How can the septuagenarian "Gene Godfather" turn the tide?
MGI Tech Co.,Ltd. (688114.SH) recently released its 2025 performance forecast, revealing another year of losses—with net profit attributable to shareholders reaching a maximum loss of 273 million yuan. However, compared to the previous year, the loss narrowed by over 50%.
Regarding the reasons for the performance change, MGI pointed out that during the reporting period, the company implemented a series of measures to "improve quality, increase efficiency, and enhance returns," including initiatives to boost personnel efficiency, focus R&D efforts, and manage marketing expenses across the entire cycle. These actions led to a reduction in related costs and expenses compared to the same period last year.
Merely narrowing the losses, yet failing to avoid them entirely, remains a thorny issue.
According to analysis by Jiang Han, a senior researcher at Pangoal Institution, the fundamental reason for MGI's consecutive annual losses lies in its business model not yet achieving a closed loop of scaled profitability. Firstly, its core business of gene sequencers involves sophisticated, high-precision equipment requiring substantial upfront R&D investment and high customer education costs. Furthermore, the market has long been monopolized by international giants, and the process of domestic substitution is slow. Secondly, equipment sales constitute a high proportion of the company's revenue structure, but gross margins are suppressed by price wars, while the high-margin reagent and service businesses have not yet achieved economies of scale. Additionally, following the receding pandemic-driven demand, public health emergency procurement has significantly shrunk. Meanwhile, the expansion into routine research and clinical markets has fallen short of expectations, leading to sluggish revenue growth that is insufficient to cover the persistently high R&D and marketing expenditures.
As of the market close on January 30th, MGI's stock price was 65.13 yuan per share, down 3.37%, with a total market capitalization of 27.1 billion yuan.
Although losses were reduced last year, they still exceeded 200 million yuan.
Looking at MGI's performance in recent years, revenues for 2022-2024 were 4.231 billion yuan, 2.911 billion yuan, and 3.013 billion yuan, respectively. Net profits attributable to shareholders were 2.027 billion yuan, -608 million yuan, and -601 million yuan, respectively. The dramatic 319.04% surge in net profit for 2022 was primarily due to MGI and its subsidiaries reaching a settlement with Illumina over all pending litigation in the United States, receiving a net compensation payment of $325 million.
According to the 2025 performance forecast, the company expects a net loss attributable to shareholders between 273 million yuan and 221 million yuan, representing a year-on-year reduction in losses of approximately 54.56% to 63.22%.
Analyzing the crux of MGI's persistent losses, Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance and Chief Economist for China, believes the essence lies in the concentrated eruption of multiple structural contradictions.
Specifically, it can be viewed from four dimensions. First, the business discontinuity following the receding pandemic红利. During the peak of the pandemic in 2020-2021, MGI's laboratory automation business revenue surged due to COVID-19 testing demand, but this segment experienced a cliff-like decline in 2023. This "pulse-type" revenue created severe capacity mismatches—the capacity and staffing expanded for the pandemic became a heavy burden post-normalization.
Second, MGI faces the conversion dilemma of high investment versus low output. In 2024, MGI's R&D investment was 811 million yuan (accounting for 26.92% of revenue), but the output efficiency is questionable. While gene sequencers are technology-intensive products, the cycle from R&D to commercialization can take 3-5 years. The company is currently in a critical window for technological iteration, and high-end products like the DNBSEQ-T20×2 have not yet achieved economies of scale.
Third, overseas expansion is relatively "cash-burning." MGI's overseas business is still in the investment phase, with the construction of international marketing networks and infrastructure projects leading to a rigid increase in fixed costs. In 2024, overseas revenue from gene sequencers was 741 million yuan, a year-on-year decrease of 12.66%, indicating a severe imbalance in the input-output ratio.
Finally, considering the pressure from the industry's competitive landscape, Illumina, a company founded in 1998 specializing in gene sequencing and chip technology R&D, holds a dominant "monopoly" position in the global gene sequencer market, with an estimated market share exceeding 70%. In contrast, what is MGI's market share? According to data from CIC, the global market size for gene sequencers and consumables in 2024 was approximately $4.83 billion. MGI's share of the upstream revenue in the global gene sequencing industry was about 7.1%. Bai Wenxi believes that under price war pressure, MGI has to exchange higher sales expenses for market share. In 2024, the proportion of marketing personnel increased from 31.9% the previous year to 34.4%, further eroding profits.
MGI坦言 admitted that the company's performance in 2023-2024 was not particularly ideal. Regarding whether profitability can be achieved next, they cannot predict the financial situation for now, but they are certainly optimistic that each subsequent year will trend positively based on the overall development of the current business.
High R&D investment drags on profits, but cost-control effects are evident.
Currently, MGI has formed two main business segments: gene sequencing instruments and laboratory automation. It has also laid out new business segments centered on comprehensive life digitization, represented by products like cell omics, spatiotemporal omics, BIT products, ultrasound imaging platforms, and ultra-low temperature automated biobanks.
MGI's gene sequencer business segment's R&D and production are already industry-leading. It has become the world's first company to simultaneously possess large-scale commercial production capabilities for both short-read and long-read sequencing products, building a full-process tool matrix aimed at "full-read-length" (SEQALL) sequencing. In 2024, MGI released the medium-throughput nanopore gene sequencer CycloneSEQ-WT02 and the high-throughput nanopore sequencer G400-ER.
R&D is the lifeblood for MGI. However, the high R&D expenses in recent years have also become a point of external质疑. In 2022, the company's non-GAAP net profit decreased by 46.43% year-on-year. Besides the impact of changing market demand on product sales, this also included MGI's continuous increased investment in technological product innovation and R&D for gene sequencers and supporting equipment, high-density sequencing chips and consumables, automated sample processing systems, and remote ultrasound robots. The rise in R&D expenses led to a decline in its operating net profit.
Looking at specific data, from 2022 to 2023, MGI's R&D expenses were approximately 814 million yuan (a year-on-year increase of 33.88%) and 910 million yuan (a year-on-year increase of 11.74%), respectively.
MGI has taken note of the issue of high R&D expenses and decisively reduced investment in 2024, with R&D expenses amounting to 746 million yuan, a year-on-year decrease of 17.99%. MGI stated that the company implemented R&D efficiency optimization measures. By streamlining resource allocation, focusing on core projects, and strengthening personnel and material management, it achieved cost reduction and efficiency gains, forming a virtuous cycle of "precise investment - rapid iteration - value verification," thereby accumulating strength for subsequent innovation.
From the 2025 performance forecast, it can be seen that MGI implemented comprehensive cost reduction and efficiency improvement measures last year. MGI emphasized that the reason for the previously high R&D investment was that cutting-edge research requires significant time, financial resources, and manpower to deploy. However, for 2025, whether for R&D expenses or other costs, they are implementing corresponding cost controls, and the results of these controls are quite satisfactory.
The specific amount of R&D investment for 2025 has not yet been disclosed, but MGI透露 revealed that future R&D expenditure will follow the trend of 2024. If there are any R&D projects worthy of investment, the company will still invest and will not control costs merely for the sake of cost control. After all, as a high-end technology company, it needs R&D to master more technological support.
From a global perspective, the EU launched the "Horizon Europe" plan as early as 2021, with a budget as high as 95.5 billion euros (approximately RMB 7,954.67 billion), aiming to guide EU member states to increase their research expenditure levels by 50% from the existing base during 2021-2027. The budget for the life and health field is about 8.1 billion euros (approximately RMB 67.463 billion), focusing on areas like personalized medicine, antimicrobial resistance research, and brain science.
According to data released by the National Bureau of Statistics, China's total R&D expenditure in 2024 was 3.61 trillion yuan, an increase of 8.3% over the previous year. The R&D intensity (R&D expenditure/GDP) reached 2.68%, exceeding the EU average (2.11%). Within this, basic research expenditure was 249.7 billion yuan, a year-on-year increase of 10.5%. China's key R&D plan for 2024 specifically supported emerging fields like gene editing and synthetic biology under the frontier biotechnology专项. The budget estimate for the stem cell research and organ repair专项 was 430 million yuan, covering 19 directions including basic stem cell research, organ manufacturing, and major disease treatment.
Whether high investment can lead to high-efficiency output is particularly important for enterprises. According to MGI's introduction, it places great emphasis on the落地 implementation of R&D成果. In previous years, it almost released one sequencer per year, and its domestic market share has steadily increased. Last year, its share of new installations reached over 60%, and this year the increase in market share is steady and solid. This is the result of previous R&D projects and R&D expense control.
Regarding how high R&D investment can be transformed into high效益, Jiang Han believes the key lies in technological commercialization efficiency and product portfolio synergy. R&D needs to focus on core platforms that can be quickly落地 and have clear clinical or research application scenarios, avoiding "technology for technology's sake." The expansion of MGI's marketing team indicates the company is strengthening its market conversion capabilities, but it needs to ensure that R&D and marketing strategies are aligned to avoid resource mismatches. For example, developing cost-effective products tailored for emerging overseas markets, rather than solely pursuing technological leadership.
Jiang Han further analyzed that post-pandemic, MGI's main business has not significantly "deviated from its course," but there is a mismatch between its market positioning and commercialization rhythm. Firstly, the company has consistently focused on布局 the entire gene sequencing industry chain, which is the correct direction. Secondly, it over-relied on government procurement and research institution orders, failing to promptly penetrate more stable C-end markets like clinical diagnostics. Furthermore, in overseas expansion, insufficient investment in local compliance, channel building, and brand recognition has led to "technology going出海 global" faster than "market扎根 taking root," leaving revenue growth without sustainable support.
Septuagenarian founder hailed as "Gene Godfather"
MGI was founded on April 13, 2016, and listed on the Shanghai Stock Exchange's STAR Market on September 9, 2022. The founder and chairman, Wang Jian, is now 73 years old and has over 30 years of experience in the gene sequencing industry. He is one of the earliest pioneers in gene sequencing in China.
In the late 1970s, Wang Jian graduated from the Medical Department of Hunan Medical College (now Xiangya School of Medicine, Central South University). In 1986, he obtained a master's degree in pathology from the combined traditional Chinese and Western medicine discipline at Beijing College of Traditional Chinese Medicine (now Beijing University of Chinese Medicine). From 1988 to 1994, he conducted postdoctoral research successively at the University of Texas, University of Iowa, and University of Washington in the United States.
In 1991, Wang Jian led the establishment of the Seattle Chinese Biomedical Association, planning to bring the Human Genome Project back to China. In 1994, he returned to China and founded GBI Biotech (Beijing) Co., Ltd., promoting the implementation of the Human Genome Project. In 1999, to undertake the Chinese part of the Human Genome Project, Wang Jian led the creation of BGI Genomics. Between 2003 and 2007, Wang Jian served as Deputy Director of the Beijing Institute of Genomics, Chinese Academy of Sciences. In 2007, he moved south to Shenzhen, establishing the Shenzhen Huada Life Science Research Institute and building the subsequent scientific research and industrial system, as well as founding the BGI Group. Every step Wang Jian has taken in his life has been tightly scheduled and taken with great strides.
Wang Jian is referred to as "Teacher Wang" by employees. MGI stated that Teacher Wang is a very energetic person. "Our Teacher Wang has a great philosophy called 'i99' (the English letter 'i', meaning 'me'), implying 'starting with me, living to at least 99 years old, with no upper limit.'" He himself is particularly enthusiastic about outdoor sports, having ascended Mount Everest and descended into the Mariana Trench. He is a rather legendary figure.
Over seventy years old, he fears no challenges. Wang Jian is the first Chinese scientist to have completed investigations in the Earth's Arctic and Antarctic regions, summited the world's highest peak, Mount Everest, and descended to the deepest part of the global ocean to conduct abyssal scientific research. At 10:28 AM on May 21, 2024, Wang Jian led the BGI mountaineering team to successfully summit from the north slope of Mount Everest and transmitted back the world's first ultrasound images and EEG data from the top of the world. These precious scientific materials will provide important references for future scientific research.
MGI透露 revealed that Wang Jian has a "grand vision" for the company—hoping to make their gene technology benefit everyone, meaning bringing gene technology into every household, not just serving high-net-worth individuals. He wants gene sequencing technology and products to allow people worldwide to equally enjoy the benefits and life improvements brought by this technology. The硬核 hardcore Wang Jian is called the "Gene Godfather," which is sufficient to see his prestige in the industry. Bai Wenxi believes that gene sequencing is the infrastructure of life sciences. The MGI created by Wang Jian's hand has already obtained the entry ticket; whether it can achieve profitability depends on the speed at which it converts its technological advantages into ecosystem advantages.
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