Since 2019, Berry Genomics Co.Ltd(000710) has received inquiry letters from regulatory authorities after publishing annual reports for three consecutive years.
In 2017, Berry Genomics Co.Ltd(000710) backdoor Tianxing instrument was listed, known as "the first share of gene testing". At the time of listing, Berry Genomics Co.Ltd(000710) the original shareholder made a three-year performance commitment. After the expiration of the period, Berry Genomics Co.Ltd(000710) stepped on the line with a score of 100.8%. However, since 2020, Berry Genomics Co.Ltd(000710) 's performance has begun to decline sharply. In 2020, the net profit fell by more than 40% year-on-year, and last year it changed from profit to loss.
The "face change" of the company's performance has attracted the attention of Shenzhen Stock Exchange, which focuses on the authenticity of Berry Genomics Co.Ltd(000710) early performance and the high accounts receivable of several major customers.
The reporter of the daily economic news noted that the two major customers of Berry Genomics Co.Ltd(000710) over the years are Hunan Jiahui Biotechnology Co., Ltd. and its related party Fujian Herui Gene Technology Co., Ltd. (hereinafter referred to as Fujian Herui). The former owns a Jiahui genetics hospital, while the latter is a Berry Genomics Co.Ltd(000710) joint-stock subsidiary mainly engaged in tumor early screening and other businesses. In recent years, they have contributed more than 1 billion in revenue to Berry Genomics Co.Ltd(000710) but there are large accounts receivable at the same time. Last year, Berry Genomics Co.Ltd(000710) also made a single provision for bad debts on the accounts receivable of Hunan Jiahui, resulting in a significant increase in the company's bad debt provision.
At the same time, the company's accounts receivable has continued to rise in recent years, and the proportion in revenue has increased year by year. From 2017 to the end of 2021, Berry Genomics Co.Ltd(000710) the accounts receivable were 514 million yuan, 646 million yuan, 840 million yuan, 1070 million yuan and 1.103 billion yuan respectively, accounting for 43.89%, 44.86%, 51.92%, 69.48% and 77.57% of the company's total revenue in that year.
On May 19, Berry Genomics Co.Ltd(000710) replied to the inquiry letter of 2021 annual report and explained several questions mentioned in the inquiry letter.
after the expiration of performance commitment, the "turn down" accounts receivable continued to rise
Half a month after the annual report of 2021 was released, Berry Genomics Co.Ltd(000710) received the inquiry letter from Shenzhen Stock Exchange. The key point of the inquiry is that the performance of Berry Genomics Co.Ltd(000710) has changed greatly in recent two years.
In 2021, Berry Genomics Co.Ltd(000710) achieved an operating revenue of 1.422 billion yuan, a year-on-year decrease of 7.67%; The net profit attributable to the parent company was -111 million yuan, down 152.60% year-on-year. This is Berry Genomics Co.Ltd(000710) the second consecutive year of sharp decline in performance after completing the performance commitment of backdoor listing. In 2020, the year after Berry Genomics Co.Ltd(000710) fulfilled its performance commitment, the company's performance showed signs of turning around and falling. In that year, the net profit attributable to the parent company decreased by more than 40% year-on-year.
Accordingly, the Shenzhen stock exchange requires the annual audit accountant to explain whether the company's early financial data are true and accurate in combination with the sharp decline of Berry Genomics Co.Ltd(000710) the net profit and the conversion from profit to loss after the performance commitment period.
In 2017, Berry Genomics Co.Ltd(000710) backdoor Tianxing instrument was listed. When backdoor, the original shareholders made performance commitments. According to the transcripts handed over by Berry Genomics Co.Ltd(000710) from 2017 to 2019, the completion ratio of Berry Genomics Co.Ltd(000710) performance commitment was 101.88%, 103.41% and 98.19%, and finally reached the standard by "stepping on the line" of 100.80% of the performance commitment.
But then, Berry Genomics Co.Ltd(000710) appeared performance "face change".
Berry Genomics Co.Ltd(000710) is mainly engaged in gene testing services, equipment and reagent sales based on high-throughput sequencing technology. Medical testing services mainly based on non-invasive prenatal genetic testing (NIPT) are the main source of income of the company.
By business, in 2021, Berry Genomics Co.Ltd(000710) medical testing service revenue was about 507 million yuan, a year-on-year decrease of 15.20%, and the gross profit margin of this business also decreased by 7.39 percentage points compared with the same period of last year. In its annual report, the company said that the reason for the decline in the overall income of clinical business, including medical testing services, was that the price of product testing services in the mature stage of the company showed a downward trend, and the repeated covid-19 epidemic caused the number of hospital diagnosis and treatment to return to instability; The business income of covid-19 testing service in this period decreased year-on-year.
In addition, Berry Genomics Co.Ltd(000710) 's basic scientific research service revenue was about 314 million yuan, a year-on-year decrease of 24.08%, and the gross profit margin decreased by 22.45 percentage points compared with the same period of the previous year. The company said that the decline in this part of revenue was due to the conclusion of customers' preliminary research projects and the reduction of phased scientific research service procurement.
When explaining why the performance declined in 2020, the company listed covid-19 epidemic as an important factor.
However, the daily economic news reporter found that in 2019 before the covid-19 epidemic, the main business of Berry Genomics Co.Ltd(000710) the medical testing service has declined. That year, the company's medical testing service revenue was 644 million yuan, a year-on-year decrease of 16.12%.
In addition, the gross profit margin of the company's basic scientific research services has also experienced a "roller coaster" fluctuation in recent years, rising from 30.12% in 2017 to 58.01% in 2019 and falling to 32.72% in 2021p align="center" style="text-align:center;"> Changes in gross profit margin of basic scientific research services
The reporter also noted that compared with peer enterprises, the gross profit margin of Berry Genomics Co.Ltd(000710) basic scientific research services also showed the opposite trend from 2017 to 2019p align="center" style="text-align:center;"> Image source: screenshot of the company's reply to the inquiry letter of 2019 Annual Report
Since the backdoor listing, Berry Genomics Co.Ltd(000710) 's accounts receivable have been rising, and its proportion in the company's total revenue has also gradually increased. From the end of 2017 to the end of 2021, the company's accounts receivable were 514 million yuan, 646 million yuan, 840 million yuan, 1070 million yuan and 1.103 billion yuan respectively, accounting for 43.89%, 44.86%, 51.92%, 69.48% and 77.57% of the company's total revenue in that year. Among enterprises in the same industry, in 2021, the accounts receivable of Bgi Genomics Co.Ltd(300676) and Daan Gene Co.Ltd(002030) accounted for 17.96% and 29.49% of the company's total revenue respectively, lower than the Berry Genomics Co.Ltd(000710) level.
On May 19, Berry Genomics Co.Ltd(000710) replied in the announcement on the authenticity of early operating data, changes in some performance data and other issues. Taking the decline of medical testing service revenue as an example, the company said that as the company's main products entered the mature stage, medical institutions tended to purchase reagents independently for sample testing, and the company's medical testing service mode gradually changed to reagent sales mode, resulting in the decline of this part of revenue. The main reasons for the fluctuation of gross profit margin of basic scientific research services during the reporting period include the phased reduction of scientific research services purchased by Fujian and Switzerland, and the reduced gross profit margin of scientific research services is higher than other ordinary scientific research projects, resulting in the reduction of the overall gross profit margin of scientific research services of the company.
key customers have contributed more than 700 million in revenue in recent five years, and the change of bad debt provision method was inquired
Although the company mentioned in the reply that by the end of last year, the company had recovered more than 80% of the accounts receivable during the period when the performance commitment was completed, the high accounts receivable still brought certain hidden dangers to Berry Genomics Co.Ltd(000710) the company.
At the end of 2021, the book balance of Berry Genomics Co.Ltd(000710) accounts receivable was 1.263 billion yuan, a year-on-year increase of 7.41%. The balance of bad debt provision was 160 million yuan, a year-on-year increase of 50.48%. Among them, the book balance of accounts receivable with individual provision for bad debts was 267 million yuan, a year-on-year increase of 157673%, and the balance of bad debt provision was 87 million yuan, a year-on-year increase of 446.96%.
The company's bad debt provision increased significantly, one of the main reasons is that the bad debt provision of accounts receivable of Hunan Jiahui Biotechnology Co., Ltd. (hereinafter referred to as Hunan Jiahui) was adjusted from combination provision to individual provision.
Hunan Jiahui was founded in 2009 with a registered capital of 2 million yuan. It has a branch called Jiahui genetics hospital. According to the data at the time of asset restructuring, Hunan Jiahui was the largest customer of Beirui Hekang ( Berry Genomics Co.Ltd(000710) predecessor) from 2014 to 2016, and contributed nearly half of the revenue to Beirui Hekang during the peak period. Meanwhile, Hunan Jiahui ranked first in the closing balance of accounts receivable of Beirui and Kang.
After the backdoor listing, Hunan Jiahui is still a major customer of Berry Genomics Co.Ltd(000710) . From 2017 to 2020, Berry Genomics Co.Ltd(000710) and Hunan Jiahui had transaction amounts of 237 million yuan, 180 million yuan, 167 million yuan and 120 million yuan respectively, and the corresponding balance of accounts receivable at the end of the period was 117 million yuan, 125 million yuan, 172 million yuan and 211 million yuanp align="center" style="text-align:center;"> 20182020 Berry Genomics Co.Ltd(000710) to Hunan Jiahui sales amount and accounts receivable amount, photo source: Announcement screenshot
From 2020, Hunan Jiahui began to have accounts receivable for more than one year. However, by the end of 2021, the ending balance of accounts receivable of Hunan Jiahui was 235 million yuan, still the first.
Berry Genomics Co.Ltd(000710) once said in a reply letter in July 2021 that the company has always maintained a good cooperative relationship with Hunan Jiahui, and the relevant funds are within the company's control and reasonable. However, in 2021, Berry Genomics Co.Ltd(000710) made bad debt provision for the accounts receivable held by Hunan Jiahui. According to the company, the total impairment provision for individual withdrawal is 87.256 million yuan, which is mainly due to the comprehensive analysis of the customer's accounts receivable held by the company. It is considered that there is an impairment risk and it is expected to be difficult to recover. Among them, the bad debt provision for Hunan Jiahui was 55.264 million yuanp align="center" style="text-align:center;"> Source: screenshot of the company's 2021 Annual Report
A person in the audit industry told the reporter of the daily economic news that the reason for changing the accrual method to single accrual is generally because there are some special circumstances or risks in the accounts receivable side, which makes it difficult to recover the accounts, and then carry out single accrual. The proportion of single withdrawal is generally higher than that of combined withdrawal.
Berry Genomics Co.Ltd(000710) said in the latest reply that under the condition of active collection, the turnover rate of accounts receivable of Hunan Jiahui still showed a trend of slowing down year by year. The company believes that the overall risk is controllable, but it still adopts the principle of combination to withdraw bad debts, which does not meet the principle of prudence.
The reporter noted that according to the collection coefficient of Hunan Jiahui over the years disclosed in the announcement, from 2018 to 2021, the collection coefficient of Hunan Jiahui (collection in the current period / (balance receivable in the previous period + amount incurred in the current period)) decreased from 61.37% to 26.07% year by year. As of the reply date of the above inquiry letter, the balance of accounts receivable of Hunan Jiahui still had 236 million yuan.
backdoor listing was established in the same month, and the purchase amount of the participating subsidiary exceeded the current year's revenue for three consecutive years after its establishment
Berry Genomics Co.Ltd(000710) over the years, another major customer is related party Fujian Herui.
Fujian Herui was established by Berry Genomics Co.Ltd(000710) in August 2017, that is, in the month of backdoor listing. After introducing several investors, Fujian Herui is a joint-stock subsidiary of Berry Genomics Co.Ltd(000710) . Fujian Herui's main businesses include tumor detection in the middle and late stage, early screening and early diagnosis of tumors. Its liver cancer early screening product "lessning" has been commercialized in the service mode. By the end of the reporting period in 2021, it is promoting the registration and application of medical devices.
After the establishment of Fujian Herui, it began to purchase large amount from Berry Genomics Co.Ltd(000710) company. In 2018, 2019 and 2020, the operating revenues of Fujian and Rui were 623031 million yuan, 121 million yuan and 129 million yuan respectively. In the same period, the sales of Berry Genomics Co.Ltd(000710) to Fujian and Rui were 146 million yuan, 228 million yuan and 180 million yuan respectively. For three consecutive years, the purchase amount of Fujian and Rui is higher than their current revenue.
Last year, Berry Genomics Co.Ltd(000710) gave an explanation for this - the purchase amount of Fujian Herui was greater than the operating income, which was mainly due to the large investment in its tumor early screening R & D project.
Similar to Hunan Jiahui, Fujian and Rui also have high accounts receivable. By the end of 2020, the book balance of accounts receivable from Berry Genomics Co.Ltd(000710) to Fujian and Ruizhou was 192 million yuan, with a year-on-year increase of 599.60%. The company once said that the main customer of Fujian Herui was the hospital, which was affected by the covid-19 epidemic, and the collection speed slowed down, putting pressure on the capital of Fujian Herui. The company also said that with the completion of the new round of financing of Fujian Herui, Fujian Herui will settle with the company in time, and the amount is expected to be recovered in 2021.
However, it seems that the amount has not been recovered within the expected time of the company. In 2021, Berry Genomics Co.Ltd(000710) the ending balance of accounts receivable from Fujian and Ruizhou was 164 million yuan. The reporter of the daily economic news noted that Berry Genomics Co.Ltd(000710) disclosed that the accounts receivable balance of Fujian Herui was 70.67 million yuan within one year and 93.54 million yuan within one to two years. From January to April this year, Berry Genomics Co.Ltd(000710) has recovered 93.72 million yuanp align="center" style="text-align:center;"> Photo source: screenshot of the inquiry letter of the company's 2021 Annual Report
Shenzhen stock exchange requires the company to explain the aging of accounts receivable of Fujian Herui and whether the amount of bad debt provision is sufficient and accurate.
key parts of equipment depend on external procurement
In the field of prenatal noninvasive gene testing, Berry Genomics Co.Ltd(000710) and Bgi Genomics Co.Ltd(300676) are called the two leaders, accounting for nearly 70% of the market share.
However, compared with the revenue of Bgi Genomics Co.Ltd(300676) 2021 of 6.766 billion yuan and the net profit of 1.462 billion yuan, Berry Genomics Co.Ltd(000710) 's performance has been greatly improved.
Excluding the contribution of covid-19 testing business, Bgi Genomics Co.Ltd(300676) the income from basic research and clinical application services of reproductive health is also relatively stable. In 2019, 2020 and 2021, the revenue will reach 1.176 billion yuan, 1.178 billion yuan and 1.192 billion yuan respectively, far exceeding the scale of Berry Genomics Co.Ltd(000710) medical testing business, and the growth is relatively stable.
As another important part of Berry Genomics Co.Ltd(000710) business, the sales of equipment and reagents have also contributed to the company's performance in recent years. Data show that in 2021, the company's equipment sales revenue reached 117 million yuan, an increase of 42.48% over the same period last year; Reagent sales realized a revenue of 431 million yuan, accounting for 30.28% of the company's current revenue.
However, the gross profit margin of Berry Genomics Co.Ltd(000710) 's equipment sales is not high, only 9.62% last year. This is because a large number of sequencer components and some sequencing reagent raw materials sold by Berry Genomics Co.Ltd(000710) are purchased from Illumina, a leading gene sequencing enterprise.
According to the annual report of 2021, the procurement amount of Berry Genomics Co.Ltd(000710) from Illumina from 2019 to 2021 was RMB 457 million, RMB 483 million and RMB 668 million respectively, accounting for 35.27%, 36.03% and 58.79% of the total procurement of the current period.
In this regard, Shenzhen stock exchange requires Berry Genomics Co.Ltd(000710) to explain the cooperation mode with Illumina and the low gross profit margin of equipment sales business, as well as the specific links undertaken by the company in the manufacturing process of equipment products.
The company mentioned in its reply that the hardware of nextseq cn500 purchased from Illumina includes: host module, optical module, single board computer module and other components. After purchasing equipment spare parts, the company undertakes equipment assembly, commissioning, safety test, quality inspection, system configuration, software placement and other work, makes finished products, and undertakes finished product installation, after-sales and other related work. The software part is independently developed by the company.
It is worth noting that there may be some hidden worries about selling Illumina devices.
Since the gene detection equipment system is often closed, that is, the reagent must be the product produced by the original manufacturer of the equipment, will Berry Genomics Co.Ltd(000710) also play the role of middleman in the reagent sales business? The reporter noted that in Berry Genomics Co.Ltd(000710) the reagent products on sale, nextseq cn500 high-throughput sequencing kit and nextseq cn500 medium throughput sequencing kit are marked as "sequencing reagent cooperating with Illumina, and its performance is equivalent to Illumina".
In response to relevant questions, the reporter of "daily economic news" recently sent the interview outline to Berry Genomics Co.Ltd(000710) aspect, and the staff of the other party said that "since they will reply to the inquiry letter of Shenzhen Stock Exchange, they will not make a separate reply to the interview".
