Company overview
The company is an innovative platform for assisted reproductive gene testing solutions in China, which was established in Suzhou in 2010.
The core product PGT-A (preimplantation genetic testing) kit was registered by the State Drug Administration in February 2020 as three types of "innovative medical devices". It is the first and only third-generation test-tube baby genetic testing kit approved by the State Drug Administration.
Two other PGT products, PGT-M and PGT-SR kits, are being developed. These two kits will form a complete series of detection kits with PGT-A kits, covering the PGT field in an all-round way. The products are based on second-generation sequencing (NGS) technology. The two kits are expected to be registered and approved by the State Drug Administration in 2022 and 2024, respectively.
The company has only started the commercial sale of PGT-A kits since April 2020, and is still in the pre-profit stage. FY2018/2019 and the nine months ended September 30, 2019 and 2020, the net loss during the period was 157.8xpx 572.9 / 852.3 million respectively. The net loss mainly comes from changes in the carrying amount of distribution, research and development, administrative expenses and financial instruments.
Industry status and prospects
Driven by the third generation of IVF treatment, China's demand for PGT is growing rapidly, and China's PGT reagent market is expected to grow rapidly in the next few years. In terms of sales revenue based on ex-factory prices, the market size will increase from 95.9 million yuan in 2025 to 3.4 billion yuan in 2025, with a CAGR of 103.8%. It will further increase to 14.7 billion yuan in 2030, and CAGR will be 34.2% from 2020 to 2030.
The market for CNV services is expected to grow significantly, driven by improved accuracy and speed of CNV (copy number variation) detection and more affordable prices. In terms of patients' total expenditure on CNV services, the market size is expected to reach Rmb900m and Rmb1.3 billion in 2024 and 2030 respectively, with 35.2 per cent of CAGR from 2019 to 2024 and 5.7 per cent of CAGR from 2024 to 2030.
Advantages and opportunities
The company's PGT-A kit, the first and only third-generation test-tube baby gene testing kit approved by the State Drug Administration, occupies a leading position in the field of PGT. Compared with other PGT-A products based on fluorescence in situ hybridization (FISH) and quantitative polymerase chain reaction (QPCR), aneuploidy (a chromosome disease often associated with IVF failure) can be screened in embryos before implantation.
Favored by top capital, Hillhouse is introduced as shareholder, Aobo Capital and Qingchi Capital as cornerstone investors.
Management team with deep experience in the industry. Founder Dr. Liang has more than 10 years of bioinformatics experience, has led the development of successful products and technologies in the field of gene testing, and enjoys a good reputation in academic circles.
The R & D team has stable core members and has worked together in the reproductive science industry for nearly a decade.
Weakness and risk
The progress of product development and approval may not be as expected
Product commercialization and sales may not be as expected
Competition in the industry has intensified.
The purpose of the proceeds from the issue
Assuming the offering price of HK $26.86 per share, the company expects the net proceeds from the offering to be about HK $1684.7 million.
The plan is to spend about 30 per cent (HK $505.4 million) on the development and commercialization of the core product PGT-A. Use about 20% (HK $336.5 million) for the development and commercialization of PGT-M kits. About 30 per cent (HK $505.4 million) will be used to fund other product development. About 10.0% (HK $168.5 million) is spent on improving R & D capacity and technology. About 10% (HK $168.5 million) is used for working capital and general corporate purposes.
Cornerstone investor
The company introduced OrbiMed Funds, Lake Bleu Prime, CRF, AHAM, WinTwin, ForesightFunds and IvyRock Funds as cornerstone investors and will subscribe for 38.3% of the 39.7% shares in the offering.
Investment suggestion
From the perspective of industry prospect and competition pattern, driven by the third generation of IVF therapy, China's demand for PGT is growing rapidly, and China's PGT reagent market is expected to increase rapidly in the next few years. The pattern of competition in the industry is benign, with the exception of Baikang Medical, only 2 enterprises are researching related products, which is 2 or 3 years behind Baycom Medical.
At present, Baikang Medical has the first and only third-generation test-tube baby gene testing kit approved by the State Drug Administration, which has the advantage of starting in 2 to 3 years, and the follow-up product portfolio is rich, covering the whole reproductive cycle and sufficient growth motivation.
From the valuation point of view, we expect the company's PGT kit series of products to reach a peak sales of 1.2 billion in 2025. Using the market-to-sales ratio method, the A-share gene sequencing leader, BGI (300676.SZ), is taken as 9 times Pmax S, and we believe that the reasonable market capitalization of the company is more than 10 billion, and the IPO market value is attractive.
From the perspective of market sentiment, assisted reproduction is a hot subdivision field, there are few listed companies at present, and the target is scarce. Referring to 1951.HK, an assisted reproductive medical service company, IPO's share price rose more than 15% on the first day, and its recent performance is outstanding. It is expected that Baycom will also be favored by the market after its listing.
Judging from the performance of IPO sponsors in the past two years, the projects recommended by CITIC have gone up and down.
Considering the rapid growth prospect of China's assisted reproductive gene testing market, the company's leading PGT products, high-quality product line, and the favor of top capital, we are optimistic about the long-term development of the company. It should be noted that the IPO time has collided with Kuaishou Technology (1024.HK) and Xintong Medical (2160.HK) two hot IPO, it is expected that Bacon's IPO subscription response will be lower, so the success rate will be higher, financing subscription needs to pay attention to affordability. We give IPO a dedicated rating of "6".