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Marty Chilberg is a seasoned financial professional with over 30 years of executive leadership, board, consulting and advisory experience.  He began his career as a certified public accountant (CPA). He moved to Silicon Valley in 1981 to begin his career in the software industry, working for... More
  • China $8 Billion Potential NIPT Market Stopped By FDA 6 comments
    Apr 6, 2014 12:56 PM | about stocks: ILMN

    China Cracks Down on DNA Testing (Mar 4, 2014)

    Genetic testing has grown to be a business big enough in China to warrant the government's intervention. Early in February, the government quietly put the brakes on the provision of genetic tests to customers by domestic hospitals and a variety of medical and health institutions.

    If the ban persists it could blunt the ambitions of Shenzhen-based BGI, which has the world's largest gene-sequencing capacity, and its various competitors, including Beijing-based Berry Genomics, Hunan-based Second Xiangya Hospital of Central South University, and Shenzhen-listed DAAN Gene. BGI itself is in the process of preparing for an IPO to list part of its business.

    BGI declined to comment on how the ban would affect its business. It is understood the company is in the process of seeking government approval for the commercial use of its products, including its proprietary sequencing software and the Complete Genomics-branded equipment made by the American company it acquired a year ago. An approval would allow it to sell its noninvasive DNA test, invented in 2010, which screens a fetus for Down syndrome by testing the mother's blood.

    The ban has made the country's regulation of genetic testing - which existed till now in a legal grey area - among the most stringent, going beyond the U.S. Food and Drug Administration's recent action in stopping a U.S. company, 23andMe, from offering health-related genetic tests directly to consumers.

    The authorities appear to be most concerned about DNA-based prenatal testing. Even though the government is relaxing its notorious population controls to cope with an aging population, many Chinese parents still have only one child, and want to ensure its health if not its sex and other traits. Now providers of genetic tests, with some exceptions, will have to apply for special permission from government agencies to conduct such tests.

    Prenatal testing is the most popular in the nascent business of genetic testing in China. A Chinese securities analyst estimates its market to be worth 50 billion yuan ($8 billion) a year, based on the number of expected births and a testing fee of 3000 yuan ($480) each. A more realistic figure might be about 480 million yuan (US$77 million), the amount spent by the 160,000 women who have taken the tests since they were made available in China. In the United States, the comparable market is estimated to be worth upward of $1.3 billion a year.

    The official ban was made through a cross-agency announcement posted on the website of the China Food and Drug Administration. The vague wording of the announcement makes it unclear how widely it would apply to different types of genetic testing, but it names prenatal DNA tests as an example of those subject to the ban. It applies to all current projects except those approved by the government, and requires all related medical devices to be licensed by the government before they can be manufactured, imported, sold or used, potentially covering the world's most popular gene-sequencing equipment, made by Boston-based Illumina, Inc.

    From now on, clinical applications of gene-sequencing technology can be offered only at locations approved as pilot trial points by the National Health and Planning Commission, the Chinese population control authority. And they have to be done according to regulations, with "proper certifications and evaluations."

    Other than that, a blanket ban is enforced. "Before relevant certification and regulations are promulgated, medical institutions cannot conduct clinical applications of gene sequencing. Those ongoing projects have to stop immediately," the announcement states.

    In the announcement the government raises its concerns about the fast development of genetic testing as it has moved from labs to clinical applications. "Many genetic testing products and technologies, those for prenatal testing included, belong to the fields of pioneering research studies. They pose problems in issues such as ethics, privacy, the protection of human heredity resources, biological safety, as well as the management of diagnosis expertise of related medical institutions, their pricing policy and quality controls," it states in a long run-on sentence.

    Before the ban, Chinese health clinics had offered customers a proliferation of genetic tests for the diagnosis of various diseases, from tumors and diabetes to immunity system deficiency and hearing impairment. In Shenzhen, where BGI has its headquarters, a major newspaper estimated the ban on prenatal testing would result in the birth of some 11,000 babies with congenital disorders, based on a total of 210,000 babies born last year in the city and a national birth defect rate of 5.6%.

    Earlier, Chinese newspapers reported that BGI's DNA-based prenatal testing for Down syndrome was being censured by the government after an anonymous letter accused it of using testing equipment that was not certified by the government. The equipment in question, ironically, is the industry's most advanced model, Hiseq2000, made by Illumina.

    Shu-Ching Jean Chen, Forbes

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: NIPT, Reproductive Health Stocks: ILMN
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Comments (6)
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  • shams.528@gmail.com
    , contributor
    Comments (8) | Send Message
     
    How long it may take BGI to get approval from the government for its NIFTY test? Also is it so, in China no NIPT will be performed during 2014?
    7 Apr 2014, 03:31 AM Reply Like
  • sqnm:)
    , contributor
    Comments (12) | Send Message
     
    whats the relationship between sequenom and BGI ? i thought i read some where before that dennis lo and sequenom had some relationship with them to provide nifty ? is it a licensing or royalty deal or am i off base there ?
    21 Apr 2014, 07:26 AM Reply Like
  • Marty Chilberg
    , contributor
    Comments (455) | Send Message
     
    Author’s reply » Frank answer is I don't know. I believe that Sequenom's licensing agreement with Dr Lo is for all markets except for China. In Hong Kong, Dr Lo is marketing the test as safeT21 but it is MaterniT21 Plus and all samples are sent to US for processing. Mainland China could have been licensed to BGI by Dr Lo, but I don't recall ever seeing that announced. Seems unlikely since BGI has launched NIFTY in numerous other markets and is competing with Sequenom.
    21 Apr 2014, 10:08 AM Reply Like
  • Doustimotlagh
    , contributor
    Comment (1) | Send Message
     
    How much does the test cost?
    What devices are required to perform the test?
    24 May 2014, 12:57 PM Reply Like
  • Marty Chilberg
    , contributor
    Comments (455) | Send Message
     
    Author’s reply » Just realized my other article is PRO only. The NIFTY and Bambni tests are estimated at around $500. Harmony sells for between $500-800 in most markets. MaterniT21 has a list of $2700 but the asp is around $1000 in US. Pricing in international markets varies quite a bit and in some cases is dictated by partners with a royalty paid to SQNM. Panorama and Verifi have prices similar to MaterniT21
    24 May 2014, 02:14 PM Reply Like
  • Marty Chilberg
    , contributor
    Comments (455) | Send Message
     
    Author’s reply » Not completely sure which test you are referencing. I referenced each of the tests and their pricing here http://seekingalpha.co...
    24 May 2014, 02:09 PM Reply Like
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