“Science and Technology Innovation Board Daily”, May 9 (Reporter Zheng Bingxun) “Currently, we are still making strategic investments rather than financial investments. Newly established companies are not included in the scope of the company's statements.” In response to the investment in Hunan Shengwei Sumin Biotechnology Co., Ltd. (hereinafter referred to as “Hunan Shengwei Sumin”), Shengxiang Biotech (688289.SH) company personnel told the “Science and Technology Innovation Board Daily” reporter.

In order to enter the field of rapid drug allergy testing, Shengxiang Biotech plans to jointly invest in Hunan Shengwei Sumin with the Hunan Xiangjiang Shengxiang Biological Industry Fund Partnership (Limited Partnership) (hereinafter referred to as the “Industrial Fund”) through its own capital investment. After the investment is completed, Shengxiang Biotech will hold 39.9985% of the shares, corresponding to an investment amount of 53.33 million yuan, and the industrial fund will hold the remaining 60.0015% of the shares.

Hunan Shengwei Sumin was founded on March 26, 2024. Due to the early stages of operation, revenue and net profit for the first quarter were zero.

Prior to the investment, Hunan Shengwei Sumin was 100% owned by Changsha Shengwei Rongquan, while Hunan Shengwei Sumin and Changsha Shengwei Rongquan were both companies actually controlled by Shengxiang Biotech Chairman Dai Lizhong, and Shengxiang Biotech held 30% of the shares in Changsha Shengwei Rongquan. Zhao Hui, director of Shengxiang Biotech, was also the legal representative, executive director and general manager of Shengwei Rongquan in Changsha, holding 18% of the shares. At the same time, Shengxiang Biotech also holds 50% of the property share of the Industrial Fund. Therefore, this transaction constitutes a related transaction.

In addition, while investing in Hunan Shengwei Sumin, Shengxiang Biotech also plans to transfer 21.69% of its shares in the participating company First Light to a wholly-owned subsidiary of Hunan Shengwei Sumin, with a transfer consideration of US$2,215,800. Shengxiang Biotech said that in the future, it will rely on Hunan Shengwei Speed Sensitive as an overall operation and further focus on the field of rapid drug sensitivity testing.

According to data, First Light was founded in 2006 and focuses on the development of rapid detection products for antibiotic drug sensitivity. The MultiPath platform it developed is a POCT detector with the three functions of single-molecule immunoassay, microbial identification, and rapid antibiotic drug sensitivity testing.

At this stage, First Light is still losing money. In 2023, Fitst Light achieved revenue of US$1,669,900 and net loss of US$6.674,400. As of the end of the year, First Light's total assets were $6.8386 million, and net assets were -$40.51 million.

In other words, after investing in the newly established Hunan Shengwei Sumin, Shengxiang Biotech also transferred all of the shares of the original participating companies to Hunan Shengwei Sumin to test the waters for rapid drug sensitivity testing business. Since Hunan Shengwei Ximin is not included in the scope of the report, the results of the water test will not affect Shengxiang Biotech's performance.

The “Science and Technology Innovation Board Daily” reporter asked the personnel of the Shengxiang Biotech company whether Hunan Shengwei Sumin is interested in ordering cooperation. The other party declined to answer on the grounds that it was not convenient for the company to be established soon and that too many statements were not convenient. However, the other party also said that if the subsequent business of Hunan Shengwei Sumin becomes more mature, it is not ruled out that Shengxiang Biotech will take more actions other than strategic investment.

According to Shengxiang Biotech, at present, there are 20 million antibiotic drug sensitivity tests in clinical microbiology laboratories in China every year. The stock market is estimated to be about 2 to 3 billion yuan using reagents and instruments. On this basis, there are still a large number of unmet demand for antibiotic drug sensitivity tests for bacterial infections at the grassroots level and rural areas.

Shengxiang Biotech believes that most of the domestic market share is dominated by multinational giants such as BD (BD) and BioMérieux, and there is an urgent need for solutions with higher local accessibility, and there is broad space for domestic innovation and replacement.

It is worth mentioning that with early strategic planning and investment layout, including the release of ultrasonic direct diffusion dropper technology and products, leading routine nucleic acid testing reports within 1 hour, and collaborating with Meituan and Jingdong to build a “3-hour respiratory nucleic acid testing circle” to launch home nucleic acid testing services, etc., after the peak of the epidemic, IVD companies' performance generally declined.

In the first quarter of 2024, Shengxiang Biotech achieved revenue of 391 million yuan, an increase of 100.31% year on year, and net profit of 81.0247 million yuan to mother, an increase of 35.01% year on year.