Genscript Biotech Corporation

Please be advised that today's conference is being recorded. I would now like to hand the call over to your first speaker today, Mr. Shen Youwei. Please go ahead.

Thank you, operator. Good morning, everyone. Welcome. I'm Shen Youwei, CFO at Genscript. We also have the following management team members attending today's call. Mr. Robin Meng, Chairman of the Board. Dr. Patrick Liu, Rotating CEO of Genscript. Dr. Ying Huang, CEO and CFO of Legend Biotech, Dr. Brian Ming, CEO of GenScript ProBio, Dr. Ray Chen, President of GenScript Life Science Group, and Dr. Ai-Shi Bai, General Manager of Best9. Before we begin, I'd like to remind everyone that on today's call, we will be making forward-looking statements about future expectations, plans, and prospects, as well as any other statements regarding matters that are not historical facts which may constitute forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements, such as results of various important risk factors and changing market conditions. We do not undertake any obligation to publicly update any forward-looking statements. In today's conference call, Patrick will give an opening remark and present business updates. Then I will walk you through the company's financial performance. Then Patrick will outline our company's future strategies. Our chairman, Robin, will give a summary, followed by the Q&A session at the end. Now I will invite Dr. Liu to highlight our business achievements in 2021.

Good morning, good evening, everyone, depending where you are. Before we get started, on behalf of Barb, the management team, and all GeneScript employees, I would like to thank all shareholders, investors, and analysts for your long-time support and recognition. We witnessed the COVID spikes, rising global tension, and marketing turmoil over the past few months. Despite that, we are glad to see our fellow shareholders, investors, and analysts remain confident and supportive to GeneScript. I believe efforts of all of our employees have shown business performance as a cornerstone of this confidence. Over the past few years, GeneScript has established a presence in biology, CDMO, synthetic biology, and cell therapy business. As our business line grows, we are excited to see our business thrive and our strategy. Now I would like to walk you through our highlights in different business segments. So LifeScience, as a foundation of the group, the LifeScience business continues to generate considerable revenue and profit. In 2021, the growth rate of our gene synthesis business far outpaced the industry average, while our oligo, protein, antibody, and peptide business grew on a double-digit base. So revenue from LifeScience business reached a historical high, surpassing 300 million for the first time and grew at 26.4% year-over-year. Revenue from emerging markets like China and Asia-Pacific region grew about 30% with very strong growth momentum. We expect higher growth potential in those two regions in the near future. Due to strong demand from customers' non-viral payload and CRISPR-related GCT business, Our oligo business continues to grow rapidly in the second half of 2021, and revenue grew over 90% year-over-year. Leveraging our life science platform for new medical material development, we launched non-viral payload for GCT applications in 2021. While offering single-strand DA, SGRA, and CRISPR-related materials, we continue to upgrade our production capacity to ensure safety, efficacy, and compliance required for those products and establish medium-scale GMP production lines. We also optimize our automation and digitalize the production platforms for our molecular biology business. Our automation platforms for gene and oligo business in Xinjiang, Nanjing, and the US are fully operational. and we expect to fully expand and upgrade those production lines in the next few years. By the end of 2021, we have more than 60% of the genes synthesized from our automated production lines. This also significantly increases our labor efficiency. Over the last few years, the company has expanded our life science business capacity in China, Singapore, and the U.S. In the U.S., we launched a fully automated gene synthesis production line covering 5,000 square meters. This supports our local rapid gene synthesis services in the U.S. In Singapore, we built an automated facility covering over 3,000 square meters with highly automated protein production and gene synthesis equipment. In Shanghai, we commissioned a production center coming about 1,700 square meter, which is for in vitro self-modeling, viral vector preparation, and the development, and so on. So for our, by our CDMO business, ProBio achieved very impressive results in 2021. ProBio's revenue grew over 101%, backlog grew over 108%. On antibody CDMO business, we deliver 24 CMC projects up by 71% year-over-year. Our downstream project deliver capability are improving rapidly. With accumulation of experience, we expect to attract more customers and further improve customer loyalty. We helped our customers with eight R&D approvals in China and the U.S. Profile is on the way to become a top-tier antibody CDMO in China. On GCT CDMO business, thanks to our strategic investment in early years, we have become number one plasmid supplier in China. We offer a wide range of plasmids from preclinical to commercial stage and offer solutions for R&D filings and clinical development. We helped our customer with six R&D approvals in China, Japan, and South Korea. ProBio received $150 million series A financing in 2021. The capital intensive biologics CDMO industry, so it's very essential to obtain sufficient resources for capacity expansion. For our industries and business, and 2021 is a turning point for best business. Over the past several years, we optimized of ISM business portfolio, improved R&D efficiency, and implemented key accounting development strategy. All those efforts helped BASAM reach breaking even in 2021. BASAM revenue grew over 33% year-over-year, ranking on the top in the industry. Our labor efficiency and energy utilization efficiency grew at 20% and 17% respectively. We constantly optimize our strength so that we could upgrade our enzyme product to meet very diverse demand from our customers. We are also seeking new opportunities in synthetic biology areas. Leveraging our synthetic biology technology, we will develop new functional proteins and high-value small molecules to help our customers address challenges in food health home care, and chemical process substitution fields. So, last segment, cell therapy. In December 2021, at the ASHNN meeting, Legend presented the updated clinical data from CARTITUDE 1 and CARTITUDE 2 study for cell-to-cell treating multiple myeloma, which is the best in-class drug candidate on the market. Legend Energy have submitted MAA and NDA for cell-to-cell in Europe and Japan, respectively. Considering resources we will need for early-line clinical trials and R&D investment in other pipelines, sufficient R&D funding is essential for Legend's long-term success. In 2021, Legend raised a total amount of $645 million financing. We believe that adequate R&D funding will help us accelerate the cell-to-cell early-line clinical trials and push forward other pipelines as well. In late February this year, Legend received commercial approval of China's first proprietary CAR-T product, Cell-to-Cell, with a commercial name, CAR-VT, in the U.S. This is a solid proof of international recognition on China's innovative drug industry and 2021 is the year of innovation for genescript business lines. LifeSense, we develop our gene and oligo automation capability by combining industry-leading SOPs accumulated over decades with our know-how and automation technology, which results in a revolutionary automation platform. Over the past few years, genesynthesized through our automation platform increased by 10% year-over-year. As I just mentioned, we have more than 60% of genes synthesized from our automated production lines. Our labor efficiency on gene synthesis business line also improved by more than 20% year-over-year. In response to market demand for gene and cell therapy materials, we launched new GCT-related products and received very positive feedback GeneScript provides HPLC-grade, safe-edited SGRA featuring more than 90% purity, 100% accuracy for all sequences, and low toxicity. This product is essential for GCT and preclinical IND validation stages. Also, by leveraging our proprietary high-throughput synthesis platform technology, GeneScript provides The academic community with easy-edit SGRA synthesis services feature 100% accuracy for all sequences and a 100% guaranteed quantity. It also features low toxicity, high stability, and high editing efficiency. This is an optimal choice for basic CRISPR-Cas9 gene editing research. to meet the industry demand for efficient and accurate gene editing during gene insertion, replacement, and modification in CRISPR experiments. We launched a precise and low cytotoxicity gene exact single-strand DNA synthesis service as a way to fulfill our commitment to make research easy. In 2021, revenue of our non-viral vector therapy grew over 150% and CRISPR-related SGRA business group over 80%. We believe that SGRA and single-stranded GMT capacity expansion in the next few years will further drive our business growth. On GCT-related instrument and the consumables, we launched CytoSync cell isolation platform to address high cost of the cell isolation process. CytoSynq's platform consists of CytoSynq NanoBeads, columns, and a magnetic separator. CytoSynq NanoBeads are coupled with highly specific molecule antibodies, which are paramagnetic, biodegradable, easy to use, and enable highly efficient cell isolation. We roll out IOO beads on the market, and we built GMP beads manufacturing facility in Xinjiang. to meet the customer needs for industry grade B. On the protein business line, we upgrade our proprietary next generation true transiting expression systems for recombinant protein and antibody production. This system significantly increases the yield and shortens the production time. It also enables microgram to kilogram level protein production, which has greater significance for our future industry-grade capacity scaling. So capacity expansion is essential for our growth in the life science business segment in the next three to five years. In 2021, we expanded our capacity in the US, Singapore, and China, which fueled the growth of our gene, protein, peptide, and oligo business. We will continue to expand production capacity In the U.S., we will launch an automated molecular biology facility and a non-viral reactor manufacturing facility to address local customer needs for molecular biology and GCT-related business. In Singapore, we will build a gene and plasmid manufacturing facility covering 500 square meters. In Xinjiang, we plan to expand the molecular biology business line to increase our gene and oligo throughput. Having built our lifetime building, covering over 34,000 square meters in the 250-meter Xinjiang site, we will fulfill the production lines of peptide, SGA, single-strand DNA, and GMT beads in this building over the next few years. Turning to profile, we continue to optimize the plasmid production process has become a leading GMT-grade linearized consumable provider for mRNA vaccine in China. In addition to those products, we also offer one-stop solution to help our customers with R&D funding. In terms of project experience, we help our customers get five mRNA-related R&D approvals, and we are also China's first CDMO with GMT-grade commercial plasmid production capability. We will have a 500-liter fermentation tank this year to further meet the different capacity needs of our customers. In terms of efficiency, our clinical sample manufacturing cycle has shortened from 10 weeks to seven weeks. We believe that as our project experience and technology platform continuously upgrade, our plasmid platform will have a more competitive edge. In terms of platform innovation, with our proprietary AEV suspension cell line, Harbor S-293 platform, and a triple transfection system, we are able to produce different AEV stereotypes to meet customer needs for AEV vectors. Now our platform can offer 30% to 50% higher product height than commercial cell lines, demonstrating our strong commercialization effectiveness. We believe that with more customers choosing AAV vectors for gene and cell therapy R&D, we could have more opportunities lying ahead. Our strategy investment in biology CDMO will focus on capacity and infrastructure buildup in the next three years. On gene and cell therapy business in 2021, we commissioned 6400 square meter GMP plasmid facility in Xinjiang to meet exclusive customer demand for gene and cell therapy. This facility increases the total area of ProBio's plasmid manufacture facility to over 10,000 square meters. In 2022, we will launch a GMP plasmid facility of the same size. We expect to expand our plasmid and virus manufacture facility to over 47,000 square meters by 2024. In addition, we are also building a plasmid and a virus manufacturer facility in the U.S. to address local demand in U.S. And in the future, we will invest in CDMO business in two ways. On the antibody CDMO business, our focus will be on two areas. First, capacity expansion for antibody discovery, developing, and CMC. we plan to build a new R&D building in Nanjing of which over 10,000 square meters will be dedicated to antibody discovery and process development. This will improve our capacity to handle orders of upstream business. Secondly, our biology field and finish line will be ready in the second half of this year. Antibody CDMO commercial manufacturing area We adjusted our commercial capacity plant in Xinjiang and increased the plant capacity from 12,000 liters to 1,600 liters to further meet customer needs. Turning to Bestem, with years of development of engine editing tools, direct evolution, and high throughput screening platforms, Bestem has built its own component library and enzyme molecule library, as well as ready-to-use cross-industry grid platform. Those efforts significantly improve R&D efficiency. Enzyme product innovation. In 2021, Bestem launched a series of new products. Liquefine, which is an emulator for food processing, features high activity, acid resistance, and thermal stability. This product can help our customers with less chemical use, improved process stability, and a lower production cost. In the feeding processing industry, our product PRO-MAX can adapt to the pH level of the digestive system in animals and improve feeding efficiency and the economic benefits of breeding in animal feeding experiments. Our best-sell VRE is a High Efficiency Mixed Viscosity Reducing Engine, which is designed to address excess of viscosity in weight processing. This product can significantly reduce the viscosity of weight slurry in early processing, improve production efficiency, reduce energy consumption, and improve the purity and quality of the further processed weight products. BASCM is leveraging its robust innovation capability and enzyme platform to achieve commercial success and fulfill our commitment to make better enzymes. So for cell therapy in 2022, Latina and its partner, J&J, received last-line commercial approval of the lead product, Cell2Cell, for treating multiple myeloma from US FDA. Cell-to-cell is also under review by health authorities in Japan and Europe. Cell-to-cell has the potential to address the worldwide challenges of multiple myeloma treatment, also a potential best-in-class CAR T-cell therapy, which received FDA approval. Cell-to-cell is a solid encouragement of China's innovative drive to seek global commercialization. Legend's cause of success will also serve as an ideal reference for the entire China's intervertebral drug industry. So following the commercial approval, capacity expansion will be one of Legend's key priorities. For clinical sample supply, we have built a GMP supply site for current tea products in Somerset, New Jersey, U.S., and Nanjing, China as well. In addition, with the launch of Cell2Cell, our commercial GMP facilities in Riverton, New Jersey has been put into operation. On global business presence, we are also building commercial sites in Ghent, Belgium, and Nanjing, China to meet future commercial demand. We believe that Legend is able to build commercial capacity as scheduled to meet the patient's urgent need for self-sale. On other pipelines, we have initiated different R&D plans. and studies for blood tumors, solid tumors, and infectious diseases. Candidate drugs in our pipeline have shown greater promise in multiple areas, such as gastric cancer. I think I can conclude temporarily and send it back to Shen Yu to cover the financial results.