Good day. And thank you for standing by. Welcome to Burning Rock's 2021 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, that today's conference is being recorded. Before we begin, I'd 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 Litigation Reform Act of 1995. These forward-looking statements can be identified by terminologies such as will, expects, anticipates, future, intends, plans, believes, estimates, target, confident and similar statements. Statements that are not historical facts, including statements about Burning Rock's beliefs and expectations are forward-looking statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Burning Rock's control. Forward-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 forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law. And now, I'd like to hand the conference over to the management team of Burning Rock. Thank you, please go ahead.

Thank you. Welcome to Burning Rock's earnings call. I am Yusheng Han, the CEO and Founder of Burning Rock. And today we also have our COO, Shannon Chuai; our CTO, Joe Zhang; and our CFO, Leo Li in this call. The Burning Rock is China's molecular diagnostic leader for precision oncology. There are two parts of our business. The first one is early detection and using liquid biopsy for pan-cancer. And the second is for therapy selection and MRD. Please turn to page four. So today, we're going to recap the recent progress for those early detection and therapy selection. So for early detection, we are very excited to launch the multi-omics 22-cancer test, which is called PRESCIENT. And the second cancer [ph] PREDICT trial for 9-cancer test it's going well, mostly. And our COO, Shannon Chuai will talk about these two trials in detail. And meantime, the preparation of our commercialization of the 6-cancer test is ongoing. And we are continuously building our commercial and operating team and optimizing the SLPS [ph] Nothing significantly important to report for the 6-cancer so far. But if you have any question, welcome to ask at our Q&A session. And for the therapy selection, we have great news that finally the results of liquid biopsy part of SEQC2 has published in Nature Biotechnology, which proved us that Burning Rock's quality is at the top tier level in the world. And our CTO, Joe will talk about that in detail. And after that, our CFO, Leo, will talk about the financial numbers. So let's turn to Shannon first to talk about the early detection part. Shannon?

All right, thanks. Thanks, Yusheng. So, if we go to page six, this is to recap the product development roadmap for our early detection program. So we started with a proof-of-concept on lung cancer and the study and the methodology has been actually most recently accepted for publication. And a manuscript is pending publication right now. And then we move on to 3-cancer test, which we presented the data last year in January in the AACR Special Conference on Liquid Biopsy. We were able to achieve a 95% specificity and 81% sensitivity. And then most recently, I think a lot of you are familiar with our 6-cancer test results that we released last year in November on the ESMO Asia. The 6-cancer test includes or covers lung cancer, colorectal cancer, liver, ovarian, pancreatic and esophageal. And the data showed that we - were able to maintain our 81% sensitivity, while improved the specificity - improving the specificity to 80 - about 98%. And we also were able to achieve a reasonably good accuracy for TOO analysis, tissue-of-origin analysis from this, as high as about 81% accuracy from the six-cancer test, in the results we released last year. And then for the 6-cancer test, after the THUNDER study, which was a case-control study to validate the specificity and sensitivity of the product, we also were planning to move on to a prospective interventional study for asymptomatic population. So that study is currently under planning. And I'm going to show you an overview in later pages. And today, we really wanted to focus on the most recent, very exciting progresses that we are making on the 9-cancer test and looking forward to the 22-cancer test. As Yusheng had mentioned, for the 9-cancer test, our current status is that the PREDICT study that…

Thanks, Shannon. So I'm going to cover a little bit about our therapy selection part, so further slide 15, which is a highlight what's the strengths of Burning Rock in terms of a therapy selection business. So with regards to superior product, as well as the NMPA approval process for the different IBD kit in the pipeline, but also the commercial penetration. But today I'm going to focus on the first bullet point which is a superior product, which one number the evidence showing is a paper published last month in Nature Biotechnology. This is in the slide 16. This is basically a learning effort led by consortium - community effort led by - a consortium led by FDA and which they call MAQC Consortium and focusing on the quality control of the sequencing business. So, what you can see here, so the paper has been published. We participate in both the liquid biopsy part, as well as pan-cancer which is tissue-based. So the liquid biopsy study has been published in last month. So, page 17 basically highlights what's the participating assay, as well as study design. So there's a five different company participated, they are all kit vendor, which means, all being capable to produce the liquid biopsy panel and while sell as a kit format, and lead the customer to use them. So Burning Rock as a one – as the only Chinese vendor participated in this study and each vendor will distribute their kit to different labs. Also, the lab will receive the FDA distributed reference material and the performed assay based on the vendor’s kit guidance and trying to generate the library and the sequence and also using the kit vendor’s bioinformatics pipeline to perform analysis. Then all the result will be submitted to FDA. And…

Thank you, Joe. Our financials are shown on page 25 of our presentation, and for this quarter we'll focus mostly on our top line numbers. And first, we recap that all our revenues are generated from our therapy selection business. So there is no contribution from early detection yet, which is still under R&D and clinical development. In the first quarter, we are happy with the year-over-year growth that we've been able to achieve. We grew our revenues by 58% on a year-over-year basis. We grew our gross profits by 72% on a year-over-year basis. By channel, our central lab revenue grew 72 – grew 62%, our in-hospital revenues grew 70%. In our observation of some anecdotal industry data points, this is above industry growth rate, indicating that we've been able to gain some shares in this period. Within the first quarter, talking about [indiscernible] and the sequential trends. January was impacted by COVID resurgence in Beijing, Shanghai, and a few other key cities in China. So that did have a negative impact on testing volumes for some of our key customers. February was a quite month due to Chinese New Year and March was an okay month. Because of the negative track from January and February, the sequential growth rates was negative for the first quarter at minus 14% Q-on-Q. Now looking at the rest of the year, we have a guidance of RMB 610 million for the 2021 full year, which is unchanged from our previous earnings release. We have not hit the monthly run rate yet to achieve that full year target. So there is certainly more work that we need to do. And in terms of what we're doing, in terms of driving additional NGS penetration, we are doing, number one, executing our in-hospital strategy, putting our test available at more hospitals, which we think is important for building NGS penetration, because this is the most typical format of testing in China. And second will be the continued execution of our multi year NMPA registration pipeline process which will be key in terms of competitive differentiation. So we remain focused on these initiatives for driving the long-term success of our therapy selection business. Now with that, we conclude our prepared remarks and we open up for questions please.

Thank you. [Operator Instructions] Your first question comes from the line of Doug Schenkel from Cowen. Please go ahead.

Hi, good day and thank you for taking my questions. Starting on the topic of asymptomatic screening, I appreciate all the detail you provided today. You know, regarding the 6-cancer, 9-cancer and 22-cancer asymptomatic screening programs. Three things that are pretty important remain unclear to me. One, do you believe studies like THUNDER, PREDICT and PRESCIENT will be sufficient to allow for product launch from a regulatory standpoint and reimbursement? Second, if not, how big a study will be required to allow for regulatory approval and reimbursement? And third, what is the acceptable target from this perspective when it comes to sensitivity and specificity? I want to go back to these questions because you referenced CTGA and Pathfinder [ph] in your prepared remarks as good precedents, or at least comparable studies. Neither of these studies are sufficient in the United States to support FDA approval for CMS reimbursement. Most companies, in fact, that are based in the West have indicated FDA approval and reimbursement would require large randomized prospective studies. And by large, I mean over 100,000 patients. So I understand your programs are not targeted at the US or Western markets, they're targeted at China. So it just would be helpful to understand, again, what the answers are to my three questions, as it relates to asymptomatic screening, given the market is different.

Okay. Hi, Doug. Thanks for your question. I'll take your question. I will try. So first of all, a very straightforward answer for your first question, no, we don't think the PREDICT or PRESCIENT will be enough for testing the asymptomatic population, because they are apparently not powered enough to have a precise enough assessment on the sensitivity, especially the sensitivity for the asymptomatic population. And also the recruitment strategy actually, naturally complex with prospective asymptomatic validation study, because in these studies, the participants, the control arm actually, we define them as the “healthy”, because they need to go through a health check up or physical examination once - you know at the other recuerdo [ph] point, but actually, for a purely asymptomatic study they don't necessarily have to go through that, it's just symptom free and, you know, relying on whatever health check up habits they're going through in their real life. So PREDICT and PRESCIENT are not designed. They're not designed to give us answers for the asymptomatic population performances. They are, on the other hand, powers, or designed to give us answers for the case-control cohorts, which will help us to be design - or to design the future asymptomatic prospective or even interventional studies. However, for the 6-cancer test, the study that we just mentioned, that's under planning, that one will be designed and powered to give us a different answer for the asymptomatic population for the 6-cancer test. So that one we do think or we are designing for the purpose, potentially down the road for registration. Of course, the registration pathway for early detection products in China is not crystal clear or anywhere near crystal clear. At this point, we're having a conversation with an MPA so we don't have 100% answers, that is…

Thanks so much for that, Shannon, that was really helpful. I think my other topics are probably more for Leo. So Leo, just in terms of the quarter, and specific to the central lab, volume dropped relative to Q4, maybe that wouldn't have been shocking, regardless of how January and March went given Lunar New Year was in the quarter, and wasn't in Q4. That being said, volume was also lower than Q3. Additionally, you know, revenue dropped back to levels not seen since the second quarter of last year in this channel. And that was largely a function of both the volume dynamics, and maybe just as if not more importantly ASPs dropping a bit. So on the topic of ASPs, because it sounds like you don't think there's any competitive pressure on volume, it sounds like you think that's just the market. So when it comes to ASPs, were there market pricing pressures in the quarter? Or was that a function of product mix? And then, you know, kind of building off of that, how are you thinking about volume and pricing in the central lab channel over the balance of the year, you know, essentially what's built into guidance?

Yeah. So, for the central lab channels, we did see ASP fluctuations quarter-over-quarter, and that was more to do with product mix. So, we have not made any pricing changes for that channel during the first quarter and so, pretty much driven by product mix shifts and some seasonality. So, that was for the first quarter. For the remainder of the year, for the central lab, we think there are structural challenges that we'll we do need to work through. Then if we look at, as we mentioned earlier, if we look at building NGS penetration, we are putting efforts into the in-hospital channel. We think this will be very important for the future growth of NGS penetration, as the most typical formats of testing. The central lab channel is a more fragmented channel with lower entry barriers, whereas the in-hospital channel is a more institutionalized channel, where our product strength will be able to compete better we believe versus other non-products and some aggressive commercial factors in the central lab channel. So we think looking for the rest of the year, in-hospital channel will be important in terms of driving growth. For the in-hospital, or the central lab channel, we have been building our sales team and headcounts. So we have seen sales and marketing expenses increasing over time and that's mostly due to headcount increases. So we are putting more manpower on the grounds, speaking to more physicians to build up this channel, but we think that this will take time.

So Leo, you know, also keeping in mind that you know, in-hospital revenue dropped below levels generated in both the third and fourth quarter of last. Would you attribute the performance in Q1 largely to normal seasonality, and thus, you feel pretty confident about a more pronounced ramp in the in-hospital channel versus the central lab over the coming quarters?

The first Q drop of the in-hospital channel was expected as we were expecting Chinese New Year. And typically there was not a lot of ordering during that month. Then the January COVID resurgence was unexpected. So that did hit us. Without that, we would have been better. Looking at volume trends, we were happy about being hospital volumes for the month of March, which grew double digits. And we are keeping a watch on the second quarter, as we have not closed the second quarter yet.

Okay. And that's a perfect segue to my last question, which again, is on guidance. You know, obviously, you knew Lunar New Year, was in Q1, as it always is. It sounds like what surprised you was the COVID impact on January, and probably more of the central lab performance in March versus the in-hospital performance in March. What is it that you saw coming out of the quarter and over the early part of Q2, which made you confident in reaffirming guidance in spite of the fact that it does seem like there were more headwinds in the first quarter than you might have anticipated?

Yeah, as we were building the guidance, we were expecting a second half heavy versus first half lights of the year. And it played out that way. And we did leave some butter [ph] for COVID fluctuations. And we did get hit by that in January, so lot of surprises in terms of looking at our guidance. Looking forwards for the rest of the year, we do need to ramp up our monthly revenue run rates, which we haven't hit the run rate yet to be able to achieve that full year guidance. So we need to go back and work hard. And we look forward to update you guys in the next earnings call.

Okay. Thanks to all of you. I appreciate all the details.

Thanks, Doug.

Thank you. Our next question comes from Ethan Terry [ph] from Bank of America. Please ask your question.

Thank you for taking my question. I'm Ethan from Bank of America. And I'll ask two questions on behalf of our analyst David Lee. The first is that, can we have some update information about our 6-cancer test? Is there any changes for the timetable guidance?

You mean for early detection, commercialization?

Yes, and approval and like discussion with NMPA, is there any update?

You know, last time we talked about we're going to be doing the EIT [ph] and also the prospective clinical trial. And in terms of the commercialization timeline, now, we are executing our team for commercial and operation. So we think that the key point for the early pan-cancer early detection is for the consumer side. So we recently are recruiting team from consumer - consumer industry and also the Internet industry. And we believe that that we have already found the right way to commercialize that. And - but at the same time, you know, that's a totally new thing in the market. So how to build up an SLPS next time and when it's time to optimize the whole process. So, so far, we're seeing that everything is on the right track, as we said that the commercialization will start early next year. And in terms of the clinical trial, Shannon will talk about that?

Right. I don't think we ever gave any guidance or registration because we honestly are ongoing - having an ongoing conversation with a NMPA, so as I said, there's nothing sure at this point and also, we are, of course, for the whole feud [ph] the early detection products, the registration pathway for that is not clear yet. So I think it's a dynamic process or discussion with the NMPA. So we don't have a specific timetable that we could give out yet. But as you [indiscernible] for other – the progresses or efforts on getting everything as - see going as what we planned or expected, including the study that we are planning for among the asymptomatic population, that still - that's the ongoing successes, and also what we have released the last time.

Thank you. Very clear. And so second question is about the participants in our PREDICT and PRESCIENT study. Do you think that for the PREDICT study there are around 14,000 participants, while for the PRESCIENT they are around 12,000 and can help us to illustrate more about how this number has been confirmed. And why there's a difference and why PRESCIENT has fewer number of participants? Thank you.

Thanks. It's a very good question. Thank you for noticing that. Actually for PREDICT, because we have quite rich preliminaries out for those 9-cancer, at least 6 out of the 9-cancers. And there's still a little bit data on the other 3-cancer type. So we were able to design the study and planning for the sample size, a stage-specific estimate for the sensitivity, sensitivity and to accuracy. So that's why for PREDICT even with fewer cancer types, we will - we are planning for a larger sample size because the sample size was calculated so that each stage, each cancer type, each stage, we will have a precise enough estimate for the sensitivity. However, when we are planning for PRESCIENT study, because its is longer down the road, and also because apparently we don't have as much preliminary data or knowledge about the other 13-cancer types as for the these nine. So that's why when we designed the PRESCIENT study its more cancer specific estimate for the sensitivity instead of cancer and stage specific estimate. So that's why for PRESCIENT for each cancer type, we actually have a smaller sample size and also even amount PREDICT and PRESCIENT each cancer type actually has different sample size plant in terms of or depending on our estimated sensitivity that we will be able to reach or achieve. So especially for the PRESCIENT study, we actually have fewer samples planned for the 9-cancer types that were already covered in PREDICT. And we allocated more samples for the other 13-cancer types. But all in all the design, the sample size calculation was based on different objectives. That's why you see different sample sizes for each cancer type.

Okay, thank you. Very clear. That's all my questions.

Thank you. Our next question comes from Sean Wu from Morgan Stanley. Please ask your question.

Okay. Thank you for taking my question. And I actually - I'm also kind of curious about that [indiscernible] used for the core study. You have exactly 40,026 [ph] of PREDICT, and 11,879, how did you come out with those kind of numbers? Let's just say, for my curiosity, so for one study you were doing 9-cancer type, and the other 22, I mean, in some sense, so why don't you just combine them together? Those two sides clearly are designed for different purposes for nine, one, do you expect that you will get more conclusive results from the nine, one. And also the two combined [ph] And also your competitors, some of them have come out with prospective well designed product and for one type of cancer detection or liver cancer or prostate cancer. What's the difference, the advantage of more times versus single one? And for liver cancer clearly people getting a lot by [indiscernible] this one type basically - possibly intended for them? And then finally, I think you have found some very good oncologist and especially in top hospitals and how does it improve your clinical trials? How you’ve been successful with getting so much - so many of key PIs, like Biogen and PA [ph] as part of your program. Thank you very much.

Okay. Well, first of all, for the study sample size, as I just previously explained, Predict and PRESCIENT are designed based on different objectives, one for PREDICT, we are aiming to estimate stage and cancer type specific sensitivity. So, for each cancer types we allocated more simplified. But for PRESCIENT, because we didn't have as much previous knowledge to support stage, and cancer type specificity design that's why we actually will only assess the cancer type or cancer - yeah, cancer specific on sensitivity. So roughly that's why for PRESCIENT we have a little bit fewer sample size plans for the PRESCIENT study. And also for your question, why don't we just combine the two, because they are for two different products because for the PREDICT study, we're using our 9-cancer test product, and then for PRESCIENT study, we will use our next generation of 22-cancer test product. They're not just - it's not an add-on relationship between the two products. Actually, the chemistry and also the molecule selection, and the model will all change. And, you know, hopefully will all improve between the two generations. So that's why for the new generation, we will have to retest its performance to see whether it holds or even improve on the existing 9-cancer cancers that were already tested in PREDICT. And for your last question about the principal investigators, thank you for your comments. We are also very proud and as I said, it reflects actually, the strong interest and attention that early detection has strong amount of oncologist community. I would say about three years ago, not often really believed in, you know, the new technology is getting close to real app group [ph] application or to make real contribution to cancer, early detection. But nowadays, a lot of them believe in that and they think the new technology, especially epigenetics based biomarkers, plus machine learning and next generation sequencing is finally is bringing into reality that early detection can be realized, in a large scale, especially on a multi cancer application. That's the one. And for two, there are actually very few hospitals in China that has the capability and capacity to be able to host studies like PREDICT or PRESCIENT or lead studies like these, and it actually requires a lot of organization powers and also the impact from the principal investigators. So that's why actually only the top clinicians or oncologists in China have the capability and impact to be able to operate these really large cohort studies. I think that's also why they have the passion and the ambition as well to fulfill these very innovative studies. Did that answer your question?

All right, thank you. So ladies and gentlemen, we have reached the end of the question-and-answer session. So with that, we conclude our conference for today. Thank you for participating. You may all disconnect.