Original title: Liars, lunatics, fools: BGI, the absolute leader of China's genetic testing industry and the "Whampoa Military Academy" | One of the keynote reports on the gene sequencing industry:
Author | Wooden box
z in Manhattan, Atomic bomb Manhattan The plan was launched. Three years later, the United States dropped atomic bombs on Hiroshima and Nagasaki, Japan. The surrender of Japan changed the pattern of World War II.
(mushroom clouds of Hiroshima (left) and Nagasaki (right) atomic bombs)
In 1961, the American Apollo moon landing program was launched. In 1972, mankind's first moon landing was successful. The pressure of the arms race eventually brought down the former Soviet Union and the Cold War collapsed. .
(this is a small step for me, but a big step for mankind)
In 1990, the "Human Genome Project" was officially launched, with an estimated investment of 3 billion US dollars within 15 years. This magnificent scientific project aims to map the human genome, identify the genes and their sequences, and achieve the ultimate goal of deciphering human genetic information.
"Human Genome Project" is also known as the third greatest project in human history after the atomic bomb Manhattan Project and the Apollo Moon Project.
DNA is genetic material. The so-called gene sequencing is the sequence of the four bases of DNA (ATCG) in the form of base pairs (A-C, C-G). The
gene is a basic genetic unit with a certain function composed of a piece of DNA. The genome is a synthesis of all biological individuals containing genetic material. The human genome has 23 pairs of DNA, about 20,000-25,000 genes, and 3 billion base pairs.
Follow-up countries have joined the plan one after another. On June 26, 2000, scientists from the United States, Britain, France, Germany, Japan and China who participated in the Human Genome Project jointly announced that the drafting of the human genome has been completed, and China is responsible for the entire 1% of the genome.
1. Those things about BGI genes
When the Human Genome Project was launched in the United States in 1990, mainstream scientists did not approve of the project. Z107z Wang Jian sold a company he started in the early years and mortgaged 40 million yuan from the bank. 30 million and partner Yang Huanming invested in this plan at his own expense.
(Decrypting the BGI gene: from the scientific "bandit" to the "godfather")
BGI was established in September 1999. It is said that when it first started its business, it shared a set of people with the Human Gene Research Center under the Institute of Genetics of the Chinese Academy of Sciences. .
In 2007, he broke away from the system and set up the BGI Gene Research Institute, where BGI Gene (300676.SZ) was born.
BGI has not found a chance to break out for a long time. This is because the cost of gene sequencing is still very high: In 2000, the human genome released the draft of the human genome and it cost a total of 3 billion US dollars, and today it only needs 600 US dollars to obtain a person's genome data. Z3z
Feng Yunjun believes that if the gene sequencing industry is to develop, two conditions must be met: low cost and fast speed!
This is the reason why BGI was called a liar in the early stage. This is also the key point of many high-tech industry investments: Intervene when technology can be commercialized at low cost.
gene sequencing technology has 4 core indicators-read length, cost, and accuracyRate and throughput:
(1) The read length refers to the length of the gene sequence that can be measured by the sequencing reaction. The longer the better, the read length of the first-generation dideoxy chain termination method (Sanger method) is 1000 bp, and the second-generation sequencing is more As low as 50bp-300bp, the third generation can reach 5000bp or more, and the longest read length can even reach 20kb;
(2) The cost refers to the amount of sequencing, such as the aforementioned $600 to obtain a person's genome data.
(3) Accuracy refers to the accuracy of sequencing results. For example, the accuracy of first-generation sequencing can reach 99.999%, and the solid of second-generation sequencing can reach 99.9%. In 2017, the only practical third-generation sequencing pacbio has an accuracy rate of only 85%. ; Z13z
(4) Throughput refers to the amount of data that can be generated per unit time, which is essentially a comprehensive manifestation of sequencing speed and quantity. High-throughput sequencing can sequence millions of sequences at the same time, just like the multi-core CPU , Parallel work efficiency is faster.
In short, we hope that gene sequencing will be longer, lower cost, higher accuracy, and faster. This is also the direction of gene sequencing technology progress in these years.
Historically, gene sequencing technology has gone through three stages of development:
(1) The first stage of development is based on Sanger sequencing, with an accuracy rate of 99.999%, but the high cost and low throughput limit large-scale applications. The gold standard for sequencing technology verification. What does
"gold standard" mean? It is recognized as the most reliable method. The accuracy of new gene sequencing still needs to be verified by the method of Sanger.
(the only person who won the Nobel Prize in Chemistry twice: Sanger. Fengyunjun’s idol, the first time he won the award was to measure the amino acid sequence of insulin, the second time was to measure the base sequence of DNA)
(2) the second stage of development It is based on high-throughput sequencing technology. High-throughput sequencing greatly reduces costs and time, while ensuring a high accuracy rate. It is currently the mainstream technology of gene sequencing.
(high-throughput sequencing process, involving PCR amplification)
(3) The third stage is mainly single-molecule sequencing, relying on physical methods to read directly. The sequencing process does not require PCR amplification, which increases the read length and makes data analysis difficult. Reduced, but the accuracy rate is low, and the technology needs to be improved. It is currently used as a supplement to meet some special research needs of scientific research institutions. The advent of the second-generation high-throughput sequencer
in 2006 made Wang Jian excited: the sequencing capacity has increased a hundredfold, and the cost has been reduced a hundredfold.
Zhou Daixing, who was working for Solexa in the UK (later acquired by Illumina) at the time, approached Wang Jian to promote this sequencer. Wang looked impatient: the first machine could not work due to transportation damage, so he decided to purchase five more.
After this, competitors of BGI Gene also appeared one after another, many of them were former employees:
(1) Berry Gene , one of the founders of , Gao Yang, was the former head of BGI medicine and participated in China almost all the time. Preparation and start-up of the big gene non-invasive prenatal testing project; (download the market value APP, search for "Berry Gene" independent research report) ;
(2) two founders of the gene big data company Carbon Cloud Intelligence Wang Jun, Li Yingrui is the former CEO/dean of BGI and the former CEO of BGI Technology. Founded in 2015, he became a unicorn with a valuation of one billion US dollars in half a year;
(3) Novo, whose business is mainly for basic scientific research services Zhiyuan was founded in 2011 by Li Ruiqiang, the former president of Huada Technology;
(4) Zhao Baiwen, who joined BGI before graduating from high school, also came out and founded Beijing Quantitative Health Technology Co., Ltd., doing intestinal microbial testing;
...
These companies founded by former BGI employees compete with it in different fields. Relationship and compete with it for the market. For example, Nuohe Zhiyuan's income from basic scientific research services exceeds that of BGI. (download the market value APP, follow the "Gene Sequencing Topic Three: Nuohe Origin" in this series of reports.)
2. BGI's blood war broke through
These employees left BGI and founded a new company independently. The management of BGI is severely turbulent. On the other hand, it also shows that technological progress has led to the explosion and maturity of the entire gene sequencing industry. Only these employees can see new opportunities and even be able to raise capital and start business.
Wang Jun, the former CEO of Huada Gene's No. 2 figure, left, and it is said that there is also a "route dispute" with Wang Jian.
(Source: "BGI Gene and the Challenger It Cultivated")
Feng Yunjun agrees more with Wang Jian's ideas (but Wang Jun is also right), because for the genetic testing industry chain, detectors and reagents are Basically, especially when the upstream industry is monopolized, the pricing of upstream equipment vendors is directly related to the survival of midstream sequencing service companies.
For example, the price increase of Illumina reagents in 2014 led to a negative growth in BGI's net profit that year, with a decline of 79.3%.
In this case, BGI must find a way to break through and cannot be controlled by others.
took this most important step: the acquisition of Complete Genomics in the United States in 2013.
Let's first look at the market pattern of upstream sequencers.
Due to competition, mergers and acquisitions, the entire sequencer industry formed a monopoly of Illumina, Thermo Fisher, and Pacific Biosciences in 2015:
(1) Illumina: acquired Solexa’s sequencing technology in 2006 and developed it on this basis Produced a full series of next-generation gene sequencers (second-generation high-throughput sequencers), and subsequently acquired British genetic mutation sequencing service companies Blue Gnome and Verinata Health, which accounted for 71% of the global market share in 2013;
(2) Thermo Fisher: Acquired Life Technologies in 2013 and Affymetrix, a US gene chip representative company, in 2016, which accounted for 16% of the global market share in 2013;
(3) Pacific Biosciences has successively updated PacBio RS II and PacBio Sequel, etc. The series of single-molecule sequencers also occupy a certain market share;
(4) In 2013, Roche announced the closure of the 454 sequencing business and decided to terminate related services in 2016. The 454 sequencer gradually withdrew from the market.
(Industry pattern in 2015)
In November 2018, Illumina acquired Pacific Biosciences for 1.2 billion yuan, and took the top spot in the global gene sequencing industry, and the industry entered the duopoly of Illumina and Thermo Fisher.
Therefore, at the time when the upstream of the industry was in a monopoly pattern, BGI had to fundamentally solve the problem of sequencers.
acquired the American sequencing company Complete Genomics (hereinafter referred to as “CG Company”) for US$117 million in March 2013 in order to improve its independent research and development capabilities for sequencers and reduce the cost of sequencing services. However, the main body of the acquisition was Huada Gene’s controlling shareholder Hua Big holdings.
(The controlling shareholder of BGI Gene is BGI Holdings, as of December 31, 2016)
3. How big is BGI?
This raises a question: how big is
Huada Holdings? How much assets does the listed entity occupy? How about related transactions? Is BGI Gene Independent?
This is one of the most important issues of BGI. It is the root cause of a large number of related transactions, so it needs to be analyzed.
(1) BGI’s asset map
In fact, the listed company BGI is only a part of BGI’s securitization. BGI also includes research institutes, colleges, academic journals GigaScience, and intellectual manufacturing ( Sequencer development), agriculture, justice, health and other sectors.
(shareholding structure: open source securities)
Huada Holdings not only has profitable companies, but also non-profit institutions, such as the Shenzhen Huada Life Science Research Institute, which is engaged in research and development, as well as Huada Agriculture, Huada Intelligent Manufacturing and other industries mechanism. The BGI gene listed on
is only one of the sections for localization testing.
According to relevant information, more quality assets of are not in listed companies, but in the hands of Huada Holdings. For example, it is said that Huada Agriculture and Huada Zhizhi have better profitability than Huada Gene, and Huada Holdings only has one-ninth. The assets are listed.
Since Huada Gene does not disclose the controlling shareholder’s assets and its profitability, it is difficult for us to judge how big Huada Holdings is, but the handsome, windy and suave Feng Yunjun found a clever way to judge: that is, the scale of research and development expenditures. .
The research and development of BGI Holdings and its subsidiaries can be divided into two categories:
(1) basic research and development projects supported by national/local funds and the national gene bank;
(2) forensic identification technology research, sequencing, basic agricultural science research Instrument technology, etc.
Some research directions of Huada Holdings and its subsidiaries are overlapping. The research and development expenses in 2016 before listing totaled 730 million.
(2016 R&D expenses of BGI)
In 2016, BGI’s research and development expenses were 177 million, and BGI’s research expenses were about four times that of BGI. If calculated according to R&D expenses, the size of BGI’s genes is equivalent One-fifth of Huada Holdings.
In addition to BGI, BGI has many sections:
(1) BGI Regional Company: The main function is to assist the BGI Research Institute to expand and develop basic scientific research projects in various regions at home and abroad.
(2) Huada Agriculture: conduct animal and plant breeding, planting and breeding, including crops, aquatic animals and plants, etc., mainly to provide products, including tilapia, grouper, green goat breeding and breeding, rice, millet Breeding and planting, etc.
(3) Sequencing equipment: including the acquired CG company, BGI equipment that specializes in in-house sequencing technology research and development and sequencing equipment manufacturing, and sequencersAnd the research and development, production and sales of supporting reagents made by Huada Zhizhi and Wuhan...
(4) Other: Huada Internet is mainly engaged in e-commerce, Huada Logistics is mainly engaged in professional cold chain transportation, Huada Forensic, Huada Fangrui, The main business of the Judicial Identification Institute is forensic identification...
(5) Basic research: BGI Research Institute, Yunnan Research Institute, Shenzhen BGI Research Center, the main business is to engage in the basic scientific research of international frontier genomics, and does not engage in For-profit activities.
(6) Education: Huada College’s main business is the education and training of talents in life sciences; the industry-university-research funding alliance aims to promote gene technology and market cutting-edge science. The main business is member exchange and training; Huada kindergarten owner The business is preschool education for school-age children.
The business of these companies overlaps with BGI Gene or is located in the upstream and downstream areas, especially the sequencing equipment section, so more related transactions have occurred.
(BGI Gene Fire Eye Laboratory)
(2) How about related transactions?
From 2014 to 2016, the total amount of BGI related transactions was 39.63 million, 48.49 million, and 81.65 million, of which the amount of services provided accounted for a very small proportion, and the proportion of purchased materials (sequencer accessories and consumables), sequencers and services High, but also a certain percentage.
(2014-2016 total related transactions of BGI)
Then, how are related transactions priced? Fair or not?
Huada Gene has two main pricing methods:
(1) gene sequencing services (including procurement services and provision of services) are priced at market prices because they can easily obtain similar business prices in the market;
(2) is very customizable For strong businesses (sequencers and accessories, technology development, clinical sequencing, etc.), when the market is difficult to find a year-on-year business price, the purchase cost plus price is set.
takes the sequencer as an example. In 2014, the CG sequencer was purchased. After the localization in 2016, the two domestic related parties, MGI and Hong Kong equipment, were purchased, using cost-plus pricing.
(purchasing related-party transaction instruments)
There are also materials, including sequencer components (optical system, housing module, main frame module, etc.), reagent consumables, which belong to the upstream of the sequencer, and cost-plus pricing is adopted.
(Purchasing related-party transaction materials)
CG cost markup rate is determined by referring to the average gross profit margin of the industry combined with the comprehensive cost. According to the average gross margin, the reagent cost markup rate is 166%, and the spare parts cost markup rate is 26%.
(CG peer gross margin)
Huada Zhizhi’s addition rate principle is the same as CG, and the cost addition rate is 178% or 39%. According to the cost-plus method used in the construction of the
sequencer and the pricing of reagents, Feng Yunjun believes that the gross profit margin of 62.5% is within a reasonable range, but unfortunately this part of the assets is not in the listed company.
takes the BGISEQ-500 sequencer of BGI as an example. Although the property rights and assembly belong to a listed company, the core components and consumables need to be purchased from related parties (such as MGI).
This also resulted in a relatively large amount of related-party transactions of BGI, especially related-party procurement.
From 2017 to 2019, the largest supplier is a related party, with purchases of 300 million, 650 million, and 640 million, respectively, accounting for 34.81%, 45.83%, and 5 of the total purchases.0.31%.
(the first supplier in 2019 is a related party)
The net profit attributable to the parent in the same period was 398 million, 387 million and 276 million, respectively. In 2018 and 2019, the amount of related party purchases was much higher than the net profit. The content purchased by the related party
is equipment (sequencer) and materials (sequencer components, reagents).
(Major related transactions in 2019)
The total amount of related transactions in 2019 was 719 million, of which the amount of purchasing related transactions was 659 million, and the amount of sales related transactions was 60.92 million. There are still more related transactions of purchasing nature.
In February 2020, BGI predicts that the total amount of related-party transactions in 2020 will not exceed 637 million, of which the amount of related-party transactions for purchases is 498 million and the amount of related-party transactions for sales is 121 million.
However, with the development of the new crown epidemic prevention and control and business development, BGI has repeatedly announced an increase in the amount of connected transactions:
will increase by 165 million in 2020 on April 23, 2020;
will increase by 2 in 2020 on April 30, 2020. 100 million;
On June 19, 2020, an additional 50 million will be added to logistics and transportation procurement related services.
(3) Inquiries from regulators
The related transactions of Huada Gene are not only issues that investors pay close attention to, but also the focus of attention of regulators.
On April 8, 2019, the Shenzhen Stock Exchange asked about some related-party transactions of Huada Gene:
(1) Shenzhen Huada Life Sciences Research Institute (owned by the controlling shareholder Huada Holdings) Dr. Song, participated in the 2017 and In 2018, your company's "Non-Small Cell Lung Cancer ctDNA Detection Kit (NGS) Registration Application Project" and "Colorectal Cancer Early Screening Multiple Methylation PCR Technology Development Project" were included as one of the first project research results. The first inventor.
(2) The contract number signed by your company’s subsidiary Shenzhen Huada Gene Biomedical Engineering Co., Ltd. and your company’s related party Shenzhen Huada Zhizao Technology Co., Ltd. is 13100-600086, the contract amount is 128 million yuan, and the contract is agreed The payment method is "100% prepaid", but your company actually paid 159 million yuan after the contract was signed.
Fengyunjun animal language level eight, the above inquiry letter translates into:
(1) The listed company gave money to Dr. Song from the related party Huada Research Institute, and he was also the first inventor. Isn't this the only thing to do?
(2) 100% prepaid payment to related parties, and overpaid, why? The explanation of
BGI is:
(1) Dr. Song joined BGI in 2013 and intends to participate in post-doctoral projects in 2015. Considering that he cannot devote full time to the R&D of listed companies and avoid occupying the resources of listed companies, the application will be prepared Transferred to BGI Research Institute. Dr. Song joined the postdoctoral workstation in 2016 and will rejoin the listed company after the completion of the postdoctoral project.
(2) The payment of 159 million yuan includes not only the 13100-600086 contract (contract value of 128 million), but also the 13100-600121 (contract value of 164 million). The transaction model of partial delivery and 100% prepayment is in line with the industry's equipment procurement and settlement practices, and does not constitute the occupation of funds by related parties.
Fengyun Jun thinks the reason is reluctantExplainable. But this is also the core question of BGI: Is
independent? Are people, business, and related parties separated?
In addition to the association problem, there are still irregularities in the BGI gene. For example, in April 2019, the company received the "Decision on Ordering Corrections to Shenzhen Huada Gene Co., Ltd." issued by the China Securities Regulatory Commission, requesting rectification:
(1) Order-type business has intertemporal cancellation of delivery and causes Related income cost accounting inter-period issues, resulting in an undercalculation of 500,000 yuan in revenue and 420,000 yuan in net profit in 2017;
(2) Order-type business has duplicate sample codes and causes double accounting problems, which makes 2017 an extra 380,000 yuan in revenue , Net profit is 320,000 yuan.
(3) When the test report is sent out by mail (the BGI gene order-type service is to confirm the income when the mail is sent to the customer), the recipient's mailbox information has no written verification record, such as the recipient's mailbox name suffix @qq.com , There are situations in which it is impossible to accurately verify that the recipient of the report is a hospital staff, agent, or test patient, it is difficult to accurately determine whether the recipient belongs to the contractual object, and the business standardization is difficult to effectively guarantee.
(4) Some project-based income accounting is inconsistent with accounting policies, and related income accounting is not standardized;
(5) The degree of standardized operation is not high. For example, some of the actual financial systems implemented are those of the controlling shareholder Huada Holdings, and Huada Holdings Some financial systems of listed companies can be abolished.
(6) is the above Dr. Song, spanning the listed company and the controlling shareholder.
(4) Pledge and reduction of
It is precisely because of the large business footprint of BGI, BGI’s in vitro funding requirements are also expected to be substantial.
At the end of 2019, the controlling shareholder of Huada Gene and its concerted person Huada Sanshengyuan held 38.17% of the company's share capital, and the pledge accounted for 91.57% of the company's shares and 34.95% of the total share capital. The pledge rate of
is too high, which is also one of the risks of BGI. We do not know the flow and use of funds outside the body.
Shenzhen Qianhai Huada Gene Investment Enterprise (Limited Partnership), hereinafter referred to as "BGI Investment", after being listed in 2017, holds 16.72% of the shares of Huada Gene and is the second largest shareholder.
planned to reduce its holdings by 3% in October 2018, and is expected to reduce its holdings by 1% in 2019. As of the end of 2019, BGI's shareholding ratio has been reduced from 16.72% to 12.72%.
will reduce its holdings as soon as the ban is lifted. What is the purpose of the reduction of Huada Investment? Is it employee stock ownership? Z2z
Fengyunjun checked BGI's investment and found that it was basically all company executives, including the directors and supervisors of BGI, but the two largest persons were Wang Jun and Yang Huanming.
(the top 13 largest shareholders of Huada Investment)
Wang Jun and Li Yingrui left before listing and founded Carbon Cloud. The purpose of reducing holdings is the need for venture capital.
If this is the case, then it is expected that Huada Investment will continue to reduce its holdings.
(picture from the Internet)
4. Technically, the leading position in China is firmly established.
There are not many companies or units in China that have independent research and development of sequencers:
(1) Boao Bio also developed biochips and biochips with independent property rights. Related instruments and software databases have successfully developed many countries and regions;
(2) The Beijing Institute of Genomics, Chinese Academy of Sciences released a new domestic gene sequencer in 2015.
(3) and the BGI gene that has been digested and absorbed CG and re-created;
From 2014 to 2016, BGI also purchased chips and sequencer accessories from CG for BGISEQ-1000 sequencing platform supporting reagents. BGI was launched in 2016 After the self-developed improved sequencing platform BGISEQ-500, it mainly purchases reagent chips and sequencer accessories made by MGI.
It is through the acquisition of CG and digestion and improvement of its technology that BGI has become the first in many technical applications in China.
(1) The field of non-invasive prenatal testing
In 2014, the first non-invasive prenatal sequencer was approved by BGI's two products, namely BGISEQ-100 based on Thermo Fisher technology and BGISEQ-1000 based on CG technology.
(comparison of four domestic sequencers in 2017)
From the above figure, we can know: BGISEQ-1000 of BGI in June 2014 or the technology of acquiring CG, no matter it is read length, high throughput, it is not better than Berry Gene is based on NextSeqCN500, a product developed by Illumina technology.
BGISEQ-500 independently developed by BGI Gene in October 2006, after the comparison result of BGI-SEQ 500 and Illumina NovaSeq used by DNAnexus (a provider of DNA data storage, sharing, analysis, and management services) in July 2018, it shows The difference is not big.
As of the end of 2019, BGISEQ-500 has more than 120 prenatal diagnosis centers (371 nationwide) equipped with more than 140 sequencers, and it is also operating in many countries or regions overseas.
In addition, BGI's genetic testing reagents were also approved in June 2014 at the earliest, more than half a year earlier than competitors Berry and Kang; testing software was also approved at the earliest in March 2017, earlier than competitors Berry and Kang For more than 2 years.
(the status of products approved for non-invasive prenatal testing)
(2) Tumor detection field
On August 29, 2019, the “EGFR/ KRAS/ALK Gene Mutation Joint Detection Kit (Combined Probe-anchored Polymerization Sequencing Method)” has passed the registration and approval of three types of medical device products.
This is China's first tumor gene detection kit based on a domestic high-throughput sequencer, breaking the monopoly of imported sequencers in the field of tumor gene detection kits.
From the aspect of product testing, BGI can detect hereditary tumors, breast cancer, lung cancer, rectal cancer, prostate cancer, stomach cancer, etc.
(part of tumor detection products)
For example, in August 2019, BGI's EGFR/KRAS/ALK gene mutation joint detection kit (joint probe-anchored polymer sequencing method) obtained the registration certificate of the National Medical Products Administration and was approved for listing , The brand name "Hua Fei Ran", used to detect lung cancer.
(3) New crown virus detection field
BGI is the first nucleic acid testing company to be listed on the market. On January 26, 2020, the State Food and Drug Administration urgently approved 4 companies and 4 new crown virus test products:
(1) BGI Gene detection kit;
(2) MGI DNBSEQ-T7 sequencing system;
(3) Shanghai Zhijiang Bioassay Kit;
(4) Shanghai Geno Bioassay Kit;
Among them, BGI has two detection kits: fluorescent PCR method, combined probe anchor polymerization sequencing method. Different kits need to be matched with corresponding sequencers, and the registration certificate is valid for one year.
(Remarks: Huada Biotechnology (Wuhan) Co., Ltd. is a wholly-owned subsidiary of Huada Gene)
fluorescent PCR method is a commonly used traditional technology, PCR technology is characterized by the ability to greatly increase very small amounts of DNA, fluorescence It is used for marking. The joint probe-anchored polymerization sequencing method belongs to gene sequencing, which is a self-developed technology of BGI. It was registered in November 2015 for the kit and registered for the tester in October 2016.
Judging from the currently approved nucleic acid detection technology, fluorescent PCR is the mainstream method.
(Registration Certificate for Nucleic Acid Testing Products issued by the National Food and Drug Administration as of April 27, 2020)
(4) R&D investment
At present, BGI has multiple sequencing platforms BGISEQ-50 and BGISEQ- that can be used for medical testing. 500, MGISEQ-200, MGISEQ-2000, DNBSEQ-T7, etc., have the characteristics of fast, flexible and ultra-high throughput.
In 2019, a million-level detection throughput fully automated platform with independent research and development of core hardware and control systems was installed, realizing automated and intelligent detection of large sample volumes.
BGI has developed new products or technologies in various fields:
(1) Reproductive health: BGI can not only detect non-integer chromosomes, single-gene genetic diseases, etc., but also has one more mass spectrum than Berry Gene. The platform can detect neonatal genetic metabolic disease screening, pregnancy nutrition testing, human amino acid testing, human vitamin testing, human steroid hormone testing, etc.;
(2) Oncology: not only clinical testing for existing cancer patients, but also completion Z13z
(3) Infectious areas: BGI’s PMseq® high-throughput genetic testing of pathogenic microorganisms based on metagenomics, as the company’s main product, can directly perform high-throughput genetic testing on infected specimens. Throughput sequencing, this is where BGI Gene does better than Berry Gene;
(4) Research service area: BGI Gene can provide services such as gene sequencing, mass spectrometry, biological database, cloud computing, and gene synthesis. , Site-directed mutagenesis, Oligo synthesis and whole genome/chromosome fragment system design, transformation and synthesis services;
(5) Comprehensive solution: In fact, it is to help customers build laboratories, sell sequencers, reagents and software. This piece of BGI has already done To independent research and development.
From the perspective of product breadth, technology depth, new technology development, and own technology, Nuohezhiyuan and Berry Gene are indeed far from BGI Gene. (Search and download "Market Capitalization APP" in major application stores, and get the first-hand independent research report of Nuohe Zhiyuan and Berry Gene for the first time)
Compared with companies in the same industry, Huada Gene has the highest absolute amount of R&D investment, and R&D investment The proportion of income is also higher than that of Nuohe Zhiyuan and Berry Gene.
often has litigation with competitors in terms of technology patents:
(1) BGI Gene was authorized by Berry Gene's Astronomer to infringe the "Non-invasive Fetal DNA Prenatal Screening Law" of the Chinese University of Hong Kong. 8.58 millionreconciliation.
(2) Illumina and BGI and related companies also have many lawsuits, each believing that each other has infringed their own technology patent rights.
As of 2019, BGI has 655 R&D personnel, accounting for 18.27%. There is a certain amount of capitalization of R&D expenditure, but the proportion is not high.
5. The market is firmly established as the industry leader
(1) The original business situation
2015-2019 BGI's revenue has increased every year: from 2015 and 2019, the revenue increased from RMB 2.819 billion to no more than RMB 1.319 billion in 2018. Increased profits.
The main reason for the decline in profits, in addition to the increase in R&D investment, is the increase in sales expenses, which are much higher than R&D expenses.
The highest proportion of sales expenses are employee compensation, marketing expenses and business insurance premiums, not the highest proportion of marketing expenses. Fengyun Jun believes that the structure is reasonable.
(details of sales expenses in 2019 and 2018)
business insurance premiums are estimated to be brought by non-invasive prenatal genetic testing business, because of technical limitations, there may be detection errors-false positives and false negatives (alleged prenatal genes) The sensitivity is 99.5%), BGI has insured the subjects.
BGI’s revenue in 2019 was 2.8 billion, of which:
(1) clinical applications (reproductive health, tumors, infections) accounted for the highest 55%, and scientific research services (multi-omics big data services and synthesis services) accounted for 24.34%. Sales of instruments and reagents (comprehensive solutions for precision medical testing) accounted for 20.30%;
(2) Infection revenue only accounted for 2.9%, but the growth rate was indeed the highest. The new crown epidemic also gave BGI's revenue Bring huge growth opportunities, which will be analyzed in detail later.
Huada Gene's income compared with Berry Gene and Novo Gene is:
(1) Like Berry Gene, BGI’s reproductive health income also accounts for the highest proportion, with 1.176 billion in 2019, and Berry Gene has not disclosed. Specific amount.
(2) BGI's clinical application of genes (including fertility, tumor, infection), the total revenue in 2019 was 1.54 billion, compared with Berry Gene's 644 million in 2019.
(3) BGI's genetic instruments and reagents have revenue of 571 million in 2019, which is 583 million compared to Berry Gene, which is less than Berry Gene.
(4) BGI's genetic research service has revenue of 681 million in 2019, and Nuovo Zhiyuan’s 1.369 billion, which is less than Nuovo Zhiyuan.
(5) In 2019, BGI Gene's revenue was 2.8 billion, Berry Gene's revenue was 1.617 billion, and Nuohezhiyuan was 1.535 billion.
The gross profit margin of Huada Gene is between Nuohezhiyuan and Berry Gene, but it has been declining in the past three years, which is also an important reason for increasing revenue but not profit.
The gross profit margin of the reproductive health business and medical testing integrated solutions is relatively high, and the multi-group learning big data service and synthesis business seriously drag down the company's gross profit margin.
BGI Gene's 80% business is concentrated in China. After the outbreak of the new crown epidemic, it is expected that the proportion of overseas revenue will increase a lot in 2020.
(2) Opportunities of the new crown epidemic
In 2020, BGI's genetic infection business has achieved significant results.
With its new crown nucleic acid detection technology, BGI is one of the first domestic companies to obtain foreign certification or registration:
February 26, 2020, obtained the EU free sales certificate, valid for 2 years;
March 26, 2020 , Obtained U.S. FDA emergency use authorization, only used in authorized laboratories under emergency conditions;
obtained Japanese PMDA certification on March 27, 2020;
obtained Australian TGA registration on April 11, 2020, for use only by testing laboratories and cannot be used Point-of-care testing;
passed the certification of Health Canada on May 7, 2020 and authorized by the Singapore Health Sciences Agency;
on May 11, 2020, the new crown nucleic acid test product was included in the World Health Organization emergency use list, valid for one year.
is also the company with the most overseas registrations:
(as of April 28, 2020)
Huada Gene has set up a "fire eye" laboratory in many countries, which is actually a large-scale, standardized nucleic acid testing platform that can quickly detect New coronavirus, and detect the mutations that may occur during the spread of the new coronavirus.
(pictured from BGI Gene)
Of course, these instruments and reagents are all purchased from BGI DNBSEQ-T7, DNBSEQ-G400, MGISP-960 high-throughput equipment.
From March to April 28, 2020, BGI's new crown detection products have been sold overseas one after another. Overseas orders cover more than 80 countries/regions, and a total of 20 million units have been shipped. The price is 25 yuan per person (province set). Picking price) -179 yuan/person (Pingduoduo price), about 500 million-3.6 billion yuan.
On April 26, 2020, BGI and Saudi Arabia signed a contract not exceeding US$265 million in Hong Kong, with a contract period of 8 months.
Reuters reported on May 14 that Australia said it had purchased 10 million kits from BGI.
Domestic: On April 26, 2020, there are 6 companies in the list of the winning bids for the collection of Hubei new crown virus detection reagents, including BGI, although the price of 24.99 yuan per person is the highest.
However, the follow-up collection of Guizhou, Fujian and Heilongjiang provinces, BGI is not in the pre-winning list.
April 2020 BGI's first quarter notice: operating income is expected to increase by 30%-40% year-on-year. The cause of
is the impact of the new crown pneumonia epidemic, and the market demand for test kits has greatly increased. The entire infection prevention and control business and the precision medical detection integrated solution business achieved rapid growth during the reporting period.
In the first quarter of 2020, revenue will eventually increase by 35.78% year-on-year, net profit will increase by 42.59% year-on-year, and net profit deducted from the parent will increase by 29.11% year-on-year.
(data for the first quarter of 2020)
The most critical indicatorIt is contract liabilities. In the first quarter of 2020, it was 828 million, an increase of 63.51% from 506 million at the end of 2019. It was also mainly due to the increase in the payment for new crown testing kits received in advance.
(3) Important assets: fixed assets + accounts receivable
The common financial feature of genetic testing companies is that they account for a high proportion of fixed assets and belong to a “heavy asset” industry. In 2019, BGI Gene’s fixed assets had 1.126 billion and are under construction. There are 185 million, accounting for 18% of total assets.
The largest proportion of fixed assets is production equipment, mainly sequencers.
Regarding equipment, the depreciation of Huada Gene is 5-10 years, Binoco Gene is 5 years, Berry Gene is 5-8 years, Daan Gene is 3-10 years, and the depreciation is relatively loose.
Huada Gene's second largest financial subject is accounts receivable. The balance of accounts receivable in 2019 is 1.232 billion, and the age of accounts is mainly within one year.
From January 1, 2019, Huada Gene will measure credit loss provisions for accounts receivable based on the entire duration of expected credit loss, and the overall provisioning is relatively strict.
Judging from the top five accounts receivable, the degree of concentration is not high, indicating that customers are relatively scattered and do not rely on major customers.
Due to large capital expenditures such as fixed assets, BGI actually has relatively low free cash flow.
VI. Summary
Huada Gene is only a small part of the listed assets of Huada Holdings. Better quality Huada Intelligent Manufacturing and Huada Agriculture are not listed. They must purchase sequencers, accessories and reagents from related parties every year. In 2019, it basically accounted for half of the total purchases.
BGI Holdings has a large business footprint, which also brings two risks to BGI: connected transactions and high pledge rate. The resignation of former core executives of
caused the second largest shareholder Huada Investment to continue to reduce its holdings.
In addition, BGI also has irregular management.
However, compared with competitors, BGI is superior to its competitors in terms of revenue scale, technological advancement, and development of new crown testing products, and some of the founders of the competitors are from BGI. "Whampoa Military Academy" in the field of genetic testing in China.
From the perspective of the entire industry chain, whether it is upstream gene sequencers, reagents and software, midstream gene detection technology and large gene databases, or downstream clinical applications, BGI is much better than its competitors.
and BGI has paid dividends every year after its listing. The dividend rates from 2017 to 2019 are 30.15%, 31.04%, and 14.48%.
New crown testing products in 2020 will contribute significantly to the growth of BGI's revenue.
Currently, there is a second outbreak of the new crown epidemic overseas, and the epidemic is far from over. The short-term performance growth of BGI in the past two years is worry-free.
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