Q2 2021 Centogene NV Earnings Call
Good day and thank you for standing by welcome to the Sun to Gene Q2, 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on Europe.
Please be advised that today's conference is being recorded if you acquire any further assistance. Please press star Zero I would now like to turn the conference over to your first speaker today. That's Tiber. Please go ahead.
Thank you, Sharon and Hello, and welcome and thank you for joining us to discuss our second quarter 2021 results, which were issued earlier today you can use this presentation of the related press release on <unk> website for those unable to view. The webcast you can find the relevant slides on investors thought central Green Dot com.
Before we begin please refer to slide two of our presentation, which provides information about certain statements to be made today that may be considered forward looking statements within the meaning of the U S securities laws, including those regarding our strategic plans development programs and future financial results.
Statements made during this call that are not historical statements may be forward looking statements and as such may be subject to risks and uncertainties, which if they materialize could materially affect actual results.
The forward looking statements in this presentation speak only as of today September 7th and we undertake no obligation to update or revise any of these statements to reflect future events or developments, except as required by the law additional information regarding these statements appears in our SEC filings.
It is now my pleasure to introduce you to today's because our Chief Executive Officer, Andrew Oswald.
Our Chief Financial Officer, following our presentation, we will open up the call to Q&A, we kindly request that you ask a maximum of three questions I will now hand, the presentation over to Andrea Please turn to slide four.
Thank you Alina Hello, everyone.
Today I will begin by walking you through our operational performance during the second quarter of 2021.
I'll then update you on the progress of our core business, meaning the pharma and clinical diagnostics segments and provide you with further insights into our company and its key assets.
Rene will then take you through the financials, including what you have been able to achieve in our commercial COVID-19 testing.
He will then provide our financial guidance for 2021 and the business outlook.
Afterwards, we will open up for Q&A.
Let's please turn to slide five.
Okay.
Let me first highlight the key messages for today.
We delivered a strong quarter on the topline and made meaningful progress on our strategic priorities, which we outlined at our investor event in June.
It's mentioned that they are continuously.
Continuously expanding our data driven approach to reinventing rare disease drug discovery and development teams June you have further added to our new management team with the most recent addition of Patrice the NASA, It's our Chief Scientific Officer, who will lead our efforts in drug discovery into battle.
Very excited to have Patrice on board.
We delivered a very strong performance from a revenue perspective, surpassing 50 million in Europe and revenue for the quarter do you still reflects a strong contribution from the COVID-19 testing, but most importantly, you are seeing the return of growth in our core business.
The year over year growth of 25%.
We're also pleased to see positive segment adjusted EBITDA NOLA pricing segments.
Our Biodata Bank also demonstrated growth with approximately 25, new patients added in Q2 2021.
Is a steady increase towards our goal of having 1 million patients that were biodata bank.
We have shown that we are committed to offering superior diagnostics.
We currently offer the broadest agnostic taxi portfolio focused on rare diseases, calling over 19000 team using over 10000 different tests.
Within this segment, we have seen the business returned to solid growth up 82% year over year. You have indicated these trained in the last quarters and it's nice to see the business to continue to steady growth.
In the pharma segment continue to leverage the compounding value of our leading a continuously growing body of data bank, while the revenues down year over year. He believes he believes these reflects the lumpiness of these kind of revenue stream.
We have 53 active collaborations for the end of the quarter and our contract value assigned in the first half of 2020 alone already exceeds what we find in full year 2020.
Nobody believes the expansion on the pharma partnership contracts continues.
Overall, I want to underline that our firm focus remains on our core business for rare disease in 2021 and beyond Europe.
Built a strong foundation and are set to deliver against our mission of enabling it to Europe under direct adhesives in the next 10 years. This will be reflected in solid core versus growth across both segments towards the end of the year. This statement is indicative of our strong belief in the recovery of our pharma business in the second half of the year.
Let us now discuss the Companys performance in detail.
Please turn to slide six.
Okay.
Our revenue is more than quadrupled in Q2 2021 compared to Q2 2020.
This increase was driven by COVID-19 testing, which accounted for 42 million euros as well as a strong recovery of our core business, which includes diagnostics and pharma.
Our core business grew by 25% to 95 million euros.
As a recap we experienced headwinds from the COVID-19 pandemic that impacted our core business segments, particularly in the second quarter of 2020.
The core basis trends gradually recovered towards standard last year and early this year.
So AC message is worth looking at the order intake trends, which we communicated to investors prior earning calls.
Yeah and are pleased to see that recovery trends in that agnostic second confirmed in their report the diagnostics revenues increased 82% compared to Q2 2020 reached $13.0 million versus $8.0 million euros in Q2 last year.
<unk> revenue decreased year over year from $12.0 million to $10.0 million in Q2 2021.
As discussed in prior update calls the pharma business has a longer sales cycle, so rebuilding that pipeline and recovery in the base just takes more time.
On top of that they are cognizant that revenue in this segment is lumpy.
But based on.
The contract value in this first half of 2021, we believe our of Europe accelerating pharma momentum towards the end up to Europe remains fully intact.
To provide a quick recap of the signed deals.
First half of 2021, we initiated a new collaborations immuno neurology pioneer aleks Torchwood accelerate to that diagnosis for patients with pumped a temporal dementia and genetics neuro degenerative disease, we extended our partnership with Takeda and extend that to global Parkinson's disease study of robot aiming to recruit in genetic testing.
Additional 2500 patients for Parkinson's center teams keep prioritize diseases.
In 2018 vintage and entered into new strategic by the breakthrough Denali therapeutics, what the target profit vacation crude in Parkinson's disease patients with mutations in <unk>. So this expansion is part of that deal.
And he currently leads 12 phone got an observation longitudinal observational clinical studies to validate monitor biomarkers covering several disease categories, such as Parkinson trend.
13, amyloidosis and inborn errors of metabolism.
So as we look ahead into the second half of 2021, I'm fully confident that we will return to solid core growth not only in diagnostics, but also in pharma.
Now please turn to slide seven.
The number of sample or you can take some of our core business, meaning diagnostics and pharma is up 15% even to discuss pharma revenue the growth was driven by decreasing the diagnostic is this right.
Test requests are up 40% versus the same periods in 2020.
Overall, we are making progress in growing our body of data banks, which include samples as well as data until.
On the graph on the right you see the number of individuals in our data repository.
But of course, if the first two quarters in 2021, we added almost 50000 needless to already see century database and biobank, which is our core asset.
To provide an update on this later.
Turning to slide eight.
In addition to growing our body of data bank and we have also ramped up our R&D initiatives. We have recently reached a milestone with publishing two of them.
Papers in which we would like to use as a basis to discuss our continued striving for excellence and leadership in your eye disease diagnostics and insights generations will differentiate the drug development.
The graph shows the exponential growth in the past two years and our published papers and this momentum is reflected not just back east and there are numbers of 18, author Tru scientific computations alone in Q2 2021, but also how we are focused on generating critical insights into diseases, including Parkinson's as well as advancement.
Nicky sequencing and technology.
Our strategic progress any parking the publications is clearly creating impact.
That says you have published advanced research has led to the discovery of Seix, new rare diseases, which are now incorporated into our diagnostic offering and immediately enabled the diagnosis of over 19 patients by leveraging existing data smaller biobank.
On the product side, we have launched an enhanced whole exome sequencing.
Called New Center Exome Copping insights from our unique rare disease centric biobased event with superior economics, all makes technology, and which increases agnostic yield up by 20% compared to a conventional whole exome sequencing.
We view our contribution to better understand the various diseases at the core of our commitment to patients around the world and to provide the best technology as possible and locking the complexity with rare diseases to enable differentiate orphan drug development.
Let's turn to slide nine.
At the core of what we do is our aim to revolutionize the understanding of rare diseases by connecting patients around the world and connecting their biology.
We have shown today, how we have continuously and managed to grow our <unk> by a data bank of an asset both in terms of volume and the quality of the data.
It allows us to address different use cases for value creation.
Nearly 650000 samples in our body of data banks have already been mentioned.
But it has also grown index and doing more specific testing and going beyond genomics. We have also been able to accumulate depth of data on each of the specific diseases that abbvie has been prioritizing.
If we take a deeper look at how this translates into numbers.
Diagnosed over 1500 registered users to date reaches a remarkably high number considering that only for a subset of rare diseases and genetic linkage actually currently known.
Ill mutation database into India includes more than 31 million bar items.
Patient identification that trial support biotech the bank is valuable as he can provide insights on patient cohorts for certain diseases and geographies.
More than 300 diseases at least 20 diagnosed patients and about 100 with over 100 patients.
Again, that's a high number considering that rare disease type of very low prevalence they're rare after all.
Our large physician network wholesome composites 20000 physicians, it's active contact over the last couple of years.
All of these things add up and make us the world's number one rare disease partner for life science companies working on rare disease.
On the other end of the spectrum, our Biodata Bank support Strep discovery and development overall this structure allows us to grow in both core segments by driving novel Medical solutions.
Please turn to slide 10.
Okay.
He really believes in a data driven approach and for these reasons. We believe we are positioned like no. Other company. Unlike the complexities of a patient's biology and understand as well as treat rare disease by accident, it's a partner of choice and talking about identification orphan drug discovery and development.
Improving our data to artificial intelligence.
The ability to mine this data.
Wait to not only analyze public available data, but to combine our unique patient cell and device data with the data sets in the public sphere.
To ramp up our data driven approach to inventory Azz's drug discovery and development appointed Patrice and therefore must chief scientific officer.
<unk> is one of the few deepened industry, who has successfully applied unique data driven approach to drug discovery and development.
With his deep scientific expertise and credentials as well as his proven track record and industry Petrobras will be an outstanding scientific leader percentages.
And I'm very much looking forward to work with the trees to accelerate our vertical patients.
Initially we are focusing on to metabolic diseases gaucher niemann pick type C.
And on genetic Parkinson's and allergic disorders.
Looking to the future, we will focus on more diseases, <unk> and expand our data by strategically too late to develop for the full disease models.
OTC smartphone for US is in the range of 100 to 500 diagnosed patients with a full omics data set and 10% to 20 cell lines for validation and to be able to discover a drug target some biomarkers.
Achieving this will be enabled to cure 100 Pcs in the next 10 years.
Let's please turn to slide 11.
Lastly, I would like to provide a quick recap on why we believe we are uniquely positioned in their agencies ecosystem and why do you feel confident in delivering against our mission.
We're starting from a very solid base I believe he has been one of the first rare disease genetic testing companies in the world.
State of course building a unique asset over many years now a leading genomic rare disease expert that is recognized around the world is a strong brand and we are respected for that yes.
<unk> been able to develop a unique five date the bank, allowing not just access to Pos diagnosis, but to access to Stuart's samples enduring further analysis can be done in new tools and insights to become available.
And do you have a truly global footprint, particularly strong in some areas also like the middle east or certain parts of Asia, because we have followed geographies for rare diseases are prevalent and that's genetic testing was needed and we think that this global footprint really differentiate us from companies who may have started doing genetic testing much later on.
In high income countries.
And importantly, as discussed before our approach relies on multi omics, bringing together the deep has been a typical curation with kinetic and eventually multi omics impact.
And while this is important for our research activities and constantly strive to bring the new benefits to patients and you pick a market also improving our diagnostic same site with simple metabolic our multi omics panel for diagnosis of rare metabolic diseases. Do you believe you are truly one of the pioneers that is putting cutting edge multi omics product onto the mark.
But for physicians today to better diagnose their patients.
This together, we believe positions us in the ecosystem as the player for data driven insights focus on rare diseases.
You can see the companies that we compare ourselves within the table you truly think that we are unique in the sense that we are fully focused on rare disease has the most comprehensive body of data bank and tools and have the geographic presence that really means that became leading data mining and <unk> generation around the world.
With that said, let me hand over to Renee to walk you through the financials in more detail over to you.
Thank you and Greg.
Let's please turn to slide 13.
Our Q2 revenue grew by an impressive 234% year on year to $60.0 million euros.
This growth was mainly driven by the COVID-19 testing, creating $45.0 million euros in revenues in Q2 2021.
Q1, and Q2 combined our revenues climbed to $124.0 million euros compared to $29.0 million euros in first half 'twenty two 'twenty.
This makes the first half of 2021 of the most successful half year incentive <unk> history in terms of revenue.
Focusing on the core business, which includes our diagnostic and pharma segment. This expanded by 25% in Q2 2021 year over year to $14.0 million euros compared to seven 6 million euros for the same quarter in 2020.
This growth was mainly driven by the strong uptake.
If the clinical diagnostic business, which recorded $13.0 million euros in Q2, 2021, representing 82% growth compared to the same quarter in 2020.
Pharma revenues decreased year over year from three 9 million euros to $10.0 million euros in Q2, 2021, reflecting a decrease of 28% compared to the previous year period.
The decrease was primarily due to the impact of the COVID-19, pandemic, which slowed the clinical studies of our pharmaceutical partners.
In principle, we believe the recovery in pharma takes longer given the generally longer sales cycles. However, the value at the time of contract signs in the first half of 2021 already exceeds the value of the deal signed for the full year of 'twenty upon 2020, indicating a strong uptake in <unk>.
Pharma revenues in the second half of 2021 and beyond.
Please turn to slide 14.
Yeah.
We achieved a strong segment adjusted EBITDA of $12.0 million euros in Q2, 2021, compared to 1 million euros for the same quarter last year.
Our segment adjusted EBITDA includes all of diagnostics pharma and COVID-19 segments.
As it is the case followed revenue segment adjusted EBITDA was driven mainly by the contribution from the COVID-19 business.
The picture for our two core business segment is mixed at Yahoo.
The EBITDA for the diagnostics segment turned from a minus one 6 million euros in Q2 2020 into a positive adjusted EBITDA of <unk> 6 million euros.
Adjusted EBITDA of our pharma segment decreased to <unk> 6 million euros compared to $9.0 million euros. In Q2 2020. The decrease was primarily attributable to lower revenues as well as product mix.
Total coal business segment, adjusted EBITDA grew to $3.0 million up from <unk> 2 million euros in Q2 2020.
Indicating the strong uptake of the diagnostic business after COVID-19 hit in 2020.
Now, let's look at a further breakdown of the revenue in our coal segment.
Please turn to slide 16.
Slide 15, sorry.
Central gains pharma revenue in the first half of 2021 were still affected by the COVID-19 pandemic, we see in the graph that pharma revenue decreased to $10.0 million in first half of 2021 compared to $13.0 million Euro in first half of 2020.
The decline in revenues is mainly due to the successful completion of contracts by the end of 2020.
The main drivers of revenue as a patient identification and clinical trial support partnerships.
The large increase of signed contract in the first half of 2021 compared to the COVID-19 focused full year 2020 is assigned for a strong pharma business rebound towards the end of the year.
During the six months ended June 32021, we entered into 12, new collaborations and successfully completed the 25 collaborations resulting in a total of 53 active collaborations as of June 32021.
Revenue from our new collaborations totaled 2 million euros. So of the three months ended June <unk> 2021, with no upfront payments.
I previously mentioned that 53 active collaborate collaborations on the pharma side to give a little bit more perspective into the type of collaborations we have in place take a look at the Pie chart in the bottom right corner.
We have one large patient identification collaboration which replaces the <unk> fields back commercial stage products are already available in this case our contract with Takeda.
Currently most of our collaboration signed the clinical development States with clinical trials have polled all of those are based on the set up we already have clinical development stage collaborations can be used to support clinical trials all clinical studies like we do with our Denali collaboration.
As part of our strategy you will see our increasing focus in the earlier parts of the drug development cycle.
And with Liberty.
The libertarian on the bio data bank, our unique data driven insights will look to sign collaborations in the R&D stage, where you're currently only see one collaboration.
As discussed at our investment day event in June in detail. This is an area, where we will expand and expect to have the first value. She had the added in the next 12 months.
Those collaborations with generally include a value share for <unk>, where when historically these may have been small contracts only to face things our research questions.
Please move to slide 16.
While the take up in revenue in the pharma segment, and just taking a bit longer. We are pleased to see the diagnostic business has shown strong growth revenues from our diagnostics segment were $13.0 million euros for the three months ended June 32021, an increase of 3 million euros or eight.
Two 3% from $10.0 million euros for the three months ended June 32020.
We received approximately 13900 test request in our diagnostics segment, representing an increase of approximately 94% as compared to approximately 7300 Chase to request received for the three months ended June 32020.
The increase in revenues was primarily related to an increase in test requests for whole exome sequencing and totally keen on sequencing. During the three months ended June 32021 total revenues for the two area of others to sequencing amounted to $6.0 million euros.
<unk>, representing an increase of 6% to 7% as compared to Q2 2020.
In total this reflects that the W. S E S and W. BD Dts accounts for approximately 30% of the number of tests to be placed in the diagnostics segment 2021 to date.
Please go to slide 17.
Looking at our income statement the slides show through Q2 results on the left as well as year to date results on the right and we will focus on the quarterly results for the purpose of this discussion and compare year over year.
We have already mentioned the increase in revenues in the quarter, which drove an increase in gross profit of approximately $7.0 million euros in Q2, 2021 compared to last year last year's Q2.
Relatively to revenues the gross profit margin decreased overall, reflecting higher cost of sales and COVID-19 testing as well as the pharma segment.
Higher cost of sales in the pharma segment, but related to the larger portion of clinical trial related revenues.
This was offset by a decrease of cost of sales in our diagnostics segment, reflecting our investment and cost efficient equipment in previous years.
Our expenses, including other operating income increased by approximately $10.0 million euros for the quarter compared to Q2 last year.
Let me comment on the two biggest factors that drove this increase in expenses.
Firstly, a gentle at minutes or stretching expenses increased by approximately $10.0 million. The increase is principally due to the increased personnel costs legal and administrative costs and additional expenditure on it support and data centers.
Some of the additional costs are related to putting in place the new management team with some being a one off one off nature. In addition, the Covid expenses included share based compensation compensation expenses of $4.0 million euros and increase of 1.9 million euros versus the prior year quarter.
Second our R&D expenses for the quarter were up approximately <unk> 9 billion euros. This increase mainly represents personal cost and it related expenses incurred in the biomarker in AI research and development pace business.
This is reflective of our continued commitment to advancing our research and technology platform, such as AI and we'll see on me two.
In total our operating loss improved by $6.0 million euros to make it to $14.0 million euros.
Now please turn to slide 18 for cash flow and the balance sheet highlights.
As of June 30, 'twenty to 'twenty, one we had $42.0 million of cash or cash equivalents on our balance sheet.
Regarding our outstanding debt I would like to remind you that as of the end of June. This includes approximately 20 million euros of lease liabilities.
Looking at the movements Castro from.
Operating activities improved significantly significantly compared to last year. The main drivers were the additional revenue from COVID-19 testing and its positive adjusted EBITDA margin in that segment.
Having said that we do recognize that the impact of the earlier discussed the increase in cost of sales in the COVID-19 segment, leading to a lower margin contribution from the segment compared to previous quarters.
We are managing that business as tightly as uncertainty around COVID-19 remains.
In 2021 year to date cash flow used in investing activities was $12.0 million as compared to cash flow.
$12.0 million euros in first half of 2020.
Consistently with our aforementioned attention to the Covid business. The decrease is mainly due to a reduction in the COVID-19 related investments during the six months ended June 32021, COVID-19 related investments with $6.0 million euros of which $2 million that you wrote.
We're included in property plant and equipment and <unk> 4 million euros were related to the development of the sensor.
Kilometers portal.
Yeah.
Cash flow from financing activities decreased compared to 2021, mainly reflecting bank overdrafts in 2020.
With that let me hand, it back to Ann brand in total our 2021 outlook. Please turn to slide 20.
Yes.
Thank you.
Let me summarize the presentation briefly and highlight the key takeaways from today's discussion.
For the quarter and first half of the year, we had strong topline revenue of 52 million Europe, and 117 million euros, respectively. While this performance was driven in large part by commercial COVID-19 testing. It also highlights that our core business is on track for recovery with more than 25% growth over Q2 2020.
We're excited about the trajectory in our technology segment as he believes he offered a broadest agnostic testing portfolio for rare diseases.
They collected from our diagnostic services and biomaterials allow us to continue to grow our repository and our central AMD database.
Each to almost 650000 patients right now in our Biodata bank, which means we are continuously improving generating royalty fees centric insights.
And we continue to view the biodata bank as the key assets delivering value for orphan drug development to drive of our long term growth.
We will deploy that asset even more strategically and sharpen the value proposition both for our pharma partners and internal development going forward.
On the corporate side, we have made great strides in the first half of the year with five new members on the management team and now and with batteries and SLS Chief Scientific officer joining.
I'm proud of the effort not yourself decent team, but of course also of all the pizza centered gene and the work that they do for six patients around the world and I'm very confident that under new leadership, the company will prosper and create significant value in the years to come.
Before we move to Q&A, Let me lastly, touch on the outlook for the rest of the year.
For the core business you have seen the recovery in diagnostics and are confident that the pharma revenue will pick up as well.
Accordingly, we expect both businesses to grow solidly in 2021.
With regards to the total business, we all know the pandemic continues to throw one after the other which makes predicting commercial COVID-19 testing around when it's somewhat difficult.
What I can tell you is that we are confident that our overall revenue for full year 2021.
The only sort of past 2020 revenues of 128 million years, and they continue to make strategic investments into our core business segments to enhance our leading position your OTC space and generate long term value for our shareholders.
I would like to hand back to Leonard.
Yes.
Thank you Andrew.
As a short decide on calendar for Q&A on ex conference attendance will be the Baird Global Health care conference exactly a week from today, we look forward to seeing you and others from the investment community that virtually as soon as feasible know management will also be on the road again in person. So looking forward to that and I'll call turn the call over to Sharon.
<unk> for the Q&A portion of the cold and I would like to kindly remind you to ask a maximum of three questions. So that we have enough time to address as many as possible. Thank you again for joining us today.
Thank you as a reminder to ask a question you press star one on your telephone to withdraw your question press the pound Husky.
Your first question today comes from Puneet soda from SBB Leerink. Please go ahead. Your line is open.
Yeah, Hi.
Thanks for taking the question. So first one is really on the.
The guidance that you're providing which is.
Without much details on it but I just wanted to get a sense of you know obviously pharma was impacted in the quarter.
And when do you expect that to recover meaningfully in the second half or this is going to be more of a 'twenty 'twenty two a recovery and pharma and then on the diagnostics segment you've recovered only.
You know 5% sequentially. So is that a pace that we should continue to expect here in the second half just wanted to get a sense of the core business recovery.
Yeah. Thank you for the question so I think on the <unk>.
We expect the second half of the year to significantly outpace the first half so that the overall.
Pharma revenues for the year will be significantly above.
Last year, so that is our.
Forward direction that you can get I think I would also look at this.
It's a trend.
I had said in previous call I think the company has been focused on Covid last year and as such any pharma deals have been more or less put on hold.
Now that we have restarted that work and have strengthened that team, we see really good progress but of course from the time that you negotiate until you sign a deal and then until they teeter translating revenue when the clinical.
It comes trials actually start that just has a certain lead time, but I'm very confident that you will see quarter over quarter significant growth and then if you extrapolate a course that trajectory into 2022.
We'll see that that business is back on a on a highly attractive growth track.
For diagnostics and I think you were mentioning 5%. Despite the short term I would.
Take comparison overall, we clearly expect the diagnostic business.
To outpace their beverage genetic diagnostic market, which we are.
When we look at the benchmarks seem currently at around 10%. So we clearly have a plan to grow above that.
Okay. That's helpful and then in terms of the Dcs models that you mentioned.
Wondering if there was a you know if you're looking at it from a contribution perspective how.
How much was the contribution from disease models, and obviously Youre building this up.
As a as a resource just beyond the database so.
How should we expect the contribution from the disease models and and also what's been the feedback from pharma about these disease models.
And lastly, wondering if there was any contribution from ICSC work that youre doing but what the partners. Thank you.
Yeah. So.
Fourth at Tcs model you have to.
I understand that as a solid deep insight into a biodiesel.
Biodata effect on a on a rare disease, which in our mind will be quite unique.
<unk>.
As mentioned piece will not stand on its own. So we are basically mining niche.
Nature of publicly available data to understand the right outstanding medical and scientific questions that we have some certain rare disease and then we can use our disease model to find the right answers to dose.
That roadmap to finding the answer is very engaged partner with to align on what question, we answer and then.
There is interest in the deal to actually.
Get the work support that then and funded.
After the exact financial contribution.
Can only tell you that we expect them to be significant when you look at the <unk>.
And the other deals of similar nature that you could reference to industry.
Such deals they do come with a significant upfront payment, which is in the multimillion dollars range, but that of course is not the true value. The true value is that if the work delivers against its promise, we expect such deals to deliver milestones and royalties that would adopt to web.
The value that can clearly be above $100 million.
Thank you Sal I go to the next question.
Yes, Keith Thank you very much. Your next question comes from the line of Catherine Schulte from Fat. Please go ahead. Your line is open.
Hi, Thanks for the questions I guess first you talked about the value of contracts signed in the first half was higher than all of those signed in 2020 can you just give us any details on how you go about calculating those values does that just include a kind of contracted base value or does it factoring your potential longer term upside from.
Revenue sharing or milestones and things like that.
That dose both deals are.
True.
The largest extent the number referring to a short term revenues.
So if there is a longer term you know a royalty of some value share that wouldn't be included in that statement.
Yes.
Okay got it very helpful.
And then for the southern New pharma collaborations in the second quarter that was after signing five in the first quarter and I believe 16 in all of 2020, how should we think about the pace of new collaborations going forward and how meaningfully cut those contribute to revenue in the back half of the year.
So the.
The number of deals.
Doesn't probably tell you that much because it all depends of course on the quality of the.
Of the deal emphasize after of the deal.
But it does tell you is that we have a broad range of collaborations are not just relying.
On the one or two but with regards of the total revenue that they bring.
I have two.
Refer you back to the initial statement I mean D.
<unk> signed in the first half of the year will bring.
Blame or new revenue and all the deals are signed in 2020.
And that's why we are very confident that this business starting from the second half of Europe will be back to a very attractive growth rate.
Okay got it and then last one for me is good to see core diagnostics gross margins staying up above 30% again this quarter.
Is that sustainable going forward and then on pharma just with the ramp up of revenue you're expecting in the back half for me in neuroscience collaborations and how should we think about the gross margin profile of that segment as those contributions ramp.
You know should we be getting back to the 70% type gross margins you saw for pharma in 2019, as we exit 2021.
Yeah, So I think on the <unk>.
Diagnostics side.
Indeed, the March and this is.
He is quite attractive and we are happy that the state.
That level, because there is a certain price pressure when I went to genetic testing overall, we were able to insulate ourselves to some extent from that but I do believe that the pricing pressure on what we consider.
More simplified genetic testing.
We'll further increase going forward as you know different players are making compromises on the pricing in return for getting access to.
Two patient data basically.
We think that given we have a unique value proposition in rare diseases.
That we're not just making a standard genetic tests, but really tailor our testing with superior to seize value. We believe that we can defend the.
The margins that you currently see.
And here and there we may also to collect the appropriate data make a certain compromised head, but be very targeted as making certain geographies, where we know prices are low and we still want to make sure that you get and the right insights because the true value of.
Our diagnostic business is not just that marching that youre, referring to but it's really also to remain the leader in collecting very disease data and through debt, creating the best data insights going forward.
On the pharma side, the second half of the year.
Revenues.
I guess in a simple way.
I assume what needs to happen for the revenue used to be above last year I think last year, we had pharma type of $16.6 million.
You can look at the sales in the first half and then you can put in a number that will show that the full year will be significantly above last year. So I think that and so that I can tell you exactly how much above.
That depends a bit because the patients who are rapidly recover in Q3, and even more so in Q4 and of course with a much more aggressive growth.
We'll see how much of it happens in Q4 and how much if you'd move standing Q1, 2022, because every month or two of course can make quite a difference that's why I don't want to keep you at this point in time exactly.
Number four the margins on the pharma business, we think they will absolutely improve while the business grows we don't think they will go back to.
Let's say pre.
The pandemic level has nothing to do with the pandemic, but it has to do with the fact that they are signed.
Assigning pro their sets of collaborations with pharma partners in that spirit of getting access to really highly.
Track this data thats coming out of the clinical studies that these partnerships and tails, we still expect the margins to be very attractive, but maybe slightly less than what you saw before.
Okay, great. Thank you.
Thank you.
Your next question comes from the line of Casey try hanging from Credit Suisse. Please go ahead. Your line is open.
Hi, Thanks for taking my question.
First on the Covid testing side, you mentioned that contribution to slow over the back half of the year, but just trying to get a better sense of how exactly youre thinking about contribution can you help us think maybe about holiday volumes trend throughout the quarter and what was the run rate.
Accident at the corner I saw anything there would be helpful.
Yes.
I think Q2 had a six.
It's quite a substantial revenue, but more of that revenue happened in March.
Maybe starting out in March and April maybe the first half of May and then things clearly declined as especially in Germany, which is by far of course our.
The biggest.
Market.
The testing paradigm.
Some extent.
Changed and more people could rely on antigen self testing rather than PCR high quality tests.
That revenue spend or the testing volume has stayed more or less stable same stirring summer at a lower.
Pace, let's.
I'd say, maybe half of what the.
We saw during the.
Time before and the question is where does it go from here I think the business is at this point in time cash positive for us. So there's no need for immediate actions.
About that while weather gets colder in fall as we saw last year situation may get worse again and testing volumes will increase.
Or they may not happen I think that's where we said look we simply cant predict that.
Has to be you have to be patient and see what happens, but this means for.
But other revenues overall.
Our base case, clearly assumes that the revenues for the second half of the year are going to be significantly lower than the first half of the year.
Okay got it that's very helpful and then I know.
You mentioned that the signed contract by volume or value for the pharma business is higher than the first half versus all of 2020, but can you maybe remind us of the average lead time of when you sign a contract when he began generating revenue I'm just trying to get a better sense.
How these contracts will ramp over the back half of the year and then just got plenty cases.
Yes, so from from signing until the actual so most of those contracts and as said that may change in the future, while we sign different.
Search deals, but for those contracts that are largely clinical trials support contract revenue.
When you start to kick in when we do the testing. So there is no payment at finding our upfront milestone payment of timing.
And from signing of the deal until the clinical study starts that takes an average of six.
Because from the contract signed.
Of course, afterwards society needs to be planned and details the protocol is finalized.
Interesting for them to and educate them and then eventually.
You can start to recruiting mpc's vendor revenues kick in so I think six months is a good average.
Okay. That's great. Thanks, so much.
Thank you. Your next question comes from the line of Mila alike.
<unk> from Pfizer that please go ahead your line is open.
Yeah.
Hello, My name is your phone on mute.
Hi, I think this is actually a country from BTG.
So.
Thanks for taking the questions.
Sorry to ask another question on the the.
Pharma contract signed in the first half just to clarify is that just a function of more deals or more contracts being signed or are the contract per pharma customer also increasing overtime.
I wouldn't say.
Say that it's not that we signed with the same.
Customer more contracts I think it's a combination of some contract extensions or another contract with an existing customer and about half are new.
Our new customer sites, it's quite a nice mix.
Mix.
<unk>.
In the first half of the year signed a few contracts like the one next door, who clearly have a significant.
Revenue value.
You have seen in that press release that we are recruiting about 4000.
Patients that need to be.
And our lives and test it and I won't keep you an exact revenue number per patient, but you can assume that this translates into it.
Quite a significant revenue stream over the year of the of the trial.
So.
One thing and I think we plan to do more of that in the future to give you a little bit more.
Transparency.
The deals we group them into the research deals.
Clinical trials support treatments for assistant the patient identification deals, which is pretty much.
Just doing the.
The work.
To find patients on existing drugs now the client clinics drive support deals like the vantage without next door.
I think we try it there to publish arent sure. We think the numbers of patients in those trails and over time, I think we'll be able to somewhat come up with an average FX of AD.
Revenue per patient for the work that we do there. The reason why we don't share. The details with you is one because of competitive nature, you can deduct pricing information from that which of course.
A we don't want to share publicly and b.
Most of those deals also the customers and clearly want to keep these confidential.
Gotcha, great. Thank you for that and then just the value share.
That you're talking about the first stop or at least one signed over the next 12 months.
Could you kind of give us more color in terms of the type of feedback you're getting as you were.
Talking to the potential pharma collaborators.
What gets them excited about working with you guys or were also maybe either what are some of the hurdles for some of the pharma as they are discussing you know.
Potential partnerships with you kind of what what they would like to see more of.
Yes.
It gets them excited is the deep understanding of the disease.
Clarity on what type of biomarker or a potential path.
Halfway understanding would lead to a to a new drug target identification of a drug target that they can afterwards.
For further development.
D.
Discussions we have at least since I joined I mean, they're getting.
Better pretty much by by the month Baidu, they get better for two reasons. One of it is that we have invested significantly to make our biodata bank.
Able to deliver more tailored answers to some of those questions. The biobased the bank has grown over years.
Actually more coming out of the clinical diagnostic settings. So there's a lot of data there are a lot of books there, but the granularity in terms of how the data is being recorded or what type of genetic testing has done.
To some extent so now that Rupert diseases with a clear understanding of what can be tried to learn as you know for drug discovery and development, we really clean up the state. This up sometimes you go back and do additional testing also make sure that the clean up the respective final types you have a lot of Saint Pat's inflammation.
So the more.
Great that gets better I think the more.
The customers are excited and then the second one is our understanding of drug discovery.
The company has seen a genetic testing company, historically and let's not forget that.
The idea to use this unique drove of inflammation and shape it up for it for drug discovery and development.
Relatively new so that clearly means there is a learning curve and I think we have made great.
Progress in ultra strengthening the competency.
Entergy because you can't go to a partner and say Hey, I have some data here I don't know what it means is it interesting to you and that's also why I'm Super excited about that the tree.
Joined us and he's.
Well, we could nice to discover industry leader.
And under him I think Covid has started to build up.
The comprehensive scientific program lead it can really.
Come up with what I have described.
Clear roadmap from our Biodata bank. The data we have and then over a reasonable amount of time what type of insights. We can generate and then of course, it's a negotiation with our partner I mean, some partners to say well why can't you know crazy based on the insights and then.
Come and talk to me when you have them and some of them. They clearly understand that they don't want to wait that long I shouldn't wait that long because once you have a new drug target or an insight for you on the table then of course the competition for that.
While the value is higher for us, but the competition for the assets of those increase so that turns them into a negotiation, where we tried to find the right balance in terms of.
Finding a deal signing up with a partner at.
At the time when the note that he can extract the value into negotiation. So we don't want to do it too early but also not too late and that's why.
One of the key reasons why I can't give you an exact kind of commitment to say between four months that you will be here, but in principle on each of those data assets that we have the lama relates the higher the value of the exit because we invest of course in the research and <unk>.
The work that needs to be done to really extract the value for pro forma so it along the rates the higher the value of the deal for us and define it but of course, we don't want to wait too long either some of these deals.
We see the most us a validation for it.
The attractiveness of the customers in terms of like you're doing and we absolutely know that investors are looking for that is filed with some external validation of the work that you're doing.
Gotcha and then just lastly for me could you talk about for your second half outlook.
Whether or not the impact from the Delta variance has been factored in and you know would love to kind of hear what you guys are seeing how that's impacting your business both on the diagnostic and then on the pharma side globally.
Year to date.
So on that on the core business that you haven't seen any.
The impact to date.
Overall the most.
Most of our key markets I mean, the clinical diagnostic testing goes on.
As in the past now this could change if you get the game to hospitals being overcrowded and hospitals.
Hospitals physicians delaying some of the more routine work because they need to prioritize Colby patients. I mean this is what late last year to the reduction in the testing volume given that some of those.
Mustique work has been postponed.
Postponed or delayed.
Now, we don't see that in a significant way and I hope that most countries after pandemic control and strengths can be enough that we don't.
But there is minimal risk.
The risks to that but at this point in time I'm not worried about it so that's why the.
We expect our.
In our core basins to continue without a significant impact of the different d'amico and going forward. If there was some impact from the pandemic.
Purely from a financial point of view that could be mitigated by in return some higher than <unk> anticipated COVID-19 testing revenue. So if you have a little off.
Off of natural.
Hedge nothing really like it from a pandemic point of view, but from a financial point of view. That's what you were talking about <unk> and I think.
Our base plan is that in the second half.
Covid goes down so we slowly see less of that but in return, we see more core basis and from a financial point of view that gives us the transition we're looking for.
Universe case scenario it would be somewhat delayed can be with T. Mo COVID-19 revenue seemed a bit less.
Core revenue in the second half, but again at this point in time, we have no reason to believe that that will happen.
Gotcha. Thank you so much.
Okay.
Thank you there are no further questions I will hand, the cobalt Qi for closing remarks.
Thank you and thank you all for listening and.
And thank you for your interest in the company and your questions.
I hope you're able to answer them to your satisfaction. Please feel free to reach out even after the call. If you have specific questions Lynette and the team are very happy to take them up and respond to you as quickly as possible.
One again assure you that our core business is in solid shape for future growth into the second half of the year and we will keep you updated quarter to quarter as they materialize.
Our new strategy with a new very competent management team that is going to deliver against our creating the value with our buy data bank fully six patients in the quarters, but also the years to come.
You all and have a good day or good good afternoon.
Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.
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