Genetron Holdings Ltd (GTH) 2021 Q1 法說會逐字稿

Good day and thank you for standing by. Welcome to the Q1 2021 Genetron Health Earnings Conference Call. At this time, all participants are in listen-only mode. After our speakers' presentation there will be a question-and-answer session. (Operator Instructions). I would now like to hand the conference over to your first speaker today, Ms. Hoki Luk. Please go ahead. Thank you.

Hello, everyone, and welcome to Genetron Health's First 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 Litigations Reform Act of 1995. Statements that are not historical facts, including statements about Genetron'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 Genetron's filings with the SEC. All information provided today is as of the date of this call and Genetron does not undertake any obligation to update any forward-looking statement, 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. Sizhen Wang, Co-Founder and CEO of Genetron Health, will discuss recent business updates and outlook. Evan Xu, our CFO, will provide financial highlights related to the unaudited first quarter results outlined in today's release. Following management's prepared remarks, we will open up the call to questions. During the Q&A session, our CTO, Dr. Yuchen Jiao, and Chief Medical Officer, Dr. Yun-fu Hu, will also be available to answer questions.

With that said, I would now like to turn the call over to Mr. Sizhen Wang, CEO of Genetron Health. Sizhen, please go ahead.

Thank you, Hoki. Good morning and good evening, everyone, and thank you for joining our First Quarter 2021 Earnings Conference Call. I would like to direct you to the supplemental earnings presentation on our IR website and begin on slide two.

So thus far in 2021, we have continued to solidify our position as a leading precision oncology company in China, with a comprehensive portfolio that covers the entire spectrum of cancer management, addressing needs and challenges from early screening, diagnosis and treatment recommendations, as well as disease monitoring.

Turning to slide four, in the first quarter, Genetron delivered strong financial and operational results, with close to 20% top-line year-over-year growth reaching RMB 92.1 million. However, note that last year in the same period, we recorded significant revenue from our Covid-19 IVD test. So if we exclude that, our underlying core oncology business revenue grow 52.9% year over year.

Our revenue growth was also accompanied by notable margin improvements, up 59.3% compared to 55% in the first quarter of last year. So we are pleased with these results, given the backdrop of a challenging operating environment, coupled with seasonality resulting from the Chinese New Year holiday in February.

As we mentioned on our last call, in late December and January, there was notable COVID resurgence in China, particularly in northern parts of the country including Beijing, our headquarters, and Shijiazhuang, a city not too far away from Beijing. Recall that northern China is our key markets and this resurgence had resulted in major disruptions in hospital and patient traffic, sales and marketing activities and other restrictions.

As such, we were impacted by these issues throughout the first two months of the quarter. Since March, we are starting to see some volume stabilization and we are optimistic that the trends will be more normalized in the coming few months.

Operationally, over the last quarter, we continued to make significant progress across all business lines in diagnosis and monitoring, early screening as well as biopharma service. We've had a few key announcements thus far in 2021 and I would like to highlight some of these developments with you.

So first, let's focus on our liver cancer liquid biopsy early screening product, HCCscreen. In the first quarter, we reported encouraging new clinical data and announced two key partnerships to commercialize this product.

Recall that in March, we shared data from our leading prospective study, namely the HIT study. Based on data on 1,615 patients, HCCscreen achieved 88% sensitivity and 93% specificity and a 40.9% PPV and a 99.3% NPV. These numbers showed better sensitivity and comparable specificity versus ultrasound plus AFP combined, which is the standard of care, as summarized on slide six and seven for review.

So based on these results, we plan to initiate a registrational trial in China very soon. We have had dialogues with NMPA regarding the design of the study, which will be a head-to-head trial comparing HCCscreen versus ultrasound plus AFP and we are currently finalizing clinical sites. We continue to project the trial to complete by the end of 2022 and a potential NMPA approval of HCCscreen in 2023.

Turning to page eight. On the commercialization front, in January, we established an exclusive strategic partnership for HCCscreen with Chia Tai Tianqing, a subsidiary of Sino Biopharma, to co-promote the product in the hospital market. So in China, Chia Tai Tianqing has a estimated 30% plus market share in hepatitis antiviral drugs, a sales team of over 7,000 reps and a network of over 2,000 general and liver disease-focused hospitals.

So since this announcement, the teams from both companies have already set up a dedicated group to focus on the initial roll-out to about 50 hospitals. So we expect this partnership to become more productive and allow us to launch HCCscreen effectively into the key hospitals over the next few quarters.

And just a few days ago, we have announced a strategic partnership with JD Health, a subsidiary of JD.com, and the largest online healthcare platform in China. So this partnership includes HCCscreen, as well as our NMPA approved lung cancer 8-gene product.

For HCCscreen, this represents a fourth commercialization pathway, in addition to our existing channels through medical examination centers, public health projects and hospitals. There are already a series of upcoming marketing and educational activities planned for high risk liver cancer patient population. And for Lung-8, the plans are also underway for this product to be offered through JD's network of online hospitals and their retail pharmacies soon.

So JD Health has massive online users, along with a significant network of doctors and pharmacies. We are very excited to be working with this top-notch technology-driven domestic healthcare company. By combining Genetron's precision oncology capabilities with their online platform and other resources, we see this collaboration as an innovative commercialization strategy for molecular diagnostics products in oncology and we expect this to become a more prominent channel over time.

So touching on our U.S. plan for HCCscreen post our receipt of the Breakthrough Device Designation. Our next step is to perform confirmatory studies on high risk cohort in the U.S. population with some U.S. medical institutions. Now, our lab in Maryland is CLIA-certified and will be used to facilitate the U.S. studies for HCCscreen, as well as to serve global pharma companies on R&D and commercialization.

So moving on to slide 10. You'll recall that HCCscreen is powered by Genetron's innovative and proprietary Mutation Capsule technology, which enables detection of multiple methylation alterations in parallel with mutations in cell-free DNA from blood sample. HCCscreen is the first product out of this platform and we are pleased to see all the progress we have made.

Our next cancer indication will be in CRC, of which we expect to report case-control data this year. Now our strategy is to find the best performing biomarkers in each single-cancer assay and conduct prospective studies, with the long-term goal of efficiently combining these assays and cohort data to create a panel for multi-cancer screening.

So in addition to its application in early screening product development, we have also leveraged Mutation Capsule technology to develop our MRD products. Based on early encouraging results observed, we are planning to start larger multi-center studies for our MRD liver and CRC panels. We continue to expect to report case control liver MRD data later this year or first half of next year.

Turning to slide 12. On the IVD side, we have recently formed a strategic partnership with Siemens Healthineers that was announced just a few weeks ago at the China Medical Equipment Fair. This partnership aims to promote Genetron's S5 platform and lung cancer 8-gene IVD assay in Chinese hospitals in order to provide non-small cell lung cancer patients with efficient and accurate personalized diagnosis and treatment guidance.

And based on our One-Step Seq technology, the lung cancer 8-gene IVD assay can detect many mutations and fusions across eight different genes at once for targeted therapy selections in non-small cell lung cancer. Combined with Genetron S5, it offers advantage in detection efficiency, ease of use, economic value and can achieve a two-day turnaround time. It's suitable for independent clinical molecular testing in Chinese hospitals on all levels.

Another product that we leveraged off of our One-step Seq technology is our Seq-MRD product for blood cancer. We plan to launch our Seq-MRD product shortly.

So as a global leading IVD and diagnostic imaging player with extensive distribution and sales networks in China, Siemens' is a desirable IVD partner for Genetron. As of the end of the first quarter, we had 23 in-hospital purchase agreements. Overall, we anticipate the partnership with Siemens to help us continue to expand our distribution reach of our S5 and lung 8 - lung cancer 8-gene IVD assay.

So looking at our other IVD products in the portfolio, the trials of our blood-based lung EGFR IVD assay, as well as tissue-based thyroid cancer IVD assay are both progressing accordingly.

Also, we recently participated in funding round for start-up TellBio, which focus on developing its TellDx circulating tumor cell, or CTC, technology and complementary TellRx therapeutics platform. So as part of the strategic agreement, we will license and distribute TellDx within China and collaborate with TellBio to improve the platform. We remain keen on exploring new tech and leveraging our capabilities to bring them to China.

So now I will turn the call over to our CFO, Mr. Evan Xu, to provide more details on our first quarter financials. Evan?

Thank you, Sizhen. I will provide an update on our financial performance during the reporting quarter. Please note that all numbers provided are in RMB terms and that all comparisons are made on a year-over-year basis.

Starting on slide 14, in the first quarter, total revenue increased by 19.8% to RMB 92.1 million from RMB 76.8 million in the same period of 2020. As Sizhen mentioned, excluding revenue from Genetron's COVID-19 IVD test revenue in the first quarter of 2020, total revenue grew 52.9% year over year.

Diagnosis and monitoring revenue increased by 30.4% to RMB 87.1 million in the first quarter 2021 from RMB 66.8 million in the same period of 2020. The increase was driven by growth in the revenues generated from the provision of LDT services, in both diagnosis and early screening. Note, revenue in the first quarter was impacted by COVID-19 resurgence in some of our key sales territories, which Sizhen discussed earlier, as well as the Chinese New Year Holiday.

LDT revenue increased by 51% to RMB 71.8 million during the first quarter 2021 from RMB 47.6 million in the same period of 2020. This was driven by HCCscreen sales, as well as the LDT diagnostic tests. LDT diagnostic tests sold in the first quarter 2021 totaled approximately 5,100 units, representing an increase of 29.6% compared to the number of LDT tests sold in - LDT diagnostic tests sold in the same period of 2020.

IVD revenue decreased by 20.5% to RMB 15.3 million in the first quarter 2021 from RMB 19.2 million in the first quarter 2020. The decrease was due to RMB 16.6 million of COVID-19 test revenue that was booked in the first quarter of 2020. So excluding that revenue, sales of IVD products grew 490%, driven primarily by sales of S5 instruments.

We continue to expect our expanding installation base, propelled by Genetron's IVD sales team, along with our - with our collaboration with Siemens, to drive our reagent and overall sales in the - in the coming quarters.

Revenue generated from development services decreased by 50.6% to RMB 5 million in the first quarter 2021, from RMB 10.1 million in the same period of 2020. The change mainly resulted from the decrease in sequencing services, reflecting our continued adjustment of our business strategy towards more highly value - high value biopharma services. Biopharmaceutical revenue continued to increase by several folds compared to a year ago and we are optimistic on overall biopharma services trends.

Cost of revenue increased by 8.4% to RMB 37.5 million for the three months ended March 31st, 2021 compared to RMB 34.6 million in the same period of 2020.

Moving to slide 15, gross profit increased by 29.1% to RMB 54.5 million in the first quarter 2021 from RMB 42.2 million in the same period of 2020. Gross margin increased to 59.3% for the - for the first quarter of 2021, compared to 55% in the same period of last year. In particular, gross margin for our LDT segment was 68%, compared to 60.2% a year ago, thanks to better scale and product optimization.

For our IVD segment, gross margin was 34.2% versus 79.9% last year. Note that IVD gross margin in 2020 first quarter was abnormally high due to the oversized revenue from the COVID-19 test. We saw a mix shift in the first quarter of 2021 to substantial instrument sales as compared to prior quarter, which resulted in lower IVD gross margins. IVD kit sales were lower primarily due to seasonality, although we expect this to normalize going forward.

Operating expenses increased by 49.5% to RMB 163.5 million for the first quarter from RMB 109.4 million in the same period of last year. Operating expenses are broken out on slide 16, and are as follows.

Selling expenses increased by 10.9% to RMB 59.7 million in the first quarter 2021 from RMB 53.8 million in the same period last year. Selling expenses as a percentage of revenues decreased to 64.8% in this quarter from 70% last year. The decrease was primarily due to better scale and different revenue mix.

Administrative expenses increased by 106.3% to RMB 44.6 million in the first quarter 2021 from RMB 21.6 million in the same period of 2020. Administrative expenses as a percentage of revenue increased to 48.4% in the first quarter 2021 from 28.1% in the first quarter 2020. The increases were mainly due to more headcount, as well as higher professional fees after IPO.

Research and development expenses increased by 80.9% to RMB 50 million in the first quarter 2021 from RMB 27.6 million in the same period of 2020. R&D expenses as a percentage of revenue increased to 54.3% in the first quarter of 2021 from 36% in the same period of 2020. The increases were driven by higher R&D headcount and related expenses, as well as continued innovation efforts, including product development and clinical trial initiatives.

As a result, operating loss was RMB 109 million in the first quarter, compared to RMB 67.2 million last year, on slide 17.

Net loss for the period was RMB 115 million for the first quarter, compared to RMB 115.5 million for first quarter of 2020.

We are also providing non-IFRS net loss figures as management believes these numbers would be helpful to show the trends of the underlying business. Non-IFRS net loss excludes share-based compensation expenses, fair value change and other loss of financial instruments with preferred rights. Non-IFRS net loss was RMB 105.8 million for the first quarter 2021, compared to RMB 65.6 million for the prior year.

Basic loss per ordinary share attributable to ordinary shareholders of the company was RMB 0.25 for the first quarter of 2021, compared to RMB 0.92 for the same period of last year. Non-IFRS basic loss per ordinary share attributable to ordinary shareholders of the company was RMB 0.23 for the first quarter of 2021, compared to RMB 0.52 for the same period of 2020. Diluted loss per ordinary share is equivalent to basic loss per ordinary share.

We have a very strong cash position. Cash and cash equivalents and financial assets at fair value were close to RMB 1.4 billion or U.S. $212.7 million as of March 31st, 2021. Our cash and cash equivalents decreased compared to the end of last quarter due to net cash used in operating and investing activities, primarily attributable to the net loss of RMB 115 million incurred and the purchase of cash and currency management products of RMB 197.1 million.

Now moving to discuss our revenue outlook for 2021 on slide 18. Based on the current environment and providing no further major COVID-related disruptions in our key markets, we remain confident in delivering revenue growth to be in the range of 45% to 47%, which represents 2021 revenue in the range of RMB 615 million to RMB 625 million.

This concludes the discussion of our first quarter financial results. I will now turn the call back to Sizhen.

Thank you, Evan. In closing, we've had a good start to 2021 financially and operationally, highlighted by our new strategic collaborations and encouraging HCCscreen data. Shown on slides 20 and 21, our strategic focus going forward will be to accelerate the development of liquid biopsy-based solutions across the full-cycle cancer management, particularly in early screening and MRD, while continuing to ramp up our commercialization efforts and grow our base business.

We remain on track to initiate registrational trials of HCCscreen and Onco Panscan shortly, as well - as well as launching Seq-MRD for our biopharma customers in their clinical trials for hematologic cancers and we look forward to sharing CRC case control early screening data and MRD liver cancer data with you in the near future.

So overall, we remain confident that we are well-positioned in the fast-growing precision oncology sector and we are excited about our growth prospects. And last but not least, we remain highly committed to focusing on innovation to develop high quality products that would benefit more cancer patients.

So this concludes the prepared remarks portion of today's call. Operator, we are now ready for questions.

Certainly. (Operator Instructions). We had first question from the line of Sung Ji Nam from BTIG. Please go ahead.

Hi. Thanks for taking the questions. Maybe starting out with your biopharma business, could you talk about the trend there? Obviously it was also impacted by the pandemic and just kind of curious. You saw growth year over year again this quarter. Are you seeing that business normalizing, anticipate more projects, that biopharma or clinical trials will continue to normalize going forward?

Right. So yes, definitely you are looking at a very fast growth pace of Genetron's business. In fact, our CMO just got back from a very busy meeting in Suzhou over the weekend, Right, DIA meeting in China and there are - there are - there are so many - so much biopharma activities going on in China with the environment stabilizing. In fact, we see the biopharma activities are picking up and generally coming back to a normal pace starting in the second half of last year.

And although we have disruption in the first quarter of this year, right? Especially in essentially December last year and January this year, but with the environment back to normal in March, like I said, the biopharma activities are really picking up speed.

And Genetron, again, is very well positioned to serve the surge in demand from this biopharma sector given that we are the very few players in the market that possess the well-rounded capability to help them in their - the drug development, the full cycle of their drug development given that we have a strong R&D capability and we have probably the world class regulatory capability as well as we already build up a nice coverage in terms of the testing market.

So we basically have everything that the biopharma partners are looking for. So that's why we see a strong demand in this alliance business of Genetron. So remember, we had a very slow start last year, but now we have over 40. I think we have 40 biopharma partners now, including the big MNCs as well as really the cutting edge - the leading local start-ups and they're covering a full range from the small molecule to CGT, to a cell - a cell gene - to CGT sector, cell gene therapy sector.

And we are leveraging fully our proprietary technology such as One-step technology, the fusion scan as well as the Mutation Capsule.

Yes. Could I follow up with a couple more questions? So thank you so much for that. That was very helpful.

Yes. Sure.

Maybe one on Siemens. Obviously Siemens Healthineers, exciting partnership there. Could you talk about - just based on my knowledge, they have not done a lot of partnerships in terms of on the genomic diagnostic side, so this seems pretty unique from that standpoint.

So would love to hear kind of what they might be thinking as well and if there are opportunities for them to further expand into this area and also from you guys' standpoint, are there opportunities to also partner with other multinational large IVD players such as Roche and others, Abbott and others?

Yes. So you're right, Sung Ji. So we're pleased that we established the partnership with Siemens Healthineers. You know that they are - they do have a sizable IVD business portfolio in China and then they are, I think, the fourth largest players among all the big international players such as Roche Diagnostics or Abbott and they do have extensive outreach to the in-hospital testing market in China with especially that strong presence in certain areas.

And right now in their offering, they do see the molecular profiling or molecular diagnostics offering is relatively a weakness. So that's why they do have strong motivation to collaborate with a full range molecular diagnostic - oncology molecular diagnostic players like Genetron and so Genetron have one of the leading molecular diagnostic solutions for oncology in China.

We have - with the combination of S5 medium strip sequencer with our One-step Seq technology-based lung cancer 8-gene assay, we have the sought after, we have the solution that the - that the hospitals need for their - for their more effective treatment on the lung cancer patient. So we do believe that that partnership between our innovative product solutions with their extensive distribution network will yield good results against this fast-growing in-hospital testing market in China.

And for your second part of the question then, yes. So we are definitely open and I can't share what exactly or other partnerships we might be making, but I can tell you that Genetron is an innovative company, focusing on developing the first class molecular diagnostic solutions, right? And we will be always looking for the right partner in order to educate and to penetrate the market together more effectively.

Great. Super helpful. And then lastly from me, just a clarification. You mentioned the timeline for the CRC screening test case control study data readout. What about the MRD for CRC? Did you guys talk about the timeline there in terms of when the data readout might be available? Thank you.

Yes. I think we mentioned over the call that we're making significant progress in our already quite rich pipeline. So leveraging the same edition capture technology, we are not only pushing our HCCscreen into the registrational trial as planned, but also we have already started our work or study on CRC early screening and we do expect to release the preliminary case controls data sometime this year on CRC.

And again, by leveraging the advantages of Mutation Capsule, right? So basically we can profile a mutation in parallel with methylation changes. So we are developing our MRD product platform as well and we do expect to release our primary liver cancer MRD study data sometime this year and we also see some encouraging early - encouraging early data on CRC as well and as I mentioned on the call, we will be launching a larger multi-center study for liver cancer MRD as well as CRC MRD sometime this year.

Great. Thank you so much.

And thank you, Sung Ji.

The line from Credit Suisse is open. You can ask your question now. Thank you. Yang Huang from Credit Suisse, your line is open. You can ask your question now.

Okay. Thank you. Yes. This is Yang from Credit Suisse and congrats for the nice quarter. My first question is about HCC commercialization progress in the first quarter. So can you provide maybe more color on HCCscreen sales in the first quarter number? What is the percentage in our LDT sales?

And the second thing, can you provide more details on the traditional trial we are going to launch later this quarter for our HCCscreen? I suppose we now have a complete trial design detail and also we probably have a number of clinical trial size being monitored as well.

Yes. Sure, Yang. Yes. To answer your first question about the update on the commercialization progress of HCCscreen. So remember, we previously guided revenue from HCCscreen will be roughly about 10% to 15% of our annual revenue of 2021. And in first quarter, I mean, at this point we have not broken out our HCCscreen quarterly sales yet, but I can tell you that early screening revenue is significant in Q1.

It's part of a - it's part of the reason that our LDT sales growth, it's quite strong in Q1 and I can also share here is that with development in all these channels we have set up since the - since the Q4 of last year, we do see that the HCCscreen as a new service, as a new product has started to generate - has already exhibited ability to generate sustainable growth. So we do expect the revenue from this product will continue to grow for the rest of this year.

So for the - for the channels, right? And you see that we have started the work - the roll-out with Ikang last year and starting beginning this year we're - Q1 this year, we're pretty much in all of their major health checking down centers and we do observe the trend of the same-store sales is actually growing month by month.

So this is a very good channel, we observed, as this reflect that with the proper education or proper outreach to the customer with an effective channel, we will - we are starting to generate essentially the awareness among the high-risk population and the buying interest from these people is going strong.

So this reflects our belief that at this stage, we want to work with the best partners to invest heavily into the market education. We need to tell the people who needs the early screening and where and what product to get, right? And that area will continue to invest along with our partners and we believe this will translate eventually to a high product revenue growth. And, Yang, you also - I'm pretty sure you also noticed the recent announcement of our partnership with -

Sorry? So okay. So you probably have also noticed the recent announcement of our partnership with JD Health. Yes. So that's essentially another very good channel we believe that we will be able to effectively educate the market and it will be effectively build up the brand, build up the awareness and, again, as like I said, it will eventually translate to the sustainable revenue growth.

Yes. Thanks. So by the way, are you going to consider to increase your guidance for HCCscreen for this year or not yet?

Well, I think, as you can imagine, right? All these channels have really great potential, right? And these channels - these partnerships position us well for future revenue growth and we have no doubt about that, but, again, all these partnership building and, like I said, the market education and the penetration will take time, right?

We will take our steps, as a company, not only focusing on commercializing the HCCscreen as LDT service, but also we're investing heavily into pushing this into researching trial and turning it into eventually IVD product.

And we do believe that the big, big potential and potentially the $1 billion revenue product like HCCscreen, its full potential will be hit when you get the regulatory approval and when you are working your way over these partnerships to, again, build up the awareness among your target population and we do have a high expectation that we're going to complete the trial and then get approval timely in the - in the very near future, right?

We expect now - we just restated in the earning call that we expect to have the trial done in next year and have the assay approved in 2023 and we're also quite optimistic that we can eventually drive down the cost structure - drive down the cost and thus drive down the price and eventually obtain the national reimbursement coverage and then that's when you will see this product reach a hyper growth period.

And then we'll see that this product will - the large-scale application of this product will eventually serve our purpose - I mean our ultimate goal of driving down the death rate of liver cancer and we have - we are all working very hard on that from R&D team to regular team to sales marketing team.

Okay. Great. And maybe my second question. Can you provide maybe more details on the registrational study for the HCCscreen?

Yes. So the registration, as we stated, will start very soon and we're just finalizing the final list of the clinical sites and the trial design, as our CMO, Yun-Fu, mentioned in last - couple months ago in the last earnings call, we're pretty much finalized with NMPA and the trial design will call for a head-to-head comparison between AFP and ultrasound with our product HCCscreen, right?

And it will be in the size of several thousands of patient enrollment and, again, like I said - like I said, we do expect the trial will be completed sometime next year. So we're fully on track for that.

And okay. I remember last time we said the trial is going to kind of do the test only as a baseline and there will be no follow-up time - follow-up or very short follow-up. Is that still the thinking?

Hey, Yang. This is Yun-Fu. Yes. So there will be additional tests done at the same time just to get the clinical truth, so it's not just our test. As Sizhen mentioned, there will be comparison of our test against the AFP ultrasound, but the end point is the clinical tools determined by CT or MRI and our statistical hypothesis, our test, will be superior to the standard of care, AFP plus ultrasound, in terms of sensitivity by non-inferiority for the specificity. And we expect to have no fewer than maybe 4,500 patients in the two studies.

Okay. Just want to make sure. So we are going to have our HCCscreen test as a baseline and they are - some people will get the comparison test, right? The AFP and the - and the ultrasound test and for the clinical truth, the test will be done as a baseline or will be done after some follow-up time?

Okay. So all the patients enrolled in our study will have HCCscreen test, AFP plus ultrasound and the clinical truth determined by CT or MRI at the same time or approximately the same time.

Okay. As a baseline?

Yes. So there will be no follow-up.

Okay. Okay. Okay. Okay. And do we know how many sites we're going to open?

You mean the clinical sites? We are - yes. They are looking for ...

Yes, the clinical sites. Yes.

Yes. We're looking for multiple sites, probably around five to eight sites.

Five to eight. Okay. Number of patients is about 4,500. Okay. Got it. Thank you.

Thank you.

Yes. Thanks. Okay.

(Operator Instructions).

[Now hold on].

No more questions?

Certainly. So we have our next question from the line of Christy from HSBC. Please go ahead.

Hi, management. Thank you for your presentation and congratulations on your results. So I just have a quick question on the COVID-19 test kit because I think for this quarter, it's quite a significant part of the IVD revenue. So I'm just wondering - so including that, first of all, for this year what do you expect the IVD growth to be compared to last year and overall, how much does this COVID-19 test kit take as a percentage in terms of the overall IVD revenue from last year? Thank you.

Right. So regarding your second question, most of the COVID tests last year sold was concentrated in Q1. Throughout the year, there was a small revenue in Q4 as well, but in terms of scale, Q1 was the majority part of the whole year for last year.

And the other question.

Yes. And the first - can you repeat the first question? Sorry. Can you repeat that?

Yes. So the first question is more on the guidance for this year in terms of IVD revenue growth.

Oh, okay. We don't provide guidance on individual revenue segments. However, as we do - we give - we reiterate our full guidance of RMB 615 million to RMB 625 million for this year, driven by growth in all business segments from LDT to IVD and also early screening and biopharma services and out of these, obviously we do believe that IVD and early screening revenue will be strong growth drivers among the other business segments.

And this year, we continue to focus on getting more IVD solutions into the hospitals given that, last year, the impact from the pandemic was still quite severe throughout the whole year, right? And this year, assuming that COVID is within good control, our diagnosis business, the key strategic focus is to target the top 100 plus hospitals and to work with the hospitals and penetrate those hospitals with our IVD solutions, the Genetron S5 plus lung 8 solution.

Which provides a lot of competitive advantages compared to other solutions offered by other players in this sector given our solution provides a simpler solution as well as a faster runtime from sample to report. Only requires two days and this has been well received by public hospitals in China. So this year, this will be - continue to be our focus in terms of IVD commercialization and we intend to accelerate the number of in-hospital IVD partnerships.

Okay. Thank you. And I have another question on the development services. So I understand that development service has been under pressure because it's shifting away from - shifting towards biopharma services. So I'm just wondering when will we - when can we expect to see a turnaround in terms of revenue contribution from this? Thank you.

Yes. So as with each quarter, we share with the investors that within development services, our focus is really the high value biopharma partnerships, biopharma services and although in terms of absolute dollar amount this is still relatively small - relatively small percentage of the total revenue, however, we do see significant strategic value from these partnerships.

As Sizhen introduced in the beginning, we are quickly establishing Genetron's reputation and brand name in this community thanks to our CMO, Dr. Hu, and I think by now we can be proudly saying that we have - we're a leading player and we have earned quite a - quite a bit of good trust from the biopharma community with approximately 40 partnerships already established.

Many of these partnerships and contracts takes time to execute given that they are usually tied to the biopharma partners' research timeline, especially for clinical trials. We have to collaborate with them and sync up with their schedule. However, all these backlog partnerships, they will help us to establish our solid foundation in this - in this community and we believe that this is really a good start.

And we'll continue to build on top of this and with more partnerships and word of mouth, we're confident that biopharma revenues soon will become the prominent part of the development services and eventually will be the major part of the development services segment.

Thank you. And in terms of dollar terms - actually in terms of percentage terms, when do you expect the growth territory to be back to positive for development services overall?

I can't have - I'm not writing a guidance on exact timeline, but I guess my estimate is that in the next few quarters, we should be able to see the development services revenue to return to positive growth trend.

Okay.

Yes. Just in addition to that, and then we'll start to see even higher percentage coming from the high value or high margin biopharma service sector. And one more thing I want to emphasize on this one as Sung Ji was - the first question was about this sector as well. So we all know that the partnership or the business with these biopharma companies not only going to generate revenue immediately for us, but also it will - I mean, in most of these partnerships, it will lead to a co-developer product or, in many cases, it's a companion diagnosis kit.

I can tell you that one of our first partnerships - one of our first early partnerships with Sino, right? With their new drug approved in China, we have already completed our COVID-19 diagnosis kit clinical trial with them now. It's a - it's a PDGFRA testing kit and we do expect the approval in the - in the near future. That will welcome our first completed companion diagnosis project.

And these kits will lead to sustainable product revenue in the future, which means that some of these development service sectors - this development will lead to future IVD business growth. So we're very excited to see that the growth in this sector will - and we believe it will translate to more growth in the future in the - in the IVD business sector.

And in terms of the higher margin that you mentioned earlier, is there like a rough like range or guidance that you're looking at?

Yes. So like Evan said, right? We cannot provide a detailed breakdown of different business segments' gross margin this point, especially for the young business segment like the biopharma service. It's still going through - it's far from being mature, right? So at this stage, I guess any projection around gross margin would not be too meaningful.

Okay. No problem. Thank you so much.

Thanks.

Thank you. Thank you. As there are no further questions, I would like to hand the call back to Hoki Luk for any closing remarks. Over to you, ma'am. Thank you.

Thank you again for joining us for our first quarter earnings and business update call. We appreciate everyone's ongoing support. If you have any questions, please do not hesitate to reach out to the investor relations team. Have a good day and evening. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Thank you.