According to the latest industry statistics, China's ICL (third-party medical testing) market size exceeds 30 billion and is expected to maintain rapid growth. At present, it is still dominated by general inspection, and the proportion of the special inspection market is expected to increase. In 2021, the penetration rate of ICL in China was in the single digits, far lower than the 67% in Japan, 44% in Germany and 35% in United States.
This article attempts to take the public information of two leading ICL listed companies as an example to make a preliminary comparison of the different business models of Jinyu Medical and Dian Diagnostics for the reference of experts.
First, the testing follows the crowd, and the national layout has become a must, and in the laboratory coverage of key indicators, there are 49 Dean and 43 in Jinyu
Jinyu can be traced back to the establishment of the school-run enterprise Guangzhou Medical College Medical Laboratory Center in 1994, and the establishment of Guangzhou Jinyu Medical Laboratory Center in 2003, after 14 years to complete the layout of central laboratories in all provinces and regions of the country. In September 2017, Jinyu Medical was listed on the main board of the Shanghai Stock Exchange.
According to the 2023 annual report of Golden Mile, the company has established 49 medical laboratories in the Mainland, Hong Kong and Macao, and built nearly 800 laboratories with partners, covering 31 provinces and autonomous regions in China and the Hong Kong S.A.R..
Jinyu continues to build its own cold chain logistics network, with more than 2,400 logistics outlets, and its service network extends to the township and community level, providing services for more than 23,000 medical institutions, covering more than 90% of the country's population. At the same time, relying on digital transformation, the company has continuously enriched its online services, and has provided online services to more than 440,000 doctors across the country, and continues to deeply integrate online and offline services.
Dian Diagnostics was founded in 1996 and listed on the Growth Enterprise Market of the Shenzhen Stock Exchange in July 2011. With the mission of "allowing Chinese people to share health equally", the company actively lays out the industrial ecological chain, and its business covers medical diagnosis services, diagnostic technology research and development, diagnostic product production and marketing, CRO, judicial appraisal, health management, cold chain logistics and other fields.
According to Dian 2023 annual report, as one of the leading enterprises in the third-party medical diagnosis industry in China, the company has 43 chain laboratories across the country, with a service network covering more than 90% of the country's population, providing more than 4,000 medical testing items for more than 22,000 medical institutions. Up to now, Dean has formed a national multi-center and multi-level ICL network layout of "1 headquarters laboratory + 4 regional central laboratories + 38 provincial and municipal flagship laboratories + 70 precision centers + 700 cooperative laboratories", and at the same time, Dian is preparing to build China's first overseas ICL laboratory in Ho Chi Minh City, Viet Nam, taking the first step to find more business opportunities on a global scale.
Di'an's product distribution network covers 16 provinces and cities across the country, with three self-owned product lines of molecular diagnosis, pathological diagnosis and mass spectrometry diagnosis, and its agent products cover more than 1,300 kinds of domestic and foreign brand products such as Roche Diagnostics, Sysmex and Mérieux in France, and more than 4,000 end customers.
As a biomedical pre-medical testing service, service tentacles and convenience are very important. It is not difficult to see that as the leader of the ICL industry, Jinyu and Dean are not much different from each other, after 30 years of development, in the construction of core laboratories, Jinyu is slightly ahead with the advantage of 6. As the terminal service of "nerve endings", there are more than 23,000 cooperative medical institutions in Jinyu and more than 22,000 cooperative medical institutions in Di'an.
Second, on the supply side of testing, Jinyu Dian has made great efforts in tumor marker screening, but still focuses on different disciplines based on its own advantages
During the reporting period of 2023, Golden Mile completed a total of 412 new project developments. Among them, innovative projects such as MetaCAP, whole genome sequencing of genetic diseases, allergen component detection, methylation sequencing of solid tumors, and mass spectrometry amino acid spectrometry continue to lead the technological development of the industry. The company has also integrated the advantages of multi-technology platforms and launched nearly 20 multidisciplinary integration solutions, including multidisciplinary integration solutions for growth and development diseases, pediatric hematological tumor diseases, and pediatric neurological diseases, and developed joint testing services for tNGS+ microbial morphology, MetaCAP+ pathology and other multi-technology platforms, providing multi-technology platform integration reports for clinical practice.
In 2023, the number of samples for the tumor marker screening and testing program of the Jinyu Medical Center Laboratory will reach a new high of 10 million; The tumor molecular diagnostic program has more than 140,000 samples, of which more than 70,000 cases have been detected by tumor NGS, which is in a leading position in the industry.
During the 2023 reporting period, Dean focused on the business breakthroughs of leading tertiary hospitals and made a thick customer interface. During the reporting period, 238 new tertiary hospital customers were added, and the proportion of tertiary hospital revenue increased to 32.8%; The growth rate of Dian specialty discipline products was significant, with a year-on-year increase of 142% in infectious diseases, 102% in neuroimmunity, and 69% in hematology. During the reporting period, 164 new projects such as flow cytometry, ddPCR, and NGS were opened, and the exclusive project NGS-MRD for myeloid tumors was launched, realizing cooperation with the top 5 hospitals of hematology in China; Improve the tumor detection product line and cancer coverage, provide more than 180 testing items, and test more than 260,000 tests in the reporting period; It covers all high-incidence cancer species, with methylation and new protein marker detection technology as the core of the early screening product system, and provides early tumor screening services for more than 200,000 people during the reporting period.
From the above, due to the objective differences between the key statements and statistical scopes and standards of the two parties in the annual reports, it is impossible to directly compare all the actual annual testing volumes. However, the intention of both parties to give full play to their own special testing is still fully revealed, and early cancer detection and early screening services have become the focus of efforts.
Third, the gross profit margin of testing services is higher than that of trade, and the paths chosen by the founders of Jinyu and Dian are different at the beginning, and the subsequent transformation costs are very high
In the 2023 reporting period, Jinyu achieved operating income of 8.539 billion yuan, a year-on-year decrease of 44.82%, and the net profit attributable to shareholders of listed companies was 643 million yuan, a year-on-year decrease of 86.53%. In the 2023 reporting period, Dean achieved operating income of 13.408 billion yuan, a year-on-year decrease of 33.89%; the net profit attributable to the parent company was 307 million yuan, a year-on-year decrease of 78.56%; The net profit after deducting non-recurring gains and losses was 295 million yuan, a year-on-year decrease of 81.90%.
In the four-year long cycle from 2020 to 2023, Jinyu Medical's revenue/attributable net profit will be 8.244 billion/1.51 billion, 11.94 billion/2.22 billion, 15.48 billion/2.755 billion, and 8.54 billion/643.4 million respectively, with net profit margins of 19.09%, 19.79%, 18.38%, and 7.46%; The corresponding revenue/attributable net profit of Dian was 10.65 billion/802.9 million, 13.08 billion/1.163 billion, 20.28 billion/1.434 billion, 13.41 billion/307.5 million respectively, and the net profit margin was 10.05%, 11.34%, 9.18% and 4.34%.
It is not difficult to find that the net profit margin of Jinyu for four consecutive years has been significantly ahead of Dean. In addition to financial factors such as management costs, are there any other direct reasons for this? The answer lies in the different business models chosen by the two companies, Jinyu belongs to "pure service" and Dean chooses "service + trade", so where are the advantages and disadvantages of these two models?
United States poet Robert · Frost's famous poem "The Road Not Taken" says: "I will look back with a soft sigh: two paths split in a wood—and I chose the less traveled one, and the path of my life has been determined." ”
From 2021 to 2023, the proportion of Jinyu medical testing services in revenue will be 94.65%, 93.88% and 90.47% respectively, the gross profit margin in the service field will be 47.2%, 42.94% and 35.53% respectively, and the proportion of service business in profit will be 94.45%, 93.46% and 88.12%.
For Dean, the main source of its revenue is business (trade). From 2021 to 2023, the commercial segment of Dian Diagnostics accounted for 59.55%, 60.32% and 67.76% of the main revenue, the gross profit margin of the commercial sector was 26.81%, 41.95% and 24.52%, and the proportion of the commercial sector in profit was 41.09%, 68.09% and 53.11%.
In the past three years, the gross profit margin of testing services in the ICL industry has actually been higher than that of trade. Since Jinyu's revenue basically comes from testing services with high gross profit margins, its gross profit margin as a listed company as a whole is higher than that of Dean in the same period. According to the three-year data from 2021 to the first quarter of 2024, the gross profit margin of Jinyu (Di'an) is 47.29% (38.26%), 43.13% (37.16%), 36.48% (31.29%), and 32.09% (25.53%), respectively, and the gross profit margin of Jinyu Company has been pressing Di'an by more than 5 percentage points.
In the past three years (2021-2023), the revenue of testing services will be 11.3 billion yuan, 14.53 billion yuan, and 7.726 billion yuan respectively, exceeding Dian by 82%, 18.8%, and 59%, respectively.
Doesn't Dean want to do more testing services with high gross profit margins? The causes of this are complex, and perhaps the most important of them are the accumulation of historical capabilities, path dependence, and transformation costs. Looking at the listing prospectus of Di'an, it will be found that its business is divided into two parts: "medical diagnosis service outsourcing" and "in vitro diagnostic product agency", the latter refers to its "strategic cooperative relationship with Shanghai Roche and other leading medical diagnostic product suppliers at home and abroad, and the company sells or leases testing instruments in some regions, as well as sells reagent consumables and provides technical support services".
At that time, Dian was the agent of Shanghai Roche in Zhejiang for many years, and the laboratories under Dian chose Shanghai Roche products more in terms of instruments and reagents. In 2010, the year before Di'an's IPO, the revenue of its agent Shanghai Roche (Roche Pharmaceutical) products reached 134 million yuan, accounting for 38.97% of the operating income. At the same time, in 2010, the revenue generated by the use of Shanghai Roche products in the medical diagnosis service outsourcing business was 45.15 million yuan, accounting for 13.16% of the operating income.
Since its listing, Dian has been highly dependent on Shanghai Roche's products and services, and revenue from Shanghai Roche contributes half of total revenue. The resume of Chen Haibin, the actual controller of De'an, shows that he has been engaged in the medical device agency business from 1996 to 2001; In September 2001, Dean Limited was founded. According to the 2023 annual report, Di'an's agent products cover more than 1,300 kinds of domestic and foreign brand products such as Roche Diagnostics, Sysmex and Mérieux in France, and more than 4,000 end customers.
According to the prospectus of Jinyu that year, 3 of its 12 promoter shareholders, including Liang Yaoming, the current actual controller of Jinyu, and Yan Ting, the director at that time, and Zeng Zhanwen, were engaged in the management and technology of the Science and Technology Experimental Factory of Guangzhou Medical College, the predecessor of Jinyu, such as Liang Yaoming served as the director of the factory from 1990 to 1999, Yan Ting served as a technician of the factory from 1994 to 1999, and Zeng Zhanwen served as a pathological technician of the factory from 1993 to 2001.
The 2017 Jinyu IPO prospectus shows in the chapter on the industry competition pattern that "at present, the company is in the first place in the market segment in terms of business scale, number of chain laboratories, number of customers served, market service network and other aspects, accounting for more than 30% of the market share of the third-party medical laboratory industry", the table listed shows that the market share of Jinyu ICL is 4 percentage points ahead of Dean, almost reaching the combined market share of the second place Dian and the third place Adicon (35%). Today, the market share of ICL testing services ranks "the sound of the waves is still the same", and the first place in Golden Mile is still the sum of the second place Dean and the third place Adicon.
Fourth, the future development is digital, the "digital" in the annual report is 48 times and 33 times, and the basic value of the medical inspection industry is worth pondering
I believe that people in different industries have their own views on the advantages and disadvantages of the two models. However, in terms of capital market performance, as of July 23, 2024, the total market value of Jinyu is 12.9 billion yuan (7.648 billion yuan for Dean), with a dividend yield of 3.16% and a cash financing ratio of 341.5% (Dean dividend yield of 0.49% and a cash financing ratio of 17.25%). For ordinary investors, the market value and the amount of dividends are undoubtedly the "capital temperature" that they can best feel and distinguish the intrinsic value of Jinyu and Dean.
It is true that due to various factors such as macro, policy, capital, and emotion, due to the well-known sequelae of public health events, listed companies in the industry, including Jinyu and Dean, are currently under pressure from high receivables and resolution. Like other industries, how to cope with the deep transformation of the economy, grasp the opportunities of the silver economy, promote digital transformation, and maintain sustainable and healthy development is still a practical problem that must be faced and solved.
At present, the medical examination service industry is in a critical period of digital transformation, and the industry needs to deeply integrate the concept of "medical examination + AI" in the transformation, realize the transformation and upgrading of the industry through the integration and innovation of biotechnology and a new generation of information technology, improve service experience and production efficiency, and create new business growth points.
Liang Yaoming, chairman of Jinyu, pointed out in his speech in the 2023 annual report, "We promote digital transformation, and use AI technology as the engine to build an industrial ecology of co-creation, sharing and win-win, and have taken a more solid and powerful step on the journey of digital and intelligent transformation", and a total of 48 "digital" keywords appeared in Jinyu's 2023 annual report: such as improving customer experience and satisfaction through 24-hour uninterrupted customer service, fast electronic reports and other functions, and innovating and launching digital clinical service products, Provide value-added services for clinical customers to assist in diagnosis, and participate in the drafting of national standards in the field of digitalization and pathology for the first time. At present, Jinyu is deeply promoting the digital transformation strategy of "Medical Examination 4.0", and has established a professional digital team of more than 150 people.
At present, Jinyu is focusing on the construction of AI large models for medical examination around the three major technical capabilities of computer vision, natural language knowledge graph and multi-modal and multi-omics. Internally, the Jinyu model will play the role of "AI laboratory steward", integrate the existing informatization, digitalization and intelligent applications, innovate the internal service and application organization mode in the form of agents, precipitate AI technology into business processes, and achieve data-driven cost reduction and efficiency increase. Externally, the Golden Mile model will act as an "AI medical examination consultant", making full use of the understanding and dialogue capabilities of the current large language model, combined with the accumulation of Jinyu's own medical examination expertise, to provide doctors and patients with more intimate and differentiated customized services, so as to improve work efficiency and improve customer experience.
Chen Haibin, Chairman of Dian Din'an, said in the 2023 annual report that Dian has signed a comprehensive cooperation agreement with HUAWEI CLOUD on digital diagnosis and treatment, and released the X-MedExplorer clinical research big data platform, and looks forward to working in 2024 through "digital intelligence" empowerment along the four major directions of "digital organization, digital products, digital marketing, and digital delivery". The keyword "digital" appeared 33 times in Dean's annual report.
Technology empowers, health first. Unlike many other industries, the ultimate pursuit of life science and technology, the general policy of "people's health as the center", and the basic value of medical testing in this major policy are what everyone needs to think about. As for individual enterprises, it is the continuous demonstration of their core competitiveness, as well as the forward-looking layout of artificial intelligence and data development and application. From this point of view, as the industry leader, Golden Mile seems to have taken the lead.
Disclaimer: The market is risky, choose carefully! This article is for reference only and is not intended as a basis for trading.