Burning Rock Biotech (NASDAQ:BNR) Q3 2020 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by. Welcome to the Burning Rocks 2020 Q3 Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the US Private Securities Litigations Reform Act of 1995. These forward-looking statements can be identified by terminology such as will, expects, anticipates, future, intends, plans, beliefs, estimates, target, confident and similar statements. Statements that are not historical facts, including statements about burning rock's belief and expectations, are forward-looking statements.

1:01 Such statements are based upon management's current expectations and current markets and operating conditions, and relate to events that involve known and unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond burning rock's control. Four looking statements involve risks, uncertainties, and other factors that could cause actual results to differ materially from those contained in any such statements. Burning Rock does not undertake any obligation to update any four looking statements as a result of new information, future events, or otherwise, except as required under applicable law. With that, I would like to turn the call over to the company's founder and CEO, Mr. Yusheng Han. Thank you.

1:46 Please go ahead.

1:49 Thank you.

1:50 This is Yusheng Han, the CEO and founder of Burning Rock. Good morning and good evening, everyone. Thanks for attending this call. Let's start with a little bit of introduction of Burning Rock. We are China's molecular diagnosis leader for persistent medicine. There are two parts of our business. The first one is therapy selections. which means 4.5 billion PEM for China market. And the second one is early detection, which means 29 billion PEM for China market only. And our strengths lies in three parts. The first one, we have world-class technology. And the second is that we have a deep understanding and good experience about China regulations.

2:41 And the third one is that we have a very strong network for hospitals and doctors. So for therapy selection, our focus nowadays are for expanding leadership in China market based on our product performance and quality for both tissue and liquid-based MGS testing. Also, we enable higher MGS test penetration through kit-based in-hospital channels, and that is complementing to existing central lab-based testing. And for early detection, We are at the forefront of global R&D on blood-based pan-cancer early detection through in-house R&D and clinical collaboration with top physicians and top hospitals in China.

3:33 And today, I'm very pleased to introduce the speakers today, including me and our COO, Shenan Chai, and our CTO, Zhou Zhang, our CFO, Leo Li, and our CMO, Chief Medical Officer, Hao Liu is now online. And our topic today will cover three parts. The first part is for our progress for early detection. We will give everyone the product roadmap update, telling everybody that how we plan to do the clinical development for our products, no matter for the are the six cancer tasks or the nine types of cancer tasks.

4:22 And I'm very excited to say that we have very good data just released at ECMO Asia Virtual Congress 2020. And we have our six cancer task validation data released. are very fresh and welcome to find the poster and read it. And our CTO, Joe, will explain that in detail later on. And the second thing is about the milestones for therapy selection. And the first one is that we have our lab prep automation system, MEDMIS-BR, analytical validation data released at EMP. also called Association for Molecular Pathology, and very good data for both tissue-based and the liquid-based.

5:16 And the second news is that we just signed a licensing agreement with Merit for their MyChoice HRD test. MyChoice HRD test is a gold standard for PARP inhibitor So we are very excited and proud to say that that task will bring a very meaningful task for all the patients of ovarian cancer and potential application for prostate cancer. And the third part is our numbers. Our CFO, Leo Li, will explain that in detail, including the Q3 operation metrics and also the financials. So let me transfer to our CEO, Zhou Zhang, to talk about exciting early detection progress.

6:10 Zhou. Thanks, Yusheng. So let's just get started on the slide seven. So first, let's just recap the ALSA-Seq, which is the technology behind our early detection program. So the ELSA-Seq is a targeted deep methylation sequencing assay utilizing the high-efficient library preparation as well as the machine learning-aided classification model to perform the early detection. So the master can inquiry methylation status from hundreds or thousands of the loci from the genome on the methylation status. and from as low as one nanogram of cell-free DNA to detect whether the ctDNA, we call circular tumor DNA, is existing in the blood or not, and also predict tumor of origin.

7:03 So it has some kind of technology highlights being listed here, so including, I just mentioned, there's a single-strand live preparation as well as compatible with different kind of conversion. and also we select the most informative region from the genome for deep sequencing. Also, we apply the multiple noise reduction and the signal correction before machine learning model building. So the next slide talk about the early detection product development roadmap. So this is basically back in 2000. We started this program actually four years ago, but it's been under the research development mode. And right now, I mean, back to last year, in 2019, we presented the proof of concept of a single cancer type. which is lung cancer in AACR annual meeting.

7:54 And it's been listed in the first step. And in early this year, early 2020, we demonstrated three cancer performance in AACR Advancing Lupus Biopsy Special Meeting. And we demonstrated 95% of one specificity. At this specificity, we achieved about 81% sensitivity on three cancer types. As of like a couple of hours ago, we actually just presented our six cancer model in ESMO Asia Virtual Congress as a mini oral session there. And in the progress right now, we query about six cancer types, which are lung cancer, colorectal, liver cancer, ovarian cancer, pancreatic cancer, and esophageal cancer.

8:43 So we will be able to achieve, in the validations cohort, we will be able to achieve 98.3% specificity. And this specificity, we achieve 88.6% overall sensitivity. I'm going to talk about detail later in later slides. We also will be able to achieve the tumor variation results in the 98.6% case. Among those, about 81% are correct. which means we can predict 81% of the correct tumor of our region. For the next step, currently we are still develop further in terms of further expand of the cancer type. And we'll be able, right now, the assay is still under development and the training and validation to follow. And in addition to the six cancer type, we add a couple more including gastric and cholangina and head and neck.

9:40 So this is basically the product development roadmap in terms of a cancer early detection program happening in Brunei Rock. First, like next slide, we just talk about the latest ESMO Asia result. And Dr. Gao Qiang from Fudan University Shanghai Liver Institute presented this latest data on multiple cancer type early detection study. The study includes three stages, including what we call marker discovery, panel design and validation, as well as acid validation. So for marker discovery, we profile cancer and non-cancer tissue sample in-house and also survey the TCG and GEO public database to investigate a key muscle nation change associated with the six specified cancer type.

10:28 As a result, we finally select about 160,000 CPG sites to construct a customized capture-based panel to enable this cancer early detection. In assay validation stage, we randomly divide the plasma CFDNA sample from clinical diagnostic cancer patient as well as non-cancer control into a training set and also independent validation set. During the training phase, A machine learning-based classifier was built to identify the presence of localization of cancer-derived signals. Subsequently, the model was applied to the validation set to evaluate the performance independently.

11:13 As you can see, the overall work chart is listed in slide 9. And in the next slide, we basically listed the overview of the training validation set and how many patients individually have been tested, including the cancer patient and the non-cancer control. The top table listed clinical characteristic of the training cohort and bottom listed the validation cohort. Both the case and the control groups are comparable with respect to age. and Xiaozhi Hu. As we know, methylation is age-related biomarker. That's why we've been really careful about this and make sure the age and gender and smoking status are being tracked and controlled.

11:58 And about like 80% of a patient with diagnosis early stage in this cohort, which means stage one, two, three at the time of the study entry. The next slide is a very critical slide, which is slide 11. That's just the list of the summary of the detection accuracy, or we can call it sensitivity, across different cancer type and clinical stage. So we put six different box or bar graph here. The training set is labeled in green and the validation is labeled in red or orange color. And the numbers in bracket and the number of samples included for the indicated stages group. In general, the performance was consistent in training and validation sets.

12:49 And this gave us a lot of confidence. And the detection rate increased along with the tumor progression from stage 1 to 4. In training, the specificity was being controlled at 99.5%, and at this specificity, the sensitivity was 79.9 overall. And the invalidation cohort, we will be able to achieve the specificity at 98.3%, with the sensitivity about 80.6%. The next slide basically recaps the number listed. This is slide 12. Basically, we separate the number by cancer type in the clinic stage and be doing a little bit of grouping out here. And at the given specificities, which are 99.5% for training and 98.3% for validation, the categorized sensitivity are listed in the bar chart again.

13:41 In validation cohort, especially at the orange to red color, pay attention on that. Overall sensitivity from stage 1 to 3, we can call early sensitivity at 75%. and Xiaozhi Hu. In all stages, the liver cancer showed highest detection sensitivity, around 93%, and the lung cancer was lowest, around 67%. The next slide is basically talking about the predicted tumor or tissue of origin with high accuracy. So to pay attention on the rightmost one, which is validation cohort. So basically, we'll be able to achieve Yusheng Han, Xinru Mao, Xiaozhi Hu, Hao Liu So for the next slide, basically, as Yusheng just mentioned here, we're going to talk about the therapy selection business. So we will have two topics.

15:01 First, let me just give you some update on the Magnus VR, the walk-away, aka turnkey solution for hybridization capture method in oncology panel testing. The instrument make actually current library prep method much easier and enable 9-hour from DNA to enrich library for ready for sequencing in a fully automatic fashion. So this year, we actually made a MagnusBR now compatible to our several most popular panel, including the liquid biopsy test, which is 168 genes panel. as well as 520 genes tissue-based testing. So this is being listed at slide 15, just give you some kind of highlight in terms of the workflow and how the Magnus VR look like and why it's so useful for this kind of a turnkey solution for small-scale hospital lab.

16:04 Very exciting, basically, as a platform presentation selected by the AMP annual meeting. We actually presented, be able to present this analytical validation result, Magnus BR assay on this both assay, which we call OncoScreen IO tissue assay. This is a 520 genes assay, as well as OncoCompass target cell-free DNA assay, which is 168 liquid biopsy. And we did an assay validation on both panels as we presented in the AMP annual meeting happened earlier this week. And the overall take-home message here is basically the Magnus BR assay showing equivalent of better performance compared to our manual assay.

16:49 and very high concordance being achieved. And also the Magnus BR assay, it's actually will be able to fully, you know, take compatible with multiple different biomarker, including the SNV, indel, fusion, and that's copy number variation as well as the microsatellite instability status. Next, let me ask our Chief Operating Officer, Shannon, to give you more update on the Mirror My Choice product licensing activity. Shannon? Yes, thanks, Joe. So on page number 17, Another exciting progress by Burning Rock in the last quarter is that we finally reached an agreement with NIRID to bring in My Choice HRD assay into China. So this assay is actually the first and arguably the current gold standard for genomic instability calculation, which has become a very important and significant biomarker, especially for pot inhibitor developments.

18:02 So far, the FDA has approved the mitros HRD as a companion diagnostics for two pop inhibitors, the olaparib and noreparib, both in the ovarian cancers. And we are listing the exact indications here on the table. So they were approved in 2019 and 2020, respectively. And then on the next page, here we want to introduce our thoughts behind the licensing in. So the purpose of bringing in this to China was first to improve our capabilities to collaborate with the pharmaceutical companies for biomarker, especially CDX biomarker development for PARP inhibitors in China, because we see highly growing interest in that realm. And secondly, we also want to make this essay commercially available to Chinese patients in an LDP format at first. So our estimated immediately adjustable market, which would be the first line, advanced ovarian cancer patients who will undergo maintenance therapy is around are 10 to 15,000 patients annually. But I want to emphasize here that our estimated penetrance initially for these patients

19:33 for that test would be around 5% in the first year or so. And then we anticipate it to grow, of course, in the long run. And the second purpose was, of course, to host the long-run development and also commercial needs for this asset because we have a very optimistic view of the HRD as the biomarker for PARP inhibitors. And we are listing, I think, an incomplete list of the PARP inhibitors and cancer types which my choice HRD is currently being used as a companion or exploratory biomarker in clinical studies. So you can see that it has a great potential to be expanded beyond ovarian cancer and also beyond olaparib or noreparib in the future. So we are very optimistic in that and we are also, we want to fit in this good position to host such services for pharmaceutical companies and also for hospitals in the future in China.

20:46 So next, I'm going to turn to Leo, our CFO for the operating metrics. Leo.

20:56 Thank you, Shannon. And going into our numbers on page 20. And first of all, let me recap that overall, we have had a good quarter during 3Q 2020. continuing our sequential recovery, growing in both the central lab and in hospital channels on a sequential basis. And this is, unfortunately, this is under the context of increasing competition in our industry in China. For example, we achieved 16% overall revenue growth on our top line on a sequential or quarter over quarter basis. And this is higher than the numbers we have seen from other are public and private companies in our industry in China.

21:42 Looking specifically at our operating numbers on slide 19, first on the central lab channel, we continued the sequential recovery, growing our volume at 19% quarter over quarter. On a year-over-year basis, our central lab volume grew 28%. Although there's no published industry-wide data, we believe we are gaining market share based on anecdotal observations. For example, one company in our industry reported a 5% year-over-year LDT volume growth in the third quarter, which is lower than our 28% volume growth rate. Looking at the in-hospital channel, the third quarter has been a slow quarter in terms of new contracted hospitals.

22:27 But on the other hand, the existing contracted hospitals continued their recovery and grew at good double-digit rates. And let me discuss a little bit on the Magnus BR and recap that this was launched at the China Annual Pathology Conference back in November last year. The demand for Magnus BR has been strong. However, we encountered some external supply issues in the previous couple of quarters. This has been gradually resolved, but it did mean that we have missed some demands and we were not able to supply customers for a couple of quarters. At the end of the third quarter, we have placed Magnus VR into more than 10 hospitals in the low teens. But because of the delay in getting supply and the delay in procurement process as a result, we expect to complete sales contracts and afterwards book revenues for these instruments in 2021 for the majority of the low teens Magnus VRs that we have placed so far. with a minority spilling into 2022 due to hospitals procurement cycles. The demand for Magnus VR is strong and we expect additional placements into 2021.

23:48 And Magnus VR as the only fully automated library prep system in China that can do large tissue and liquid panels is very important for us in terms of differentiating us from competition and continue our leadership in the in-hospital markets. Moving on to our revenues on page 20. Overall, our revenue grew 19% year-over-year. And the central lab channel, which is more diversified geographically across China, grew 30%. And this is an improvement versus the 18% year-over-year growth rates in the second quarter. And the trend is in line with the volume trend that we just discussed, that we displayed on page 19.

24:33 The in-hospital revenue grew only 3% year over year, and we'd like to explain the reasons behind that. So first, we note that we had lumpiness in our quarterly in-hospital revenues back in 2019. And this happens when we have a large hospital getting contracted in a given quarter. The lumpiness comes from one-off revenues getting booked in that quarter, the quarter of getting a contract signed for kids that were shipped in prior quarters before contract signing. So the third quarter 2019 was such a quarter. And to a lesser extent, the first quarter in 2019 too. So you could see two clear lumpiness in those two quarters across 2019.

25:23 We believe it's more representative to look at the trends across the number of quarters for the in-hospital channel due to the lumpiness in this channel. Numerically, if we were to take the average of 3Q19 and 4Q19 as the base, our 3Q20 year-over-year in-hospital revenue growth rate would have been 41.6%. And sequentially, we should also note that third quarter this year in-hospital revenue improved versus the second quarter and grew 15% sequentially. We had fewer number of newly contracted hospitals in the third quarter compared to the second quarter. And this is an offsetting factor dragging the growth rate lower in contrast to the continued recovery of the existing contracted hospitals.

26:16 And we'd like to make a note that in the second quarter and third quarter 2020, all the in-hospital revenues were reagent revenues. We booked revenue for one Magnus VR back in January this year, but because of the supply issues we just discussed, we were not able to supply or book revenues for additional Magnus since then. We expect to convert the currently placed Magnus VR instruments into revenues starting 2021, and the demand for Magnus has been strong. Pharma revenue drops in the third quarter, and this is due to reduced testing volume of pharma projects. in this quarter. Looking further ahead, we observed that COVID is still going around in China or lingering around with many outbreaks from time to time and across a number of places.

27:10 For example, we saw a few incidents of COVID cases, particularly in northern China. And in a couple of those cases, these many outbreaks led to population-wide testing for the entire city, And in one case, this led to the resignation of the head of the city's public health administrator. So overall, the public health system and hospitals in China are still putting a lot of emphasis on COVID. And in this context, it is hard for us to make a precise prediction on how or when we will be back to normal. So we'll just have to continue to observe. and we will provide an update on our thoughts for 2021 at the time of our fourth quarter results. And lastly, on OPEX, we expect increasing spend on early detection R&D going forward as we are excited to continue to pursue this significant opportunity and increase our investments there.

28:11 So with that, we're happy to open up for questions. Thank you, ladies and gentlemen. We will now begin the question and answer session. To ask a question on the phone, please press star 1 and wait for a name to be announced. To cancel a request, you can also press the pound or hash key. The first question comes from the line of Doug Schenkel of Colvin. Please go ahead.

28:39 Hey, good morning and good afternoon, everyone, and thank you for taking my questions. Just to start with a few questions on the asymptomatic cancer data presentation that you shared. First, just to start, I'm a little bit surprised that the way you cut this data, it seems like you toggled to higher specificity than what we talked about earlier this year. At that point, at least in our discussions and going back to the AACR liquid biopsy meeting in Miami, you talked about maybe structuring the assay to have higher sensitivity at the expense of specificity, the normal toggle decision that one has to make in designing an assay. and kind of going that way in a way that was really different than maybe what we see typically from companies focused on developing liquid biopsy assays for asymptomatic cancer screens in Western markets.

29:40 And I think you said that you were positioning it that way largely because of the differences in screening tests availability in China relative to Western markets. I'm just wondering why this changed in the way it seemed to over the last several months. Yes, this is Jenna. I can answer that question, Joe. Jenna, maybe go ahead. Yeah. So first off all, I wanted to make it clear that we didn't do it Our philosophy stays the same. If we could compromise sensitivity to gain largely sensitivity, that would still be a route that we want to take.

30:31 Moving from the three-cancer assay to six-cancer assay, actually we didn't just expand on the cancer types. There was a reshape of the molecule selection and also the chemistry and also the algorithm. So this was not, we didn't keep it at the same 95% specificity level on purpose, of course, but this is, again, looking at this assay data Thank you.

31:12 Okay. That's helpful. And maybe building off of that, the performance is impressive, especially when you look at it on a blended basis across all stages of cancers. On that When you peg the results at a high specificity and then look at the sensitivity specifically for stage 1 lung cancer, which was 37.5%, I think it was 33% in stage 1 ovarian, it gets a bit better. In esophageal and ovarian, where you get to 54% and 64%. And then, of course, liver and pancreatic is quite good in the 80s. That said, for the first four cancers I mentioned, I'm just wondering if you think that's good enough for your target market.

32:00 And I guess by extension, I'm wondering if your thinking is that given the absence of standard screening in China, at least in terms of availability relative to Western markets, that performance at that level would be good enough given the alternative is effectively finding no cancers. I'm just wondering how you're thinking about this because it does seem like the early stage detection for those cancers could be better while keeping in mind that typically these metrics actually deteriorate when you move the assays more into real-world studies. Yes, I think you're absolutely right, Doc. Of course, this is not ideal. This is not like the ideal scenario.

32:45 The final ultimate performance we want to see on an early detection product, but we actually think this is already a very good performance product for early detection market, especially given that it's a pan-cancer or a multi-cancer assay. And keep in mind that when we say multi-cancer, we have to also in the algorithm to balance between are the algorithms to balance the performance among different epithets. And also for the specificity especially, it's highly correlated between different cancer types. So it's not like you can just adjust the cutoff on one cancer type and not impacting the other one.

33:33 So this is what our research team has so far figured out at the end. are the best balance, quote-unquote. But of course, there are room for improvement possible in the future, especially this is still a relatively small cohort. We are still learning a lot about these stage one, stage two, because actually even within stage one, stage two, there are a lot of different clinical and Xiaozhi Hu. There are different clinical features and they each can have different performance. So in the future when we have the larger cohort, we might be able to tweak it a little bit more precisely to see where can we gain and without losing too much on the other cancer types.

34:31 And also I want to point out that this Surprisingly, we find that now that we are in the 98 young specificity zone, we actually do have a better sensitivity or a similar sensitivity, at least with what Grail is showing. So we are also very interested to watch how people perceive the product performance on Grail's products. and we are also, of course, talking closely with the Chinese clinicians and see what their take is on this. And their view will also help us to shape the, to find the best balance probably when we do commercialization.

35:23 Okay, thank you, Shannon.

35:26 Okay, I'm sorry. Oh, I was just going to add. Yeah.

35:34 Okay, thank you. Sorry to interrupt.

35:42 So you mentioned China, and just at one point, if we look across other Chinese innovators in this space, this data does look very strong. I mean, we've seen more data around liver cancers in China, and this pan-cancer test results look strong, even compared to others doing blood-based for liver cancer.

36:08 Yeah, absolutely. That data did look good. Yeah, that's a good point. Just last on the studies, what comes next in terms of, I guess, what should we look for? I guess, could you provide an update on predict study enrollment and timelines or plans for any other large studies? Well, unfortunately, we can't provide any further details on Predix. We will, as long as we have any update that we can release, we will share them with you guys, but not at this point. Sorry.

36:52 Okay. No, that's okay. Can't blame me for trying. Leo, maybe just a couple for you, and then I'll get back in the queue. It was a better than expected revenue quarter. That said, we had expected the number of ordering physicians and number of hospitals ordering in the central lab to maybe increase a bit more than they did in the quarter. It did seem like you lost a little momentum there relative to what we saw in Q2. And it also seems like, on a net basis at least, that there were no additions to the in-hospital pipeline. I know you talked about some inherent lumpiness to some of these things in your prepared remarks, but I just want to make sure that these metrics weren't drastically different than what you expected. And if there was a divergence from expectation, I'm just hoping you could provide a little more detail.

37:54 Neil? This is your operator. I'm afraid Leo has just got disconnected. Allow me to call him back and we will resume the call shortly. Please stand by. Thank you. Thank you for your patience. Leo is now back.

38:43 Maybe I'll invite Doc to ask the questions again, please.

38:46 Okay. Hey, Leo, do you want to... Okay, great.

38:51 I have a question on the operating numbers for the technical issues. So first, on the central lab operating metrics, and I would note that we are still under COVID in China, so we were not able to get back to the peak breadth of reach or catchments that we achieved back in the fourth quarter of 2019. So I think that's still... Due to COVID being around China, we are, I think, doing well in terms of the number of patients tested per physician. So we are making progress there. But in terms of the breadthness of our coverage, that's with the COVID backdrop in mind. And the in-hospitals, I mean, this is one quarter.

39:42 And hospitals, they run annual cycles. So I think we should keep observing and rather than drawing too much of a conclusion, not of a single quarter.

39:55 Okay. That's great, Leo. And very last one, and thank you for giving me this much air time. Just in terms of competitive dynamics and pricing, I'm just wondering how impactful pricing changes from Illumina in China have been in terms of your positioning relative to others in the in-hospital market. We've heard from Illumina's public remarks and just other checks that there were some notable price cuts made in the Chinese market as well as in some other geographies with certain products, but specific to China. Have those helped you at all as you look ahead and think about your positioning in the in-hospital channel?

40:40 Are you asking to go, Hao Liu?

40:47 Go ahead, Yusheng.

40:50 I'm checking the questions about the impact of the new hospital model.

40:57 Yeah, really just Illumina reducing the cost as your partner on the sequencing side in the hospital market. I'm wondering if their price cuts have led to any improvement in your competitive positioning in China.

41:13 Well, you know that since most of the competitors are using Illumis platform, they did cut the price. And the good thing for us is that we don't cut our price. So I think that in the long run, it means that we will have a better margin. But since you know that for most of the in-house model, sequencing cost is not a significant part for the overall cost. So we don't expect significantly lower, I mean, significantly higher margin. But will be a little bit improvement.

42:03 OK. Thank you again. Thank you for the questions. Next question comes from the line of David Lee of Bank of America. Please go ahead.

42:13 David Lee Great. Thanks, management. Thanks for taking my question. So basically, congratulations for your good third quarter result, especially during the pandemic period. You can still register a very strong growth. Basically, I have two questions. Number one is that Recently, we observed the press card, the centralized procurement policy spreading not only on the medical, not only on the drugs, but also on the medical devices. And it seems like there's a trend and there's a chance that the PCR testing is also going to have the potential to be enlisted into the centralized procurement. Do you think that is something going to happen in the future?

43:03 And if that is going to happen, how does this impact our business in the long run? This is my first question. I've got another question. Can you share with us your understanding or a better understanding to your six cancer sensitivity and specificity data? because the sensitivity and the specificity is very strong, is very high for the cancer at the phase three and the phase four stage. But when it comes to the phase one and the phase two, it seems like some of the number is not that high. The previous analyst asked about your views on it. So this time I want to ask in another way is that how does this data, especially the early cancer data, Thank you.

44:33 Okay, so for the first question, I would like to answer that. We think that it will be quite too early to talk about the price cut from the government for IVD, especially for cancer companion technology products. The first reason is that, you know, IVD products, usually the hospital takes a significant margin because they have a complicated operation in the hospital. So it's quite hard to blame the supplier for the price. And the second thing is that the testing cost for overall treatment for cancer obviously is not a major part. And the third one, and it's a very important one, is that usually if there's something happen, similar things happen for the IVD, it means that after we get the pricing, three years after pricing, we will see the potential price cut or procurement from the government.

45:49 So I would say that for our segment, it will be, It will be a long way and we do not expect any change in the coming three years. And in terms of the sensitivity and specificity of early detection, I will turn to our CTO, Joe, to explain about the data. Joe?

46:14 Yeah, just to try to comment in terms of a different stage and different cancer type has different sensitivity.

46:20 As you can see here, as just mentioned there, stage three and four will be showing higher in general sensitivity. Just try to be aware. If you compare to our peer data, for example, Grillo, and we currently have a very similar specificity and we will be able to achieve in terms of over 75% sensitivity for stage 1, 2, 3 which is a removable cancer and compared to their publication I think we are still showing a little bit higher sensitivity but of course this is still within the you know, every range.

47:08 We are optimistic, but we've been very conservative and optimistic on that. And we currently, from R&D program perspective, we are currently further refining our pipeline and methodology, and hopefully by applying additional data filtering as well as the model building. and trying to further improve the sensitivity, especially for the earlier stage for certain cancer types, for example, lung cancer and ovarian cancer. And right now, it's still under development at this moment. I would just say we hope we will improve this, you know, the early stage sensitivity, but I cannot tell actually, you know, how much we can improve it at this moment.

47:51 Yeah. Right. Got you very clear. That's helpful. Can I ask a follow-on question? So days ago, you announced the cooperation with MIUI. Can you share with us from the P&L perspective, how does this cooperation impact your potential revenue and potential profits, and what's your pricing strategy? Can you give us some color on this? Thank you so much.

48:25 David, this is Leo, and I appreciate the question. And we are excited about commencing the partnership. And hopefully this will not be the only licensing partnership that we're going to have. So we are excited about leveraging our commercial infrastructure and bringing more tests to China for the benefit of Chinese patients. At this moment, we cannot comment specifically I got you. Very clear. Thank you. Thank you so much.

49:21 I have no more questions.

49:24 Thank you for the question. Thank you, David. Next question comes from the line of Yifen Ding of Morgan Stanley. Please go ahead.

49:35 Thank you for taking my question and congratulations on a strong quarter. I want to ask two questions on the behalf of Sean. So the first one is still in the data. I kind of want to follow up on David's questions earlier. So I think that compared with your previous three cancer model, your six model data seem, you know, some are higher, some are lower, maybe basically in line with your three cancer model. So how should we interpret this trend? And do you think this trend could be sustained for a non-cancer model?

50:20 That's my first question. And my second question is that in this year's negotiation for the national reimbursement list, more targeted cancer therapies may be included. and maybe in the next couple of years, more will be included as well. So how do you think that could drive the overall cancer genotyping market, especially NGS, given that NGS is not reimbursable at this point? That's my two questions. Thank you.

51:03 Shanna, maybe you can go ahead. Yes, so for the six cancer type improvement over three cancer type improvement, I think we are optimistic about the chance that we will be able to maintain that performance when we expand into nine cancer type or even more cancer types because we do have further ideas or or activities to further improve our chemistry and algorithms once we move into the 19-3rd type assay. So there will be another technical improvement which theoretically will bring a better performance, especially on the tissue of origin accuracy. I think there you will definitely see some group for improvement in the future.

52:05 For the early stage cancer sensitivity, we are not sure. We'll have to sit and see once we have more data come in, more data to train our model. As you know, this is a highly data-driven self-learning algorithm. So I think with more data coming in, we will for sure have a more robust model So the short answer is yes, we are confident that we will be able to at least maintain and significantly improve in some dimensions, maybe not all. Leo, so do you want to take the second question about insurance?

53:00 On the second question, we do note increasing progress of volume-based procurements in therapeutics, and we agree that it is helpful in terms of driving demands and increasing availability or affordability of targeted treatments for the benefit of Chinese patients, which will lead to increasing demands for patients with Thank you very much. Thank you. with increasing accessibility through our in-hospital model by placing more tests into the pathology labs of hospitals, which is a typical way that patients are used to getting tested in China. So I think with the combination of increasing affordability and accessibility, these are helpful for increasing NGS penetration.

54:21 Yusheng, do you have anything to add?

54:24 have some additional comments for that. So I think for the top 200 hospitals, whether the NGS goes into reimbursement is not a key issue. If you have an investigation for the top hospitals with NGS tests installed in the hospital, you can see that NGS now is taking a majority for the tests for cancer patients. And we can see that PCR test is still increasing. The thing is that they are penetrating lower to more hospitals. And that's a good thing. First, for NGS testing, the penetration is just starting. And we can see that TCR is exploring the boundary of gene testing.

55:14 And we can see that overall, the gene testing for cancer patients is increasing. So we don't see any increased situation for the whole market in the coming several years. Thank you. Excuse me, Mr. Ting, any follow-up questions?

55:48 No, that would be all. Thank you. Once again, if you'd like to ask questions, please press star 1 and wait for a name to be announced. There are no more questions at this time. With that, ladies and gentlemen, that does conclude the conference for today. Thank you for your participation. You may now disconnect your lines.