Chinese manufacturers of in vitro diagnostic (IVD) tests are pivoting to new markets such as Southeast Asia for growth, as a period of pandemic-driven sales comes to an end.
Daan Gene Co. Ltd. (002030.SZ), a major Guangdong-based manufacturer of Covid test kits, has projected an up to 98.2% drop in net income for 2023, according to a filing to the Shenzhen Stock Exchange late last month. Sales in the third quarter slumped 88.5% year-on-year to 306 million yuan ($42.5 million) while losses stood at 50.2 million yuan in the same period, a separate filing shows.
Maccura Biotechnology Co. Ltd. (300463.SZ), a Chengdu-headquartered maker of IVD tests, said in a filing last month it expects an up to 60% decline in net income for 2023. Third quarter sales dropped 21.6% year-on-year to 734 million yuan while net income dropped 52% to 93.8 million yuan.
Both companies mentioned significant demand and sales drops in their IVD products as factors affecting their annual earnings projections. IVDs are tests done on samples taken from the human body, such as saliva, blood or tissue, to detect, diagnose or monitor diseases or other conditions.
The weaker market has also affected some companies’ listing plans. Fapon Biotech Inc., another IVD firm, has withdrawn its IPO application on Shenzhen’s ChiNext board, according to a Feb. 22 disclosure.
In its updated prospectus in July, the Shenzhen-based firm had said that there had been a significant decline in the demand for certain acute respiratory infectious disease testing equipment since the start of 2023, which could result in a substantial decline in the company’s financial performance.
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Shanghai Danli Bio-technology Co. Ltd. is one of the firms looking at the Southeast Asian market for new growth, according to its chairman Zhang Xianlong.
“During the pandemic, in vitro diagnostic companies achieved high revenues, but their expenses were also high. Following multiple rounds of centralized procurement, the high-revenue performance was not sustainable,” Zhang told Caixin. “Compared with the domestic market, the profit margin in the Southeast Asian market is actually higher,” he said.
Tengchen Biotechnology (Shanghai) Co. Ltd. is also exploring opportunities in Southeast Asia alongside many of its peers in the sector, its chief financial officer Wang Xinhua told Caixin.
The Shanghai-based firm is targeting an IPO in 2026 and Hong Kong is one of the markets under consideration, Wang said. The firm, which has completed a Series B fundraising round, has established a subsidiary in the city and a joint laboratory with Hong Kong Polytechnic University.
Companies are also ramping up innovation to spur growth. Shanghai Danli Bio-technology’s Zhang said that the company is investing more than 10 million yuan every year in research and development, including test kits to help diagnose Posner-Schlossman Syndrome, a type of inflammatory glaucoma, and polycythemia vera, a type of chronic leukemia.
Contact reporter Kelsey Cheng (kelseycheng@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)
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