Break through the giant blockade! The scarce and top domestic high-end instrument leader has greater potential than Lianying

In the field of high-end medical devices, it is not only Lianying Medical that bears the burden of localization substitution, but also BGI Intelligent Manufacturing

Although the two companies belong to different business areas, they have attracted great attention

As a leading domestic medical imaging company, Lianying Medical has landed on the science and technology innovation board market and has been affirmed by the capital market, with a total market value of more than 150 billion yuan, while the IPO of BGI Intelligent Manufacturing Science and Technology Innovation Board, as the leader of gene sequencers, was registered in July this year and approved by the CSRC and will be listed

And won the affirmation of the capital market, the total market value of more than 150 billion yuan, as a gene sequencer leader, BGI Intelligent Science and Technology Innovation Board IPO registration in July this year was approved by the CSRC, will be listed on August 31

01 Breaking the monopoly of multinational giants, the new crown epidemic has driven performance growth

01 Breaking the monopoly of multinational giants, the new crown epidemic has driven performance growth

In addition to BGI Gene, which is helmed by Wang Jian, in addition to BGI Gene, which focuses on providing genetic testing services, there is also a company with great scientific research strength - BGI Intelligent Manufacturing

In 2013, in order to break Illumina's monopoly position in the second-generation gene sequencing market, BGI Group acquired Illustrat Genomics (CG), a competitor of Illumina, to obtain core patented technologies and form a sequencer research and development team to seek to get rid of the dilemma

We seek to get rid of the dilemma

Nowadays, BGI Intelligent Manufacturing continues to innovate based on the technology of CG Company, mastering the core technologies of gene sequencing, library preparation, laboratory automation and other fields, and forming two major sectors

And the formation of gene sequencer business and laboratory automation business two major sectors

Gradually from the initial loss of the establishment to the realization of the turnaround, this is mainly due to the company's continuous high investment in

From the perspective of revenue composition, the gene sequencer business and laboratory automation business are the main sources of income for

From the perspective of revenue composition, the gene sequencer business and laboratory automation business are the main sources of income for

1.

Specifically, the higher revenue of instruments and equipment in 2019 is mainly due to the increase in demand for downstream gene sequencing service products, the significant increase in overseas customers, and the introduction of a number of new sequencing instruments that have been widely recognized by downstream customers; The sharp decline in revenue in 2020 was mainly due to the slowdown in the growth of the company's customer demand due to the NEW CROWN epidemic; In 2021, business recovered with the COVID-19 pandemic easing, and revenue was higher than in 2019

In 2021, the company's main business income unrelated to the epidemic was 1.

(BGI Intelligent Manufacturing Products Source: Prospectus, Shenwan Hongyuan Research)

2.

2.
Laboratory automation business

From 2019 to 2021, the company's laboratory automation business revenue was 58.
97 million yuan, 2.
062 billion yuan and 2.
192 billion yuan respectively, accounting for 5.
45%, 74.
87% and 56.
27%
of the company's total revenue.

Specifically, the performance in 2020 and 2021 has increased significantly, mainly due to the outbreak of the new crown epidemic, and the company has increased the production and sales of automated sample processing systems and extraction sample processing reagents to the CDC, customs, third-party medical inspection agencies, enterprises, government agencies and other units, which has led to a significant increase in
laboratory automation business revenue.
In 2021, the company's revenue related to the new crown epidemic was 2.
344 billion yuan, accounting for 59.
67% of the current operating income, mainly from the laboratory automation business segment
.

Mainly from the laboratory automation business segment
.

02 Master the core technology and build an upstream moat

02 Master the core technology and build an upstream moat

Whether it is innovative drugs or domestic medical devices, it has always wanted to open the door to the international market and prove the strength
of domestic enterprises.
However, if you want to enter the international market, you must face problems such as patent interception and multinational giants" "stuck necks" on core technologies
.

The reason why BGI Intelligent Manufacturing was able to win the patent dispute with global sequencing giant Illumina is that it firmly grasps the core technology
.
This is also the core reason
why it can break the monopoly of multinational giants on the "national heavy device" gene sequencer.

It lies in firmly grasping the core technology
.
This is also the core reason
why it can break the monopoly of multinational giants on the "national heavy device" gene sequencer.

More critically, through this event that caused a global sensation, BGI Intelligent Manufacturing can not only enhance the brand effect, expand more downstream application scenarios, but also knock on the "door" of the US and European markets
.

It also knocked on the "door" of the American and European markets
.

According to the results of the litigation, the two parties reached a settlement and agreed that in the next three years, they will not sue each other and their customers for patent infringement, violations of U.
S.
antitrust laws or unfair competition, and will not compensate for
the losses that may be caused by the existing sequencing platform.

Based on this, BGI announced that it will start selling its CooIMPS technology-based sequencing products in the United States in August 2022 and Will start selling StandardMPS-related sequencing products in January 2023; At the same time, on July 8 this year, BGI also announced that it would officially sell the sequencing equipment of HotMPS high-throughput sequencing reagents in the UK market from now on, reversing the situation that the previous dispute case was unclear and unable to enter the UK market
.

It reversed the previous situation that could not enter the British market due to the unclear outcome of the
dispute.

It should be known that the previous revenue of BGI Intelligent Manufacturing mainly came from Chinese mainland and Hong Kong, Macao and Taiwan, for example, in 2019, it accounted for 90.
66%.

However, in recent years, with the help of the outbreak of the new crown epidemic, BGI Intelligent Manufacturing has accelerated the pace of entering the international market and established a global marketing system, which has made the proportion of overseas markets in the company's revenue rise sharply, accounting for 67.
49% and 54.
31%
in 2020 and 2021, respectively.

As a result, the proportion of overseas markets in the company's revenue has increased significantly, accounting for 67.
49% and 54.
31%
in 2020 and 2021, respectively.

In addition, by the end of 2021, the company's business layout is more than 80 countries and regions on six continents, serving more than 1,300 users in the world, and has set up scientific research, production bases and training and after-sales service centers in many countries and regions
around the world.

It can be seen that only by mastering the core technology is the "golden key" to open the international market, and can we also build an upstream moat with high technical barriers
.

It can be seen that only by mastering the core technology is the "golden key" to open the international market, and can we also build an upstream moat with high technical barriers
.

As a technology-driven gene sequencing industry, gene sequencing technology is the core of gene sequencers, and technological innovation will directly affect the cost of gene sequencing products to enter the market and promote applications
.

Since ABI launched the first commercial gene sequencing equipment in 1986, gene sequencing technology has undergone an update and iteration
of four generations of sequencing technology such as Sanger dideoxy termination method, synthesis-while sequencing method, single-molecule sequencing and nanopore sequencing.

Different sequencing techniques have different characteristics and have different advantages and disadvantages in indicators such as cost, reading length, throughput and accuracy
.
Among them, the second generation of sequencing technology (also known as high-throughput sequencing, NGS) has a high usage rate with high throughput and high accuracy, which has become the mainstream gene sequencing technology and is expected to remain mainstream for a long time
.

Gene sequencing technology, which has become the mainstream at present, is expected to remain mainstream for a long time
.

High-throughput sequencing technology is divided into three major technical schools: the technical route of bridge PCR amplification and the combination of synthesis and sequencing while synthesis represented by Illumina, the technical route of combining emulsion PCR amplification and semiconductor sequencing represented by Thermo Fisher, and the technical route of combining DNA nanospheres and joint probe anchor polymerization represented by BGI Intelligent Manufacturing
.

The technical route of combining DNA nanospheres and joint probe anchor polymerization represented by BGI Intelligent Manufacturing
.

It can be seen that BGI Intelligent Manufacturing is precisely by virtue of the fact that it is the only few high-end manufacturers in the world that have the ability to independently develop and mass-produce clinical-grade sequencers with Illumina and Thermo Fisher, which together occupy more than 90% of the global market share and firmly occupy the upstream market
of the gene sequencing industry chain.

In contrast, the business model of gene sequencing service providers in the middle of the industrial chain is mainly to provide sequencing services
to customers such as scientific research institutions, research hospitals, and biomedical companies by purchasing upstream gene sequencers, reagents, consumables and other products, and building a large-scale sequencing platform.

However, because such gene sequencing enterprises mainly adopt the mode of OEM cooperation, although the product landing is fast, the overall bargaining power is weak, some enterprises are subject to foreign instrument and reagent providers, and more services for specific genetic testing products, it is difficult to expand more application scenarios, the market threshold is low and the ceiling is obvious
.
In addition, unlike the oligopoly pattern in the upstream of the industrial chain, the profitability of the midstream market is relatively weak
due to the large number of such enterprises and the fierce competition.

Because such gene sequencing companies mainly adopt the mode of OEM cooperation, although the products land quickly, the overall bargaining power is weak

03 Expand business boundaries, the replicability of the "sell shovel man" model

03 Expand business boundaries, the replicability of the "sell shovel man" model

As BGI clearly indicated in the prospectus, as the new crown epidemic is gradually controlled, the instrument and reagent business of the laboratory automation sector that accounts for a higher proportion of the company's total revenue in recent years and the fight against the new crown epidemic will be affected
.

Therefore, in the long run, the gene sequencer business that recovered after the epidemic eased in 2021 and whose income was higher than the 2019 level is an important performance contribution point
.

Based on this, BGI Intelligent Manufacturing has also used industrialization thinking to continuously expand business boundaries and enhance scale effects
in the past two years.

On the one hand, relying on the core technology, closely following the development trend of "miniaturization" and "ultra-high throughput" of gene sequencers, we have targeted the development of small and medium-sized desktop sequencers and large and ultra-large sequencers, and established a full range of multi-model product matrix, which can meet the needs of users in different application scenarios and further reduce the cost
of gene sequencing products through scale effects.

On the other hand, with multi-omics solutions as the core tools of top-level life science and technology, it has developed new business directions, laid out new business sectors such as cytomic solutions, remote ultrasound robots, and BIT products, and provided more diversified products and services
for downstream customers in the industry.

Not only that, the problem of "high related party transactions with BGI Gene", which was previously criticized by the market, has also been solved
.

Not only that, the problem of "high related party transactions with BGI Gene", which was previously criticized by the market, has also been solved
.

Previously, revenue from BGI had a relatively high
proportion of the company's operating income.
For example, in 2019, the total sales amount of the company's top five customers accounted for 79.
18% of the operating income in the same period, of which BGI gene accounted for 55.
92%, which means that a single company contributed "half of the company's revenue"
.

Among them, BGI gene accounted for 55.
92%, which means that a single company contributed "half of the company's revenue"
.

However, in recent years, due to the continuous improvement of the marketing system, the active expansion of the third-party market, and the wider range of customers, not only has the concentration of customers decreased, but also the proportion of related party sales has also decreased
significantly.
In 2020 and 2021, the total sales amount of the company's top five customers accounted for 34.
71% and 25.
95% of the operating income in the same period, respectively, of which the proportion of BGI Gene dropped to 17.
15% and 14.
2%
respectively.

In fact, the decrease in customer concentration is mainly due to the increase
in scale effect.

In fact, the decrease in customer concentration is mainly due to the increase
in scale effect.

As Michael Porter mentions in his book Competitive Strategy, the strategy of "reducing product costs through economies of scale" is at the heart of what makes Illumina a global sequencing leader
.

Since the acquisition of sequencer manufacturer Solexa in 2006, Illumina's business has gradually shifted from gene chips to gene sequencing, and has spent nearly 20 years to promote the second-generation sequencing new products developed to a wide range of applications, not only reducing the cost of whole genome sequencing from $100 million to less than $1000 at a super-Moore's law speed, but also the company's high-end and low-throughput sequencer can meet almost all the sequencing needs of downstream customers, which also makes Illumina a global leader
。

It can be seen that BGI is attacking its "shield" (market share) through the "spear" (scale effect) that Illumina is good at, and gradually confronting
it in the international market.

In addition, in order to break through the bottleneck of the mature gene sequencing product business development, Illumina also extended the industrial chain
by acquiring Grail, a cancer early screening company, to cut into the midstream sequencing service field.

Illumina also extended the industrial chain
by acquiring Grail, a cancer early screening company, to enter the midstream sequencing service field.

As a company founded by illumina, Grail was once split off-the-shelf by illumina, but now it has been acquired by illumina, with the purpose of deeply extending the industrial chain, obtaining more high-quality customers in the middle and lower reaches, and creating integrated services
.
This model of incubation investment is similar to the "shovel seller" model in the CXO industry
.

This model of incubation investment is similar to the "shovel seller" model in the CXO industry
.

Similarly, with the launch of many domestic gene sequencers, BGI Intelligent Manufacturing can also play a good role in "selling shovelers" and cooperate
with more gene sequencing companies other than BGI.

For example, tumor NGS head manufacturers such as Stone Burning Medicine, Jiinga, Panshengzi, Zhenhe Technology, etc.
, which occupy half of the domestic market, have previously adopted the core technology of BGI's intelligent gene sequencer to build a gene sequencing platform
.

In addition, in addition to being applied to the most mature scientific research services, reproductive health diagnosis/screening, genetic disease diagnosis, and tumor gene diagnosis, gene sequencing also plays an important value in the medical fields such as drug research and development and tumor targeted therapy, which undoubtedly opens up a larger market space
for BGI.

This undoubtedly opens up a larger market space
for BGI Intelligent Manufacturing.

For example, gene sequencing technology can not only find effective compounds or potential therapeutic targets for drug development, but also screen out potential drug positive response populations for clinical trials, and find groups with high matching with a certain drug, thereby improving research and development efficiency and saving research and development costs
.

For example, the targeted lung cancer drug gefitinib is the application of pharmacogenomics (PGx) screening lung cancer patients with EGFR gene mutations for clinical trials, so that the efficacy of gefitinib has been effectively verified and improved, and finally approved for marketing
.

It is conceivable that once other application areas of gene sequencing are expanded, and can replicate the "selling shovel" model of BGI Intelligent Manufacturing, it will undoubtedly expand larger business boundaries and market space
in the future.

It is conceivable that once other application areas of gene sequencing are expanded, and can replicate the "selling shovel" model of BGI Intelligent Manufacturing, it will undoubtedly expand larger business boundaries and market space
in the future.

Conclusion: Whether gene sequencing enterprises can open the bottleneck of market value lies in whether they can broaden market channels, expand the depth and breadth of product application scenarios and business, and BGI Intelligent Manufacturing is currently based on this clear strategic positioning to enhance competitive advantage
.

Epilogue: