Coronavirus Testing Equipment Maker MGI Tech Gets $1 Billion Funding

MGI Tech Co. Ltd., a major provider of Covid-19 testing equipment in China, completed a $1 billion series B funding round led by IDG Capital and CPE China Fund.

The second round of financing was much bigger than the first round of $200 million completed a year ago when the company originally expected to raise $1 billion. MGI declined to disclose what value the new round of financing put on the company.

The Covid-19 pandemic has created favorable conditions for the medical equipment maker to raise funds as its business has been bolstered by huge demand for its nucleic acid extraction kits used in detecting virus infection.

MGI said it has been providing more than 100,000 sample extractions a day in more than 30 cities in China. After the epidemic was largely controlled in China, MGI also exported nucleic acid extraction kits to countries including India, Australia, Canada and France.

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 Co. Ltd. and the equity investment unit of brokerage Guotai Junan Securities Co. Ltd. Existing investors including Citic Securities Co. Ltd.’s private equity unit Gold Stone Investment Co. Ltd. and Shenzhen Green Pine Capital Partners Co. Ltd. also participated.

The four-year-old startup told Caixin there is no timetable for an initial public offering (IPO). Where the company will be listed eventually will depend on the company’s development and policy changes, MGI said. Last year a private equity 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, a private equity investor said. In 2019, BGI and its affiliates bought 597 million yuan ($83.5 million) of products and services from MGI, according to BGI’s annual report. BGI didn’t disclose how much of total sales were related-party transactions.

MGI 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 and 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.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)