3B Blackbio DX Ltd

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I have been tracking Kilpest through this thread on and off for the last one year without taking a very detailed look at it. With the amalgamation of 3BBB into Kilpest finally on the verge of happening, I decided to give this company a detailed read. Thanks to all the participants of this thread, this is one of the several amazing threads on micro-cap companies that only a platform like Valuepickr can have :slight_smile:

Thanks to @Vineetjain111 I came across this company called Molbio Diagnostics (Molbio Diagnostics Pvt. Ltd.) which is in the same space as Kilpest - PCR based molecular diagnostics. The company is not listed and is valued at around ~$1.6bn (~13000Cr) at a 10x P/S multiple. Temasek and Motilal Oswal are existing PE investors in the company. The company is known for its TrueNat PCR platform which provides a portable end-to-end PCR solution from sample extraction to report generation for 40 different diseases.

One can see their TrueNat platform in action in this video where its being used for a Covid 19 test - https://www.youtube.com/watch?v=rPuSk4quQT4

If one wants to understand the science behind a PCR test (Polymerase chain reaction), these two animated videos are good for a first level understanding

Basically, a PCR test involves the following key steps:

  1. Identification of target DNA (part of the DNA that carries disease signature)
  2. RNA/DNA extraction from sample
  3. If RNA is extracted (in case of virus borne diseases), then use Reverse Transcriptase to convert the RNA to cDNA (The RT part of the RT-PCR test)
  4. The extracted DNA is mixed with primer, free nucleotides and Taq polymerase (an enzyme extracted from heat resistant bacteria)
  5. This mixture is put in a machine called a thermal cycler which multiplies the target DNA into billions of copies thus making detection possible
  6. In this concentrated sample of the target DNA, its presence or absence is identified via different probes for e.g. in the case of Covid 19 it seems to be a probe that causes fluorescence upon detection which is measured in the final mixture to give a positive/negative verdict.

The quoted report in this article (April, 2023) provides some important data points
Molecular Diagnostics Market in India is Expected to Reach US$ ~1.6 Billion by 2030, ET HealthWorld -

  • Main use cases of MD - infectious disease detection like COVID-19, dengue, malaria, tuberculosis, influenza, HIV and hepatitis. Emerging areas - cancer detection, cardiovascular disease detection, neurological conditions
  • Current market in India is just short of 1bn$ now and is expected to grow to 1.6bn $ by 2030 and 90% of the current MD market is PCR based, so that’s a market size of 1.44bn$ by 2030 (~12000Cr at today’s exchange rates)
  • There are 3000 labs capable of doing MD tests in India now
  • Key players in India - Molbio, Mylab and Tata MD. Large global players - Abbott and Roche.

Unlike Molbio, 3BBB seems to manufacture only the assays (primer + nucleotide + probe mixtures) and not the portable machines themselves. With that background, let me document a few open questions that I think we as a group needs to answer to nail down the long term potential of 3BBB:

  1. Opportunity size for 3BBB - Of the current PCR market size of ~7000Cr, how much is from assays and testing (3BBB’s area) and how much is from diagnostic equipment (outside 3BBB’s purview)?

  2. Why does 3BBB have such low market share even after being an early entrant? - 3BBB exists for more than a decade. Spain is a hotbed of biotech research, so the JV with the Spanish company was a step in the right direction in the early 2010s. But why does Kilpest only have a 50Cr market share in a 7000Cr market?

  3. Business models of competitors - The likes of Molbio and Mylab both offer PCR machines in addition to assays and kits. Do they manufacture these machines or do they simply import them and sell under their own brand names? For a lot of pathology and radiology equipment, the machine is provided for free but the buyer has to buy a min amount of reagents/chemicals/kits from the OEM - is it the same arrangement for PCR machines and kits? If that is the case, then is a kit provider like 3BBB frozen out from diagnostic labs with Mylab or Molbio machines and only restricted to labs using imported machines like Thermofisher?

  4. Product distribution and penetration in India - What is the buying behaviour of Indian labs and hospitals? Do they prefer to buy kits from OEMs who make machines or are they open to buying kits from a provider like 3BBB?

  5. Can 3BBB move into PCR machines? - If players like Molbio/Mylab are simply importing or outsourcing the manufacturing of these machines, what prevents 3BBB from doing the same?

  6. Finally the most important question - Does 3BBB’s business have any real barriers to entry? During Covid, 532 RTPCR kits were approved by ICMR as of Feb 2022 (https://www.icmr.gov.in/pdf/covid/kits/RT_PCR_Tests_Kits_Evaluation_Summ_17022022.pdf) of which at least 200 were manufactured by domestic companies. If any Tom, Dick and Harry can make Covid 19 RTPCR kits so easily, what barriers to entry does 3BBB actually have wrt kits for other diseases?

Tagging the erstwhile active contributors in this thread - @Vineetjain111 @sahil_vi @aga.ayush11 @ravish @Anand6 @msandip @enelay

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