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spk09: Thanks, Roberto. Hello, and thank you for joining us for today's Q4 and fiscal year 2021 financial results and business update conference call. This morning, we issued a press release on our results, highlighting recent accomplishments and the outlook for the upcoming year. The full release can be found on the investor section of the Centogene website at centogene.com. Before we begin, I would like to remind everyone that statements we make on this conference call will include forward-looking statements within the meaning of the U.S. securities laws, including those regarding our strategic plan, development programs, and future 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 of today, March 30th. 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 appear in our SEC filings. Joining us on today's call are Kim Stratton, Sandwich & CEO, and Miguel Coelho, EVP Finance and appointed Interim CFO. We will first begin with a general business update, followed by a summary of our financial results for 2021. We will then open up the call to a Q&A session. The call is audio only. I would now like to turn the call over to Kim Stratton, Centergene CEO. Kim, over to you.
spk03: Thank you, Leonard, and hello, everyone. We are grateful for you joining us today, and I'm also really grateful to be here representing Centergene as the CEO. Probably I should start off with the acknowledgement of my predecessor, Andrin, thanking him for his contributions and wishing him continued success personally and also professionally in the future. I would also like to thank everyone here at Centergene for their dedicated work to build and evolve the company and for the very warm welcome I have received since joining. Since assuming the CEO role, I've met many great people, a great group of diverse and exceptionally capable professionals. all of them deeply dedicated to improving the lives of hundreds of millions of people suffering from genetic and especially rare diseases. So I joined Centergene in an interim role in January, and I was excited at the opportunity to assume the role permanently as of last month. However, I feel it's important that my experience with the company dates back to 2013, with my responsibility then as the international head for commercial business at Shire, where much of my role was focused on rare diseases. I see our successful collaboration with Shire, now Takeda, as a blueprint for Centogene's tremendous ability to partner with leading biopharma partners to provide great value for partners and rare disease patients alike. I think this serves as a prime example of where I see Centogene excelling. differentiating and positioning for future growth. But first, let's discuss the 2021 results. Let me highlight the key messages for the day. So we're really encouraged by the progress achieved in the fourth quarter of 2021. In Q4, we recorded solid quarter-over-quarter revenue growth in both core businesses of diagnostics and pharma. This growth has exceeded our prior guidance given for the full year 2021. And I think overall shows the annual core business growth of 11%. And we are positioned to strengthen our core business over the course of 2022. The management team and I are really focused on expanding and adding partnerships with Biopharma, both pipeline building and also execution. In the fourth quarter, we added approximately 24,000 new individual samples to our extensive Centogene BioData Bank. This is a steady increase towards our goal of reaching 1 million individuals overall in the Centogene BioData Bank. And even though we are strategically shifting out of the COVID business, and this is on track, by the way, the COVID segment still has contributed better than planned in quarter four. Recent highlights since 2021 also include the successful closing of a combined equity and debt financing, raising approximately $62 million to strengthen our balance sheet, strategic management appointments completed, and also expanded pharma collaborations. You saw the Pfizer announcement just this month, and we're expecting another key extension announcement to come out over the next couple of weeks. These milestones reflect effective execution by our overall team, setting a strong foundation that we can build upon throughout 2022. Now let's look a bit closer at the 2021 results. For the purposes of today, I will focus on the core business, and Miguel will later comment on the COVID-19 business separately. The core business encompasses our diagnostics and our pharma business. These are the two key drivers of CentiGene's continued growth. In the fourth quarter, we reported core business revenue growth of 34% versus the same quarter last year for 2020. This was the third consecutive quarter reporting core business growth overall. However, it was the first quarter since the start of the pandemic where we observed both growth in diagnostics and pharma. So let's first cover our diagnostics business. The diagnostics business grew 30% in the fourth quarter and 26% in the full year 2021 versus full year 2020. And I think it's important to talk about a couple of operational highlights. In Q4, we reported order intake of approximately 15,000 test requests. This represents a 30% increase compared to 12,000 in the same period for 2020. We believe we offer the broadest diagnostic testing portfolio for rare diseases globally, and we cover over 19,000 genes. In quarter four 2021, we signed the collaboration with Twist Bioscience for the development and the commercialization of custom assay kits for rare diseases. And in January 2022, we released the SEM2Cloud globally. It's our cloud-based bioinformatics solution which enables decentralized analysis, interpretation, and quality reporting for laboratories all over the world. I think it's important to note that our diagnostics business was abruptly shut and significantly impacted in quarter two of 2020, with sales decline of almost 50%. Since then, diagnostic revenues have grown consecutively each quarter to recover to the current level of 7.5 million euros. Please note that this is at the same level as a quarter one 2020, which was the record quarter in diagnostic sales in the company's history. I think we can report that we have now recovered to pre-pandemic levels in our diagnostics business. I would like to take this opportunity to thank Matt Schmidt and our diagnostics team, as well as Florian Vogel and our laboratory team for this turnaround performance. And we will not stop here. Our diagnostic business remains a key pillar of our strategy and will provide a stable base for our business It keeps us close to both patients and physicians, and it will continue to fuel CentiGene's biodata bank. Now let's turn to our pharma business. Our pharma business grew 40% in the fourth quarter versus Q4 2020. For the full year 2021, pharma revenue was 15.6 million euros. Yes, it was still below the prior year. We believe this year-over-year trend reflects a longer recovery time in the pharma segment as compared to diagnostics. It's important to remember that prior to the pandemic, CentiGene had been on a solid growth trajectory, averaging around 20% annual revenue growth in the years leading up to 2019. The impact of COVID-19 pandemic on Centogene in 2021 and 2020 was twofold. Internally, the company deployed great efforts to set up and opportunistically pioneer commercial COVID-19 testing in Europe. It was really needed. This was a significant driver of revenue, and it certainly was also a service to the health system and to society. However, it did also mean that some of the focus shifted away from execution in the core diagnostics and pharma businesses. Externally, the pandemic also slowed down or stalled commercial and clinical development programs and studies at biopharma companies, leading to a contraction of the company's business pipeline. While Centogene experienced this decline, we know this impact was also felt by the broader industry. For example, in 2021, the annual sponsor survey by Jefferies reported that 60% of new trials and 40% of existing trials were either delayed or paused due to pandemic-related disruption. Looking forward, a return to normality provides an opportunity for Centogene in 2022 and beyond, a potential tailwind for catch-up and additional activities in the industry. We are positioning the company to proactively identify the relevant trials and parties and address them as part of our business development and partnership pipeline expansion. The key 2021 pharma highlights are Q4 revenues was the first comparative growth quarter since Q1 2020. We also announced the following. We enrolled the first patients in the clinical study partnered with Elector, targeting data-rich genetic testing for more than 3,000 frontotemporal dementia or FTD patients. We expanded the clinical development partnership with Agios Pharmaceuticals to provide genomics and central lab support for Agios' three global pivotal trials in thalassemia and sickle cell disease. And more recently, a few more milestones. As we announced just a couple of weeks ago, we expanded the data access and collaboration R&D agreement with Pfizer to advance the discovery and validation of novel genetic targets as candidates for the development of new therapies for rare diseases. We know that providing insights into these types of partnerships is of tremendous value for our investors and for the public, and we are committed to improving transparency in this regard. On the research side, we have joined forces within Silico Medicine. The partnership is leveraging the Centogene Biodata Bank and artificial intelligence together with Insilico's AI-based drug discovery platform to identify new targets and accelerate orphan drug development, in this case, for Niemann-Pick type C, or NPC, which is an ultra-rare disease for which no FDA-approved treatment exists at the moment. So we're looking forward to the outcomes in the second half of 2022. Now, before handing to Miguel for the financial section, I'd like to take a moment to recognize Rene Jus, our outgoing CFO. On behalf of the company and the board, I would like to thank Rene for his contributions during his tenure, including internal process improvements, the cost reduction process, accelerating our annual reporting cycle, and also to thank him for securing a strong financial foundation for CenterGene with the financing that closed in February. Rene has been fully engaged with the transition of CFO responsibilities to Miguel, including the preparation of our 2021 report. We wish Rene all the best in his future endeavors. And in the same spirit, it's a privilege to welcome Miguel Coelho to the CenterGene team as interim CFO. I've worked with Miguel in previous roles, and with his more than a decade of experience in senior finance roles in the biopharma sector, I can personally attest that Miguel brings great expertise for the role. And with that, I would like to turn over to Miguel. Miguel.
spk06: Thank you, Kim, and hello, everyone. Before we start, I would like to emphasize how excited I am to be joining CentoGene at this time. The company has set a solid financial foundation with the financing completed in the first quarter of this year, and we are in a strong position to deliver on the next step in the evolution of this strategy. I am looking forward to enhancing the value generation of Centogene by ensuring optimal resource allocation on our strategic path forward. And now we'll turn to the fiscal year 2021 financial results. Our fiscal year 2021 revenues increased by over 48% to 190 million euros in full year 2021, compared to 128.4 million euros in 2020. This development was mainly driven by the COVID-19 testing, generating 146.4 million euros in the year, up 57 million from last year. Importantly, the growth also reflects a return to honor growth in the core business. I will discuss the COVID business separately in a moment and first focus on the core business which consists of our diagnostics and pharma segments. The core business expanded by 11% in full year 2021 to 43.5 million euros compared to 39.1 million euros in full year 2020. This growth was largely driven by the material uptake of our diagnostics business. The core business will pick up significantly towards the end of 2021 demonstrated by a 34% increase in core business revenues in the fourth quarter. For the diagnostic segment, we recorded 27.9 million euros in diagnostic revenues in 2021, compared to the 23.1 million euros in 2020, representing revenue growth of 26% for the business segment. We are proud to report that this is a record year. The diagnostic segment received an order intake of 57,000 tests requested in 2021, representing an increase of 37-36% as compared to the 42,000 tests requested receiving full year 2020. The increasing revenues were primarily due to the surge in order intakes for panel testing, exome and genome screening during 2021. Total revenues from panel testing, exome and genome, augmented to approximately 20 million euros in 2021, representing an increase of 25% as compared to 15.9 million euros in 2020. The diagnostic segment revenue increase was mainly from increased demand in the Middle East in our MENA region. This leads to an increase in segment gross margin by over 22 percentage points, which you will also see reflected in the segment adjusted EBITDA. In Q4, diagnostic revenues were 7.5 million euros, up 30% versus Q4 2020. It is important to note that this is about the same as the prior record quarter in the diagnostic segment before the pandemic in Q1 2020. So it is fair to say that the DX business is truly back. Turning to the pharma segment, pharma revenues decreased 8% year-over-year from 16.9 million euros in 2020 to 15.6 million euros in 2021. The annual comparison in pharma revenues reflects the impact of the COVID pandemic and related slowdown, as Kim mentioned earlier. However, I will talk later about the positive performance in the fourth quarter and also on the value of pharma contracts signed in 2021, which significantly exceeds the value of deals signed in 2020. This is extremely encouraging as our partnership agreements are a major growth catalyst for the pharma sector. We have started a number of initiatives to accelerate the farmer recovery and growth for the year 2022. In 2021, we entered into 18 new collaborations and completed 39, resulting in a total of 45 active collaborations per year end 2021. Revenues from our new collaborations totaled €2.3 million in 2021, with upfront payments of €0.5 million related to setup fees. In the prior year, revenues from new collaborations totaled approximately €1 million, with no upfront fees included. The main drivers of pharma segment revenues were partnerships in patient identification and clinical development. This is something we expect will continue. However, we will strive to improve in a range of areas, including, first, focus on the contribution margin per contract. For example, by providing more upfront fees into new proposals and contracts, we believe this is fair to capture the value of the platform we have built and invested in. And second, improve our portfolio definition. For example, in the category of patient identification, we are actually providing a lot more value than just finding a patient. So we will want to position a set of distinct offerings under the umbrella of market access and expansion. In Q4, pharma revenues were at 6.5 million euros compared to 4.6 million in Q4 2020. So this is an increase of 40%. showing great end of the year momentum. Turning to our COVID business. Post Q3 2021, CentoGym made executive determination to begin placing out this business segment, which was communicated to our stakeholders on the last quarterly update called in November. The segment adjusted EBITDA contribution from the COVID segment was still 20.7 million euros in full year 2021, a decrease by 16.5 million euros year over year. Revenue generated for the year 2021 amounted to 146.4 million euros, with approximately 2.3 million test requests received during the year. The segment growth margin was significantly lower in 2021 compared to 2020, which also caused the overall company growth margin to drop. This significant change was driven by a range of factors, including the shift to short contractors to increase flexibility, changes in government contract structures, downturn of COVID testing in the second half of 2021, accelerated depreciation and amortization expenses, and costs related to the shutdown of our Hamburg lab and unprofitable testing sites. As a result, growth margin for the segment declined from 43% that year to 9% this year. This impact was specifically felt in Q3 2021. Afterwards, we were able to streamline operation by closing unprofitable testing sites. This resulted in improved contribution from the segment. The COVID business is on plan to phase out by the end of the current quarter. The rundown plan is being diligently executed and Q4 was actually better than planned. At the end of this activity, COVID-19 testing will have generated over 250 million euros in revenues for sentencing, mainly through airport test centers, supporting and enabling international travel, and other contracts supporting local and state governments, which might need testing solutions and capacity. The business will have delivered a total adjusted EBITDA contribution of roughly 60 million euros, and positive cash contribution of about 50 million euros. We look forward to now refocusing our efforts to further build and scale our core business. Going further down in our P&L and gross margin by segment, overall gross margin for the company was 15% in 2021 compared to 35% in full year 2020. As discussed, this decline was caused by the COVID margins, but the core business improved. Our core business segment, Diagnostics and Pharma combined, generated total gross margin of 34% of revenues, a significant increase versus a core business gross margin of 14% in the prior year. This improvement mainly reflects the improved gross margin in the diagnostic segment, with gross margin of 38% versus 16% in the prior year, mainly reflecting the product mix toward higher margin products. The margin in the pharma segment improved from 12% in 2020 to 26% in 2021. To note, the prior year comparable reflects an impairment of 4.7 million euros to the capitalized biomarkers included in cost of sales. The total segment adjusted EBITDA was 29.5 million euros in full year 2021 compared to 41 million euros in full year 2020. Again, the decline was caused by COVID as discussed. by the core business, but the core business improved year over year and showed a stronger adjusted EBITDA contribution. Core business segment adjusted EBITDA, that is the sum of adjusted EBITDA in the diagnostic and pharma segments, was 8.9 million in full year 2021, compared to 3.8 million in full year 2020. The picture for our two core business segments is mixed. Adjusted EBITDA for the diagnostic segment turned from minus 2.4 million euros in full year 2020 into a positive adjusted EBITDA of 4 million euros. The adjusted EBITDA of our farmer segment was 4.8 million compared to 6.2 million in full year 2020, and the decrease was primarily attributable to lower revenues. The segment adjusted EBITDA leaves out the so-called corporate expenses, and I will go through the remainder of the P&L. Our expenses, including other operating income, totaled approximately 74 million euros for the year 2021, an increase of 9.3 million euros compared to last year. General administrative expenses increased by 6.6 million euros to 46.7 million euros. The increase was mainly due to an increase in personal costs, including management additions and severance costs related to the restructuring announced in November 2021. G&A also includes share-based compensation expenses of 8 million euros in 2021, an increase of 2.4 million euros as compared to 5.7 million euros for the year 2020. In addition, we saw increased costs relating to being publicly listed company, as well as an additional investment in IT support and data center costs. Second, our R&D expenses were 19.3 million euros, approximately 4.4 million higher than in 2020. This increase mainly represents software enhancement costs and research costs related to biomarker development projects that don't qualify for capitalization. On a related note, in 2021, we booked an impairment of approximately 1 million euros on biomarkers that have been deprioritized as we focus on the development of biomarkers directly linked to ongoing pharma projects or our project pipeline. The R&D expenses include extended investments in additional intelligence and database development in 2021 and associated amortizations. We believe we will see a decline of overall corporate costs in 2022, with the effects of the restructuring fully implemented and further assessments and action we are reviewing. We will share more on this in the future. Thirdly, Our selling expenses, including sales and marketing expenses for the year, were 9.8 million euros, an increase of 1.7 million euros, mainly reflecting an increase in personal expenses, online service expenses, as well as travel expenses due to the easing of travel restrictions from the COVID-19 pandemic. We believe investing in Salesforce is the right step. In total, our operating loss was 46 million euros, a decrease of 26.3 million euros compared to a loss of 19.7 million euros in 2020. The main driver was the lower gross profit generated in the COVID-19 testing business. Looking at profitability overall, I would like to comment that we, as the incoming management, are and will be focusing on our spending, ensuring that we are operating efficiently and spending with great accountability and investing wisely. We have kicked off a number of review initiatives to drive efficiencies in our lab and IT operation, as well as our administrative functions. It is too early for us to provide any immediate guidance, but it is our clear target to lower our corporate expenses while supporting the businesses with greater potential. Turning to cash flow and balance sheet highlights, as of December 31st, 2021, We have 17.8 million euros of cash and cash equivalents on our balance sheet. With regard to our overall debt, I would like to remind you that as of the end of December, this includes approximately 19 million euros of lease liability. Looking at the movements, cash flow used in operating activities was 21.7 million, an increase of 30.1 million euros compared to cash generated from operating activities of 8.5 million euros. This change was mainly driven by the lower contribution from the COVID-19 business segment in 2021 as discussed. Notably, contribution from COVID should be positive in Q1 2022. In 2021, class cash flow used in investment activities was 5.4 million euros as compared to cash flow used in investing of 16.2 million euros in full year 2020. Consistent with our decision on the COVID business, the decrease is mainly due to our reduction in COVID-19 related investments. Cash flow used in financing activities was 3.2 million euros in 2021, compared to cash generated of 14.8 million euros in full year 2020. Here, 2020 mainly reflected the follow-on equity offering with contributed 22 million euros in Q3 2020. Excuse me one second. Sorry. Again, let me reiterate that one of our clear targets for this year is to improve our expense structure and therefore improving our core business operational cashflow for 2022 and beyond. Please note that after the end of the year, we successfully secure approximately 55 million euros in aggregate equity and debt financing. This includes 15 million euros in a pipe financing from existing investor, as well as approximately 40 million euros in a debt financing from Oxford Finance. The financing was important to address the coin concern qualification we published in the third quarter last year, and I'm confident that this has indeed been addressed. Tentagene now has a stable balance sheet to transition
spk03: into our next phase of growth and execution with that i would like to hand the call all back over to people kim for discussion on outlook strategy and guidance thank you thanks miguel okay so now we've looked at 2021 financials and depths i'd really like to give an outlook on where we see the business going we're looking forward to a solid emergence in 2022 a strong focus on growth on execution making sure we've got a fit-for-purpose organization and in line with our three strategic pillars. So our biopharma partnerships, strengthening the center gene biodata bank, and keeping the focus on our diagnostics business. So let me touch on each of these key drivers in terms of the midterm success. We believe we have the largest real-world biodata bank for rare and neurodegenerative diseases. The Centigene Biodatabank is a leading global proprietary platform. It's based on real-world data, and it has a biological repository representing over 650,000 individuals from over 120 countries. So our platform includes epidemiologic, phenotypic, genetic, and multi-omics data that reflect a truly global, population across all ethnicities. And we believe this represents the only platform that comprehensively analyzes multilevel data to improve the understanding of rare and neurodegenerative hereditary diseases. Out of the estimated 7,000 rare diseases, they say that 5,600 of these have a genetic origin. And in our center gene biodata bank, we have over 2,500 diseases covered. It's important to remember that new genetic variants associated with rare diseases are discovered every year. And as a result, rare genetic diseases that can be diagnosed need to be updated continuously with the new information. And we have most of these variances updated in our center gene biodata bank. Our capabilities enable us to deeply characterize patients with rare genetic variants, including RNA and transcriptomic analysis, proteomic analysis, metabolomic analysis. And this helps to significantly delineate mechanisms of disease and thereby characterize molecular markers of disease beyond the variants captured through DNA sequencing. In 2021, we added 94,000 individuals to our leading center gene biodata bank, and we are seeing growth trends in terms of depth of phenotypical information as well as the optional research consent rate. Additionally, our network of active physicians is now over 29,000. It's truly a unique asset. We plan to continue growing our repository of information and biological examples through the identification of additional patients by expanding our clinical network and with our current biopharma partnerships even further. We are also working on better packaging our capabilities into solutions for biopharma partners. And I think one example offering these solutions is the data access and collaboration agreement with Pfizer, which utilizes the center gene biodatabank. Our chief data officer, Bettina Gerner, will join us also for the Q&A session later if you have any further questions on that topic. In terms of biopharma partnerships, we use the Centogene Biodata Bank and we are able to add significant value to biopharma partners along their entire development plan, accelerating and hopefully de-risking pharma projects. Rare diseases affect over 350 million patients globally, and less than 5% have an FDA-approved treatment. The rare disease drug market is expected to grow at about 11% annually to $207 billion in 2024. And to note, these rare disease drugs will capture approximately 18% of worldwide prescription sales by 2024. And if you add the neurodegenerative diseases space here, the numbers are much, much larger. The introduction of new treatments and the development of drugs in this space is still constrained by a number of factors. A lack of high-quality information regarding the clinical heterogeneity of medical symptoms, the lack of comprehensive and curated medical data, the difficulties in the early identification of patients, a lack of biomarkers, and also difficulties in understanding the market size and epidemiology. Our services span the full spectrum of diagnostics, drug discovery and development, clinical development, including natural history studies, biomarker development, as well as patient recruitment, identification, market access and market expansion. December 31, 2021, we collaborated with 33 pharmaceutical partners on projects targeting over 46 different rare diseases. There is an ongoing trend that data-driven intelligence is helping grow the use of real-world evidence, and this can improve the current clinical model and advance how studies are designed and executed. As I said, helping to de-risk and to accelerate. CentiGene's capabilities align well in this context already, but we have initiated in advance several initiatives to capitalize on the opportunity. First of these is a complete horizon scan of the market, including the growing number of gene therapy development projects. This tracks over 120 companies with many more assets. The second is to strengthen our bandwidth for outreach, contracting, and operational project delivery by adding the needed resources. Now, our diagnostics are truly also differentiated products and services that support efficient and timely diagnosis of rare and neurodegenerative diseases leading to better treatment and health outcomes. We have a differentiated product portfolio focused on high-quality genetic testing with leading whole exomes and genome sequencing, and we're on the leading edge of the multiomics. It is our goal to provide the best diagnostic yield. For example, with the enhanced acentoexome, we actually increase the diagnostic yield up to 20%. This means more patients are getting the results on their tests. The CenterCard is our proprietary dry blood spot solution. It provides easy logistics and central testing, and it's registered in over 50 countries around the world. With the highly advanced technology, the CenterGene Biodata Bank, with our team of medical experts and geneticists, we deliver reports back to the physicians that contain critical genetic, proteomic, metabolomic information, or a combination depending upon what is most salient for each case. And we also put this data back into the center gene by a data bank. In diagnostics, we are building on a strong performance in 2021, striving to again reach above the market growth, which we estimate at 11%, by focusing on two strategic drivers. The first one is capturing the opportunity in decentralization. In January, we released the center cloud globally, and we're already working with early customers. Next steps to this year are the launch of the kits developed in partnership with Twist, which allows for global decentralization and standardization, and we expect to roll out in the second half of 2022. Driving innovation Out of the core laboratory, we are focusing on multiomics as a key value driver for diagnostics of rare and neurodegenerative diseases. We recently launched several new products that build on our strong existing multiomic portfolio. For example, SEMTO Metabolic, where we just presented our first data set of over 3,700 patients at the ACMG. the American College of Medical Genetics. This multi-omic product not only presents a high diagnostic yield, but for nearly 1,400 patients, it is expected to lead to benefits in treatment and or counseling for the family. We truly believe that we're one of the pioneers that's putting actual commercial multi-omic products onto the market today. Matt Schmidt, who is our Chief Commercial Officer of Diagnostics, will also join us for the Q&A session today if you have any more questions around this. So let's round out today's call. We'd like to provide an outlook for 2022 with specific guidance for the calendar year. We expect our core business revenues to grow between 15% to 20% year over year in 2022. We expect revenues derived from COVID-19 testing to be approximately 18 million euros. all in the first quarter of 2022, in line with the phase out at the end of the first quarter. As a result, our annual total revenues guidance for the fiscal year 2022 is in the range of 68 to 70 million euros. To put this into perspective, the company has historically been on a solid growth trajectory, averaging around 20% growth in the years leading up to 2019. The COVID pandemic arose in 2020, and we've discussed the impact to the business and the pipeline. In 2022, with the new team on board, we've kicked off a range of initiatives to drive biopharma partnerships. Realistically, it will take some time for these initiatives to kick in, and I think as a result, quarter one 2022 is expected to be relatively flat or with minor growth in the core business. as the pharma segment will have a stronger acceleration towards the second half of 2022. In summary, we're really excited about the opportunity here at Centergene. We are committed to driving financial performance to deliver increased value to our shareholders. We are really focused on growth and execution with a fit-for-purpose organization. And with that, I'd like to hand back to our operator, Roberto, for a Q&A. Thanks, Roberto.
spk02: Ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone. The first question from Chad Wiatowski from SVB Dealing. Please go ahead. Your line is open.
spk07: Chad Wiatowski All right. Good morning. Yves Chad Wiatowski. Thanks for the call. I was just wondering regarding cash burn. Can you sort of speak to your top spending priorities this year? And what is that cash burn expectation in 2022? And just given the recent raise, how much visibility in one way do you see going forward?
spk06: Thanks, Chad. Thanks, Chad, for your question. Just give me a couple of seconds here, please, because you are coming about the cash burn. Okay. Look, when the company embarked on the financing, the goal was to finance the company for a couple of years. That was the initial target. Then with the efforts that we did and we managed to guarantee this financing, we should be able to extend this one way. We didn't come specifically with a guidance cash fund. And the intention is that, as we were saying, It is on one side the revenue progression, but also this exercise that we are doing on costs. We expect that we would be able to come with more specific details in the next communications.
spk07: That's helpful. Thanks. And just in terms of the pharma business, last quarter we saw a recycling of roughly 40,000 samples. Was that a one-time event, and can you give sort of a timeline on that long-term goal of a million samples in the biobank?
spk03: Maybe Bettina, do you want to talk about the samples that are actually in the data bank specifically?
spk05: Yes, sure. Hello. Thanks for your question, and thanks for having me today. So we see a healthy growth of our biodata bank in the last quarter with 24,000 individuals added, and then For year 2021, around 94,000 individuals added. We think we are well on track to achieving that midterm goal of 1 million patients. And everything Kim described is, in a sense, a positive feedback loop, right? As she said, all future partnerships will continue to feed the biodata bank. And as the biodata bank gets richer and richer, our partnership value proposition gets richer and richer, which then in turn accelerates the growth of the biodata bank.
spk07: Thanks for taking the questions.
spk03: Thank you.
spk02: Thank you for your question. We have the next question from the line from . Please go ahead.
spk01: Hi. Thanks for taking the questions. Just a few clarification questions. In terms of your guidance for 2022, 15% to 20% core revenue growth. And Kim, you provided some color in terms of for the biopharma. Just trying to better understand kind of for the diagnostics versus the core diagnostics versus pharma. What's embedded in your assumptions in terms of overall growth within the 15% to 20%?
spk03: Yeah, I mean, look, for the diagnostics, we said, Sunji, that we want to continue to grow above the market rate, which is at about 11%. And I think historically, if you go back and look at the last numbers, I think it was about, of the core business, about two-thirds was diagnostics. One, you know, maybe a bit over a third was pharma. And obviously, we want to see, you know, pharma actually increasing the kind of share of of that core business to around the 60-40. So I think that would be where we would be headed.
spk01: Gotcha. And then in terms of your gross margins for your core business, good to see that continuing to improve. But what's kind of the expectation for 2022? And what are the drivers for potential margin expansion into 2022 for the core business?
spk06: Yeah, thank you. Thank you for the question. So as you could see, there was a good recovery in 21 versus 20 on the overall gross margin. And for this year, we plan to have similar levels when it comes to DX, despite of the market price pressure that we can upset by our product mix. And when we see on pharma, we believe that we could improve it. I mean, that would come demonstrating the value proposition of our company at the products, combined with some internal process and cost optimization. So I would say flat dish in the case of DX and improving on pharma. Gotcha.
spk01: And then lastly, go ahead.
spk03: I was going to say something just on the kind of pharma and the diagnostics kind of mix as well. I think it's important to remember that diagnostics is is a much more kind of smoother business. And as you know, with farmer, it can be a bit lumpier. So, and also I think it takes a much longer to restore. So as I also said in my comments, you know, I think we're for quarter one, we'll expect it to be kind of flat or with some modest growth, but then you should see it actually pick up as the year progresses in the second half.
spk01: Gotcha. That's very helpful. And then lastly for me, for your biopharma business, you talked about for 2021, the overall, the total contract, overall contract for the value, if you will, of that business increased significantly year over year. Could we anticipate that type of trajectory? I know that may not translate, you know, into revenues in the near term. But could we anticipate that type of trajectory to continue into 2022? From the contract value standpoint.
spk03: Yeah, I mean, I think it is, as you say, Sungji, you can't, with some of these contracts, they span multi-year. But yeah, that's the intention to keep that kind of growth going in 2022. Absolutely. Fantastic.
spk01: Thank you so much.
spk02: Thank you for your question. The next question from Catherine Shetlow from Bay. Please go ahead.
spk04: Hi, thanks for the questions. I guess first, can you just talk to the trends that you've seen in the core diagnostics business so far in the first quarter? To your point, COVID has been a big disruptor to core diagnostics over the last couple of years. So did you see any disruption from the Omicron wave or was the business fairly resilient and how do you view your positioning in potential future COVID waves?
spk03: Thanks, Catherine. For me, Max, you're probably best to answer that here.
spk08: Yeah, thank you, Catherine. This is Max. So we don't comment yet on obviously in our Q1 performance. Having said this, at the moment, business is developing stable and the impact of Omicron so far has not been significant. significant.
spk04: Okay, great. And then Kim, you talked about, I think, adding resources to increase your pharma outreach team. Can you just talk to the size of that team today and what kind of additions you envision going forward?
spk03: Yeah, I mean, the team is kind of, obviously, the team is quite broad and it's spread out through you know, the biodata banks, the genomics group, and also in part, I guess, in diagnostics. But I was specifically talking about, you know, increasing our sales team, increasing the project management team so that we can really have a much stronger outreach to, as I said, you know, there's 120 companies out there that are currently developing products or have inline products. in either rare, neurodegenerative, or gene therapies. So we need to have a stronger kind of outreach and make sure we have a stronger lead generation, that we have a beefed up kind of sales team, and also that we're able to kind of manage these projects, you know, in a very kind of professional and kind of excellence in execution internally. So it's about adding resources, but it's also about fine-tuning our operations and our processes going forward as well.
spk04: Okay, thank you.
spk02: Thank you for your question. There are no further questions at the moment.
spk10: Ladies and gentlemen, that's everything for today. Thank you for... You can now disconnect.
spk03: Okay, thanks, everybody, for joining us. Thank you for your questions. Thank you to the CenterGene team. Thank you. Bye-bye.
spk10: Thank you, everyone. Bye.
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