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In the spring of 2022, due to repeated domestic epidemics, Runda Medical chose to increase its new crown testing business, and its intensive release of good news also drove the stock price to continue to soar. But the sudden “false positive” event brought it to the forefront, causing the stock price to plummet. Even without the “false positive” event, it faces increased risks.
Author｜Editor by Yiwei Zhou｜Anxiety
Source: Good-looking Business (ID: IGreatBI)
From three consecutive daily limit ups to two consecutive intraday limit downs, the stock price of Runda Medical (603108) has successfully completed a bungee jump in five consecutive trading days.
The stock price soared and plummeted in a few days, all because of one key word: nucleic acid detection.
Runda Medical is a comprehensive medical laboratory service provider established in 1998 and listed on the Shanghai Stock Exchange in May 2015.
The company’s largest shareholder is Hangzhou Gongshu District State-owned Investment Holding Group Co., Ltd., which currently holds 20.02% of the shares.
Runda Medical currently has two major businesses: commercial sector (IVD agency distribution business, intensive business/regional inspection center business, third-party laboratory business) and industrial sector (IVD product R&D and production business, medical information business).
In recent years, due to the new crown epidemic, the volume of nucleic acid testing business has increased significantly, driving the rapid growth of its third-party laboratory business segment.
Today, the nucleic acid testing business has also become the main cause of its stock price plummeting.
From May 8th to 10th, according to media reports such as “First Finance and Economics” and residents’ reflections on social platforms, a total of 18 residents of the two small towns in Wuliqiao Street, Huangpu, Shanghai had positive nucleic acid test results, and all were negative after review. .
Their “false positive” reports all came from the same institution: Zhongke Runda (ie, Shanghai Zhongke Runda Medical Laboratory Co., Ltd.).
Zhongke Runda is a wholly-owned company of Shanghai Zhongke Runda Precision Medical Laboratory Co., Ltd., in which Runda Medical holds 48.43% of the shares.
On May 10, at the press conference on the prevention and control of the new crown epidemic in Shanghai, the relevant leaders made a clear statement on the “abnormal nucleic acid results”: they will carry out inspections by relevant third-party testing agencies, and if there are violations, they will be dealt with in accordance with the law.
So far, Zhongke Runda and the Runda Medical behind it have been pushed to the forefront.
Previously, in the field of new crown nucleic acid detection, Runda Medical’s revenue was relatively small. In 2021, the revenue of its third-party laboratory business (mainly nucleic acid testing) will be less than a fraction of that of BGI’s similar business.
However, in the spring of 2022 when the new crown epidemic was repeated, Runda Medical chose to increase the nucleic acid test, and the good news released by its centralized release drove the stock price to rise sharply.
The flip side of the coin is that it also faces heightened risks.
Intensive positive after encountering major negative
Regarding the “false positive” incident, Runda Medical stated in its announcement on May 11 that “the company attaches great importance to it” and “has asked China Science Laboratory to initiate an internal self-examination on the relevant situation and cooperate with relevant departments in the investigation.”
For Runda Medical and Zhongke Runda, when the accuracy of its nucleic acid detection is questioned, it is like a fast-moving train suddenly encountering a track break, and the car body will inevitably suffer huge shocks and shocks.
Runda Medical owns two third-party laboratories, Zhongke Runda and Heilongjiang Weilong.
Before the “false positive” incident, Runda Medical released a lot of good news to the market, making its third-party laboratory business look promising.
According to the “Securities Times” report, on April 28, Runda Medical held a 2021 performance exchange meeting. Company officials revealed at the meeting that, as a key epidemic prevention and control unit in Shanghai, Runda Medical ranks among the top three in Shanghai’s new crown testing scale. .
Runda Medical also revealed at the performance exchange meeting that the company currently has two third-party laboratory fixed testing points in Shanghai Hongkou District and Pudong New Area, with a testing capacity of over 300,000 tubes/day); at the same time, they are also in the World Expo in Huangpu District In the park and other areas, mobile cabin laboratories have been arranged, with a detection capacity of over 30,000 tubes/day.
In addition, in order to facilitate the nucleic acid testing of citizens, Shanghai plans to promote the construction of a normalized and convenient nucleic acid sampling network in the city through a combination of “fixed sampling points + convenient sampling points + mobile sampling points”.
“Shanghai Securities News” reported that at present, Zhongke Runda has landed the first batch of nearly 300 “nucleic acid testing convenience sampling points” in Hongkou District, Huangpu District, Pudong New District, and Baoshan District.
According to Shanghai’s charging standard of 28 yuan/single tube, and Runda Medical’s current testing volume of over 300,000 tubes/day, the daily revenue of its new crown testing business can reach 8.4 million yuan. The business earned more than 250 million yuan in April alone.
What is even more exciting than this is that Runda Medical will continue to increase its production capacity and increase its nucleic acid detection business.
Among them, Zhongke Runda will continue to build normalized and convenient nucleic acid detection sampling points to achieve a “15-minute walk nucleic acid service circle”.
On May 5, the first nucleic acid detection gas membrane laboratory in Shanghai Huangpu, invested and constructed by Runda Medical, was opened.
According to public information, the initial design capacity of the gas membrane laboratory is 100,000 tubes per day, and a reserve capacity of about 50,000 tubes is reserved in the later stage. If nucleic acid sampling is carried out according to 1:10, the gas-film laboratory has the ability to screen more than one million samples per day.
Runda Medical’s nucleic acid testing business not only soared in East China, but the repeated epidemics in Northeast China this spring also made it the main institution for nucleic acid testing.
Heilongjiang Longwei Precision Medicine Testing Center (hereinafter referred to as “Heilongjiang Longwei”) covers an area of 6,000 square meters. It is one of the medical testing institutions with the most complete testing platform and the largest testing area in Heilongjiang Province.
Heilongjiang Longwei was established in 2016, in which Runda Medical holds 70% of the shares.
In September last year, Runda Medical disclosed on the investor interaction platform that the daily nucleic acid detection capacity of Heilongjiang Longwei at that time could reach 20,000 tests per day.
Due to the spread of the epidemic in Northeast China, on March 31 this year, the Nucleic Acid Testing Laboratory of the Fourth Affiliated Hospital of Harbin Medical University, led by the Fourth Affiliated Hospital of Harbin Medical University and jointly built by Runda Medical, was officially put into use.
The article in The Paper mentioned that the laboratory has a total area of 2,490 square meters and is currently the nucleic acid testing laboratory with the largest area and the strongest detection capability in the three northeastern provinces.
At this stage, the detection capacity can reach 100,000 tubes/day (that is, 2 million person-times/day) based on the 20-to-1 detection method.
In addition to the deployment of new crown testing laboratories and sampling points, Runda Medical is also actively promoting the application and registration of domestic new crown antigen reagent products. According to the “Daily Economic News” report, at the end of March, its antigen reagent products have entered the clinical stage.
At the performance exchange meeting at the end of April, people from Runda Medical said that after the normalization of the epidemic, the traditional in-hospital testing service business will enter a normal track, superimposed on the normalized testing business of the new crown, and the company will do its best to achieve the performance goals set at the beginning of the year.
The repeated spread of the epidemic, the resolute dynamic zero-clearing policy, the company’s centralized release of good news, and the reports of authoritative media, for stock investors, these undoubtedly represent certainty, and are the driving force for stock prices to rise.
If there is no “false positive” event this time, maybe everything will continue to be crazy along the established track.
Nucleic acid detection business of Daqiankuai Shang
According to the proportion of revenue, intensive business/regional inspection center business and industrial sector business are the main businesses of Runda Medical.
According to its 2021 consolidated income statement, Runda Medical achieved a total revenue of 8.86 billion yuan.
Among them, the intensive business/regional inspection center business income was 2.515 billion yuan, and the industrial segment income was 502 million yuan.
In contrast, the third-party laboratory business started late and currently has the smallest revenue scale. In 2021, the revenue of this business is only 353 million yuan.
However, benefiting from the increase brought by nucleic acid testing, the third-party laboratory business is almost the fastest growing business segment of Runda Medical in recent years.
In 2021, the revenue of this business will increase by 125.6% year-on-year. During the same period, the year-on-year growth rates of the intensive business/regional inspection center business and the industrial sector business were only 25.33% and 21.19% respectively.
The main customers of the intensive business/regional inspection center business are hospitals, which mainly undertake outsourcing orders for the routine inspection business of hospitals.
In the past two years, the outbreak of the new crown epidemic has repeatedly affected Runda Medical’s intensive business/regional inspection center business. Especially in the first half of 2020, this part of the revenue fell by 10.97% year-on-year.
Although Runda Medical’s general inspection business has been affected by the epidemic, its third-party laboratory business has become a beneficiary of epidemic prevention and has quickly become the company’s new growth engine.
Runda Medical first began to deploy third-party laboratory business in 2016, and successively established Heilongjiang Weilong and Zhongke Runda through joint ventures.
In 2019, the revenue of two third-party laboratories under the company (Zhongke Runda and Heilongjiang Weilong) was 44.67 million yuan. After the outbreak of the epidemic in 2020, the revenue that year soared by 251.43% to 157 million yuan; the revenue in 2020 was 353 million yuan, a growth rate of 125.6%.
In hindsight, this growth rate did not satisfy Runda’s management.
According to a report by the Securities Times at the end of April, a person related to Runda Medical said, “If more efforts have been invested in the testing of the new crown in the past two years or more, the profits may be much better, which is also what the management has recently reviewed.”
In the spring of 2022, the new crown epidemic repeated again, especially in Northeast and East China, with unprecedented severity and epidemic prevention efforts.
Runda Medical has learned the lessons of the past two years. This year, it has a positive attitude in the new crown testing business, and it has a tendency to work hard.
According to surging news reports, in order to resolutely win the battle against epidemic prevention and control, and to ensure the maximum efficiency of nucleic acid testing in Harbin, the nucleic acid testing laboratory of the Fourth Affiliated Hospital of Harbin Medical University built by Runda Medical has experienced After more than a month of intense construction, it was put into use on March 31.
On May 5th, under the tight schedule and heavy tasks, all parties fought all night to overcome various difficulties and uncertainties, and the first nucleic acid testing gas membrane laboratory in Huangpu, Shanghai, invested and constructed by Runda Medical, was opened. After the laboratory was opened on the same day, it began to accept orders in the afternoon, and completed the testing of 20,000 samples on the same day.
With the rapid advancement of new laboratories and the addition of normal testing points, Runda Medical’s nucleic acid testing capacity has rapidly increased from tens of thousands of tubes/day in March to 300,000-400,000 tubes/day, that is, within one month It has increased about ten times, and the speed is amazing.
The radish is too fast to wash the mud. Under the speed, the detection quality may be compromised for various reasons. The “false positives” exposed this time include Runda Medical’s gas membrane laboratory in Huangpu.
Why do “false positives” appear? There are various speculations in the industry, including the rapid expansion of the production capacity of Zhongke Runda and the use of rapid detection reagents with higher sensitivity but higher probability of false positives.
However, these are still speculations at present, and the real reasons behind them must eventually be issued by the regulatory authorities to issue an authoritative report.
But at least, the appearance of 18 “false positives” has had a negative impact on the reputation of Zhongke Runda and Runda Medical; it is unclear whether the next step will have a financial impact.
other risks
Even if there is no “false positive” incident, while Runda Medical is increasing its nucleic acid testing business this year, some risks are also intensifying.
First of all, the nucleic acid detection business not only requires a large amount of capital investment, but also has a long account period, which is a big challenge for Runda Medical.
According to the consolidated income statement of Runda Medical in 2021, it realized a total net profit of 598 million yuan in the current period.
According to its consolidated cash flow statement, as of the end of 2021, the company’s cash and cash equivalents balance was 705 million yuan. By the end of the first quarter of this year, the balance of cash and cash equivalents of Runda Medical was 470 million yuan.
Although the demand for nucleic acid testing is still huge in the short term due to repeated epidemics, the price of new crown testing has been declining at a speed visible to the naked eye.
In 2020, when the new coronavirus nucleic acid test was first launched, it was initially priced at 200 yuan per person. After that, as more and more companies obtained qualifications and their production capacity continued to increase, the National Medical Insurance Administration repeatedly lowered government guidance for nucleic acid testing in public medical institutions. price. The price of single-person inspection has gradually dropped from 200 yuan to 180 yuan, 80 yuan, and 60 yuan.
At the beginning of April this year, the National Medical Insurance Bureau adjusted the price again, stipulating that all provinces should reduce the price of single-person single examination to no more than 28 yuan per person; multi-person mixed examinations were uniformly reduced to no more than 8 yuan per person.
In April, the closed Shanghai lowered the nucleic acid testing price of public medical institutions twice: from 40 yuan to 28 yuan from April 13; Yuan.
From May 1st to June 30th, the normalized nucleic acid testing points in Shanghai will implement free nucleic acid testing.
Recently, Hebei, Henan, Beijing and other places have also lowered the price of nucleic acid testing.
This means that nucleic acid testing is no longer a “profitable business”.
Now that the domestic epidemic situation is repeated, especially in big cities, the signal of normalization of nucleic acid testing is gradually clear, which brings a new round of expansion opportunities to some participants.
However, judging from the financial reports of the leading companies, the growth rate of the nucleic acid testing business is slowing down sharply, and the dividends are fading.
Taking BGI as an example, in 2021, the business revenue of BGI’s “Comprehensive Solutions for Precision Medicine Testing” will be 3.382 billion yuan, a year-on-year decrease of 39.2%. Last year, the revenue growth rate of this business was 873.7%, reaching 5.562 billion yuan.
The representative product of “Comprehensive Solutions for Precision Medicine Testing” is Huoyan Lab, which provides comprehensive solutions for large-scale nucleic acid testing.
In 2020, when the new crown epidemic broke out, BGI launched the Huoyan laboratory, and established more than 80 Huoyan laboratories in nearly 30 countries and regions within a year, with a maximum daily test throughput of more than 1 million copies. In 2021, there will be less than 20 new Fire Eye laboratories.
BGI’s new crown detection kit business is also shrinking: its kits sold well in 2020, driving revenue from “basic research and clinical application services for infection prevention and control” to surge by 724.22% to 670 million yuan. In 2021, the segment’s revenue growth slowed to 73.01%.
In the first quarter of 2022, BGI’s revenue and net profit growth continued to “double decline”: revenue fell by 8.52% year-on-year, and net profit fell by 37.06% year-on-year.
The reason is that in addition to the repeated epidemics in mainland China and its insistence on dynamic clearing, the demand for nucleic acid testing has increased, and many overseas countries have implemented herd immunity, and the market demand has shrunk significantly; at the same time, the market competition has intensified, resulting in a drop in the price of nucleic acid testing.
Affected by factors such as the no longer high growth of the nucleic acid detection business, BGI’s stock price has also declined after 2020.
The revenue growth rates of KingMed and Dean Diagnostics are also slowing down: the former will drop from 56.45% in 2020 to 44.88% in 2021; the latter will drop from 26% in 2020 to 22.85% in 2021.
In terms of horizontal comparison, Runda Medical increased its nucleic acid testing business this year, and it was somewhat hindsight and missed the opportunity of the previous round of expansion; the winning rate of its big bet may be discounted.
(Disclaimer: This article only represents the author’s point of view and does not represent the position of Sina.com.)
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