Genetron Health Reports Unaudited Financial Results and Business Highlights for Q1 2021

Financial and Operational Highlights for Q1 2021:

· Total revenue in the first quarter of 2021 amounted to RMB 92.1 million (USD 14.1 million), representing a year-on-year increase of 19.8%. Excluding sales revenue of RMB 16.6 million from the Genetron SARS-CoV-2 RNA Test (hereinafter referred to as the “COVID-19 test kit”) in the first quarter of 2020, core business revenue increased by 52.9% year on year.

· Cutting-edge liquid biopsy-based early screening for hepatocellular carcinoma (hereinafter referred to as “HCCscreen™”) and diagnostic LDT testing services jointly drove a robust 51.0% year-over-year increase in LDT revenue, reaching RMB 71.8 million (USD 11.0 million).

· In the first quarter of 2021, IVD sales amounted to RMB 15.3 million. Excluding sales from COVID-19 test kits, the base IVD sales increased by nearly fivefold year-on-year.

·The gross profit margin increased from 55.0% in the same period of 2020 to 59.3% in the first quarter of 2021.

· Genetron Health Announces Two Major Strategic Partnerships with JD Health and Siemens HealthineersGenetron Health announced two major strategic partnerships, with JD Health and Siemens Healthineers respectively. Through JD Health’s online healthcare platform, Genetron Health will promote its HCCscreen™ test and the Human 8-Gene Mutation Combined Detection Kit (Semiconductor Sequencing Method) (NMPA Registration No. 20203400072, hereinafter referred to as the “Lung Cancer 8-Gene Kit”). In parallel, the strategic collaboration with Siemens Healthineers aims to drive the large-scale adoption of the GENETRON S5 gene sequencer (NMPA Registration No. 20193220820) and the Lung Cancer 8-Gene Kit in China’s hospital market.

·In March 2021, Genetron Health announced the latest data from 1,615 patients in its large-scale prospective cohort study on early liver cancer screening (HIT). The data showed that HCCscreen™ achieved a sensitivity of 88% and a specificity of 93%, significantly outperforming the combination of ultrasound and alpha-fetoprotein (AFP) testing, which had a sensitivity of 71% and a specificity of 95%. HCCscreen™ also achieved a positive predictive value (PPV) of 40.9% and a negative predictive value (NPV) of 99.3%.

·In January 2021, Genetron Health entered into an exclusive strategic partnership with Chia Tai Tianqing, a subsidiary of Sino Biopharmaceutical (HKEX: 1177), for the Chinese hospital market regarding HCCscreen™.

Mr. Wang Sizhen, Co-founder and CEO of Genetron Healthstated: “In the first quarter of 2021, despite the dual challenges posed by the global spread of the pandemic and a slowdown in growth during the Spring Festival period, Genetron Health still achieved steady growth in business revenue, while also making significant progress in commercial partnerships and clinical applications. First, we established an important strategic partnership with Chia Tai Tianqing Pharmaceutical Group. Subsequently, Genetron Health announced encouraging data results from the HCCscreen™ prospective cohort study for early screening of hepatocellular carcinoma. We then secured two additional major strategic collaborations: one with JD Health, leveraging its domestic online healthcare platform to promote our flagship products, HCCscreen™ and the 8-Gene Lung Cancer Kit; and another with Siemens Healthcare, involving a strategic cooperation agreement on the GENETRON S5 platform and the 8-Gene Lung Cancer Kit, which will provide strong momentum for the growth of our IVD business. We are honored to engage in these innovative collaborations with two leading companies and hope that these partnerships will further drive Genetron Health’s business growth.”

Mr. Wang Sizhenstated: “Looking ahead to the next three quarters, Genetron Health will steadily advance toward its established goals. Regarding our product pipeline, we are about to initiate registrational clinical trials for HCCscreen™ and the Onco Panscan large panel, and will launch our blood cancer minimal residual disease (Seq-MRD) product as a laboratory-developed test (LDT). Benefiting from our Mutation Capsule technology, the preliminary results of our minimal residual disease (MRD) detection programs for hepatocellular carcinoma and colorectal cancer solid tumors have been encouraging, prompting us to proceed to larger multicenter studies. Looking further ahead, Genetron Health will maintain its revenue growth target of 45%–47% for 2021.”

Total revenue in the first quarter of 2021 reached RMB 92.1 million (USD 14.1 million), a year-on-year increase of 19.8%, compared with RMB 76.8 million in the same period of 2020.

In the first quarter of 2021, revenue from diagnostic and monitoring services amounted to RMB 87.1 million (USD 13.3 million), representing a year-on-year increase of 30.4% compared to RMB 66.8 million in the same period of 2020, primarily driven by laboratory-developed test (LDT) services.

· In the first quarter of 2021, LDT service revenue reached RMB 71.8 million (USD 11.0 million), representing a year-over-year increase of 51.0% from RMB 47.6 million in the same period of 2020; LDT service revenue for the first quarter of 2021 included sales revenue from HCCscreenTM, an early screening test for liver cancer. Approximately 5,100 LDT diagnostic tests were sold in the first quarter of 2021, a year-over-year increase of 29.6%.

·In the first quarter of 2021, IVD product sales revenue amounted to RMB 15.3 million (USD 2.3 million), representing a 20.5% decrease from RMB 19.2 million in the same period of 2020, when RMB 16.6 million of the Q1 2020 IVD revenue was derived from sales of COVID-19 test kits.

Development services revenue in the first quarter of 2021 was RMB5.0 million (USD0.8 million), representing a 50.6% decrease from RMB10.1 million in the same period of 2020. This change was primarily due to adjustments in the company’s business development strategy, with a continued focus on high-value pharmaceutical enterprise services, which led to a decline in sequencing service revenue. Revenue from pharmaceutical enterprise services in the first quarter of 2021 increased year-on-year.

Meanwhile, for the three months ended March 31, 2021, the cost of revenue was RMB37.5 million (USD5.7 million), compared with RMB34.6 million for the same period in 2020, representing a year-on-year increase of 8.4%.

Gross profit for the first quarter of 2021 was RMB 54.5 million (USD 8.3 million), compared with RMB 42.2 million in the same period of 2020, representing a year-on-year increase of 29.1%. Meanwhile, driven by expanded sales volume and an optimized product portfolio, the gross margin of the Company’s LDT business improved, lifting the overall gross margin for the first quarter to 59.3%, up from 55.0% in the same period of 2020.

Operating expenses for the first quarter of 2021 were RMB 163.5 million (USD 25.0 million), representing a 49.5% increase from RMB 109.4 million in the same period of 2020.

Selling expenses for the first quarter of 2021 amounted to RMB59.7 million (USD9.1 million), representing a 10.9% increase from RMB53.8 million in the same period of 2020. Selling expenses as a percentage of revenue stood at 64.8% in the first quarter of 2021, down from 70.0% in the same period of 2020. The decrease in the ratio of selling expenses to revenue was primarily driven by the expansion of sales scale and the optimization of revenue structure.

Administrative expenses for the first quarter of 2021 amounted to RMB 44.6 million (USD 6.8 million), representing a 106.3% increase compared with RMB 21.6 million in the same period of 2020. The ratio of administrative expenses to revenue rose from 28.1% in the same period of 2020 to 48.4% in the first quarter of 2021, primarily due to an increase in headcount and higher professional service fees following the Company’s initial public offering.

R&D expenses for the first quarter of 2021 amounted to RMB 50.0 million (USD 7.6 million), representing an 80.9% increase from RMB 27.6 million in the same period of 2020. The ratio of R&D expenses to revenue rose from 36.0% in the first quarter of 2020 to 54.3% in the same period of 2021. This increase was primarily driven by higher compensation and related costs resulting from 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 first quarter of 2021 was RMB 109 million (USD 16.6 million), compared with RMB 67.2 million in the same period last year.

Financial expenses increased to RMB 6.0 million (USD 0.9 million) in the first quarter of 2021, compared with RMB 3.5 million in the same period of 2020, primarily due to foreign exchange losses.

Net Loss and Non-IFRS Net Loss

As of March 31, 2021, the net loss for the period was RMB 115 million (USD 17.6 million), compared with RMB 115.5 million in the same period last year.

Non-IFRS net loss refers to the net loss for the period 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 net loss for the first quarter of 2021 was RMB 105.8 million (USD 16.1 million), compared with RMB 65.6 million for the same period last year. For further details, please refer to the section “Reconciliation of Non-International Financial Reporting Standards (Non-IFRS) Financial Measures” in this press release.

The basic net loss per ordinary share attributable to the Company’s ordinary shareholders for the first quarter of 2021 was RMB0.25 (US$0.04), compared with a basic net loss per ordinary share of RMB0.92 in the same period of the previous 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 RMB0.23 (US$0.03), compared with RMB0.52 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 ADS represents five 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 March 31, 2021, the Company’s cash and cash equivalents totaled RMB1.069 billion (USD163.2 million), representing a decrease from RMB1.3758 billion as of December 31, 2020. This decline was attributable to net cash used in operating and investing activities during the quarter, which included a net loss of RMB115 million and purchases of cash management and foreign exchange hedging wealth management products amounting to RMB197.1 million.

Based on the current market environment and assuming that the COVID-19 pandemic will not have a significant impact on the Company’s key markets in 2021, Genetron Health forecasts its 2021 revenue to be approximately RMB 615 million to RMB 625 million, representing a year-on-year growth of approximately 45% to 47% compared with 2020.

The conference call and webcast to discuss financial results will be held at 8:30 a.m. Eastern Time (or 8:30 p.m. Beijing Time) on May 24, 2021. To participate in the conference call, please dial:

Due to the large number of participants, it is recommended to dial in at least 15 minutes in advance.

Replays of the conference are available until May 31, 2021. Please call:

A live webcast of the conference call will be available simultaneously in the “News and Events” section under the Investors tab on the Company’s website. The replay will be accessible for 30 days following the call. Please visit ir.genetronhealth.com for more information.

The financial statements in this announcement and amounts presented elsewhere have been translated from Renminbi (RMB) into U.S. dollars (USD) solely for the convenience of readers, using the exchange rate of USD 1 = RMB 6.5518 as reported in the Federal Reserve Board’s H.10 statistical release on March 31, 2021. The Company makes no representation that any RMB amounts in this report were or could have been converted, realized, or settled into USD at this exchange rate or at any other exchange rate as of March 31, 2021.

Genetron Health uses Non-IFRS net loss and Non-IFRS basic net loss per ordinary share attributable to the Company’s shareholders to evaluate the Company’s operating results, as well as for financial and operational decision-making. The Company believes that Non-IFRS net loss and Non-IFRS basic net loss per ordinary share attributable to the Company’s shareholders help identify underlying trends in its business, which may be distorted by the impact of certain expenses included in the net loss for the current year/period. The Company believes that Non-IFRS net loss and Non-IFRS basic net loss per ordinary share attributable to the Company’s shareholders provide useful information regarding its operating results, enhance overall understanding of its past performance and future prospects, and improve the visibility of key metrics used by management in making financial and operational decisions.

For the measurement of Non-IFRS financial metrics for the current year/period, Genetron Health’s use of Non-IFRS net loss and Non-IFRS basic net loss per share attributable to ordinary shareholders of the Company should not be considered in isolation, nor should it be regarded as a substitute for operating profit, net loss, or any other performance measure for such year/period, or as a measure of its operating performance. The Company encourages investors to review the Non-IFRS net loss and Non-IFRS basic net loss per share attributable to ordinary shareholders of the Company for such year/period, along with the reconciliation to the most directly comparable financial measures under International Financial Reporting Standards (IFRS). The Non-IFRS net loss and Non-IFRS basic net loss per share attributable to ordinary shareholders of the Company presented herein for such year/period may not be comparable to similarly titled financial measures provided by other companies. Other companies may calculate similar financial measures differently, thereby limiting their usefulness as comparable data. Genetron Health encourages investors and others to comprehensively review the Company’s financial information rather than focusing solely on a single financial metric.

For the current year/period, the Non-IFRS net loss and the Non-IFRS basic net loss per ordinary share attributable to shareholders of the Company, calculated under the net profit metric, exclude share-based compensation expenses, losses from changes in the fair value of preferred shares, and other losses related to preferred shares (if applicable).

Please refer to “Reconciliation of Unaudited Non-International Financial Reporting Standards (Non-IFRS) Financial Measures” at the end of this announcement for the complete reconciliation of the Non-IFRS net loss and the Non-IFRS basic net loss per ordinary share attributable to shareholders of the Company for the current year/period.

Genetron Health (NASDAQ: GTH) is a global leader in precision oncology, dedicated to advancing cancer genomics research and applications. Leveraging cutting-edge molecular biology and big data analytics, the company is transforming cancer diagnosis and treatment. 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 prognosis management. Furthermore, the company actively collaborates with partners across the industry value chain to expand innovative applications and scenarios for molecular testing technologies.

This press release contains expectations, plans, and forward-looking statements regarding Genetron Health. Such statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties, as well as numerous factors that could cause actual results to differ materially from those described in any forward-looking statement. Other statements containing words such as “anticipate,” “believe,” “expect,” “plan,” and similar expressions also constitute forward-looking descriptions. Additional information regarding these and other risks and uncertainties is included in the filings submitted by the Company to the U.S. Securities and Exchange Commission. All information provided in this press release should not be construed as representing the Company’s views at any point in time after the date of this announcement. Genetron Health anticipates that future events and developments may cause its assumptions and expectations to change; however, except as required by applicable law, the Company undertakes no obligation to update any forward-looking descriptions, whether as a result of new information, future events, or otherwise.