Genscript Biotech Corporation

2020 Annual Result Conference Pod. I'm John, the Investor Relations Director at GenScript. Joining me on the pod today are Mr. Robin Meng, Chairman of the Board, Ms. Gary Shao, Rebidding CEO of GenScript, Dr. Patrick Liu, Off-Duty Rebidding CEO of GenScript, Mr. Shenyue Wei, CFO 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, Before we begin, I would like to remind everyone that on today's call, we will be making statements about future expectations, plans, and perspectives, 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 as a result of various important risk factors and changing market conditions. We do not undertake any obligations to publicly update any forward-looking statements. In today's conference call, Sherry, our rotating CEO, will share business highlights and future strategies with you. and our staff will walk you through our financial performance. We also have a Q&A section for you at the end of the call. Now, let's start with our CEO presentation. Sherry, please.

Hi, everyone. I'm Sherry Shao, Rotating CEO of GamesPage. I'm pleased to share with you our business updates. 2022 was a challenging year that included geopolitical tensions, war in Ukraine, war in Taiwan, Currency and COVID Disruption. Despite those setbacks, we are able to navigate through the choppy waters and maintain solid business growth. On behalf of the group, I'd like to thank G-Script people for their dedication and support to our business success. Now, I will start with some facts and highlights about our business for each segment. G-Script Lifetime is the foundation of growth business. revenue from master and business grew about 14.2%, demonstrating 21 years of consecutive growth. The organic growth at constant currency, including the COVID impact, was about 22.6%. In 2022, we served about 49,000 customers, rising 6.5% YOY. In terms of original performance, issue specific business saw impressive growth. Europe's business recovered from the COVID impact, and our US business maintained steady growth. We launched innovative reagent consumables and equipment for gene and cell therapy. Probio continued its strong growth in 2022. Probio's revenue growth 54 cents, constant currency revenue growth is actually 59.3 cents. In terms of our original revenue speech, we have a 50-50 switch between international and mainland China itself. Turning to our check record, we signed 36 new biologic CMC projects and 55 new GCT CMC projects. We helped customers obtain 32 China and international new anti-approval. We also upgraded our antibody protein and GCP-related platforms to enhance competitiveness. BestDems revenue growth turned positive in second half 2022. We continued to optimize the cost of various enzyme products and developed new feed-through TNs helping customers manage the rising cost of raw materials. By implementing our new business strategy, Bethlehem's growth margin grew to 43%. To ensure our future growth, we continue to invest in our expression platform and add it to our offering by launching quotients for liquid detergent and neural media. will license out bad acid technology using asthmatic hydrolysis, generating RMB 15 million in revenue. Turning to latent biotech, SubCell received last-line commercial approvals in the US, EU, and Japan, and generated $134 million in net-trade sales. To address clinical needs of frontline multiple myeloma patients, We are also conducting CARTICUDE 4, 5, and 6 test retries. In January 2023, CARTICUDE 4 met its primary endpoint. Results from the CARTICUDE 4 study will be presented at an upcoming medical conference and will support discussions with health authorities about potential regulatory submissions. is also ramping up capacity to support market demand. Let's dive into detailed performance of our four segments. Starting with last time, we have been investing in our gene-related technology platform and processes. Leveraging our cutting-edge, chip-based knowledge, we have been able to further improve the competitiveness of our gene fragment service. We will launch GeneTitan's gene blackmail service by Q2 this year, which will allow us to support diversified, inclusive needs. As a reliable one-stop product and service provider in the industry, we have also optimized our operations to meet diverse customer needs. The booming GCT and mRNA industries drive robust demand for high-quality genes and platelets. We upgraded services for AAV and mRNA-related downstream applications. Sending to protein and antibody business. Empowered by our high throughput, rushed gene synthesis, and the exploratory high-expression cash flow to be true, we have shortened turnaround time for protein and antibody services to 7 to 10 business days. Supporting the increasing demand for biologics from early-stage R&D to pre-communicable stage. Moving to peptide business, we have upgraded PEPHTS platform, which is the world's largest automated peptide workstation. We have also established a platform for complex modified peptides, like non-sexy peptides, offering innovative peptide drug solutions to our customers. Now, we are building a GMT peptide facility in Xinjiang, which could support a full range of services and defining to clinical manufacturing for innovative peptide drugs. In nuclear acid business, as the first class supplier of critical materials in CRISPR-based gene editing tool, we developed one-stop solutions from RUO grade to TNT grade manufacturing and successfully increased the volume of CRISPR-SDRNA while shortening turnaround time. We increased our ssDNA capacity to 6 KB minimum level and rolled out a coiled circular vector in minimal size for transporters and gene therapy. To support global customers, we implemented a global project management process. We have successfully supported the first UCAR TID approval in China. Our services have been cited by our customers in leading peer-reviewed journals such as Natural and Science, which validates our ability to explore lab science frontiers along with our customers. In GCT-related instruments and consumables, such things, our cell isolation platform for CAR-T cell preparation has received orders from cell therapy customers in China and is also on the testing among overseas customers. We have also launched magnetic beads for NKSA CD4-6H cell separation, beads for T-cell activation, and columns for cell separation. To support future demand for GMT-grade bead manufacturing, we will complete phase two GMT-grade bead manufacturing facilities in mid-2023. We also launched NMAP partial automated system for fully automated preparation in second half 2022. By the end of 2022, we have sold over 49,000 global customers, rising 7% versus 2021. We saw an increase in industrial customers, which made up 54% of our global sales. This drove the increase in average sales from each customer as we provide a skill and more compact service. Both our mainland China and international business continues to grow momentum. We have. And they should all over the years. In 2022, over 10,000 mainstream journal articles cited our product and services. Our life science capacity expansion plan is aligned with our strategy. First, to renovate traditional business lines for higher throughput and automation. Second, to build up capacity for emerging business. Third, to support localized production for global customers. New facilities could support our business growth in the next three to five years. Turning to providers, we delivered strong growth in addition to a solid track record we first are upgrading our technology platform boasting production efficiency and improving services for therapeutic drug modality. Improving an antibody drug CDMO business, our discovery business has been the foundation of ProBio's success. We shortened the timeline for hypoderma services to 12 weeks and improved our success rate to over 90%. By leveraging six these generation technologies, 14 in vitro assays, and for in vivo validation, we can both deliver traditional biologic projects and novel drug modalities such as biospecifics, fusion proteins, cell therapy, ADC, and AOC. On large-scale protein and antibody production, our new vectors could both yield to 15 grams liters. With accumulation of experience from our CMC orders, We have shortened turnaround time to six months. We launched our first inceptive fuel and finish line for liquid, powder, and refueled syringe filling. In machine and self-service business, our focus is to improve our processes and accumulate track record. We are now the number one GMT plasmid supplier in China. Also, we are expanding our plasmid application and GMT grade manufacturing capabilities. In viral vector business, our proprietary suspension cell line, Power S293T, enables efficient viral vector packaging and higher simulation . We delivered over 70 batch and several 50 liter GMT batch manufacturing. We also launched our AAV platform, which allows us to offer a wide range of services. mRNA technology has been increasingly used for areas beyond COVID vaccines, as the critical material for the mRNA platform has been played a critical role in manufacturing. To better address market needs, we launched one-stop mRNA service. Turning to our track record, in biologic CDMO business, we saw an increase in CMC products reflecting our improved CMO capabilities. In GCD CDMO business, despite a decline in CMC projects, our projects in undefined process increased significantly. Moving to baseline, our first is on three areas. On production, we aim to optimize production processes and to continuously reduce manufacturing costs. we achieved over 10% efficiency improvement in permutation, extraction, and formulation processes. On cells, we draft cells by enriching our product portfolios and strengthening overseas market penetration. Our fit enzyme product line covers more than 20 single enzymes and multiple compound enzymes. On industrial enzymes, we gained market share through our competitive products, and new launches, improving our industrial product line. In 2022, our overseas sales efforts brought us about 43% overseas sales growth on industrial enzymes. On R&D, we have been upgrading our co-products. We optimized the formulation of 2D products to improve cost structure. We also optimized strength for these products. will define our products for downstream applications and launch China's first for liquid detergent and . Synthetic biology is one of the major areas of our future investments. Our synthetic biology pipeline works on substitution for traditional chemically synthesized products and nutritional additives. That is acid technology using and the magic hydrolysis is at the forefront of our pipeline, which has been licensed to our partner and generated about RMB 15 million in revenue in 2022. Going forward, we will cooperate with our partner on manufacturing and commercialization of this product. In addition, we are also exploring opportunities in sweetened hemoglobin and organic ethics. Legend Biotech is our cell therapy segment. Throughout 2022, along with our partner Jensen, Legend received commercial approvals for its lead product, Cavity, in the U.S., EU, and Japan, making a new treatment of gene available to left-line multiple myeloma patients. Currently, Legend is actively ramping up capacity to meet patients' needs for cell-to-cell with respect to clinical studies. Chapter 4 program is our first phase 3 study for multiple myeloma, evaluating cell cell for the treatment of patients who have received 1, 2, 3, higher than 9, 30, and also who are refractory to their lineage. The study enrolled over 400 patients, with the last patient enrolled in October 2021. In January, , that is primary endpoint. Results from the study will be presented at an upcoming medical conference and support potential regulatory submissions for frontline indications. We also started our first phase three trial in first-line multiple myeloma , and this is the phase three open-label study of . We plan to enroll 650 patients. We are comparing to active control arm where the patients are being treated with standard of care VID followed by RT maintenance. This is actually the first phase three trial for anti-BCMA targeting CAR T in the first-line setting of multiple myeloma. Partial six was initiated earlier this year. Another phase three trial in front-line setting aiming to compare the efficacy of DVRD followed by cell-cell versus DVRD followed by SCT in newly diagnosed multiple myeloma patients who are transplant eligible. We plan to enroll roughly 750 patients. Looking at other programs, the US FDA approved anti-application for solid tumor CAR T, LB, 1908 targeting relapsed or refractory septic esophageal and pancreatic cancers. In November 2022, the US FDA also approved anti-application for LD2102 and investigational therapy for the treatment of adult patients with extensive invasive small cell lung cancer. Now, I will turn to to recap the financials.

Thank you, Sherry. For those who are listening online, I'm on page 17 of our slide deck. Genscript continues to deliver steady growth in 2022. Group revenue grew 27.7% year-over-year to about $625.7 million. Group gross profit reached about $304.1 million, an increase of 7.6% year-over-year. Group gross margin was about 48.6%, group consolidated net loss was about 428 million, and adjusted net loss was about 359.4 million. Non-self-servicing business saw continued growth in 2022. External revenue grew 19.8% to about 509 million, driven by new product launch, stronger business development capabilities, and ramp up of capacity in our three business segments. Our non-sale therapy business reported adjusted gross profit of about 268.1 million, 17.4% higher year over year, and adjusted net profit of about 62.4 million, 31.4% higher year over year. Our cell therapy business generated revenue of $117 million, up 70% year over year, reflecting continued revenue recognition of upfront and milestone payments from collaboration with Jensen, and also our share of the product sales of SteltaCell. The adjusted net loss for cell therapy business was about $422 million, mainly due to increased clinical trials of Cell to Cell and other R&D activities. Please also note cell therapy profit-loss figures reported at the group level may be slightly different from Legends' own reported numbers due to intercompany elimination. On page 18, we continue to invest in R&D under our long-term strategy, excluding share-based compensation expenses. Our total R&D expense was $368 million up about 7% year-over-year. In 2022, R&D expenses of our non-cell therapy business grew 17%, which is in line with our strategic planning. R&D, as a percentage of our non-cell therapy revenue, is expected to remain about 10%. R&D expenses for our cell therapy business grew 5% due to R&D investment in cell-to-cell and other pipeline activities. We expect R&D expenses related to DeltaCell to increase in 2023. Our capital expenditure was about $218 million. Major areas of CapEx included capacity expansion for lifetime business, CDMO business, and commercial manufacturing of DeltaCell. The group has a strong balance sheet As of the end of 2022, our cash position stood at roughly $1.5 billion. Cell therapy business has a cash position of about $1 billion, while non-cell therapy business cash stood at about $463 million. In early 2023, Bobov also announced another round of financing for about $200 million. further adding to our cash position. Now I will turn to page 19 to provide details about our segment financials. Starting with our lifestyle business, which maintained rapid growth. Reported revenue was about 361 million, up 14.2% year over year. The organic growth and constant currency, including COVID related product decline, was about 22.6%. Adjusted gross profit grew 8% year over year to about 201 million. Adjusted gross margin was 55.8%, decreased slightly from the 59% level last year for the state. The decline was mainly due to several factors. First, our capacity rent up in Singapore and the US initially produced lower gross margin. Second, shipping costs continue to rise in 2022 due to COVID, but we expect shipping costs to grow slower in the coming years. Third, decrease in high-margin COVID-related revenue expenses. However, we think all these factors are short-term. Also, I would like to let you know that Profile has established an independent legal entity. Group's non-cell therapy operating expenses have been allocated to the three business segments within this year. Now, due to allocation of back office expenses, R&D, selling, and administrative expenses, and operating profits cannot be directly compared year over year. As we can see, LifeScience Business reported adjusted operating profit of about $66.1 million and adjusted operating margin was about 18.3% in 2022. For 2023, due to uncertainties in global macroeconomics, we expect livestock's revenue to grow about 10% to 20%, and gross margin to be flat or slightly declined compared to 2023. Now, turning to Biologics' BDMO business, Jinsco ProBio continued robust growth. Reported revenue grew 53.6% year-over-year to $125 million. Revenue at constant currency grew 59.3%. This was primarily driven by successful delivery of ongoing CDMO projects and increasing demand for gene and cell therapy CDMO. Within Probop, gene and cell therapy CDMO service delivered revenue growth of 129% year-over-year. Antibody and protein drug CDMO grew 32% in revenue. ProBio's China-based and international business grew in parallel, reaching a roughly 50-50 revenue split. As the pandemic subsides, overseas market will be our priority in 2023. so we expect to invest more aggressively in overseas sales and marketing activities. We've moved to an economy that's more challenging in 2022. As of the end of 2022, ProVal's total backlog stood at about $233 million, up 18% year over year, among which fee-for-service backlog has increased about 21% to $215 million. We expect to convert backlog into revenue in the next two years. As ProBio grew its revenue, adjusted gross profit was also grew 64.5% to $42.8 million. With higher capacity utilization, substitution with domestic materials, R&D optimization, and higher labor efficiency, we believe adjusted gross profit still has room to improve. In 2022, adjusted EBITDA was about $15.2 million, and we expect our production costs and administrative expenses to further improve as we scale up. Profile rates Series B and Series C financing in 2022 and early 2023, respectively, which will support our growth momentum. Following Series C financing, before converting ESOP and Warris, the group owns about 70% of ProVal. We expect ProVal revenue to continue to grow at about 30% to 50% rate in 2023 and growth margin to be flat to slightly improve in 2023. Turning to industrial synthetic biology products, Beth Dynas revenue was $38.7 million, and revenue growth turned positive in second half. By implementing our new business strategy, gross profit and gross margin grew fast. Revenue from feed enzyme business declined about 22, mainly due to COVID and the feed enzyme market decline. Our industrial enzyme business grew 23% year-over-year thanks to improvement in our existing products and launch of new products. Also in 2022, we licensed a patent to our partner and received patent royalty of RMB 15 million. Excluding this impact, our gross margin was about 40% for best-done business. adjusted operating profit reached 2.6 million up significantly year over year. We expect revenue to continue to grow 20 to 30% for 23 for this business and gross margin remains flat. Now turning to cell therapy on page 22. Legend reported revenue of about 117 million reflecting milestone payments of $50 million, and also Legend received collaborative sales revenues of $66.7 million for coverage-based sales, representing 15% share of the net trade sales. R&D expenses at Legend include costs for conducting clinical trials in the U.S. and China for cell-to-cell programs, which was around $250 $210.9 million. R&D expenses for other pipelines were about $125 million. As Legend continued to invest in R&D at the early stage of commercial launch for Convicti, a suggested net loss for the year was about $422.1 million. As of the end of 2022, Legend had a cash position of about $1 billion Through financing in the secondary market in Q3 last year, Legend raised about $400 million in gross property. This helped Legend to accelerate DeltaCell early-line clinical trials and support our investment in other pipelines. Now, I'll turn it back to Sherry to share our long-term planning strategy.