Genetron Biotech's financial report and operating status for the fourth quarter and full year of 2020

Revenue from development services for the fourth quarter of 2020 was RMB 10.
5 million (US$1.
6 million), a year-on-year decrease of 39.
0%.
Revenue for the same period in 2019 was RMB 17.
2 million
.
This change reflects the company's initiative to adjust its business development strategy and focus on high-value pharmaceutical enterprise service business.
Therefore, in the fourth quarter of 2020, the service revenue of Chinese pharmaceutical enterprises in development services has achieved significant year-on-year growth, while sequencing service revenue has decreased
.

While sales revenue grew strongly in the fourth quarter of 2020, the cost of sales fell 12.
8% year-on-year to RMB 49.
8 million (US$7.
6 million), compared to RMB 57.
1 million in the same period in 2019
.
The reduction in sales costs is mainly due to the economies of scale and the reduction in reagent costs
.

Gross profit and gross profit margin

Gross profit for the fourth quarter of 2020 was RMB 84.
1 million (US$12.
9 million), a significant increase of 83.
6% year-on-year, and RMB 45.
8 million in the same period last year
.
The gross profit margin in the fourth quarter of 2020 was 62.
8%, an increase of 18.
3 percentage points from 44.
5% in the same period in 2019
.

 Operating expenses

Operating expenses for the last quarter of 2020 totaled RMB 173 million (US$26.
5 million), a year-on-year increase of 32.
5% from the same period in 2019 (RMB 130.
6 million)
.

Sales expenses for the fourth quarter of 2020 were RMB 72.
0 million (US$11.
0 million), a slight increase of 4.
3% year-on-year, and RMB 69.
0 million for the same period in 2019
.
Sales expenses as a percentage of revenue decreased significantly, from 67.
0% in the fourth quarter of 2019 to 53.
7% in the same period of 2020
.
The decrease in sales expenses as a percentage of revenue is mainly due to the increase in sales scale and the diversified income mix
.

Administrative expenses for the fourth quarter of 2020 were RMB 44.
3 million (US$6.
8 million), a year-on-year increase of RMB 28.
7 million in the same period of 2019, an increase of 54.
5%
.
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 mainly due to the increase in the company’s management staff, the increase in the cost of options granted to employees and the increase in service fees for professional institutions
.

Research and development expenses for the fourth quarter of 2020 were RMB 53.
0 million (US$8.
1 million), an increase of 63.
7% year-on-year, and RMB 32.
4 million for the same period in 2019
.
R&D expenses as a percentage of revenue increased from 31.
4% in the fourth quarter of 2019 to 39.
5% in the same period of 2020
.
The increase in R&D expenses is mainly due to continuous R&D and innovation investment, including the development of new products and technologies, the development of clinical trials, the increased salary expenses of R&D personnel and the option expenses granted to employees
.

In summary, the operating loss for the last quarter of 2020 was RMB 88.
9 million (US$13.
6 million), and the loss for the same period in 2019 was RMB 84.
8 million
.

Other income

Financial income increased to RMB 15.
6 million (US$2.
4 million) in the fourth quarter of 2020, and financial expenses for the same period of 2019 were RMB 6.
1 million
.
The growth mainly comes from exchange rate gains
.

   
Net loss and non-IFRS net loss

The net loss for the fourth quarter of 2020 was RMB 73.
2 million (US$11.
2 million), compared with a loss of RMB 134.
8 million for the same period in 2019
.

Non-IFRS net loss for the fourth quarter of 2020, after deducting equity incentive expenses, loss from changes in the fair value of preferred shares and other losses from preferred shares, the current net loss is RMB 62.
5 million (9.
6 million) USD), while the Non-IFRS net loss in the same period in 2019 was RMB 86.
4 million
.

In the fourth quarter of 2020, the basic net loss per common share was RMB 0.
16 (US$0.
02), and the net loss per common share for the same period last year was RMB 1.
06
.
After deducting equity incentive expenses, losses from changes in the fair value of preferred stocks, and other losses from preferred stocks, the non-IFRS basic net loss per common share was RMB 0.
14 (USD 0.
02), compared to RMB 0.
68 for the same period in 2019
.
The diluted net loss per common share is equal to the net loss per common share
.
Each ADS represents five common shares with a par value of $0.
00002 per share
.

2020 full-year financial performance

income

The total revenue for the whole year of 2020 was RMB 424.
5 million (US$65.
1 million), compared with RMB 323.
4 million in the same period in 2019, a year-on-year increase of 31.
3%
.

The diagnosis and monitoring business for the whole year of 2020 increased by 43.
1% year-on-year to RMB 385.
7 million (US$59.
1 million), compared with RMB 269.
5 million in the same period in 2019
.
The year-on-year growth of this business was mainly attributable to the growth in revenue from LDT testing services and IVD products
.

• For the full year of 2020, LDT service revenue was RMB 291.
  7 million (US$44.
  7 million), compared with RMB 234.
  6 million in the same period in 2019, a year-on-year increase of 24.
  4%
  .
  In 2020, the number of LDT diagnostic tests was approximately 21,900.
  Affected by the epidemic, the number of LDT tests decreased slightly by 4.
  1% year-on-year
  .
  However, thanks to the increase in the proportion of high-value products such as large panel testing Onco PanScanTM and a more reasonable pricing management strategy, the average unit price of testing has increased year-on-year
  .
  The revenue from LDT services for the full year of 2020 includes the sales revenue of HCCscreenTM, an early screening test for liver cancer
  .
  
• In 2020, revenue from IVD products was RMB 94 million (US$14.
  4 million), a significant year-on-year increase of 169.
  2%, and it was RMB 34.
  9 million in the same period in 2019
  .
  The reason for the increase is mainly due to the increase in sales of kits and sequencing instruments in 2020, especially the significant increase in sales of Genetron S5 and Lung Cancer 8-gene kits
  .
  

For the full year of 2020, revenue from development services was RMB 38.
8 million (US$5.
9 million), a decrease of 28.
1% from RMB 53.
9 million in the same period in 2019
.
This change is mainly due to the adjustment of the company's business development strategy and continued focus on high-value pharmaceutical enterprise service businesses, resulting in a decrease in sequencing service revenue
.
In 2020, the service revenue of pharmaceutical companies in the development services has achieved strong year-on-year growth
.

While the total revenue for the whole year of 2020 is growing strongly, the cost of sales fell 7.
9% year-on-year to RMB 164.
3 million (US$25.
2 million), compared with RMB 178.
4 million in the same period in 2019
.
The decrease in the cost of sales is mainly due to the economies of scale and the reduction in reagent costs
.

Gross profit and gross profit margin

The gross profit for the whole year of 2020 was RMB 260.
2 million (US$39.
9 million), a significant increase of 79.
5% year-on-year, and it was RMB 145 million in 2019
.
The gross profit margin in 2020 is 61.
3%, which is a significant increase of 16.
5 percentage points compared with the gross profit margin of 44.
8% in 2019
.
In 2020, the gross profit margin of the company's three business lines will have increased significantly, mainly due to the increase in sales scale, continuous optimization of business operations and a better product portfolio
.

Operating expenses

The total operating expenses in 2020 totaled RMB 528.
6 million (USD 81 million), a year-on-year increase of 17%.
In 2019, it was RMB 451.
9 million
.

Sales expenses in 2020 were RMB 247 million (US$37.
8 million), a slight decrease of 2.
6% from RMB 253.
6 million in the same period in 2019, mainly because the sales and marketing teams remained basically stable
.
Sales expenses accounted for revenue ratio from 78.
4% in 2019 to 58.
2% in 2020
.

Management expenses in 2020 were RMB 126.
3 million (US$19.
4 million), a slight increase of 7.
8% from 2019 management expenses (RMB 117.
2 million), mainly due to the increase in the number of management personnel and professional agency service fees
.
The ratio of administrative expenses to revenue decreased from 36.
2% in 2019 to 29.
8% in 2020
.

R&D expenses in 2020 increased by 62.
5% year-on-year to RMB 149 million (US$22.
8 million), compared with RMB 91.
7 million in the same period in 2019
.
The main reason for the growth is the company's continuous R&D and innovation investment, including the development of new products and technologies, the development of clinical trials, the salary expenses caused by the growth of R&D personnel, and the option expenses granted to employees
.
The ratio of R&D expenses to revenue increased from 28.
4% in 2019 to 35.
1% in 2020
.

In summary, the operating loss for the full year of 2020 decreased by 12.
5% ​​year-on-year to RMB 268.
4 million (US$41.
1 million), while the operating loss for the full year of 2019 was RMB 306.
9 million
.

Other income

The financial income for the full year of 2020 increased to RMB 22.
7 million (US$3.
5 million), and the financial cost for the full year of 2019 was RMB 9.
2 million
.
The growth comes from exchange rate gains
.

Net loss and non-IFRS net loss

The company’s valuation at the time of its IPO was significantly higher than before, resulting in a significant increase in the loss caused by the fair value of preferred stocks in 2020, to RMB 2,823.
4 million
.
At the time of the IPO, all preferred shares are converted into common shares, and the impact will not last after the completion of the IPO
.

The net loss for the current period in 2020 was RMB 3.
1 billion (US$470.
4 million), compared with RMB 676 million in 2019
.

For the full year of 2020, the net loss under Non-IFRS (Non-IFRS) is RMB 215.
7 million (US$33.
1 million) after deducting equity incentive expenses, loss from changes in the fair value of preferred stocks, and other losses from preferred stocks.
, Non-IFRS net loss in 2019 was RMB 280.
2 million
.

The basic net loss per common share for the full year of 2020 is RMB 10.
18 (US$1.
56), and the basic net loss per common share for the full year of 2019 is RMB 5.
41
.
After deducting equity incentive expenses, loss from changes in the fair value of preferred shares and other losses from preferred shares, the 2020 non-IFRS basic net loss per common share is RMB 0.
72 (US$0.
11), and the 2019 non-IFRS net loss per common share It is RMB 2.
24
.
The diluted net loss per common share is equal to the basic net loss per common share
.
Each American Depositary Share represents five ordinary shares with a par value of $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 Financial Guidelines

Based on the current market environment and assuming that the new crown epidemic in 2021 will not have a major impact on the company's key markets, Genetron Biotech predicts that its sales revenue in 2021 will be RMB 615 million to RMB 625 million, a year-on-year increase of 45%-47%
.