Q4 2020 Burning Rock Biotech Ltd Earnings Call
Ladies and gentlemen, todays conference call is due to begin shortly until such time. Your line remain on music hold piece continue to standby. We thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the bidding rock 2000, Twenty's fourth quarter and full year earnings conference call.
Before we begin I would like to remind you that this conference call contains forward looking statements within the meaning of section 21 E of the Securities Exchange Act of 1930 for as amended and as defined in the U S. Private Securities Litigation Reform Act of of 1995 the.
These forward looking statements can be identified by terminology such as the wheel expects anticipates future intends plans beliefs estimates targets confident at similar statements.
Statements that are not historical facts, including statements about burning rock <unk> beliefs and expectations are forward looking statements such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve the known or unknown risks uncertainties.
Argentina and other factors all of which are difficult to predict and many of which are beyond burning rock control.
Forward looking statements involve risks uncertainties and other factors that could cause actual results to differ materially from those contained in any such statements burning.
Burning rock does not undertake any obligation to update any forward looking statement as the result of new information future events or otherwise, except as required under applicable law.
Well at this time, all participants are in a listen only mode.
After the Speakers' presentation, there will be a question and answer session to ask a question today you need to press star one on your telephone.
Please be advised the today's conference is being recorded.
I'd like to hand, the conference over to the management team of burning rock. Thank you. Please go ahead.
Welcome to burning rock.
Earning conference call, they said that in Shanghai the seal.
On there.
The day, you have all of the team.
Because the thing up.
The Oh southern tide.
The T O.
Total.
The Apple the only.
Please turn the page.
Let's start for.
For the burning rock, it's part of the molecular diagnostics leader who'll criticism on college debt.
The main cause all goodness for the first one the therapy selection and the second one early adoption.
Let's turn to page four.
They will go through our safety trial, the recap and also will go through other issues such as Sandeep anyone priorities on financials.
Well, we well what is more exciting.
Of all of our commercialization plans for all of them.
Cloud based multi cancer early detection.
Let's please turn to page five.
Let's look at the plenty of trying to account for in terms of therapy selection.
Oh, we have accumulated.
207.
73, K simple in the past seven years.
Which means that the burning rock at one of the biggest genomic data off of the kinds of patients in the world.
And the second thing I wanted to.
The let's say is that plenty of trying to really top.
Couple of year for the whole industry.
Cost of the coat of Kobe 19.
The gross hockey Uh Huh.
First half year.
They've significantly impact of.
By the the COVID-19.
But we will see that in the second half year, we'd have a stone for them that so.
So we reached a record of 30 33 Yo Yo gross.
Hap I'll talk plenty of times.
In terms of early detection.
We know we all know that would start of the early detection of R&D effort from 'twenty 70 76.
We have already accumulated around 10000 samples in the past five years.
It was just the one of the biggest one in the world as well and the biggest one in China for Pan cancer early detection.
Our strong product development execution, we have completed the fixed cancer product development and and moved to the cleanup of a child for my cancer and the other the other trials as well.
Next page.
So.
Yeah, that's in the places that one so this is the highlight of today.
I thought that that.
Through the five year RMB Oh.
Oh, we have for finally published.
Six tenths of the validation.
The data maybe even more.
So a lot of November.
With the very very.
Very high sensitivity and specificity.
Well, we when we shared this data without the potential partners before we're excited about the data.
And that makes all the things that we might we might have started commercialization for the fixed panel.
Cancer panel.
Before originally plan to put on a nighttime sir.
That means that.
We need to sort of early access program for <unk>.
To find out what do you think the ability in operation a key point and also the feedback from the potential of collaborators.
And at the same time, we have already designed the.
Our perspective of validation for <unk> for the sake of sensor for docs.
We expect the revenue for it.
Early detection started January and the early out for 'twenty.
Was it which means that one year before originally plan.
Operator, do we have strong advantage for the same kind of for early detection.
China.
We have the biggest day to accumulate it and also we have the strongest clinical execution.
And the effect on the first thing.
It's about where the the FERC mover on the fastest moving.
The next stage.
In the beginning we think there are two paths for commercialization. The first one is for the commercial insurers and the second one is the public hospital.
So for commercial use for we can Oh, we have a strong synergy with them and help them to save a lot of cost.
By discovering on trading cancer patient early nowadays, 80% of all theater.
All of them.
Heyman with was paid five pay too late stage cancers.
And also we can help them to Oh.
The pain and maintain their customers with the unique multi cancer early detection for that.
Helping them to set up and so on competitive advantage.
Among the peers.
And for hospitals.
It's the benefits for the hospital personal on the.
Chuck on revenue.
The revenue generation.
And then also we can help them by helping them find.
You'll find more patients.
We can have some sort of generate the downstream revenue for.
The 10th of patient access.
And came on as well.
At the same time, those big hotbed of always have high demand for in the video product.
To do the food and strengthen the brand in the market.
And then I'll pass the I would see of Ocean to talk about the product development roadmap for the 10 kind of a pretty good actually.
Isn't it.
Yeah. Thanks, Suzanne So let's go to the next page page nine on this lays out our product growth.
I believe some of you might have seen that's on a few times before we have shared our kind of co development plan. This war.
However, as you shouldn't have mentioned them with the reasoned response, we have received after the release of the cans.
Cash on cash results there have been some.
Edition and also the updates on our plan on going forward on leading to commercialization. So just to recap we started our clinical on product development.
From the year of 2016, and then we started with the proof of concept on on single cancer, which with lung cancer on assets.
Proof of concept on the feasibility true for early detection on both of the assay and on the bank from IDEXX methodology or alcoholism and Dan we expanded on the validation from September of cancer, two three cancer as an additional proof of concept for modulation of being able to.
The love our tissue of origin accuracy as well.
And most of the reasons play as I mentioned on the last November we released our results on Asia.
On the six cancer test on the assay.
And the of algorithm has being.
Being significantly improved.
<unk> to the previous versions of them and.
And we delivered a 98.3%, but the circuitry and 86% sensitivity across different kinds of pad on mostly early stage cancer patients.
And originally our plan was to just use this as kind of the past as the prototype and then to move on to the Knight cancer test of which would ultimately become all of our commercialization product and also guidance for registration However, as Jason mentioned with the reasons respond.
We have received the from potential partners.
Partner with our collaborators we have decided to be down for the commercialization plan on the rollout plan and because of that we have added two additional programs on the six tens of town. So we didn't stop we wouldn't stop at the.
The validation that we have presented at least from Asia on the 16th of accounts, we well first in the.
We actually have initiated an early access program.
To gather on real word ease of Bill I T and the feedbacks.
And in these early access programs, we will also called closely monitor the.
Positive range, which reflects largely almost like I spoke of true end to make sure that it holds largely compared to the validation of all case control studies that we have established on both of my statistic established in the case control study.
So we will try.
Tried to draw back to follow up on the positive.
Pockets of it.
All participants are and to assess the downstream downstream shoe pocket, right, which was actually on sensitivity as well.
But in the Meanwhile, we will also launch a.
On prospective validation study on the sixth tens of test we have finalized the design of the protocol that goes back to validation and are in.
Progress of communicating with the participating sites and investigators.
So hopefully we'll have a more detailed to to disclose on in the near future.
And and then on the Knight cancer tests I wanted to emphasize that Oh. The studies that we plan for the 19th of test them. They were still being carried out in parallel on origin of plan, they're making good progress on so what we have added almost like the kinds of tasks.
Our moving in parallel with all of origin on plan on the like cancer tests.
Ill pass on delay or any impact nuggets of impact on the on on the other I'd planned studies.
And then last on at least we are also lunching from development effort on all future of products going to lung cancer test.
Which involves involved.
Validating the product in more cancer types as well as adding on more dimensions of biomarkers as almost all the no contribution to the the MSA and the motto.
So page 10 on page 10, we wanted to illustrate or recap a little bit.
Again on.
Why the targeted on multi cancer early detection.
As you might know in China. There are some emerging early detection of play are in the field, but most of them aren't focusing on single cancer types I'm here with just wanted to have the real simple and straightforward.
Tricia to show that bi.
By focusing on the multi cancer are the detection product. So we are we are facing on a.
The much larger on Tam markets on the fixed cancer test of burning rock covers 49% of China.
And of instant on.
Of all of that.
Oh, the cancer and then on I can't sort of tests would cover about 63 per cent of other cancers and in China, So compared to the the most popular single cancer type early detection products switch focuses mostly on liver on colorectal on the multi concern are you touched on the well.
You know sort of focus on the different market in the larger market.
So in light of time, we're going to step on page number 11, and now switch gear a little bit to talk about our petition on the of therapy selection market. We also have some exciting.
For instance on there as well.
So on page 13.
Again to recap the factors for long term success for the therapy selection market.
On the first one of the all the the products and the quality on performance on our products, especially the liquid biopsy products, we do have some very exciting.
Our data to share on in a minute to demonstrate again on the performance of our liquid.
Biopsy technology and products and then another key factor to tooling in China as the N. P. A approval of course. So we also have some exciting progress on on back on our liquid biopsy the panel.
And which which establishes our leading position in registration pipeline compared to our peers in China.
Our trying to I'll hand to all of our CTO, Joe to talk about the the data and the progress on registration for <unk>.
Our liquid biopsy products Joe.
Okay. Thanks, Shannon So on page 14 basic kind of this as well.
All benefit from.
A presentation for Jakafi net.
And last month and the meeting on the.
Bob.
On the subject. So basically this is the basically very true.
The doctrine.
Talking about the act.
Uh huh.
The study, especially on <unk>.
So on the cash.
All of them off the panel.
Nice talking with all of it.
For the overview from basic kidney assay.
<unk> is a wonderful day.
Ashford participated by a lot of Oh.
And the industry.
Birth.
Moving to New York.
The two actually in the fourth.
Of Oh from.
Acura trying to understand of the best practice of AR.
Okay.
Whole genome sequencing.
So basically the Penny rock participated of.
The panel of sequencing of oncology panels.
And then on both the tissue based anymore.
Policy based assay.
The FDA issued a multiple of standard of rough on from a Q2 different.
Okay.
And the funny rock distributed on just kind of a reference material to the.
Rock on.
Our collaboration Rob first of all of our Union and the queues for any rock kick to possible capital and cash.
On the sequencing data and send it back to the FDA FDA do the right.
The thorough.
The comparison against the other player on other man.
Other.
So basically on the bottom of that on top.
Bob for you called study so the study actually focus on a set of.
True.
Frequency of.
From Duncan on 1% of Q2, 5% range, which is very similar to mimic the real situation for them.
CTG in on.
Concentration.
Thank you for patient.
So the awesome awesome of studying the D&A.
In fact the X.
So.
On right panel of the.
On slide talking about the <unk>.
Different company participate of new studies, including from.
The walk from Iraq.
I'm proud of the Muslim for which the uncle complex on targeted panel the.
Its version of the Encore cognizant of and talk about next slides.
And I.
I don't know with.
The other company, including IDT in the Minot Roche off of Thermo Fisher and <unk>.
We participate the study and presenting all of the data and if you look on the next slide basically and the inbound meeting on FDA meeting author prevented the of the.
The sensitivities back in as well.
The data to study across five different company.
You can see here in for different car, representing the fall company utilizing the character based assay and what kind of sensitivity as low as the reproducibility.
So each different part of or for that one company and in the presentation of the author doomed.
Identify who the who.
The reason you.
The new cockpit Danko all chose the paper published I think youre going to be very soon some of the paper on the manuscript of RTP.
The accepted by the nature of biotech knowledge.
As you can see here along with the different like a burn of ideal frequency are the.
The lower the sensitivity of that will become more of a nurse due to company actually showing higher.
The relative of higher sensitivity compared to other burning rock for one of them, but I cannot speak too much on debt at this moment then the the also studying the reproducibility, which agony.
Peter basically at the same conclusion that lower.
On your frequency for the P. T D N a the lower reproducibility.
So just give us the lot of confidence from showing the burning rock has a very solid.
And the solution, including the bio came through on the wall of the <unk>.
Bioinformatics pipeline on.
Leverage on this this tech knowledge and on the next slide the basically very briefly talking about the progress of our again of NPA, we shouldn't Chinese FDA version Chinese version of FDA approval of our liquid biopsy panel, we caught the Hong Kong compound target kit, which actually is.
Based on the non profit month, a panel of preventing earning in the in the F E.
The Q study.
So as you know the order.
Hum and approve the Kid in China.
For stage and suggested at the at the.
On line graph showing here, including the analytical validation of its usually done bye bye.
Bye Bye the company also of typing tests, which in the third party of evaluating analytical validation by the third party and we should call attacking test than the clinical validation of on putting a lot of our peer.
Net.
Clinical study and trying to prove the efficacy clinical utility and the clinical validity of the kit before and submitted to the NDA for final review on the approval for.
The the burning rock uncle compound target kit.
For both past the piping passed back to training training and this is the one on one mile.
Milestone, we achieved trying to get a leading position of the this type.
Type of of kit get approval in China the.
So that's why we think we have some of the vantage as a first mover advantage. So the.
The kidney itself, including we kind of recall the 101 gene mutations.
Mutation status, including the F&B in Dallas and the gene fusion.
On the very very specific kidney, we often talk about kind of report the blood based the MSI status of the.
In the kitchen, and then Theres the multiple companion diagnostic in the pharmaceutical.
The collaboration happening and hopefully on them on to a one for you can kind of approval you will get them from companion diagnostic enable madewell and back end.
So we plan to do the Concordance study, which is the part of the clinical validation.
And second half of this of year. So this is basically the status of the.
C G being in the liquid biopsy kit approval.
The progress we.
To update at this moment so the next slide I'm going to turn back to our CEO and share talking about the trend in 'twenty one for variety.
Thanks, Joe.
So, let's turn to page 18.
The <unk> tennis anyone is a year that we're really looking forward.
For Saturday Saturday of selection, we're going to continuously increased about penetration of jazz space.
Sir therapy selection and the some.
Key drivers the first one ex to extend our motto.
As we all know that we have the.
For the out of support.
Well as I P and the city.
For the DNA for companion diagnostic and and last year, we successfully.
Completed debt.
The the licensing gain of <unk> <unk>.
My choice as far the task for all off on day rate and also if the turmoil from uncle of site.
And this year, we'll complete the.
The tech transfer and authority of commercialization.
And the thing I won't.
Mentioned more of its about the determinant alright. These targets for the early detection.
The.
Adenoma lung non small cell lung cancer.
It is the big population.
In China, 20% about the kinds of patients of lung cancer patients and 85% of the lung cancer patients.
The outlying Kansas among them.
On 40% of the early stage. So it means the huge market with a unique.
The panel.
With our unique.
For that.
With with strong clinical validation.
And a second second cyber the there are others of products as well.
Oh, sorry about that.
In the when is available in the market.
And the second driver is.
And on P. A registration program execution.
We have several of panels on the way.
Of our registration and clothing broadcom.
So the deal right now.
The big panel for.
For <unk>, so that will bring our strong comp.
It is the foundation.
And the third one is.
Further in the hospital penetration you might have already noticed that we have a strong.
The hospital.
Total revenue increased in the second half of 'twenty trend will continue as the grille.
Turning to kind of work.
And the second.
I guess the early detection and so we have that debt that we're going to bring the cancer path.
Into the real work from lab to commercialization and we are.
Really very excited about that.
And at the same time, we have started to build out the multichannel from the commercial team.
Another good point issue for us is that some of them.
We started.
From the conversation always the MPA it seems that the the.
The registration for Pan cancer early detection.
Might have used the way to be clear.
In the future so before before before recently there was no clear way for sort of exits in the past.
But now we're very positive of about that.
And also in this year.
The way, we're rollout that we are moving out.
The additional large large clinical programs for product development and validation.
For that same type of well, we're adding other dimension.
The also more kind of the types of included in the <unk>.
No R&D from.
For the new version for.
But we cannot disclose the lodge at this time.
So yeah in 'twenty 'twenty, one we're really looking forward for that no matter of your therapy selection and also for already for taxes.
Now I'll turn of our CFO of all the financials.
Thanks, Susan let's tenths of our financials and first we'd like to recap the recent COVID-19 ways in China in the October and November 2020, the number of Covid cases in China was relatively low however cases started to search in December which.
That's to a renewed restrictions by hospitals across the number of cities in China. This had a negative impact on our business volumes in December hammering down the a good double digit revenue growth trends that we saw in the October and November.
The Covid resurgence worsens in January of 'twenty 'twenty, one on here a few examples.
And Shanghai closed schools for period of time.
So that's wrong of city with approximately 11 million population about 200 miles away from Beijing shut it's outbound travel so that no personnel could leave the city of La.
Large oncology hospital in Shanghai have cases, and it was temporarily closed so the COVID-19 headwind was significance in January of 2021.
With that context, the minds, we achieved strong growth in the fourth quarter 2020, growing our revenues by 14, 9% on a year over year basis.
By channel the in hospital channel growth was notably strong triple digits year over year in the fourth quarter.
We do note that our hospital revenues historically have been lumpy and if we look at the third and fourth quarter 2020, combined to smooth out of the lumpy base across the third and fourth quarter. In 2019 are in the hospital revenue grew 63% year over year in the second half of <unk>.
On to 'twenty.
We had for new hospitals coming on board in the fourth quarter 2020 in terms of having the reagent supply contract completed which brings the total of newly contracted hospitals to 10 for the full year of 2020. This is further progress compared to seven newly contracted hospitals that we.
Hats during 2019, and just to remind everybody from an accounting standpoint, we only start booking revenues after completing of the contracts contract with the hospital.
Maintenance of our Central lab channel year over year.
Turning to the Central lab channel year over year of growth was 23 per cent for the fourth quarter.
Sequentially, the fourth quarter was down slightly versus the third quarter per.
The amount because of the debt that we had in December.
And going into our gross profit trends, we improved the gross profit margin for the in the fourth quarter, whereas the overall GP margin trending into the mid Seventy's by channel.
And intuit's into the mid seventies and by channel since we'll lap the GP margin was 76, 8% in the fourth quarter 2020, if the new high driven by our scale and reagent cost reductions.
On the in hospital, the GP margin was in the low Seventy's range in the fourth quarter.
Our next on.
Turning to our guidance, let me first recap the COVID-19 less deceleration in January.
In the February was also quiet because of the Chinese new year.
January February combined was down significantly on the sequential basis, though it was still up.
Double digits year over year.
Looking forward when we think about our guidance numbers there on two factors that we're watching very closely the first is risk of COVID-19 resurgence and the related restrictions at hospitals, which negatively.
The negative impacts overall testing volume for the second factor is competition, which has been intense and in some cases on disciplined way.
We remain confident that our strategy of bringing the highest quality product to the market is the right path to win in the Chinese Mgs diagnostics industry for the long term, though we're doing counter of intense competition in the near term. We believe competition should normalize after a major NGL products for example on liquid based CTD.
On a panel and large tissue panels have gone through the <unk> approval process.
So with these factors in mind, our initial guidance for 2021 full year is 610 million RMB. This implies a year over year of growth rates of 42%.
So with that we conclude the management of remarks, and the operator, we are ready for questions. Please.
Thank you ladies and gentlemen, we will now begin the question and answer session.
You wish you asked the question now please press star one on your telephone and wait for your name to be announced if you wish of cancel your request. Please press the pound or hash key once again Thats star one the for questions.
Your first question comes from Doug Schenkel from Cowen. Please ask your question.
Good afternoon, and good morning, everybody and thank you for taking the buy.
I wanted to start on guidance.
How should we model quarterly revenue essentially I, just would like to get your thoughts on pricing and then how can how much do you plan on investing in R&D This year.
It would seem like that should increase pretty notably given all of the exciting efforts pursuant to the new product development and additional study initiation surface from a modeling standpoint, how should we think about that.
Thanks for the questions, let me speak qualitatively.
Qualitatively.
All of these points in terms of quantitative guidance.
The guidance, we have is for the full year top line.
We don't have a quarterly revenue guidance. So first on the quarterly trends Q1 is is going to be soft.
Because of the January hips, which worsened compared to December and our clients February because of the Chinese new year, and it's still relatively early in March.
Year over year, it is still going to be up a likely double digits.
We watch the first three weeks of January.
And compare that for the first three weeks of 2020, which we didn't have.
Half of Covid restrictions back in China, we grew about teens. So that's one data point.
Then you know of February March was quiet last year because of the Chinese new year and Covid restrictions. So.
That's the first quarter of beyond the first quarter on I would still watch out for the two factors that we mentioned.
On an overall, we are working hard on the in hospital channel.
With the Magnus beyond making further progress on having placed.
High teens number of Magnus VR platforms into into our hospital partners.
And we will we will we would like to executes on our.
Our strategy on it.
Outside of the hospital of penetration throughout the year, although we don't have any quantitative guidance for each quarter. So that's what the top line.
Then for R&D. If you look at 2020, we have seen notable.
Personnel based increases on in terms of head counts.
The salary and share based compensation as we expanded our team, which we do benefits.
From a launch the team on in terms of expanding the R&D and the clinical capability.
Capabilities and in addition, there is a commercial commercial organization for.
For the detection, which.
With the leads to increased sales and marketing expenses for.
Therefore on early detection and also as you mentioned for additional clinical programs, which we have of.
You onto the plants, which we will announce them.
Specifics throughout this year as we rollout those programs, we will expects additional spend on on additional.
Additional car on the programs these will be large programs over 10000 subjects, although we do note.
For tie in on the overall program.
Programming expense is still likely to be lower than the U S programs. So we.
We will erode these outs and announce those.
As we go throughout the year, we don't have any quantitative guidance on the R&D line.
To take care of it is going to increase as you mentioned versus the same period last year.
And in the Oh, Thank you for all of that one one very quick follow up.
As I'm sure you appreciate you had a very strong I mean, the fourth quarter was strong in general, but what really jumped out to me.
<unk> you're in the hospital revenue.
Yeah, that's that's where most of the upside was relative to our forecast.
I'm guessing some of that of seasonality, but on.
As we just think about momentum heading into 2021.
Should we be thinking that Q4 is emblematic of.
Continued progress in the in the hospital channel and then by extension contemplate a continued change in revenue mix that.
Essentially shifts a little more revenue towards the in hospital versus the Central lab.
Yes, overall, we would expect from the hospital to grow stronger and faster.
Compared to the central lab as that is a more.
On that as the channel that we believe on company competes better in terms of our product performance.
And the.
The Magnus BR differentiate its product solution.
If you look at the fourth quarter 2020, there on a.
True things that's driving the in hospital revenue growth for US is the sort of same store sales growth like metric.
And that metric is tracking on similarly.
Compared to the Central Lab channel.
The supply of staff, so that that was a much smaller factor.
Factor in terms of contributing to growth versus the second factor, which is newly contracted hospitals and we made good progress, adding full of hospitals in the fourth quarter.
And it's hard to pin down for each exact quarter on how many hospitals, we're going to the contract because it is more driven by hospitals on process and contracting and internal approval processes. So.
It's hard to speak to.
Each quarter going forward and it's probably more reasonable to look at a few quarters for example of rolling to a rolling four quarters and if you look on a rolling four quarters. We added 10 <unk> for 2020, and we certainly like to keep.
Keep it up for 2021.
Okay, and I know I'm, probably Overstaying my welcome, but I wanted to just make sure I get a couple of questions in the on the multi cancer test program.
It's really encouraging the here that you are launching the six cancer product in the near term.
On the other hands on it.
Maybe a bit surprising on debt.
This is being launched so quickly with the Grand scheme of things of relatively small datasets and low prospective data.
So I just wanted to make sure that I'm understanding how you think we should think about this sort.
My first question related to that is if you didn't need.
On prospective data to launch of the six cancers why was that not the case with the nine cancers is it simply because.
The data was stronger on the first six and you were asked to do more work to support with confidence the other three cancers. So that's the first question. The second is.
Again, it's great that you can launch, but given you are going to be generating more data and there is a lack of prospective data of substance at this point how are you thinking that's going to impact adoption over the first few quarters of launch and then my third question on this is.
If you are now essentially establishing that companies can launch multi cancer screening test with this type of data, which is good but again, it's a relatively small data set and it's not perspective.
As a possible conclusion that the barrier to entry associated with data generation for the assays like this is actually lower than previously thought and on.
One hand that would be good because you can get to market quicker, but on the other hand the debt.
Structured doesn't just apply the burning rock burning rock. So I guess my concern would be in this new world of this new paradigm that your ability to differentiate from a regulatory standpoint on your established scientific rigor might actually be at the diminished. So it would be great to get your thoughts on.
On those three topics. Thank you.
It's got on does the Shannon I tried to tap on on your question to address it.
Those are really excellent questions on exactly those are you know what we debated over and over within the team over these past few weeks.
Our commercialization decision our strategy on.
So first of all we don't we don't believe that the module cancer detection.
On products bearish enter on will.
Well the.
And.
And the lower than previously expected.
And we do the loves that.
First batch of validation on.
The study of skills the.
The skill of must have.
Hmm.
Let alone the registration of course will need goes back to the validation data on.
And that's the that is exactly why.
When we.
Start thinking about this the roll out roll out plan. We also added on a per.
Of course back to validation study for the cancer test.
True to rent in parallel however.
That's very encouraging response from potential channel collaborators for does it kind of for the test.
The product and which encourage us to sort of.
About.
You know, while we generate more interest back to validation data maybe to have some real world.
Experience will also help us.
Assessing for one.
Two of validation population really matches, our future customers because the you know when you start thinking about commercialization of this actually gets very tricky.
You know whether your targeted population are those that go on annual checkup already or not actually well hugely influence you are pushed on expected sensitivity and then also other operation now matrix swings when we start to think about these are question.
That's true.
Probably won't be answered in the first batch of validation clinical trial because they're in the trial is set up so we wanted to accumulate those knowledge and data as well you're an hour or the access program on to sort of to know what we didn't know together such knowledge.
And also.
In terms of the the.
On the commercialization channel.
We also wanted to SaaS like for for individuals for them.
On individual level.
We know exactly like what are the harms and what are the potential benefits, but we wanted to assaf for potential institutional collaborators like hospitals are insurance companies, what exact kind of value can we bring for them. So those are the things we wanted to answer sort of rock.
These exploratory exploratory of commercialization.
And then again as I mentioned before in the early access program actually with some of.
Done.
Some of them.
We tried some of them already and during these programs we are closely monitoring the.
Positive rates, which actually reflects the specificity. So when you think about the prospective validation.
Cohort the specificity of part is actually much easier to SaaS because.
Those of us.
The the top of your thoughts on top of it right.
It is your positive percentage so.
If you've been to a SaaS immediately whether yes specificity of hose out in this real world population. So we are closely monitoring that we we are making sure that it doesn't job and sort of the country compared to what we would expect from the Thunder study and then if the.
The temperature part of that.
Actually it takes the fall off time to have an accurate.
On <unk>.
At the right estimate from the perspective of validation cohort, which may be very different from what you have observed for some of the case control.
Studies, because those are symptomatic patients so for for that part. We are also putting a lot of effort to follow up the throat for award positive findings.
Just ask for one.
On the possible.
Estimate on the sensitivity and then for to the the path to diagnose the for for these positive.
Posture of participants on.
I'm not sure whether I answered your question, but those are the thoughts that we went through.
When we discussed about this commercialization plan.
And then Michele.
Perhaps.
Oh, yes.
The stuff.
Yes.
The extra come on for that.
And of that for early detection is not only adjusted sensitivity and especially the.
Specificity, we think that in the operation part and also in the consumer education.
Also of how to even even by how to do that.
How about it.
Perfect reported two.
To make the consumers to easily to accept the result, and how to.
That in the service for perspective, I think that all of these issues all new topic, we need two phase that's why we started the oh.
Early access program.
This product is not of just the size of course that is a product that we need to.
Consider the psychology of each consumer as well.
Super helpful team I really appreciate all of the additional color.
Really really helpful. As always thank you for all the time.
Thank you. Thank you.
Thank you on next question comes from the line of David Li from Bank of America Merrill Lynch.
Please ask the question.
Right. Thank you management team so give me the chance to ask a question so basically I would like to.
Oscar of about a jewel.
The in license the product. So previously you mentioned that the NVCA. The top line is going to be a 600 and timing of argument because it includes the potential revenue contribution from the in license the product.
This is number one the number two.
We know that.
You are now maybe of dealing with.
Tech transfer so besides the tech transfer easy any barriers on regulation for fall.
On these two product.
Launch the commercialization plan in China. I mean, these are also sort of what kind of early detection products. So is there any regulation typically on this.
Hum financial in terms of your.
For.
Our quarter results Oh.
On its retiary expense is over 100 million items, Chad to give us more color on this.
On a minutes.
And administration expense a rest of my questions. Thank you.
Thanks, David for the questions.
So.
First on the two licensed in products.
Which are to myriad HRD.
And Shannon talked about this during the third quarter results one of the.
The indications.
And the initial approved indication is not a big market and this is.
To serve pharmaceutical partners as well.
So this is the smaller elements compared to the second.
Licensed in products, which.
Just looking at early stage at the you know kind of enormous and this product that has had a Chinese cohorts over the 1000.
Subjects that have gone through and published validation data on.
On the lancet. So this is a.
No on by some on Chinese physicians already as well. So these are the two different.
Current products and.
And we will be doing tech transfer.
Yeah.
At least for the first half of the year.
To be followed by.
On a validation as well to make sure that the products perform as.
They have in the original and the transfer of labs as well. So these will take a period of time.
So if any revenue contribution of these are likely to be late for this year.
So in terms of the guidance, we don't we don't break out Oh, the versus new products, but.
This has had a little bit of on the new products, Although we will have more visibility on.
After we complete on the tech transfer and valid.
Validation and to note that there will be more products that we're going to rollouts subjects, who are R&D process. So vs.
He is on not be on me two new products.
So that's for the for the first question on the second question.
We will be offering these two products in the L. D. T formats are similar to.
Many of the other mgs based products that we currently offer as well the myriad HRD school products on my choice that has.
Being approved by the FDA for.
A couple of indications.
So that.
That has its own back end in terms of marketing and the acceptance and awareness among physicians and we spoke a little bit about the determine of Rx.
Validation data previously already so the.
Is it going to be offered OTT and there will be.
After launch there will be driven by our existing.
The sales teams picked up for lung cancer, which is our largest indication. So that's sort of the second question on.
The third for G. In eight of the main two elements for that line.
The one increased personnel and stuff on.
As we expand our head count on overall head counts have gone past one thousands of personnel.
Which of the which is the significant increase as we build out.
Across a number of functions from both our fonts hand to Matt and.
And back office, we have been expanding our team pretty.
Pretty significantly over the over the time.
In the second of the elements is increased physical space. We recently had a new building next to our current lab on the new building will be housing the early detection.
The labs, and we have been building capacity.
For that so we can run a large clinical studies and at the same time.
On offering.
The access programs. So we were capacity restraints on for a period of time and we were glad for that we'd have solved that issue.
So these are the main drivers for the overall G&A line.
Great. Thank you that's helpful.
No more question.
Thank you once again, ladies and gentlemen, if you wish to ask the question now Please press star one on your telephone keypad.
Our next question comes from Tien Tsin.
From HSBC. Please go ahead.
Hello, Good evening.
Thank you very much for taking my questions on I think your opening remarks, you were talking about in discussion with the Chinese record day times all of the safety a token of all of the approval process that you can make some progress.
Alternative routes for GAAP.
The liquid biopsies.
Can you spin.
Spin of sometime give us a bit of more detail.
Yeah.
Hi, This is a person for the block.
Got it.
Okay.
Do you want it.
Okay I'll try to address this question on.
So I think there might be a misunderstanding I think what you said I meant on the.
The on the opening remark is that for the early detection, which used to be very.
You know, it's a it's a completely new new in the class product and we had no dialogue on previously with the and N. P. A budge on most recently we've started the dialogue and do we are we see very positive feedback and so we are very hopeful.
In the in the near or mid term future on the early detection. The the liquid based on not chickens, the early detection kind of products well on.
The irregular true pass on.
The clear or the.
Paths to registration.
Being more much more clear than the than the current situation for the liquid based on product. The <unk> the regulatory has always been.
On the the structure the the chapter two of registration is it's all of a stare at it similar to the other on jazz tissue based on products.
Other than other than the other the.
Concordance study, except for the Concordance study, which.
To do it tissue, whereas the slick water concordance on which is different than the tissue based on panel.
But overall the.
It's largely the structure is very similar between the two of them. However, the liquid based on.
Product of course.
That'd be the first in class. So there will be some unpredicted sort of a G on down the road, but that's on.
Joe has mentioned on page 16 with the on the.
The types of past the past we are now entering the clinical validation starting the concordance study and also establishing companion diagnostic collaborations so much so on where we're having very positive.
Positive progress on that as well hopefully we will see.
The first liquid based on.
Liquid liquid biopsy based on jazz panel being approved.
In China in the next couple of years.
Hi, Yeah, Okay, that's clear now.
So I guess on your discussion what under discussion is the main day.
There was some bouchie kind of early Detections correct approval for says okay. So.
Understanding was why there's no clear approval path because of.
The regulator has it be existing at the looking at the each individual indicates on it right. So that's a problem in terms of design and also how the population recruitment that will be the Mei.
The area.
Given youre talking the multi cancer type.
And the progress has been made.
The the how to testing of the <unk>.
And the way you indicate the or would they go for on the kind of multi indicate the level of the students of seasonal the each individual indicators are efficacy. So that's the first one a second why is the bulk of the populations.
Given you'll be from other people with type.
For the regulator of Stuart space, the population of has to be.
Sufficiently robust sufficiently enough to control for the each of type of the Kansas.
Well for.
The first question, Yes, I think the the major ones. One later on progress. We are seeing is that none of the regulatory analyst day embraces the idea of having a multi cancer on early.
Early detection products being applied on them.
Multi cancers simultaneously instead of testing it on them.
It's sort of the are intended to use population for each single cause of the type the high risk populations individually. So it's gonna be on the general population on application. So so that's one major progress. However, it's not just it's it's a it's far more than that I'm actually for early detection products, how do you.
The fly your benefit how do you how do you control your measure of your you'll harm and how do you justify that the benefit of its greater than the harm. That's the that's the sort of the the key to the on to the regulatory.
And I think on was the.
With the the the most of the reason for why says from our on data and also from our global peers like on Grill and thrive on you know such such justification rules or or philosophies are becoming much much clearer over the time and that's why.
Of the reasons why we.
We are we could start the dialog right now with the N M P.
Okay. So you think the cost of the benefit for the multi cancer early screening can be conduct on the pool level, rather on the individual cancer the type of levels.
Of course, because your intent to use population would be the general population you wouldn't you wouldn't be able to differentiate the.
Just for one cancer type you you know that would be of a huge waste designing the the study. So you would measure of okay. The.
For the performance on multi cancer 17 of the state yeah.
N P a notice of.
Recognizes the agree too.
To go.
That represents.
No we're not seeing the loans being rich the we're just saying that we started the conversation with the positive trend towards you know high the having an active dialogue.
Got you.
Can I get your sense of a last question on the on your Oh the assay.
Assess on a program because you know the answer to the other questions I can see why you would go for that low.
But just on the PMA point of view can I say.
This kind of idea of says program pulp of it will be.
Lots of making all you can do it on the cash break even levels for the main point is for you to get.
The other validated in the real world and so connecting the more data points.
I don't think that the about the the cash used for look at the the for.
So Ah report, we still have a lot of cash on account. So the main purpose for our early access program is find out the any.
Any potential issues in the in the real world and the clock feedback for example.
How are you.
The Richmond will be a certain.
A certain cohort like the hmm annually.
The annual reach hookup of.
The population during the annual checkup without I know the check up.
The sensitivity in the sort of.
Is he might be.
On the difference and also there'll be operation.
Issues for example, how to advocate of the.
The customer about NPV.
Alright, PV and MTV, how to allocate the sensitivity as of the 50. These terms are quite familiar with the professional.
The people to common consumer debt the totally.
No.
The total of new.
So we will for example, we know that of PPV with like.
Finally any cash.
Cash flow fan cancer of kind of read through of 40 to 50 P b without the great product.
In terms of PPV.
Our consumer of them I think that acreage.
The positive result, and I only have half of the <unk> to the to be really a policy.
Might be of problem.
So we need we need the early access program to find out all of these things.
Okay.
And also I need to pass the issues such as the pricing and how the how do they think about that table.
Talk to you.
The result.
Net debt.
The issues, we need to find out.
And the operation is no less than those in a net.
Claims of child.
Gotcha Gotcha.
Yes on your P&L structure, if for you do any other says program. This will be through your central net secondaries index.
Yeah.
Exactly this will be this will be expenses.
This is.
We're not charging for the Oh, the axis. So it's kind of hit our expenses line.
Gotcha Gotcha.
Okay. Okay. That's all for me thank you very much.
Thank you as a reminder, ladies and gentlemen, if you wish you asked the question. Please press star one.
Alright, there are no for the question so with that we conclude our conference for today. Thank you for participating.
Now disconnect.
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