In the past decade, the molecular testing industry has experienced significant leaps and bounds, and its application fields have been continuously expanded, and have penetrated into many key links of medical health such as prenatal testing, precision oncology, and pathogen detection.
At the same time, technological innovation has also brought about a variety of detection methods.
For example, polymerase chain reaction (PCR) technology has become one of the core technologies of molecular diagnostics due to its high sensitivity and specificity. The application of next-generation sequencing technology (NGS) provides the possibility for the acquisition of large-scale genomic data and promotes the development of personalized medicine. At the same time, with the advancement of bioinformatics, the ability to analyze and interpret massive molecular data has also been significantly improved, making molecular detection results more accurate and reliable.
These technological advances not only bring new opportunities to the molecular testing industry, but also put forward higher requirements for the technological innovation and product development capabilities of enterprises.
In this process, some gene technology companies such as Youxun Medical have occupied a place in the molecular testing industry through continuous technological innovation and product development. With the recent submission of the prospectus to the Hong Kong Stock Exchange, it has also officially entered the capital market. From an investor's point of view, what is the confidence of Youxun Medical to list in Hong Kong? Is it worth paying attention to in the future?
1. Capital injection + talent elite, dual support for listing in Hong Kong
For the average individual investor, the healthcare industry is difficult to understand due to its high degree of specialization and complexity. In contrast, professional investment institutions usually have deeper industry knowledge, rich investment experience, and a wide range of information channels and resource advantages. Following in the footsteps of professional investment institutions, especially in the biotech sector, which has a high barrier to entry and relatively high risk and return potential, may be a smarter, more efficient and risk-controlled investment strategy.
The shareholder lineup behind Youxun Medical is particularly eye-catching, including veteran institutional investors in the field of gene technology and innovation, such as BGI, a leader in China's NGS sequencing platform industry, Decheng Capital, ZGC Science City Ltd., a government-guided fund, Meinian Health, Infinity Capital, Xianfeng Qiyun and CITIC Guoan, which has a nationwide medical service network.
The blessing of a number of senior investment institutions can not only bring financial support to Youxun Medical, but more importantly, their industry experience and resource network will also provide strong endorsement and help for its future development, which shows the favor of capital for Youxun Medical. In addition, CICC, a top investment bank, is the sole sponsor of Youxun Medical.
In addition to capital assistance, the four members of Youxun Medical's management team have an average of more than 15 years of experience in the medical industry, all of whom come from leading pharmaceutical and biological companies at home and abroad, such as Huada Group and Merck, as well as top research institutions such as Peking University, and have the strength to lead the company to continue to make breakthroughs in innovation and achieve a dominant position in the industry.
Among them, Ms. Wang Jianwei, Chairman of the Board, President and Executive Director, has over 16 years of management experience in the biotechnology and healthcare industries; Mr. Han Yinfeng, Vice President and General Manager of Prenatal Testing Business, has more than 10 years of experience in market development and sales management, having served as sales director of Huada Group and sales manager at Roche and GlaxoSmithKline. Mr. Song Shijie, General Manager of Precision Oncology Business, has held management positions at AstraZeneca, Roche and other leading pharmaceutical companies.
2. Based on the four major technologies, build a diversified pipeline to strengthen growth
Of course, long-term investment ultimately needs to return to fundamental analysis to judge the future value of Youxun Medical.
For a gene technology company like Youxun Medical, if it wants to develop similar innovative products that stand out, it must be inseparable from the support of its technological innovation platform.
At present, Youxun Medical has mastered the four core technologies of liquid biopsy, DNA methylation detection, NGS and POCT microfluidic biochips, which have complementary and synergistic effects, thus establishing an LDT and equipment research and development platform and an IVD equipment and detection kit research and development platform, forming an obvious competitive advantage in the market.
Relying on the four core technologies and R&D platforms, Youxun Medical has adopted the "LDT+IVD" dual-track business model and established a comprehensive portfolio of products and services including 24 commercialized and 14 products and services under development, covering a wide range of business in three high-growth areas: prenatal testing, precision oncology and pathogen detection.
It is reported that Youxun Medical is one of the few companies in China that has been approved by the State Food and Drug Administration to have its own brand sequencer, and has a number of compatible testing services, and a number of compatible testing kits are under development.
Source: Prospectus
At the same time, Youxun Medical also continues to promote product innovation and upgrading, especially in the two areas of increasing demand for prenatal testing and precision oncology, and a number of innovative products of the company will be commercialized soon, which will further consolidate the company's industry position and ensure its continued vitality and competitiveness in the medical industry.
In the field of prenatal testing, the market size of NIPT and NIPT Plus in China is expected to increase from 8.5 billion yuan in 2022 to 13.5 billion yuan in 2026, with a compound annual growth rate of 9.39%, and further increase to 17 billion yuan in 2030. Among them, the NIPT Plus market is growing faster.
Source: Prospectus
Grasping the market trend, Youxun Medical expects to apply for a Class III medical device registration certificate from the NMPA in 2025 for the Youxinan NIPT Plus test kit, which is expected to become one of the first NIPT Plus test kits to apply for registration and approval from the State Food and Drug Administration in China.
In the field of precision oncology, the number of new cancer cases in China is expected to increase from 4.8 million in 2022 to 5.3 million in 2026, with a compound annual growth rate of 2.46%, and further increase to 5.8 million in 2030. The market size growth trend of non-small cell lung cancer and endometrial cancer in the chart below is enough to confirm this.
Source: Prospectus
It is reported that the company expects that its Youxu NSCLC detection kit will obtain the registration certificate of Class III medical devices in 2024; Youxu ctDNA Assay Kit is expected to be the first approved NGS tumor companion diagnostic kit for lung cancer based on liquid biopsy technology in China; The Gongmei Endometrial Cancer Screening and Detection Kit is expected to obtain the Class III medical device registration certificate in 2025.
3. The prenatal testing and precision oncology business returned to high growth, and the profit potential continued to be released
Finally, looking at the financial situation, performance as a direct indicator to measure the company's operating conditions, Youxun Medical's commercial products not only bring stable revenue and cash flow to the company, but also provide necessary financial support for the research and development of other products under development.
According to the prospectus, from 2021 to 2023, the company achieved revenue of 265.7 million yuan, 570.8 million yuan and 468.4 million yuan respectively, gross profit of 199.6 million yuan, 217.9 million yuan and 303 million yuan respectively, and gross profit margin of 75.1%, 38.2% and 64.7% respectively.
However, despite the solid revenue and high gross profit, Youxun Medical is still facing a loss-making situation. An in-depth analysis of the financial statements suggests that the author believes that there are three main reasons:
First, the loss was primarily due to a one-time loss due to changes in the fair value of convertible redeemable preferred shares. In fact, Youxun Medical achieved a net profit of 18.101 million yuan in 2020, which is enough to reflect the company's profitability.
Second, the company's sales and distribution expenses continue to grow, and these investments are necessary for the company to expand and gain market share. With the gradual establishment of the company's sales network and the continuous improvement of product reputation, it is expected to regain profitability.
Source: Prospectus
Third, under the impact of public health events, Youxun Medical's pathogen detection business accounted for a high proportion of revenue in the first two years. However, as the economy gradually returns to normal in 2023, the performance of this business segment has declined, which will put some pressure on the company's performance in the short term.
Nonetheless, it is clear from the latest financial data that the company's prenatal testing and precision oncology businesses have begun to regain growth momentum and show strong signs of recovery. This shows that the core business segment of Youxun Medical is recovering and the company's long-term growth potential has not been affected.
Source: Prospectus
4. Summary
Overall, under the combined effect of multiple factors such as policy-oriented support, improvement of molecular testing technology, aging population and rising medical expenditure, the domestic molecular testing market has shown the potential for continuous growth, and the overall market size is expected to reach 100 billion yuan.
In the track, Youxun Medical has demonstrated its leading technical strength, comprehensive products and services, and stable financial performance, which also means that the company's development path and growth may continue to be verified by the market, and eventually achieve profitability.
If Youxun Medical successfully promotes the subsequent listing process of Hong Kong stocks, it is expected that the company will further consolidate and expand its market advantages with the help of capital, and its growth is considerable, so we can pay more attention to it.