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10 Chinese Genomics Companies Decoding China

We’ve had boots on the ground in China for some time now, and we’re firmly convinced that investment exposure to China is a must. A recent article by Peter Diamandis on the topic pointed out the 9-9-6 work culture for Chinese startups which stands for 9AM to 9PM, 6 days a week – in other words, 72 hours a week. Perhaps Silicon Valley could have posed a worthy challenge to China a decade ago, but today it’s a different story. We now have a bunch of tools running around spreading misinformation like “working more than 50 hours a week is unproductive“, which is simply an excuse for not being able to compete with those people who do.

One place where the USA has managed to attain technological dominance is in the area of genomics, in particular, the hardware being used for genomics. Estimates say that Illumina (NASDAQ:ILMN) commands upwards of 80% market share for the “picks-and-shovels” of genomics – DNA sequencing machines. China has taken notice, and it won’t be long before they’ve created their own Illumina which should be cause for concern if you’re a long-term shareholder of ILMN today as we are. To get you up to speed on what’s happening in China, here are 10 genomic companies busting out some 9-9-6.

Founded in 2012, Beijing startup Annoroad Genomics has taken in $106 million in funding to develop “novel diagnostic products” and conduct “life science research”. In 2015, the company announced a joint develop agreement with “American Illumina Company” to work on building an easily-operated prenatal DNA testing platform for the Chinese market. Back of the napkin math tells us that 48,931 Chinese babies are born every day, and all you have to do is convince the parents that sharing their child’s genetic info will “bring good luck and fortune” and you will have nearly 18 million genetic profiles in just one years’ time of cute babies like this one:

Random cute Chinese baby from Pintrest

That seems to be where this whole thing is heading with the “easy to operate” comment about the machine they are developing. Annoroad is already one of the top-3 providers of sequencing services in China having developed their own Non-Invasive Prenatal Testing (NIPT) kit which is approved by the appropriate authorities and widely used in China.

You may recall our article on the IPO of BGI Genomics (SHE:300676) this past summer. Since that article was published just four months ago, you would have made more than 9X your money if you bought shares the day they began trading. If you were actually able to get your hands on some pre-IPO shares, here’s how you would be sitting today according to an article by Caixin a few weeks ago:

Shares of China’s largest genomics firm BGI Genomics Co. were, as of Wednesday, worth 17 times more than when it listed in Shenzhen just four months ago, triggering concerns over potential risks behind the investment craze.

Seasoned investors know that an astronomical price appreciation like this one goes against every notion of financial common sense there is, especially the notion that “the market prices in all available information”. Was new information made available in the past 4 months that would have turned a $1,000 investment into $17,000? It seems highly unlikely when you see the steady share price increase over time:

It’s no secret that many Chinese retail investors treat the stock market like a day at the race track, so take that above chart with a grain of salt. If you want to read all about the company, just check out our article from 4 months ago.

BGI is a good segue into our next company which was founded in 2010 by a team of ex-executives from BGI. Beijing-based Berry Genomics (SHE:000710) was actually the first Chinese gene-testing company to become publicly traded when they did a reverse merger as opposed to an IPO. This is a convoluted way some companies choose to go public, and it’s puzzling how the pre-existing shell was already seeing some suspiciously bullish trading action well before the announcement. Here’s a 5-year chart with a red arrow showing when they actually began trading:

Similar to BGI, Berry Genomics is primarily focused on reproductive health testing, which should come as no surprise when you consider how competitive an environment it is there for children. According to the company’s website:

Report on Birth Defects Prevention and Control in China (2012) released by the Ministry of Health shows that the birth defect rate in China is about 5.6%, with an average of one birth defect every 30 seconds.

All this worry translates into some serious profits from investors. According to an article by Caixin, in the first six months of 2016, Berry Genomics brought in $756 million in profit. When it comes to the numbers, Berry Genomics weighs in at a $3.18 billion market cap compared to $12.11 billion for BGI Genomics.

Founded in 2014, Shanghai company CloudHealth Genomics is part of a bigger group of companies called the CloudHealth Medical Group. Back in January 2014, Illumina released the HiSeq X Ten, a $10 million set of machines that brought us the $1,000 genome. CloudHealth gobbled up one set, and then in October of this year brought on none other than George Church himself to their scientific advisory board. According to the press release, Dr. Church will be helping them to develop a “direct-to-consumer” platform for genetic testing which will be all about big data and artificial intelligence. Funny that, since Dr. Church’s own genetics company, Veritas Genetics, is trying to market their myBabyGenome product in China according to this press release. If you decide to go work for CloudHealth, they’ll give you “birthday care” along with a red envelope stuffed with money:

Feel the warmth, Silicon Valley

In addition to offering up various health-related genetic tests direct to the consumer, they’re also doing work in the oncology space with a 565-gene solid tumor test that has a turnaround time of 10 working days – in other words, 10 days.

Also referred to as Beijing Gene Plus, this startup was founded in 2015 and has taken in $30 million in funding from a number of investors with none other than BGI as the lead investor. As with most Chinese startups, they have no need to provide a website in English Engrish because they don’t need to. This means you need to translate everything and then hope that Google’s AI algorithms got it right. In this case, one diagram tells us everything we need to know:

It looks like they’re doing liquid biopsies to detect 62 different cancer genes which means they’re directly competing with Illumina’s Grail.

Speaking of liquid biopsies, our next company is working on the first large-scale cancer precision medicine project in China. With access to a funding pool of $10.6 million, HaploX biotechnology has been working with 10,000 different cancer patients in 60 different hospitals and organizations. Founded in 2014, they are a showcase of China’s young talent with an average employee age of 27, and 20% of their 70-person team having a PhD (plus 8 experts in machine learning). With one Chinese person diagnosed with cancer every 10 seconds, the market for liquid biopsies is massive to say the least.

Founded in 2011, another Beijing startup called Novogene has taken in $78 million in funding, some of which they used to buy sequencing machines from Illumina (30 HiSeq X and 25 NovaSeq 6000) giving them the largest sequencing capacity in the world. All those machines are operated by +3,200 bioinformaticians led by company founder, Dr. Ruiqiang Li, one of the world’s leading genomics experts (at least going by his 90 peer-reviewed publications which have been cited over 15,000 times). The Novogene folks have sequenced more than 370,000 samples, and they’re running a promotion if you want to join their growing list of 10,000 global customers:

The results are superior in quality with a guaranteed Q30 score which translates to about 99.9% accuracy (you can read all about Q-score accuracy here).

Founded in 2014, San Diego startup Singlera Genomics has taken in $20 million in funding to develop “non-invasive genetic testing” for both liquid biopsies and prenatal testing. Now it’s understandable why all you geography majors out there will be asking why this San Diego company made our list. That’s a great question, but how do you classify a company with primarily Chinese investors, that does a lot of work with Chinese institutions, and with a management team that looks like this?

If you said “not diverse” then that’s the wrong answer people. You better not start harassing them about the makeup of their management team or else they’re going to disappear back to the mainland. The truth is, they’re just a quick name change away from being a Chinese company if they’re not one already.

Beijing based MEGA Genomics is one of these Chinese startups where people are so busy working that there’s no time left to establish a decent web presence. According to Tech in Asia, the startup took in $24.7 million in funding late last year. Their vision is to use gene technology  to “make human beings more beautiful and healthier”. Sounds like a plan.

We saved one of the best for last, if by “best’ we mean a company that just landed $240 million in funding led by Sequoia and with participation from Mr. Jack Ma himself. Just a few weeks ago, they brought on a former Baidu CIO to drive the growth of their genomics data platform, if that tells you anything about how serious they are. According to an article by Tech Crunch, that brings total funding to $270 million which they plan to use for gathering “2 million genomes in its information database by 2020, more than any other database in the world”. They’re actually a subsidiary of a much larger company called Wuxi AppTec, but that’s a story for another time.

Meanwhile in ‘Murica, C-suite executives of the world’s biggest distraction platform sell books and drive tractors while their key employees talk about how bad meritocracies are. To top it all off, there are actually people complaining that startups with unlimited time off policies need to “force employees to take time off”. The Chinese are having a good chuckle about this as they set about to demonstrate what successful people already know. Great things happen to those who are willing to put in the time. As Confucius once said, “the harder you work, the luckier you get”.

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