Genetron Holdings Limited

Good day and thank you for standing by. Welcome to the second quarter of 2021 Genetron Health Earnings Conference Call. At this time, all participants are in listen-only mode. Now for the speaker's presentation, there will be a question and answer session. And to ask a question during the session, you need to press star 1 on your telephone. And please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. Now I'd like to hand the conference over to your first speaker for today, Ms. Hoki Lok. Thank you. Please go ahead, ma'am.

Thank you. Hello, everyone, and welcome to Genetron Health's second quarter 2021 earnings conference call. The company's earnings release was issued earlier today and is available on the company's IR website. During this call, the company will be making some forward-looking statements regarding future events and results. These statements are made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about Gentron Health's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in Gentron Health's filing to the SEC. All information provided today is as of the date of this call, and Genetron Health does not undertake any obligation to update any forward-looking statements, except as required under applicable law. With respect to any non-IFRS measures discussed during today's call, the company's reconciliation information related to those measures can be found in the earnings release issued earlier today. Allow me to introduce the management team on the call today. Susan Wang, co-founder and CEO of Gintron Health, will discuss recent business updates and upcoming catalysts. Evan Xu, our CFO, will provide financial highlights related to the unaudited second quarter results outlined in today's release, as well as our outlook for 2021. Following management's prepared remarks, we'll open up the call to questions. During the Q&A session, our co-founder and chief scientific officer, Dr. Haiyan, Chief Technology Officer, Dr. Yuzheng Zhang, and our Chief Medical Officer, Dr. Yunfu Hu, will also be available to answer questions. With that said, I would now like to turn the call over to Mr. Shizhen Wang, CEO of Jinchuan Health. Shizhen, please go ahead.

Thank you, Hoki. Good morning and good evening, everyone. Thank you for joining our second quarter 2021 earnings conference call. So I would like to direct you to the supplemental earnings presentation with investor relations website and begin on slide two. In the first half of this year, we continue to solidify our position as the leading position oncology company in China with a comprehensive portfolio that covers the entire spectrum of cancer management. Our products allow our customers to address patient needs and challenges from early screening, diagnosis, and treatment recommendations, as well as disease monitoring. If you turn into slide four, in the second quarter, we delivered strong results, with 38.1% top-line year-over-year growths reaching revenue of remaining $140.5 million. Our revenue growth was also accompanied by notable margin improvements, with gross margin at 67% compared to 63% in the second quarter of last year, thanks to improvements in both LDT and IVD business lines. We were pleased with the momentum in the business during the second quarter across all of our business lines. The beginning of the sub-quarter continued with strong trends and positive However, recent COVID-related restrictions in China have impacted our business activities as more cases in more regions have been announced. Although the absolute total number of COVID cases are not notably high compared to other parts of the world, health officials in China have continued to stay on high alert, implementing stringent strategies to contain the spread. For example, in Beijing, where Jingcheng headquarters is located, as well as being a key market for us, the patient traffic to hospitals has been limited by strict testing and other requirements. Travel within areas where cases have been reported is also discouraged, with quarantine rules in place. As a result of these measures, in Beijing and other high-risk areas, such as Shanghai, Liaoning, and Jiangsu provinces, Our business has been affected over the past few weeks, particularly our LDT segment, which relies on patient traffic. At this point, we believe that restricted operating environment is temporary, and rules could be lifted sometime in the third quarter. So if the situation normalizes in full queue, we do expect patient activity to improve from current levels. similar to the rebound and pent-up demand that we have experienced a few times over the last year. And meanwhile, we're closely monitoring the fast-evolving circumstances and continue to execute in key geographical areas that are currently less impacted, such as Shandong, Zhejiang, and Tianjin. In addition, our IVD segment has been growing stronger than our internal forecast. So if 4Q normalizes, IVD sales transaction expected to, traction expected to continue. Despite COVID-related disruptions, we continue to grow and expand our business lines with significant market size potential and are anticipating some key catalysts for the rest of this year. Turning to page five and six, for our early screening business, we have began the prep work for our NAMPA registrational trial during the second quarter, the head-to-head trial which compares HCC screen versus ultrasound plus AFP remains on track with our plans to proceed with enrollment this year. And we continue to project potential NAMPA approval of HCC screen in 2023. We look forward to updating the market with more information on the trial over the next few months. We also plan to expand to multi-cancer early screening and project to release case control CRC data for early screening later this year. Recently, in our second effort to partner with local governments as we have done with the Wuxi Initiative, we announced that we would work with Guizhou Province, Dafang County authorities by utilizing our HCC screen assay. Together with our partners, we intend to carry out early screening, diagnosis, treatment, follow-up screenings, and patient management for high-risk liver cancer groups in Dafang County. The project seeks to bring leading cancer early screening products and services into China's rural markets, enabling better technology and more equitable health care options for more people in the country. These types of initiatives are consistent with other supportive measures laid out and being implemented by the Chinese central and other local governments. Under China State Council's Healthy China 2030 plan, the goal is to increase five-year cancer survival rate from the current roughly 40% to over 46%, or a 15% growth rate. As a leading NGS player in China, the rapid emergence of targeting the immunotherapies will increase demand for our diagnosis and monitoring business, as well as our biopharma services. Whereas early detection, particularly liver cancer, also remains a focus for the government. And companies with differentiated technologies like us, I highly encourage to introduce innovative solutions to address unmet medical needs. So overall, we remain confident about the gross prospects of the precision oncology sector in China, and we anticipate Jingcheng to be a continued beneficiary from policy tolerance. So now turning to page seven, on the MRD side, our efforts are progressing well. For second MRD in blood cancer, this panel continues to be well received by our biopharma partners. So recently, SecMRD has inked a partnership with a leading MNC pharma company, representing the first domestic blood cancer MRD product that the partner has chosen to use in their clinical trials. Our broader LDT launch to the clinical setting, including hematology centers and hospitals, is expected to take place in the next couple of months. Other studies in solid tumors, including liver and lung cancer, is ongoing. And we look forward to sharing some initial data later this year or next year. Turning to slide eight. So overall, we're very excited about our biopharma service business as we continue to form partnership through our MRD products, OncopanScan, FusionScan, et cetera. We're also collaborating with biopharma companies to co-develop CDX kits. for their innovative drug candidates. For example, our collaboration with system for the CDX test for Avapretinib has entered the priority review and approval process in China. And in the U.S., our ClearLab in Maryland is up and running, providing us with a solid platform to offer services for cross-border trials and CDX developments. With a booming Chinese biotech sector, We are optimistic about our growth in this business segment. And in the second quarter, we have signed on additional three biopharma partners, now totaling 40 partners, and we continue to see a strong pipeline. And for our diagnosis business, we expect to initiate the recreational trial for our tissue-based large panel oncopan scan in the next month or two. Using OncoPenscan, our Beijing lab achieved full marks and was ranked first in NCCL's external quality assessment of comprehensive genomic profiling panels. We continue to be a leading LDT player in China, and we're planning to providing other types of LDT assets to enrich this part of business. And for the IVD segment, we just announced a new partnership with Shanghai Econ Genomics. Recall that Jingquan owns a CDX version of the S5 instrument in China. And with this partnership, we will work with Econ to apply S5 in reproductive health field in the China market. And Econ currently offers pre-pregnancy, prenatal, and inheritance disorder testing solutions for a network of over 400 hospital partners in China. GeneTron will also support the commercialization efforts. Overall, we're pleased to expand application potential of S5. So turning to slide nine, recently we also received CE mark for our aging lung cancer assay. The CE mark represents the second regulatory milestone for this assay and a new commercialization opportunity. So together with S5, In our fully automated bioinformatics solutions, we offer end-to-end fast turnaround and a seamless workflow for hospitals and clinical laboratories that prefer to run NGS testing on their own. We believe that this offers a significant operational advantage for our potential customers outside of China. So I will now turn the call over to our CFO, Mr. Evan Xu, to provide more details on our second quarter financials.