Genscript Biotech Corporation

Mr. Robin Meng, Chairman of the Board, Dr. Patrick Liu, rotating CEO of GenScript, Dr. Ying Huang, CEO of Legend Biotech, Dr. Brian Ming, CEO of GenScript ProBio, Dr. Ray Chen, President of GenScript Life Science Group, and Dr. Aishi Bai, General Manager of Best9. Before we begin, I would still remind everybody to the obligatory forward-looking statements. Please take a second to read them. In today's conference call, Patrick will give an opening remark and present business update of 2022 first half. Then I will walk you through the company's financial performance. After that, Patrick will outline our company's future strategies and second half focus. Our chairman, Robin, will give a summary followed by Q&A session at the end. Now I will invite Dr. Liu to highlight our business achievement in 2021, 2022 first half. Patrick.

Hi, good morning. Good evening, everyone. I'm very excited to share with you about business update in the first half of 2022. First of all, on behalf of all management team and all teams with employees, I would like to thank all the shareholders investors and analysts for a long time. 2022 is an eventful year. We witnessed dramatic international geopolitical events, ongoing impact of COVID, and a tremendous heat this summer due to the climate change. This makes us more aware of our social responsibility and a commitment embodied in our mission to make people and nature healthier through biotechnology. Since Richard celebrated his 20th anniversary on August 15, going through numerous changes over the years, we now have a well-established business portfolio in place, and our teams are working in a highly effective way. We are impressed and inspired by our dare to win spirit as demonstrated by employees in the first half of this year. During the COVID surge in Shanghai, our team in Shanghai, navigating difficulties to live and work on site. Both our automatic and our overseas logistics team tried various shipping roads in a very short time to ensure our business continuity. Amid strict power restrictions lasting for almost half a month this summer, Our manufacturer's top team took swift action to meet the production schedule. I believe with the effort of our ambitious team, our company will continue this very strong growth momentum and become a top-tier biotech company in the world. On behalf of the management team, I would like to extend our thanks to everyone at Genescript, and I expect to achieve long-term success together with shareholders, investors, and analysts as well. Now I would like to walk you through our business highlights for the first half of this year. Slide number five. So for our lifetime segment, since our inception, lifetime business has grown very steadily thanks to our solid expertise in lifetime. We have incubated three subset areas over the years, diversifying our presence across different business segments. Revenue from licensed business grew by 16.5% year-over-year, demonstrated 20 years of continuous growth. As of the end of the first half, our lifetime business has a global footprint spanning more than 100 countries and regions with over 200,000 customers. Our extensive skills network and well-established global business have built the foundation for future growth. As the COVID impact is starting to diminish in Europe, we saw faster sales recovery in European region. Our sales in China and the U.S. are also growing very fast as well. So in the emerging field of gene and cell therapy, we have launched a series of services, raw materials, and consumables to meet the market demand while setting the standard for the industry. We will continue to improve our business and upgrade our GMP capacity to ensure safety, efficacy, and compliance required for those products. We are also commercializing GCT instrument and region of business. We launched CycloSync isolation platform, which was the first isolation solution in China. Also, we started to commercialize magnetic beads for cell isolation in the first half of the year. Our cell isolation instrument is also under testing. This year, we launched the InBeck Portrait Automation System, which is an automated placement preparation instrument that supports automation throughput the plasmid preparation process and meets the demand for the high throughput for the needs. We further invest in capacity extension of life center facilities in China, Singapore, and the US operational successfully, including capacity expansion for our molecular biology, protein, TCT-related raw materials, and a TNT-grade instrument in the region and business lines. In addition, we also introduced our proprietary automated production process in those new facilities as well. So since we provide, provide continue to have very strong momentum in the first half of this year, provide external revenue for over 90, 94% backup group, 57%. Our sales increased by 70% year-over-year. Revenue growth was attributed to rapid growth of downstream antibody CDMO business and a new TCT-related CDMO project as well. By the end of the first half, we have served about 1,600 global biotech and biopharma customers. Our new project, our CMC orders are growing rapidly. In the first half, we added a 21 CMC antibody project and the 39 TCT CMC project, almost equal to the total project number of 2021. We are also a community R&D project experiment. In the first half, we helped the customers obtain 11 domestic and international R&D approvals. Our revenue growth is also attributed to our tenant base. As of now, we provide nearly 1,000 employees, with 40 of them holding the master degree or above. We will continue to grow our tenant base as our business grows and provide competitive incentives to our employees. We are also pushing ahead with our capacity plan. I will put some more technical information very shortly. In the first half, investment revenues declined by 17% due to the negative impact of COVID and a downturn in the feed-in market. However, gross margin and net margin significantly improved, mainly due to the product mix chain by actively pruning low-margin business. Despite external difficulties, investment business has been improving. that's in gross margin grew to 43%. We launched a number of optimized enzyme products and a new enzyme product for home care detergent to address diversified needs and get into high margin areas. In the first half, we also worked with a partner to develop and commercialize the chemical materials with our proprietary technology. This collaboration generally about 8 million RMB in revenue in the first half. In the synthetic biology field, our projects in the pipeline are well on the track as detected. We are also exploring multiple new applications as well. So, let's do the bio. Cell4Cell, with the brand name Cavixy, received regulatory approval from the U.S. FDA and the European Commission for the Treatment of Adults with Relapsed Reproduct-Free Moisture Myeloma. KaVecT has been launched in the U.S. in the first half. As China's first KaT product commercialized overseas, KaVecT's success is very strong validation of China's innovative product. Legend's efforts from R&D to commercial approval provide a path to global commercialization for inter-virtual jobs. On behalf of the management team, I want to thank Legend and the G-Sphere team for this great achievement. As of the second quarter of this year, Kavitsky generated about 24 million sales, with the exact with rapid alcohol capacity and expansion into early-line clinical trials, having a mutual greater promise in commercialization. Western Bio is also moving into early-line clinical trials, where conducting phase three clinical trials are cut into the fall five and six programs, having to be potentially used to treat a patient in the early months of multiple myeloma. In addition, is also pushing ahead with other pipelines. The U.S. FDA cleared application for our solid tumor have been relapsed of refractory and pancreatic cancer. Next slide, slide number six. In the first half, Lifestyle businesses continue to perceive innovation. On the platform side, we continue to automate our production lines. We have over 60% of chains synthesized from the automation platform, which have significantly improved our production efficiency. We also saw improvement in Oligo and other automated production lines as well. To develop our business and shorten the turnaround time, we will launch a plasma maxi-purple automation platform in the US later this year. We believe this will support our local production in the US and better meet the customer needs for gene synthesis services. In the first half, we launched a semiconductor chip platform with the world's highest throughput for BNC synthesis, which features low cost and high throughput. Based on this platform, we launched an all-through product of BNC synthesis of about 18 million unique oligos from a small chip reaching 2.5 million per centimeter. This technology has also been applied in downstream gene editing, protein antibody engineering, molecular diagnostics, and synthetic biology. This platform may also be applied to other potential applications including DNA data storage. Our capacity expansion for DCT business production line in 19 to provide a GMT raw material such as SGRA, SSD and the DSDA. Capacity expansion in Xinjiang is also underway. To meet the demand on raw materials for the development of non-viral vectors, we leveraged our R&D expertise to develop a safe raw material. for non-viral gene and cell therapy, including test nucleases in mRNA or protein form, 160 more GRAs, and a different DNA payload, such as single-stranding and double-stranding, which can help our customers ensure precise and precise targeted gene knocking with improved safety profile. on protein mobility. We developed our proprietary choice person system last year, and I launched this system in the first half of this year. This whole system significantly increases the protein productivity, and it's shocking that it's turned around tonight. It also enables micrograms to produce microgram production fields in single batch. This system makes our protein expression level and timeline more competitive in the industry. On peptide business, we have become China's largest customized peptide service provider. Our peptide synthesis platform features high throughput and automation in the world. This platform can synthesize about 18,000 peptides in a month. On product innovation, considering increased demand for MRI technology in drug development, we launched a one-stop IO-MRI solution this June, including a property code optimization platform for MRI sequence design, plasmid prep automation platform for a high-throughput screening, proprietary full-translational 5-chrome caching analog, and a genetically modified E. coli strain for stable polycloning. In this, we were able to provide the fastest and the most reliable delivery of MRI therapy materials with superior performance. On TCT-related instrument and consumables, we launched the CytoSync cell isolation platform to address high cost of cell isolation process in the development of cell therapy. We launched the for cell activation and cell isolation in encouraging testing results from our customers. We have completed three validation batches for GMT-grade bees manufacturer, and we also plan to start a GMT-grade bees manufacturing in the third quarter of this year. Also, we are building a GMT-grade facility in Xinjiang to meet the industry-grade manufacturing needs. Next slide. In 2022, we expanded our capacity expansion for life science business, supporting our revenue and business planning in the next three to five years. Our molecular building covering about 20,000 square meters in Xinjiang has been built. Our life science building covering also about 20,000 square meters in 19 has also been get to completion this year. About last time's building for about 35,000 square meters in the 250-meter down side will also be completed for the first phase by the end of this year. in 2023 and then 2024 will be expected to be to further drive our business in the next seven days. Next slide, turning to providers. We continue to make heavy biotech expansion business. We'll continue to build up a consolidated customer check network In antibody drug signal services, in the first half, Provault added a total of 42 antibody starter projects, 27 cell and development projects, and 21 state and state-owned projects. And this helped our customer attitude and the approach. In GCT's field of business, Provault is a video creator. In the first half, provides 51 preclinical, 39 CMC, and 38 clinical projects, and also helps our customers get nice R&D approvals. Antibiotic trap capability, thanks to our aggressive investment to provide and accumulation of experiments in this area in the past several years, our capability has significantly improved. Biology discovery turn one has been shortened about 10 to 25%. Our CMC turn one from has been shortened to six months. Benefiting from upgrade of cell line and vector platform of antibody yield, the energy yield is higher than six grams per liter right now. On the Plasmid platform, we have now become the number one GMT supplier in China. In the first half, we launched a string of essential plasmid sequences and a process to support a large scale . We also successfully delivered the first cell therapy project with our . about production capacity, which is the largest in China production this year. It can meet the diverse needs of our customers. We as we continue to build and upgrade technology probably have a long-term impact in the field. Next slide. In the past seven years, our business is shifting closer to business, and we are also building up our GMC batches experiments in helping our customers get their MD approved. On TCT business, we have had our TCT customers of 2019 TCT related and be approved in just three years. We have set a number of standards for the plasma and the viral vector field, especially in the global gene and cell therapy downstream development. Next slide. capacity expansion for biology CDMO will remain a top priority for ProBio. In the next three years, we'll also focus on capacity expansion for biology business and process development to meet the increasing customer demand in this area. We also expect to commission our 16,000-liter GMT facility in Xinjiang. in 2023. On TCT, we will also focus on expanding GMT plasma and virus capacity. Our TCT-GMT facility covering over 5,000 in the U.S. is also under construction, which will be used to meet the needs from international customers. Next slide. I'll turn to Bethlehem. In the second quarter, BestBank launched a new protein-based product, Turivise 1.0, which is used in detergent to break down the protein strains on clothes. The launch of this product first by international companies. and then we upgrade our product and launch new product and product portfolio with new response market demand. We also optimize low margin product, improve our course margin significantly. We also upgraded the existing streams and the processes to improve our production efficiency and reduce cost as well. We now focus on functional proteins and enzymatic methods in the replacement of chemical methods. Next slide. I'll turn to Leijing. In 2022, the United States partner G&G received last line commercial approval of the leader product for the treatment of multiple myeloma from the US FDA and also received Canadian marketing authorization from the EU on May 26th. Has the potential to address the worldwide challenge of multiple myeloma as potential best-in-class country cell therapy with FDA approval. Cephasis is a solid encouragement for China's universal drugs to seek global commercialization. Legends cause of success will also serve as an ideal reference for China's universal drug industry. Currently, we are conducting global cell cell studies along with our partner, GND. are connecting three global randomized history clinical trials. The first one being , is our first of the 53 trials in the study. And this is you evaluating patient with one, two, three prior lines of therapy, and also who are respiratory to , We completed enrollment of more than 400 patients in October of 2021, and now we are in the fallout. We also started our first three, phase three trials in early-line myeloma, low myeloma, and this is the phase three open-label study of cell-to-cell. We plan to enroll 650 patients. We are compared to active control arm where the patients are being treated with standard care ready for the RD maintenance. This is actually the first phase three trials for NAD7 targeting CAR-T in a setting of multiple myeloma. CAR-T26 was initiated early this year. Another phase three trials in frontline, aiming to compare the efficacy of DVRD followed by self-assail versus DVRD followed by DSCT in nearly biodegradable multiple myeloma patients. We plan to enroll about 700 basic patients. Based on the promising clinical data we have generated in the BCA program and the clinical development plan, we are very confident that this data has great potential in the future. Next slide. From the commercial approval in the U.S. and Europe, capacity extension will be one of our best business priorities. for clinical supply we have the CMP clinical supply of CACI products in Somerset, New Jersey, U.S., and then in China. In addition, with the launch of our facility in Riverton, the facility has been put into operation, and it currently supports both clinics and commercial manufacturers worldwide. On global business presence, we are also building commercial sites in Gaines, Belgium, and Nanjing, China, to meet future commercial demand. GMJ and Legend is building the Belgium facility, and upon completion, it will be able to supply globally together with . In China, we have one GMT operational facility in Nanjing. which is served as our clinical and also first last site for Chinese market. At the same time, we are building a large-scale commercial manufacturer site in a new company in Nanjing. So we believe that Lighting is able to build commercial capacity as scheduled to meet changing the urgent needs for sales sales. So I think I now will turn it back to Sunil again to cover the financial results. Sunil.

Thank you, Patrick. We are on page 15 for those who are on the webcast. GenScript continues to grow steadily in the first half of 2022. Group adjusted external revenue grew 32.7% year over year. to about $305 million. Group adjusted gross profit reached about $188 million, 31.4% higher year over year. Adjusted gross margin was about 61.6%. Group consolidated net loss was about $226 million, and adjusted net loss was about $130 million. Non-sale therapy business continued its growth in first half. External revenue grew 26.6% to about $248 million. Non-cell therapy revenue benefited from new product launch, stronger business development capabilities, and capacity expansion in all three business units. The adjusted non-cell therapy gross profit was about 135 million, 22.4% higher year-over-year. The adjusted net profits on non-cell therapy was about 30.2 million, 42.4% higher year-over-year. Cell therapy revenue was about 57 million, 68% higher year-over-year. This represents continued revenue recognition. of the upfront and milestone agreements with J&J Collaboration. The jump in net loss for cell therapy business is about 169, mainly due to increased clinical studies and other R&D activities. Please also note that cell therapy profit-loss figures reported at the group level may be slightly different from Legend's own numbers due to intercompany elimination. On slide 16, as we can see, we continue to invest into R&D in the first half, excluding share-based compensation. Our total R&D was 168 million, down about 2% year-over-year. In first half, due to our strategic investment across non-sale therapy business lines, R&D expenses of non-sale therapy business grew significantly. which is in line with our strategic expectation. We expect R&D spending to further rise as we increase investment in life science business, biologic CDMO and synthetic biology. We expect R&D for non-cell therapy business overall accounts for over 10% of revenue in the long run. We also made significant capital expenditure in first half. CapEx was about 82.5 million. Major areas of CapEx included capacity expansion for the life science business, CDMO business, and production to support commercialization of cell-to-cell. The group has a very strong balance sheet. As of the end of first half 2022, total cash position included cash and cash equivalent time deposits and wealth management products stood at $1.26 billion. Cell therapy business has a cash position of $789 million, while non-cell therapy business cash positions stood at about $474 million. Now let's turn to financial performance of each unit. On flat 17, we review the life science products and services financial performance. In first half, on top of our high achievement last year, our life science business continued to grow steadily. External revenue was about 171 million, up 16.5%. Life science business has also further diversified, excluding the impact of COVID related products revenue of lifestyle business would have grown to over 20%. Due to the impact of long-term projects and the growth in first half for lifestyle will be slower than what we expect in second half. An adjusted gross profit grew 8.6% year-over-year to about $101 million. Increased shipping costs due to COVID had a negative impact on our business, which cost about 1.5% of gross margin for a glass-sized business. But we expect this impact to narrow in the second half In addition, we have been investing in overseas production capacity in Singapore and US. As we ran capacity there, this will have a negative impact on our gross profit margin. In the first half, launch of the two new facilities had a negative impact of 3.3% on gross margin. And COVID-related products such as CPAS also declined in the first half with lower gross margin as well. Overall had cost about 12.8% on gross margin . On the positive side, we have to gain our production efficiency. Therefore, overall gross margin had decreased about 3.5% in this business. We believe with further logistic optimization, overseas capacity ramp-up, and a normalized COVID response environment, our gross profit margin in the second half will stabilize and be comparable to what we have achieved in the first half. Also, I would like to note, as proposed, has been established as an independent legal entity in the second half of last year. The group's back office expense has been allocated to the life science and profile business segments this year. Now, due to the allocation of back office expenses, R&D, selling and administration expenses, and operating profits for segments cannot be compared to last year's number directly. As we can see, the adjusted operating profit of the life science business was about 33.2 million in first half and adjusted operating net profit margin was about 20%. Excluding the impact of COVID related products, we expect the life science business for the full year to still grow 20 to 25%. On slide 18, Let's look at biologic CDMO performance. In first half, our biologic CDMO business ProBio continued its robust growth. ProBio's external revenue grew about 94% year over year to 6.4 million. Revenue growth was attributed to successful delivery of ongoing projects and fast growth of gene and cell therapy CDMO demand. Within Probio, gene and cell therapy CDMO service revenue saw explosive growth up 168% year over year. Revenue for antibody and protein drug CDMO grew 77.5%. As we focus on overseas business over the years, Probio's domestic and international business are growing in parallel Our China-based and international revenue split is nearly half and half. In the future, we will continue to pursue a global strategy to diversify our revenue footprint. Based on our existing backlog, we expect ProBio to continue robust growth and maintain a CAGR of 50 to 60% in the next two to three years. As of second half, total backlog right now is about 228 million, up 57% year over year. This significant backlog buildup had resulted in rapid increase in project numbers. We expect to convert this backlog into revenue in the next one to two years. As ProBio grew its revenue, Gross profit also grew significantly, up 125% to 24 million. ProBio's gross margin continued to grow fast, driven by higher capacity utilization, substitution with domestic raw materials, and R&D platform optimization, and higher labor efficiency. In the first half, the net profit for ProBio was about 3.2 million, and we expect ProBio's gross profit to further rise in the future. With gross profit increase and operation optimization, we believe ProBio's financial performance will continue to improve. For the full year of 2022, we expect ProBio's revenue to grow about 60 to 70%. Turning to industrial synthetic biology products, Best Docs Revenue declined 7% year-over-year to $16.6 million in the first half. This is mainly driven by product mix optimization. We actively pruned low and negative gross margin products. Therefore, gross profit and gross margin significantly improved. Revenue decline was also contributed by negative impact from the seed industry in China. which is experiencing a downturn. Also, Russian-Ukraine war had a negative impact on our overseas business for profile. However, we have noticed a recovery of customer demand in Q3. We do not think this one-time decline in revenue in first half will impact our long-term revenue growth outlook for best time. Excluding revenue from also in the first half, we had licensed out a patent to our partners and received patent royalty in first half. Excluding this impact, our gross margin was over 40%. This represents an increase about 10 points year over year. and benefiting from improved cost profit will also achieve operating profit in first half for BestDyme. For the full year of 2022, we expect BestDyme's revenue to grow in single digits within 10%. On slide 20, cell therapy led to biotech external revenue was about 57 million. R&D expenses was slightly lower year over year. R&D expenses at Legend include cost for conducting principal files in the U.S. and China, which was 89.6 million. R&D expenses for other pipelines were 60.5 million. As Legend continues to invest in R&D, adjusted net loss was about 163 million. At the end of the first half, Legend has a cash position of 789 million. Also, we have just finished a follow-on offering in Q3 for Legend. So accounting for that, Legend raised another 402 million. Overall, we believe Legend has a very strong cash position to support cell-to-cell clinical trials and investment into other pipelines. Now I will hand back to Patrick and for him to share our major business and management focus in second half. Patrick.