Analysis of Industry Trends Reflected in Changes in Gross Margin of Singlera Genomics' Tumor Testing Business

Based on the searched information, I will provide a detailed analysis of the industry trends reflected in the changes in gross margin of Singlera Genomics’ tumor testing business.

According to public information, Singlera Genomics’ gross margin shows an

rather than a decline: the company’s gross margin increased from 41.9% in 2022 to 68.5% in H1 2025[1]. This improvement is mainly due to the adjustment of product structure towards high value-added products. However, from a broader industry perspective, [2].

The competition pattern of China’s tumor gene testing industry is relatively fragmented. The first echelon includes Amoy Diagnostics, BGI Group, Geneseeq Technology, etc., while the second echelon includes Genetron Health, Burning Rock Biotech, Berry Genomics, Singlera Genomics, etc.[2]. In the context of competition in the existing market, enterprises generally adopt price-cutting strategies to compete for hospital channels and market share. Cloud Health Group’s overall gross margin decreased from 36.5% in 2023 to 29.6% in 2024, and the company clearly stated that “intensified industry competition and further downward adjustment of market prices for medical testing items” is the main factor[3].

Since 2023, various provinces and cities have intensively issued policies and regulations to standardize the outsourcing of clinical samples. Anhui Province and Shanghai have clearly stipulated that medical institutions shall not include testing items that they are capable of conducting in the scope of outsourced sample testing; Chongqing requires medical institutions to submit a list of outsourced sample testing items based on their actual situation[4]. This policy orientation directly compresses the profit space of the traditional sample outsourcing model, forcing enterprises to switch to in-hospital deployment models, which face higher operating costs and longer market cultivation cycles.

Taking the in-hospital deployment model as an example, operating costs include labor costs, reagent and consumable costs, and operating costs, while operating revenue is mainly determined by the in-hospital price of kits and the number of tested samples. For a tumor NGS enterprise with an in-hospital kit price of RMB 10,000, to deploy in a hospital with a penetration rate of 10%, it needs to start the machine 4 times a week using the MGI-2000 FCS chip, and the hospital’s annual surgical volume must reach 1,920 cases to break even. According to IQVIA statistics, there are only about 170 hospitals in China with an annual surgical volume of more than 1,920 cases[4]. This means that most hospitals cannot support the economies of scale of tumor NGS testing, resulting in persistently high unit costs.

Currently, only a few provinces and cities in China, such as Liaoning, Guangdong, and Fujian, have added charging barcodes for tumor NGS. Even fewer provinces and cities have included tumor NGS in medical insurance, with only Fujian Province and Beijing Municipality[4]. In hospitals in most other regions, tumor NGS can only be charged using related barcodes and cannot be reimbursed through medical insurance, which greatly limits the market penetration and pricing power of the products.

Since 2021, capital has become cautious about tumor NGS and turned to new hotspots such as pathogenic metagenomic testing[4]. Over the past four years, there have been few large financings in China’s tumor NGS industry. Burning Rock Biotech sustained net losses from 2018 to 2023, with net losses of RMB 178 million, RMB 169 million, RMB 407 million, RMB 797 million, and RMB 971 million respectively; Genetron Health accumulated losses of over RMB 5.5 billion from 2018 to 2022[4]. Against the backdrop of tightened external financing, enterprises’ willingness and ability to cut prices to seize market share are intertwined, further compressing profit margins.

Although continuous progress in sequencing technology has driven cost reduction, tumor NGS testing involves large fixed asset and personnel investments. Once the volume of tested samples fails to increase, it is difficult to lower product prices[4]. In its prospectus, Singlera Genomics admitted that it incurred a loss of RMB 424 million in 2024, mainly due to “the growth rate of routine testing demand fell short of expectations, overall diagnostic service revenue declined, and high fixed cost investment led to a significant decline in gross profit”[1].

The shift from sample outsourcing to in-hospital models is reshaping the industry’s competitive landscape. In-hospital models include bundled outsourcing and in-hospital deployment. Under the bundled outsourcing model, hospitals cooperate with third-party testing companies, doctors issue prescriptions through the hospital’s internal system, and testing is completed outside the hospital; the in-hospital deployment model involves building a tumor NGS laboratory within the hospital, with sample flow, data flow, and capital flow all retained within the hospital[4]. For enterprises, it is a top priority to continuously improve gross margins through scale advantages, compress sales and R&D expenses, and accelerate the achievement of operational break-even.

The improvement in Singlera Genomics’ gross margin reflects the optimization of its own product structure, rather than the overall industry trend. China’s tumor gene testing industry is undergoing an adjustment period from rapid expansion to rational return. The decline in gross margin is the result of the combined effect of multiple factors such as intensified market competition, tightened regulatory policies, and cooling capital enthusiasm. In the short term, the industry will continue to consolidate, and enterprises lacking core competitiveness will exit the market; in the long term, with the expansion of medical insurance coverage, the increase in in-hospital penetration, and the emergence of economies of scale, high-quality enterprises are expected to usher in a profit inflection point.

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[1] Yahoo Finance - Post-Pandemic Dividend Fades, Singlera Genomics Steadily Re-Launches (https://hk.finance.yahoo.com/news/疫情紅利退潮-吉因加穩手穩打再出發-003317403.html)

[2] Eastmoney.com - Overview Report of China’s Tumor Gene Testing Industry (https://pdf.dfcfw.com/pdf/H3_AP202312041613237292_1.pdf)

[3] Cloud Health Group Limited 2024 Annual Report (https://www.hkexnews.hk/listedco/listconews/sehk/2025/0425/2025042503084_c.pdf)

[4] Tencent News - Tumor NGS is Shifting Battlefields (https://news.qq.com/rain/a/20250220A01F1J00)