China’s genomics giant BGI, once the world leader in DNA sequencing for basic science, is going public — capping off a dramatic transformation into a mainly biomedical firm with a focus on reproductive health.
A financial prospectus document released to support the initial public offering (IPO) details how BGI, squeezed by its rivals and the plummeting cost of sequencing, has been drawn to more-profitable pursuits, such as prenatal genetic testing, in China’s expanding medical market. The shift is also in line with the Chinese government’s multibillion-yuan drive to promote precision medicine, an effort to use the reams of genomic and other medical data being created to tailor treatments.
BGI is currently working out the details of the IPO, which was years in the making and approved by China’s financial regulators in late May. The IPO is expected within a month and the firm hopes to raise 1.7 billion yuan (US$250 million).
As the first genomics company to be listed in China, BGI will be a pioneer in the country’s precision-medicine market, which is estimated to be worth 20 billion yuan by 2020. “It's a milestone for both BGI and the field,” says Ruiqiang Li, who used to work for BGI and is now chief executive of competing genomics firm Beijing-based Novogene, which Li hopes to take public.
BGI was established in 1999 as the Beijing Genomics Institute and the force behind China’s contribution to the Human Genome Project — it sequenced a small, but symbolic, 1% of the genome.
Source: BGI IPO prospectus
Over the next decade, it produced a series of high-profile sequencing breakthroughs, including the genomes of rice, the giant panda, the cucumber, an ancient human and more than 1,000 species of gut bacteria. In 2010 — now based in Shenzhen and known simply as BGI — the company purchased 128 of the world’s most-advanced genome-sequencing machines. Overnight it became the industry’s most prolific player.
The firm gained a reputation as a genome factory. The number of studies based on BGI-sequenced genomes — paid for by scientists from all over the world, who acknowledged BGI scientists’ contributions by making them co-authors — jumped from a handful to hundreds per year.
But that number has plateaued, and it looks set to drop this year. According to the prospectus, BGI’s income from research-driven sequencing dropped by more than one-quarter between 2014 and 2016, and now accounts for less than 20% of its business, down from 40% in 2014. Reproductive-health screening makes up the lion’s share of the company's income, at 55% (see ‘Focus on health’). Services related to complex diseases — those caused by a combination of genetic and environmental factors — brings in 23%.
The company would not comment on its operations, citing a “quiet” period mandated by the financial regulator before its stock-market debut. But its prospectus says that the move away from research-based sequencing is the result of the falling price of sequencing machines, which has allowed research institutes to set up their own facilities.
Li says, however, that even though some institutions are trying to build their own facilities, the market for third-party research sequencing is growing. “It’s not efficient and cost effective to maintain a small-scale sequencing lab,” he says. “Most such labs in China decided to discontinue their own platform operation and outsource sequencing to centralized sequencing centres.”
Still, sequencing for researchers isn’t the business it used to be. The prospectus points out that in the early days, there was more low-hanging fruit — sequencing the whole genome of a plant or animal, for example, were large projects with big profit margins. Now, projects are smaller and less lucrative. And competition has intensified from companies such as Novogene, which says it has the largest sequencing capacity in the world.
“This shift seems to be market driven,” says Dorret Boomsma of the VU University Amsterdam, who has used BGI sequences in studies of Dutch twins. “Apparently facilities for large-scale research sequencing are available on a more-competitive pricing, or nearer by, elsewhere.”
BGI’s ability to keep pace in the research was also affected by its failure to develop an advanced sequencer based on technology that it bought in 2013 from Complete Genomics in Mountain View, California. It also suffered after the departure of its chief executive Jun Wang, who spearheaded many of BGI’s research projects, but left in 2015 to start his own company.
Clinical sequencing in China, however, is booming, fuelled by the country’s growing middle class, expanding health-care system and focus on precision medicine. Sales of BGI’s non-invasive prenatal testing kit, NIFTY — which screens maternal blood to determine whether a fetus has chromosomal abnormalities such as Down’s syndrome — passed the million mark in March 2016. And China’s move from a one-child to two-child policy in 2016 increased the birth rate among NIFTY’s target demographic: women in their late 30s who are considered to be high risk for chromosomal abnormalities. According to an analysis by Chinese investment bank CITIC Securities, BGI has nearly 50% of the prenatal screening market in China, far ahead of its closest competitor.
With the money raised from its IPO, the firm hopes to improve its reproductive and cancer-diagnosis technologies, and add other, similar, sequencing-based diagnostic services for other health conditions. It also plans to expand genetic consulting services and establish cloud-computing platforms to crunch genomic data for precision medicine. Earlier this year, BGI struck a deal with Foxconn — the Taiwanese company that manufactures iPhones at its base in Shenzhen — to mass-produce sequencers, which BGI plans to sell to hospitals throughout China.
Other sequencing companies will be watching closely to see how BGI fares in the nascent market. “We don’t know the level of interest from investors. The industry is still relatively small, but it’s fast growing and has a lot of potential,” says Li.
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