Genetron Holdings Ltd (GTH) 2020 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to Q2 2020 Genetron Health Earnings Conference Call.

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

I would now like to hand the conference to your first speaker today, Ms. Hoki Luk. Thank you. Please go ahead, ma'am.

Hoki Luk: Hello, everyone and welcome to Genetron Health second quarter 2020 earnings conference call. The company's earnings results were released earlier today and are 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 provision of the U.S. Private Securities Litigation Reform Act of 1995.

Statements that are not historical facts, including statements about the Genetron 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 Genetron Health's 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 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 second 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 Co-founder and Chief Scientific Officer, Dr. Han Yan; Chief Technology Officer, 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 and Co-founder of Genetron Health. Sizhen, please go ahead.

Sizhen Wang: Yes. Thank you, Hoki. Good morning and good evening, everyone, and thank you for joining our second quarter 2020 earnings conference call. I'm pleased to address you today, our first earnings call since completing our IPO.

On June 19, 2020, we successfully got listed on the NASDAQ stock exchange and raised net proceeds of $235 million. This milestone event was a culmination of our team's continued persistence and drive since our founding in 2015.

On behalf of the entire management team, we would like to thank our employees for their hard work and dedication over the past five years as well as our customers and shareholders for their support.

I would like start today's call by providing an overview of our business. So, Genetron is a leading precision oncology company in China that specializes in cancer molecular profiling. By harnessing advanced technologies in molecular biology data science, we have developed a comprehensive oncology portfolio that covers the entire spectrum of cancer management.

Our three primary business units address current and the future needs including first, diagnosis and treatment recommendation as well as continued disease management and care; and second, early screening; and the third, development service with global biopharmaceutical companies.

As you know, China is the largest oncology market in the world with the estimate over 4 million cancer incidence in 2019 representing about a quarter of total global incidence and deaths. Precision oncology is relatively nascent in China, there was a critical need for a comprehensive molecular profiling solution.

And so, this sector represents a tremendous market opportunity. To compare to the U.S., China has twice the number of cancer cases, yet, molecular profiling is performed on around only 5% of eligible patients versus around 10% in the U.S. Specifically, in Next Generation Sequencing or NGS, the penetration rate is estimated to be in the 1% range compared to around 4.5% in the U.S. So, the penetration rates are calculated based on the total number of estimated cancer survivors.

I'm proud to say that although we are a relatively young company, we have already become a market leader in China in all three of our business segments as verified by third party research.

So, first, in the diagnosis and management market, Genetron is a leading NGS-based cancer molecular diagnosis player by revenue in China. In 2019, we were ranked third in China with about 12% overall market share in terms of NGS-based Lab Developed Test or LDT revenue.

In terms of cancer type, we have the largest market share in central nervous system and digestive systems and we're ranked third in lung cancer. In addition to our focus to gene panel testing service which covers almost all of the top cancer types, we also provide comprehensive gene panel, mainly our flagship product, Onco PanScan covering over 800 genes.

Onco PanScan is one with the broadest gene panels available and it's applicable for both tissue and molecular biopsies for the best clinical outcome. Among NGS-based diagnostic and monitoring companies in China, we were ranked number one in terms of obtaining the most NMPA in other words, NMPA-approved In Vitro Diagnostic or IVD products.

As you may know, NMPA or National Medical Products Administration is the regulatory body in China similar to the FDA in the United States. We have established the most comprehensive NGS-based IVD platform and assay portfolio.

Our NMPA approvals include four clinical molecular testing instruments and three diagnostics assays with the most recent approvals obtained in late 2019 for our Genetron S5 and S5 Chef instruments as well as in early 2020 for our Genetron S2000 instrument and our 8-gene lung cancer IVD tissue assay.

We are very excited about our 8-gene lung cancer IVD assay as it is not only -- not only offers the most comprehensive gene coverage compared to other products on the market in China but it also represents our first clinically-approved NGS assay based on Genetron's proprietary One-Step Seq Method. Our One-Step Seq Method is specifically designed to optimize for hospitals to carry out their own NGS testing on site, thanks to its simplicity and quick turnaround time. We expect this product to be a key growth driver for our IVD segment in the next few years.

Moving on to other IVD products in our pipeline, we have seven assays being developed that cover across diagnostics, monitoring and early screening. For diagnostic and monitoring, our most clinically-advanced IVD assay in the pipeline include two blood-based assays in lung cancer, namely T790M, ctDNA assay developed on Genetron's 3D platform, it's a digital PCR platform and the NGS ctDNA assay developed on Genetron S5 platform which is a medium-throughput NGS sequencer.

We also have a tissue based assay being developed in thyroid cancer. Trials of these three assays are ongoing and we expect to receive some of these approvals next year.

We are also advancing the IVD registration process for our flagship product, Onco PanScan. We are on target to complete the technical filing by the end of this year and to start the clinical trial at the beginning of 2021.

The other three assays are being developed in liver, glioma and bladder cancers and I will elaborate on our liver program and early screening in a little bit.

We are focused on commercializing our LDT service and IVD products to provide a comprehensive suite of solutions to hospitals across China. In LDT of more than 1,000 class 3 grade A hospitals that are capable of cancer treatment in China, over half of them have ordered LDT tests from Genetron through our team of 270-plus sales and marketing reps and about 30 distribution partners.

Genetron has signed additional contracts during the quarter and now has 35 direct hospital contracts including 18 IVD ones. Leveraging the operational simplicity afforded by our One-Step Seq Method combined with our self-developed and cost-effective assays, we created a win-win scenario by increasing margin for both Genetron and the hospitals.

We're continuing to expand our commercialization footprint by signing up additional hospitals and channel partners. For example, we recently deepened the strategic partnership with Thermo Fisher in order to augment our capabilities to promote our medium-throughput NGS system Genetron S5 to more public hospitals in additional disease fields across China.

So with intent of expanding our reimbursement footprint, we are undertaking initiatives for our IVD assays to be included in the provincial level central procurement systems which is the very first step towards public medical coverage in the future. Two of our assays TERT and IDH have been approved in 10 provinces so far. Our 8-gene lung cancer assay has also obtained two provincial approvals so far and is pending approval in another five provinces.

Moving on to our initiative starting early screening market perhaps potentially the most transformative asset is the development of our proprietary lipid biopsy for liver cancer screening named HCCscreen. Genetron is the first mover in the liver cancer early screening space in China which targets about 74 million HBV carriers with elevated risk for liver cancer and represents a the potential market size over $7 billion.

We have developed our proprietary mutation capture technology which allows parallel profiling of mutation and [maturation] alterations in one reaction from the same ctDNA sample and supports multiple tests of a single ctDNA sample without sacrificing sensitivity. Our technology enables us to save time, cost and increase efficiency of our R&D effort in early screening.

We are now conducting a multi-center prospective study of the 4,500 HBV positive individuals to follow up the first 2,000 case cohort, is expected to be completed by end of 2020. Preliminary data from one center which was conducted based on about 300 patients, has been very encouraging showing 92% of sensitivity, 93% of specificity and 35% of positive predictive value.

And we are currently projecting that we could have a data read out from these 2,000 patient follow ups in the first half of 2021 and we're also simultaneously seeking an IVD registration based on the remaining 2,500 patients in the study and this portion of the study expects to enter clinical trial phase in the first half of 2021.

In addition, we have started to explore the commercialization strategy for our liver cancer screening test and one of the key initiatives was the formation in 2019 of a nationwide strategic alliance with iKang Healthcare Group which is a major provider of preventive healthcare service in China. And under the agreement, iKang will offer our HCCscreen in their applicable medical examination centers.

We believe this partnership will not only be beneficial as we commercialize the HCCscreen but it also provides a nation-wide healthcare platform to drive market education and acceptance of early cancer screening. Such collaboration would also allow us to collect real world data and help us fine tune our product.

So, leveraging our mutation cancer technology, we plan to expand our R&D efforts into early screening of lung and digestive cancers as well. Currently, we are the only company in China that was selected to participate in national key research and development projects organized by the Ministry of Science and Technology for liver, lung and digestive cancer early screening. R&D plans of these assets are currently underway and we plan to share more details with you in the next few quarters.

So, regarding our development service segment, Genetron has established the number one position in this space by collaborating with 26 global and local biopharma companies. We provide customized service and products that treat these customers' needs including biomarker evaluation for molecularly-targeted therapy and immunotherapy, clinical trial enrollment, companion diagnostics development and joint marketing post drug approval.

Touching on our recent business performance. The outbreak of the COVID-19 started in late 2019 and early 2020, has resulted in quarantines, travel restrictions, temporary closure of hospitals in China affecting our customers, employees and business partners.

Like many other companies, our first quarter 2020 results were negatively impacted by COVID-19 pandemic. However, our team acted quickly and developed a COVID-19 detection kit. So, the Genetron SARS-CoV-2 RNA test in the first quarter. Later into June, in June, this test received FDA Emergency Use Authorization approval for export by the Chinese authority.

The management team is not only pleased that we leveraged our capabilities to play a role in the fight against the current pandemic, but this product also underscores our team's ability to stay nimble in the face of an evolving and challenging threat environment.

In the second quarter, the overall impact from COVID-19 has reduced based on the easing of related restriction and our about has started to recover.

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

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

Revenue increased by 40% to RMB102 million, up from RMB73 million a year ago. Diagnostics and monitoring revenue increased by 52% to RMB94 million, up from RMB62 million in the same period of 2019.

Revenue generate from the provision of LDT services increased by 31% to RMB76 million versus RMB58 million in quarter 2019. The increase was mainly attributable to the increase in the number of LDT tests which rose 15% year-over-year to approximately 6,700 tests. To a lesser extent, the increase was also attributable to a higher average selling price per test as a result of product mix shifting to higher value products such as Onco PanScan.

Revenue generated from sales of IVD products grew by 381% to RMB18 million from about RMB4 million in the second quarter of 2019. The increase was mainly driven by the increase in the number of assets and the sequencing platform sold in the second quarter of 2020. Notably, our Genetron S5 instrument and the lung 8-gene assay, we cannot record any COVID-19 detection kit sales in the second quarter this year.

Development services revenue decreased to RMB8 million from RMB11 million a year ago mainly resulting from the decreases in sequencing services. Historically, sequencing services have not been profitable. So, it was our deliberate effort to reduce such offering in the quarter. Within development services revenue, revenue from biopharmaceutical services increased multiple fold compare4d to a year ago indicating our continued efforts in growing this business going forward.

Despite higher revenue, cost of revenue remained relatively stable at RMB38 million in the second quarter which was about the same amount as a year ago. As a result, gross profits increased by 85% to RMB64 million in the second quarter, up from RMB35 million in the same period of 2019.

Overall gross margin increased to 63% for the quarter compared to 48% in the prior year mainly attributable to improved scale, operational optimization as well as better product mix. In particular, gross margin for our LDT segment was 70% compared to 63% a year ago, thanks to operating leverage and our focus on margin improvements through both product mix optimization and prudent price management.

For our IVD segment, gross margin was 55% versus 36% in the second quarter of 2019 attributable to significantly higher sales in this quarter.

Operating expenses increased by 16% to RMB117 million for the second quarter this year, up from RMB102 million a year ago.

Selling expenses decreased by 7% to RMB61 million from RMB65 million. Selling expenses as a percentage of revenue decreased to 60% from 90%. The decrease was driven by improved sales productivity and reduce of travel and the marketing activities amid the COVID-19 environment.

Administrative expenses were mostly flat compared to a year ago at RMB28 million.

Administrative expenses as a percentage of revenue decreased to 27% from 38%. This reflected the benefit of improved operational efficiency.

R&D expenses increased by 56% to RMB30 million from RMB19 million in the second quarter of last year. The increase was driven by our continued innovation efforts by development of new products and technologies. R&D expenses as a percentage of revenue increased to 29% from 26%.

Other income-net was RMB1.3 million, down from RMB10.5 million. This was primarily due to reduced government subsidies during the quarter.

Operating loss decreased by 21% to RMB53 million for the second quarter of this year versus RMB67 million a year ago.

In the second quarter, we recorded RMB2.78 billion (see press release - "RMB2,778.6 million") in fair value loss of financial instruments with preferred rights compared to RMB68 million a year ago.

Now, prior to the IPO, the fair value of preferred shares was recorded as a liability on the balance sheet. Any appreciation in fair value of this instruments was recorded as a fair value loss in the income statement. Due to the significant increase in Genetron's valuation immediately prior to the IPO during this quarter, the fair value loss recorded was multiple times higher than a year ago.

Upon the completion of the IPO, all preferred shares were converted to ordinary shares. As a result, in compliance with IFRS, the carrying value of the financial instruments with the preferred rights under non-current liabilities was derecognized and the same amount was recorded into total shareholders' equity. In the future, the fair value loss of financial instruments of preferred rights will no longer reoccur.

Net loss for the period was RMB2.83 billion for the second quarter compared to RMB136 million a year ago. We are also providing a non-IFRS net loss figure as management believes that these figure would be helpful to show the trend of our underlying business.

Non-IFRS net loss excludes share-based compensation, fair value change and other loss of financial instruments with preferred rights. Non-IFRS was RMB44 million for the second quarter of this year, decreased by 25% compared to RMB59 million last year.

Basic net loss per share was RMB17.04 compared to RMB1.09 year ago. Non-IFRS basic net loss per share was RMB0.26 for this quarter compared to RMB0.47 last year. Diluted net loss per share is equivalent to basic net loss per share.

Cash, cash equivalents and financial assets at fair value, basically marketable securities, were close to RMB 1.9 billion or $268 million as of June 30, 2020. In June, Genetron completed an initial public offering raising approximately $235 million of net proceeds, net of underwriting fees and other expenses.

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

Okay, thank you, Evan. Overall, management is pleased with our second quarter financial results. Against the backdrop of the lingering COVID related challenges, we've delivered strong top line growth and gross margins, along with our improved expense structure.

Now looking in the first six months of 2020, despite a very challenging operating environment, we still delivered 28.3% revenue growth year-over-year, thanks to the strong foundation that the team has built over the past few years. It's truly highlighted the resilience of Genetron's business and our solid execution in scaling up our business.

So looking ahead to the second half of 2020, we expect uncertainties and challenges remain for all industry players due to the ongoing pandemic. So any large scale outbreak in one or more regional markets in China expect to potentially have adverse impact on our business.

So in fact, towards the end of the second quarter end of July, Beijing in which is the location of our headquarters and our major market experienced the second wave of outbreak and this caused some impact on our business. So recently, we have also seen clusters of outbreaks in other key markets, such as Dalian and Xinjiang.

So as such, we're closely watching the situations, however, as exemplified by the solid performance delivered in first half, the strength of our balance sheet, thanks to our successful IPO, we're confident that Genetron is stronger than ever and we're well positioned to adapt quickly to changes in market conditions.

Longer term, the total addressable market for Genetron's current and pipeline products is estimated to be around $20 billion. Our growth strategy remains intact. We intend to continue to grow our product portfolio for diagnostics monitoring, to innovate and develop high value early screening pipeline assets and to collaborate with additional biopharma partners.

So based on our strategies and financial strengths, I'm very confident that the total addressable markets for Genetron's current and future products will continue to expand over time.

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

Certainly. (Operator Instructions). We have our first question from line of Max Masucci from Canaccord. Please go ahead.

Hi, congratulations on a strong opening quarter as a public company and for your success in navigating through an uncertain COVID-19 environment.

To start, can you highlight any key sources of growth within the LDT portfolio in the quarter? I know Onco PanScan performed well. Are there any other particular sources of strength in the LDT portfolio that you would call out during the quarter?

Yeah, this quarter obviously Onco PanScan is one of the major revenue drivers in terms of percentage of our overall tests delivered. But other than Onco PanScan, we also see our smaller lung cancer panel, the 18-gene panel as well as our glioma panel. We have a dedicated panel for glioma for TDM also growing.

Great. And then I imagine that your HCCscreen program was, with the Chinese municipal government was probably impacted by COVID-19 in Q1 and likely in Q2. How is this program recovering now that COVID-19 disruption has lessened a bit over the past few weeks?

Yeah, you see, we are talking about the initial commercialization efforts of our liver cancer screening. We have focused our efforts by partnering with iKang Healthcare Group, as I introduced in the remark at the beginning. But that channel has been quite negatively impacted by the pandemic for the first half of this year.

As you can imagine, for the first quarter, I think pretty much all their examination centers remained closed. On the second quarter, they are opening the centers gradually but it's still a big portion of their centers are still not back to the normal business level.

And then also, just in the recent months, they have dedicated a whole lot of efforts, the iKang Group have dedicated a lot of their efforts into providing the COVID-19 related tests, especially over the period of time in June when Beijing is under the COVID restriction.

So as you may know that Beijing has under -- kind of went through an extensive testing period where the government organized large scale testing that we have completed, a testing of the first 10 million people in just about 10 days. That was a tremendous amount of effort and then iKang, a lot of medical centers were a major contributor in that process.

So that again, which pretty much put our commercialization efforts on the liver cancer screening on hold. But the good thing is that we see and more and more of their medical centers are back to operation and we do expect in the Q3 we'll see the increase of the revenue by collaborating with them to market our liver cancer early screening product.

Great. And then one more final question. In the U.S., we've observed a buildup of delayed cancer diagnoses in Q1 due to COVID. Are you seeing a similar trend in the Chinese market? And how can your precision oncology tests help doctors navigate through a potential delayed cancer diagnosis buildup in that backlog?

Yeah. We do see some extent of that pent-up demand, right as the delayed diagnose need. So when we're looking at the business volume in May and June and we see that our revenue growth has primarily driven by the normal business activity so our normal diagnostics activities.

So again, I just want to emphasize again that in Q2, especially one of our key markets in Beijing towards the second half of Q2, especially in June, we do see that the second wave outbreak actually negatively impact our business. In absence of that, we believed that we would probably deliver an even stronger growth.

Thank you. We have our next question from the line of Jason Liu from Credit Suisse. Please go ahead.

Hi, everyone. Congratulations to the team under the challenging times again, and congratulations on the first earnings conference. I just had three questions here on my side. The first question is around the IVD segment. I was wondering if the team can share any more sales figures for the 8-lung or 8-gene lung cancer kit. Specifically, how has hospital adoption been going? Any more color would be helpful. That would be my first question.

Yeah. So Evan, you probably want to address that.

Sure. Thanks, Jason. So in this quarter among -- within the IVD revenues, the revenue from the equipment versus assay are roughly 50-50 in terms of the percentage. So as you can see that there's quite a significant pickup of the assay sales during the quarter. And then within the assay sales, lung 8-gene assay contributed to a little over half of that.

So we do see the demand, the popularity of this assay in the market after we have successfully expanded our S5 sequencer installation pace over the last six months or so.

Got it. Thank you. That's very clear. And then my second -- yeah.

Jason, I just want to add a few -- a little more color at that is that in our 8-gene lung cancer assay was just approved in February, right. And pretty much all the selling activities into the hospital is on hold in Q1. Q2, we start to see the opportunities opening up. And we are, our sales team are in talk with a number of hospitals.

We see a very good level of acceptance or a very good level entry for these key cancer hospitals to deploy our S5, the sequencing instrument plus the 8-gene lung cancer assay as a whole solution, right. That's a one stop medium-throughput sequencing solution to set up their own in hospital testing lab for the rest of this year.

Just that the first half of this year, I think that the overall, the process of the in-hospital setup, again was adversely impacted by the COVID-19, the virus situation. But we do see a clear trend. In the absence of any major outbreak for the second half of this year, I think our deployment of the S5 system and the 8-gene lung cancer assay, this whole solution that will be accelerating in the second half of this year.

Got it. Thank you very much. That was very helpful. And then my second question is around the early screening segment as well. I know, Sizhen, you mentioned the iKang partnership. I was wondering if you could provide a little more color as well whether the product has gone to a lot of the iKang diagnostic centers and do we actually see patients using this product or is it still in the process of getting to iKang? Thank you.

Yeah. So we have done the pilot launch at a few medical examination centers with iKang already. So we do see that again, the great level of interest from iKang's customer on the liver screening assay. We're still in the early stage to educate the customer base of iKang by launching the product one-by-one in their over 300 medical examination centers across the nation and that will be done for the rest of this year.

Got it. And then my last question is around the COVID-19 detection kits. Evan mentioned earlier that there were no recorded sales in the second quarter. I was wondering, I know it's still going into the next quarter, but can the team give some color as to past month? Have we seen orders in the U.S. or in the EU? How has that been going?

Yeah, so you know that our kit was just approved in June right, for FDA EUA. And our core business is still cancer so we haven't devoted much of that commercialization for marketing that kit at this point.

But I was hoping that all the pandemic will be easing across the world for the rest of this year, that's our hope. But in case of the demand going up, we still see this as an opportunity of generating additional income for the rest of this year.

Operator: Thank you. We have our next question from the line of Sung Ji Nam from BTIG. Please go ahead.

Hi, thanks for taking the questions. Maybe since we have Doctors Yan and Jiao on board, maybe I could kick off with a question on the HCCscreen. For the PPV that you're seeing in the current prospective studies of 35%, obviously a significant improvement over your initial study and the publication associated with that. Could you kind of talk about what that -- the implications of that in terms of clinical utility compared to existing screening methodologies? And what's kind of the value proposition that that PPV provides? And is there also further headroom for improvement beyond that?

Yeah, sure, Sung Ji. Yeah, I'll probably relay that question to our CTO, Dr. Yuchen Jiao.

Yeah. So the HCCscreen is to detect early stage liver cancer patients from the healthy individuals HBV carrier stage who do not have any symptoms and they could be inactive in the alpha-fetoprotein test, a (inaudible) scan test, that we can use our technology to detect this earliest early stage patients.

We have PPV of 35% that is inall together got 31 tests positive [ones] and we confirm that 11 of them are real liver cancer patient. So this is a (inaudible) this is a rather high PPV value making the less individuals be conscious because they've got fewer positive result.

Yeah, I think Yuchen the second part of the question is more about when we apply this HCCscreen what clinical value that we expect to see compared with the traditional screening method.

Yes, we do our test will have a higher sensitivity originally we can detect more early stage liver cancer so that they will have the chance to get on time [ERP] and their prognosis will be much better and some of them will even be cured. Because when the tumor is less than 3 cm, they could have the chance to remove the tumor surgically and they would have a much better clinical outcome than the advanced stage liver cancer.

Great, thank you for that. And then on the development services side, obviously it's still a smaller part of your business and the sequencing service is kind of going away as well. But was there any impacts from COVID in terms of clinical trial delays or other study delays on your biopharma partner side that could get impacted revenue from the quarter or I guess more likely the outlook for over the next several months?

Yeah, obviously, in Q1, all the clinical trials are on hold, since almost muted activities and the Q2, along with the clinical testing activities, right, we see that rebounding of the clinical trials activities as well. So as you can see that the overall development service revenue has decreased for Q2. However, it reflects primarily the management's strategy change. We're shifting our focus from a low margin sequencing service type of business to more of biopharma service contracts and we are adding more as we speak these partnerships.

And, again, we do expect that without any additional outbreak or major outbreak for the second half of this year, the clinical trials activity will definitely pick up pace which will translate to obviously higher revenue from the biopharma business segment.

Great. And then lastly for me, it's great to see additional hospital contract in the quarter. I was curious about your sales force structure currently and if there are plans for further expansion in the near term, how are you -- what you're thinking about that?

Right, as you can see that we had a very good optimization of our selling expenses for the first half of this year. So in fact, we grow our business quite significantly especially the LDT, especially the diagnosis and the monitoring service segment. We grow about 50% for the second quarter.

We achieved all these without adding any additional sales force right. We have achieved that all through our optimization and increase of self-sufficiency. But speaking, looking into the second half of this year, we do see opportunities for additional coverage. And also we do see the opportunity of driving deeper in terms of penetration of some of the key hospitals that we cover.

So speaking of that, we do expect to expand the sales force by certain level towards the end of this year. So, in short, we are expanding our sales marketing efforts, at the same time we're optimizing that effort as well and which will translate into further sales efficient -- sales efficiency gain. So that's one of the key tasks we're trying to accomplish this year.

Thank you. (Operator Instructions) We have the next question from the line of [Shipen Feng] from [CICC]. Please go ahead.

Congratulations on the company progress and thank you for taking my question. Well, actually, I just have one little question. On the [positive] side, we see that National Health Commission of China just released a regulatory policy regarding the ICL industry a week ago. So I just wonder what's your opinion on the policy, especially considering that the policy was released amid this post the COVID-19 period in China? And how do you understand the potential influence to the whole industry [by the] document? Thanks.

Xipeng, can you repeat your second part of the question?

Yeah, actually, the National Health Commission of China released a regulatory policy. So I just wanted your opinion on this regulatory policy.

Yeah. So I guess you're referring to the latest policy or guideline in terms of the ICL management, right, the independent clinical laboratory management. So we are actually excited to see these new guidelines being published. I think it reflects central government much greater attention on developing ICLs as one of the major force to provide sufficient diagnosis service.

But obviously all the hospitals in China, across China need it. And I think this guideline, to some extent were promoted or basically were brought up by the realization of the importance of diagnosis, particularly molecular diagnosis that the need, that the great needs caused by the pandemic, right.

As I mentioned earlier in the call, we were actually quite amazed by the government's ability to mobilize all the resources to complete and almost it's like 10 million tests in less than two weeks in Beijing so when Beijing had -- unfortunately had the second wave outbreak.

But obviously that level of intensity of the testing helps gratefully for the Chinese government, for Beijing government to put down the outbreak. So we're now pretty much in control, under control. So again in that testing efforts a major players are actually the ICLs in Beijing region. We actually obtained a license to do the testing as well, although we were not one of the major players, right, because that's not our core business.

But obviously, you see that the government's attention on this one and then they were trying to tightening the quality management. And that's I think the most important foundation you want to put down first before you push out other regulations or policies to promote the growth of ICL. And I think that's pretty much a prelude of additional policies is probably promoting the ICLs growth.

So as you can see that, in our business, we have two segments, right. One is the LDT, the other is IVD for our diagnosis monitoring business segments, which is the biggest business segment. The LDT essentially is carried out in our ICLs. So we are one of the ICLs as well for molecular diagnosis for oncology.

So, we do believe these new guideline or the policy will serve as a tailwind for us to develop further our LDT business which is still a major, major revenue driver for Genetron.

Thank you. As there are no further questions, I would like to hand the call back to the team for any closing remarks. Thank you.

Thank you everyone again for joining us for our first investor call following the completion of our IPO in June. We appreciate your ongoing support. And if you have any questions, please do not hesitate to reach out to the Investor Relations team. Thank you and have a good day.

Thank you. Ladies and gentlemen, that does conclude the conference for today. Thank you for participating. You may all disconnect now. Thank you.