Genetron Holdings Ltd (GTH) 2020 Q4 法說會逐字稿

Good day and thank you for standing by. Welcome to the Genetron Holdings Ltd Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session.

(Operator Instructions). Please be advised that today's conference call is being recorded. (Operator Instructions).

I would now like to hand the conference over to our first speaker today, Hoki Luk. Please take over now.

Hello, everyone, and welcome to Genetron Health Third Quarter and Full Year 2020 Earnings Conference Call. The company's earnings release was issued earlier today and it's 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 of not historical facts, including statements about Genetron Health beliefs and expectations are forward-looking statements.

Forward-looking statements involve inherent risk and uncertainties. Further information regarding these and other risks is included in Genetron Health filings with 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. Sizhen Wang, Co-founder and CEO of Genetron Health, will recap some of our recent announcements and discuss upcoming milestones. Dr. Yun-Fu Hu, our Chief Medical Officer, will speak about our new HCC data and plans for this asset. Dr. Yuchen Jiao, our CTO, will go over our early screening technology and strategy. Evan Xu, our CFO, will provide financial highlights related to the fourth quarter and full-year results outlined in today's release in addition to 2021 revenue outlook.

Following management's prepared remarks, we will open up the call to questions. Our Co-founder and Chief Scientific Officer, Dr. Han Yan, 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. Hello everyone. Thank you for joining our Fourth Quarter and Full-Year 2020 Earnings Conference Call. I would like to direct you to the supplemental earning presentation on our Investor Relations' website and begin on slide 2.

In this past year, Genetron continues to solidify our position as a leading precision oncology company in China with the comprehensive portfolio that covers the entire spectrum of cancer management, addressing needs and challenges from early screening, diagnosis and treatment recommendations as well as continued disease monitoring and care.

If you turn into slide 5, to our 2020, despite challenges brought on by the COVID-19 pandemic, Genetron delivered strong financial results. We were excited to successfully complete our IPO on Nasdaq while making significant commercial and clinical progress across all of our business lines.

Our total revenue grow by 31%, year over year to RMB425 million in 2020. We were pleased with acceleration in year over year growth during the second half of the year, after reporting 28% year over year growth in the first half of 2020. Sales from HCCscreen, our most advanced early screening product for hepatocellular carcinoma which is currently commercialized as LDT service in China as well as our IVD revenue and hopefully our S5 instrument and Lung 8 Assay, both grow significantly.

Moreover our robust revenue growth was accompanied by strong margin improvements, improved SG&A operational efficiencies and the resulting narrowed losses compared to year 2019. Given a series of the key announcement in the past months in HCCscreen, I would like to spend the next few minutes to focus on this exciting asset of ours. So, let's move to slide 7.

So just yesterday, we announced exciting new data of 1,615 patients from our prospective cohort study of HCCscreen in which we reported data that has better sensitivity and comparable specificity versus the current standard of care. Yun-Fu will go into the details in a little bit.

Recall that HCCscreen is powered by Genetron's innovative and proprietary Mutation Capsule technology which enables detection of the multiple methylation alterations in parallel with mutation in cell-free DNA from blood samples. HCCscreen is the first product out of this platform and we are pleased to see all the progress we have made.

As you may know, liver cancer is endemic in China, accounting for almost half of the global incidences, with 350,000 annual new cases and death respectively. And its estimate that among the 120 million in high risk liver cancer population in China, around 74 million were HCC carriers. The potential market opportunity of HCCscreen to markets was the estimated TAM of over $7 billion according to [process] and research.

We are excited about the market potential of HCCscreen but more importantly we are also very proud that we're contributing to address the critical unmet need that could benefit hundreds of thousands of patients that save many lives and alleviate societal burdens. The market environment of early screening and detection also continues to be promising.

The Chinese government remained supported around the policy initiatives that focus on early detection and treatment. A few months ago, we announced that HCCscreen was selected by the National Cancer Center in China and that we see municipal governments were using its public health initiative. Of which, we see is committed to administering 150,000 tests over a period of the three years with local residents who are high-risk individuals for HCC.

This project has kicked off in the fourth quarter of last year, allowing us to realize some the test orders in our revenue. This pilot model set us off a good possible future commercialization and reimbursement roadmaps. More importantly, we are generating large scale, real-world data from this collaboration which offers tremendous strategic value as we continue the progress on expanding our early screening top-line beyond liver cancer.

We are advancing in digestive and lung cancer assay development and we look forward to sharing some early data in colorectal cancer this year. Also in early 2021, we established an exclusive, strategy partnership for HCCscreen with Chia Tai Tianqing, a subsidiary of Sino Biopharma to co-promote HCCscreen in the hospital market.

In China, Chia Tai Tianqing has the estimated 30 percent-plus market share in hepatitis antiviral drugs, a sales team of over 7,000 reps and network of over 2,000 general and liver disease-focused hospitals. Since the announcement, the teams from both companies have already set up a dedicated group to focus on initial rollout to about a 50 to 100 hospitals.

We expect this partnership to become more productive and allow us to launch HCCscreen effectively into the key hospitals over the next few quarters. So with these developments in addition to our partnership with iKang, Genetron has now covered the major market segments including hospitals [procurement contracts] and medical exam centers which we expect to really help us ramp up our HCCscreen revenue this year and beyond.

So, let me now pass the call to Yun-Fu, who will discuss our new HCCscreen data that we just reported. Yun-Fu?

Thank you, Sizhen. Please turn to slide 8. In February, we completed our prospective HCCscreen investigational study referred to as hereafter as the HIT study in 2,000 HCC positive patients. We called the study the collaboration between Genetron and National Health Center that start in 2019.

The protocol call for two six months follow-ups on these patients. They were able to complete followup work for total 1,615 patients. Results from study show HCCscreen achieved 88% sensitivity and 93% specificity and 40.9% PPV and 99.3% NPV. As evident on slide number 8, this line, HCCscreen reported better sensitivity and comparable specificity versus ultrasound and AFP combined which is [better care]. Ultrasound plus AFP shows 71% sensitivity and a 95% specificity.

Another important analysis and stratified by tumor size as shown on slide 10. Here of the patients we could obtain tumor size information. Forty-nine percent of the cases identified by HCCscreen are in early stage or less than 3 centimeters and these patients expect to have better prognosis than advanced stage patients.

In terms of sensitivity based on tumor size, HCCscreen showed 85% sensitivity for tumor size of less than 3 centimeters, 96% for 3 to 5 centimeters and 88% or larger than 5 centimeters.

On slide 11, we called it (inaudible) reported preliminary data of 297 patients which we showed 92% sensitivity and 93% specificity. If we look at the 95% confidence interval numbers and compare this more in the large dataset of the screen. The (inaudible) range narrow with the large patient pool. Furthermore, for sensitivity the lower bar [number] improved greatly to 80% from 62%, whereas specificity also got better going to 91% from 89%.

With this improvement and bigger center [site], we are more confident about our test performance. Based on this encourage data, we plan to initiate a registrational trial in China in second quarter of this year. We have dialogue with NMPA regarding design of the study which will be a head-to-head comparison -- compare HCCscreen versus ultrasound and AFP. We are currently finalizing clinical site and [NPIs].

Right now our U.S. plans for HCCscreen post our receipt of the breakthrough device designation. As result of the pandemic seems to move a little slower in the U.S. Our next step is to perform a confirmatory study on high-risk cohort in the U.S. population. Our lab in Maryland now -- is now CLIA certified and will be used to pursue U.S. studies for HCCscreen so as to serve global pharmaceutical companies, R&D and commercialization.

I would now like to pass the call to our CTO, Dr. Yuchen Jiao, who will drill a little deeper on our early screen technology namely, Mutation Capsule and our overall strategy beyond HCCscreen. Yuchen?

Thank you, Yun-Fu. I will discussion our Mutation Capsule early screening technology on slide 13. Mutation Capsule are developed in-house by Genetron and has two distinctive features that are very beneficial in the development of (inaudible).

First, this technology offers a detection of methylation alterations in new patients in (inaudible) axis. Both technology platform tend to focus on other mutations or methylations seldom we got traditional methylation method such as (inaudible) sequencing is known to Chinese, the mutation signals. And our mutation provided technology which our [PCR] and PCP (inaudible) remove other methylation signals.

Mutation Capsule can detect the two types of marker in one injection without having to obtain the [cfD] sample for separate mutation and the methylation and (inaudible). As such, it will be (inaudible) toward achieving high detection sensitivity. The compound detection of mutation and the methylation, these shows significant synergy in the detection of HCC which is conditioned with (inaudible) part in the screening of colon cancer from tool sample.

The second feature of Mutation Capsule is that the cfD sample (inaudible) recognized the information is preserved and amplified in the [Genetron] Laboratory which can be used for u to 10 analysis without sacrificing sensitivity then it is where possibly the cfD into (inaudible) action. In addition to the (inaudible) of this in the panels of mutation and the methylation markers, Mutation Capsule elaborate and also give you (inaudible) whole genome sequencing to profile (inaudible) parameters.

Lastly, Mutation Capsule (inaudible) has the function of de novo (inaudible) of methylation size that could have diagnostic value. The limited use of cfD from one blood draw is always the bottleneck in the development and application of (inaudible) products. The [multiplex] feature of Mutation Capsule enables comprehensive profiling of almost all types of cfD-based biomarkers from one cfD example. So, that we can compare the performance of the market and select the best class for the final product.

Furthermore, the Mutation Capsule elaborate collective further R&D of one tumor types can always be used to provide new markers for other tumor types. Panels for single cancer type can be easily combined for our multi-cancer panels. This screens notable time and the cost saving, giving -- given blood samples and the patient checking [other class]. HCCscreen represents the first product out of our technology platform.

Genetron has advantages of both its unique technology and then access to a large, real-world cohort. Our strategy is to find the best perform in the market in each single cancer assay and conduct prospective studies with the long-term goal of efficiently combining these assays and the cohort data to create a panel for multi-cancer screening.

So, then more details about our technology and applications, I would like to mention that we will be hosting a webinar with Science (inaudible) next week on the 31st. I will be discussing our technology and other liquid assay topics together with Dr. Anne Marie Lennon, director and the professor of division of gastroenterology and hepatology at the Johns Hopkins University School of Medicine. I look forward to speaking at this event and hope some of you can join us as well.

I will now turn the call over to our CFO, Ms. Evan Xu, to provide more details on our first quarter and the full-year financials. Evan?

Thank you, Yuchen. I will provide an update on our financial performance. Please note that all numbers provided are in RMB terms and that all comparisons I made on year over year basis. Starting on slide 15.

In the fourth quarter, total revenue increased by 30% to RMB134 million, up from RMB103 million a year ago. Diagnosis and monitoring revenue grew 44% to RMB124 million, up from RMB86 million in 2019. The increase was driven by the growth in the revenues generated from both the provision of LDT services, particularly in early screening and the sales of IVD products.

LDT revenue rose by 49% to RMB97 million versus RMB65 million in 2019. LDT diagnostic test starting in fourth quarter totaled approximately 5,340 units, representing a decrease of 16% from a year ago, primary due to the resurgence of COVID in our key sales territories in the fourth quarter.

In late December and January, there was notable COVID resurgence in China, particularly in the northern parts of the country including Beijing, our headquarters and (Inaudible) City next to Beijing. Record that Northern China is our key markets and the big resurgence had resulted in major disruptions in hospital and patient traffic, sales and the marketing activities and also other limitations and restrictions.

As such, we were negatively impacted by these issues, particularly in our LDT business. This negative impact sustained throughout the first two months of this quarter, coupled with typical slowdown here in Chinese New Year. In March, we are starting to see volume recovery and we are optimistic that the trends will be more normalized in the coming few quarters.

In addition, a few days ago the Chinese government has updated the regulations on supervision and administration of medical devices which include a language to formalize the regulatory framework of the LDT services. Specifically, the guidelines stated that self-developed diagnostic assays will be allowed based on clinical needs subject to certain standard and that there is no market products available.

More details of the rules and the guidelines are expected to come from the NMPA and the National Health Commission in the next few months. The leading LDT provider, Genetron welcomes tighter and a clearer regulations set a higher bar for the industry and believe that this will be beneficial for us in the long run.

Additionally, offsetting some of the COVID headwinds was a fact that our average selling prices increased compared to the same period in 2019 which was attributable to a shift to a higher value product such as Onco PanScan and also better pricing management. In the fourth quarter, our early screening test, HCCscreen, was sold in the form of the LDT services contributed to growing portion of the LDT revenue.

As Sizhen touched on earlier, our expanded collaboration with Wuxi in November has resulted in strong HCCscreen sales coupled with contribution from iKang. We expect HCCscreen sales to ramp up further based on our three commercialization channels, the Chia Tai Tianqing for the hospital market, government procurement contracts and expansion of the iKang Medical examination network.

IVD revenue grew 30% to RMB27 million, up from about RMB21 million in 2019. The increase was driven by post-assay and the sequencing platforms. Notable in November 2020 marked one year since the NMPA approval of Genetron S5 instrument. Our Lung 8 Assay was approved a few months after. Together this product formed a highly efficient in-hospital NGS solution within -- with the two-day turnaround time from sample to report.

For slide 16, Genetron has signed additional contracts during the quarter and now has 40 direct in-hospital contracts, of which 22 are in-hospital assay or sequencer purchase agreements compared to last quarter was 38 and 20 respectively.

Development services revenue decreased by 39% to RMB10 million from RMB17 million a year ago, mainly resulting from less sequencing services. Sequencing services has low margin, so we deliberately reduced that.

Within development services, revenue from biopharma services increased strongly compared to a year ago. We are optimistic of biopharma services trends. Despite higher revenue, cost of revenue decreased 13% to RMB50 million in the fourth quarter from RMB57 million a year ago. The decrease was primary due to better scale and a lower cost of certain reagents.

This brings us to slide 17, gross profit increased by 84% to RMB84 million in the fourth quarter, up from RMB46 million in 2019. Overall, gross margin increased to 63% for this quarter compared to 45% in the prior year. In particular, gross margin for LDT segment was 69% compared to 61% a year ago, thanks to better scale and also our focus on margin improvements through those product mix optimization and better prudent price management.

For our IVD segment, gross margin improved significantly to 62% versus 36% in 2019, attributable to a better mix of instrument and assays. In biopharma services, our margin also improved due to our shift of focus to biopharma services.

Operating expenses increased by 33% to RMB173 million, up from RMB171 million a year ago. Operating expenses are broken out on slide 18, among which selling expenses increased by 4% slightly to RMB72 million in the quarter from RMB69 million a year ago. However, selling expenses has a percentage of revenue, markedly decreased to 54% versus 67% in 2019. This decrease is primarily due to better scale and also different revenue mix.

Administrative expenses increased by 53% -- 55% to RMB44 million compared to RMB29 million in 2019. As a percentage of revenue, the ratio increased to 33% from 28% a year ago. The increase was mainly due to more headcount for administrative staff and also share-based compensation as well as higher professional fee.

Research and development expenses increased by 64% to RMB53 million from RMB32 million in 2019. The increase was driven by continued innovation efforts including product development, clinical trial activities, higher R&D headcount and also share-based compensation. As a percentage of revenue, the ratio increased just from 31% in 2019 to 40%. As a result of these expenses, operating loss was RMB89 million for 4Q versus RMB85 million a year ago.

Net loss for a period markedly improved to RMB73 million compared to RMB135 million a year ago. We're also providing non-IFRS in the loss figures as the management believe these numbers would be helpful to show the trends of the underlying business. Non-IFRS net loss exclude share-based compensation, fair value change for financial instruments with preferred rights.

So, non-IFRS net loss also improved significantly to RMB63 million for the fourth quarter compared to RMB86 million a year ago. Basic net loss per share was RMB0.16 compared to RMB1.06 a year ago. Non-IFRS basic net loss first quarter was RMB0.14 compared RMB0.68 in 2019. Diluted net loss per share is equivalent to basic net loss per share.

And I'll briefly discuss our full-year results covered on slide 19. Total revenue for year 2020 increased by 31% to RMB425 million from RMB323 million in 2019. Diagnostic -- diagnosis and monitoring revenue grows 43% to RMB386 million, up from RMB270 million in 2019. Revenue generated from LDT services increased by 24% to RMB292 million compared to RMB235 million a year ago.

Revenue from IVD products increased by RMB169 million -- 169% to RMB94 million from RMB35 million in 2019. Revenue from development services decreased by 28% to RMB39 million in 2020. Gross profit increased by 80% to RMB260 million in 2020 from RMB145 million in 2019. This resulted in an increase of gross margin to 61% for the full-year 2020 compared to 45% in 2019.

Operating expenses increased by 17%. Loss for the period was RMB3.1 billion for year 2020 compared to RMB600 million -- RMB676 million in 2019. Non-IFRS loss improved during year 2020 and it was RMB216 million compared to RMB280 million in 2019. Basic loss per ordinary share was RMB10.18 for 2020 as compared with basic loss per ordinary share of RMB5.41 in 2019. Non-IFRS basic loss per share was RMB0.72 for 2020 compared with RMB2.24 for 2019.

We have a very strong cash position. Cash, cash equivalents and the financial assets at fair value were close to RMB1.5 billion or $232 million as of December 31st, 2020. Now moving on to discuss our revenue outlook for 2021 on slide 20.

Based on current environment and providing no further major COVID-related disruptions in our key markets, we are forecasting revenue growth to be in the range of 45% to 47% which represents 2021 revenue in the range of RMB615 to RMB625 million.

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

Thank you, Evan. Moving on to discuss other assays and upcoming milestone on slide 22. On the early screening site, we view that reported HCCscreen new data as quite encouraging, especially concerning these are prospective data from a large patient pool. As Yun-Fu shared earlier, we're on track to initiate our registrational trial for HCCscreen in the second quarter.

I also mentioned in the beginning of the call that later this year, we plan to provide case control data from our colorectal cancer early screening study. On the diagnosis and monitoring site, we plan to initiate registrational trial of large panel Onco PanScan in the second quarter. We also expect our CDx test for avapritinib to gain NMPA approval this year.

Regarding MRDs, we are advancing the validation of Seq-MRD in larger cohort studies for select hematology cancers and expect consolidation to start in the first half. This asset was exclusively licensed from ImmuQuad late last year. In addition, this product also complements our biopharma service business line since Seq-MRD could be used in clinical trials for hematology cancer drugs.

We continue to generate many productive discussions in our biopharma partnership pipeline as a result. Additionally, we're working on MRD projects in solid tumors with initial focus on liver and colorectal cancer. We project that we could have MRD data in liver cancer in the second half this year or first half of next year.

In closing, we have a very strong year in 2020 and a good start to 2021 so far. Shown on slide 23, our strategic focus going forward will be to accelerate the development of the liquid biopsy base and solutions across the full cycle of cancer management, particularly in early screening and MRD while continuing to ramp up our commercialization efforts and grow our base business.

I'm also pleased that we took this opportunity today to tap into more discussion of our proprietary early screening technology which enable strong [path] of performance while delivering [significant] time and cost saving benefits. This technology along with our access to sizeable, real-world cohorts will be instrumental as we expand from HCCscreen, our single cancer assay, to a multi-cancer product.

Overall, we remained confident that we are well-positioned in the fast-growing precision oncology sector and we are excited about our gross prospects. And last but not least, we remained 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're now ready for questions.

(Operator Instructions) We have a question coming from the line of Sung Ji Nam from BTIG. Please go ahead.

Hi, thanks for taking the questions. First of all, congratulations on the quarter as well as the year and also I really appreciate 2021 guidance and also the color for the first quarter thus far. I was wondering if you might be able to comment on kind of how you're thinking about revenue cadence from 4Q to first quarter. Do you anticipate kind of flattish or could there be potential for an increase sequential growth or -- given just the COVID further pandemic impact and also the holiday you anticipate revenue -- there could be revenue step down the first quarter?

Yes, hi, Sung Ji. So first of all, the first quarter usually marks the lowest due to seasonality among four quarters for other year given the Chinese New Year. Normally, this Q1 will be -- in the normalized environment, Q1 would be the lowest quarter among the four, right.

Now this year, as you've correctly mentioned, Q1, we still continue to see the COVID impact in our key markets, especially in January prior to Chinese New Year. People are encouraged not to go home for the Spring Festival. So, these two factors combined, we do expect that Q1 will be -- for this year will be as a percentage of the full-year will -- still the lowest season.

Having said that, we saw as mentioned earlier after Chinese New Year, with better control in COVID environments, we do see volume rebounding, especially in our LDT and the core markets.

Got you, that's very helpful. And then just in terms of gross margins, obviously you continue to improve on your gross margins and as we look out to 2021 and beyond, do you anticipate to continue to improve upon your gross margins and kind of where the key driver is I guess rather than your top-line growth?

Yes, we expect to see continued margin improvements for 2021 for all of our three segments, LDT, IVD as well as biopharma services. Obviously due to continued volume or advantage in terms of scale and also continued product mix optimization and we'll continue to install prudent price management of our businesses.

Also in IVD, we do expect to see a mix shift to more assay sales, which will also drive gross margin as well.

Great. And then lastly for me, just on the HIT study, thank you so much for the data there. Just curious in terms on the sensitivity, the step down for greater than 5 millimeter, is that just function of the sample size or is there other scientific explanation behind that?

You're correct, it's just simply sample size issue, just small sample size, so.

Okay, got it.

Thank you.

Thank you so much.

We have the next question. This is coming from the line of Ying Wang from Credit Suisse. Please go ahead.

Thanks for the opportunity to ask a question. My question is about HIT study. So you provide a sensitivity regarding tumor size but do you have a sensitivity data regarding liver cancer stage, stage 1, let's say, what is the sensitivity of stage 1 and stage 2, et cetera? Thank you.

As of now, we don't have it, sorry.

But will you announce it later or -- I guess you plan to publish or not at all?

We will try to get more information and we will publish results later.

Okay, okay, yes. So, my next question is about HCCscreen commercialization efforts in China. So, I wonder can you provide us more color about HCCscreen sales in 4Q last year and how much HCCscreen sales you factor in when you make your 2021 sales guidance. Thank you.

So, in first quarter reduced because we started the -- we started the HCC commercialization from both Wuxi project as well as the ramp up of volume from iKang channel. However, this is the beginning of our commercialization for HCCscreen; therefore, we are not separately reporting the revenue number.

For this year, we do see -- we do anticipate HCCscreen test will continue to gain traction from all our three commercialization channels including the Wuxi project, the iKang channel as well as the Chia Tai Tianqing collaboration which is just ramping up in the first quarter. For this year, we do think that we'll see significant volume and revenue pickup for HCCscreen, given that all these three channels will generate strong momentum from last year's low base. We expect that, although it's been the first year, the HCC sales will contribute to -- between 10% to 15% of this year, 2021's revenue.

Okay, so that means about [RMB60 million to RMB70 million]?

That's right.

Hello, yes, this is Yuchen and I?d like to add one information and because we are working on our prospect to cohort and doing the screenings, we do not have other pathology information of the patient, so that we cannot catch the stage -- I mean know the size of the tumors but it is difficult to catch the stage of other tumors. So, that's why we don't have the sensitivity based on the stage. Thank you.

I see, yes, it's just a lot of data when we look at it, competitive data -- competitor?s data. They also report sensitivity based on stage. Yes, that's why I wonder if we have (inaudible) data.

Yes. That's because -- yes -- that's because they are working on a retrospective cohort and they're comparing the patient, cancer patients which have been diagnosed to have cancer -- to have (inaudible) is in the hospital with the healthy individual or high-risk individuals but we are doing the screening.

We are working on those who looked healthy and do not have any symptom and we gathered the positive results and that they got the confirmation by (inaudible) CT, then they go to (inaudible) hospitals to gather treatment in the treatment centers. That's why we cannot get the pathology information of those cases. That's the nature of the prospective cohort.

Yes, maybe a quick followup, I understand some of the companies are doing case controlled study and get data and actually some companies already submitting case controlled liver cancer detection data to China regulators for approval but we are working to initiate their prospective study.

So, I wonder if we have two kind of test kits, one got approval through case controlled, one got approval to prospective study, is that going to be any difference in terms of regulatory approval process and in terms of commercialization? Thank you. I will get back to the queue.

As of now, I don't think we know for sure what kind of claim we'll be getting with the prospective -- the case controlled study. So, for cancer screen, I believe the NMPA were -- follow FDA will require the prospective study.

Thanks.

Shall we move to the next question, sir?

Sure.

The next question comes from the line of Max Masucci from Canaccord Genuity. Please go ahead.

Hi, thanks for taking the questions and congrats on a great year. Nice to see the expanded data readout for HCCscreen and the strong performance of -- now that this expanded data is available, do you expect to see rising interest for new government procurement contracts or additional partnerships that target hospitals or health check centers?

Yes, so obviously, this is very encouraging results we're getting from this prospective study that we'd been working on for like almost two years now, right. And in our commercialization efforts, as we stated in our earnings call have started since last year when we have built essentially three different channels to educate the market and to commercialize our HCCscreen product.

And I believe that the latest prospective data as well as our upcoming efforts to get into the registrational trial will allow us to work more closely with our partners to essentially dig deeper into all these three different commercialized -- three different ways of a commercialization.

The HCC data, we've been working with iKang at the health check center for about a year now and I believe that this year we're getting into more of a rollout phase where we are almost -- we're almost ready to roll out any -- all these iKang health check centers throughout China who has been busy, very busy in training their staff last year over the difficult COVID-19 situation but we were able to achieve a lot.

So this year, so again with the validation from the prospective data, prospective study data, we will be accelerating the -- as a commercialization efforts to the iKang channel and with (inaudible) we just started this year, right. And the team has been working together to identify the first group of rural health. And again, I have to emphasize -- I cannot emphasize more than the importance of -- is completing this prospective data. That will give us the confidence data. Our product is at the stage, so we can start to apply in the clinical market setting and start to save lives.

Great. And then, under your program with Wuxi, you're establishing a centralized lab in the region. How is that lab build-out coming along, is it still the expectation that lab will be functional around mid-year?

We are right now running our HCC [seeking] screen test in our Tianqing lab, right, as we introduced before. And we will start building the Wuxi lab actually the second half of this year and we do expect the lab will be more or less ready and essentially could be [chartered] to use by the end of this year. So, that's the current timeline we're looking at.

Okay, great. And then, just one final question, during Q4 what sort of trends, bigger picture were you seeing in your IVD segment just in terms of hospitals willingness to bring in new instruments and also to go live with IVD testing?

Yes, right, so you can see that. We just -- we got our lung cancer, the 8-gene assay approved about a year ago, right. It was back in last February and a lot of activities of promoting it was essentially delayed by the -- by the pandemic in China. But I want to say that starting the second half of last year, our efforts start to accelerate and in Q4, we added about two hospitals, right, but we bring in many more hospital into the hotline. So, essentially, all the activities for the in-hospital [have been] market penetration is really accelerating at [Tianqing].

When we start to gain recognition among the pathologists, among the pathology labs, in big hospitals in China, they start to realize that the combination of S5 as well as our one step sequencing methodology base Lung 8 Assay is one of the best solution that fits the needs in the Chinese market. So therefore, we do expect this year that our in-hospital penetration will accelerate compared to last year.

And just like Evan mentioned earlier in the call, that we do expect that we start to see higher finish in our IVD cells to be -- essentially the assay cells which will not only help our cells grow, the IVD cells grow but also will help to marginalized [really] segment to improve first.

Great. Thanks for taking the questions.

Okay, thanks, Max.

Thank you. I would now like to hand the conference over to our host. Hoki, please take over.

Thank you again for joining us for our Fourth 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 IR team. Thank you very much.

Thank you. Ladies and gentlemen, that concludes our conference call for today. Thank you all for your participation. You may disconnect now.