Genetron Health Reports Unaudited Financial Results for Fourth Quarter and Full Year 2020

March 25, 2021, Beijing, China—Genetron Holdings Limited (the “Company”) (NASDAQ: GTH), a leading cancer precision medicine company in China focused on providing tumor molecular testing, early cancer screening, and companion diagnostic development services, today announced its unaudited financial results for the fourth quarter and full year of 2020.

· Revenue in the fourth quarter of 2020 reached RMB 133.9 million, a year-on-year increase of 30.1%; total revenue for the full year 2020 amounted to RMB 424.5 million, representing a year-on-year growth of 31.3%.

· Genetron Holdings Limited’s most advanced liquid biopsy-based early screening test for hepatocellular carcinoma, HCCscreen, is being commercialized as a laboratory-developed test (LDT). In 2020, revenues from both the HCCscreen LDT and in vitro diagnostic (IVD) products—including the Genetron S5 instrument and the 8-gene lung cancer kit—experienced significant growth.

· The gross profit margin was 62.8% in the fourth quarter and 61.3% for the full year of 2020, compared with 44.5% and 44.8%, respectively, in the same period of 2019.

· Operating losses narrowed from RMB 306.9 million in 2019 to RMB 268.4 million in 2020

· The net loss under Non-IFRS decreased to RMB 215.7 million in 2020, compared with RMB 280.2 million in the same period of 2019.

· Successfully listed on the NASDAQ in the United States and completed its initial public offering, raising a total of $256 million

· Early Screening Test for Liver Cancer—HCCscreen

1) On March 24, 2021, Genetron Holdings Limited announced the latest data from 1,615 patients in its large-scale prospective cohort study on early screening for liver cancer (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 of 40.9% and a negative predictive value of 99.3%.

2) Launch an exclusive strategic partnership with Chia Tai Tianqing, a subsidiary of Sino Biopharmaceutical (HKEX: 1177), to promote HCCscreen and penetrate the Chinese hospital market

3) Adopted by the public health initiative launched by the National Cancer Center and the Wuxi Municipal Government, which will conduct 150,000 early screening tests for liver cancer within three years

4) HCCscreen Receives U.S. FDA Breakthrough Device Designation

· In the field of early screening for lung cancer and gastrointestinal cancers, Genetron Holdings participates in the National Key R&D Program on Cancer Early Screening under the Ministry of Science and Technology of China.

· The 8-gene lung cancer panel has received approval from the National Medical Products Administration (NMPA) for market launch. Integrated with the Genetron S5 platform, it forms an in-hospital NGS testing solution capable of delivering reports in as fast as two days.

· Genetron Signs Exclusive Global License Agreement with Aimuoen to Accelerate Development and Commercialization of MRD Kits for Blood Cancers

· Dr. Hu Yunfu, a former senior expert at the U.S. FDA, has been appointed as Chief Medical Officer (CMO) of Genetron Holdings Limited, leading the company’s product development, IVD registration, regulatory affairs, and pharmaceutical partnerships

“Looking back at 2020, despite the global outbreak of the pandemic and the numerous challenges we faced, Genetron Holdings Limited successfully completed its initial public offering, and achieved significant breakthroughs in both commercialization and clinical research across its three major business lines. The company’s full-year revenue for 2020 saw a robust year-over-year growth of 31.3%, with particularly outstanding results in the commercial deployment of liver cancer early screening and IVD products. The overall gross margin increased substantially from 44.8% in 2019 to 61.3% in 2020, while sales and administrative efficiency improved significantly,” said Mr. Wang Sizhen, Co-founder and Chief Executive Officer of Genetron Holdings.

“Genetron Holdings Limited announced the latest data from its prospective cohort study on early screening for liver cancer. Compared with the standard of care, HCCscreen demonstrated superior sensitivity and comparable specificity. The further validation results of the company’s leading liquid biopsy-based early screening technology are highly encouraging, and we will initiate the registration clinical trial for our liver cancer early screening product in the second quarter.”

Mr. Wang Sizhen stated, “Looking ahead to 2021, based on the current market environment and assuming that the COVID-19 pandemic will not cause significant disruption to Genetron’s key markets, we project total revenue for 2021 to reach RMB 615–625 million, representing a year-over-year growth of 45%–47%. Regarding our early-screening R&D pipeline, we plan to release case-control data for colorectal cancer early screening this year. Leveraging Genetron’s proprietary Mutation Capsule technology platform, we are able to effectively explore and validate individual cancer types and develop products for multi-cancer early detection tests. We will also continue to advance our minimal residual disease (MRD) projects for liver cancer and colorectal cancer. In summary, Genetron is focused on the rapidly growing precision medicine sector, continuously increasing its market share, and our growth prospects are exciting. More importantly, we remain committed to developing innovative products that benefit patients, thereby saving more lives.”

Total revenue in the fourth quarter of 2020 was RMB 133.9 million (USD 20.5 million), representing a 30.1% year-on-year increase from RMB 102.9 million in the same period of 2019.

In the fourth quarter of 2020, revenue from diagnostic and monitoring services increased by 44.0% year-over-year to RMB 123.5 million (USD 18.9 million), compared with RMB 85.8 million in the same period of 2019. This year-over-year growth was primarily driven by increased revenue from laboratory-developed test (LDT) services, particularly early screening tests, and in vitro diagnostic (IVD) products.

· LDT service revenue in the fourth quarter of 2020 was RMB 96.9 million (USD 14.9 million), representing a 48.5% increase from RMB 65.3 million in the same period of 2019. Among these, the HCCscreen business for early liver cancer screening achieved rapid growth, becoming the primary driver of total LDT revenue growth. In the fourth quarter of 2020, our key markets were impacted again by the COVID-19 pandemic, with approximately 5,340 LDT diagnostic tests performed, a 16% year-over-year decrease compared to the same period in 2019. Meanwhile, the average selling price (ASP) of LDT diagnostics increased significantly, effectively offsetting the impact of the decline in test volume, driven by a higher proportion of high-value products such as the large-panel Onco PanScan test and more rational pricing management strategies.

· In the fourth quarter of 2020, revenue from IVD products increased by 29.5% year-on-year to RMB 26.5 million, compared with RMB 20.5 million in the same period of 2019. Sales volumes of both test kits and sequencing instruments achieved growth.

Number of hospital clients with signed B2B contracts as of the end of each reporting period

In the fourth quarter of 2020, revenue from development services amounted to RMB10.5 million (USD1.6 million), representing a year-over-year decrease of 39.0%, compared with RMB17.2 million in the same period of 2019. This change reflects the Company’s proactive adjustment of its business development strategy to focus on high-value pharmaceutical company services. As a result, revenue from pharmaceutical company services within development services achieved significant year-over-year growth in the fourth quarter of 2020, while revenue from sequencing services declined.

In the fourth quarter of 2020, while sales revenue experienced strong growth, the cost of sales decreased by 12.8% year-on-year to RMB 49.8 million (USD 7.6 million), compared with RMB 57.1 million in the same period of 2019. The reduction in cost of sales was primarily attributable to economies of scale and lower reagent costs.

Gross profit for the fourth quarter of 2020 was RMB84.1 million (USD12.9 million), representing a significant year-on-year increase of 83.6%, compared with RMB45.8 million in the same period last year. The gross margin for the fourth quarter of 2020 was 62.8%, an increase of 18.3 percentage points from 44.5% in the same period of 2019.

Total operating expenses for the fourth quarter of 2020 amounted to RMB 173 million (USD 26.5 million), representing a 32.5% year-over-year increase from RMB 130.6 million in the same period of 2019.

Selling expenses for the fourth quarter of 2020 were RMB72.0 million (US$11.0 million), representing a slight year-over-year increase of 4.3% from RMB69.0 million in the same period of 2019. The ratio of selling expenses to revenue decreased significantly, dropping from 67.0% in the fourth quarter of 2019 to 53.7% in the same period of 2020. This decline was primarily driven by an expansion in sales scale and a diversified revenue mix.

Administrative expenses for the fourth quarter of 2020 were RMB44.3 million (US$6.8 million), representing a 54.5% increase from RMB28.7 million in the same period of 2019. The ratio of administrative expenses to revenue increased from 27.9% in the fourth quarter of 2019 to 33.1% in the same period of 2020. The increase was primarily driven by an increase in management personnel, higher share-based compensation expenses related to employee stock options, and increased fees for professional services.

R&D expenses for the fourth quarter of 2020 were RMB53.0 million (USD8.1 million), representing a 63.7% year-over-year increase from RMB32.4 million in the same period of 2019. The ratio of R&D expenses to revenue increased from 31.4% in the fourth quarter of 2019 to 39.5% in the same period of 2020. The growth in R&D expenses was primarily driven by sustained investment in R&D innovation, including the development of new products and technologies, the conduct of clinical trials, as well as increased compensation expenses for expanded R&D personnel and share-based option expenses granted to employees.

In summary, the operating loss for the last quarter of 2020 was RMB 88.9 million (USD 13.6 million), compared to a loss of RMB 84.8 million in the same period of 2019.

Financial income increased to RMB 15.6 million (USD 2.4 million) in the fourth quarter of 2020, compared with financial expenses of RMB 6.1 million in the same period of 2019. The increase was primarily driven by foreign exchange gains.

Net Loss and Non-IFRS Net Loss

The net loss for the fourth quarter of 2020 was RMB73.2 million (US$11.2 million), compared with a loss of RMB134.8 million in the same period of 2019.

In the fourth quarter of 2020, the net loss under Non-IFRS measures, excluding share-based compensation expenses, changes in fair value of preferred shares, and other losses related to preferred shares, amounted to RMB62.5 million (USD9.6 million), compared with a Non-IFRS net loss of RMB86.4 million in the same period of 2019.

The basic net loss per ordinary share was RMB 0.16 (US$0.02) in the fourth quarter of 2020, compared with RMB 1.06 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 was RMB 0.14 (US$0.02), compared with RMB 0.68 in the same period of 2019. The diluted net loss per ordinary share 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.

Total revenue for the full year 2020 was RMB 424.5 million (USD 65.1 million), representing a year-on-year increase of 31.3% compared with RMB 323.4 million in the same period of 2019.

For the full year 2020, revenue from diagnostic and monitoring services increased by 43.1% year-over-year to RMB 385.7 million (USD 59.1 million), compared with RMB 269.5 million in the same period of 2019. This year-over-year growth was primarily driven by increased revenue from laboratory-developed test (LDT) services and in vitro diagnostic (IVD) products.

· Full-year 2020 LDT service revenue amounted to RMB 291.7 million (USD 44.7 million), representing a year-over-year increase of 24.4% from RMB 234.6 million in the same period of 2019. The total number of LDT diagnostic tests performed in 2020 was approximately 21,900, reflecting a slight year-over-year decline of 4.1% due to the impact of the COVID-19 pandemic. However, the average selling price per test increased year-over-year, driven by a higher proportion of high-value products such as the large-panel Onco PanScan assay and more rational pricing management strategies. Full-year 2020 LDT service revenue included sales revenue from HCCscreen, an early-screening test for hepatocellular carcinoma.

· In 2020, IVD product revenue reached RMB 94 million (USD 14.4 million), representing a significant year-on-year increase of 169.2%, compared to RMB 34.9 million in the same period of 2019. The growth was primarily driven by increased sales of reagent kits and sequencing instruments, with notable increases in sales of the Genetron S5 and the 8-gene lung cancer reagent kit.

Full-year 2020 revenue from development services amounted to RMB38.8 million (US$5.9 million), representing a 28.1% decrease from RMB53.9 million in the same period of 2019. This change was primarily attributable to adjustments in the Company’s business development strategy, with a continued focus on high-value pharmaceutical company services, which led to a decline in sequencing service revenue. Revenue from pharmaceutical company services within development services achieved strong year-over-year growth in full-year 2020.

In 2020, while total annual revenue experienced robust growth, the cost of sales decreased by 7.9% year-over-year to RMB 164.3 million (USD 25.2 million), compared with RMB 178.4 million in the same period of 2019. The decline in cost of sales was primarily attributable to economies of scale and reduced reagent costs.

In 2020, the gross profit for the full year was RMB 260.2 million (USD 39.9 million), representing a significant year-on-year increase of 79.5% from RMB 145 million in 2019. The gross margin in 2020 was 61.3%, a substantial increase of 16.5 percentage points compared to 44.8% in 2019. The gross margins of the company’s three major business lines all experienced notable growth in 2020, primarily driven by increased sales volume, continuous optimization of business operations, and an improved product mix.

Total operating expenses for the full year 2020 amounted to RMB 528.6 million (USD 81 million), representing a 17% year-on-year increase from RMB 451.9 million in 2019.

Selling expenses in 2020 amounted to RMB 247.0 million (USD 37.8 million), representing a slight decrease of 2.6% compared with RMB 253.6 million in the same period of 2019, primarily due to the overall stability of the sales and marketing teams. The ratio of selling expenses to revenue declined from 78.4% in 2019 to 58.2% in 2020.

In 2020, administrative expenses amounted to RMB 126.3 million (USD 19.4 million), representing a slight increase of 7.8% compared with RMB 117.2 million in 2019, primarily due to an increase in the number of administrative staff and professional service fees. The ratio of administrative expenses to revenue decreased from 36.2% in 2019 to 29.8% in 2020.

In 2020, R&D expenses increased by 62.5% year-on-year to RMB149 million (US$22.8 million), compared with RMB91.7 million in the same period of 2019. The increase was primarily driven by the Company’s continued investment in R&D innovation, including the development of new products and technologies, conduct of clinical trials, increased compensation expenses resulting from growth in R&D personnel, and share-based option expenses granted to employees. R&D expenses as a percentage of revenue rose from 28.4% in 2019 to 35.1% in 2020.

In summary, the full-year operating loss for 2020 decreased by 12.5% year-on-year to RMB 268.4 million (USD 41.1 million), compared with RMB 306.9 million in 2019.

Financial income for the full year 2020 increased to RMB 22.7 million (USD 3.5 million), compared with financial costs of RMB 9.2 million in the full year 2019. The increase was attributable to foreign exchange gains.

Net Loss and Non-IFRS Net Loss

The Company’s valuation increased significantly at the time of its initial public offering (IPO), resulting in a substantial rise in the loss from the fair value measurement of preferred shares in 2020, which amounted to RMB 2.8234 billion. At the IPO, all preferred shares were converted into ordinary shares, and this impact will not persist after the completion of the IPO.

The net loss for 2020 was RMB 3.1 billion (USD 470.4 million), compared with RMB 676 million in 2019.

For the full year 2020, the net loss under Non-IFRS measures, defined as the current period’s net loss adjusted for share-based compensation expenses, changes in the fair value of preferred shares, and other preferred share-related losses, amounted to RMB215.7 million (USD33.1 million). The Non-IFRS net loss for 2019 was RMB280.2 million.

The basic net loss per ordinary share for the full year of 2020 was RMB10.18 (US$1.56), compared with RMB5.41 for the full year of 2019. 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 was RMB0.72 (US$0.11) for 2020, compared with RMB2.24 for 2019. The diluted net loss per ordinary share was equal to the basic net loss per ordinary share. Each American Depositary Share represents five ordinary shares, with a par value of US$0.00002 per share.

As of December 31, 2020, the fair value of the Company’s cash, cash equivalents, and financial assets was RMB 1.5161 billion (US$232.3 million).

2021

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 Holdings Limited projects its 2021 sales revenue to be RMB 615 million–RMB 625 million, representing a year-over-year growth of 45%–47% compared with 2020.

Conference Call

The company’s management will hold a conference call on March 25, 2021, at 8:30 a.m. Eastern Time (8:30 p.m. Beijing Time on the same day) to discuss the earnings report. To participate in the conference call, please dial:

The company’s management held a conference call on March 25, 2021, at 8:30 a.m. Eastern Time (8:30 p.m. Beijing Time on the same day) to discuss the earnings report.

The conference replay will be available for listening until April 2, 2021. Please dial the US number: +1-855-452-5696

International: +61-2-8199-0299

Meeting ID: 5379298

The Company’s investor relations website will stream the conference live and provide a replay on the “News and Events” page. The replay will be available for 30 days following the live broadcast. Please visit ir.genetronhealth.com for more information.

The “News and Events” section of the company’s investor relations website will host a live webcast of the conference and provide a replay, which will be available for 30 days following the live broadcast. Please visit ir.genetronhealth.com for more information.

Exchange Rate Information

The financial statements in this announcement, or 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 6.525 as published by the Federal Reserve Board in its H.10 statistical release on December 31, 2020. The Company makes no representation that any RMB amounts could have been, or could be, converted, realized, or settled into USD at such exchange rate or at any other exchange rate as of December 31, 2020.

Measurement of Non-IFRS Financial Measures

Genetron Holdings Limited uses Non-IFRS net loss and Non-IFRS net loss per ordinary share to evaluate the Company’s operating results and to make financial and operational decisions. The Company believes that Non-IFRS net loss and Non-IFRS net loss per ordinary share 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 considers that Non-IFRS net loss and Non-IFRS net loss per ordinary share provide useful information about 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.

With respect to the measurement of Non-IFRS financial measures for the current year/period, Genetron Holdings Limited’s use of Non-IFRS net loss and Non-IFRS net loss per ordinary share should not be considered in isolation or as a substitute for operating profit, net loss, or any other performance measure for such year/period, nor should they be regarded as indicators of its operating performance. The Company encourages investors to review the Non-IFRS net loss and Non-IFRS net loss per ordinary share for the year/period, along with the reconciliation to the most directly comparable International Financial Reporting Standards (IFRS) financial measures. The Non-IFRS net loss and Non-IFRS net loss per ordinary share presented herein for the 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 for the Company. Genetron Holdings Limited encourages investors and others to comprehensively review the Company’s financial information rather than focusing solely on a single financial measure.

The Non-IFRS net loss and Non-IFRS net loss per ordinary share calculated under the net profit metric for the current year/period 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 Non-IFRS net loss per ordinary share for the current year/period.

Genetron Holdings (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 has established a comprehensive portfolio of products and services spanning the entire cancer care continuum—from early screening, diagnosis, and treatment 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 Holdings Limited. Such statements are made pursuant to the “safe harbor” provisions of the 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 concerning these and other risks and uncertainties is included in the company’s filings with the U.S. Securities and Exchange Commission. All information provided in this press release should not be construed as representing the company’s views as of any time after the date of this announcement. Genetron 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 statements, whether as a result of new information, future events, or otherwise.