first approvedfecal occult blood (fit) home self-test product pupu tube, and the only one in china approved for consumer self-testinghelicobacter pylori self-test product uu tube。

novahealth's three core products and their share in different channels

compared with the difficulties faced by many early cancer screening companies in obtaining certification and commercializing their products, the outstanding commercial performance of novecare health's three products has enabled it to gain a first-mover advantage early on.

"take early screening for colorectal cancer as an example. based on the 540 million people aged 45-75, a product unit price of 1,500 yuan and a product penetration rate of 20%, this market space in china will reach 162 billion yuan in the next 10 years." zhu yeqing, chairman and ceo of novecare health, once made such a calculation.

according to frost & sullivan data, the market size of early cancer screening in china will grow from us$18.4 billion in 2019 to us$28.9 billion in 2030, with a compound annual growth rate (cagr) of 4.2%.

with broad market prospects, companies such as pangenomics, berry genomics, burning rock medical, yuanma gene, aide biopharmaceuticals, and xunyuan biopharmaceuticals have entered the market to advance the research and development of related technologies.however, how to implement commercialization path is still a difficult problem facing the early cancer screening industry.

due to its high prevalence, long preclinical period, and high survival rate if detected early, early screening for colorectal cancer has greater application value and health economic value among all types of cancer, and is one of the most popular cancer early screening categories.the growth in novecare health’s performance also gave people hope at the end of the tunnel.

however, one question in the industry is:given the current public awareness of early cancer screening and the fact that medical insurance payment has not yet been implemented, how can such a large market be supported?

in comparison, cologuard, a similar early screening product for colorectal cancer in the united states, has a penetration rate of less than 10% after years of development, even with u.s. medical insurance reimbursement. data shows that its penetration rate in 2019 was only 5.93%.

in other words, how difficult is it to get more than 100 million people in china willing to spend 1,500 yuan for early screening of a single cancer? is it even possible? the answer is self-evident.

financial fraud by listed companies has become increasingly common in recent years due to early listing, performance betting, and avoiding delisting. especially under the influence of the overall economic environment, when performance highlights are hard to find, embellishing financial figures can give investors a relatively acceptable explanation.

as the fastest-growing cancer early screening company in china, novahealth's revenue data carries the expectations of the entire industry: how big is novahealth's revenue potential?it largely determines people's imagination of the entire early cancer screening market space.

if the financial fraud is confirmed, the imagination space will be shattered, which may affect the confidence of peer companies and investors in the early cancer screening industry for a long time.

now that novecare has fallen from grace, who can stand up and wait for the demand for early cancer screening to explode and a market worth hundreds of billions to blossom?

august 16, 2023 capitalwatch, a wall street financial media, released an "investigation report on the fraud of nouva health's financial data", which stated that nouva health created 90% of false sales revenue by constantly suppressing goods, triggering a financial fraud scandal for nouva health;

nouva health immediately issued a clarification announcement entitled "nouva health's statement on the "short-selling" report", pointing out that the report was false, unfounded and misleading, and its purpose was to have a negative impact on the company's stock price and thus satisfy the private interests of the short-selling institutions.

august 17, 2023 nouva health released "nouva health's further statement on the "short-selling" report", reiterating that the company's previously disclosed and published financial information is true and accurate.

september 2023 capitalwatch ceo zhu jiang mailed materials to the hong kong independent commission against corruption to report deloitte, reporting that there may be misconduct by deloitte during the audit process of nouva health.

march 27, 2024 zhu jiang announced that capitalwatch will soon release an investigation report on the fraud of nouva health's 2023 financial data;

deloitte sent a letter of concern to nouva health, questioning the authenticity of its sales and related financial issues.

march 28, 2024 novecare health issued an announcement early in the morning, announcing a temporary suspension of trading from 9 a.m. that day; in the evening, it announced the delay in publishing its 2023 annual results and would continue to suspend trading.

april 8, 2024 novecare health issued an announcement to appoint two independent non-executive directors and establish an independent special committee including two new directors to investigate the matter.

may 23, 2024 novecare health received a letter from the hong kong stock exchange containing the "resumption of trading guidelines", stating that the company must complete all six resumption of trading guidelines, including publishing all unpublished financial results and handling any audit changes, conducting an appropriate independent forensic investigation into audit issues and publishing the investigation results, before the securities are allowed to resume trading.

june 28, 2024 novecare health released a quarterly update on the progress of its resumption of trading, claiming that the investigation is still ongoing and has made substantial progress and interim investigation results.

july 10, 2024 the shenzhen stock exchange issued an announcement stating that novecare health was removed from the list of securities eligible for the "hong kong stock connect".

september 9, 2024 auditor resigned; joint company secretary and chief financial officer resigned.

*the pictures in this article are from nouva health official website and other public channels