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MGI Tech Launches Additional Sequencing Products in Europe Following Illumina Patent Invalidation


NEW YORK – MGI Tech reported last week that its entire sequencing platform portfolio is now available in several additional European countries, following the European Patent Office (EPO) Board of Appeal’s decision to invalidate an Illumina patent.

According to the Chinese sequencing instrument maker's first-quarter report, filed with the Shanghai Stock Exchange, the disputed patent was EP3002289, titled “Modified nucleotides for polynucleotide sequencing.”

MGI and Illumina have been engaging in patent litigation in several European countries, and the revocation of this patent means MGI’s StandardMPS and CoolMPS sequencing reagents and sequencers for their use are now available in Turkey, Portugal, Austria, Romania, Finland, Greece, Hungary, and Belgium, an MGI spokesperson said in an email. Before that, only the HotMPS sequencing chemistry was available in these countries, the spokesperson added.

In an email, an Illumina spokesperson said patent EP3002289 was set to expire in August 2023, and its revocation, “which Illumina disagrees with, does not have a material impact on Illumina’s patent portfolio.”

Furthermore, the spokesperson said the ruling does not affect other patents in the same patent family, on the basis of which Illumina obtained injunctions against MGI, including patent EP1530578, titled “Modified nucleotides for polynucleotide sequencing.”

Last year, MGI ended years of legal battles with Illumina in the US, enabling the company to return to the US market at the beginning of this year.

In its report, MGI also reported its Q1 2023 financial results. For the quarter ended March 31, MGI booked RMB 619.0 million ($89.6 million) in total revenues, down 49 percent from RMB 1.22 billion in Q1 2022. The company attributed the decline to dropping demand for its lab automation products.

MGI reported RMB 149.8 million in net loss attributable to shareholders in Q1, compared to a net profit of RMB 342.2 million in the same period last year. Per-share loss was RMB .36, compared to earnings per share of RMB .92 in Q1 2022.

MGI’s R&D expenses for the quarter were RMB 218.8 million, a 40 percent increase year over year from RMB 156.2 million in the first quarter of last year. SG&A expenses were RMB 267.6 million, up 16 percent from RMB 230.1 million in Q1 2022.

MGI ended the quarter with RMB 5.91 billion in cash and cash equivalents.

The company also filed its 2022 annual financial report with the stock exchange last week. For the year ended Dec. 31, the company booked RMB 4.23 billion in total revenues, an 8 percent increase from RMB 3.93 billion in the prior year.

MGI disclosed that revenues from other companies affiliated with the BGI group were RMB 775.5 million in 2022, making up 18 percent of the company’s total revenue.

The firm's net profit attributable to shareholders increased more than fourfold to RMB 2.03 billion from RMB 483.6 million in 2021, primarily due to a $325 million settlement that the company received from Illumina and above the preliminary number MGI had reported in February.

Accordingly, the firm’s earnings per share for 2022 quadrupled to RMB 5.26 from RMB 1.30 in 2021. MGI’s diluted earnings per share for the year were RMB 5.22, compared to RMB 1.29 in 2021.

The company’s adjusted 2022 net profit attributable to shareholders, which excludes non-recurring income, was RMB 264.1 million, a decline from RMB 493.0 million in the prior year. EPS excluding non-recurring income was RMB .69, down year over year from RMB 1.33 in 2021.

MGI attributed the declining profit to “changes in market demand,” which resulted in a decrease in the proportion of sales of high-margin products and increasing R&D costs.

MGI’s 2022 R&D expenses were RMB 814.4 million, a 34 percent increase from RMB 608.3 in 2021. The company said it expanded its R&D team by 42 percent from 710 employees in 2021 to 1,010 in 2022.

SG&A expenses for 2022 were RMB 1.22 billion, on par with RMB 1.24 billion in 2021.

By market segment, MGI’s 2022 sequencing revenues were RMB 1.76 billion, up 38 percent year over year. Revenues from lab automation products were RMB 1.25 billion, down 43 percent from 2021. Revenues in the company’s so-called “new business sectors,” which include automated biobanking, ultrasound diagnostic instruments, single-cell omics platforms, and information tools, were RMB 1.20 billion, representing a 180 percent increase from the year-ago period.

In terms of geographic regions, MGI’s revenues in mainland China, Hong Kong, Macau, and Taiwan were RMB 2.70 billion, up 52 percent from the prior year. Revenues in other parts of Asia-Pacific were RMB 532.4 million, while revenues in Europe and Africa were RMB 690.9 million, and those in the Americas were RMB 283.7 million.

In 2022, MGI sold more than 600 sequencers across the globe, including 470 in the domestic Chinese market and 130 overseas. The company also sold more than 900 lab automation systems.

During the year, the company also established its dNTP production facility in Wuhan, with the goal to achieve complete in-house production of dNTP ingredients for the company’s sequencing chemistry.

MGI ended the year with RMB 6.47 billion in cash and cash equivalents.

Upon market close on April 28, before China's national holiday this week, MGI’s stock was up 2 percent to RMB 80.14 on the Shanghai Stock Exchange.