Centogene N.V.

Ladies and gentlemen, thank you for standing by, and welcome to the Center Team H1 2020 earnings conference call. At this time, all participants are in a listening-only mode. After the speaker presentation, there will be a question-and-answer session, and to ask a question during the Q&A session, you will need to press star and 1 in your telephone. I must advise you that this conference is being recorded today, 23rd of September, 2020. I'd now like to hand the conference over to our first speaker today, Mr. Son Kim. Thank you and please go ahead.

Thank you. Hello and welcome. Thank you for joining us to discuss our H1 2020 results, which were issued earlier today. You can view this presentation and the related press release on CentoGene's website. For those not able to view the webcast, you can find the relevant slides on www.investors.centogene.com. Our speakers today are Centogene's Chief Executive Officer, Professor Arndt Rolfs, and Richard Stoffelin, Centogene's Chief Financial Officer. Before we begin, please refer to slide two of our presentation, which provides information about certain statements to be made today that may be considered forward-looking statements within the meaning of the U.S. securities laws. including those regarding our strategic plans, development programs, and future financial results. Statements made during this call that are not historical statements may be forward-looking statements and, as such, may be subject to risks and uncertainties, which, if they materialize, could materially affect our actual results. The forward-looking statements in this presentation speak only as of today and we undertake no obligation to update or revise any of these statements to reflect future events or developments, except as required by the law. Additional information regarding these statements appears in our SEC filings. Following our presentation, we will also open up the call to Q&A. We currently ask that you ask only a maximum of three questions. I will now hand the presentation over to Arndt. Please turn to slide three.

Thank you, Son, and hello, everyone. Thank you for joining our call today, especially during these unprecedented times. We hope everyone is staying healthy and safe, and our thoughts are with those affected by the COVID-19 pandemic. Today, I will first walk through our operational performance during the first half of the year, with more focus on Q2, as we already discussed Q1 performance in June. In addition to the progress of our core business, I will provide an update on our COVID-19 testing activities in Region 1. Richard will then walk you through the financials and provide our view on how we see the rest of the year. Afterwards, we will open up the call for Q&A. I will remind you of some requests for everyone to only ask two or three questions so that we have enough time to address as many questions as possible. Let this turn to slide four. Before we get into the performance each quarter, we always start our presentation with CentuGene's goal. I think it is always good to put things into context, and for me, that means looking at recent achievements with our long-term goal in mind. Our ultimate goal is to provide precise medical diagnosis of inherited rare diseases at the earliest possible moment, by transforming medical expertise and analytical information into actionable results for physicians, patients, and pharmaceutical partners. Importantly, over the last few months, we have been able to leverage that expertise to help address the COVID-19 pandemic. This is being driven by Centurgy in doing its part in the fight against the unprecedented global challenge and adapting to an environment where our partners and customers needed time to adjust to the pandemic. This has by no means changed the long-term direction of the company, but has narrowly demonstrated our resilience by leveraging our diagnostics expertise to successfully generate an additional near-term source of revenue during these unprecedented times. You will see from today's presentation that we remain dedicated to and focus on our goals. Now let's dive into today's presentation starting on slide five. Let me first highlight the key message for today. Firstly, we believe the worst of the COVID-19 pandemic is behind us. The months of April and May were a difficult period for our core business in which our pharma partnership discussions stalled and clinical diagnostic volumes decreased by more than 50%. Since then, our core business has started to recover and both segments remain on the recovery trajectory. Over the first six months of 2020, our revenues were largely flat compared to the prior year with a decline of 0.4%. While even a small decline is disappointing, San Jose has been able to weather the pandemic with resilience, and I'm very proud of what we have been able to achieve. Secondly, we have continued to drive growth in our COVID-19 testing efforts. In particular, our activities at Frankfurt Airport, which I will discuss in more detail later on, have picked up significantly in July, August and September. Finally, I would like to reiterate the financial resilience of Centurgy. Given the uncertainty of the COVID-19 pandemic, we have taken steps to further strengthen our balance sheet through a follow-on offering which closed in July 2020. In addition, with the help of commercial COVID-19 testing, We anticipate our 2020 revenues to be in line with our strong growth trajectory in recent years. Richard will cover these topics later in the section of the presentation. Let us now discuss these points in more detail. Please turn to slide 6. In Age 1 2020, our revenues decreased by less than 1% compared to Age 1 2019 to approximately 21.8 million euros. This was driven by an approximately 2% decline in the pharma segment and a 1% growth in the diagnostic segment. The worst of the pandemic impact hit us during April and May, and we began to observe recovery in June. Nonetheless, this difficult period translated to 13% revenues decline in Q1 2020. Let me take a moment to step back and put things in perspective. In light of the challenges presented in 2020, I think these results demonstrate resilience and the strong determination of all CentuGene employees. I would like to take this time to thank the entire CentuGene family for their extraordinary efforts over the past several months. Please turn to slide 7. As mentioned earlier, our core business is gradually recovering, both in terms of clinical diagnostics and pharma partnership discussions. I wanted to put that into context of larger the trends we are seeing in the market overall. On the left side of this slide, you will see the number of active pharma clinical trials from late March until late August. As you can see, the industry hit the trough in late April to mid-May, and it has gradually recovered since then. Based on this clinical trial data, pharma industry investment level appears to have returned close to pre-pandemic levels. On the right side is Sendogene's weekly order intake volume in approximately the same time period, exhibiting a similar trend. If the current trend continues, we anticipate gathering back to pre-pandemic level in Q4. I hope these indicators give you a sense of the gradual recovery we are seeing in our core business. With this trend in mind, let us look specifically at our operating metrics. Please turn to slide eight. Let me first focus on our pharma segments. The first metric is the number of pharma collaborations, which increased by three compared to 12 months ago. This is a smaller increase compared to recent periods, and that is a consequence of the challenges we faced during the first half of this year. With many pharma conversations stalling in April and May, our progress during the first half of the year was relatively limited. However, as I mentioned before, Our activities have started to pick up since June. These conversations have led to six new partnerships being signed during the month of August, demonstrating that we are getting back on track. Other metrics have also demonstrated slower growth compared to prior periods, such as the number of disease areas and the number of biomarkers under partnership. With the acceleration of partnership discussions, we anticipate demonstrating a more robust performance in the near future again. Please turn to slide 9, where I will speak about the progress made in our diagnostic segment. Now shifting gears to our diagnostic segment. This is a critical part of our business, as it enables us to access data and knowledge that we then translate into extremely valuable medical insights. As you can see from the chart on the left, we have added 119,000 patients to our database in the last 12 months. This is still robust growth, even it is at a slightly slower pace than we have observed in recent periods. This is also a result of the slowdown of business activities we saw in Q2. On the right hand side, we report the number of sample order intakes during the six month period of 2019 and 2020. We observed an 18% reduction in order volume during the first half of this year compared to the same period in 2019. This is a good illustration of how serious the pandemic situation was. And I'm glad that we are able to offset some of this impact with commercial COVID-19 testing. Now please turn to slide 10 for an update on our COVID-19 testing activities. Since our last update in June, we have made progress on multiple fronts regarding our COVID-19 testing. We received emergency use authorization from the US FDA and expanded into multiple testing partnerships. On-site testing at airports has turned out to be the biggest success in terms of financial returns. Let me focus on Frankfurt Airport, where we started to provide testing towards the end of June. Testing allows travelers to travel safely and reduces the likelihood of transmission of COVID-19 internationally to these travelers. you can see the increased test volume over the first few months. We have recently opened our second airport testing service at Hamburg Airport, and yesterday we are proud to realize that we have opened Düsseldorf Airport as well. It is too early to tell if the volume uptake will follow the same trajectory as at Frankfurt Airport, but we are pleased to expand our presence to meet the urgent need presented by COVID-19. We are looking into further expansion to other airports, amongst other locations, and we will update you further if and when we do. Please turn to slide 11. As I conclude the business performance section, let me provide you with the latest update on the status of our business. First, as I mentioned earlier, pharma partnership discussions have picked up since June. Many of these companies have expressed their desire to get their R&D programs back on track, and see SensuGene as a way to achieve the goal. As a result, we have signed six new partnerships in the month of August. This is a good signal, given that these are the first new partnerships that we have signed since the COVID-19 pandemic hit. Second, our co-genetic business within the diagnostic segment has started to recover. The trough of weekly sample volume was observed in late April, which had dropped to below 50% of pre-pandemic levels. As we showed earlier, the volume has been on a gradual recovery trend since the end of May. If the current trend continues, we anticipate getting back to pre-pandemic levels in Q4. In addition to our core business, as I mentioned earlier, we plan on further expanding our COVID-19 testing to meet the continued demand in the market. At this point in time, we believe we can make up any revenue shortfall caused by the COVID-19 pandemic by the end of the year and get back to our growth trajectory. Let me hand it over to Richard here to provide further details.