"Star Daily" October 10 news (Reporter Zheng Bingxun) In recent years, due to the impact of downstream pharmaceutical industry customers' investment and financing environment on operations, Nanmo Biotechnology (688265.SH), engaged in gene-modified animal model business, has been significantly affected. This impact has not dissipated by the beginning of 2024.

In the first half of 2024, Nanmo Biotechnology achieved revenue of 0.177 billion yuan, a year-on-year decrease of 2.17%. The net loss attributable to the parent company was 9.1436 million yuan, a year-on-year decrease of 214.89%. In 2022 and 2023, the net loss attributable to the parent company of Nanmo Biotechnology was 5.3996 million yuan and 20.5826 million yuan respectively.

At the earnings conference held on the 10th, the reporter of 'Star Daily' asked Fei Jian, Chairman of Nanmo Biotechnology, whether the impact from downstream industrial customers had improved in the third quarter. He did not directly respond. However, he also revealed that in the second quarter, the standardized model business and pharmacological evaluation and phenotype analysis business saw an increase in orders compared to the same period last year, providing a guarantee for performance in the second half of the year.

In response to long-term profit pressure, Nanmo Biotechnology revealed at an investor communication meeting in early September this year that part of the reason is that the company's main base is located in Shanghai, facing significant pressure in terms of house rental, decoration, and other expenses. Nanmo Biotechnology stated that it will take measures to optimize the existing cage positions, vacate some cage positions, and negotiate rent reductions to reduce the pressure.

Shortly after, at the end of September this year, Nanmo Biotechnology suddenly announced the addition of a 'non-residential real estate rental' business to its original scope of business. When asked if this was to utilize vacant cages, Fei Jian explained at the earnings conference, "The main reason for the addition of the new scope of business is that some customers have a demand for using supporting laboratories and offices when purchasing the company's breeding services. This move not only brings certain revenue increase to the company but also provides better service experience to customers."

Information shows that Nanmo Biotechnology mainly produces gene-modified animal models, mainly gene-modified mouse models, supplying research institutions including higher education institutions, research institutes, and comprehensive hospitals to conduct scientific research. Models are also sold to industrial customers including pharmaceutical companies, CRO companies for new drug and target discovery, drug screening, and other work.

As of the first half of 2024, Nanmo Biosciences has independently developed over 120,000 standardized models, and has provided more than 7800 customized models, covering various areas in gene function research, oncology, rare diseases, and other drug development fields.

Currently, Nanmo Biosciences has a total of 9 production and R&D bases located in Shanghai, Guangdong, and Beijing, with a subsidiary in the USA, with a total capacity of approximately 140,000 cage units.

Fei Jian revealed that Nanmo Biosciences' overall capacity utilization level domestically is close to 80%, which is considered relatively high. However, in order to further improve capacity utilization, Nanmo Biosciences will expand new model varieties, scale up business operations, and optimize capacity structure by increasing the success rate of mouse sales by enhancing sales of mice with higher single-cage output or services.

Of note, 'Science and Technology Innovation Board Daily' reporters have discovered that in terms of profit generation, Nanmo Biosciences' overseas regions have consistently outperformed domestic operations. From 2021 to 2023, the gross profit margins in overseas regions were 87.91%, 79.72%, and 79.31%, significantly higher than the domestic gross margins of 58.78%, 37.11%, and 38.01%.

However, revenues from overseas regions have remained relatively low, amounting to 19.4383 million yuan, 32.6927 million yuan, and 40.2307 million yuan in 2021 to 2023, accounting for 7.06%, 10.79%, and 10.98% of the total revenue respectively. During the same period, domestic revenues were 0.254 billion yuan, 0.27 billion yuan, and 0.325 billion yuan, representing 92.35%, 89.03%, and 88.61% of the total, respectively.

Fei Jian noted that Nanmo Biosciences' share of overseas revenue is relatively low, mainly due to the late entry into overseas markets. He also disclosed that the main challenge for domestic companies expanding into overseas markets lies in establishing customer trust relationships.

On one hand, overseas scientific research customers still prefer to conduct modeling in their own laboratories, without the habit of outsourcing modeling to other institutions. On the other hand, the difficulty in cooperating with overseas industrial customers lies in the cumbersome and lengthy process of entering the supplier pool of major pharmaceutical companies.

However, Fei Jian emphasized that overseas expansion is a key focus for the company, with overseas business revenue accounting for 14% in the first half of 2024, and plans to further optimize the overseas BD team in the second half of the year. This will be achieved through participation in biomedical professional conferences, increasing collaboration with overseas agents, and cooperating with renowned CXO companies to enhance competitiveness in overseas markets.