The COVID-19 pandemic is in its third year, and everyone who should earn money has earned it.
According to the data of Zhiyan Consulting, in 2020 and 2021, the domestic nucleic acid testing market reached 12.1 billion yuan and 13.6 billion yuan respectively, with an average growth rate of more than 10%. Independent third-party medical laboratories (ICLs) that provide testing services have achieved collective leapfrog growth in the process.
Entering 2022, with the introduction of antigen detection products in the national fight against the epidemic, nucleic acid testing no longer has explosive growth space. At this time, there is also a nucleic acid testing agency ready to land on the capital market.
On March 4, as one of hundreds of third-party inspection institutions that have eaten the "dividend" of the epidemic, Adicon submitted a listing application to the Hong Kong Stock Exchange. The company's revenue doubled from 1.729 billion yuan in 2019 to 3.38 billion yuan in 2021.
The epidemic outlet may soon be completely over, what is Edikon going to make?
"Late" IPOs
One word to describe Adicos's path to market is: it's late.
As one of the four leading domestic third-party testing institutions with the same name as Jinyu Medical, Dean Diagnostics and Daan Gene, Adicon did not submit a listing application to the Hong Kong Stock Exchange for the first time until June 2021, but it ended due to "material failure". In March 2022, Adicon entered the Hong Kong Stock Exchange.
In fact, Adicon is an out-and-out established enterprise. Around 2000, a number of early third-party testing institutions such as Adicom were established.
After more than ten years of racing, the pattern of the ICL field has been basically divided: in 2020, the four enterprises of Jinyu, Dean, Adikon and Daan have monopolized about 60% of the domestic ICL market.
The three old rivals have been in the capital market for many years, but Adicon has not been listed. Around 2010, the popular Adicon was not without the idea of landing on the capital market, but the plan could not catch up with the changes.
In 2012, the market reported that there was a personnel turmoil within the company. A number of executives ran away and founded another third-party testing agency, Qianmai Medical Testing, which formed a competitive relationship with Adicon.
The Health Bureau learned that Chen Yani, the current chairman of Qianmai Medical Group, has held important positions in Adicoon's Hangzhou and Shanghai branches, responsible for the expansion of Adikang's provincial laboratory chain and the negotiation of major business projects of the company. And Qianmai's initial investment and financing projects, she also participated.
After its establishment, Qianmai has received investment from many well-known institutions such as Kangqiao Capital. Today, the company's inspection laboratory has covered Shanghai, Zhejiang, Sichuan, Hunan and other provinces. During the COVID-19 epidemic in Wuhan in 2020, Qianmai undertook the main testing projects of Huoshenshan and Leishenshan Hospitals.
Adikon's downhill road also began from this period. In the three years from 2012 to 2015, Edison slowed down its expansion, setting up only one laboratory a year, something unprecedented in its history. At its peak in 2009, Adikang opened 4 inspection centers in Fujian, Jilin and other places in one go.
Among the four dragon heads, Adicon gradually lagged behind.
Under DRG, third-party testing has opportunities
The development of the domestic ICL industry started relatively late. It was not until 1994 that China officially had its first third-party testing institution, which was still a school-run enterprise under the name of a medical school. By 2020, the domestic ICL penetration rate will only be about 6%, far lower than that of some Western countries.
Source: Eddison prospectus
ICL enterprises are a favorable complement to the testing capacity of public medical institutions. The benefits of public hospitals doing their own testing programs are low, and on average, this benefit accounts for only about 20% and 10% of outpatient and inpatient income.
Under the control of medical insurance costs, inspection outsourcing has become the most cost-effective choice.
A data released by the National Health Commission in 2018 showed that ICL companies can save about 1% of their annual expenditure on medical insurance. Between 2016 and 2020, ICL saved more than 10 billion yuan in testing costs every year, reaching about 27.4 billion yuan at its peak.
Third-party testing is a business that makes "hard money" to eat. Although the gross profit of several head companies mostly hovers around 40%, the net profit is generally not high, rarely exceeding 10%. According to the prospectus, in 2021, Edison's gross profit reached 42.7%, but the net profit was only 9.5%, and most of the money was spent on operation management.
"Scale" is the core of the profitability of third-party testing agencies. Through the continuous expansion of laboratories, the cultivation of markets, and the receipt of orders, third-party testing institutions can seek a way to survive in "accumulation".
Whether it is the scale of the company or the service projects, Adicon is not outstanding in the competitive landscape. In 2017, jinyu medicine and Dean diagnostic testable projects exceeded 2,000, while Edicoson only had about 1,400. In terms of revenue, in 2017, Adikang only earned about 1.4 billion yuan in the whole year, less than half of Jinyu Medical and Dean Diagnosis, and even lagged behind the "Ten Thousand Years Old Fourth" Daan Gene.
Until the covid-19 pandemic, Adikon did not catch up with the opportunity.
The dividend is no longer there, it will tend to be flat
The one-time opportunity of the new crown has brought the ICL industry to life, and the ensuing promotion of the DRG disease payment model has brought more opportunities to the ICL industry.
Under the favorable conditions of the policy side, the development of the domestic ICL industry in recent years is very optimistic. The data shows that the market size of the ICL industry is expected to exceed 46 billion yuan in 2025.
The cake is in, and who can get it is the more critical question.
The industry barriers to the ICL market have basically been formed, and the possibility of new players wanting to enter the game is not high. According to the analysis of brokers, at the primary market level, the ICL industry has no new investment opportunities. In the future, competition and shuffling will basically only be limited to the players who have already participated.
It is not difficult to understand why the "Buddhist" Adikon suddenly began to advance.
After 2020, Adikon took advantage of the trend to become bigger. According to the prospectus, Adicon's test volume increased from 46 million in 2019 to 80.5 million in 2021, with an average annual growth rate of more than 30%. In the past two years, the new crown testing business has brought 2.157 billion yuan of revenue to Adicon.
Source: Adicon Prospectus
The leading enterprises that rely on nucleic acid testing to increase their income are not only Adicos. Jinyu Medical's financial report shows that as of September 2021, the company's cumulative nucleic acid testing volume has approached 200 million. According to Haitong Securities estimates, in 2020, the new crown nucleic acid testing business will bring at least 2.3 billion yuan of revenue to Jinyu Medicine, and the net profit will reach more than 700 million yuan.
The COVID-19 "dividend" has become clearly unsustainable. According to Frost & Sullivan data, the size of the new crown testing market may shrink to less than 10 billion in 2022, and will gradually decrease in the next few years.
A third-party testing agency told the Health Bureau that since 2021, due to the gradual withdrawal of nucleic acid testing from special inspection projects, the price has been reduced, and at present, unless it is a large-scale screening order from the government, nucleic acid testing is no longer a good business.
In February 2022, Guo Yanhong, supervisor of the Medical Administration Bureau of the National Health Commission, said that the average single person in nucleic acid testing in public institutions across the country is currently 39 yuan. The Health Bureau has learned that in Beijing and other areas, many third-party testing agencies have dropped to more than 30 yuan for single testing, and the profit margin is very limited.
In the non-COVID-19 testing business, Today's Adicon does not seem to be able to compete with Golden Mile Medicine and Dean Diagnostics. Taking Dean Diagnostics, which has focused on special inspection business in recent years, as an example, as of the first half of 2021, its special inspection revenue has accounted for about 40% of the total revenue of ICL services.
However, Adikang's prospectus shows that the proportion of the company's more than 3,100 testing projects still accounts for more than half of the general inspection. And although the performance of this part has increased year after year, the growth rate is not prominent, and the highest is less than 20%. It can be said that if it were not for the new crown, it would be difficult for Edikon to develop so quickly.
In terms of R&D investment, Adicon is also far inferior to jinyu medicine and Dean Diagnostics, and it is difficult to catch up in a short period of time.
#Nucleic acid testing ##吉林疫情 #