Why should investors focus on these cancer screening stocks?

Source | official account: CapitalWatch

Strong > Genetron Holdings Limited Holdings Limited (Genetron,Nasdaq:GTH)

Like California-based GRAIL, Genetron Holdings Limited focuses on early detection of a variety of cancers to improve patient prognosis in a high-precision and cost-effective way. The Beijing-based company's products include early cancer screening, cancer molecular analysis, treatment advice and monitoring.

Genetron Holdings Limited's main business is in China, and the market will reach $58 billion by 2023, according to research firm EqualOcean. In addition, Genetron Holdings Limited has expanded to the United States, where it was recently awarded the groundbreaking device name by FDA for the blood-based next-generation sequencing (NGS) test, HCCscreenTM, for early detection of hepatocellular carcinoma.

Genetron Holdings Limited just released its third-quarter financial results on Monday, and its shares rose 10 per cent on the day as sales soared. CapitalWatch's article focuses on Genetron Holdings Limited's tumor portfolio and its position in the market, so that investors can better understand its future potential in the market.

Looking for an effective treatment for cancer

Because countless public and private companies claim to have the next drug to treat some cancers, they can do well in this field as an investor without an advanced medical degree. In fact, although significant progress has been made in treatment over the past few decades, there is still no cure for cancer. On the contrary, early detection of some cancers is still the best way to defeat cancer.

It is for this reason that the early detection space represents one of the most promising areas of the medical industry. Molecular biology and data science is a new field, which has been proved to be effective. Although there will be multiple participants around the world, there are so few barriers to entry that there are still few potential leaders in cancer screening. In China, Jianchuang is fully capable of continuing to lead the world's largest market for early cancer screening.

Genetron Holdings Limited's Genome Test

Genetron Holdings Limited covers 8 of the 10 major cancer types in China and is developing an advanced NGS platform and genetic analysis covering many popular cancer types.

The company provides comprehensive genome testing as well as centralized gene panel testing services. For the former, Genentech operates one of the world's largest pan-cancer NGS panels, according to a research report by Frost Sullivan, cited in the prospectus. The latter claims to be the first domestic research and development and commercialization of glioma detection products, and the detection rate of its glioma 8 biomarker panel is between 96% and 100%, depending on changes in the genome.

In terms of brain cancer detection, Genetron Holdings Limited is the market leader in China in 2019, accounting for 58.4% of the market share. In addition, Genetron Holdings Limited also provides urine-based urinary cancer biopsies, cerebrospinal fluid biopsies for brain tumors, NGS-based thyroid cancer detection, and other services.

In 2019, Genetron Holdings Limited was one of the top three suppliers of NGS-based molecular diagnostics of cancer in China by revenue, with a market share of 11.6 per cent. In addition, the company said it ranked first among in vitro diagnostic (IVD) products approved by the State Pharmaceutical products Administration (NMPA). Specifically, these are digital PCR systems, Genetron 3D biochip readers, IDH1/TERT gene analysis of gliomas, medium-flow NGS system Genetron S5/Chef, high-throughput NGS platform Genetron S2000 and 8-gene lung cancer detection (tissue), a NGS-based IVD analysis product, proprietary by GenetronOneDriven by step Seq technology, the laboratory procedure of NGS testing is greatly simplified.

Great opportunities in China's Cancer Market

Cancer is the second leading cause of death in China, and the 5-year survival rate for all cancers is 40.5%, compared with 67.1% in the United States. The government has developed regulatory guidelines to control the cost of cancer treatment and has established a rapid evaluation and approval system for innovative drugs. Although chemotherapy is still the main cancer treatment in China, accounting for 80% of the market share, its cost and serious side effects have opened up the market for precision oncology.

At present, China lags behind the West in the application of molecular targeting and monoclonal antibody drugs, showing great potential for growth. This new area has been supported by the government and has been included in China's 13th five-year Plan.

Genetron Holdings Limited seeks to take advantage of this new national focus and cooperate with the government on a number of projects. In August, the company announced that it would join a research project of the Chinese Ministry of Science and Technology to establish an early detection technology platform based on liquid biopsies. Genetron Holdings Limited will bring its patented mutation capsule to this project-the same technology as the above HCCscreenTM.

Precision oncology

Genetron Holdings Limited said in his prospectus that China began to shift to precision oncology in 2018, a trend that is expected to rise. According to Frost&Sullivan, targeted therapy and immunotherapy are expected to grow to 41.2% of the national tumor market by 2023. People's understanding and adoption of the molecular characteristics of cancer is also expected to improve. Last year, the penetration rate of NGS-based molecular analysis was 1.3 per cent in China, compared with 4.6 per cent in the US.

In the second quarter, despite the continuing impact of the Covid-19 epidemic, Genetron Holdings Limited's income grew strongly, rising 40% year-on-year to US $14.4 million. Most of the revenue comes from diagnostics and monitoring: laboratory development testing (LDT) revenues of $10.7 million (up 31 per cent) and in vitro diagnostic products (IVD) revenues of $2.6 million (up 381 per cent).

The other part comes from development services, valued at $1.1 million. Genetron Holdings Limited's solutions in this area include biomarker evaluation of molecular targeted therapy and immunotherapy, registration of clinical trials, partner diagnostic development and joint marketing after drug approval.

Genome analysis of biopharmaceutical partners

Genetron Holdings Limited cooperates with the government, hospitals and medical examination centers. In the second quarter, the company maintained partnerships with 26 biopharmaceutical companies. This makes Chuangneng's partner network the largest among NGS cancer diagnostic companies in China, according to Frost and Sullivan.

"the network is expanding," Sizhen Wang, chief executive of venture capital, commented in an interview with Capital Watch.

"our strong regulatory approval capabilities provide services to our biopharmaceutical customers at any time, providing the NMPA registration process for their new drugs and accompanying diagnostic test analysis," he continued.

Make its public debut in the second quarter

Like most emerging growth companies focused on healthcare, Genetron Holdings Limited is still losing money. In the second quarter, the company posted a net loss of $409 million, or $2.41 a share. However, the non-IFRS net loss was $6.2 million, or 4 cents per share. This data mainly excludes the fair value loss of financial instruments with priority, thus providing greater visibility into the underlying business key indicators. Future losses are expected to shrink.

Genetron Holdings Limited sold 16 million American depositary shares at $16 each in an initial public offering (IPO) of $256 million on June 19. ByCredit SuisseSecurities (USA) Limited (Credit Suisse Securities (USA) LLC) andChina International Capital CorporationThe IPO guaranteed by banks such as CICC is priced above the expected range, exceeding the initial estimate of $175.5 million.

Although the Hong Kong Stock Exchange has always been the preferred destination for many pharmaceutical companies, Genetron Holdings Limited chose to list in the United States, where genomics has a higher adoption rate than China, and investors are better aware of the growth potential.

"the decision to list in New York was well thought out," Wang said.

"We want to be a global company headquartered in China. Listing in New York will help us build our brand. "

Global focus

Led by an impressive team of innovators with international expertise, Genetron Holdings Limited has global ambitions. Prior to co-founding Genetron Holdings Limited, Mr. Wang led the expansion of iTalkBB in North America, Australia and Singapore, a mobile communications company he co-founded in 2004. Previously, he worked at Capital One and GD Capital.

Genetron Holdings Limited's chief scientific officer, Dr. Yan Hai, has a wealth of experience in neurotumor research in the West, and has served as director of Duke University School of Medicine and Molecular Genomics Laboratory. Yan also has a list of awards and awards won for his research in the United States. Dr. Yunfu Hu, Chief Medical Officer, has worked at the U.S. Food and Drug Administration (FDA) for more than 10 years, focusing on genetic testing, molecular cancer diagnosis, partner diagnosis, radiation dosimetry, digital pathology and IVD products and LDT reviews for artificial intelligence devices.

In addition, Dr. Jiao Yuchen, Genetron Holdings Limited's chief technical officer, received his doctorate from Johns Hopkins University (Johns Hopkins University) and published several papers in academic journals such as Science and Nature Genetics. Both Yan and Jiao received postdoctoral training at Johns Hopkins University's Burt Vogelstein Laboratory (Bert Vogelstein Laboratory), a Massachusetts-based cancer screening company that recently receivedExact SciencesTo buy it for $2.5 billion. Xu Zezeng, the company's chief financial officer, worked withDeutsche Bank(Deutsche Bank AG),Goldman Sachs Group(Goldman Sachs (Asia),Citigroup Inc (Citigroup)Cooperate with other international banks. Hong Ying, chief operating officer, used to work at C.R.Bard Inc. AndJohnson & Johnson Ltd.Hold a post.

With the establishment of a CLIA-certified laboratory and R & D center in Maryland, Genetron Holdings Limited has taken the first step of listing in the United States. At present, the company has laboratories in Beijing, Shanghai, Hangzhou, Chongqing and Guangzhou.

China is not only the most populous country in the world, but also the country with the largest population aged 50 and above. China's early cancer detection market has great potential.

"China is a huge blue ocean for cancer diagnosis and treatment," Wang said. "Genetron Holdings Limited will achieve explosive growth in the next three to five years."

The enthusiasm of investors after the release of the third-quarter results has shown a consensus that investors are optimistic about Genetron Holdings Limited's future. Investors looking for long-term investment opportunities in a large market should put this leading cancer detection stock on their investment radar.