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COVID-19 Testing Enterprises: Huge Profits, Opportunities, and Regulatory Walls

Updated: Dec 6, 2022

"The performance is better than in previous years, with an increase of about 80%." From the industrial chain, you can see the popularity of the nucleic acid testing track. The development of the industry is in full swing, and some nucleic acid testing companies are making much money. Among them, iHealth(九安医疗), the most eye-catching, made its fortune with COVID-19 antigen reagents, dubbed a "monster stock" because of its sharp increase in performance.



From the industry's perspective, due to the low threshold of nucleic acid testing, many companies have also entered the game, and the nucleic acid testing track has become extremely crowded. The growth in performance has led many companies to plan to go public. However, the Shanghai and Shenzhen Stock Exchanges strictly investigated the IPOs of nucleic acid testing companies, and Yeasen Biotechnology became the first company to be suspended.

An industry that takes off in an instant and may fall rapidly. Many companies face the question of getting rich overnight, the price constantly bottoming out, and the unrecoverable accounts. Under the assumption that PCR testing will eventually return to normal, they are walking toward the crossroads of fate.

"Crazy Rich Testing Companies"

In the context of repeated epidemics, the violations of nucleic acid testing companies have repeatedly touched the sensitive nerves of the public.

According to public information, as of November 30, 2022, more than 10 cases of nucleic acid testing (also referred to as PCR Testing) violations have been investigated and dealt with, involving more than 11 companies, including Guangzhou KingMed Diagnostics Group Co., Ltd, Hefei Harmony Health Laboratory, Hefei Novel Gene, etc., while Beijing Pushi Medical Laboratory Co., Ltd. and Beijing Kingfocus Biomedical have had their business licenses revoked.

Among them, Nucleus Gene is the most eye-catching. From April 2020 to the present, Nucleus Gene in Jinan, Xingtai, Shenzhen, and other places have also been fined for various violations.

Statistics show that in the past three years, more than 10,000 new medical testing companies have been established in China. According to iFinD, there are currently 109 listed companies related to "COVID-19 testing & detection", including 24 in Guangdong Province and more than 10 in Beijing, Shanghai, Jiangsu, and Zhejiang.

In the first three quarters of this year, the total revenue of 109 publicly listed companies was 363.18 billion yuan, an increase of 23.85% over the same period last year; the net profit totaled 85.782 billion yuan, a year-on-year increase of 41.32%. Among them, iHealth's net profit in the first three quarters reached 16.05 billion yuan, a year-on-year growth rate as high as 31918.64%.

Outside of the IPO Gate

Nucleic acid testing turmoil, the signal of strict listing review is unmistakable. On November 23, the Shanghai Stock Exchange announced that it had decided to cancel the assessment of the listing application of Yeasen Biotechnology . Two days ago, the Shanghai Stock Exchange and the Shenzhen Stock Exchange just released an attitude of paying close attention to the listing applications of nucleic acid testing companies and insisting on strict review. So far, Yeasen Biotechnology has also become the "first shot" to scrutinize the IPO of the COVID-19 testing company.

Liu Peng, a researcher at the Department of Biomedical Engineering, Tsinghua University School of Medicine, explained that nucleic acid testing for COVID-19 is essentially an in vitro diagnosis. In vitro diagnosis is also an essential part of the laboratory department of the hospital. The detection of routine blood routine, urine routine, and other indicators belongs to this category. In vitro diagnosis includes biochemical diagnosis, immunodiagnosis, and molecular diagnosis. Most of the projects that hospitals do are the first two, and molecular diagnosis mainly refers to nucleic acid-based detection.

Molecular diagnosis also has various applications, such as detecting multiple pathogenic microorganisms and some detections related to human genes. But Liu Peng also mentioned that the overall detection technology involved in molecular detection is very complicated, including digital PCR, DNA sequencing, single-molecule sequencing, etc. Still, the qPCR technology used in conventional nucleic acid detection is relatively simple and mature.

The data shows that in 2020, 2021, and January-June 2022, the sales revenue of Yeasen Biotechnology COVID-related products were 46.1476 million yuan, 81.7413 million yuan, and 76.8973 million yuan, respectively, accounting for 24.77%, 25.42% and 38.28% of the current operating income respectively.

In the long term, large-scale nucleic acid testing is challenging to sustain. Besides, from the perspective of enterprises, nucleic acid detection is a relatively elementary technology. The qPCR technology can be a necessary skill for biological practitioners.

Therefore, for such a company goes public, there will be big problems in the sustainability of the core business. That is, the business operation cycle is limited, and there is no core technology; it is challenging to promote technology applications to other fields, and there are very few opportunities for diversified development.

However, nucleic acid detection is an effective virus detection method, and the market demand for detection, reagents, and consumables will remain. Still, it is not necessarily mainly used for the prevention and control of the COVID-19 pandemic, and there is also a great demand for other applications.

Nucleic acid testing companies have accumulated a large amount of capital, talent, and management experience during the epidemic. These constitute the intense competitiveness and development potential of nucleic acid testing companies. To achieve domestic substitution, they can invest in research and development in mid-to-high-end equipment and biological reagent consumables.

Who is still chasing the wind

The IPO failure of Yeasen Biotechnology is also a wake-up call for other companies. According to statistical data, five companies related to "COVID-19 testing" have passed the IPO meeting this year: JiangSu CoWin Biotech (CWBIO), Dakewe, Zeesan Biotech, RayBiotech, and Fapon Biotech Inc. In October this year, JiangSu CoWin Biotech (CWBIO) was listed on the Science and Technology Innovation Board. Dakewe and Fapon Biotech Inc. have both submitted for registration and will be listed soon.

JiangSu CoWin Biotech (CWBIO) is a biotechnology enterprise with molecular diagnostic products as its core and molecular diagnostic services as its supplement. In 2019 before the outbreak, the company's operating income was only 73.9385 million yuan, but in 2020, the operating income directly rushed to 233 million yuan, and in 2021 it reached 339 million yuan. In the past two years, the revenue from products and services related to COVID-19 reached 127 million yuan and 177 million yuan, respectively.

Under the low barriers to core technology and the uncertainties of COVID-19 policies in the future, the destinies of these companies are unclear. Nucleic acid testing is an apparent policy-driven industry. If it is difficult to maintain high demand for nucleic acid testing, then its performance expectations must be unstable.

At present, nucleic acid testing laboratories in many places have problems rooted in the excessive profit-seeking of nucleic acid testing as a market service driven by capital. The capital market's "strict review" of nucleic acid-related companies can prevent disorderly investment in the capital market and excessive binding of nucleic acid testing institutions.

As of the third quarter of 2022, the accounts receivable of many listed companies in the nucleic acid testing business have increased significantly. But the inflection point is difficult to predict. Still, companies have also stepped out of a clear differentiation trend under the sharp reduction in the price of nucleic acid testing.

Taking BGI as an example, the company’s revenue in the third quarter of this year was 1.353 billion yuan, a year-on-year decrease of 10.17%; the net profit attributable to shareholders of listed companies was 141 million yuan, a year-on-year decrease of 56.91%.

The same situation happened in Yeasen Biotechnology . In the third quarter of 2022, the average sales price of the company’s molecular biological reagent products related to COVID-19 was 0.18 yuan/rxn, a decrease of 0.1 yuan/rxn from January to June 2022. The average sales price of qPCR series products is 0.34 yuan/rxn, a reduction of 0.1 yuan/rxn from January to June 2022, a drop of 22.73%.

How long can nucleic acid testing prosperity last? Please leave your thoughts below or click the subscribe button to stay tuned for the most up-to-date, insightful news.

Disclaimer: The blog information shared on Monisight ( is based on the open source data collected on multiple channels and throughout the investigation of the writer of Monisight. Visitors from using, copying, reproducing, distributing, selling, licensing, or exploiting the property “for any other uses whatsoever," the logo of Monisight is required to be added and referred to.

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