When it comes to the major issue of China's gene sequencing industry, the Biosafety Act is an unavoidable topic.

At the beginning of the year, in the draft version of the Biosafety Act submitted by members of the U.S. House of Representatives, domestic companies such as WuXi AppTec, BGI, and BGI were mentioned; a similar draft bill was recently proposed by the U.S. Senate.

If these bills are passed, medical institutions funded by the U.S. government will be restricted from using the products and technologies of the mentioned companies. Therefore, the Biosafety Act inevitably caused excessive panic in the domestic capital market, causing some companies to oversell.

Since the "924 market", the Science and Technology Innovation 50 has been a weather vane, with a cumulative increase of nearly 20%. Although BGI is a component of the Science and Technology Innovation 50, its stock price has fallen by nearly 40% since the beginning of the year due to the uninterrupted impact of the Biosafety Act, nearly halving.

Now, it seems that everything is over-concerned.

On December 7, the shoe finally dropped: the relevant provisions of the Biosafety Act did not appear in the final negotiation text of the 2025 National Defense Authorization Act ("NDAA") after consultation by members of the Senate Armed Services Committee.

This shows that the attempt to include the Biosafety Act in the 2025 NDAA has failed, and will not pose an obstacle to the overseas expansion of companies such as MGI in the short term.

This is the case in the short term, and it is likely to be the case in the long term. In the eyes of the market, this is not the end, and there is still a possibility of being mentioned again in the future. This is the case in theory, but in fact, the "abortion" of the Biosafety Act reflects a fact: the global biotechnology industry is a community and it is difficult to "decouple".

The reason why MGI can have business layouts in more than 100 countries and regions on six continents is that its "precise and specialized" product layout enables global users to enjoy more convenient, one-stop multi-omics tools, thereby bringing the benefits of improved efficiency and reduced costs.

In other words, MGI's breakthrough relies on comprehensive service capabilities, not just simply providing a product. This also leads to the fact that forced "decoupling" actually faces many obstacles, is not in the interests of the US medical industry, and is narrow protectionism.

Therefore, after the emergence of the Biosafety Bill, there was a lot of opposition, and even reports circulated overseas that it would become more moderate. The fact that it was finally "aborted" now shows that American politicians have actually returned to rationality and realized the above problems.

A more positive signal is that some politicians who oppose the Biosafety Bill will hold important positions in the next government. For example, Rand Paul, who cast the only opposing vote at the Senate Homeland Security and Government Affairs Committee hearing in March this year, was successfully elected as the chairman of the new Senate Homeland Security Affairs Committee.

This also means that the probability of irrational policies such as the Biosafety Bill being mentioned is actually getting lower and lower.

On the other hand, Chinese gene sequencing companies represented by MGI will not face the influence of narrow-mindedness when competing in the global market, and are expected to achieve more outstanding results with their outstanding comprehensive service capabilities.

While overseas troubles are eliminated, the domestic growth logic is becoming clearer and clearer.

In the past year, the market was worried that due to the macro environment and industry policies, the investment of end customers in fixed assets decreased and the procurement cycle lengthened, resulting in a decrease in the overall procurement volume of sequencer equipment.

But in fact, the leading players can eliminate this adverse effect by increasing their market share:

In the first three quarters of this year, MGI achieved counter-cyclical growth by continuing to increase its market share. The cumulative sales and installation volume of gene sequencers in the first three quarters exceeded 670 units, a year-on-year increase of 4%.

While the logic of increasing market penetration still exists, the entire industry has ushered in two major benefits.

On the one hand, the signal of demand boost has been clear. At the top-level meeting on December 9, the central government once again proposed "moderate easing" for 14 years, which means that an extraordinary counter-cyclical policy is about to start. Since the beginning of this year, "large-scale equipment renewal" has always been the top priority. Under the logic of further expanding domestic demand, the demand for equipment such as gene sequencing will inevitably usher in a new round of growth peaks.

On the other hand, policies supporting domestic brands have been further implemented.

On December 7, the Ministry of Finance issued the "Notice on Matters Related to Domestic Product Standards and Implementation Policies in the Field of Government Procurement (Draft for Comments)", which pointed out that it is planned to give domestic products a 20% price review discount relative to non-domestic products in government procurement activities.

This is a further implementation of the policy to support domestic brands. The public account "Gene Jianghu" has made a vivid analogy for this move: non-domestic products quote 1 million yuan, and domestic products also quote 1 million yuan. When participating in the review, the quotation of domestic products is calculated as 800,000 yuan (which will get a higher business score).

Under this trend, in addition to benefiting directly, MGI can also benefit indirectly by empowering partners and providing technology and products. At present, 36 gene sequencers in China have been approved by NMPA for clinical testing, of which 22 are based on MGI's DNBSEQ sequencing technology. Driven by policies supporting domestic brands, MGI's empowerment circle of friends is expected to become larger in the future.

Overall, driven by multiple driving factors, MGI's domestic business is ushering in a new round of high growth curve.

Whether overseas or domestic, the logic supporting the growth of the sequencing market is driven by downstream demand. Since the beginning of this year, the demand side has also ushered in a series of turning point signals.

A recent positive news is that Burning Rock Medical has achieved positive operating profits after deducting R&D expenses for three consecutive quarters. Although the improvement in Burning Rock Medical's financial data is partly due to cost reduction and efficiency improvement, it may also indicate that under the "fast-forward" trend of genomics, the huge market of tumor applications will expand rapidly.

The prospects of precision medicine for tumors are self-evident. From diagnosis to treatment to prognosis, there is great room for development. But in the past, the entire industry fell into an operating dilemma, which to some extent limited the exploration of precision medicine for tumors.

Therefore, the significance of Burning Rock Medical's financial improvement is that while verifying the prospects of the precision tumor medicine market, it also encourages more companies, including it, to further explore the tumor precision medicine market. For example, on October 31, Burning Rock Medical chose to deepen cooperation with MGI to expand tumor product registration and hospital-side business based on the latter's DNBSEQ core sequencing technology, and jointly promote the clinical application progress and global business development of precision medicine for tumors.

At the same time, another major base of gene sequencing, the field of reproductive health, has also ushered in a series of catalysts. On the one hand, the three-level prevention strategy for genetic diseases before marriage, prenatal and preschool testing has received further attention. For example, on November 22, the Guangdong Provincial Health Commission announced the "Guangdong Province Newborn Disease Screening Management Measures", which clearly stated that newborn disease screening will be fully implemented from January 1 next year. On the other hand, this year, many provinces and cities have successively included assisted reproductive technology in the scope of medical insurance. Because gene sequencing technology can help evaluate the genetic health of embryos and improve the success rate of assisted reproduction. Under this trend, the future will also benefit.

In addition, the demand for gene sequencing of autoimmune diseases and rare diseases is accelerating. Typical examples include autoimmune diseases, most of which have unclear mechanisms, so gene sequencing will become a means of much attention.

In November, the First Affiliated Hospital of Anhui Medical University and other institutions published the latest research results in the internationally renowned dermatology journal British Journal of Dermatology (IF=10.98), revealing new evidence of stromal cells involved in the inflammatory microenvironment of psoriasis. The development of new drug targets for psoriasis is of great significance, and this study is based on the multi-omics tools of MGI.

The publication of these studies, on the one hand, verifies the importance of multi-omics tools, and on the other hand, will encourage more researchers to use multi-omics tools to participate in research.

Of course, the application of genetic testing is not limited to the clinical end. In many fields such as scientific research, gene sequencing is also an indispensable tool. Since the beginning of this year, there are signs that the demand for scientific research is also growing rapidly.

One example is that MGI has achieved a series of "new models" this year. For example, the DCS Lab laboratory, which was strategically cooperated with the Nanjing Jiangbei New District Biomedicine Public Service Platform and MGI in December, is a new model and new path.

On November 27, the 1,000th DNBSEQ-G99 of MGI rolled off the production line, which is the fastest sequencer that MGI has mass-produced, confirming the strong demand from users in the scientific research and clinical fields.

The cost of gene sequencing continues to decline, which means that its accessibility will continue to increase, so the logic of more vigorous downstream demand is very clear, which will eventually be reflected in the demand for upstream gene sequencing.

Peter Lynch once proposed six types of stock classifications: slow growth, stable growth, rapid growth, cyclical, hidden asset, and distress reversal.

Among them, the distress reversal strategy refers to the layout of industries that are in a bottom reversal, waiting for the benefits brought by corporate profit improvement and valuation repair.

The biggest advantage of this strategy is high odds and high stock price safety margin, because in distress, the stock price of good companies is likely to fall sharply, and once the bet is right, the return is quite generous.

Perhaps, China's gene sequencing industry also belongs to this category.

In the past, the entire biomedicine and medical device industry was in a difficult moment. As a more niche market and a more cutting-edge field, the situation of China's gene sequencing industry was even more difficult. But now "the boat has passed through thousands of mountains", the entire industry has survived the darkest moment and ushered in its own reversal moment: the external factors that plagued the development of the industry are weakening, and the company's own business layout is still in the harvest period.

As mentioned above, the capital market may not be fully aware of this. For example, the stock price trend of BGI has not kept up with the pace of Science and Technology Innovation 50.

So, under the joint action of multiple favorable factors, will China's genetic testing industry stage an expectation gap in the capital market?

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