Burning Rock Biotech Limited

Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended and as defined in the US Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as will, expects, anticipates, future, intends, plans, beliefs, estimates, target, confident, and similar statements. Statements that are not historical facts, including statements about Burning Rock's beliefs and expectations are forward-looking statements. Such statements are based upon management's current expectations and current markets and operating conditions, and relate to events that involve known or unknown risk. uncertainties and other factors all of which are difficult to predict and many of which are beyond burning rocks control forward-looking statements involve risks and certainties and other factors that could cause actual results to differ materially from those contained in any such statements burning rock contains not undertake any obligation to update any forward-looking statements as a result of new information future events or otherwise, except as required under applicable law. I would now like to hand the conference over to your speaker today, Mr. Han, the CEO. Please go ahead.

Thank you. And welcome to Burning Rock's 2022 Annual Conference Call. I'm Yusheng Han, CEO and founder of Burning Rock. Today, we also have our CTO, Zhou Zhang, and CFO, Leo Li. So now let's turn to page three. In case there are some investors who are not familiar with Burning Rock, I hereby illustrate what we do. So our business started from tissue-based therapy selection in 2014 and then expanded to multi-directions of liquid biopsy, including liquid-based therapy selection, MRD, multi-cancer early detection, and we have three business units. providing products and services to doctors, farmers, and consumers. Now let's turn to page four. So in this page, we will have a review of 2022. For the general view of our company, we completed profitability-driven organization optimization. the overall headcount have been optimized by 25%. And in that case, we still deliver strong growth in non-COVID quarters and achieved 11% year-on-year growth in 2022. And we completed a listing on London Stock Exchange, offering an alternative listing venue in addition to Nasdaq. We believe that this is a significant corporate development as it provides a fallback solution to facilitate continued trading and listing of shares in case of a delisting scenario of ADRs on NASDAQ. We also noted that the latest statement from the SEC in December, that as of now, there is no risk of Chinese issuers getting delisted, which is good for us. For therapy selection, we achieved 13% volume growth despite COVID challenges driven by in-hospital channel. And the nine genes panel was approved by NIMPA, providing a better weapon for in-hospital model. This is our second approved NGS-based test by the NIMPA and demonstrating our capability of working with NIMPA to bring innovative diagnostic product to the market. For MRD, 2022 was a big year in terms of clinical data publication. We provided the initial readout on lung and colon cancer at AACR 2022, followed by additional publications on colon and pancreatic cancer at ASCO 2023. We also expected additional publication on lung this year at AACR And commercially, we launched our BR profit, our personalized MRD product in March. And the volume of patients that were serving keep increasing at very good speed. For Bell Pharma, the new contract value increased 43% to RMB 263 million in 2022. And over 200% revenue growth on strong backlog execution. And for MRD, Oversea was granted FDA breakthrough device designation and standard study for six cancer tests. Development was published on annual of oncology. It's a journal with an impact factor of 51, and it's another strong proof of our technology and product. The problem is a study which is around, which is exactly 2,035 subjects, nine cancer test development completed and read out. Predict and present study, almost 17,000 subjects, 22 cancer test development is ongoing. And prevent study, which is a prospective study of a safe cancer test was launched last year. And our CTO Joe Zhang will illustrate more about our early detection study. And now let's turn to page five. This page shows what Burning Rock aimed to achieve in 2023. The number one goal is profitability. The goal we set is to break even, excluding R&D during a quarter in 2023. The main reason is that in 2023 and 2024 is still a big year for MCED R&D development. The second goal is continued revenue growth. A healthy increase with probability is what we want to achieve. Our initial outlook for 2023 revenue growth rate is at 20%. And the third goal is to further our leading position in MCED as number one player in China and a top player globally. The main R&D spend asset set will focus on MCED this year. And let me break down the goals into four parts. For therapy selection, will continue to improve the sales productivity by strengthening the in-hospital model. And for MRD, launch and install personalized MRD in top hospitals. Due to the operation difficulties of personalized MRD, it is very challenging to install this method in hospital. However, since more and more hospitals control the outstanding of tissue samples and MRD baseline needs tissue samples, only an in-hospital model can bring the volume of MRD to the next level. And thanks to the efforts of our R&D and operation team, we will be able to launch the in-hospital model of BR-PROFIT in the near future. I believe it will be a strong engine for Burning Rock, OncoBio, and start to impact in Q4 this year. For BioPharma, the goal is to continue its profitable growth. With the new platform of MRD and more international orders, we are optimistic to the growth of BioPharma business. Prevent study, which is a prospective study of over 10,000 subjects, will have an interim readout in second half year of 2023. We will continue the development study of 22 cancer tests in predict and present. Also, we are building the regulatory pathways with FDA and NIMPA, especially NIMPA. The commercialization will go on as selected top hospitals. Let's turn to page six. I know that investors care about our financial status. I would say Apple will elicit more later on. But on this page, I just want to show that we are doing a great effort to reduce the burn rate. If there's no more big scale clinical trials of MCED, the burn rate will significantly decrease in the coming two years. And if there is a new trial started, especially under NIMPA registration, I think that will be even better news. So that's what I want to present today. And I will pass the presentation to Joe to talk about our technologies and trials of MCD and MRD. Joe, please.

Thanks, Yusheng.

So I'm going to introduce some updates regarding the MCED and MRD. Let's turn to page 8. So this is basically an update regarding the Burning Rocks early detection technology development. So after publication of the basic technology in proof of concept in Nature Biomedical Engineering last year, We actually recently made a good publication on NM oncology with regards to the SONDR study, which is a six cancer early detection trial we ran the past several years. And so the other very highlight part is basically we got a regulatory breakthrough, which is FDA granted us the breakthrough device as a nation. early this year, and this is actually a very significant achievement for Burning Rock. Currently, we actually are working closely with FDA for the next step to seeking for regulatory approval in the future. So let's turn to page nine. Basically, this is a slide which we presented previously, talking about the Burning Rock's early detection program product development roadmap. As you can see here, for the six cancer early detection product, which we oversee, and after the Thunder study being published in annual oncology last month. So currently, we are actually running a program called PREVENT study, which is a prospective and interventional intended youth population. And this is ongoing at this moment. The recruitment is a pretty significant number there. We probably will update the readout later this year for the first phase. And meanwhile, actually, we are actually developing up to 22 cancer MCED product. There's several trials, several clinical studies related to it. And we already published in a poster format in ESMO last year. we call promise study. And at this moment, we actually in a very intensive preparation stage in the prediction study, which cover up to 17,000 individuals for this 22 cancer product in the future. So like I mentioned there, the slide 10, just the layout of the six cancer and 22 cancer program, what step it is, it is, and I won't cover too much, repeat this anymore. And so let's just talk to, turn to page 12. We're going to talk about the minimal residual disease update. So MRD is actually one of the very important business, new business of Burning Rock in past several years. And slide 13 talk about the MRD test. So there's two kind of utility. One is the prognosis utility, which has already been proven in a lot of clinical study in the trial. Another more important utility will be the actionable diagnosis and try to direct the therapy, as you can see showing in red. And in United States, there's already some CMS coverage regards the MRD utility. by some other product. So that's why Burning Rock actually is seeking for all those kind of utility utilizing our own technology we call Burning BR Profit, which is summarized in slide 14. So BR Profit is our technology. It's leveraged on the whole exon sequencing to get up to 50 tracking sites. And we designed a personalized panel trying to track in these 50 sites for the follow-up trying to get the prognosis as well as the therapy guidance utility in the future. So this product already launched last year. We almost like in the anniversary of the launching at this moment. And slide 15 talk about the current some MRD-related publication we achieved. So we are keeping working very hard trying to get a lot of cancer coverage. This is basically a pan-cancer product that we can do. We have already published our non-small cell lung cancer poster in AACR last year. And in AACR happen next month, we'll provide update on this non-small cell lung cancer study. And the patient number will increase significantly. And for the carotid cancer, we provide two different studies. One study already been published last year in AACR 2022. And there's another one. It's actually ongoing. It's a very brief update. I'm going to talk about it later. Basically, it's the ASCO GI. This year, early this year in San Francisco, we present the initial data. But this study is still ongoing, and we are currently actively collecting the longitudinal monitoring data point. And hopefully, we'll get more readout in the future. And in ASCO-GI this year, we also have a pancreatic cancer small cohort to demonstrate not only small cell lung cancer as well as the colorectal cancer. We can do a lot of other cancer types, including the pancreatic cancer, which is mostly cell cancer, and also being proved hard to find the MRD in some other study. So next slide, slide 16, basically talking about the pancreatic cancer cohort. So we recruit, actually, this is observational study, and we collect, and also we collect 20 patient baseline, which is a pre-surgery, and as well as some follow like seven days after surgery and 30 days after surgery. And you can see here for pre-surgery pancreatic cancer, we got 100% positive regardless of the ctDNA existence, which is showing this very impressive sensitivity of this assay. And as you can see here, since there's some of the survival curve showing that very, very good hazard ratio as 23.45 and showing the prognosis utility of this MRD assay. And so the slide 17 is another update regarding the cholera cancer, like I mentioned earlier. So we are actually still working on this. In ASCO GI 2023, we already demonstrated 127 patients in the initial cohort. Right now, we almost collect like 220 patient data from the baseline till the continuous follow-up. And we'll see there's a lot of data showing here. If you have interest, you can read that in detail later. Basically, the technology demonstrated very high sensitivity along with very high specificity, which we believe it will potentially generate a lot more utility other than prognosis. So I'm going to conclude my part here. Let me turn to our CFO, Leo. to talk about financial. Thank you.

Thanks, Joe.

I'd like to cover three topics. First, I'm going to talk about the fourth quarter 2022 recap. Then I'll talk about the latest trend in the first quarter 2023. Then I'll talk about 2023 initial outlook. So first, let's go to the fourth quarter recap, and we can go to page 20. Then we can see that we finished the fourth quarter stronger than we previously anticipated. Recall that back in November, we guided for 2022 full-year revenue growth to be about 5%, which implies a 20-something year-over-year drop for the first quarter. We ended the quarter in a stronger performance, down only 3% year-over-year. And breaking this down a little bit further, clinical testing revenues dropped in the teens range year-over-year in the fourth quarter, slightly better than we anticipated back in November. And testing for pharma customers held up very well, maintaining the triple digit growth rate that we achieved throughout 2022. And we like to take this opportunity to commend all our staff who worked tirelessly during the difficult COVID lockdown period. Our testing carried out pretty much unaffected, despite the lockdown suffered by many areas in China, and in particular, the city of Guangzhou, where our lab is located. We believe the resilience demonstrated by our business, the strong mentality of our staff to overcome challenges will help us in our future growth years. We also like to recap our 2022 full year performance. Our 2022 full year revenues grew 11% year over year. We think this is likely on the high end of growth rates achieved in a precision oncology testing industry by our own estimate. There were three pillars that drove that strength. Number one, our dominant market position in the in-hospital segment, which we have built over the years into China's number one position. And the second driver is MRD, which is a new product that we launched in March. We believe this is a multi-year growth runway. And Joe talked about some of the initial readouts and the future investments we're going to make in the MRD area. And the third is the pharma service segments, which benefited from our top performing product portfolio and our leading position in the companion diagnostics regulatory approval capabilities in China. We think these three pillars will continue to drive our growth in the future years. Moving down on our P&L, we grew our adjusted gross profit, which excludes non-cash depreciation and amortization by 12% in the 2022 full year, which again is likely towards the high end of industry performance by our own estimate. Then moving down to the OPEX lines, as mentioned in our previous earnings calls, we continued to deliver OPEX reductions as we deliver on efficiency improvement initiatives. All three OPEX lines dropped in the fourth quarter as we focused on improved sales productivity, reduction in corporate overhead, and better focus on our R&D projects. If we look at the metric of gross profit minus SG&A, so take the adjusted gross profit line and subtract the sales and marketing and the SG&A line, you can see that we're showing on the slide here, we're getting closer and closer towards breakeven. And we anticipate to hit breakeven at some quarter by this metric during 2023. The drivers behind this was laid out in our CEO's remarks. we are driving our commercial business units towards profitability, while our R&D is going to be mostly on multi-cancer earth detection, which will be more focused than the previous years. So in summary, operating efficiency and breakeven excluding R&D expenses is going to be our number one priority for 2023. Next, we'd like to talk about our latest trend, and we present our latest volumes on page 19 of the slide deck. We can see that the fourth quarter dropped double digits compared to the third quarter, where the central lab segment dropped a bit further. And breaking out into the latest months, we can see that we hit a bad trough in December and January as COVID ramped through China, but we have returned to positive year-over-year growth in February. Regarding the first quarter, given the sharp drop of volumes in January, which brought the January-February two-month combined volumes to a decline of 28% year over year. So we think it's prudent to keep expectations for the first quarter moderate. And next, I'd like to talk about our 2023 outlook For 2023, we have two financial metrics to track. And number one is what we talked about is the adjusted gross profit minus SG&A. We like to hit break-even on that metric some quarter during 2023. And second, we like to continue to deliver top-line growth. And out of the two objectives, number one is of higher priority for us. And within that context, we are guiding initially for a 20% increase in revenues in 2023. We'll keep track of our latest progress and update you on our guidance in our next quarterly results. And lastly, to recap our cash position and future burn rate estimates, which we showed on page six during our CEO's opening remarks, we are sitting close to 1 billion RMB of cash balance. We are sitting on three years of cash runway, assuming no capital raise. And our cash balance covers all the clinical programs that we have in place. So we would not be in a rush to do any capital raise.

and that concludes our prepared remarks and we'd like to open for questions please thank you if you wish to ask a question you will need to press star 1 and 1 on your telephone and wait for your name to be announced to withdraw your question please press star 1 and 1 again please stand by while we compile the q a roster We would take our first question, and the question comes from the line of Alexis Yan from Morgan Stanley. Please go ahead. Your line is open.

Hi. Thank you for taking my question. I have two questions.

Number one is that regarding the 2023 revenue growth target of 20%, can you help us maybe better understand how much of that would be from the existing therapy selection portfolio and how much would be from the MRD as well as the early detection product portfolio. It may also be helpful to get a sense of MRD contribution in 2022 as context. And a second question is that So for the new businesses like MRD and early detection, what are some of the key commercial milestones? For example, hospital contracting that we could track for the next few years. And also in terms of ourselves and marketing or market education investment, how do we assess our ROI in terms of these commercial investments?

Thanks for your question, Alexis. I'm Yisheng. So for your first question, we don't have a very clear cut of which part will contribute how much to the percentage of growth. But I can give you a general view that since Let's take the three parts, OncoBio, Pharma, and also early detection. So OncoBio, I think that will still be the main driver. As you know that we have a big baseline of OncoBio, including therapy selection and MRD. And within OncoBio, as I said, The in-hospital model of MRD will impact on Q4 as we completed some in-hospital installment of personalized MRD technology into that. So before that, I think that therapy selection will be the main driver, including tissue-based and also liquid-based. And for pharma, I think that they will continue the growth, especially with the revenue. I think that trend is good, but compared to the big baseline for OncoBio, I think that OncoBio will be the main driver. And for multi-cancer early detection and commercialization, I think that the number still cannot be compared with the rest to be used. But that can also answer your second question is that multi-cancer early detection, we have installed probably around 50, sorry, 40 hospitals. Half of them are big hospitals. But as you are expected, we need to do more marketing activities to educate the doctors in class 3A hospital for them to understand the product and know how to prescribe to the consumers. So, yeah, I think that the growth rate of multi-cancer early detection this year will be good, but I cannot give you the exact number of how much we can achieve. But one thing is sure that since we're controlling the burn rate, we're focusing our energies and high-count cost and modeling activities on class three hospitals.

Does that answer your question?

Yes, that's my question for now. Thank you.

Thank you. Thank you. There are no further questions. This concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you. Music playing Thank you. Bye. Thank you. Thank you. you

Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as will, expects, anticipates, future, intends, plans, beliefs, estimates, target, confidence, and similar statements. Statements that are not historical facts, including statements about Burning Rock's beliefs and expectations, are forward-looking statements. Such statements are based upon management's current expectations and current markets and operating conditions, and relate to events that involve known or unknown risk. uncertainties and other factors all of which are difficult to predict and many of which are beyond burning rocks control forward-looking statements involve risks and certainties and other factors that could cause actual results to differ materially from those contained in any such statements burning rock contains not undertake any obligation to update any forward-looking statements as a result of new information future events or otherwise except as required under applicable law. I would now like to hand the conference over to your speaker today, Mr. Han, the CEO. Please go ahead.

Thank you.

Welcome to Burning Rock's 2022 Annual Conference Call. I'm Yusheng Han, CEO and founder of Burning Rock. Today we also have our CTO Zhou Zhang and CFO Leo Li. Now let's turn to page three. In case there are some investors who are not familiar with Burning Rock, I hereby illustrate what we do. So our business started from tissue-based therapy selection in 2014 and then expanded to multi-directions of liquid biopsy, including liquid-based therapy selection, MRD, multi-cancer early detection, and we have three business units. providing products and services to doctors, farmers, and consumers. Now let's turn to page four. So in this page, we will have a review of 2022. For the general view of our company, we completed profitability-driven organization optimization. the overall headcount have been optimized by 25%. And in that case, we still deliver strong growth in non-COVID quarters and achieved 11% year-on-year growth in 2022. And we completed a listing on London Stock Exchange, offering an alternative listing venue in addition to Nasdaq. We believe that this is a significant corporate development as it provides a fallback solution to facilitate continued trading and listing of shares in case of a delisting scenario of ADRs on NASDAQ. We also noted that the latest statement from the SEC in December that as of now, there is no risk of Chinese issuers getting delisted, which is good for us. For therapy selection, we achieved 13% volume growth despite COVID challenges driven by in-hospital channel. And the nine genes panel was approved by NIMPA, providing a better weapon for in-hospital model. This is our second approved NGS-based test by the NIMPA and demonstrating our capability of working with NIMPA to bring innovative diagnostic product to the market. For MRD, 2022 was a big year in terms of clinical data publication. We provided the initial readout on lung and colon cancer at AACR 2022, followed by additional publications on colon and pancreatic cancer at ASCO 2023. We also expected additional publication on lung this year at AACR And commercially, we launched our BR profit, our personalized MRD product in March. And the volume of patients that were serving keep increasing at very good speed. For Bell Pharma, the new contract value increased 43% to RMB 263 million in 2022. And over 200% revenue growth on strong backlog execution. And for MRD, Oversea was granted FDA breakthrough device designation and standard study for six cancer tests. Development was published on annual of oncology. It's a journal with impact factor of 51, and it's another strong proof of our technology and product. The PROM is a study which is around, which is exactly 2,035 subjects, nine cancer test development completed and read out. PREDICT and PRESENT study, almost 17,000 subjects, 22 cancer test development is ongoing. And PREVENT study, which is a prospective study of a safe cancer test was launched last year. And our CTO Joe Zhang will illustrate more about our early detection study. And now let's turn to page five. This page shows what Burning Rock aimed to achieve in 2023. The number one goal is profitability. The goal we set is to break even, excluding R&D during a quarter in 2023. The main reason is that in 2023 and 2024 is still a big year for MCED R&D development. The second goal is continued revenue growth. A healthy increase with probability is what we want to achieve. Our initial outlook for 2023 revenue growth rate is at 20%. And the third goal is to further our leading position in MCED as number one player in China and a top player globally. The main R&D span, as I said, will focus on MCED this year. And let me break down the goals into four parts. For therapy selection, will continue to improve the sales productivity by strengthening the in-hospital model. And for MRD, launch and install personalized MRD in top hospitals. Due to the operation difficulties of personalized MRD, it is very challenging to install this method in hospital. However, since more and more hospitals control the outstanding of tissue samples and MRD baseline needs tissue samples, only an in-hospital model can bring the volume of MRD to the next level. And thanks to the efforts of our R&D and operation team, we will be able to launch the in-hospital model of BR-PROFIT in the near future. I believe it will be a strong engine for Burning Rock, OncoBio, and start to impact in Q4 this year. For BioPharma, the goal is to continue its profitable growth. With the new platform of MRD and more international orders, we are optimistic to the growth of BioPharma business. Prevent study, which is a prospective study of over 10,000 subjects, will have an interim readout in second half year of 2023. We will continue the development study of 22 cancer tests in predict and present. Also, we are building the regulatory pathways with FDA and NIMPA, especially NIMPA. The commercialization will go on as selected top hospitals. Let's turn to page six. I know that investors care about our financial status. I would say Apple will elicit more later on. But on this page, I just want to show that we are doing a great effort to reduce the burn rate. If there's no more big scale clinical trials of MCED, the burn rate will significantly decrease in the coming two years. And if there is a new trial started, especially under NIMPA registration, I think that will be even better news. So that's what I want to present today. And I will pass the presentation to Joe to talk about our technologies and trials of MCD and MRD. Joe, please.

Thanks, Yusheng.

So I'm going to introduce some updates regarding the MCED and MRD. Let's turn to page 8. So this is basically an update regarding the Burning Rocks early detection technology development. So after publication of the basic technology proof of concept in Nature Biomedical Engineering last year, We actually recently made a good publication on NLM oncology in regards to the SUNDAR study, which is a six cancer early detection trial we ran the past several years. And so the other very highlight part is basically we got a regulatory breakthrough, which is FDA granted us the breakthrough device as a nation. early this year, and this is actually a very significant achievement for Burning Rock. Currently, we actually are working closely with FDA for the next step to seeking for regulatory approval in the future. So let's turn to page nine. Basically, this is a slide which we presented previously, talking about the Burning Rock's early detection program product development roadmap. As you can see here, for the six cancer early detection product, which we oversee, and after the Thunder study being published in annual oncology last month. So currently, we are actually running a program called PREVENT study, which is a prospective and interventional intent of youth population. And this is ongoing at this moment. The recruitment is a pretty significant number there. We probably will update the readout later this year for the first phase. And meanwhile, actually, we are actually developing up to 22 cancer MCED product. There's several trials, several clinical studies related to it. And we already published in a poster format in ESMO last year. we call promise study. And at this moment, we're actually in a very intensive preparation stage in the prediction study, which cover up to 17,000 individuals for this 22 cancer product in the future. So like I mentioned there, the slide 10, just the layout of the six cancer and the 22 cancer program, what step it is, it is, and I won't cover too much, repeat this anymore. And so let's just talk to, turn to page 12. We're gonna talk about the minimal residual disease update. So MRD is actually one of the very important business, new business of Burning Rock in past several years. And slide 13 talk about the MRD test. So there's two kind of utility. One is the prognosis utility, which has already been proven in a lot of clinical study in the trial. Another more important utility will be the actionable diagnosis and try to direct the therapy, as you can see showing in red. And in United States, there's already some CMS coverage regards the MRD utility. by some other product. So that's why Burning Rock is actually seeking for all those kind of utility utilizing our own technology we call Burning BR Profit, which is summarized in slide 14. So BR Profit is our technology. It's leveraged on the whole exon sequencing to get up to 50 tracking sites. And we designed a personalized panel trying to track in these 50 sites for for the follow-up, trying to get the prognosis as well as the therapy guidance utility in the future. So this product already launched last year. We almost like in the anniversary of the launching at this moment. And slide 15 talks about the current MRD-related publication we achieved. So we are keeping working very hard trying to get a lot of cancer coverage. This is basically a pan-cancer product that we can do. We have already published our non-small cell lung cancer poster in AACR last year. And in AACR happen next month, we'll provide update on this non-small cell lung cancer study. And the patient number will increase significantly. And for the carotid cancer, we provide two different studies. One study already been published last year in AACR 2022. And there's another one. It's actually ongoing. It's a very brief update. I'm going to talk about it later. Basically, it's the ASCO GI. This year, early this year in San Francisco, we present the initial data. But this study is still ongoing, and we are currently actively collecting the longitudinal monitoring data point. And hopefully, we'll get more readout in the future. And in ASCO-GI this year, we also have a pancreatic cancer small cohort to demonstrate not only non-small cell lung cancer, as well as the colorectal cancer. We can do a lot of other cancer types, including the pancreatic cancer, which is mostly cell cancer, and also being proved hard to find the MRD in some other study. So next slide, slide 16, basically talking about the pancreatic cancer cohort. So we recruit, actually, this is observational study, and we collect, and also we collect 20 patient baseline, which is a pre-surgery, and as well as some follow like seven days after surgery and 30 days after surgery. And you can see here for pre-surgery pancreatic cancer, we got 100% positive regardless of the ctDNA existence, which is showing this very impressive sensitivity of this assay. And as you can see here, since there's some of the survival curve showing that very, very good hazard ratio as 23.45 and showing the prognosis utility of this MRD assay. And so the slide 17 is another update regarding the cholera cancer, like I mentioned earlier. So we are actually still working on this. In ASCO GI 2023, we already demonstrated 127 patients in the initial cohort. Right now, we almost collect like 220 patient data from the baseline till the continuous follow-up. And we'll see there's a lot of data showing here. If you have interest, you can read that in detail later. Basically, the technology demonstrated very high sensitivity along with very high specificity, which we believe it will potentially generate a lot more utility other than prognosis. So I'm going to conclude my part here. Let me turn to our CFO, Leo. to talk about financial. Thank you.

Thanks, Joe.

I'd like to cover three topics. First, I'm going to talk about the fourth quarter 2022 recap. Then I'll talk about the latest trend in the first quarter 2023. Then I'll talk about 2023 initial outlook. So first, let's go to the fourth quarter recap, and we can go to page 20. Then we can see that we finished the fourth quarter stronger than we previously anticipated. Recall that back in November, we guided for 2022 full-year revenue growth to be about 5%, which implies a 20-something year-over-year drop for the first quarter. We ended the quarter in a stronger performance, down only 3% year-over-year. And breaking this down a little bit further, clinical testing revenues dropped in the teens range year-over-year in the fourth quarter, slightly better than we anticipated back in November. And testing for pharma customers held up very well, maintaining the triple digit growth rate that we achieved throughout 2022. And we like to take this opportunity to commend all our staff who worked tirelessly during the difficult COVID lockdown period. Our testing carried out pretty much unaffected, despite the lockdown suffered by many areas in China, and in particular, the city of Guangzhou, where our lab is located. We believe the resilience demonstrated by our business, the strong mentality of our staff to overcome challenges will help us in our future growth years. We also like to recap our 2022 full year performance. Our 2022 full year revenues grew 11% year over year. We think this is likely on the high end of growth rates achieved in a precision oncology testing industry by our own estimate. There were three pillars that drove that strength. Number one, our dominant market position in the in-hospital segment, which we have built over the years into China's number one position. And the second driver is MRD, which is a new product that we launched in March. We believe this is a multi-year growth runway. And Joe talked about some of the initial readouts and the future investments we're going to make in the MRD area. And the third is the pharma service segments which benefited from our top performing product portfolio and our leading position in the companion diagnostics regulatory approval capabilities in China. We think these three pillars will continue to drive our growth in the future years. Moving down on our P&L, we grew our adjusted gross profit, which excludes non-cash depreciation and amortization by 12% in the 2022 full year, which again is likely towards the high end of the industry performance by our own estimate. Then moving down to the OPEX lines, as mentioned in our previous earnings calls, we continued to deliver OPEX reductions as we deliver on efficiency improvement initiatives. All three OPEX lines dropped in the fourth quarter as we focused on improved sales productivity, reduction in corporate overhead, and better focus on our R&D projects. If we look at the metric of gross profit minus SG&A, so take the adjusted gross profit line and subtract the sales and marketing and the SG&A line, you can see that we're showing on the slide here, we're getting closer and closer towards breakeven. And we anticipate to hit breakeven at some quarter by this metric during 2023. The drivers behind this was laid out in our CEO's remarks. we are driving our commercial business units towards profitability, while our R&D is going to be mostly on multi-cancer earth detection, which will be more focused than the previous years. So in summary, operating efficiency and breakeven excluding R&D expenses is going to be our number one priority for 2023. Next, we'd like to talk about our latest trend, and we present our latest volumes on page 19 of the slide deck. We can see that the fourth quarter dropped double digits compared to the third quarter, where the central lab segment dropped a bit further. And breaking out into the latest months, we can see that we hit a bad trough in December and January as COVID ramped through China, but we have returned to positive year-over-year growth in February. Regarding the first quarter, given the sharp drop of volumes in January, which brought the January-February two-month combined volumes to a decline of 28% year over year. So we think it's prudent to keep expectations for the first quarter moderate. And next, I'd like to talk about our 2023 outlook. For 2023, we have two financial metrics to track. And number one is what we talked about is the adjusted gross profit minus SG&A. We like to hit break-even on that metric some quarter during 2023. And second, we like to continue to deliver top-line growth. And out of the two objectives, number one is of higher priority for us. And within that context, we are guiding initially for a 20% increase in revenues in 2023. We'll keep track of our latest progress and update you on our guidance in our next quarterly results. And lastly, to recap our cash position and future burn rate estimates, which we showed on page six during our CEO's opening remarks. We are sitting close to 1 billion RMB of cash balance. We are sitting on three years of cash runway, assuming no capital raise. And our cash balance covers all the clinical programs that we have in place. So we would not be in a rush to do any capital raise. And that concludes our prepared remarks, and we'd like to open for questions, please.

Thank you. If you wish to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A roster. We would take our first question, and the question comes from the line of Alexis Yan from Morgan Stanley. Please go ahead. Your line is open.

Hi. Thank you for taking my question. I have two questions.

Number one is that regarding the 2023 revenue growth target of 20%, can you help us maybe better understand how much of that would be from the existing therapy selection portfolio and how much would be from the MRD as well as the early detection product portfolio. It may also be helpful to get a sense of MRD contribution in 2022 as context. And a second question is that So for the new businesses like MRD and early detection, what are some of the key commercial milestones? For example, hospital contracting that we could track for the next few years. And also in terms of ourselves and marketing or market education investment, how do we assess our ROI in terms of these commercial investments?

Thanks for your question, Alexis. I'm Yisheng. So for your first question, we don't have a very clear cut of which part will contribute how much to the percentage of growth. But I can give you a general view that since Let's take the three parts, on-call view, farmer, and also early detection. So on-call view, I think that will still be the main driver. As you know that we have a big baseline of on-call view, including therapy selection and MRD. And within on-call view, as I said, The in-hospital model of MRD will impact on Q4 as we completed some in-hospital installment of personalized MRD technology into that. So before that, I think that therapy selection will be the main driver, including tissue-based and also liquid-based. And for pharma, I think that they will continue the growth, especially with the revenue. I think that trend is good, but compared to the big baseline for OncoBio, I think that OncoBio will be the main driver. And for multi-cancer early detection and commercialization, I think that the number still cannot be compared with the rest to be used. But that can also answer your second question is that multi-cancer early detection, we have installed probably around 50, sorry, 40 hospitals. Half of them are big hospitals. But as you are expected, we need to do more marketing activities to educate the doctors in class 3A hospital for them to understand the product and know how to prescribe to the consumers. So, yeah, I think that the growth rate of multi-cancer early detection this year will be good, but I cannot give you the exact number of how much we can achieve. But one thing is sure that since we're controlling the burn rate, we're focusing our energies and high-count cost and marketing activities on class three hospitals.

Does that answer your question?

Yes, that's my question for now. Thank you.

Thank you. Thank you. There are no further questions. This concludes today's conference call. Thank you for participating. You may now disconnect.