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Caixin

Coronavirus test-equipment maker MGI Tech rakes in $1bn funding

Rising demand for startup's nucleic acid extraction kit drives Series B round

MGI Tech, a major provider of COVID-19 testing equipment in China, completed a $1 billion series B round led by IDG Capital and Citic Private Equity Funds Management.

The second round was much bigger than the first, which brought in $200 million a year ago, though the company had expected to raise $1 billion. MGI declined to disclose the company's new valuation after the latest round.

The COVID-19 pandemic has created a favorable fundraising environment for the maker, as business rises on huge demand for its nucleic acid extraction kits used for detecting the disease.

MGI said it has been extracting more than 100,000 samples a day in more than 30 Chinese cities. After the contagion was largely controlled in China, MGI began exporting the kits to India, Australia, Canada, France and other countries.

Billionaire entrepreneur Wang Jian, chairman of MGI, controls nearly 80% of the company. He is also the controlling shareholder and chairman of Shenzhen-listed genome giant BGI Group.

Other investors include Huaxing New Economic Fund, Co-Stone Asset Management and the equity investment unit of brokerage Guotai Junan Securities. Existing investors -- including Citic Securities' private equity unit Gold Stone Investment and Shenzhen Green Pine Capital Partners -- also participated.

The four-year-old startup told Caixin there is no timetable for an initial public offering. Where the company lists will depend on development and policy changes, MGI said. Last year a private investor close to MGI said the company planned an IPO in Hong Kong by the end of 2019 following the first round of financing.

MGI has long been questioned over related-party transactions. Most of the company's gene-sequencing equipment was sold to BGI and affiliated companies, an investor said. In 2019, BGI and its affiliates bought 597 million yuan ($83.5 million) worth of products and services from MGI, according to BGI's annual report. BGI did not disclose how much of total sales was related-party transactions.

The startup said it is the only company in China with the ability to mass-produce clinical-grade gene sequencers. With limited options, related-party transactions are inevitable. But all sales are carried out in accordance with fair value, laws and regulations, the company said.

BGI and its affiliated companies were MGI's earliest clients, and now the share of revenue from third-party clients is rising, MGI said.

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Read also the original story.

Caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Nikkei recently agreed with the company to exchange articles in English.

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