Berry Genomics Pursues Backdoor Listing at RMB 4.3B, Significantly Below Prior PE Valuation of RMB 10B
Genetic Technology Company“Berry Genomics” plans to43Billion-Yuan Reverse Merger with “Tianxing Instruments” Sparks Widespread Industry Attention. Yesterday,Tianxing Instruments and Berry Genomics held a media briefing at the Shenzhen Stock Exchange, with Berry Genomics just one step away from its initial public offering.. The conference agenda includes“PE“Valuation far exceeds the backdoor listing price” and many other sensitive, high-profile issues, sparking another wave of media attention.
On the evening of August 29, 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 plans 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 will issue shares to all shareholders of Berry Genomics to acquire their 100% equity interest in Berry Genomics.
According to the "Announcement on Revision of Half-Year Earnings Forecast" released by Tianxing Instrument, the net profit attributable to shareholders of the listed company is expected to be a loss of RMB 1 million to RMB 2 million, compared with a loss of RMB 4.8345 million in the same period last year.
Despite Tianxing Instruments’ continuous losses, it remains an attractive shell company for emerging enterprises seeking a public listing. Berry Genomics will go public by backdoor listing through Tianxing Instruments, signaling that the genomics giant is poised to become the first listed company focused on next-generation sequencing (NGS).
Berry Genomics is one of the star enterprises in the field of genetic technology services. Registered and established on May 18, 2010, its main business includes providing gene sequencing services for scientific research and genetic testing services for clinical medical disease screening. It also sells high-throughput sequencers and related reagents to qualified medical institutions, generating corresponding service revenue and product sales revenue.
According to Berry Genomics’ official website, its main products or services include “Beibian,” “Kenuoan,” “Keyunan,” and “Angkeyi,” which target non-invasive prenatal genetic testing, chromosomal disorder screening, preimplantation genetic screening, and tumor molecular diagnostics, respectively.
Wang Dong, Board Secretary, Chief Financial Officer, and Vice President of Berry Genomics, stated that the company had already been considering its entry into the capital market during its two rounds of financing in 2015: “At that time, the company had not yet decided whether to pursue an initial public offering (IPO) or a backdoor listing, but the direction was set—it was only a matter of time before we entered the capital market.”
In March 2015, Berry Genomics was valued at RMB 1.5 billion; by the time of its Series D financing round in December, the company’s valuation had reached RMB 10 billion. However, the valuation for this acquisition stands at only RMB 4.3 billion, representing a significant discrepancy from previous valuations. Whether shareholders have conceded profits is a question that has drawn considerable attention from external observers.
Wang Dong acknowledged that this was indeed the case: “The shareholders of Berry Genomics hold only one asset—Berry Genomics itself. Therefore, the priority was to list the company on a capital platform as soon as possible, enabling all future operations to be conducted through this platform.” He viewed this as a demonstration of the shareholders’ long-term vision, prioritizing corporate development over short-term gains that could dilute value: “Although the valuation incurred a discount shortly after the investment, the shareholders remained confident in Berry Genomics’ industry position and thus offered their full support.”
Wang Dong further emphasized that the genetic testing industry, particularly non-invasive prenatal testing (NIPT) technology, will experience rapid development in the coming years. It was with this consideration in mind that Berry Genomics chose to enter the capital market early, leveraging financial instruments and brand equity provided by public markets. This strategy has had a significant impact on the company’s future collaborations and its ability to attract customers and partners. “Given our strong confidence in the industry’s rapid future growth and a clear understanding of the IPO queue process—where many financing and M&A activities are not feasible during the waiting period—we cannot afford to wait idly,” Wang Dong stated.
The genetic testing industry is currently a major growth track, a fact clearly recognized by both investors and practitioners, leading to substantial investment in the sector. In recent years, many new drugs approved by the U.S. FDA have been related to oncology treatment and genetics, as modern healthcare has advanced to a stage where it can overcome obstacles posed by congenital genetic factors. Against this broader medical backdrop, coupled with the refinement of domestic industry policies, demographic factors, economic growth, and rising per capita GDP and living standards, the proportion of expenditure on healthcare is inevitably set to increase.
In 2015, Berry Genomics’ market penetration rate was less than 5%, and it remained below 10% in the first half of 2016. According to the latest data released by the National Health and Family Planning Commission, the annual number of newborns is approximately 20 million (taking into account the two-child policy). If the penetration rate reaches 50% when the NIPT market eventually becomes saturated, the market potential is considerable. “With rising economic standards and improvements in medical insurance policies, this 50% figure may not even be the upper limit,” said Wang Dong. “For us, the future market space for NIPT alone is vast.”
Not only is the NIPT market promising, but the oncology market also holds immense potential. Official data indicates that there are over 4 million new cancer cases annually in China. As living standards improve, expenditure on cancer diagnosis and treatment will continue to rise. According to predictions by UBS, the global potential market for oncology is approximately $23 billion. The market size for medication guidance and post-treatment recurrence monitoring in diagnosed patients alone could be ten times that of the reproductive health market. Furthermore, as sequencing costs continue to decline, the applications of gene sequencing will expand further. For instance, its use will extend beyond current reproductive health and oncology molecular diagnostics to include the diagnosis of cardiovascular diseases, gastric disorders, and other complex conditions.
Wang Dong stated, “If sequencing costs continue to decline, we may ultimately enter an era of universal genomic profiling, where each individual’s health insurance card contains their genetic sequencing data. At that point, physicians can truly deliver precision medicine based on this data, a market that is closely relevant to every individual.”
Factors such as policy and economic development have created opportunities for industry growth. How Berry Genomics transforms these market opportunities into its own operational performance metrics will depend on its position within the industry.
Berry Genomics’ primary customers are large and medium-sized hospitals or research institutions, with the top five customers accounting for approximately 30% of its revenue in the first half of this year. Overall, customer concentration has remained stable. With the rollout of first-tier screening programs this year, customer concentration is expected to further decline in the future.
Overseas, Berry Genomics has a subsidiary in Hong Kong and operates a local laboratory there, providing testing services to the Hong Kong community. Financial data for the first half of this year shows that Berry Genomics’ overseas business accounted for 7.78% of the company’s total revenue. While the domestic market is expanding rapidly and overseas operations are not expected to see significant growth in the future, Gao Yang stated that business development in overseas markets will continue.
Compared with most domestic companies, Berry Genomics has distinct characteristics by focusing on medical application areas. It concentrates its R&D capabilities to build a medical application platform and continuously adds various testing items and products that meet CFDA requirements based on this foundation. Berry Genomics is one of the few companies that can provide medical products and services to healthcare institutions such as hospitals at all levels and third-party medical laboratories. Especially in the field of NIPT, Berry Genomics holds a leading position.
“NIPT is the first application of gene sequencing in the medical field, with subsequent applications including obstetrics projects and oncology projects. ‘However, these projects are still in the introduction phase, and the broader gene sequencing projects for cancer screening have not yet been launched, leaving significant room for future profitability,’ said Wang Dong.”
Berry Genomics holds a prominent industry position in the field of reproductive health, particularly within the non-invasive prenatal testing (NIPT) segment, which is currently the largest niche market. Although many enterprises are attempting to enter the gene sequencing sector, Berry Genomics generally maintains a first-mover advantage.
Gao Yang, the controlling shareholder and actual controller of Berry Genomics, stated, “All our patents are invention patents. Due to our early-stage R&D strategy, we have only applied for the most core patents to establish a comprehensive patent portfolio.” Taking liquid biopsy as an example, tests that previously required amniotic fluid aspiration or tumor tissue sampling can now be performed simply through blood draws. Compared with other types, Berry Genomics considers these foundational patents to be even more critical.
Gao Yang emphasized, “We only apply for patents covering what we deem most core and critical, ensuring the strictest protection for intellectual property with the greatest commercial value.” It is reported that Berry Genomics is currently filing approximately 20 patents, entering different countries and patent systems in accordance with its business plan.
Overall, Berry Genomics has built an integrated platform encompassing R&D, technology, products, and services. This platform was not designed for just one or two specific products or services. “With this platform in place, along with our R&D team and sales force, we can continuously add new projects,” said Wang Dong. “We have a clear vision of our strategic direction, and our shareholders are highly confident in us.”
Currently, Berry Genomics’ development strategy focuses on building a full industry chain with expansion across the upstream, midstream, and downstream sectors. Gao Yang stated, “At present, significant efforts are being devoted to independently developed product lines, primarily concentrated in the upstream and midstream segments, to deliver high-quality products and medical services.”
In fact, Berry Genomics is also engaging in extensive collaborations and discussions with numerous research institutions and R&D entities both domestically and internationally, with some of its genetic testing products currently in clinical trials. By partnering with other organizations, the company aims to achieve its commercial objectives. In short, it relies on both internal capabilities and external collaborations.
If Berry Genomics establishes a connection with the capital markets, it will not rule out further expanding its industrial layout through external M&A. Gao Yang stated that he is more interested in the overall completeness of the industry chain.