In the post-epidemic era, people’s demands for health management are increasing day by day. In recent years, “sub-health” and “chronic diseases” have continued to arouse public discussions and concerns about self-health management. Consumer-grade genetic testing can help people understand their health risks, nutritional metabolism, and hereditary diseases.
There are already a number of consumer-grade genetic testing companies in the United States, such as 23andMe, Ancestry, Helix and Human Longevity. After 2013, China also began to give birth to such companies, such as 23 Rubik’s Cube, WeGene, Jellyfish Gene, Main Gene, etc. Its business model is to sell test kits directly to consumers through online or offline channels, recover samples, conduct tests and issue personal genetic test reports.
However, the development of Chinese consumer-grade genetic testing companies was initially difficult. On the one hand, the domestic public’s awareness of consumer-grade genetic testing products is in its infancy. In addition, when the industry initially grew savagely, there were many mixed companies that could not provide products without their own laboratories. Primitive testing data, high prices are offered to fool people into testing, and chaos occurs frequently, consuming some of the public’s trust in this industry. On the other hand, the technology and production of high-density chips for genetic testing have been monopolized by foreign companies Illumina and Affymetrix for 20 years. Domestic downstream companies basically have no bargaining power and profit is meager.
In the past nearly 20 years, companies in the domestic gene chip application market often exist: the upstream underlying technology relies heavily on imports, and the cost side is international pricing; in order to open up the local market and form growth, the sales side is localized pricing. Such an “impossible triangle” of import costs, local pricing, and users’ willingness to consume is difficult to satisfy, which greatly hinders enterprises’ innovation and breakthroughs.
The successful research and development of Lasso Bio’s high-density gene chip broke the monopoly of gene chips by European and American companies for nearly 20 years. Let domestic self-research revitalize in this field. In the field of high-density gene chip application market, the “impossible triangle” has been broken, and the renewal and upgrading of cost, pricing, and willingness to consume enables enterprises to find a new way for sustainable development.
From downstream product-end enterprises to the whole industry chain layout, the core competence is technology
In 2018, Li Zhi founded Beijing Lasso Biotechnology Co., Ltd. (hereinafter referred to as “Lasso Bio”). When he started his business, he just wanted to set up a mass-level genetic testing company on the downstream product side, using Illumina’s imported detection chips. Domestic laboratories have been set up to conduct testing and develop related Internet software APPs.
However, it didn’t take long for Li Zhi to discover that the expensive imported chips were “an insurmountable mountain”, and he relied heavily on foreign upstream technologies, which made him lose the local pricing power on the product side. However, the gross profit of imported chips itself was as high as about 90%. , if it can be produced by itself, the cost is only one-tenth of the import price. Li Zhi’s positioning of the company’s products is that of the general public, not high-end. “Chip is the biggest variable in our overall cost. If we don’t cut prices, our business model may not work in China.” Li Zhi said.
So Li Zhi decided that the company would develop its own chips. In 2018, Lasso Bio established a technical research and development team and cooperated with many domestic universities and scientific research institutions. After more than 3 years of technical research, it finally broke through the core technical problems in point design, probe design and product preparation. , which broke the monopoly position of gene chips in European and American countries, and also filled some gaps in the field of gene chip technology in my country.
Lasso Bio has submitted more than ten patents for chip-related inventions, including scanners, preparation technologies, and reagents.
As a result, Lasso Biotechnology has grown into a company integrating the entire upstream, midstream and downstream industry chain. Li Zhi compared it to opening a coffee shop. Originally, he only opened a consumer-side coffee shop. It turned out that the consumables coffee beans (chips) and coffee machines (chip-related instruments such as sequencers) were too expensive, so he developed and produced coffee beans by himself. And coffee machine, and at the same time, it has the C-side customer acquisition channel and profit method of coffee shop.
“We have technical advantages. We have our own chips, laboratories, etc., and we can have a certain right to speak and influence the entire industry.” Li Zhi said.
Expand more application scenarios from technology
Since the second half of 2020, with the normalization of the epidemic and the frequent occurrence of global trade frictions, the global “chip shortage” has begun to spread. Domestic chip companies have been struggling to “break through” in recent years. Based on the huge market size, the global chip industry is accelerating its concentration in China.
In terms of application scenarios, the high-density gene chip developed by Lasso Biotech can not only play a role in a single level of genetic testing products, but also has application space in agricultural breeding, scientific research and medical diagnosis.
Therefore, Lasso Bio has developed three other business lines and application scenarios from chip technology. The first is genetic testing for the pet market, which is distributed in pet hospitals through distributors; the second is the breeding market for scientific research institutions, hoping to gradually replace Illumina with Lasso Bio’s chips and matching sequencers to complete the process of market replacement ; Third, for clinical use, the sequencer is reported to the second-class medical device license, and the layout is arranged in some indications, which is a sales model with partial diagnosis. In the long run, several business lines will appear relatively balanced.
However, imported chips have a very high market share in China and have a good reputation and customer trust. As for how Lasso Bio competes with the existing hegemons, Li Zhi said, first of all, in the case of achieving the same performance of its own products and imported products, it will be a very effective way to compete by adopting a low-price strategy in the early stage. Since Lasso Bio is a local supplier and carries out localized production, even if the price is cheaper than imported products, it can guarantee a certain profit margin. Secondly, Lasso Bio will optimize its products. As a Chinese company, it has a better understanding of the needs of the Chinese market for the use of chips, and can make adjustments in terms of site customization, flexibility, and machine size. For example, the machine can be made smaller and easier to carry to meet the customized needs of localized customers.
At the same time, Li Zhi revealed that after the mass production of the chip is completed, it is expected that in the second half of next year, the overseas business can be tried and exported to Southeast Asia and countries along the Belt and Road.
Due to the large investment in research and development in the early stage, Lasso Biotechnology has not yet started to make profits. However, in Li Zhi’s view, his most important phased goal in the short term is not profit, but the capacity and stability of the technology platform, the layout of various business lines and the growth rate of the business.
The industry may have passed the barbaric growth stage, and more services and functions may be extended in the future
Consumer-grade genetic testing is one of the more popular segments of the domestic genetic testing industry in recent years. The Zhiyan consulting report shows that the average annual growth rate of China’s gene sequencing market from 2013 to 2018 is more than 30%. It is expected that the market size of my country’s gene sequencing industry will exceed 41 billion yuan in 2024.
Although Lasso Bio is now a technology-based company, in the long run, many of its businesses will revolve around technology. However, the C-end product “Genebao”, which is marketed and promoted to mass consumers, has attracted more attention and will also be the main source of income for Lasso Bio in the future.
When genetic testing products were initially out of the norm in the industry, news of unscrupulous merchants exaggerating their utility, over-packaging, and deceiving consumers emerged one after another. However, in Li Zhi’s view, the stage of “bad money drives out good money” has quietly passed, which is also an objective law that exists in the development of many industries. Among Chinese companies on the genetic testing product side, Lasso Bio is currently the only company with self-developed and self-produced chips. Li Zhi hopes that Lasso Bio can drive the entire industry into a more orderly development pattern.
At the same time, Li Zhi said that Lasso Bio is willing to sell chips and sequencers to other partners and even competing companies. For competition, he maintains an open welcome. In his view, orderly competition is a good thing and can lead to progress. On the one hand, making products requires inspiration and ideas. If the new functions of competing products meet new needs, then Genenbao can also iterate accordingly. If there is no competition, it means that all product ideas need to be innovated by themselves. On the other hand, competitors are also spending money on advertising, market education and consumer reach. Given that genetic testing is still a relatively new category, advertising is not only educating a single product, but also educating a large category of “popular genetic testing”, which is also a good thing for Lasso Bio.
With the increasing awareness and demand for health management, more functions and services can be derived from mass-level genetic testing products. Li Zhi believes that after consumers complete the genetic test, they can be provided with customized medical check-up plans, insurance plans, etc. However, whether it is insurance or medical check-up, they are products that require market education in terms of consumption habits. The cognition can reach a certain level, which may not be completed in the short term, but more directions can be explored.
It is believed that in the near future, with the support of many favorable policies of the state, more and more enterprises will participate in the upgrading of the upstream and downstream industrial chains, and will be able to break the “stuck neck” in “core technology”. At the same time, it will also break the other “impossible” that shackles the innovation and development of enterprises.