Comprehensive Analysis and Outlook: Berry Genomics Prior to Its IPO

In 2016, the genetic testing industry continued its rapid and unregulated expansion. The growing popularity of sequencing concepts, increasing public acceptance, and exploration of consumer models such as “genetics + health management” fueled sustained market growth and enthusiasm. The inclusion of precision medicine in China’s 13th Five-Year Plan and the formal regulatory oversight of genetic testing signaled that the industry was on the verge of entering a new era. The prenatal testing sector was the first to stand out. In 2015, non-invasive prenatal testing (NIPT), which had been suspended for one year, was resumed, and the National Health and Family Planning Commission (NHFPC) began launching NIPT pilot programs. In October 2016, the NHFPC issued another announcement, formally discontinuing the NIPT pilot programs for screening and diagnosis, and introduced new regulations for medical institutions and personnel conducting non-invasive prenatal screening and diagnosis.

The pilot program was discontinued, marking the success of clinical exploration in prenatal testing. Non-invasive prenatal testing (NIPT), as a pioneer in the genetic testing industry, became one of the first to join the formal ranks of clinical diagnostics. The entire sector quickly heated up, with genetic testing companies of all sizes flocking to enter the market. Leading the charge was Berry Genomics.

Non-invasive prenatal testing is Berry Genomics' core business and a key area for sustained development in 2016.

In February 2016, Berry Genomics launched two new products and services for chromosomal disease detection: one is Kenuoan Chromosomal Disease Testing, a comprehensive productized solution encompassing equipment, reagents, and software; the other is Beibian Plus, an upgraded service for its non-invasive prenatal testing (NIPT) based on cell-free DNA.

Konnoan Chromosomal Disease Testing can be used to detect aneuploidy variants and chromosomal copy number variations (CNVs) larger than 100 Kb, as well as mosaicism with a proportion higher than 5%. It is not only applicable for prenatal testing but also assists clinicians in investigating the causes of miscarriage and infertility, and in conducting chromosomal disease testing for patients suspected of having chromosomal disorders.

From the perspective of product functionality, the practical experience accumulated from tens of thousands of clinical samples by Berry Genomics’ predecessor service, launched in September 2013, provides a foundational guarantee for its new product. The newly launched product is the tangible offering of KonoAn. It includes a comprehensive suite of supporting products covering DNA extraction, purification, library preparation, sequencing, bioinformatic analysis, and report generation, providing clinicians with a one-stop clinical testing solution for genetic diseases—from DNA extraction to report issuance—enabling physicians to perform the entire testing workflow in their own laboratories.

The newly launched Beibian Plus represents a comprehensive upgrade to the original Beibian product. Non-invasive prenatal testing (NIPT) products have decisively outperformed traditional Down syndrome screening methods due to their superior accuracy. Beibian Plus further advances conventional non-invasive DNA prenatal testing. In addition to detecting the three major autosomal aneuploidy syndromes—Down syndrome, Patau syndrome, and Edwards syndrome—it now includes testing for various sex chromosome aneuploidies and microdeletions. This development is undoubtedly a significant benefit for families who place utmost importance on eugenics and healthy childbirth.

Since 2013, world-renowned providers of non-invasive prenatal testing (NIPT), such as Natera, Sequenom, and Illumina, have successively launched testing services for chromosomal microdeletions and microduplications (CNVs), with annual testing volumes exceeding one million. In 2015, Berry Genomics also introduced similar testing programs in Hong Kong. Given the high prevalence of advanced maternal age in China’s current social landscape, there is an even greater need for more advanced testing technologies such as NIPT-plus. For families committed to eugenics and healthy childbirth, the launch of Beibian Plus was the best gift of 2016.

In addition to its midstream sequencing products, Berry Genomics continues to explore the upstream market, aiming to achieve a balanced layout across the upstream and midstream segments of the industry chain to deliver superior products and medical services.

In August 2016, the China Food and Drug Administration (CFDA) approved Berry Genomics’ special review application for its “Preimplantation Embryo Chromosomal Aneuploidy Detection Kit,” granting it approval under the Special Review Procedures for Innovative Medical Devices (Trial), thereby approving its entry into the fast-track channel.

The Special Approval Procedure for Innovative Medical Devices is a “green channel” specifically established by the state to encourage innovative development in the medical device industry. Undoubtedly, the introduction of this “green channel” has generated great enthusiasm among all companies involved in the medical device sector. However, obtaining approval through this pathway is no easy feat. First, the mechanism of action of the submitted product must be a domestic first, with fundamental improvements in performance and safety compared to similar products, reaching an internationally leading technical level. More importantly, the product must demonstrate significant clinical application value. The approval of the new test kit will not only bring greater convenience to clinical testing but also further highlight Berry Genomics’ strong capabilities in product innovation and research and development.

National regulatory oversight, the national policy on eugenics and healthy childbirth, and the comprehensive relaxation of the two-child policy all signal significant market potential for non-invasive prenatal testing (NIPT). In recent years, various companies have rushed to carve out their share of this emerging market. Currently, there are two primary NIPT business models in China. The first is the IVD model, which involves selling products directly to hospitals; the second is the service model, wherein hospitals outsource sample analysis to third-party testing laboratories for centralized processing. Regardless of the model adopted, NIPT-related products must obtain approval from the China Food and Drug Administration (CFDA). In 2015, Berry Genomics became the first company to receive CFDA certification and has since captured approximately 70% of the IVD-based NIPT market in mainland China.

In December last year, Jiangmen Maternal and Child Health Care Hospital partnered with Berry Genomics to launch the city’s first non-invasive prenatal testing (NIPT) program. Leveraging Berry Genomics’ proprietary technology platform and its advantage of over one million cases of non-invasive prenatal biological data, the two parties will fully utilize the hospital’s precision medicine team to establish a high-throughput genetic testing center laboratory, thereby enhancing the hospital’s prenatal testing capabilities. In addition to conducting NIPT on the NextSeq CN500, the hospital will gradually roll out diverse clinical tests based on Berry Genomics’ products. For the hospital, this represents a revolutionary improvement in the level of precision medicine services; for Berry Genomics, it marks another market surge following the removal of NIPT pilot restrictions in 2016.

Many people have become acquainted with genetic testing through non-invasive prenatal testing (NIPT), while also recognizing the potential of genetic testing technologies in precision medicine, particularly in the field of oncology. Genetic testing has emerged as a prominent force in the healthcare sector in recent years, and cancer itself is inherently a high-profile topic. The former represents market potential, while the latter reflects market expectations; consequently, oncology genetic testing has naturally become a highly searched term within the genetic testing industry. It is fair to say that for any genetic testing company, oncology genetic testing is an unavoidable subject.

Counting from the R&D phase, Berry Genomics has been involved in the field of tumor genetic testing for many years. Building on its foundation in non-invasive prenatal testing, Berry Genomics initially targeted gynecologic oncology, the area most closely related to its existing expertise.

In 2016, Berry Genomics made three major moves in the field of tumor genetic testing:

In March, Berry Genomics officially launched its hereditary gynecologic tumor genetic testing product, OncoYi, at the Gynecologic Oncology Branch of the Chinese Medical Association.

This product, independently developed by Berry Genomics, leverages high-throughput sequencing technology for the detection of common malignant tumors in women. To meet the needs of users at different levels, the product is available in three versions: “Core Edition,” “Extended Edition,” and “Complete Edition.” The “Core Edition” includes four genes—BRCA1, BRCA2, PTEN, and TP53—and covers hereditary breast and ovarian cancer syndrome, Li-Fraumeni syndrome, and multiple hamartoma syndrome, which are closely associated with gynecologic tumors as recommended by the 2016 NCCN Guidelines. Building upon the “Extended Edition,” the “Complete Edition” incorporates additional genes involved in cutting-edge research on the hereditary factors of gynecologic tumors, expanding the testing panel to 48 genes to provide the most comprehensive assessment of hereditary risks for gynecologic tumors.

It is evident that Berry Genomics aims to leverage its years of accumulated expertise in the field of non-invasive prenatal testing (NIPT) to gradually replicate this advantage in the realm of tumor detection. Transitioning from obstetrics to gynecology represents the most proximate and feasible channel for this expansion. However, the company is well aware that this market is less mature than the NIPT market, making market expansion the immediate priority. To address this, the company has adopted a multi-tiered strategic model, launching products at various levels. This approach not only meets the needs of diverse consumer segments but also saves time, simultaneously penetrating different market tiers and laying the groundwork for future competitive advantages.

In November last year, Berry Oncology launched another product in the series: a comprehensive BRCA1/2 whole-exon gene mutation test. The product fully covers all 48 coding exon sequences of the BRCA1 and BRCA2 genes, with over 16,000 detection sites. It can not only detect known pathogenic mutations but also identify novel mutations specific to the Chinese population. This test uses oral exfoliated cells as samples, further simplifying the clinical sampling process.

The OncoBenefit BRCA1/2 Whole Exome Mutation Test helps physicians establish a basis for personalized patient treatment while providing valuable genetic-level reference information for breast cancer prevention among Chinese women. In the current genetic testing market, many direct-to-consumer (DTC) products utilize exfoliated oral cells as samples, since self-collected blood sampling is impractical for the general public. From a consumer perspective, the most notable feature of OncoBenefit’s new product is the change in sample type, which demonstrates its potential for the DTC market and raises speculation about whether Berry Genomics has similar strategic intentions.

In addition to independent R&D, Berry Genomics has also pursued its commercial objectives through collaborations with other institutions. In August 2016, Berry Genomics announced a partnership with U.S.-based BioNano Genomics to jointly develop next-generation clinical products for chromosomal structural variation analysis based on the Irys® platform. Berry Genomics will submit product registration applications to the China Food and Drug Administration (CFDA).

BioNano is a leader in next-generation mapping (NGM) technology. The company’s Irys® system leverages NanoChannel® technology, which is pioneering the genomics industry, to perform single-molecule imaging of molecules with an average sequence length of 350,000 base pairs using the IrysChip®. This system enables the acquisition of long-read genomic information, helping to decipher complex DNA repetitive sequences and overcome issues such as inaccurate and incomplete genome assembly caused by these repeats.

Under the agreement, both parties will jointly develop a new-generation chromosome structural variation detection and analysis system characterized by high throughput, high resolution, and ease of use, comprising instruments and assay kits based on the Irys® platform. Berry Genomics will hold exclusive rights to manufacture and market the system for clinical applications in China; BioNano will secure the Chinese market for research applications, targeting genome research centers, government agencies, academic institutions, and pharmaceutical companies.

“Through innovation in its business model, Berry Genomics has become a leader in China’s non-invasive prenatal testing (NIPT) market. We hope that our next-generation platform for chromosomal structural variation analysis will help Berry Genomics achieve similar leadership across broader fields, including genetic diseases and oncology,” said Dr. Erik Holmlin, CEO of BioNano Genomics. “We aim to collaborate with leading global clinical diagnostics companies to enhance the diagnosis and treatment of human diseases through Irys technology. This partnership with Berry Genomics is a prime example of such collaboration.”

As mentioned above, “tumor” is a buzzword in precision medicine. Achieving precision medicine, integrating and disseminating information throughout this process, and stratifying patients into subgroups all rely on the support of bioinformatics and big data. Since the advent of gene sequencing technology, building human genome databases has been one of the core missions of national genomics research centers worldwide. The primary objective of these human genome databases is to provide genomic information to scientists and healthcare professionals engaged in human genome research.

Big data analysis reveals significant variations in nucleotide sites among different ethnic groups. Currently, the majority of international human genomic data are derived from Western populations; however, evolutionary differences among ethnic groups lead to marked disparities in susceptibility genes and mutation loci. Therefore, against the backdrop of the rapid development of molecular diagnostics and precision medicine in China, establishing a high-quality genomic database for the Chinese population has become a critical barrier that leading domestic genetic testing companies strive to overcome.

In August 2015, Berry Genomics officially launched the “Shenzhou Genomic Data Cloud” project. Co-developed by Berry Genomics and Alibaba Cloud, this initiative aims to build a data cloud centered on large-scale genomic data from the Chinese population, enabling precise interpretation of individual genomic data.

This collaboration leverages Alibaba Cloud’s strengths in batch computing and the extensive genomic big data accumulated by Berry Genomics through years of dedication to China’s genetic testing sector. Berry Genomics has independently constructed a large-scale genomic database for the Chinese population, which has already amassed over 400,000 genomic datasets. In-depth mining of these data further elucidates the distribution of hereditary mutations among the Chinese population, thereby enhancing the efficiency and accuracy of genetic disease diagnosis. As a global leader in cloud computing services, Alibaba Cloud enables Berry Genomics to achieve remote database operations and data processing. The jointly developed genomic data cloud will further drive the development and advancement of clinical precision medicine in China.

In addition to the genetic database resources accumulated over many years, this collaboration also involves Berry Genomics' proprietary information analysis tools developed in-house.

In August 2016, Berry Genomics officially released two core patented technologies in the field of genetic data analysis: the Verita Trekker® Variant Detection System and the Enliven® Variant Annotation System.

The Verita Trekker® Variant Detection System undergoes rigorous genotypic quality control, achieving a sensitivity of 99.00%, with all performance metrics meeting international leading standards. The Enliven® Variant Annotation System integrates over 50 internationally authoritative databases and prediction algorithms through statistical computation and text mining methods. It includes the Chinese-specific genetic information database generated by the “Shenzhou Genomic Data Cloud” project, supports instant retrieval from tens of millions of publications, and provides comprehensive coverage of gene, variant, phenotype, and disease information.

With the strong support of two cutting-edge platforms, in September 2016, Berry Genomics announced significant interim achievements of its “Shenzhou Genomic Data Cloud” project, completing the construction of the world’s first genomic database for the Chinese population and filling the gap in international genomic databases regarding population-specific genomic data from China.

Two weeks later, the company announced significant achievements in bioinformatics analysis and big data infrastructure. These included the “Map of Hereditary Breast Cancer Gene Mutations in the Chinese Population” project, conducted in collaboration with Professor Xie Yuntao of Peking University Cancer Hospital, as well as interim clinical application results from the 400,000-person Chinese Genome Big Data Project. Building on this foundation, Berry Genomics integrated its self-developed Chinese genomic database with genetic data from 10,000 gynecological tumor patients, establishing the world’s largest genomic database for gynecological tumors.

The above represents Berry Genomics’ major strategic moves in market positioning in 2016, but the news that most excited the industry was its backdoor listing.

On the evening of August 29, 2016, Tianxing Instruments, which had been suspended from trading for two and a half months, disclosed an announcement on the progress of its major asset restructuring. The company proposed to sell all of its existing business assets, including current assets, liabilities, operations, and personnel, to Chengdu Tianxing Instruments (Group) Co., Ltd. or a third party designated by it. Meanwhile, it would issue shares to all shareholders of Berry Genomics to acquire their 100% equity interest in Berry Genomics. If the matters disclosed in the announcement proceed smoothly, this will mean that Berry Genomics will list on the capital market through a backdoor listing via Tianxing Instruments. The announcement stated: “This asset restructuring constitutes a related-party transaction, as well as a major asset restructuring and a backdoor listing.”

BGI and Berry Genomics are both leading enterprises in China’s gene sequencing industry. Which of the two companies would enter the capital market first has long been a topic of keen interest within the industry. As early as late 2015, BGI submitted its IPO documents and began waiting in line for listing on the ChiNext board, a process that lasted more than a year. Meanwhile, Berry Genomics, which had always maintained a low profile, suddenly announced plans to go public through a reverse merger, sparking intense discussion—was Berry Genomics aiming to beat BGI to the punch?

Three months later, Tianxing Instrument once again announced its plan to acquire 100% equity interest in Berry Genomics by issuing A-shares via a private placement to all shareholders of Berry Genomics. It is reported that the issue price for the shares used in this asset acquisition was RMB 21.14 per share. Based on this calculation, Tianxing Instrument would issue a total of 203,405,865 shares to all shareholders of Berry Genomics, implying a P/E valuation of only RMB 4.3 billion for Berry Genomics, which is significantly lower than its previous valuation of RMB 10 billion.Before its official debut, Berry Genomics has already sparked two rounds of public discussion.

In December 2016, the long-awaited media briefing held by Berry Genomics and Tianxing Instruments finally took place. This meeting also marked the finalization of the backdoor listing deal, leaving Berry Genomics just one step away from going public.

But just this month, another media outlet dropped a bombshell: BGI could list on the Shanghai Stock Exchange as early as March 2017! The question of who will claim the title of the first NGS stock has once again become shrouded in uncertainty.

From the trends in 2016, Berry Genomics' market layout mainly includes prenatal testing, tumor detection, and genetic big data, covering the most promising niche areas in recent years.

Continuously Deepen Prenatal Testing, Extending to the General Population

Although Berry Genomics is a leader in the field of prenatal testing, it faces threats from established competitors on one side and an influx of other genetic testing companies on the other. Consequently, the company must differentiate its products and demonstrate their superiority over those of peers to solidify its industry position.

On the other hand, although Berry Genomics currently holds approximately 70% of the non-invasive prenatal testing (NIPT) market among in vitro diagnostics (IVD) providers in mainland China, there remains substantial untapped market potential overall—with a market penetration rate of less than 10% in the first half of 2016. Following the relaxation of the two-child policy, the entire maternal and infant market nearly doubled, accompanied by a further increase in the number of advanced maternal age pregnancies. Coupled with the discontinuation of NIPT pilot programs in 2016, the widespread clinical adoption of non-invasive prenatal testing became imminent. Berry Genomics’ ambitions in this field can be illustrated by a statement made by its founder, Zhou Daixing, at the 2017 J.P. Morgan Healthcare Conference: “The era of large-scale expansion of non-invasive prenatal testing in China has arrived. The future market for NIPT will no longer be limited to pregnant women at high risk of genetic disorders; it will soon become accessible to the general population.”

Deepening prenatal testing and continuously enriching the product portfolio is a strategy for Berry Genomics that allows it to both advance (by exploring new markets) and defend (by consolidating its industry position). Zhou Daixing also revealed that the company would begin promoting single-gene disorder testing. Therefore, VCBeat predicts that in 2017, Berry Genomics will continue the strategic model of the previous year by furthering its research in the field of prenatal testing and expanding the range of detectable diseases. Meanwhile, as a leading domestic genetic testing enterprise, Berry Genomics is expected to seek breakthroughs in upstream industries. The company has previously invested significant effort in product development, including both independent and collaborative R&D. If Berry Genomics successfully lists on the capital market in 2017, it may also pursue inorganic growth through mergers and acquisitions to further expand its industrial layout and enrich the entire industry chain.

From Point to Surface: Gradually Covering the Cancer Detection Market

In addition to the NIPT market, the oncology market holds substantial potential. Official data indicate that there are over 4 million new cancer cases annually in China. As living standards improve, expenditures on cancer diagnosis and treatment are expected to continue rising. According to forecasts by UBS, the global potential market for oncology is approximately $23 billion. This sector has also been a focus of Berry Genomics’ business expansion in recent years. Currently, Berry Genomics’ presence in the field of oncology genetic testing is concentrated primarily on gynecologic cancers. For Berry Genomics, leveraging its deep expertise in obstetrics and gynecology to enter the broader oncology market through gynecologic cancers represents the most strategic choice.

In 2016, as tumor liquid biopsy based on cSMART technology gradually gained a foothold in the market and the timing became increasingly ripe, Berry Genomics was poised to begin exploring the pan-cancer market in 2017. Currently, Berry Genomics is conducting research on the application of cSMART technology in colorectal cancer. It can therefore be inferred that in the coming years, the company will progressively launch diagnostic products for individual cancers, expanding from specific points to broader lines and ultimately comprehensive coverage, thereby gradually penetrating the cancer diagnostics market.

Accelerate Database Cloud Development and Establish Industry Standards

Furthermore, Berry Genomics will accelerate the development of its genomic database cloud. Although China’s gene testing technology has reached a relatively advanced level, there is still no comprehensive gene database specifically tailored to the Chinese population. As research deepens, genetic discrepancies among different ethnic groups become increasingly pronounced. Several leading gene testing companies have already initiated the construction of genomic databases. Leveraging its previously self-developed large-scale genomic database for the Chinese population, Berry Genomics retains a first-mover advantage.

Berry Genomics has established the world’s largest genomic database for gynecological tumors. In the future, the company is expected to continue its efforts in building pan-cancer databases, as well as compiling data on cancer incidence trends and distribution patterns in China. Meanwhile, leveraging Alibaba Cloud’s robust batch computing capabilities, Berry Genomics aims to transition its genomic database to an internet-based platform. By combining this internet-enabled genomic data experience with its extensive proprietary database of Chinese populations, Berry Genomics appears poised to set industry standards through the development of a genomic database specifically tailored to the Chinese population. Should this initiative succeed, it would mark a milestone for both Berry Genomics and the domestic genetic testing industry.

Furthermore, with the increasing prevalence of sequencing, the era of personal genomics is poised to arrive. Berry Genomics is also likely to follow Google Genomics’ example by launching a gene cloud storage service accessible to individual users.

February:

KeNuonAn Comprehensive Solution for Chromosomal Disorders Now Fully Available;

Non-Invasive Prenatal Testing (NIPT) Unveils an All-New Upgraded Version—NIPT-plus.

March:

Launch the “Genetic Testing for Hereditary Gynecologic Tumors” product;

Successfully held the “Embryo Biopsy Technology Training Course” in collaboration with the 301 Hospital and the 181 Hospital.

April:

The four medical testing laboratories in Beijing, Chengdu, Qingdao, and Shanghai all passed the external quality assessment with a perfect score of 100, having tested ≥20 genes.

Supporting Prenatal Testing and Gynecologic Oncology Genetic Testing in Liaoning Province.

August:

Preimplantation Embryo Chromosomal Aneuploidy Detection Kit received special approval through the CFDA Innovative Medical Device Program;

Announced a partnership with BioNano to jointly develop next-generation chromosomal structural variation analysis technology for clinical use;

Officially released two core patented technologies in the field of genetic data analysis: the Verita Trekker® variant detection system and the Enliven® variant annotation system;

Tianxing Instruments Discloses Asset Restructuring, Plans to Acquire 100% Equity Interest in Berry Genomics

September:

Released phased achievements of the "Shenzhou Genomic Data Cloud," filling an international gap;

Announcing the Big Data System for the Chinese Population Genome and Its Clinical Applications in Breast Cancer Detection.

November:

The latest product in the OncoBenefit series, BRCA1/2 full-exon gene mutation testing, is now available.

December:

Empowering Jiangmen CityMaternal and Child Health Hospital: Establishing a Center for Precision Medicine;

Berry Genomics’ cSMART Technology Granted International Patent;

Tianxing Instruments Issues Another Announcement; Subsequently, Both Parties Hold a Media Briefing, Finalizing the Backdoor Listing Plan.