Good News on Listing | Frost & Sullivan Assists Kangsheng Global in Successful Hong Kong Listing (9960.HK)

Kangsheng Global Gene Technology Co., Ltd. (hereinafter referred to as 'Kangsheng Global') successfully went public on July 16, 2021, with a global issue of 226,405,000 shares at an offer price of HK$8.60 - 9.78 per share, raising approximately HK$1.947 - 2.214 billion. Frost & Sullivan (Frost & Sullivan, hereinafter referred to as 'Frost & Sullivan') provided exclusive industry advisory services for Kangsheng Global's listing, and we hereby extend our warmest congratulations on its successful listing.

During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the company accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the company's competitive advantages, assisting the company, investment banks, and other intermediaries in completing relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), facilitating communication with the Hong Kong Stock Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the company in completing feedback on various industry-related issues from the Hong Kong Stock Exchange.

Clinical testing refers to a set of medical examinations conducted in qualified laboratories equipped with comprehensive testing medicine and instruments. Clinical testing helps doctors make decisions by providing information about patients' health status. Clinical testing also assists pharmaceutical and biotech companies in developing drugs or vaccines. Clinical testing services are generally provided by three types of suppliers: hospital laboratories, independent clinical laboratories ('ICL'), and other institutions such as nursing homes and non-hospital medical facilities. Hospital laboratories are currently China's largest provider of clinical testing services, generally offering routine tests. Our company's ICLs generally provide more complex tests.

ICL refers to third-party medical institutions that provide clinical testing services. ICLs are legally or professionally qualified to operate with the permission of appropriate health administrative departments and/or professional bodies. ICLs engage in clinical testing or pathological diagnosis services and independently assume corresponding medical responsibilities. ICLs provide information related to human disease diagnosis and treatment through the examination of human specimens through clinical testing. This clinical testing includes clinical blood and body fluid examinations, biochemical tests, immunological tests, microbiological tests, cytogenetic and pathological examinations. Compared with other clinical testing institutions, ICLs generally have larger laboratories and more advanced equipment, experienced technical staff, and offer a wider range of testing items. Chinese ICLs usually provide over 1,000 testing items, leading ICLs offer more than 3,500 testing items, while tertiary hospitals can only provide 500 to 1,000 testing items, non-hospital medical institutions only offer about 400 basic testing items.

Compared to hospital laboratories, ICL has witnessed a significantly faster growth rate in recent years. The market size has expanded greatly from RMB 11.74 billion in 2016 to RMB 30.69 billion in 2020, with an annual compound growth rate of about 27.2%, and it is expected to further increase to RMB 47.95 billion by 2025.

As of the end of 2020, China had more than 1,800 ICLs, while the United States had about 6,800 ICLs. In 2020, the clinical testing expenditure per patient in China was RMB 102.4, while the same expenditure in the United States was RMB 675.8. As of 2020, ICLs accounted for only 6% of China's clinical testing market, while the EU accounted for 50%, the United States accounted for 35%, and Japan accounted for 60%, indicating that China's ICL industry is in its early stages and has great growth potential.

China's ICL market includes two types of testing services: routine testing and special testing. Routine testing usually refers to the routine examination items listed in the 'Clinical Laboratory Test Items Catalogue' issued by the National Health Commission, such as blood biochemistry, body fluid biochemistry, and blood type tests. Special testing usually refers to non-listed special examination items in the 'Clinical Laboratory Test Items Catalogue', such as tuberculosis bacilli and hepatitis virus testing.

The scale of China's special inspection market increased from RMB 49 million in 2016 to RMB 200.576 billion in 2020, with a compound annual growth rate of 42.2% from 2016 to 2020, and it is expected to further increase to RMB 278.601 billion by 2025, with a compound annual growth rate of 6.8% from 2020 to 2025. Specifically, China's special inspection market scale increased significantly by 105.4% from RMB 97.655 billion in 2019 to RMB 200.576 billion in 2020, mainly due to the outbreak of the COVID-19 pandemic, which led to a surge in COVID-19 testing classified as special inspections. The scale of China's routine testing market increased from RMB 68.386 billion in 2016 to RMB 106.373 billion in 2020, with a compound annual growth rate of 11.7% from 2016 to 2020, and it is expected to further increase to RMB 200.861 billion by 2025, with a compound annual growth rate of 13.6% from 2020 to 2025.

The Chinese ICL testing market, divided by specialized fields, mainly includes six sub-sectors: (i) Hematology testing; (ii) Genetic and rare disease testing; (iii) Infectious disease testing; (iv) Tumor testing; (v) Neurology testing; and (vi) Gynecological-related testing.

hematological tests

Blood diseases are primarily those that affect the blood and hematopoietic organs, including rare genetic disorders, anemia, sickle cell anemia, and complications caused by chemotherapy or blood transfusions. Hematological tests include blood tests, protein tests, and examinations of hematopoietic organs. They facilitate doctors in diagnosing various blood diseases, including anemia, infections, hemophilia, coagulation disorders, and leukemia. The technical platforms involved in hematological testing mainly include pathological platforms, flow cytometers, molecular cytogenetics, and molecular diagnostics.

In 2020, the Chinese ICL hematology testing market was RMB 11.099 billion, while the market size in 2016 was RMB 4 billion. The compound annual growth rate from 2016 to 2020 was 29.0%. It is expected that the market will further increase to RMB 46.794 billion by 2025, with a compound annual growth rate of 33.3% from 2020 to 2025.

Genetic and Rare Diseases Testing

Genetic disease and rare disease testing can facilitate the identification of pathogenic genetic variations. In 2020, the market size of genetic disease and rare disease testing in China was RMB 6.273 billion, while it was RMB 2.71 billion in 2016. The compound annual growth rate from 2016 to 2020 was as high as 23.3%. It is expected that by 2025, the market will further grow to RMB 26.372 billion, with a compound annual growth rate of 33.3% from 2020 to 2025.

Infectious disease testing

Infectious diseases are illnesses caused by pathogens such as bacteria, viruses, fungi, or parasites. Infectious disease testing includes antibody testing, antigen testing, and nucleic acid testing. Testing helps identify the cause of infectious diseases and provides insights into disease treatment plans. In 2020, China's ICL infectious disease testing market reached RMB 10.014 billion, while the market size was RMB 3.9 billion in 2016. The compound annual growth rate from 2016 to 2020 was as high as 26.6%. It is expected that it will further grow to RMB 45.119 billion by 2025, with a compound annual growth rate of 35.1% from 2020 to 2025.

solid tumor detection

Solid tumor detection involves predictive testing, diagnosis, precision medicine for cancer, prognosis monitoring, and other aspects of blood malignancies. In 2020, the Chinese ICL solid tumor detection market reached RMB 36.906 billion, while the market size in 2016 was RMB 19.028 billion. The compound annual growth rate from 2016 to 2020 was 18.0%. It is expected to further grow to RMB 77.643 billion by 2025, with a compound annual growth rate from 2020 to 2025 of 16.0%.

Neurological testing

Neurological disorders are diseases of the central and peripheral nervous systems. Common disease conditions include epilepsy, dementia, paraneoplastic diseases, multiple sclerosis, and myasthenia gravis. In 2020, the ICL neurological testing market in China reached RMB 1.892 billion, while the market size was RMB 594 million in 2016. The compound annual growth rate from 2016 to 2020 was as high as 33.6%. It is expected to further grow to RMB 102.36 billion by 2025, with a compound annual growth rate of 40.2% from 2020 to 2025.

Gynecological related tests

Gynecological related testing refers to the use of blood (peripheral blood, umbilical cord blood), body fluids, or cells to detect DNA in order to identify birth defects and receive early intervention. In 2020, the Chinese ICL gynecological related testing market reached 22.977 billion yuan, while the market size in 2016 was 16.532 billion yuan. The compound annual growth rate from 2016 to 2020 was 8.6%. It is expected to further grow to 38.123 billion yuan by 2025, with a compound annual growth rate of 10.7% from 2020 to 2025.