Genetron Holdings Ltd (GTH) 2021 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2021 Genetron Health Earnings Conference Call. At this time, all participants are in 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 may be recorded. (Operator Instructions).

I would now like to hand the conference over to your host today, Hoki Luk, head of investor relations, please go ahead.

Thank you. Hello, everyone, and welcome to Genetron Health's Fourth Quarter and Full-Year 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 US Private Securities Litigation Reform Act of 1995.

Statements that are not historical facts, including statements about 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 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, chairman, and CEO of Genetron Health will discuss recent business updates and upcoming catalysts. Evan Xu, our Chief Financial Officer, will provide financial highlights related to the unaudited fourth quarter results outlined in today's release, as well as our outlook for 2022.

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. Hai Yan; Chief Technology Officer, Dr. Yuchen Jiao; and Chief Medical Officer will also be available to answer questions.

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

Thank you, Hoki. Good morning and good evening, everyone, and thank you for joining our Fourth Quarter and Full-Year 2021 Earnings Conference Call. So first I would like to direct you to the supplemental earnings presentation on our investor relations website, and begin on slide two.

2021 was indeed a year filled with accomplishments for Genetron. Our total revenue grow over 25% year-over-year highlighted by our continued penetrations in the cancer diagnosis and monitoring market, as well as the liver cancer early screening segment.

We also established several key partnerships with the likes of AstraZeneca, Fosun Pharma, and recently with HUTCHMED to develop new tests, and expand commercialization of existing tests while further validating our products and technologies with impactful publications.

In 2022 we're excited to build on this momentum by advancing our pipeline to broaden our precision oncology platform, and enhance our value proposition. If you turn to slide four.

As a foremost provider of precision oncology products and service in China our comprehensive portfolio covers the entire spectrum of cancer management spanning early screening, therapy selection, MRD monitoring, and developing CDx with biopharma companies.

In 2021 we grow diagnosis and monitoring revenue by 28% to RMB 492.4 million. The primary driver of this growth was a 64 increase -- percent increase of IVD in-hospital sales driven by greater adoption of our sequencing platforms, and assays including the Genetron S5 instrument and the 8-gene Lung Cancer Assay.

As some of you may know, in China as the current regulations stand the IVD in-hospital market is a segment where there is a clear pathway for potential government reimbursement. Moving forward we intend to invest resources to further penetrate the in-hospital market with our solutions.

We are very pleased that we have gained good traction in the past few quarters by establishing 30 IVD hospitals contracts at the end of the year 2021. On the LDT side of the business, we grow revenue by 16% led by sales our -- of our early screening tests in addition to our LDT diagnostic test volume growth of 11%.

This was the first full-year that we introduced our early screening test as a LDT, and we are happy with the performance, and believe that early screening access will be a growth driver continuously for 2022 as we continue to roll out our commercialization strategy.

The COVID impact headwinds persisted in the fourth quarter, and weighted on top-line year-over-year growth of 10% on revenue of RMB 146.9 million. Our IVD business grow over 66% thanks to the continued uptake of our S5 instrument and Lung 8 NGS assay. The LDT business was more heavily impacted by China's zero-COVID strategy.

As we discussed in the past, the zero-COVID focus of the government has led to large-scale testing, and other travel restrictions throughout the country's outbreak areas, and resulted in declines in patient traffic to many of our LDT customers. Operationally, we had a eventful year focused on further strengthening of precision oncology portfolio.

Now I will discuss a few of the key developments. Let me start off with our early screening segment on slide five. In November, we initiated a NMPA registrational trial for our early detection assay in HCC by beginning the enrollment for the trial of our methylation multi-marker, PCR-based assay, HCCscan.

Recall that this was a 5,000 patient trial in nine planned clinical sites of which we have started in five sites already. We also intend to select some of these same sites for our multi-omics, NGS-based HCCscreen trial.

The HCCscreen trial has been slightly delayed based on COVID-related disruptions but we do plan to enroll subjects around the end of the second quarter. We continue to believe that this structure of both PCR and NGS tests would be a sound strategy.

PCR has a more established presence and readily available workflows in many hospitals and clinics in China. And the trend continues to accelerate based on the nucleic acid testing needs, and the associated government-led infrastructure build since COVID.

In addition, a few months ago, DNA methylation and other generic -- genetic testing were included in some of Beijing and other provincial insurance programs establishing a benchmark pricing of around RMB 800 for methylation-based tests and around RMB 1,500 for NIPT NGS-based testing.

Based on these dynamics, our company sees that adding a high-performing PCR-based assay would be commercially viable, while also providing self-pay for patients in lower-tier markets with a cost-optimal solution.

So overall we are confident that we can deploy both in-hospital and central lab models to increase accessibility and penetrate the liver cancer early screening market more effectively.

As for our HCCscreen plans in the U.S., we have started a confirmatory study with two leading medical institutions in the U.S. And may present data at a upcoming conference later. So beyond liver cancer, we have plans to develop a multi-cancer product in the future.

We have already shared some early retrospective CRC data during our last earnings call showing over 91% sensitivity and 95% specificity. We continue to expect the CRC data to be published some time in 2022.

So now turning to slide six. On solid tumor MRD, recall that we have announced a multi-year co-development agreement with AstraZeneca R&D China for a NGS-based personalized MRD test in China.

MRD testing may help in the clinical management for patients well before metastatic lesions grow to significant size detectable by conventional methods such as MRI and CT scan. Both AZ and Genetron teams have been working together very diligently since the partnership started.

Assay optimization is currently ongoing and expect to finish by year-end. Concurrently we are also planning a pilot LDT launch in the second quarter, and expect to expand to official launch before year-end.

Recall that with this partnership AZ plans to use the co-developed MRD test for China-specific solid tumor clinical trials that are designed to incorporate the use of NGS-based personalized MRD tests. The companies may also expand the partnership later to include IVD registration and commercialization.

So touching on the specific development plan for this co-developed personalized assay. The assay prototype development has been completed based on our proprietary Mutation Capsule platform.

We have shown great analytical validation results as demonstrated by gastric cancer data in the publication on Journal of Hematology & Oncology in which the personalized assay showed excellent sensitivity to detect 0.001% tumor DNA from peritoneal lavage fluid samples for precise prediction of peritoneal dissemination.

In terms of clinical validation work data in locally advanced rectal cancer patients were recently published in eBioMedicine, part of The Lancet Discovery Science. In the study, analysis was conducted on different MRD approaches after neoadjuvant therapy.

We are also excited the publication has been accepted for a high-impact journal for our HCC MRD data, and it is expected to be available in the next few months. These data are highlighted in slides nine and 10.

The chart on slide seven shows the general workflow of the tumor-informed approach. Essentially, mutation markers are selected based on whole exome sequencing of tumor tissue and a personalized panel is then designed for subsequent blood-based ctDNA testing.

The advantage of this approach is that the panel performance is maximized and the false positive and negative results can be avoided as much as possible. The disadvantage is that this method requires tumor tissue samples, and is a costly and long design process.

On slide 8, we would discuss the advantage of using Mutation Capsule technology in solid tumor MRD development. Mutation Capsule is a method for detecting mutation and methylation of tumor-specific genes in ctDNA, and it supports both our early screening tests, as well as our tumor-informed and tumor naive assay developments.

The platform enables multiple tests analysis based on a single cfDNA sample, thereby reducing panel validation time, and providing head-to-head comparisons between multiple MRD strategies.

So, beyond tumor-informed MRD assay, we are also exploring tumor-naive MRD approach based on Mutation Capsule to evaluate the performance of different types of biomarkers, including mutation, fragmentation, methylation, et cetera. We look forward to sharing more updates as these programs proceed.

Mutation Capsule also allows more sensitive detection in low yield cfDNA samples, with higher conversion efficiency of cfDNA molecules. Just last week, the China National Intellectual Property Administration granted an invention patent to Genetron. We are very excited that this grant further strengthens our competitive position in developing new assays in emerging segments such as MRD and early screening.

On slide 9, we present the analytic validation of our tumor-informed MRD assay in gastric cancer. In a prospective cohort of 104 Gastric cancer patients, the MRD assay detected all the cases that developed peritoneal dissemination with 100% sensitivity and 85% specificity. MRD-positive patients were associated with decreased recurrence free survival and overall survival

On slide 10, we present our clinical studies comparing personalized assay with fixed panel assay in CRC and liver cancer, respectively. Compared with personalized assay, the performance of MRD profiling based on fixed panel varies on different tumor types and clinical application scenario.

For Seq-MRD in hematological malignancies, shown in slide 11, is the validation data from 128 clinically confirmed patient samples. The positive detection results of traditional flow cytometry and Seq-MRD were highly consistent. Notably, 10 cases were detected MRD positive by Seq-MRD but negative by FCM, suggesting higher sensitivity of Seq-MRD in this study. We believe this is the first validated NGS-based MRD detection assay in China for hematological malignancies.

Commercially, our pilot launch with Fosun Pharma that started in January is progressing well. Based upon positive market feedback, we are planning for a full launch in the second quarter. This assay is also generating many dialogues with biopharma partners and we just signed a partnership with JW Therapeutics. We anticipate a few more partners, influential partners, to sign on in the next few months.

Overall, we are pleased with continued support by the healthcare authorities of MRD testing in hematological malignancies in China, and believe that our NGS-based Seq-MRD represents an innovative and competitive option in the market.

Turning to slide 12, moving on to discuss our biopharma services business.

In the fourth quarter, we have signed on an additional 13 biopharma partners, increasing the total now to 60 partners. We continue to see a strong pipeline as we have the opportunity to form partnerships through our key products including Seq-MRD, Onco Panscan, Fusion Scan and others.

For Onco Panscan, CE-marked comprehensive genomic profiling panel, a few posters utilizing this large-panel product would be presented at the upcoming AACR, including its capability in revealing molecular profiles of pediatric and adult sarcomas, gene fusions in glioma patients, and germline gene alterations and mutations in glioma and gastric cancer. For our registrational pathway, Onco Panscan has passed the tightening test. We are finishing site selections and patient enrollment is planned to begin in late second quarter.

Slide 13.

Recently, we have announced our CDx partnership with Hutchmed for savolitinib in non-small cell lung cancer, using our already marketed 8-gene lung cancer IVD assay. As mentioned, our 8-gene lung cancer assay is already gaining very good traction in the IVD in-hospital use market. We are excited about this partnership as it is our second major CDx, after our first one with C-stone for Avapritinib, which has entered the NMPA priority review and approval process.

In China, the trend of CDx demand is growing stronger resulting from NMPA's increasing focus on genomic testing for innovative targeted and immunotherapies. This, together with our CLIA lab in Maryland, provide us with lots of opportunities to work on cross border trials and CDx developments. We anticipate continued strong growth in this business segment.

Let's move on slide 14.

So, this shows our approved IVD products as well as those in the registration pipeline. We have a strong NMPA approved product portfolio, which gives us competitive advantage in driving the in-hospital model and IVD revenue growth.

Our registration pipeline represents one of the most comprehensive molecular testing pipeline in the market. I have touched upon Onco Panscan, HCCscan, HCCscreen, Lung Cancer 8-gene CDx and PDGFRa kit. We have, in fact, two more products under development.

Firstly, Thyroid Basic, a PCR-based kit that was developed as an essential tool for molecular classification and prognosis for thyroid cancer. We are currently conducting registrational trial for Thyroid Basic at four clinical sites. We anticipate to complete the trial in 2022 with potential IVD approval next year.

China has more than 220,000 thyroid cancer new incidence per year. These assays can leverage the existing and expanding PCR presence in China, providing smaller and mid-sized hospitals with more options. So secondly, we are launching a new liquid biopsy genomic profiling panel in a very exciting new product. And we look forward to sharing more updates in the coming months.

So, no I will turn the call over to our CFO, Mr. Evan Xu, to provide more details on our fourth quarter financials. Evan?

Thank you, Sizhen. Now 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 16, in the fourth quarter, total revenue increased by approximately 10% to RMB447 million from RMB174 million in the previous period.

Diagnosis and monitoring revenue increased by 5% to RMB130 million in the fourth quarter 2021, from RMB124 million in the same period of 2020.

The LDT revenue decreased by 11% to RMB86 million during the fourth quarter.

The LDT diagnostic tests solely in the fourth quarter actually increased by 10% to approximately 5,880 units compared to a year ago. So, the reason behind is that in addition to a challenging operating environment due to COVID for our core LDT business, LDT sales decline during the quarter was also due to two factors.

Firstly, we launched our Wuxi government partnership for HCCscreen in the fourth quarter in 2020 and recorded a large initial sales order, presenting a higher base for comparison in this quarter. Secondly, our early screening sales was also impacted by COVID related slowdown in the city of Wuxi.

For the full year 2021, we grew about 60% in testing volume for HCCscreen. So, we are pleased with our early screening sales uptick in the whole year -- in a full year as well as the growing adoption in the market. We have continued support from our collaborations, along with our own in-hospital sales effort which started in Q4 2021.

Moving to slide 17.

IVD revenue increased by 66% to RMB44 million in the fourth quarter 2021. The increase was mainly driven by sales of the Genetron S5 instrument as well as the 8-gene Lung cancer assay.

As of the end of the year, we had a total of 58 hospital contracts, including 30 IVD ones. Our pipeline continues to be strong. And an expanding installed base is expected to drive our tests and of overall sales in the coming quarters.

Revenue generated from development services increased by 61% to RMB17 million in the fourth quarter 2021.This was primarily driven by the growth in revenue generated from biopharmaceutical services.

Moving to slide 18, let's look at the gross profit margin. In the fourth quarter 2021, cost of revenue increased by approximately 27%, and therefore overall gross margin was 57%, compared to 63% in the same period of 2020.

In particular, gross margin for our LDT segment was 65%, compared to 69% a year ago. The reason behind this decrease is that in the fourth quarter 2021 we have started to introduce HCCscan to our China partners, such iKang health check centers for their corporate clients. We also introduced this product in our own direct sales team for our hospital partners.

These new promotional activities have impacted our gross margin temporarily in a quarter. We believe that launching HCCscan would help us strategizing our commercialization plans prior to potential approval of this assay.

For IVD segment, gross margin can have quarter-over-quarter fluctuations due to product mix shifts. In the fourth quarter 2021 our IVD gross margin was 55% versus 62% in the prior year.

Operating expenses are shown on slide 19. During 2021, we invested resources in organizational build-up, this primarily includes; firstly, R&D expenditure for MRD projects; secondly, clinical registration programs for core products such as Onco Panscan, HCCscan and HCCscreen et cetera; thirdly, commercialization for in-hospital testing as well as early screening business.

So headcounts related costs were the largest component of operating expenses. In Q4 2021, operating expenses increased by 54.7% to RMB 267.5 million, from the previous year. Take a look at the breakdown of the operating expenses.

Selling expenses increased by 40% to RMB 100 million in the quarter. Selling expenses as a percentage of revenue increased to 68%. The increase was primarily resulted from increase in headcount for our sales team for in-hospital IVD teams as well as early screening direct sales team. We do not expect significant headcount increase in 2022.

Along with revenue growth we should start to see operating leverage in selling expenses for full year 2022.

Administrative expenses increased by 46% in the first quarter of 2021 and administrative expenses as a percentage of revenue increased to 44% in the fourth quarter of 2021. The increase was mainly due to headcount increase in-line with our business expansion to cover full cycle cancer management.

As well as higher professional fees such [audit] and legal services fees.

In terms of outlook admin expenses should also -- should also show improved operating efficiency for 2022.

R&D expenses increased by 61% to RMB 85 million in the fourth quarter of 2021. And R&D expenses as a percentage of revenue increased to 58%. The increase was driven by higher R&D headcount and also related expenses, as well as our continued product development effort in MRD, clinical trial activities for early screening and Onco Panscan.

In terms of outlook, our R&D headcount should have peaked and our R&D spending will for year 2022 will continue to focus on those core projects. So the growth rate should slow down compared to that of 2021.

On slide 20. Net loss for the period was RMB 165 million compared to RMB 73 million for previous quarter in 2020.

It's important to note -- to note that our organizational build-up is complete. And we expect the increase of operating expenses will slow down in 2022. And then we do expect improved operating leverage we will be able to narrow down the loss for year 2022.

Cash and cash equivalents, restricted cash and the current financial assets at fair value through profit or loss were close to RMB 790 million or US $124 million as of the end of the year.

Now moving to discuss our outlook for 2022, let's go to slide 21. As you may have heard on the news, since the fourth quarter and well into the first quarter of 2022, COVID outbreak continued to occur across China. Officials have maintained a zero-COVID policy through lockdowns, mass testing, and travel restrictions.

More recently, rapidly soaring COVID cases had resulted in shutdowns in the cities of Beijing, Shenzhen and Shanghai, as well as part of Shandong and Jilin provinces. This week, Shanghai has began its most extensive large-scale lockdowns in two years highlighting the continued significant challenges posed by the virus.

So looking at our first quarter sales. We are expecting to grow around 15% year-over-year to approximately RMB 106 million.

The first two months were actually quite strong, with year-over-year growth of approximately 30% for January and February combined despite the restrictive operating environment. However, the trend took a turn starting in the -- starting in the month of March.

In light of the significant spread of COVID cases due to Omicron, we anticipated that the challenging business environment would persist in the near-term. Based on the current assessment, we are projecting our revenue to be around RMB 585 to RMB 638 million or around 10% to 20% growth compared to 2021.

We will closely monitor the COVID-19 situation and evaluate its impact to our business and provide timely updates.

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

Thank you, Evan. In closing, we're very pleased with the success we have achieved both financially and operationally in the face of adversity related to COVID. And I would like to emphasize the strong underlying long-term fundamentals of our business.

Shown on slide 23. In the past few years, we have established significant capabilities in all three business lines in therapy selection, early screening, and MRD. We have proven R&D capabilities with innovative technology platforms such as one step seq to bring fast and simple IVD solutions to the hospitals and Mutation Capsule technology to power our early screening and MRD product development.

We have also built a high caliber product development and clinical team who are able to execute multiple clinical registration trial -- clinical registration trials in parallel. We have also set up comprehensive commercialization models working with numerous top-tier hospitals, biopharma companies, health check network, digital health platforms and local government bodies.

Our investment and capability built-up have positioned us very well as a leading player in this market and created a lot of long term strategic value.

For IVD in-hospital model, in addition to the expanding hospital partner base, we have also made good progress on the inclusion of the approved IVD kits into procurement system and/or price lists in more than 20 provinces. For example, our 8-gene Lung Cancer Assay, which represents as one of the most clinically needed test for non-small cell lung cancer. We believe that government reimbursement inclusion could kick in for certain regions in the coming 12 to 24 months.

We anticipate that to greatly help us increase the penetration and market share.

In addition, as shown on slide 24, we have a catalyst rich pipeline in the next couple of years that we spent some time on discussing earlier.

Last but not least, we also continue to see favorable macro environment for our business. Under China's State Council's "Healthy China 2030" plan, the goal is to increase five-year cancer survival rate from the current approximately 40% to over 46%.

As a leading precision oncology player in China, we expect a rapid -- the rapid emergence of targeting immunotherapies will increase demand for our diagnosis and monitoring business, as well as our biopharma services.

While early detection, particularly liver cancer, also remains a focus for the government. And companies with differentiated technologies like us are highly encouraged to introduce innovative solutions to address unmet medical needs.

Overall, we remain confident about the growth prospects of the precision oncology sector in China and we anticipate Genetron to be a continued beneficiary from policy tailwinds.

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

Thank you. (Operator Instructions). And our first question comes from the line Sung Ji Nam with BTIG. Your line is open, please go ahead.

Hi, thanks for taking the questions. The colorectal cancer screening assay, you're -- I understand that you're expected to publish the data this year on that. Was wondering what are the next steps in terms of clinical study? For example, when you do you anticipate the registrational study for that to potentially commence?

Yes, the next step potentially we will validate the assay a larger size of samples. And potentially we'll start a prospective study sometime this year. And at this point, we don't have a set timeline for the registrational trial. But we'll sure keep -- keep you closely updated on the progress.

Got you. And then for HCC it looks like you're still expecting IDD approvals for both HCCscan and HCCscreen sometime next year. Could you kind of talk about -- how do you see the market splitting overall between the PCR based and NGS? I mean should that be essentially reflective of the install basis, if you will, of the PCR versus NGS platforms throughout the country? Is that how we should think about how the -- the market will potentially split when that IDD approved?

Yes, so I guess it's premature to give any specific number about the market split. But the overall idea is that combining these two products we will be able to actually penetrate the market quicker given that the two assay will actually be positioned differently and priced differently as well.

And we strongly believe that with the HCCscan being approved sometime next year there is a [secondary] chance for us to be included in national reimbursement for this product in the [months] shortly after the approval. We had some dialogue with the local governments, with different region and we do believe that the incentive there is pretty strong.

And then for the high performing HCCscreen panel we believe that it is -- will be well positioned for -- that the self-pay population that are willing to pay more for a better performance in terms of the early screen.

So all in all you could see that these two products will be positioned differently and it will be market with different focus for that [shared] spending level population. And it will be positioned differently in potential collaboration in the large scale with the governments.

Got you. And then lastly for me, for the thyroid assay you I think mentioned 200,000 in cases of thyroid cancer annually. What's the addressable market though? Like what's the screening population for that, or the testing population -- the target population for this particular assay? Is it 200,000? I'm expecting it to be greater than that, right?

Yes, sure, so that's the new cases for thyroid cancer, right, so that should [end their current quote] but I think they're -- [data says that they're about 200, 300 million]. Yes, [200 to 300 million people who have thyroid no use]. So there's always a problem of [over-diagnosis or over-treatment, actually in over-treatment] of those people, high-risk people.

[So you can see] the potential [application market] for this test is pretty huge. And also because [this with design is thyroid basic] using our [PTR technology]. [So as they can be easily distributed leveraging on the broad PTR] infrastructure in China for lower-tier cities.

Fantastic. Thank you so much.

Thank you, and our next question comes from the line of Yang Huang with Credit Suisse. Your line is open, please go ahead.

Thanks, so I have two questions. The first one is [NGS] reimbursement pricing in Beijing. I think management [mentioned the NGS] (inaudible) to reimburse price is about [1,500 RMB], and if that's so I wonder if there's reimbursement price below or higher than our early expectation and if our (inaudible) [panel] is already included in [Beijing] reimbursement plan and what the kind of [private market is as exact same, 1,500 to we are getting] or it's not our planning to getting to [Beijing's] (inaudible) [medical insurance reimburse plan] (inaudible).

Yes, so maybe [let me take this one, yes]. So first of all I want to clarify, right, so the 1,500 pricing point that we mentioned in the company -- in the earning call is impact for the [NIPT] screening test, right, [is an impact a] pretty simple product with a low cost structure here, and it's quite mature now, [with a widely usage] for the target population.

And we believe this can be used a [benchmark] for our [NGS based HCCscreen], the liver cancer early screening assay. [And we believe that] there is a chance when [HCCscreen] is approved and covered by the reimbursement coverage, by the [government reimbursement], we could achieve similar level, right, but remember we come [from our earlier discussion I think at the] goal from us is to get a coverage somewhere around [$150, $200, so which is actually in fact] below the current level, right, that we've seen in the recent -- [the page in government] policy.

[So we're happy to see that room that these reimbursement coverage] indicate for us. [And most to the] diagnostic assay, the [8-gene lung cancer] panel, right, which we are market -- quite [heavily in the market and then getting more and more traction in] hospital testing segments, so this I think should be benchmarked with the [QVCR] tests, which in fact -- there are several regions already or governments already giving the coverage now, [but you would have to] combine several [QVCR assays in order to achieve the same gen] coverage that we can do without [8-gene lung cancer] assay, and we believe that it is reasonable to anticipate the [reimbursement culture] pricing level at somewhere around like in [$2,000 to $3,000], (inaudible), so that's [I guess -- it was] discussed before as well, I think that's achievable reimbursement price level.

Right, so yes, maybe just to add to Sizhen's point, right now for [NGS space as is], in China there are very little price points to refer to, given this is a kind of new type of [molecular testing kits], newly introduced to the market.

So actually based on our experience, our [market access team] have been working with several [provincial government bodies, such as the reimbursement bureau], to design -- actually design the methodology for such NGS tests, for example in (inaudible) and I think (inaudible).

Yes.

[These are a few provinces] that has more -- they're more [pioneering in studies] and our team are working with them to -- participating in these -- in these studies.

So with I think the final point I want to mention is that we have -- [you missed quite a bit of resources] in the government procurement platforms, basically accessing [getting our kits -- lung kits] into the procurement list, and also adding our test into the clinical testing menu in different provinces and then we have quite -- achieved quite a -- quite a -- quite a -- more than [one in 10 provinces] already, and also we are working with several provinces on designed the basically how to charge, right, in the [clinical setting].

So with all that effort and also with the increasing clinical adoption of our assay, we do feel that we have a good chance in the next 12 to 24 months in [some regions our line] has a good chance to be eventually reimbursed.

Okay, that's clear, thanks. My second question is about [our cash long way], so you mentioned at the end of last year [we have cash] and (inaudible) cash and some other [financial vehicle] valued at (inaudible) on the 800 million, and the (inaudible) provides us some -- [looking forward] what's going to be our [cash burn rate for this year and into next, help us understand what is our cash runway] before we can achieve profitability?

Sure, so I talked about our organizational (inaudible) as pretty much [completed and it peaked by the end of last year], so we expect our loss to narrow and we expect our cash to be [sufficient] for the next at least 18 months, and (inaudible) should also be slower than compared to the last 12 months, so we do not have [immediate financing needs].

Okay, and -- so if we are going let's say after [18 months if we need] some kind of financing, [will we go to] public market or debt or what's our (inaudible) [kind of source there]?

Yes, well I guess we have many options, right, and it [could be explored in the future, and the thing is that] I guess where's [this cash runway] and we're flexible.

In monitoring the market involvement [and then find] actually the right [optimacy], just like (inaudible) emphasized, we have in [fact different spending reason] in the overall business development, right, the -- there are a number of factors affecting the cash burn, the (inaudible) [loss] as well as the working [capital needs], and the rhythm and the pace of the -- of the overall operating expenses as we mentioned in the -- in the conference call [were pretty much] a level [picking up] -- or pick up, and we [will be able to effectively control] the cash burn, [and at the same time] effectively support the growth of our [business and our R&D pipeline].

As the market situation evolves, I believe that [we're well] positioned to capture any opportunity as we see (inaudible) [to release additional capital] to support [the long-term growth].

Got it, just a quick follow-up, so (inaudible) [is there a kind of year] we can expect to break even?

Yes, so I think from today's presentation you will notice that we are actually adding to our existing portfolio with very exciting new products in particular [in MRD] and (inaudible).

[Right now we have crystal focused] on these products, and we are very excited about these products, so (inaudible) [for today I think we have shown] that solid clinical data [we have published] and to be published in the -- in the near future for our solid [MRD] products.

So we believe that the key for us is to -- is to focus on creating these long-term value and then continuing investing, but of course with very focused investment -- investing areas, so I think with that focus as long as we continue to generate a positive long-term value, I think that's the most important.

[And to address your question, I think a higher look] at this business is that [for a more mature] and baseline business, [such as diagnosis], our goal is to continue to drive revenue and high [quality revenue such as a hospital business model], and then continue to improve the operational metrics -- financial metrics to drive up the margin and achieve [break even in the] next 12 to 24 -- in the next 12 months or so, and on the new [business slides], that will create long-term value such as early screening and [MRD], which is even newer to our business portfolio, [will continue investing] in the (inaudible) successful model, and I think that's my answer to your question. Thanks.

Okay, yes, thanks a lot. That's all my questions.

Thank you, and I'm showing no further questions at this time, and I would like to turn the conference back to Hoki Luk for any further remarks.

Thank you again for joining us for [fourth quarter earnings] and business update call. We appreciate your ongoing support. If you have any questions, please do not hesitate to reach out to the investor relations team.

Thank you and have a good day.

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