Company profile
Beckham Healthcare is China's leading innovation platform for assisted reproductive genetic testing solutions, and is the only company in China with a genetic test kit product line covering the entire reproductive cycle. The company's two core businesses are (1) providing genetic testing solutions, including selling test kits and providing testing services to customers such as reproductive clinics and hospitals; and (2) sales of genetic testing equipment and instruments. The PGT-A kit developed by the company is the first and only third-generation IVF genetic test kit approved by the National Drug Administration in China. It can screen for aneuploids in embryos before implantation. The PGT-M and PGT-SR pre-implantation genetic test kits currently being developed are expected to be registered and approved by the National Drug Administration in 2022 and 2024, respectively.
Sino-Thai views
Core products can occupy huge market potential in the PGT field: the company has 5 test kits and 4 types of instruments and instruments. Its business mainly cooperates with large hospitals and reproductive clinics in China, global life science and biotechnology companies in the industry such as Thermo Fisher, etc., and academic institutions. Pre-implantation genetic testing (PGT) is a critical step in third-generation IVF treatment. The three PGT kits independently developed by the company target accurate identification of haploids and normal embryos before implantation, rapid and effective detection of single gene defects and chromosome structure rearrangements, which can form a complete kit series and occupy the PGT market with a leading edge. According to Frost & Sullivan's report, the scale of third-generation IVF services increased from 300 million yuan in 2015 to a compound annual growth rate of 70.8% to 2.5 billion yuan in 2019, and is expected to reach 25.5 billion yuan in 2024, and the CAGR from 2019 to 2024 will reach 58.6%. The market size of PGT reagents is expected to increase from 96 million yuan in 2020 to RMB 2,282 million in 2024, with a CAGR of 120.9%, and the PGT reagent market in China's reproductive genetics reagent market is expected to increase sharply from 2.7% in 2020 to 25.8% in 2024, and the PGT penetration rate will increase from 3.8% in 2019 to 18.4% in 2024. Since the candidate products of the company's potential competitors are still several years away from approval, and the entry barriers to the PGT reagent market are high, the company's leading product advantages brought by the approved PGT-A kit that can be sold commercially are sustainable.
In terms of operating performance: In the 2018-2019 fiscal year and the first nine months of 2020, the company's revenue was RMB 32.61 million, RMB 55.69 million and RMB 57.24 million respectively. Of these, revenue from genetic testing solutions accounted for 97.8%, 95.7% and 89.0% respectively. Revenue from sales of testing equipment and instruments accounted for 2.2%, 4.3%, and 11.0% respectively; gross margin was 25.0%, 47.1% and 35.8% respectively. The main reason for the decline in gross margin in the first nine months of 20 years was kit distribution sales with low gross margins increase. Looking at specific product segments, the company's self-developed genetic testing kits PGT-A and CNV kits had high gross margins in 20 years, 48.2% and 42.7% respectively. Other products had gross margins of 27.1%, 29.1%, 30.3% and 35.4% of total revenue; R&D expenses accounted for 57.7%, 35.7%, and 38.4% of total revenue respectively; losses were 152 million yuan, 528 million yuan and 848 million yuan respectively; the company focuses on product development, and currently only the PGT-A kit has obtained the national medical device registration certificate, which was invested in the early stages Large amounts of capital and unprofitable products have made it difficult for Beckham Healthcare to achieve profit in the short term.
In terms of valuation: Based on the global share capital of 270 million after the public sale, the company's market value was HK$7 to 7.3 billion. Since the company is not yet profitable, the PE valuation method does not apply. The price stabilizer this time is CITIC Lyon, which sponsored 12 projects in 2020, showing 7 increases, 2 drops and 3 draws on the first day. On the cornerstone side, seven investors were introduced, including those specializing in healthcare investment such as OrbiMed Funds and Clear Pool Capital, and subscribed for a total of 90 million US dollars. Assuming that the price was limited to HK$27.36 according to the sale price range and no overallotment rights were exercised, they accounted for a total of about 38.3% of the shares sold. The entry barrier to the company's industry is high. Its core PGT products have a leading edge in the industry and can meet the huge genetic testing needs of the IVF market. In summary, it was given 73 points, and the rating was “subscription”.
Risk warning: (1) The company is at a loss, revenue is not stable, (3) R&D progress falls short of expectations, and results are uncertain