“Science and Technology Innovation Board Daily”, August 14 (Reporter Zheng Bingxun) Genetic sequencing company Novo Zhiyuan (688315.SH) today released its 2024 semi-annual report, achieving revenue of 0.997 billion yuan, an increase of 7.18% over the previous year, and net profit of 77.9269 million yuan to mother, a slight increase of 3.86% over the previous year.

By region, revenue growth from Hong Kong, Macao, Taiwan and overseas regions continued to lead mainland China, and the specific revenue and revenue share surpassed for the first time. The former's revenue was 0.501 billion yuan, up 8.09% year on year, accounting for 50.26%, while the latter revenue was 0.496 billion yuan, up 6.27% year on year, accounting for 49.74%.

In recent years, Hong Kong, Macao, Taiwan and overseas regions have contributed more and more to the revenue provided by Novo Zhiyuan. The region's revenue increased from 0.666 billion yuan in 2021 to 0.985 billion yuan in 2023, and its share also increased from 35.67% to 49.22%. The gross margin also reached 43.65% in 2023, surpassing 41.85% in mainland China.

“Going overseas” has become an important step for Novo Zhiyuan to expand the market. Taking the first half of this year as an example, Novo Zhiyuan opened a new laboratory at the Munich Center for Biotechnology Innovation and Entrepreneurship (IZB) in Germany, further occupied the European market, opened a new laboratory in Japan, and deployed a next-generation sequencing platform to the Japanese laboratory.

In addition to the regions mentioned above, Novo Zhiyuan has also deployed laboratories in the US, the UK, Singapore, etc., and its business covers about 90 countries and regions on 6 continents, mainly providing professional gene technology products and services to nearly 7,300 customers including global research universities, research institutes, hospitals, pharmaceutical R&D companies, and agricultural enterprises.

However, it should be pointed out that Novo Source, which continues to seek incremental growth from overseas markets, is still facing an urgent situation where growth is weak.

Compared to the first half of 2023, Novo Zhiyuan's revenue growth rate for the same period this year decreased by 2.26 percentage points, while the net profit growth rate fell sharply by 28.48 percentage points. In the same period last year, Novo's revenue was 0.93 billion yuan, up 9.44% year on year, and net profit to mother was 75.034 million yuan, up 32.34% year on year.

In fact, the lack of momentum for Novo Zhiyuan's performance growth has become very obvious since 2022. Revenue for that year increased by only 3.17% year on year, down 22 percentage points from the previous year, and net profit fell 21.30% year on year. After entering 2023, the situation has not improved significantly. Revenue for the year increased slightly by 3.97% year on year, and net profit growth rate was only 0.47%.

The emergence of this situation inevitably points to the “dilemma” of Novo Genesis products and services being too single, as well as the risk of not having qualifications or business related to clinical application.

Novo Zhiyuan revealed that the company is currently mainly engaged in genetic testing research services, which is a segment of the genomics application industry that started earlier. Other application fields of genomics also include mature non-invasive prenatal screening and tumor genetic screening, as well as neonatal genetic disease screening, rare disease genetic screening, and health management. However, Novo Genesis currently has no business qualifications in this field of genetic sequencing clinical services.

Novo Zhiyuan realizes that if the market development of new products falls short of expectations, or if the company does not continue to launch new products in a timely manner in the future based on technological application development, it will adversely affect the company's industry influence, competitiveness and business growth.

On the other hand, increased competition in the market is also “eating away” at product profits generated by Novo. Novo Zhiyuan said that with the rapid development of high-throughput sequencing technology, domestic competition for mature products and services will become more intense, and product prices may continue to drop in the future.

In order to meet the challenges, Novo Zhiyuan has research and development agencies in various testing services such as pathogenic microorganism testing and tumor genetic testing. However, Novo Zhiyuan also stated that R&D projects in the genomics application industry are not only affected by uncontrollable factors such as changes in industry policies and markets, but also related to the level of R&D teams, so during the R&D process, costs will be controlled to avoid the risk of R&D failure.

In the first half of 2024, Novo Zhiyuan invested a total of 46.6151 million yuan in R&D, a year-on-year decrease of 6.18%. R&D investment accounted for 4.68% of revenue, a year-on-year decrease of 0.66 percentage points.