BNR

Good day and thank you for standing by. Welcome to the Burning Rock’s 2024 First Quarter Earnings Conference Call. At this time all participants are in listen-only mode. Please be advised that this 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 U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology 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 would now like to hand the conference over to our first speaker today, Mr. Han. Please go ahead.

Thank you. Welcome to Burning Rock's Q1 conference call. And I'm the CEO and Founder of Burning Rock, Yusheng Han. And today you also have our CFO Leo Li and our CTO Joe Zhang online. So today we'll go through our Q1 financial report. Let's turn to page three. There's a brief introduction of what Burning Rock is doing. We started from therapy selection in 2014 and then expanded to multiple areas, including early detection, MRD, and biopharma services. So we know that in our past two years we tried very hard to improve our capability of being to be profitable and we have made a lot of efforts. So if we turn to page four that is what we have done in a past one quarter basically we are driving our sales efficiency to a better level and we are improving our gross margin and there will be data show later on. And then we reduced our G&A expenses to a better level. And also, the R&D -- reduced the R&D expense, so that -- to make the order company to getting more profitable. And let's turn to page five. That's the result, the financial result of different quarters in the past two years. We have seen that in Q2 2023, it was the first time that we get the results of gross profit minus SG&A to be positive. And because of the unknown unexpected industry turbulence, so in Q3 and Q4 in 2023, we suffered from the profitability. But now things are getting to normal and we have seen that in Q1 2024, we're getting a return to profitable again. And that's a very good sign for Burning Rock. And we will try our best to make the number bigger and bigger until the whole company cash flow becomes in the future. And in terms of the detail of what we have done to make the company profitable, I would turn to our CFO Leo Li to explain that. Leo?

Thank you, Yusheng. So as Yusheng mentioned, we continue to make progress in the first quarter, and I'd like to elaborate on specific expenses lines going forward. So let's go to page six. This is the most important item in our striving our operating efficiency. You can see that the latest quarter, we achieved sales and marketing expenses as a percentage of revenue at 35%, that is a historic low or the most efficient quarter in our recent operating history. You can see that we've come a long way in the middle of 2022 and that is driven by a lot of the hard work for my sales and marketing team. So we are delivering on the risk result and this improving sales and marketing efficiency is what underpins our improving operating profitability, that is the most important factor behind the trend. Then going forward on page seven, we talked about our gross profit margin in our previous call. We continue to make progress and there is no material update on this matter in this quarter. Then going to page eight, looking at our general and admin expenses. In our previous quarterly call, we talked about reduction of headcount, reduction of office space, and other fixed operating footprint that we have carried out that drops, that reduces our G&A expenses. We mentioned that we continue to expect further savings into this year, so you can see that in the first quarter we have achieved a significant drop in this quarter, compared to the same period last year. So the factors that we mentioned before they continue to give us additional savings and we will keep working hard at reducing our operating footprint. We like to also make comments on our cash position, which is shown on page nine. We ended the quarter with RMB573 million cash balance. And if you contrast that with our cash outflow, so we have reduced our cash outflow significantly from 2022 to 2023. We expect to make further progress in 2024. Our guidance is for cash outflow in a range of RMB150 million to RMB200 million for the year of 2024. We still have a couple regulatory and important projects going on for this year, so we expect additional savings into 2025. So we expect our opening cash outflow to drop further in the year 2025, although at this stage we are not at a point to give specific quantitative guidance. So I want to benchmark that operating cash outflow against the cash balance that we have on hand. We see a good three-years of cash runway, so we should be in no rush to do any capital raising. So we have the initiative on ourselves and that provides us a good runway going forward. Page 10 talks about our P&L And here I have some comments on the revenue lines. So we had a change in our industry's operating environment and that was well reported by the press, which started in July last year. Within that context, you can see that we are accelerating our transition away from central lab and more towards in-hospital. So we are getting more share of revenue from in-hospital. And first quarter this year marks the first quarter where we're getting more revenues from in-hospital than from central lab. So I think we are continuing to make progress in that transition. You can see in the first quarter we have recovered the in-hospital business. It is growing on a year-over-year and sequential basis, and that is going to be the long-term share growth driver for our revenue lines. We continue to get into new hospitals, deploy new products, and we expect to win more hospitals going forward. So this is the most important line for our clinical business. So the overall revenue is up 4% on a quarter-over-quarter basis and that's mostly driven by the in-hospital line. So that is the additional comments we'd like to add here. On the operating expenses, we've talked about them before and we'd like to recap here that if you look at the non-GAAP gross profit and minus sales, G&A expenses, we are at a positive commercial breakeven point in first quarter. In the previous results call, we said that our guidance was to achieve this objective in the first-half of 2024. And we are very pleased that we hit that goal in the first quarter. Our latest guidance is to achieve positive non-GAAP gross profit minus G&A for the whole year of 2024, so that is what we're working on for the year of 2024 to show that on the operating level, our business are profitable. Then we have a few R&D items that we're going to work through, and we're going to work towards a positive breakeven for the whole company going forward. So that concludes the remarks for our financial section. And operator, if there are no further remarks or questions then we're happy to conclude the call.

Thank you. That concludes our conference for today. Thank you for participating, you may now all disconnect. Have a nice day.

Good day, and thank you for standing by. Welcome to the Burning Rock Fourth Quarter 2023 Earnings Conference Call. [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 U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminologies 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 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 statements as a result of new information, future events or otherwise, except as required under applicable law. I would now like to hand the conference over to your speaker today, Mr. Yusheng Han. Please go ahead.

Thanks, Gena. This is Yusheng Han, the CEO and Founder of Burning Rock. And today, you also have our CFO, Leo Li; and CTO, Joe Zhang online. So very glad to share the annual financial report with our investors. So let's turn to Page 3 that explains that how we started and how we evolved. We started from therapy selection from 2014 and then with the development of NGS technology, we expanded our market to early detection to MRD [indiscernible] to biopharma services. And in -- let's turn to Page 4. So with the macro environment changes in the past 3 years, we have makeup strategy dedicated to the efficiency gain driving towards profitability. And our -- we want to deliver in the early next -- last year, we want to deliver the result on driving sales efficiencies, improving gross margin, reducing G&A expenses and also reducing R&D expenses and the target is making the company profitable first. And in terms of the driving sales efficiency, we're going to -- we plan to increase the sales productivity per head. And also with the capital market cooling down, we benefit from a more rational industry competition. And the second is the improving gross margin. So the first thing we do is we have a scale of our sales. So we'll leverage on that. And also, we delivered our margin improvement project, including cutting reliance on sales and marketing expenses and also cutting the cost of goods by partnering with the suppliers. The third is reducing G&A expenses. We cut the overhead and lowering fixed cost base. And the fourth thing is reducing R&D expenses as our major clinical programs, such as multi cancer, early detection complete and the burning wage is cooling down. And in terms of new investment, we are very disciplined counting on the NPV carefully, but we still invested in MRD and also CDx and also MCD in a conservative way. So Page 5 explains how we achieve about driving sales efficiency. You can see that in the Q2 of '22, we reached the highest point of sales expense percentage to 77%. And then from there, we gradually and significantly drove the number down to the Q4 of 2023 to 38%. So there is a significant change, and we expect that in the coming 2024 the number will go down further, that increased our -- sales expense efficiency increase a lot. In Page 6, and that is our non-GAAP gross profit as a percentage of revenue. We -- cost of goods is a significant cost of NGS industry, especially for oncology. So we continuously to replace the suppliers and also bargaining with shipment and other issues in terms of cost of goods. So we can see that the gross margin continues to increase from the 72.5% in 2021 to 74.3% of 2023. And we expect that, that rate the gross margin will continue to grow in 2024. In Page 3, I explained how we reduced our G&A expenses. We can see that the major cut is a reduction in headcount and related costs. And then the professional services fees such as legal fees. And the third thing is a reduction in office spaces. We closed part of the Shanghai office. And also in 2024, I think we can see further reduction by partnering with the owner of the land to see the reduction in office space. And there's other reduction as well. So overall, in 2023, we can see that the G&A expenses reduced in terms of RMB of around, over 60 million. So in Page 8, let's see, Page 8 -- and from Page 8 to Page 10, I will hand to our CFO, Leo Li, to explain the chart and numbers. Leo, please?

Sure. Thank you, Yusheng, for taking us through the initiatives we've taken through and what has that translated into the P&L lines. On Page 8, we are trying to supplement that by starting from our operating profit and break that down into what is the commercial aspect versus the investments in R&D and also what's cash and noncash. So on Page 8, we start with our reported operating profit of a negative RMB 166 million. We first add back our R&D expenses of RMB 73 million. So this is to separate what's already at commercial stage versus what's in the investment. So first, we take out R&D expenses. Then we take out noncash items. The 3 major items are share-based compensation, depreciation and amortization of our fixed assets. And lastly, the provision of receivables and contract assets. So these 3, we actually expect to decrease going forward. But here, just for illustrative purposes, we take out these 3 noncash items and get to where we are on the commercial business, excluding R&D expenses and noncash provisions. And on that measure, we are at a positive RMB 4 million for the fourth quarter of 2023. So on that basis, excluding R&D and excluding noncash costs, we are at profitability already in the fourth quarter 2023, and we expect this to further improve as we head into 2024. Page 9 talks about our cash position. So this is a slide that we have been going through on each of our quarterly calls. At the end of the year 2023, we ended with a cash balance of RMB 615 million. In the year, we had cash outflow of about RMB 265 million, this is a significant reduction compared to the cash outflow of RMB 532 million in the year of 2022. So a lot Yusheng has described did deliver to results and positive impact on reducing operating cash outflow for the year 2023. Going forward, there are still a few very selective investment areas that we want to keep on going and we expect the commercial operation to reach profitability in the first half of 2024. So these 2 factors combined, we expect an outflow in a range of RMB 150 million to RMB 200 million in a year 2024. We expect this outflow to further decrease in the year after 2024. So on that basis, we have very good visibility on our cash runway for at least 3 years. So reducing operating cash outflows, ample cash balance and continued progress towards profitability, that's what we're trying to show by numbers here on Page 9. Then Page 10 breaks into our P&L in more detail. First, looking at the top line, which is at RMB 121 million in aggregates. And by the different segments, first, Central Lab had a substantial decrease. This is our active efforts going away from Central Lab, but also industry change that we saw starting July in 2023. So fourth quarter for the Central Lab is pretty much a continuation of the trends that we described on our previous earnings call. So we expect In-hospital to take greater and greater share going forward. For the In-hospital line, we did have one-off adjustments in the fourth quarter, that's described in detail in the footnote. And if we take out that one-off adjustments, we are pretty much flat or negative 1% growth in the fourth quarter in 2023, compared to the fourth quarter 2022. And even for the adjustment, if we look at the 2 hospitals related to that adjustment, their underlying demand remains robust and roughly stable. So we're not seeing deterioration on the underlying business demand, but it's mostly to do with one-off adjustments. Our Pharma segment grew very well in the fourth quarter. It grew double digits in the fourth quarter and it grew double digits in the year of 2023. It grew 59% in the year of 2023, and we expect continued growth for that line going forward. Now on the operating expenses, we have taken time to go through that in the previous slide, so I'm not going to walk through them in detail. And finally, to note here, I think on the operating cash outflow side, we have seen improving operating cash flows quarter-over-quarter, and that is the result of what Yusheng has described of a number of projects and initiatives that we have taken through and our operating cash outflows have improved significantly throughout the year in 2023. So that concludes our prepared remarks. For any questions, please feel free to reach out to us. And that would conclude the call here today. Thank you, everybody, for joining us today.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as will, expect, anticipate, 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.

Yes. Is it my turn? Well, this is Yusheng Han from Burning Rock, I'm the CEO and Founder. And today, we also have our CFO, Leo Li, and our CTO, Joe Zhang online. And today, we have a brief introduction of recent progress, and then I will hand over to Leo talking about the financials. And then Joe talking about our pipeline programs. So let's turn to Page 3, which shows what Burning Rock doing and we started from therapy selection and expect to expand it to early detection, MRD and biopharma business. And so far, that's our business construction. And let's turn to Page 4, which is the page that I think most of the investors care about most, that's about breakeven. And we set a goal to breakeven in terms of non-GAAP profit minus SG&A. And we say that in Q2 this year, we have -- this is the first time in Burning Rock to reach the goal. Well, in Q3, actually, there is some industry disruption. You know that even most of the medical conferences or meetings would hold anomaly. So in Q3, it's a little bit our -- impacted by this event and the profit dropped to the negative part, which is a negative RMB8.9 million. But we are still moving to the breakeven level. Especially, I think that this kind of volatility will pass by the end of this year. So let's turn to Page 5, that we set a goal to break even sometime this year. And we think that we are moving towards that direction very firmly and without the disruption. And in terms of the therapy selection, despite of the industry disruption, we still continue to growth in the – for the in-hospital model, which means that in-hospital revenues has a 10% year-on-year growth. And part that has been impacted was the central lab model. In MRD, we have a strong clinical validation publications, with the MEDAL study for lung cancer published in cancer cell, which is a big milestone for our MRD study. And we know that the other studies, for example, like colon cancer, [indiscernible] cancer are underway. For biopharma, despite of the struggling time of capital market for biopharmas, we still have a strong growth, showing our systematic value of Burning Rock with revenue growth up 31% year-on-year. And our backlog still keeps growing. And one thing to mention is that, we just signed a CDx contract with BI. And then in terms of early detection, there is a big step, I mean, a big milestone for that is, we've got a Breakthrough Device Designation granted by China National Medical Products Administration, which NMPA. And we are the only -- our multi-cancer early detection product is the only test that has received BDD from both FDA and NMPA. And let's turn to Page 6 to explain how the industry volatility impact our volume. You can see that the central lab model has been impacted negative 31%, while for in-hospital model is still growing in terms of volume. So we think that -- and that actually impacts our competitors much more than Burning Rock because Burning Rock is the only company that the in-hospital model represents more than half of our revenues. And then I'll turn to Leo about our financials.

If we move on to Page 7. As Yusheng mentioned earlier, the whole China health care industry had a disruption during the quarter. And what that meant for us was actually two divergent trends, which actually accelerated the path that we were already on. So if you look at central lab, that was down -- heavily down 41% on a year-over-year basis in the third quarter. [Technical Difficulty] continued to grow, and it grew 10% year-over-year, which is rare in the diagnostics industry or at least in our specialty industry in China. So I think that continues to prove the value of the in-hospital segment where the real value or the profit is. At Central Lab, as we mentioned earlier, is being shifted more towards in-hospitals. So I think the events in the third quarter only accelerated that and that moved us even more on the right track in terms of moving the mainstream of our businesses towards the in-hospital segment. So at some point last year, we were in more in-hospital segments by volume. And you can see in the third quarter, where actually in-hospital represented the largest segment, overtaking central labs. So I think with that transition complete at some point down the road, our volume and revenue trends will match again as we complete this transition. Then moving on, we can see that pharma services still had a strong growth quarter in the third quarter. Revenues grew 31% on a year-over-year basis. So we're very pleased with that result. Our backlog continues to grow, particularly from multinational companies, and Yusheng gave an example of a recent win in his remarks. So we're very pleased with the progress and the outlook that we have in the sector. Overall, because of the industry impact and the drop in central lab, our revenue was down 17% on a year-over-year basis. And we're very cautious of this trend and we are managing our expense or our cost base appropriately according to the new industry setup. So I think we had a temporary dip in our operating margins for the third quarter and that should turn for the better in the quarters down the road. So measured on a non-GAAP basis, gross profits minus SG&A, I mean, we hit a positive territory in the second quarter, but we did [Technical Difficulty] third quarter. And we're looking to turn this to a positive number again at some quarter down the road. So we are working towards that. And we have done some [indiscernible] in the recent time period to make sure that we are on the right track. So our operating loss did widened a little bit in the third quarter compared to the second quarter and we are aware of that. We've made the adjustments at towards the end of September. Then we hope to be on a better track going forward. Notably, we are also managing our operating cash flows. We're managing our expenses, our cash expenses very carefully. And you can see the net operating cash outflow this quarter has dropped to 70 -- RMB47 million per quarter. And if you look at our operating margins, if you look at our sales and marketing expenses as a percent of revenue, despite the drop in revenues, I mean, our sales and marketing expenses were 45% of our revenue, similar to 44% that we achieved in the second quarter. And as we think industry volume normalizes down the road, our operating margin should improve, and we hope to get back to the positive non-GAAP territory in the quarters down the road. So that's a quick recap of the P&L for the quarter. Then I think we should also mention our cash position as that's been a focus, if we go to Page 8. So we had cash outflow of about RMB532 million in the year of 2022. That's not our run rate for 2023. Our guidance at the start of this year was about RMB400 million outflow. And you can see in the three quarters so far to this year, we had an outflow of about RMB249 million, so significantly below the outflow guidance that we set out at the start of this year. And if you look at our third quarter quarterly cash -- operating cash outflow of RMB47 million, that's even close to the run rate that we set for the year over 2024. So on that run rate, looking at the cash balance at the end of this period of RMB637 million, we're sitting on more than three years of cash runway. So we aren't in a rush to do anything. We're sitting on ample cash balance. And I just want to reiterate our strong cash position relative to our cash outflow on this page. And the reasons for the reduced cash outflow, I think we have mentioned that before and I'll just reiterate those here again. So first, our commercial operations is coming towards profitability. We were even slightly positive in the second quarter. Our R&D spend, particularly our early cancer detection programs are maturing. And as these programs complete, the expenses associated with those programs will run off and that will help reduce cash spend naturally. So as we look to complete our spend on early cancer detection and as we move towards better profitability, then we'll look to improve our operating cash outflows, and we make sure that we're sitting on ample cash balance. Then next, I'd like to turn to Joe, who has some important pipeline and clinical publication data to share with you.

Thanks, Leo. So I'm going to present a little bit -- give you guys an introduction about the pipeline update, majorly focused on the MRD, which is minimal residual disease [indiscernible] disease. So let's turn to Page 10. So Page 10, basically representing -- presenting the Burning Rock MRD clinical publication. So basically, MRD has a lot of utilities. As shown in the picture showing here, basically, it can be done like before the [indiscernible] to look at the baseline ctDNA level. Then also we can do like after you adjust adjuvant therapy to look at treatment effectiveness, all like more commonly going to be use that like a postsurgical after resection to look at landmark MRD to get a prognosis or either some kind of a prediction value on the based on MRD status. There also could be a lot of treatment effectiveness assessment after the adjuvant therapy and also the longitudinal monitoring for the surveillance. So Burning Rock has a bunch of different kind of publication related to different cancer types, that's including the non-small cell lung cancer, as well as colorectal cancer, gastric cancer, pancreatic cancer, BTC, biliary tract cancer. So all the publications, most of them are actually shown in the poster format being presented in a different kind of [indiscernible] meeting or clinical meeting happened like within two years. So the major one I just wanted to give you guys a little bit more introduction about is the cancer cell publication, which is related to the non-small cell lung cancer. Let's turn to Page 11. So we -- the technology we've been using actually called brPROPHET, in brief, PROPHET. So basically, it's based on the whole exon sequencing. We got the tumor whole exon sequencing up to 50 mutation, which is a tumor-specific. Then we designed personalized panel, MRD panel and utilize -- use this personalized panel trying to capture a potential ctDNA fragment from the plasma collected from the same patient. Based on the proprietary ultra-deep sequencing and also the proprietary sequence result as well as MRD coding algorithm then we can determine the MRD status of that patient for that kind of -- that type -- that time point of blood collection. So on the right page, basically showing the analytical performance of this brPROPHET assay. So it's including the two type of -- so on the top right panel, we've been talking about [indiscernible] sample diluted down to 8 ppm. As you can see here, we still can see, out of 50 low size, there's quite a bit different significant difference compared to the baseline, which is [indiscernible] which is a background cellular. So this give us some kind of confidence showing this asset is sensitive enough to detect very low allele frequency, very rare tumor fraction based on the ctDNA from the patient. On the top right -- on bottom-right panel, that showing the quantitative property of this assay, based on the algorithm we used, we can estimate based on the detection capability, as well as the allele frequency of each [indiscernible], we can assess estimate what's the ctDNA fraction from that patient. As you can see here, this is a contract data, but it definitely gives us a lot of confidence showing the expectation and estimation showing very good correlation. So based on this technology, we move to Page 12. Basically, we work with a top-tier hospital in Beijing People Hospital, and we published this technology utilization on the non-small cell lung cancer in cancer cell which is a top journal -- top-tier journal for translational medicine. As you can see here, so this has been published in October 9. And there's a couple of highlights. I don't want to read it one by one, but you can look at it. Mostly it's just showing the PROPHET outperformed the fixed panel MRD assay in a head-to-head comparison in non-small cell lung cancer. Move to Page 13, basically gave you an overview of this study. So the cohort is that we enrolled about 181 patients of non-small cell lung cancer. But as you can see here, most of them, actually 63% are Stage 1 patient, very early-stage patients after surgery, and also there's a few Stage 2 and Stage 3. And at the sampling time is that we basically collect the tumor adjacent paired tissue, normal tissue collected at surgery, and we do the whole exon sequencing on those as well as like we collect the blood sample collect preoperative in three days and 30 days after surgery. And also, we do a follow-up time. So every time when patient go back to see the doctor after like six months or year out, if possible, we collect the follow-up blood sample. And then we use three different kind of approach to look at MRD status. The first one is basically showing on the top right, it's a whole exon sequencing-based personalized panel design as well as doing this kind of MRD assay, we call brPROPHET assay. In comparison, we're also using also a fixed kind of target sequencing to do the tumor -- either tumor-agnostic or tumor-informed calling to determine the MRD assets, but you can think about it this way. So basically, our exon sequencing gives us many more potential mutation [indiscernible] compared to -- relatively to smaller fixed panel target sequencing. So by using this data, let's move to Page 14, basically, there are several major conclusion observation we have seen. So the Page 14 is showing actually -- if you look at the preoperative plasma sample, so as you know, this sample is basically untreated patient coming from the -- blood coming from untreated patients. And that's why, ideally, if your assay is perfect, you should be able to see every patient blood will get like close to a very high percentage of detection sensitivity. As you can see here, the sensitivity definitely grow up from Stage 1 to Stage 3. And Stage 3, you've got the highest sensitivity -- detection sensitivity. But as you can see here the orange color, which is representing the PROPHET assay, so it outperformed the tumor-agnostic panel sequencing as well as our tumor-informed fixed panel sequencing. So totally, basically, at the Stage 2b, we already see 40% detectability, and also Stage 2, we see 75 patients with 83% positivity. And as you can see here in the panel B showing on the right page, as you can see here, for all three MRD-positive patient sample, the ctDNA [indiscernible] showing the highest one, which is shown in the box plot with the red background. But if only the -- if you look at the orange color, which means on the right with 30 patient -- preoperative patient only showing a positive in brPROPHET assay, but the ctDNA fraction is way lower, it's actually two magnitude lower than the all three positive patients. This just reflects the detection sensitivity importance, trying to get those kind of very low allele frequency, very low tumor fraction patient trying to confirm the MRD status. Of course, this is preoperative. So let's move to the Page 15. Basically, we use a postoperative blood sample to determine the real MRD status and also come associated with this kind of a status with the relapse potential to look at the disease-free survival. On the left page, basically, as we are using the landmark time point, which is three days or -- which is timepoint B of 30 days after surgery which is timepoint C to look at the survival curve. As you can see, the DFS survival percentage. If you're MRD-negative, the patient showing that even for onetime point -- landmark time point to check and follow-up up to like 1,200 days, this show very way higher disease-free survival compared to MRD-positive patient, which is showing the HR ratio reached to basically for timepoint C the HR other ratio reached to 16.4, which is a pretty significant difference. And on the right page -- right side of the panel, we're basically utilizing longitude MRD and assets. This is basically for multiple point time point assessment on the post-surgery patient plasma sample. And if there's an MRD-positive signal showing any time of the blood collection, we deem as MRD-positive. But if all the sample collected from patients is MRD-negative, then we deem it MRD-negative. As you can see here, the separation will be even better. That just gives us a lot of confidence also reflect a lot of other publications, continuous surveillance require multiple time point collection, usually give us better separation of the disease-free survival. So basically, it's also not related to the Stage 1 or Stage 2 and 3, basically showing very similar trend. So in summary, basically, this paper published in cancer cell gave us a very good example showing how the personalized [indiscernible] MRD assay can give a very good predates value on the non-small cell lung cancer, even Stage 1 and also 2 and 3. And so of course, we are still keep working on this assay and trying to working on multiple different kind of cancer type and also trying to -- with other top-tier hospitals, not only prognosis value, we also want to look at the predictive value. And if you see any kind of clinical utility related to drug selection or any kind of treatment effectiveness assessment. So that concludes my part. Thank you. Back to moderator.

Thank you for participating in today's call. You may now disconnect. Everyone, have a great day.

Thank you.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Burning Rock's 2023 Second Quarter Earnings Conference Call. [Operator Instructions] Please note 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 U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as will, expects, anticipates, future, intends, plans, believes, estimates, target, confident and similar statements. Statements 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. I will now hand the conference over to the company's CEO, Mr. Yusheng Han. Sir, you may begin.

Thanks. Welcome to the Burning Rock's 2023 Q2 conference call. I'm Yusheng Han, CEO and Founder of Burning Rock. And today, we also have our CTO, Joe Zhang; and CFO, Leo Li online So let's turn to Page 3. In case there are some investors who are not familiar with Burning Rock, I here illustrate what we do. So our business started from tissue-based therapy selection and then expanded to multi-directions of liquid biopsy, including liquid biopsy, therapy selection, MRD and multi-cancer early detection. So we have three business units, providing products and serving to doctors, pharmas and consumers. And let's turn to Page 4. So this is what we set up our goal of 2023 early this year and reported to investors twice in the last two conference call. So the number one goal is profitability. The goal we set is to breakeven, excluding R&D, during a quarter in 2023. And the second goal is continued revenue growth, a healthy increase with profitability is what we want to achieve. And our initial outlook for 2023, our revenue is mild increase over last year. And the third goal is to further our leading position in MCED as number one player in China and a top player globally. The main R&D spend will focus on MCED. And let's break down the growth in four parts. So for therapy selection, we'll continue to improve the sales and productivity by strengthening the in-hospital model. And for MRD, we launched an installed personalized MRD in top hospitals, and that start from the end of May this year. And usually, it will take like half year to one year to have one product installed in one hospital. So the earliest time we can see the impact is in Q4 this year. For biopharma, the goal is continuous profitable growth. And with the new platform of MRD and more international orders, we are optimistic to the growth of biopharma business. And for MCED, we have several big studies, including PREVENT, PREDICT and PRESCIENT. So these are very important clinical trials that will set a very solid base for our MCED data. And we are very proud of this data give us several years ahead of our peers in China, and even globally, we are leading player. And then let's see what's the result of our effort in Q2 2023, and turn to Page 5. As we illustrated, the number one goal this year is profit. The main indicator of commercial efficiency is non-GAAP gross profit minus SG&A. So in Q2 2023, we made it. So the number of non-GAAP gross profit minus SG&A was RMB 7.6 million, and this is the first quarter of breakeven in our operating history, and we are super proud of it, especially in this difficult economic environment. And the team will continuously work hard to improve this number in the coming year -- in the coming time of this year. Let's turn to Page 6 to see other important fact. So for therapy selection, as we said, the in-hospital model continue to growth of 44% year-on-year. And for MRD, there are several important clinical trials going on, and there will be additional data released at AACR. And for biopharma, the contract value and growing backlog still continues. So the contract value of new projects is 43% year-on-year growth in the first half year of 2023. And the revenue of biopharma is 46% increase. And for early detection, all the clinical trials are on track. We're still continuously on our dialogue with FDA and also NMPA. Nothing very important or special to say about the discussion, but we can see that the backlog is quite smooth, and we achieved some consensus with them. That's good news to this segment. And from Page 7, I will turn to our CFO, Leo, to discuss about the numbers in detail. Leo?

Thank you, Yusheng. I will supplement Yusheng's remarks with our latest numbers and financials. So first on Page 7 is our operating metrics in terms of our test volumes. And you can see over the years, we have migrated from the central lab model to in-hospital model; an in-hospital model, increasingly make a dominant share in our channel composition starting 2023. We have achieved very good volume growth in the second half of 2023. On a year-over-year basis, our in-hospital grew 72% in volume terms year-over-year. And overall, our volume grew about 33%. As you can see here, we have managed down our volumes in central lab as that is a less profitable channel and more competitively intensive or irregular compared to the more institutionalized in-hospital model. So we're happy about the results and progress of our transition. As you can see in our Q2 numbers, 33% overall growth. I think that's a very strong number, reflecting, I think, two things, not only a good transition towards in-hospital, but also share gain from other incumbents in the market. You might say that Q2 last year was a low base because of the COVID lockdown in Shanghai. Look at the graph here on a sequential basis, we have also grown very strong. In-hospital grew 24% on a sequential basis and overall volumes grew 19% on a sequential basis. So we are very happy about our progress and results during second quarter. There is news reports of industry-wide disturbance in China's health care industry since the end of July. Then we can see that based on our latest numbers, the in-hospital testing volumes are still stable heading into Q3. So we are very happy about the resilience of that channel. Central lab channel is more vulnerable. So that channel has seen increased shift towards in-hospital in the Q3. So we're happy that we have positioned towards the better in-hospital channel way ahead of time, and we're benefiting from the current industry turbulence. So that's the overall volume trend on Page 7. Then going to Page 8, our financial numbers. As Yusheng mentioned, the biggest news item out of this quarter is breakeven, excluding R&D expenses, and on a non-GAAP basis, i.e., excluding share-based compensation, and depreciation and amortization. So that is the first quarter we have achieved breakeven of our commercial business, and we're happy and proud of that progress. And if you look at the breakdown here, our sales and marketing expenses continue to be very efficient. We were at about 44% as a percent of revenue in Q2, and we've gone into the low 40s range at the start of 2023, and that is the result of our sales force reorganization that we have carried out in the second half of last year. So we're bearing the fruits of that effort. Then we'll continue to keep a very tight lid on sales and marketing expenses going forward. In addition to that, you can also see that our G&A expenses have also trended down. So we have been managing our overhead more efficiently. And importantly, we have increased or we have got better results in terms of receivable collections from our hospital customers. So there is a drop in the provision of credit loss, which is carried in the G&A line in the second quarter this year. So that has helped us lower G&A expenses as well. So overall, you can see the operating expenses have continued to trend down and we're still managing our expenses very well. So that's the overall result. One more thing to highlight is our pharma segment. So in this quarter, we have achieved a good growth of that segment. We grew our revenue by 46%. And if you look at the leading indicator, if you look at the contract value signed during the first half of this year, we've grown that metric by about 46%. So we continue to sign more contracts, build our backlog. And as we execute on these pharma projects, they get converted into revenue. So that has contributed our overall revenue growth very well over the past. Then gross margin, we've also achieved good results around 75% on a non-GAAP basis, i.e., excluding depreciation. And we have grown our gross profit by about 20% in this year on a year-over-year basis. So overall, continued growth and lower expenses and breakeven for the first time in our operating history. That's the financial numbers on Page 8 Now moving on to Page 9, which is our cash balance. We've laid this out at the start of this year, and we've been executing on track. So we still -- as Yusheng mentioned, we still have a few large clinical programs on our multi-cancer early detection product development, and these are executed well and on time according to schedule. So we -- our cash outflow is, again, according to our plan. So we plan for about RMB 400 million outflow of this year, and we've had about RMB 199 million in the first half of this year. So that's progressing on track. We will finish most of our clinical programs by the end of this year on MCED development So our R&D clinical program expenses will run down naturally as we complete those programs. Then we expect lower expense. And this is the same number as we laid out at the start of this year. So RMB 200 million operating outflow next year, and that excludes any upside that we may achieve from the commercial business. So reduced share burn and well capitalized for the next three years in terms of our cash balance. So this concludes our prepared remarks, and we'll see if we have questions.

[Operator Instructions] And I see we have no phone questions at this time. Ladies and gentlemen, that does conclude our conference call for today. Thank you for your participation for today. You may now disconnect.

Good day, and thank you, for standing by. Welcome to the Burning Rock’s 2023 Q1 Earnings Conference Call. Before we begin, I’d like to remind you that this conference call contains forward-looking statements within the meaning of Section 21(e) of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as will, expects, anticipates, future, intends, plans, believes, estimates, targets, confidence, 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 [Technical Difficulty] forward-looking statements as a result of new information, future events or otherwise, except as required under applicable law. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference call is being recorded. With that, I would now like to turn the call over to your first speaker today, Mr. Han, CEO of the company. Thank you. Please go ahead.

Thank you. Welcome to Burning Rock’s 2023 Q1 conference call. I’m Yusheng Han, the CEO and Founder of Burning Rock. So today, we also have our CTO, Joe Zhang; and CFO, Leo Li online. So before the presentation, I would say that, this quarter's data, although not a lot of new information, but very important information and making us exciting. So let's turn to Page 3. In case, there are some investors who are not very familiar with Burning Rock, I hereby illustrates, what we do. So our business started from tissue based therapy selection and then expanded to multi-directions of a liquid biopsy, including liquid-based therapy selection, MRD, and multi-cancer early detection. We have three business units providing products, and services to doctors, pharmas and consumers. So let's turn to Page 4. We set up our goals of 2023 and reported to the investors three months ago. The number one goal is profitability, that is -- the goal we set is to breakeven excluding R&D during the quarter in 2023. And the second goal is continued revenue growth, a healthy increase with profitability is what we want to achieve and our initial outlook for 2023 revenue growth rate is at 20%. And the third goal of -- is to further our leading position in multi-cancer early detection as the number one player in China and a top player globally, and the main R&D spend will focus on multi-cancer early detection. So let me break down the goals in four parts. So for therapy selection, we will continue to improve the sales productivity by strengthening the in-hospital model and for MRD launch install, personalized MRD in top hospitals and due to the operation difficulties of personalized MRD, it is very challenging to install this method in hospitals. However, since more and more top hospitals controlled outstanding of tissue samples and MRD baseline needs tissue samples, only in-hospital model can bring the volume of MRD to the next level. So we have launched the in-hospital MRD product early May, and I believe that it will be a strong engine for Burning Rock, Onco BU (ph) and start to impact in Q4 this year. And for Pharma, this goal is continued its profitable growth, with a new platform of top MRD and more international orders, we are optimistic to the growth of biopharma business. For MCD PREVENT study, which is prospective study of over 10,000 subjects, we will have an interim readout in second half year of 2023. We will continue this development study of nine cancer and 22 cancer tests in PREDICT and PRESCIENT. Also, we are building the regulatory pathways with FDA and NMPA, especially NMPA. The commercialization will go on at selected top hospitals, that's what we said the goal of 2023. So let's see, what's the result of our effort in Q1 2023 and turn to Page 6. As we illustrated, the number one goal this year is profitability. And the main indicator of commercial efficiency is non-GAAP gross profit minus SG&A. So the number reaches its bottom in Q2 2022 and we can see that it's quite bad at that time. And it was at that time, we initiated the optimized vision plan (ph). We can see that we are able to narrow down the loss from minus $84 million per quarter in Q2 2022 to minus $3.8 (ph) million this -- in Q1 2023. So we are very excited by this achievement. So that means that we are in a good trend to breakeven. So let's turn to Page 4 -- sorry, Page 7 to see the other achievement. As we know, Q1 is quite challenging for most of the companies this year, especially January and early February due to the pandemic impact. The reason that we were able to narrow this loss is because our strong rebound of in-hospital in March and continued to improve our sales efficiency. For the progress of MRD, we launched the in-hospital model of our product in May. And since the installing of the platform to hospital really take time, we expect it to start the impact to revenue in Q4 this year. And in terms of clinical study, we released a data AACR and we will have more in the coming ASCO conference. So MRD in terms of no matter in commercial or in clinical trials or going on the chat (ph). For Biopharma, the business continues to grow. Contract value grows 27% year-on-year, while revenues grew triple-digit, that's also a good number. And for early detection, all the clinical trials are on the track and the dialogues to NMPA and FDA continues. So we will let you know, if we have new breaking news at any moment. So next, I will pass to our CFO, Leo, to talk about the numbers in detail, Leo, please.

Thank you, Yusheng Han. And for our financials, we have two key metrics to track for 2023. The first one is regarding our breakeven profitability defined as non-GAAP gross profit minus SG&A and Yusheng walked us over these numbers as demonstrated on Page 5. So you can see them in our slide track and our slide pack. And we are on track to hit breakeven on this metric at some quarter during 2023. The second metric we track is top line growth. So profitability and top line growth, two key metrics to track for this year. On growth, let's first visit our volume trend shown on Page 7. Our testing volumes achieved strong rebounds in March. Recall that in our previous results that we said January and February combined volumes were down 28% year-over-year. And we had a strong double-digit growth in March taking the whole quarter to down just 5% year-over-year. On a sequential basis, our volumes in first quarter was up 3% versus the fourth quarter last year and the strong rebound in March was led by the in-hospital segment, where we continued our lead in that channel taking further market share. And then, let's move to our P&L, which is shown on Page 8. First, on revenues, we grew our revenues by 5% year-over-year in the first quarter. Despite a very tough start in February -- in January and February, and we had very good results as Yusheng talked about in March. The continued delivery of pharma projects was the biggest contributor with Pharma segment maintaining its triple-digit revenue growth rate in the first quarter this year. In addition to strong growth rate in the current quarter, we have maintained good visibility into growth of the Pharma segment for the future. As we mentioned and Yusheng talked about on Page 6, our pharma backlog continues to grow with new contracts signed during the first quarter of this year up 27% compared to the same period last year. For our patient testing business, in-hospital showed strong growth in March taking the whole quarter to a positive 5% year-over-year growth, despite a very challenging start for the January and February period and we are pleased with our growth resilience in that segment. We continue to win major tenders in April. So we're on a strong footing for that segment going forward as well. And then moving down to the gross profit line. Gross profit grew 16% year-over-year, with non-GAAP gross profit margin, which excludes depreciation and amortization at 75.7% in the first quarter this year. We believe our gross profit growth is strong and industry leading. We have visibility into additional gross profit margin gains for the medium-term as we execute on our cost saving initiatives. So you have seen in the past that our gross profit margin have climbed steadily over the years and we aim to even climb that a bit further down the road as well. Now moving down to the operating expenses lines. Total operating expenses dropped 10% sequentially and that continues our previous trend of declining operating expenses and improving efficiency. The largest improvement this quarter came from the sales and marketing line, which is very important as we demonstrate sales and marketing efficiency. This line trended down since the middle of 2022 as we executed on our efficiency gain programs that Yusheng alluded to earlier. Importantly, sales and marketing expenses as a percentage of revenues stood at 42% in the first quarter this year, making us one of the most efficient operator in our industry. While peers, our sales and marketing expenses were probably higher in a range of 60s or even above based on published data. So our takeaway from our P&L for this quarter are mostly three points; number one, resilience top line growth, led by BioPharma and in-hospital strength; number two, strong gross profit growth up 16% year-over-year in the first quarter this year; and number three, high selling efficiency with sales and marketing at 42% of revenues. We strive to maintain our momentum in the above initiatives as we execute towards our corporate goals of breakeven and continuous top line growth. Moving on to guidance. We reiterate our previous guidance of 20% top line growth in 2023 versus 2022. Then moving on to Page 9, which talks about our cash balance and our cash runway projection remains unchanged from our previous results. Our burn in the first quarter is within the framework that we set out in the previous results call. The losses from our commercial operations is dropping rapidly and approaching breakeven, while the vast majority of our burn is towards investments on future product development, our multi-cancer early detection, MRD, and product registration with China's NMPA. Our cash balance is sufficient to fund us for the next three years, as we approach breakeven on our commercial operations and given that we retain discretion on how we want to invest towards product development. We are happy with our cash runway, and we are not in any rush to raise capital at this stage. So this concludes the financial section. Then let me pass the call to Joe to talk about our pipeline update.

Thanks, Leo. So let's move to Page 11. So basically, this is a recap of the early detection business and the development milestone we achieved in past several years, including the paper published in Nature Biomedical Engineering in regards to the technology itself as well as major 6-cancer early -- multi-cancer early detection clinical study published in Annals (ph) Oncology this year in Q1. So basically, we also got the FDA breakthrough Device Designation granted as for the product multi-cancer early detection product. So the Page 12 basically lay out the road map of MCD product development so far. And right now, we actually actively develop in 22-cancer, multi-cancer early detection product, which is the upgraded version of the 6-cancer we already published in Annals Oncology (ph) earlier. There's a multiple different kind of trials named there, like PREVENT, just mentioned by Yusheng Han as well as a PREDICT and PRESCIENT, which is 22-cancer, early multi-cancer detection. On the Page 13, I'm going to skip this one basically just talk about the difference between the 6-cancer and 22-cancer. Page -- let's move to MRD business. So for MRD as a recap here, basically, MRD has -- on Page 16 basically talking about MRD test play a role for the multiple time points throughout the treatment journey, which is very important for early cancer of curable cancer patient. As you can see here, MRD can be used as a prognosis which is nice to have. Also, it has a lot of potential for actionable therapies guidance, including deescalate or escalate utilizing based on MRD status. And also, it has a lot of other utility has been listed here at different stages of treatment. So for Burning Rock, on Page 17, we basically -- we launched this product called brPROPHET as our MRD solution. So this MRD solution is based on whole exome sequencing tumor profiling and trying to getting the trackable up to 50 tracked mutation as trying to construct a personalized panel for each individual patient. And then we're utilizing this personalized panel to perform the brPROPHET MRD assay ctDNA, and we do ultra-deep sequencing, which is 100,000x Raw Depth and utilizing leveraging the UMI error correction and to estimate the MRD status also estimate the tumor fraction based on the observation of this 50 [indiscernible] status. So right now, in Page 18, we basically have multiple different kind of trial on different kind of cancer, utilizing this technology, we call brPROPHET. As you can see here, there's multiple different cancer data either being published as a poster in different meetings from last year AACR till this year's AACR. Also, it will be -- has more data -- we will have more data in this year, such as ESMO and ASCO later. So basically, there's several updates here. I just listed in the Page 19, which is we just presented in AACR meeting last month in Orlando. And this is basically the updated -- update of the MEDAL study. We enrolled about 200 non-small cell lung cancer patients, and we compare the brPROPHET methodology versus standard tumor agnostic or fixed panel tumor [indiscernible] methodology utilizing look at the positive rate. On the left panel, basically, the orange bar showing the brPROPHET has highest detection sensitivity on pre-operated cancer patient, which showing the best performance regards to the sensitivity. And then we look at the -- in the middle panel, we basically look at the post-operative prognostic value on the landmark timepoint, which is three days or four weeks after the operation, and we look at MRD status. So if it's MRD-negative, which is shown as the blue line, as you can see here, the DFS ratio is significantly different from which is MRD positive, which is shown as a red line. As you can see here, the hazard ratio can reach as high as about 16.4. This give us a lot of confidence showing on this data. Our technology has its prognostic value, which gives us more confidence trying to pursue further interventional study. So Page 20 basically is another small cohort that we perform under gastric cancer. We also presented this data in AACR meeting last month. So in this study, we actually enrolled about 55 patients with gastric cancer with Stage 1, 2, 3. But out of this 55, we finally enrolled 19 for brPROPHET personalized panel detection. For the remaining, we just using the fixed panel to genotyping the all 55 patients utilizing fixed panel tumor-informed [indiscernible] to call the MRD status. As you can see here in the middle table, they're showing the preoperative cancer as a sample of ctDNA detection the brPROPHET methodology utilizing whole exon sequencing-based 50 individualized [indiscernible], you can see, it is reached much higher detection sensitivity compared to a fixed panel tumor-inform call-in (ph) with a limited amount of mutation detected. And on the RFS measurement in the Kaplan-Meier curve on the right, as you can see here, for the landmark, which is 2 to 4 weeks after operation, there is a 13 patients, we got this sample tested by brPROPHET. As you can see here, for the negative MRD-negative patient none of them actually recurred and relapsed. And for the positive, they're basically -- there's about like three out of four early relapse. So basically, this has given us a lot of confidence showing the brPROPHET technology, which is our MRD foundation of our MRD product as a value. So there's a multiple different kind of trials being listed in Page 18, I already mentioned there. So I think that's concluded my introduction in regards to the product development-related update. Thank you

And operator, let's open up for questions, please.

Certainly, we will now begin question-and-answer session. [Operator Instructions] We have a question from the line of Alexis Yan from Morgan Stanley. Please go ahead.

Thank you, Yusheng for taking the question. I just have a question on the commercialization of the MRD products. You mentioned that since early May, the MRD products started commercialization via the in-hospital channel as well. So I'm just wondering that could you share more color on its current, for example, hospital coverage so far? And also, if we look at the full year guidance of 12% revenue growth, how much of that roughly could come from the MRD portfolio? And also in -- probably in three to five years, any commercialization target that management could share at this stage in terms of either like sales target, market share, hospital coverage, et cetera? And second, just a housekeeping question. How has April and May performance been trending so far and has the recent many waves of COVID impacted our business? That's it for me.

The first question, I can ask Leo to take the line -- to Leo. So in terms of [indiscernible] MRD, the R&D for that is not easy. So that's why we launched that in May, I'm very proud of that. I think that we are the only one to provide in-hospital model of personalized MRD in the world. And the impact of that, the revenue, as I said, probably will start in Q4 because although, we have a large base of in-hospital model, hospitals. We still need to negotiate in attending tenders of different hospitals. So we know that the fastest period that you can win a chance to go into the hospital at this half year. So that's why I say that probably the impact will start in Q4 this year. If you wanted to see the main wave of MRD in-hospital model, I think that we at least need from now on at least one to two years to make [indiscernible] fully available in our hospitals. So -- but if you look at it in three to five years, we believe that MRD will be very important force, probably not less important than therapy selection because it covers most of the cancers and not limited to targeting drugs it can combine with chemotherapy targeting drugs and also immunotherapy. So what’s that second question?

Yeah. Let me address that. So our recent trends, I think it's premature to conclude about Q2 as we haven't even closed out for May. For April, there was no surprise. And we do benefit from a low base on year-over-year comparisons compared to last year. So I would say, April is on track, then we'll keep monitoring for Q2. But so far, no surprises.

Okay. That’s clear. Thank you.

Thank you, Alexis.

With that, there are no further questions at this time. I would like to conclude the call. Thank you for participating. That does conclude the call. You may now disconnect your lines. Thank you, management.