On December 13, the Star Daily reported (Reporter Zheng Bingxun) that the leading IVD (in vitro diagnostics) company Zhejiang Orient Gene Biotech (688298.SH) announced recent progress regarding the construction of its global R&D headquarters project in Shanghai.

On the evening of the 12th, Zhejiang Orient Gene Biotech announced that its subsidiary "Shanghai Wanshan Water" as the construction entity, has signed a contract with the Planning and Natural Resources Bureau of Pudong New Area, Shanghai, to acquire the E13-02 plot located in the Shanghai Zhangjiang Private Enterprise Headquarters Cluster Area as the construction site for the "Zhejiang Orient Gene Global Digital R&D Innovation Headquarters Project" (referred to as the "Global R&D Headquarters Project").

Acquired land for 0.3 billion yuan, total investment of 1.5 billion yuan.

The land transfer period is 50 years, covering a total area of approximately 0.0235 million square meters, with a transfer price of about 0.0123 million yuan per square meter, resulting in a total transfer price of 0.2895 billion yuan.

According to the plan, the total investment for the global R&D headquarters project is 1.5 billion yuan, with 1 billion yuan coming from Zhejiang Orient Gene Biotech's own funds and 0.5 billion yuan from bank loans.

Zhejiang Orient Gene Biotech has achieved rapid performance growth in recent years, leading to a significant accumulation of cash flow.

By the end of 2020, the balance of cash and cash equivalents for Zhejiang Orient Gene Biotech had increased by 2009.44% year-on-year to 1.8 billion yuan, and by the end of 2022, it further increased to 6.557 billion yuan. By the end of 2023, cash flow was rapidly consumed down to 2.929 billion yuan, but as of September 30, 2024, there was still 1.943 billion yuan.

Based on Zhejiang Orient Gene Biotech's current reserve of 'surplus grain', utilizing 1 billion yuan of its own funds to invest in new projects does not seem difficult. However, it is worth noting that during the rapid depletion of cash flow, it coincides with the gradual decline of the global pandemic, and Zhejiang Orient Gene Biotech is experiencing a 'slump' in performance due to the loss of testing dividends.

In 2020 and 2021, Zhejiang Orient Gene Biotech achieved revenues of 3.265 billion yuan and 10.169 billion yuan, respectively, with year-on-year growth of 788.83% and 211.43%. The net income attributable to the parent company was 1.677 billion yuan and 4.92 billion yuan, representing year-on-year increases of 1942.94% and 193.33%.

By 2022, the performance of Zhejiang Orient Gene Biotech turned downward, with revenue declining by 13.78% year-on-year to 8.768 billion yuan, and net income attributable to the parent company decreasing by 57.97% year-on-year to 2.068 billion yuan. This situation further deteriorated in 2023, turning from profit to loss, with revenue plummeting by 90.65% year-on-year to 0.82 billion yuan, and net income dropping by 119.23% year-on-year to -0.398 billion yuan.

In the first three quarters of 2024, Zhejiang Orient Gene Biotech experienced a slight year-on-year increase in revenue of 0.83% to 0.658 billion yuan, but still had a net loss of 0.262 billion yuan.

Amid continued poor performance, Zhejiang Orient Gene Biotech is attempting to outline a positive future through the Global R&D Headquarters project.

Zhejiang Orient Gene Biotech revealed that the Global R&D Headquarters project will be used to create strategic, operational, management, and R&D centers, building 400 gene sequencing testing instruments and 200 nucleic acid mass spectrometry testing instruments per year, as well as establishing a digital R&D innovation center and Big Data center for a full molecular diagnostic platform. Additionally, it will establish the Zhejiang Orient Gene Shanghai Life Science Research Institute and a third-party independent medical testing laboratory (ICL).

With this project, Zhejiang Orient Gene Biotech will achieve a dual-driven development model of 'supplier + service provider' for IVD products.

It is expected that after reaching production capacity, the annual sales revenue will be at least 1.5 billion yuan.

Zhejiang Orient Gene Biotech disclosed that the Global R&D headquarters project will help the company integrate international Medical technology resources, focusing on international technology R&D innovation capabilities and the transformation of R&D results. Prior to this, the chairman of Zhejiang Orient Gene Biotech, Fang Jianqiu, revealed that a global layout would be promoted according to the strategic plan, driving the open-source and efficiency increases of mature products, and the promotion and launch of new technology platforms and product pipelines.

According to the plan, the Global R&D headquarters project will commence before June 25, 2025, be completed before December 25, 2027, and be put into production before December 25, 2028, taking 3 years to reach production capacity. By June 25, 2030, the sales revenue generated by this project will not be less than 1.5 billion yuan per year, and the total tax amount will not be less than 150 million yuan per year.

This also means that the revenue contributed by this project alone will be nearly twice the total revenue of Zhejiang Orient Gene Biotech in 2023.

A reporter from the Star Daily called the secretary of the board of Zhejiang Orient Gene Biotech, inquiring whether the revenue target for the project is too distant. The corporate personnel replied that the relevant planning needs to be made when acquiring land in Zhangjiang, and there may be risks regarding achieving operational expectations, but it could also exceed expectations, 'However, we will try to meet the relevant requirements.'

The reporter further inquired whether there are more specific directions for business development within the project. The other party stated that even for external investments, Zhejiang Orient Gene Biotech will still focus on its main business of in vitro diagnostics and will not engage in cross-sector or cross-industry actions. 'We originally focused on R&D, production, and sales, and increased third-party testing during the pandemic. This part of R&D, production, and sales is definitely our focus, but we will also integrate services afterwards,' the spokesperson said.

Data shows that Zhejiang Orient Gene Biotech is currently focused on the Business layout of 'human medicine + animal protection,' with main products including upstream biological raw materials such as antigens/antibodies, primers, probes, and microspheres; midstream immune diagnostic platforms, molecular diagnostic platforms, liquid microarray platforms, biochemical diagnostic platforms related diagnostic reagents, and supporting diagnostic instruments; as well as downstream third-party independent testing laboratories.