Genetron Holdings Limited (NASDAQ:GTH) Q4 2021 Earnings Conference Call March 29, 2022 8:30 AM ET
Company Participants
Hoki Luk – Head of Investor Relations
Sizhen Wang – Chief Executive Officer and Chairman of the Board
Yun-Fu Hu – Chief Medical Officer
Evan Ce Xu – Chief Financial Officer
Hai Yan – Chief Technology Officer
Yuchen Jiao – Chief Technology Officer
Conference Call Participants
Sung Ji Nam – BTIG
Yang Huang – Credit Suisse
Operator
Good day and thank you for standing by. Welcome to the Fourth Quarter 2021 Genetron Health Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there’ll be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference may be recorded. [Operator Instructions]
I would now like to hand the conference over to your host today, Hoki Luk, Head of Investor Relations. Please go ahead.
Hoki Luk
Thank you. Hello, everyone, and welcome to Genetron Health’s fourth quarter and full-year 2021 earnings conference Call. The company’s earnings release was issued earlier today and is available on the company’s IR website.
During this call, the company will be making some forward-looking statements regarding future events and results. These statements are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements are not historical facts, including statements about Genetron Health’s beliefs and expectations are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in Genetron Health’s filings with the SEC. All information provided today is as of the date of this call and Genetron Health does not undertake any obligation to update any forward-looking statements except as required under applicable law.
With respect to any non-IFRS measures discussed during today’s call, the company’s reconciliation information related to those measures can be found in the earnings release issued earlier today.
Allow me to introduce the management team on the call today. Sizhen Wang, Co-Founder, Chairman and CEO of Genetron Health, will discuss recent business updates and upcoming catalysts. Evan Xu, our CFO, will provide financial highlights related to the unaudited fourth quarter results outlined in today’s release, as well as our outlook for 2022. Following management’s prepared remarks, we will open up the call to questions. During the Q&A session, our Co-Founder and Chief Scientific Officer Dr. Hai Yan; Chief Technology Officer Dr. Yuchen Jiao, and Chief Medical Officer will also be available to answer questions.
With that said, I would now like to turn the call over to Mr. Sizhen Wang, the Founder, Chairman and CEO of Genetron Health. Sizhen, please go ahead.
Sizhen Wang
Thank you, Hoki. Good morning and good evening, everyone and thank you for joining our fourth quarter and full year 2021 earnings conference call. So first I would like to direct you to the supplemental earnings presentation on our Investor Relations website and begin on Slide 2.
2021 was indeed I a year filled with accomplishments for Genetron. Our total revenue grew over 25% year-over-year, highlighted by our continued penetrations in the cancer diagnosis and managing market as well as liver cancer early screening segment. We also established several key partnerships with the likes of AstraZeneca, Fosun Pharma, and recently with HUTCHMED to develop new tests and expand the commercialization of the existing tests, while further validating our products and technologies with impactful publications. In 2022 we’re excited to build on this momentum by advancing our pipeline to broaden our precision oncology platform and to enhance our value proposition.
If you turn to Slide 4, as a foremost provider of precision oncology products and service in China, our comprehensive portfolio covers entire spectrum of cancer management, spanning early screening, therapy selection, MRD monitoring and developing CDx with biopharma companies. In 2021, we grew diagnosis and monitoring revenue by 28% to RMB492.4 million. The primary driver of this growth was a 64% increase of IVD in hospitals sales, driven by greater adoption of our sequencing platforms and assays, including the Genetron S5 instrument and 8-gene lung cancer assay.
As some of you may know, in China as the current regulation stands, the IVD in hospital market is a segment where there is a clear pathway for potential government reimbursement. But moving forward, we intend to invest resources to further penetrate the in hospital market with our solutions. We are very pleased that we have gained good traction in the past few quarters by establishing 30 IVD hospital contracts at the end of the year 2021.
On the LDT side of the business we grew revenue by 16% led by sales of our early screening tests, in addition to our LDT diagnostic test volume growth of the 11%. This was the first full year that we introduced our early screening tests as LDT and we are happy with the performance and believe that early screening assays will be a growth driver continuously for 2022, as we continue to roll out our commercialization strategy.
The COVID impact headwinds persisted in the fourth quarter and weighted on top line year-over-year growth of 10% on revenue of RMB146.9 million. Our IVD business grew over 66%, thanks to the continued uptake of our S5 instrument and lung 8 [ph] NGS assay.
The LDT business was more heavily impacted by China’s zero COVID strategy. As we discussed in the past, the COVID focus of the government has led to large scale testing and other travel restrictions throughout the country’s outbreak areas and resulted in declines in patient traffic to many of our LDT customers.
Operationally, we had an eventful year focused on further strengthening our precision oncology portfolio and now I will discuss a few of the key developments. So let me start off with our early screening segment on Slide 5. In November, we initiated a NMPA registrational trial for our early detection assay in HCC. By beginning the enrollment for the trial of our methylation multi-marker PCR based assay, HCCscan. Recall that this was a 5000-patient trial in nine planned clinical sites, of which we have started in five sites already. We also intend to select some of these same sites for our multi-omics NGS based HCCscreen trial.
The HCCscreen trial has been slightly delayed based on COVID-related disruptions, but we do plan to enroll subjects around end of the second quarter. We continue to believe that this structure of both PCR and NGS tests would be a sound strategy. PCR has a more established presence and readily available workflows in many hospitals and clinics in China and the trend continues to accelerate. Based on the nucleic acid testing needs and associated government led infrastructure built since COVID.
In addition, a few months ago, DNA methylation and other genetic testing were included in some of Beijing and other provincial insurance programs, establishing a benchmark pricing of around RMB800 for methylation-based tests and around RMB1500 for NIPT NGS-based testing. Based on these dynamics, our company sees that adding a high performing PCR-based assay would be commercially viable, while also providing self-pay for patients in lower tier markets with a cost optimal solution. So overall, we’re confident that we can deploy both in-hospital and central lab models to increase accessibility and penetrate the liver cancer early screening market more effectively.
As for our HCCscreen plans in the U.S., we have started a confirmatory study with two leading medical institutions in the U.S. and may present data at an upcoming conference later. To be on liver cancer, we have plans to develop a multi cancer product in the future. We have already shared some early retrospective CRC data during our last earnings call, showing over 91% of sensitivity and 95% of specificity. We continue to expect the CRC data to be published some time in 2022.
So, now turning to Slide 6, on solid-tumor MRD. Recall that we have announced a multiyear co-development agreement with AstraZeneca R&D China for NGS-based personalized MRD testing in China. MRD testing may help in the clinical management for patients well before metastatic lesion grow to significant size detectable by conventional methods, such as MRI and CT scan. Both AZ and Genetron teams have been working together very diligently since the partnership started as the optimization is currently ongoing and expect to finish by year end.
Concurrently, we are also planning our pilot LDT launch in the second quarter, and expect to expand the official full launch before year end. Recall that with this partnership, AZ plans to use the Co-developed MRD test for China-specific solid tumor clinical trials that are designed to incorporate the use of NGS based personalized MRD tests. The companies may also expand the partnership later to include IVD registration and commercialization.
So touching on the specific development plan for the co-developed personalized assay, the assay prototype development has been completed based on our proprietary mutation capsule platform. We have shown great analytical validation results as demonstrated by gastric cancer data in the publication on Journal of Hematology and Oncology, in which the personalized assay showed excellent sensitivity to detect point 0.001% tumor DNA from peritoneal lavage fluid samples for the precise prediction of peritoneal dissemination.
In terms of the clinical validation work, data in locally advanced rectal cancer patients were recently published in EBioMedicine part of the Lancet Discovery Science. So in this study, analysis was conducted on different MRD approaches after neoadjuvant therapy. We’re also excited the publication has been accepted for a high impact journal for our HCC MRD data, and it is expected to be available in the next few months. So these data are highlighted in Slides 9 and 10.
The chart on Slide 7 shows the general workflow of the tumor-informed approach. Essentially, mutation markers are selected based on whole exome sequencing of tumor tissues, and a personalized panel is then designed for subsequent blood-based ctDNA testing. The advantage of this approach is that the panel performance is maximized and the false positive and negative results can be avoided as much as possible. The disadvantage is that this method requires tumor tissue sample and is a costly and long design process.
On Slide 8, we will discuss the advantage of using mutation capsule technology in solid-tumor MRD development. The mutation capsule is the method for detecting mutation and the methylation of tumor specific genes as in ctDNA. And it supports both our early screening tests, as well as our tumor informed and the tumor naive assay developments. The platform enables multiple tests and analysis based on single cfDNA sample, thereby reducing panel validation time and providing head-to-head comparisons between multiple MRD strategies. So beyond tumor informed MRD assay, we’re also exploring tumor naive MRD approach based on mutation capsule, to evaluate the performance of different types of biomarkers, including mutation, fragmentation, methylation, et cetera. We look forward to sharing more updates as these programs proceed.
Mutation capsule also allows more sensitive detection in low yield cfDNA samples with higher conversion efficiency of cfDNA molecules. Just last week, the China National Intellectual Property Administration granted an invention patent to Genetron and we’re very excited this grant further strengthens our competitive position in developing new assays in emerging segments such as MRD and early screening.
On Slide 9, we present the analytical validation of our tumor-informed MRD assays in gastric cancer. In a prospective cohort of 104 gastric cancer patients, the MRD assay detected all the cases that developed peritoneal dissemination with 100% sensitivity, and 85% of a specificity. MRD positive patients were associated with decreased recurrence free survival and overall survival.
On Slide 10, we present our clinical studies comparing personalized assays with fixed panel assay in CRC and liver cancer, respectively. Compared with personalized assay, the performance of MRD profiling based on fixed panels varies on different tumor types and clinical application scenarios.
So for Seq-MRD in haematological cancers shown on Slide 11 is a validation data from 128 clinically confirmed patient samples. The positive detection results of traditional flow cytometry and Seq-MRD were highly consistent. Notably 10 cases were detected MRD positive by Seq-MRD, but negative by FCM, suggesting higher sensitivity of a Seq-MRD in this study. We believe this is the first validated NGS based MRD detection assay in China for hematological malignancies.
Commercially our pilot launch with Fosun Pharma that started in January is progressing well. Based upon positive market feedback, we’re planning for full launch of Seq-MRD in the second quarter. This assay is also generating many dialogues with biopharma partners and we have just signed a partnership with Juno and WuXi, the JW Therapeutics. We anticipate a few more partners, influential partners to sign on in the next few months. So overall, we’re pleased with continued support by the healthcare authorities of MRD testing in hematological cancers in China and belief that our NGS based Seq-MRD represents an innovative competitive option in the market.
Turning to Slide 12, moving on to discuss our biopharma service business. In the fourth quarter, we have signed on additional 13 biopharma partners, increasing the total now to 60 partners. We continue to see a strong pipeline as we have the opportunity to form partnerships through our key products, including Seq-MRD, Onco Panscan, Fusion Scan and others. For Onco Panscan, CE-marked comprehensive genomic profiling panel, a few posters utilizing this in the large panel product would be presented at the upcoming AACR, including its capability in revealing molecular profiles of pediatric and adult sarcoma, gene fusions in glioma patients and germline gene alteration and mutation in glioma and gastric cancer. For our educational pathway, Onco Panscan has passed a typing test that we’re finishing the site selections and the patient enrollment is planned to begin in late second quarter of this year.
Slide 13. Recently, we have announced our CDx partnership with HUTCHMED for savolitinib in non-small cell lung cancer using our already marketed 8-gene lung cancer IVD assay. As mentioned, our 8-gene lung cancer assays are already gaining very good traction in the IVD in-hospital use market. We’re excited about this partnership as it is our second major CDx after our first one with CStone for avapritinib which has already entered the NMPA priority review and approval process.
In China, the trend of CDx demand is growing stronger resulting from NMPA’S increasing focus on genomic testing for innovative targeted immunotherapies. This, together with our CLIA lab in Maryland, provides us with lots of opportunity to work on cross border trials and CDx developments. We anticipate continued strong growth in this exciting business segment.
So now let’s move on to Slide 14. This shows our proved IVD products as well as those in the registration pipeline. We have a strong NMPA approved product portfolio, which gives us competitive advantage in driving the in-hospital model and IVD revenue growth. Our registration pipeline represents one of the most comprehensive molecular testing pipeline in the market.
I have touched upon Onco Panscan, HCCscan, HCCscreen, lung cancer 88-gene CDx and PDGFRA kits. We have in fact two more products under development. Firstly, the thyroid basic, a PCR based kit that was developed as an essential tool for molecular classification and prognosis for thyroid cancer. We are currently conducting registrational trial for thyroid basic at four clinical sites. We anticipate to complete the trial in 2022 with potential IVD approval next year. China has more than 200,000 [ph] thyroid cancer new incidence per year. These assays can leverage the existing expanding PCR presence in China, providing smaller and mid-sized hospital with more options. So secondly, we’re launching a new liquid biopsy genomic profiling panel in a very exciting new product and we look forward to sharing more updates in the coming months.
So now I will turn over the call to our CFO, Mr. Evan Xu, to provide more details on our first quarter financials. Evan?
Evan Ce Xu
Thank you, Sizhen. Now, I will provide an update on the financial performance during the reporting quarter. Please note that all numbers provided are in RMB terms in that all comparisons are made on a year-over-year basis. Starting on Slide 16, in the fourth quarter, total revenue increased by approximately 10% to RMB147 million from RMB134 million in the previous period. Diagnosis and monitoring revenue increased by 5% to RMB130 million in the fourth quarter of 2021 from RMB124 million in the same period of 2020.
LDT revenue decreased by 11% to RMB86 million during the first quarter. The LDT diagnostics tests sold in the fourth quarter actually increased by 10% to approximately 5880 units compared to a year ago. So the reason behind is that, in addition to a challenging operating environment, due to COVID for our core LDT business. LDT sales decline during the quarter was also due to two factors. Firstly, we launched our Wuxi Government Partnership for HCCscreen in the fourth quarter in 2020 and recorded a large initial sales order presenting a high base for comparison in this quarter. Secondly, our early screening sales was also impacted by the COVID related slowdown in the city of Wuxi.
For the full year 2021 we grew about 60% in testing volume for HCCscreen. So we are pleased with our overall early screening sales uptick in the whole year — in the full year as well as the growing adoption in the market. We have continued support from our collaborations, along with our own initiatives for in-hospital sales efforts, which started in Q4 2021.
Moving to Slide 17, IVD revenue increased by 66% to RMB44 million in the first quarter of 2021. The increase was mainly driven by sales of Genetron S5 instrument as well as the 8-gene Lung Cancer Assay. As of the end of the year, we had a total of 58 hospital contracts, including 30 IVD ones. Our pipeline continues to be strong and expanding installation base is expected to drive our tests and overall sales in the coming quarters. Revenue generated from development services increased by 61% to RMB70 million in the first quarter of 2021. This was primarily driven by the growth in revenue generated from biopharmaceutical services.
Moving to Slide 18, let’s look at the gross profit margin. In the first quarter of 2021, cost of revenue increased by approximately 27% and therefore, overall gross margin was 57% in the quarter compared to 63% in the same period of 2020. In particular, gross margin of our LDT segment was 65% compared to 69% a year ago. The reason behind this decrease is that in the first quarter of 2021 we have started to introduce HCCscan to our channel partners, such as iKang health check centers for their corporate clients.
We also introduced this product in our own direct sales team for our hospital partners. These new promotional events have impacted our gross margin temporarily in the quarter. We believe that the launching of HCCscan would help us strategizing our commercialization plans prior to potential approval of this assay. For IVD segment gross margin can have quarter-over-quarter fluctuations due to product mix shifts and in the fourth quarter of 2021 our IVD gross margin was 55% versus 62% in the prior year.
Operating expenses are shown on Slide 19. During 2021 we invested resources in organizational [indiscernible]. This primarily includes, firstly R&D expenditure for MRD projects. Secondly, clinical registration programs of corporate such as Onco Panscan, HCCscan, HCCscreen, et cetera, certainly commercialization for in-hospital testing, as well as early screening business. So headcount related costs were the largest component of operating expenses. In Q4 2021, operating expenses increased by 55% to RMB267 million from the previous year.
Take a look at the breakdown of the operating expenses. Selling expenses increased by about 40% to RMB100 million in the quarter and selling expenses as a percentage of revenue increased to 68%. The increase was primarily resulted from increasing headcount for our health, for our sales team, for in-hospital IVD team, as well as early screening direct sales team. We do not expect significant headcount increase in 2022. Along with revenue growth, we should start to see operating leverage in selling expenses for full year 2022.
R&D expenses increased by 46% in the fourth quarter of 2021, and admin expenses as a percentage of revenue increased to 44% in the fourth quarter of 2021. The increase was mainly due to headcount increase in line with our business expansion to cover full cycle cancer management, as well as well as higher professional fees such as the audit and legal services fees.
In terms of outlook, admin expenses should also show improved operating efficiency for 2022. R&D expenses increased by 61% to RMB85 million in the fourth quarter of 2021 and R&D expenses as a percentage of revenue increased to 58%. The increase was driven by higher R&D headcount and also related expenses, as well as our continued product development efforts in MRD, clinical trial activities for early screening and Onco Panscan. In terms of outlook, our R&D headcount should have peaked and our R&D spending for year 2022 will continue to focus on those core projects. So the growth rate should slow down compared to that of 2021.
On Slide 20, net loss for the period was RMB165 million, compared to RMB73 million for the previous quarter in 2020. It’s important to note that our organizational build up is complete and we expect the increase of operating expenses will slow down in 2022 and we do expect improved operating leverage. We will be able to narrow down the loss for year 2022.
Cash and cash equivalents, restricted cash and current financial assets at a fair value through profit and loss were close to RMB790 million, or U.S. $124 million as of the end of the year.
Now moving to discuss our outlook for 2022, let’s go to Slide 21. As you may have heard on the news since our fourth quarter, and well into the first quarter of 2022, COVID outbreak continued to occur across China. Officials have maintained a zero COVID policy through lockdowns, mass testing and travel restrictions. More recently, rapidly soaring COVID cases had resulted in shutdowns in the cities of Beijing, Shenzhen and Shanghai, as well as part of Shandong and Jilin provinces. This week, Shanghai has begun its most extensive large scale lockdowns in two years, highlighting the continued significant challenges posed by the virus.
So, looking at our first quarter sales. We’re expecting to grow around 15% year-over-year to approximately RMB106 million. The first two months were actually quite strong with year-over-year growth of approximately 30% for January and February combined. Despite the restrictive operating environment, however, the trend took a turn starting in the month of March. In light of the significant spread of COVID cases, due to Omicron, we anticipated that the challenging business environment would persist in the near-term.
Based on the current assessment, we are projecting our 2022 revenue to be around RMB585 million to RMB638 million or around 10% to 20% of growth, compared to 2021. We will closely monitor the COVID-19 situation and evaluate the impact to our business and will provide timely updates.
This concludes the discussion of our fourth quarter financial results. I will now turn the call back to Sizhen.
Sizhen Wang
Thank you, Evan. In closing, we’re very pleased with the success we have achieved, both financially and operationally in the face of adversity related to COVID and I would like to emphasize the strong online long-term fundamentals of our business.
Shown on Slide 23, in the past few years, we have established significant capabilities in all three business lines, in therapy selection, early screening and MRD. We have proven R&D capabilities with innovative technology platforms such as One-Step Seq to bring fast and simple IVD solutions to the hospital and the Mutation Capsule technology to power our early screening and MRD product development.
We have also built a high calibre product development clinical team who are able to execute multiple clinical registration trials in parallel. We have also set up comprehensive commercialization models, working with numerous top-tier hospitals, biopharma companies, health check network, digital health platforms and local government bodies. Our investment and the capability built up have positioned us very well as a leading player in this market and created a lot of long-term strategic value.
For IVD in-hospital model, in addition to the expanding hospital partner base, we have also made good progress on the inclusion of the approved IVD kits into procurement system and all price list in more than 20 provinces. For example, our 8-gene lung cancer assay, which represents as one of the most clinically needed test for non-small cell lung cancer, we believe that the government reimbursement inclusion could kick in for certain regions in the coming 12 to 24 months. We anticipate that to greatly help us increase the penetration and market share. In addition, as shown on Slide 24, we have a catalyst-rich pipeline in the next couple of years that we spent some time on discussing earlier.
Last but not the least, we also continue to see favourable macro environment for our business. Under China’s State Councils Healthy China 2030 plan, the goal is to increase five-year cancer survival rate from the current approximately 40% to over 46%. As a leading precision oncology player in China, we expect that rapid emergence of targeted immunotherapies will increase demand for our diagnosis and monitoring business as well as our biopharma services.
While early detection, particularly liver cancer, also remains a focus for the government, and the companies with differentiated technologies like us are highly encouraged to introduce innovative solutions to address unmet medical needs. Overall, we remain confident about the growth prospects of the precision oncology sector in China and we anticipate Genetron to be a continued beneficiary from policy tailwinds.
So, this concludes the prepared remarks portion of today’s call. Operator, we’re now ready for questions.
Question-and-Answer Session
Operator
Thank you [Operator Instructions] And our first question comes from the line of Sung Ji Nam with BTIG. Your line is open. Please go ahead.
Sung Ji Nam
Hi, thanks for taking the questions. The colorectal cancer screening assay, your — I understand that you’re expected to publish the data this year on that. I was wondering what are the next steps in terms of clinical studies? For example, when do you anticipate the registrational study for that to potentially commence?
Sizhen Wang
Yes. So next step, essentially, we will validate the assay in a larger size of samples and potentially we will start a prospective study sometime this year. And at this point, we don’t have a set time line for the registrational trial, but we’ll sure keep you closely updated on the progress.
Sung Ji Nam
Got you. And then for HCC, it looks like you’re still expecting IVD approvals for both HCCscan and HCCscreen sometime next year. Could you just kind of talk about what — how do you see the market splitting overall between the PCR-based and NGS, I mean should that be essentially reflective of the installed bases, if you will, of the PCR versus NGS platform throughout the country? Is that how we should think about, how the market will potentially split when that’s IVD approved?
Sizhen Wang
Yes. So I guess it’s premature to give any specific number about the market split. But the overall idea is that combining these two products, we will be able to actually penetrate the market quicker given that the two assets will actually be positioned differently and price differently as well. And we strongly believe that with the HCCscan being approved sometime next year, there is a significant chance for us to be included in the national reimbursement for this product in the months shortly after the approval. We had some dialogue with the local governments with different region, and we do believe that the incentive there is pretty strong.
And then for the high-performing HCCscreen panel, we believe that this will be well positioned for that the self-paid population that are willing to pay more for a better performance in terms of the early screening. So all in all, you could see that these two products will be positioned differently, and it will be market with different focus for the tiered spending level population and will be positioned differently in potential collaboration in large scale with the governments.
Sung Ji Nam
Got you. And then lastly from me for the thyroid assay, you I think, mentioned 200,000 cases of thyroid cancer annually, what’s the addressable market though? Like what’s the screening population for that or the testing population, the target population for this particular assay. Is it 200,000? I’m expecting it should be greater than that, right?
Evan Ce Xu
Yes, sure. So that’s the new cases for thyroid cancer, right? So actually, there I can’t recall, but I think there are data says that there are about…
Sizhen Wang
200 million to 300 million.
Evan Ce Xu
Yes, 200 million to 300 million people who have thyroid nodules. So there’s always a problem of over diagnosis or over treatment, actually overtreatment of those people, high risk people. So as you can see, the potential application market for this test is pretty huge. And also because this design is thyroid basic using a PCR technology. So I think it can be easily distributed leveraging on the broad PCR infrastructure in China for lower-tier cities.
Sung Ji Nam
Fantastic. Thank you so much.
Operator
Thank you. And our next question comes from the line of Yang Huang with Credit Suisse. Your line is open. Please go ahead.
Yang Huang
Thanks. So I have two questions. The first one is NGS reimbursement pricing in Beijing. I think management mentioned the NGS-based test, the reimbursed price is about RMB1,500. And if that’s so, I wonder if this reimbursement price below or higher than our early expectation and if our 8-gene panel is already included in Beijing reimbursement plan? And what’s the kind of pricing we are getting or is that exact same RMB1,500 we are getting or if not, are we planning to get into Beijing and Beijing’s proper medical insurance reimburse plans? Thanks.
Sizhen Wang
Yes. So maybe let me take this one, Yang. So first of all, I want to clarify, right? So the RMB1,500 pricing point that we mentioned in the earnings call is in fact for the NIPT screening test, right? It’s in fact, a pretty simple product with a low-cost structure here and it’s quite mature now with a widely usage for the target population. And we believe this can be used as benchmark for our NGS-based HCCscreen, the liver cancer early screening assay. And we believe that there is a chance when the HCCscreen is approved and covered by the reimbursement coverage by the government reimbursement, we could achieve similar level, right?
Remember, recall from our earlier discussion, I think the goal from us is to get a coverage somewhere around $150 to $200, so which is actually, in fact, below the current level, that we’ve seen in the recent the Beijing government policy. So we’re happy to see that room that these reimbursement coverage indicate for us. And most to the diagnostic assay, the 8-gene lung cancer panel, which we are marketing quite heavily in the market and then getting more and more traction in the in-hospital testing segment.
So this, I think, should be benchmarked with the qPCR tests, which in fact, there are several regions already or governments already giving the coverage now. But you would have to combine several qPCR assays in order to achieve the same gene coverage that we can do with our 8-gene lung cancer assay. And we believe that it is reasonable to anticipate the reimbursement culture pricing level at somewhere around like $2,000 to $3,000 or 3,000. So that’s I guess, it was discussed before as well, I think that’s achievable reimbursement price level.
Evan Ce Xu
Right. So yes, maybe just to add to Sizhen’s point, right now for NGS-based assets in China, there are very little price points to refer to, given this is a kind of new type of molecular testing kits, newly introduced to the market. So actually based on our experience, our market access team have been working with several provincial government bodies such as the Reimbursement Bureau to design — actually design the methodology for such NGS tests. For example, in Guangdong, Shandong, Liaoning and I think, [indiscernible] these are a few provinces that has more — they are more pioneering these studies, and our team are working with them to participating in these studies.
So, I think the final point I want to mention is that, we have invested quite a bit of resources in the government procurement platforms, basically accessing, getting our kits, long-headed kits into the procurement list and also adding our tests into the clinical testing menu in different provinces and we have quite achieved quite a more than 10 provinces already. And also, we are working with several provinces on designing the basically how to charge, in the clinical setting. So with all that efforts and also with the increasing clinical adoption of our assay, we do feel that we have a good chance in the next 12 to 24 months. In some regions, our alliance [ph] has a good chance to be eventually reimbursed.
Yang Huang
Okay, that’s clear, thanks. My second question is about our cash runway. So you mentioned at the end of last year, we have cash and restricted cash and some other financial vehicles valued at nearly RMB800 million? And can you provide us some — looking forward, what’s going to be our cash burn rate for this year and maybe next? Help us understand, what is our cash runway before we can achieve profitability?
Evan Ce Xu
Sure. So I talked about our organizational buildup has pretty much completed and it peaked by end of last year. So we expect our loss to narrow and we expect our cash to be sufficient for the next at least 18 months. And the burn rate should also be slower than compared to the last 12 months. So we do not have immediate financing needs.
Yang Huang
Okay. And so if we are going, let’s say, after 18 months, if we need some kind of financing, will we go to public market or debt or what’s our basic kind of thoughts there?
Sizhen Wang
Yes. Well, I guess we have many options, right? And it could be explored in the future. And the good thing is that, I guess, with this cash runway and we’re flexible in monitoring the market development and find actually the right opportunity, just like Evan emphasized, we have in fact, different spending reasons in the whole business development, right? And there are a number of factors affecting the cash burn. The operating loss as well as the working capital needs and the rhythm and the pace of the overall operating expenses, as we mentioned in the conference call, were pretty much a level picking up, will pick up and we will be able to effectively control the cash burn and at the same time, effectively support the growth of our business and our R&D pipeline. As the market situation evolves, I believe that we’re well positioned to capture any opportunity as we see fit for Genetron to raise additional capital to support the long-term growth.
Yang Huang
Got it. And just a quick follow-up, so is there a kind of year we can expect to breakeven?
Evan Ce Xu
Yes, Yang. So I think from today’s presentation, you will notice that we are actually adding to our existing portfolio with very exciting new products, in particular, in MRD and early screening. Right now, we are crystal focused on these products, and we are very excited about these products. For example, today, I think we have shown that solid clinical data we have published and to be published in the near future for our solid MRD products. So we believe that the key for us is to focus on creating this long-term value and continue investing. But of course, with a very focused investment — investing areas. So I think with that focus, as long as we continue to generate positive long-term value, I think that’s the most important.
And to address your question, I think how I look at this business is that for our more mature and baseline business, such as diagnosis, our goal is to continue to drive revenue and high-quality revenues, such as the in-hospital business model and continue to improve the operational metrics, financial metrics to drive up the margin and achieve breakeven in the next 12 to 24 — in the next 12 months or so, and on the new business lines that will create long-term value, such as early screening and MRD, which is even newer to our business portfolio, we’ll continue investing and build a successful model. And I think that’s my answer to your question. Thanks.
Yang Huang
Okay, yes thanks a lot. That’s all of my questions.
Operator
Thank you. And I’m showing no further questions at this time. And I would like to turn the conference back to Hoki Luk for any further remarks.
Hoki Luk
Thank you again for joining us for our fourth quarter earnings and business update call. We appreciate your ongoing support. If you have any questions, please do not hesitate to reach out to the Investor Relations team. Thank you, and have a good day.
Operator
This concludes today’s conference call. Thank you for participating. You may now disconnect.
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