Genetron Health Reports Unaudited Financial Results for Q2 2021 and Provides Business Update

Beijing, China, August 24, 2021 – Genetron Health (hereinafter referred to as “Genetron Health” or the “Company,” NASDAQ: GTH), a leading precision oncology company in China focused on providing tumor molecular testing, cancer early screening products, and companion diagnostic development services, today announced its unaudited financial results for the second quarter ended June 30, 2021.

Q2 2021 and Recent Operational Highlights:

● Total revenue for the second quarter of 2021 was RMB 140.5 million (USD 21.8 million), representing a year-on-year increase of 38.1% compared to the same period in 2020.

● Revenue from LDT business increased by 15.0% year-on-year during the period, reaching RMB 87.1 million (USD 13.5 million).

● IVD business revenue surged by 141.5% year-over-year during the period, reaching RMB 43.8 million, primarily driven by sales of the GENETRON S5 gene sequencer and the Lung Cancer 8-Gene (Tissue) Kit.

● Substantial growth in pharmaceutical company services drove a 21.8% year-on-year increase in overall development service revenue compared to the same period in 2020.

● Thanks to the optimization and upgrading of LDT and IVD businesses, the gross profit margin in the second quarter of 2021 increased to 67.2% from 63.1% in the same period last year.

● Established a strategic partnership with Yikang Gene in the field of assisted reproduction based on the GENETRON S5 sequencer, further expanding the precision medicine business sector.

● Collaboration with leading multinational pharmaceutical companies on Seq-MRD for hematologic malignancies^®The product has signed a cooperation agreement for its clinical trials.

● The independently developed 8-gene lung cancer test kit (semiconductor sequencing method) has obtained EU CE certification.

● The “Regional Comprehensive Prevention and Control Demonstration Project for Early Liver Cancer Screening,” conducted in collaboration with Dafang County, Guizhou Province, has officially been launched, applying the HCCscreen™ liquid biopsy product for early liver cancer screening to high-risk populations within the county.

● The Beijing Medical Laboratory achieved a perfect score in the NCCL’s external quality assessment for tumor high-throughput sequencing large panels, with its NGS-based solid tumor Onco PanScan™ results ranking first among laboratories in China.

Mr. Wang Sizhen, Co-founder and CEO of Genetron Healthstated: “In the second quarter of 2021, Genetron Health demonstrated strong revenue growth, accompanied by a steady improvement in gross margin. We are pleased to see that all business segments have maintained robust growth momentum. Over the past few weeks, our business activities were temporarily impacted by the heightened COVID-19 control measures in China. We will closely monitor the evolution of the pandemic and steadily advance our strategic layout, particularly in regions and business areas less affected by the outbreak. Looking ahead to the second half of the year, despite numerous challenges including the pandemic, we will remain focused on advancing our core product pipeline. In early screening, we are about to initiate the registration clinical trial for HCCscreen™ and expect to release preliminary data for colorectal cancer (CRC) early screening within the year. Our MRD product development is also making continuous progress, with our hematologic malignancy minimal residual disease product (Seq-MRD^®) is about to be launched, and research on minimal residual disease (MRD) in solid tumors is also progressing steadily. With the support of the Chinese government and favorable policies, we are confident in the development prospects of China’s precision oncology industry. Genetron Health will make steady progress, fulfill its commitments, and strive to provide the Chinese public with higher-quality, more cost-effective medical services and products.”

Total revenue in the second quarter of 2021 reached RMB 140.5 million (USD 21.8 million), representing a year-on-year increase of 38.1%, compared with RMB 101.7 million in the same period of 2020.

In the second quarter of 2021, revenue from diagnostic and monitoring services amounted to RMB 131.0 million (USD 20.3 million), representing a year-on-year increase of 39.4% compared to RMB 93.9 million in the same period of 2020, primarily driven by growth in sales revenue from IVD products.

● In the second quarter of 2021, LDT service revenue reached RMB 87.1 million (USD 13.5 million), representing a year-on-year increase of 15.0%, compared to RMB 75.8 million in the same period of 2020. The LDT service sales revenue for the second quarter of 2021 included revenue from HCCscreen™, an early screening test for liver cancer. Approximately 6,840 LDT diagnostic tests were sold in the second quarter of 2021.

● In the second quarter of 2021, IVD product sales revenue reached RMB 43.8 million (USD 6.8 million), representing a 141.5% increase from RMB 18.1 million in the same period of 2020, driven by growth in sales of the GENETRON S5 gene sequencer and the 8-Gene Lung Cancer Kit (Tissue).

Number of Hospital Clients with Signed B2B Contracts

(As of the end of each reporting period)

In the second quarter of 2021, development service revenue amounted to RMB 9.5 million (USD 1.5 million), representing a 21.8% increase from RMB 7.8 million in the same period of 2020. Notably, revenue from pharmaceutical enterprise services experienced significant year-on-year growth compared to 2020.

Meanwhile, the cost of revenue for the three months ended June 30, 2021 was RMB 46.0 million (US$7.1 million), compared with RMB 37.5 million for the same period in 2020, representing a year-over-year increase of 22.7%.

The gross profit for the second quarter of 2021 was RMB 94.5 million (USD 14.6 million), compared with RMB 64.2 million in the same period of 2020, representing a year-on-year increase of 47.1%. Meanwhile, driven by improved gross margins in the Company’s LDT and IVD businesses, the overall gross margin for the second quarter rose to 67.2%, up from 63.1% in the same period of 2020.

Operating expenses for the three months ended June 30, 2021 were RMB194.6 million (US$30.1 million), representing a 65.8% increase from RMB117.4 million in the same period of 2020.

Selling expenses for the second quarter of 2021 were RMB88.5 million (USD13.7 million), representing a 46.0% increase from RMB60.6 million in the same period of 2020. Selling expenses as a percentage of revenue amounted to 63.0% in the second quarter of 2021, higher than 59.6% in the same period of 2020, primarily due to increased marketing expenditures for core business operations and higher employee compensation.

Administrative expenses in the second quarter of 2021 amounted to RMB54.6 million (USD8.5 million), representing a 95.6% increase from RMB27.9 million in the same period of 2020. Administrative expenses as a percentage of revenue rose from 27.4% in the same period of 2020 to 38.8% in the second quarter of 2021. The increase in administrative expenses was primarily driven by higher headcount, professional service fees incurred following the Company’s initial public offering, and increased operational costs such as IT expenses.

R&D expenses for the second quarter of 2021 amounted to RMB 56.2 million (USD 8.7 million), representing an 88.2% increase from RMB 29.8 million in the same period of 2020. The ratio of R&D expenses to revenue rose from 29.3% in the second quarter of 2020 to 40.0% in the same period of 2021, primarily driven by increased compensation and related costs due to the expansion of the R&D workforce, as well as the Company’s continued investment in R&D innovation, including the development of new products and technologies and the conduct of clinical trials.

In summary, the operating loss for the three months ended June 30, 2021 was RMB 100.2 million (USD 15.5 million), higher than RMB 53.1 million for the same period in 2020.

Net financial income for the second quarter of 2021 was RMB 8.0 million (USD 1.2 million), compared to a net loss of RMB 0.6 million in the same period of 2020, primarily driven by foreign exchange gains.

For the three months ended June 30, 2021, the loss was RMB92.1 million (USD14.3 million), compared with RMB2,832.4 million for the same period in 2020. For the three months ended June 30, 2020 and 2021, the Company’s losses from changes in the fair value of preferred shares were RMB2,778.6 million and zero, respectively.

Losses under Non-IFRS measures refer to the net loss for the period after excluding share-based compensation expenses, losses from changes in fair value, and other losses related to preferred shares. The loss for the three months ended June 30, 2021 was RMB79.6 million (USD12.3 million), compared with RMB43.9 million for the same period last year. For further details, please refer to the section “Use of Non-IFRS Financial Measures” in this press release.

In the second quarter of 2021, the basic net loss per ordinary share attributable to the Company’s ordinary shareholders was RMB0.20 (US$0.03), compared with a basic net loss per ordinary share of RMB17.04 in the same period last year. After excluding share-based compensation expenses, losses from changes in the fair value of preferred shares, and other losses related to preferred shares, the Non-IFRS basic net loss per ordinary share attributable to the Company’s ordinary shareholders was RMB0.17 (US$0.03), compared with RMB0.26 in the same period of 2020. The diluted net loss per ordinary share attributable to the Company’s ordinary shareholders was equal to the basic net loss per ordinary share. Each American Depositary Share represents five Class A ordinary shares, with a par value of US$0.00002 per share. For further details, please refer to the section “Use of Non-International Financial Reporting Standards (Non-IFRS) Financial Measures” in this press release.

As of June 30, 2021, the aggregate value of the Company’s cash and cash equivalents, restricted cash, and fair value of liquid financial assets amounted to RMB 1,214.0 million (USD 188.0 million), compared to RMB 1,516.1 million as of December 31, 2020; the decrease in the total amount was primarily attributable to expenditures for operating activities.

We anticipate that the current pandemic-related restrictions are temporary, and Genetron Health maintains its full-year 2021 revenue forecast at approximately RMB 615 million to RMB 625 million. However, should the overall pandemic situation persist or worsen, the Company will reassess its financial guidance and provide updated financial forecasts as appropriate.

Genetron Health (NASDAQ: GTH) is a global leader in precision oncology, dedicated to advancing cancer genomics research and applications. The company strives to transform cancer diagnosis and treatment by leveraging advanced molecular biology and big data analytics. Genetron Health has established a comprehensive portfolio of products and services spanning the entire cancer care continuum—from early screening, diagnosis, and therapeutic recommendations to monitoring and prognostic management. Furthermore, the company actively collaborates with partners across the industry value chain to expand innovative applications and scenarios for molecular diagnostic technologies.