Centogene N.V.
Q4 2020 Earnings Call Transcript

Published: 15 Apr 2021

Operator:

Thank you for standing by. Welcome to the Centogene Earnings Results Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Lennart Streibel. Please go ahead.
Lennart Streibel:

Thanks Sarah. Hello and welcome. Thank you for joining us to discuss our Q4 and full-year 2020 results, which were issued earlier today. You can view this presentation and the related press release on Centogene's website. For those unable to view the webcast, you can find the relevant slides on investors.centogene.com.
Andrin Oswald:

Thank you, Lennart. Hello, good afternoon, good morning everyone. But today, I will begin by walking you through our operational performance during 2020. I will update you on the progress of our core businesses, meaning the pharma and diagnostic segments, and provide you with further insights into our company and its key assets. Richard will then take you through the financials, including what we have been able to achieve in our commercial COVID-19 testing segment. We will then provide our financial guidance for 2021 and the business outlook. Afterwards, we will open up for Q&A. Let’s please turn to Slide 5. Let me first highlight the key messages for the day. We had a very strong performance from a revenue perspective having more than doubled in 2020 compared to 2019. The company surpassed €100 million in revenues for the first time in its history for a record year overall. Additionally, we have achieved directed adjusted EBITDA. Both revenues and adjusted EBITDA were driven by the COVID-19 testing segment in the second half of the year. I believe this is a truly impressive achievement, and a create to the strong performance of a dedicated working team at Centogene, especially during a very challenging year. When looking at the core business, I want to underline that this is our firm focus for 2021 and beyond. Even though the core segments overall financials for 2020 reflects the headwinds from the pandemic, I'm pleased to say that our diagnostic segment continued recovering since the lowest in the second quarter and sample an order intake value in Q1 2021 is approximately on par with Q1 2020 and growing.
Richard Stoffelen:

Thank you, Andrew. Could I kindly ask you to turn to Slide 14? Our full-year 2020 revenues grew by an impressive 163%, compared to 2019. This was largely driven by COVID-19 testing revenues with close to €19 million in revenues for the full-year. The core business segments experienced headwinds due to the COVID-19 pandemic, particularly in the second quarter, and the financials for core segments reflect the challenging year. The Pharma segment recorded €17 million in revenues, a 21% decrease, compared to 2019. The diagnostic segment recorded €22.1 million in revenues, a 19% decrease, compared to the year 2019. While such results are disappointing for the core business, I believe the company was nimble and effective in its response to the circumstances as we made good use of our diagnostic capabilities. We are well positioned as we continue into 2021 and we'll get back to solid core business growth to materialize Centogene’s long-term potential in its core segments. The slowdown in revenues translated into a decrease in adjusted EBITDA for both core business segments. Nonetheless, we are pleased with the momentum in the Pharma segment currently, and look forward to this translating into revenues in 2021. The adjusted EBITDA margin in Pharma decreased to 37% for the year as the diagnostic segment showed a solid recovery in the second half of the year, fixed cost elements resulted in the adjusted EBITDA margin declined for the year overall to minus 11%. Having said that, I want to emphasize that if sample volumes have been at pre-pandemic levels, adjusted EBITDA for the diagnostic segment would have been positive for the year. The COVID-19 testing segments delivered 42% adjusted EBITDA margin for the full-year. Even though we do not have a comparison for 2019, I want to note that includes upfront expenses for the setup of our COVID-19 segment at the beginning of 2020. Consequently, adjusted EBITDA margin improved in the third and fourth quarter as we increased the revenues substantially throughout the year. Now let's look at a further breakdown of our revenues and our segments came from in 2020. Please turn to Slide 15. As usual, we provide you with a breakdown of revenues in our Pharma segments by new and existing contracts for the period. As a reminder, we defined a new contract as one signed in the last 12 months. We are happy to report the signing of 16 new contracts in 2020. The majority of the 16 new contracts were signed in the second half and did not result in recognized revenues for 2020. Rather, we will see the revenues of in 2021. And therefore, the revenues for new contract presented here are not an accurate reflection of our promise segments momentum. In saying that, we did see revenues from existing contracts increased by 10% in 2020, compared to 2019. While it's our goal to grow the Pharma segment, it is nevertheless encouraging to see our existing collaborations bring in a robust revenues base, even the year is challenging as 2020. Looking at the diagnostic segment, revenues from NIPT decreased in 2020, compared to 2019. As mentioned in previous quarters, NIPT is not a core focus of our strategy. Revenues from other tests decreased by 19%, compared to 2019, which was due to previously discussed headwinds to our diagnostic segments. As for the COVID-19 segments, we demonstrated a significant wrap-up in each quarter in 2020, particularly in the second half of the year, which led to the substantial contribution to our top line for the year. Now, please turn to Slide 16, where I will discuss the financials for the fourth quarter in more detail. Looking at our revenues for the fourth quarter of 2020, COVID-19 testing brought in €59.8 million. In addition, we recorded an adjusted EBITDA margin of 45% in that segment, which was an increase from 35% in Q3 2020. Although COVID-19 testing is not strategic to our business long-term, the financial contribution from the segment will support us in making key strategic investments into our four segments. Shifting to our core business segments, in Pharma we recorded €4.7 million in revenues in Q4, which was a 41% decrease, compared to the same periods in 2019. In diagnostics, revenues decreased by 19%, compared to Q4 2019 to €5.8 million. These financial outcomes reflected trends we discussed earlier in the presentations were assigned Pharma partnership contracts will result in 2021 revenues and continued recovering towards the end of the year. So let us now finish discussing other key financial elements for this period. Please turn to Slide 17. Looking at our income statement, we have already mentioned the increase in revenues for a record total for the company of more than €128 million. Such increase in revenues drove an increase in gross profit of approximately €19.2 million in 2020, compared to last year. Our expenses, including other operating income, increased by approximately €20.2 million for the year, compared to 2019. As results, the operating result was lower by approximately €1 million. Let me comment on the two biggest factors that drove this increase in expenses. Firstly, general and administrative expenses increased by approximately €14.5 million. As mentioned last quarter, the increase in G&A costs are primarily result of being a public company such as D&O insurance, corporate governance, investor relations expenses and share-based payment expenses. Naturally, we did not incur those costs in 2019. In addition, we incurred costs related to our COVID-19 testing efforts, including continuing to internally test our employees to keep the company operational, as well as some upfront costs related to test side expansions. Second, our R&D expenses for the year were up by approximately €5.3 million. This increase with driven personnel costs and accumulated expenses. This is reflective of our continued commitment to advancing our biomarkers, databases, and technology platforms such as AI. It also emphasizes that although we experienced headwinds in our core segments this year, we did not lose focus of our long-term strategy and mission of the company towards rare diseases. Now, please turn to Slide 18. Let us have a closer look at the cash flow and balance sheet. Cash flow from operating activities improved significantly, compared to last year. The additional revenues from COVID-19 testing and the healthy adjusted EBITDA margin at that segment led to a positive cash flow. Looking at the change in cash flow used for investing activities, compared to 2019, I would like to emphasize that the cash flow from investing activities last year included a net positive cash flow of €21.3 million from the sale and leaseback of our Rostock headquarters. Taking that into account, the negative cash flow originated from our investments at PP&E and right of use assets, mainly related to starting our COVID-19 segments, including the development of our Corona Test Portal. Cash flow from financing activities decreased compared to 2019, as our IPO in 2019 resulted in roughly double the race when compared to our follow-on equity offering in July 2020. As of December 2020, we had €48.2 million of cash and cash equivalents on our balance sheet, which I believe is a strong financial position for a company the size of Centogene. Regarding our outstanding debt, I would like to remind you that as of year-end 2020 this includes more than €21 million of lease liabilities. Having looked at our performance for 2020, let me now update you on our financial guidance for 2021. Please turn to Slide 20. Firstly, let's start with our core business. We have seen the core business segments recover towards the end of 2020 and into 2021. As such, we believe we can return to solid growth in our core business. Moving to our COVID-19 testing segments, we will continue leveraging the contribution from that segment. As uncertainties remain around the vaccine rollout, it is possible that demand may be different than we perhaps expected. Based on the current trajectory, we anticipate revenues from the COVID-19 segments in 2021 to be approximately the same level as in 2020. Now, let me hand it back to Andrin for our 2021 business outlook. Please turn to Slide 21.
Andrin Oswald:

Thank you, Richard. So, before we get into Q&A, let me summarize the presentation briefly and highlight the key takeaways from today's discussion. We had a strong finish to the year and ended 2020 with triple digit revenues from the first time in company's history for a record top line growth. Whilst the segment is not strategic or long-term focus for us, the financial tailwind from COVID-19 testing means we with a robust balance sheet and that allows us to continue our investments in our core business, and I'm pretty confident that COVID-19 testing will also contribute significantly during this year. But I would like to reiterate again that the focus in 2021 will be our core business segments. They are what drives the long-term value and growth of the company and it is our priority to see the segments to foster and grow. We have seen the level of sample order intake value return to approximately 80% of normal at the end of 2020. In addition, we have seen that the trend continues in Q1 2021 with sample intake more or less at the level of Q1 2022 and growing. This is an encouraging sign and we anticipate those levels remain robust going forward and that we will emerge stronger post pandemic than we were before. Our Pharma partnerships are also slowly starting to pick up again. We have signed 16 new deals in the second half of 2020. We have extended 16 collaborations. And I believe that we will see more new deals coming in the next couple of months. I also view our data and biobank as the key asset delivering value for orphan drug development, and the driver of our long-term value growth. We plan to deploy the asset more strategically, and sharpen the value propositions for both our Pharma partners as for our own internal development. I would also like to invite you to the upcoming investor event. Hopefully, you have noticed some first steps we have taken today to be more transparent and clear on what we do, and the things that matter to you. I would like to take the opportunity on June 22, to dive deeper into our strategy, how we create value, and I would like to do that with our executive team that you can engage with there. Due to COVID-19 restrictions, it will be hosted in a virtual format, unfortunately. We will update you further on the agenda and registration for the event, but please save the date. I look forward to seeing you there and hopefully many of you. Overall, I’m confident that the Centogene can and will do for rare disease community, and to amplify the impact that we have on patient families awaiting answers on diagnostics and therapies. I will now turn the call over to our operator for Q&A. Please, kindly I would like to remind you not to ask more than three questions, so we have time to get to as many of you as possible. Thank you for joining us today.
Operator:

Thank you. Your first question comes from the line of Puneet Souda from SVB Leerink. Please go ahead. Your line is now open.
Unidentified Analyst:

Hi, guys. This is actually Wesley on for Puneet today. Thanks for taking the questions and congrats on the quarter. Wanted to start on the outlook for 2021, and more specifically on the COVID testing side of things. Rich, I appreciate your comments on approximately similar levels year-over-year. And the difficulty that goes into modeling out the COVID testing cadence, but just given where we are and having the first quarter close at this point, if you could provide any additional clarity on the cadence of testing throughout the year, and if you see any opportunity for COVID surveillance testing as well.
Andrin Oswald:

Yeah, maybe just two thoughts before I hand over to Richard. I hope you understand that, you know forecasting COVID is tricky. You cannot easily compare quarter over existing or future quarter. I mean the results are impacted, to some extent almost adversely in the sense that if you know the pandemic, you're talking about Europe here where, you know, our COVID testing is happening when the epidemic gets worse, and travel restrictions increase, we see somewhat less testing. And when the pandemic gets better, we see more. Given that you go more or less from wave-to-wave and the restrictions are constantly changing, it's hard to tell exactly where we’re going to end up. I mean, I think we had a good first quarter as far as revenues for COVID are concerned. And I'm pretty confident that especially as vaccinations progress and traveling takes up, you know, the numbers can look even better, but how good they will look, I think that's, frankly, is anyone's guess. It's mostly influenced by the pandemic and government policies. Richard, over to you for any other thoughts there.
Richard Stoffelen:

Thanks very much, Andrin. Thank you, Wess, for asking the question. As you do appreciate in asking the question, we have not closed Q1 formally yet. So, my guidance will vary depending on the progress of the pandemic, as well as the vaccination programs and travel patterns as Andrin just expressed. We would expect the first half of the year being somewhat similar to the second half of last year. And we feel very comfortable in saying that when looking at the initial closing of Q1 for COVID revenues.
Andrin Oswald:

And on the …
Unidentified Analyst:

Yeah, yeah, I was going to follow up there. Thank you.
Andrin Oswald:

Just quickly on the second part. I mean, yes, we do that in Germany. But given the guidance and the policy on that front, and also the fixed revenues, you can make . While we do it, we don't think this will be a major revenue contributor overall.
Unidentified Analyst:

Great, thank you for that. And then so I guess, sticking on the first quarter looking towards the diagnostics part of the business, appreciate that volumes are beginning to return to pre-pandemic levels. Curious on the mix of those volumes between I know that you've previously been seeing some momentum in higher value tests. So, just how we can expect the mix of volumes to trend and what that means for the top line as a result.
Richard Stoffelen:

Yeah, we haven't dived into debt analysis as we're focusing on closing the full-year and the full reporting of the 20-F. But I have heard nothing to the contrary of the trend we saw before Wess.
Unidentified Analyst:

Alright. And then just finally, looking forward to the Investor Day in June, Andrin, now that you've had some time to get to know the company over the past few months, just curious on some of the key priorities for the next year, where you see some opportunities and Rich, I guess, how you're feeling about the cash position currently, and where some opportunities might lie there? Thank you.
Andrin Oswald:

So, I don't want to, you know, the thunder. I guess you will have to have a bit of patience until we have the investor event. But I think as mentioned, during the presentation, I do believe that we have a great asset with our bio and databank. And I think while we focus on ensuring that we clearly built the used cases that we have identified data, and really line it up with the value that can be generated with it. I think we will have fantastic disease areas where we can bring a lot of value to the table. So, with a bit more focus on those priorities, and then really aligning our resources and investing behind them, I think we will see, you know, good development and we can share with you milestones, you know, what we expect along the way over the next couple of quarters and how this will translate into visible progress?
Richard Stoffelen:

Yeah, when answering your question Wess, in respect of our cash position, we're very comfortable, particularly as we see a continuation of this healthy revenue contribution of COVID. So, we're very comfortable there.
Unidentified Analyst:

Great, thank you.
Operator:

Your next question comes from the line of Erin Wright from Credit Suisse. Please go ahead. Your line is now open.
Erin Wright:

Great. Thanks so much for taking my questions. So, my first one is, can you speak to what the changes were with your Takeda relationship and the expansion of the contract there? How big of an opportunity that is for you, and in also what were your new Pharma partnerships signed in the quarter versus extensions of existing relationships?
Andrin Oswald:

Yes. So, I think on the Takeda extension we are – on the extension self, we pretty much continue doing what we have done there with the Takeda in the past, and we do have other collaborations with Takeda and rare diseases beyond, you know, that specific effort. And I think we definitely, of course, want to take the opportunity in the next couple of quarters engaging Takeda on those further so that we will develop additional new partnerships along the used cases that have outlined with Takeda. Those discussions are ongoing, and we'll see where that leads us in the next couple of quarters. I think on the signing of other deals and the names I’ll refer to Richard as I'm not entirely clear in terms of what we can share and what is confidential.
Richard Stoffelen:

Happy to step in. We cannot disclose too much detail on a numeric basis, unfortunately. We are not unhappy with the extension of the contract. Let's put it that way.
Erin Wright:

Okay. That's helpful. And then I guess can you speak to, kind of how the Pharma partnership pipeline is looking heading into this year and has anything changed in terms of your strategy around acquiring new Pharma partnerships or can you remind us how you're actively marketing and soliciting kind of new business from a partnership perspective?
Andrin Oswald:

So, I think the pipeline looks pretty strong in my mind. So again, I feel , as you said, before that we will whip that pipeline even in a risk adjusted way, you know, be able to get that business back to growth and have a good year, compared to last year, there's no doubt in my mind. And in terms of how we approach it, there is some form of a change there. I think that we have been initiating to be more specific. I think in the past, our partnership approach was a bit opportunistic. I mean, we, you know, talk to people at the conference at some scientific discussion, and out of it came an interesting idea and something, you know, would start in, I think, now, the size of the company that we are and the expansiveness of the biobank that we have, I think we want to formalize those used cases as I tried to give you a first outline on more specifically, so that we have a much clearer service offerings that we can bring more, you know, I would say, repetitively to a broader number of partners with a high level of confidence. Of course, then the organization can also deliver against them. I think we are also looking at expanding our commercial presence and highlight that, you know, with – I’ll highlight with how we start, of course, with that at the top, but then when I look at the opportunity, how big the market is, and what we could do, I think we will do better by also increasing our resources there that we can really cover the partner universe, there are many companies now engaged in rare genetic diseases, and I think we have not yet maxed out with regards of us being able to bring our value propositions to as many of them as possible. And I think the last point is that, I want to be more mindful in terms of how also the maximize the partnerships in terms of what is a simple service where we offer, you know, for a transaction fee, and where are we better off to really strategically partnering the value creation because we want to participate in the upside. And in that regard, I think we're developing our framework, I don't think it will be either or, meaning that we will just do simple services or one it will only ever take type of partnerships. But we want to have more clarity on what opportunity is good enough for us to also invest some of our own money and how we communicate that in the future.
Erin Wright:

Okay. Great, thank you.
Operator:

Your next question comes from the line of Alex Cogut from Kempen. Please go ahead. Your line is now open.
Alex Cogut:

Hi, thanks for taking my questions. With respect to your biobank repository, I noted the increase in Q4 was somewhat lower than the previous quarters, I think , could you provide some more color on that?
Andrin Oswald:

The increase on what? I’m sorry, I didn't understand you.
Alex Cogut:

The biobank repository.
Andrin Oswald:

I think overall, I mean, we, you know, there can be slight changes, if with regards maybe normally what comes from the clinical diagnostic from diagnostics segment is pretty, you know steady, meaning it's growing as the diagnostic business grows. On the Pharma side, you can of course see some variances. I mean, if you do a larger, you know, clinical program with a Pharma partner, then, of course, the samples come in over a couple of months while that recruiting, you know takes on, but those should be, you know, smaller changes quarter-over-quarter, I wouldn't get too much hung up on that. I think overall, we expect the sample intake to continue and steadily grow. Now we are, for the year, I think we had about a 20% overall growth over the year and I would expect this to accelerate during next year.
Alex Cogut:

Got it. Thank you. And looking at your G&A expenses, understood, it was primarily due to being a listed company, what can we expect for 2021? Would it be a similar magnitude increase or were there some one-offs in last year?
Richard Stoffelen:

Shall I take that up, Andrin?
Andrin Oswald:

Yeah. Please go ahead, Richard.
Richard Stoffelen:

Yeah. Hi, Alex. Thank you for asking that question. It’s a little bit the elephant in the room that we don't want to move around. No, we don't expect a similar increase. The increase was kind of a once increase, but it will be retained at a certain level, even though we are every year carefully reviewing where we spend our money. So, we spend it in the wisest way possible, which we will do for this year as well. Part of it was also related to setting up new test centers in the COVID segments, which we don't know yet whether that will be continuous to be to be expanded into this year, or given how the pandemic would evolve, that that will not be part of it anymore. So, a careful review, but not anticipated the similar increase as we had from 2019 to 2020, not at all.
Alex Cogut:

Thank you.
Andrin Oswald:

Yeah, and, and two points I would add is, you know, as the newcomer, I mean, there's little doubt in my mind that during a turbulent 2020, where, you know, the company was, you know in a couple of months trying to build up, you know, the COVID response. And if you think what that meant ready in terms of, you know, rare disease, testing volumes, compared to the COVID testing volume. The COVID testing volume is about 10 times bigger than what you normally do with rare disease. So, what this meant with regards to, you know, bringing people in, you know, strengthening logistics and what have you. I mean, this was a massive, massive effort. So, I do think now, you know, with this being a separate business, you need to manage on its own. I mean, we have a very careful look at our G&A costs and go deeply into and say, what do we really need for the future? here and there something maybe that we can, you know, wind down again. So rest assured that, you know, we're going to make sure that deficiency exists on that side? I mean, that being said, I think it's worthwhile to note that, and I assume you're, you know, you have some understanding for that, I mean, the, you cannot compare our G&A to a typical biotech company, who is just moving one or two molecules, you know, through the pipeline. I mean, our business has a, of course, a global presence, especially on the diagnostic side with a global commercial presence with, you know, representation in over 50 countries and what have you. Yes. So there is a certain, of course, G&A cost, you know, that is needed for us, which looks speak, if you wish, as compared to the diagnostic business, but less big, if it looks compared to all the samples, we also get through that, then how we build up our bio and databank with it.
Alex Cogut:

Thank you. That's very helpful. And with respect to your Pharma business growth in 2021, as U.S. and Europe looks to be reopening at different rates, is there some kind of a, you know, difference in how your Pharma business is exposed to Europe versus U.S.?
Andrin Oswald:

The bigger part of our Pharma business is in the U.S., meaning the customer situation, and, you know, it's not a surprise, that, of course, the U.S. is the largest life science and biotech, you know, community overall. So in that sense, you would think, and it's probably fair to assume that to take the recovery, if you wish, and we'll be fostering the U.S. there, we are stronger than in Europe. I do think that the overall, you know, R&D is going on, I mean, there is not so much a, I would say the documentary will make there is no R&D. But it is true that, given that a lot of the deals that we do are based on the exchange, you know, the business building the value offering, you know, not having, you know, at least last couple of quarters, any conferences, or normal convenings, where you can bring your value to the table and construct these discussions was quite a challenge and certain things you can do virtually, you know, on the team's call, but not everything. So, I think while – and opening up happens, I'm pretty confident. And as I said before, I mean, we're also adding some commercial resources there. I mean, for us to really be well positioned to get out there and make sure our value proposition reaches the – not just the existing, but also new customers.
Alex Cogut:

Thank you, and look forward to 22nd June.
Operator:

Your next question comes from the line of Catherine Schulte from Baird. Please go ahead. Your line is now open.
Unidentified Analyst:

Hi, everyone. This is actually Tom on for Catherine. Appreciate the questions and congrats on the quarter. So, I just wanted to first get into, sort of monthly pacing on the diagnostic side in 4Q and any color into 1Q 2021, appreciated sort of the comparisons to 1Q 2020, but just curious if you saw any significant monthly differences given sort of COVID flare ups?
Andrin Oswald:

Well Richard, shall I take that?
Richard Stoffelen:

Take it or I could, I'm just going back to a slide where we showed a graph on the sampling that will be most helpful.
Andrin Oswald:

Yeah, I mean, you saw that on that graph on page, which page was it?
Richard Stoffelen:

That was Slide 7.
Andrin Oswald:

Slide 7, indeed. Of course, you know, you don't show monthly numbers there. So, there's a bit of leveling out, but otherwise, I mean, these numbers are – the trend there is accurate. And the monthly variation is sometimes there for two reasons. I mean, we have in certain countries larger contracts that say, with a hospital chain, and it can be that they're, you know, some batch of tests comes in, you know at the end of the month or at the beginning of the month, they can move the numbers a bit. And but I think apart from that, I mean, we don't see that much of a variation. I mean, the trend is pretty clear.
Richard Stoffelen:

Yeah, I'd like to add that’s typically the only variation you in the number of days, or some of our bigger customers they kind of stick together all the samples for a week. So, sometimes it's just in one month versus the other, because how the week ends or how the week starts and when they ship them. That's nothing that we are really focusing on. On a quarterly basis, we see an upward trend, like we were seeing before the pandemic as well. We're almost at pre-pandemic levels, as you could see at so we were very comfortable there.
Unidentified Analyst:

Great, that's helpful. Moving to the Pharma side, I appreciate sort of the color on the extended momentum sort of from the back half. I was just curious, more broadly, you know, how conversations with current and potential, you know, Pharma partners is evolving, particularly as 2021 budgets become finalized, I guess what I'm trying to get at is, you know, would you sort of characterize project timelines and outlook is kind of more or less immune to COVID shocks and flare ups at this point now, that sort of those expectations are sort of built into Pharma 2021 outlooks as well?
Andrin Oswald:

Yes, they're building I think, I mean who knows what suddenly an unexpected mutation would do to the world. The base and everything, which is known today, I mean, the, you know, the gradual recovery with some uncertainty remaining, of course, at the end of the year is factored in there. And so in our, I would say, optimism, and what we said about where we think the Pharma business will be this year. In my mind, the uncertainty that is remained is for me more on the – also how we structure certain deals. I mean, it's a trade to describe before that you can structure a deal with a Pharma partner by which we pretty much sell, you know, an element of our biobank and create some revenue with it, but then the asset is gone, or you can structure a deal by which, in the other extreme, we co-invest, because we believe it creates long-term value, and you don't see anything in the top line, but the value of that deal may be bigger than some revenue generated during this year. And while we think through how we structure those deals, and then how we set them up for the future, I think that creates, of course, some uncertainty, not on the overall value creation, but in terms how much short-term revenue you were to see versus long-term value creation.
Unidentified Analyst:

No, that makes sense. That's very helpful. I want to follow up lastly, maybe on the COVID side, just sort of, you know, I think you sort of touched on this as to, you know, travel opening up, etcetera, could actually be beneficial for volume. So, it seems like you would expect your airport testing partnerships, you know, to continue, are there any other opportunities that you're working through on this side kind of getting at, you know, something like a travel corridor, etcetera. And I was also just curious how if at all mix shifts has changed from a COVID diagnostic standpoint for you guys?
Andrin Oswald:

What has changed? Sorry, didn’t understand the last piece of your question?
Unidentified Analyst:

Sorry. Just mix shift between, given the antigen offering?
Andrin Oswald:

Yeah, okay got it. Understood. The thing on the product mix, I think the – we clearly have our offering in the high quality, high-end, right. I mean that's same for rare disease genetic testing via the high-end high-quality solution provider and that's the same for COVID-19 testing. So, we do PCR. We are also, of course going with the trends to make it faster and faster. So, we get a more rapid turnaround even at an airport of a PCR results. And so that you can basically go to the airport, at least if you go to not – if you're not the one who rushes to be there 10 minutes before the flight leaves, but if you go as you should according to the guideline, you can actually do your testing at the airport wait for the result and then move on. And we also do have an antigen test, but only the, again, what we call high quality lab tested antigen. So, the idea really for us is that we want to make sure that our test results are professionally confirmed and then can serve as confirmation for travel or for whatever you need to do from an authority point of view. I mean, that's the business that we are and we believe that it's highly likely that you know these policies that you will have to test and show these results in a confirmatory way that will continue. I do believe that you know the mutations that are circulating, well I’m not so worried that that would plant just back into lockdowns. I do believe that they will probably mean that testing will be required for a longer period of time, at least for traveling. I also believe, to your question on the customer base, I also believe that there will be a certain risk of flare-ups within a country, especially as I said, if new mutations were to emerge, which may not overfill the hospital, but still, if not diagnosed, would create, you know, spread in already vaccinated people. So, I think it’s absolutely possible that there will be need for also in country testing. And I think in that regard, next to having testing centers at major cities, we are also establishing and have established contracts with major organizations, whether those are large corporations or government entities who really want to make sure that they have solutions in place to allow them to contain any future spread within an organization. So that's basically what our key customer segments are, if you wish.
Unidentified Analyst:

Great, thanks again.
Lennart Streibel:

Thank you. Just trying to be mindful of time. We've got few minutes left. So, trying to be succinct as possible Sarah with the next questions. Thanks.
Operator:

Your next question comes from the line of Sung Ji Nam from BTIG. Please go ahead. Your line is now open.
Sung Ji Nam:

Hi, thanks for taking the questions. Firstly, on the biorepository, impressive to see 20% growth, despite the pandemic, I was curious prior to the pandemic, I think their efforts to expand further diversify their biorepository I think, you know, expansion into the North American market, and also, maybe Asia as well, I was wondering if there was any progress on that front or has it been just largely from the traditional geographical sources?
Andrin Oswald:

You mean with regards of the diagnostic samples come from?
Sung Ji Nam:

Exactly.
Andrin Oswald:

Okay. Yeah. For the time being, it's pretty much what you've asked before the pandemic. So, I think as you can imagine, during the epidemic, it wasn't the best time to try to go and set up, you know new channels. That said, we clearly have a plan, and then aspiration to strengthen our presence geographically in Europe. This is my priority number one. And then when you go into Asia, I mean we are in discussions there, and I think we will accelerate those now while things become easier, in a few selected, you know, attractive Asian markets to strengthen our presence, but those are early days. So, I think you will have to be a little bit patient, we hopefully can share more on that progress in the second half of the year. That said, initially, just want to make the point that I – the presence that we do have, and I think the regions we are in, I think our – parts in Brazil, which is still suffering tremendously from the pandemic, I mean, there are robust growing regions. I think that's why we believe we have an underlying strong demand for an increase, you know, increasing demand for our tests.
Sung Ji Nam:

Got you. And then if I could ask one more question just on the ROPAD Study and the efforts there, obviously a lot of progress you're making. Just kind of curious, could you talk about what differentiates Centogene’s efforts around, you know the LRRK2 mutation identification, is it just largely the pure breadth of the database that you have, or the samples that you have? Or are there differentiated, kind of biological insights that you're finding that you might be adding value for as well? Thank you.
Andrin Oswald:

Yeah. So the two aspects may be, the first one was really how could we build up that the, you know, cohort in a reasonable amount of time. And I think that really translates to the physician network that we have. And I do think we have a very strong experience and connection in neuroscience. And it's something we want to leverage also, going forward with regards to how to prioritize diseases. I mean, there is a – there are quite a couple of highly intriguing, strong connections if you look at pathways that emerge from rare diseases, rare genetic disorders that have implications for, you know, the more well-known, maybe more towards end of stage human neurological diseases like Parkinson's and others. So that is clearly an area with the knowhow that go deeper in and I do believe that, and we have a benefit there because we can connect the rare diseases – the many rare disease patients, we have in our databank, that often presents with neurological symptoms and syndromes and mind that data in the anticipated understanding of what some of these insights mean, if you compare it to the data set of Parkinson’s patients if you wish. Bad luck. Okay, so I do believe that our rare disease biobank is a unique asset to do mining in areas like Parkinson's.
Sung Ji Nam:

Fantastic. Thank you so much.
Andrin Oswald:

All right. I think that brings us to the end. Lennart?
Lennart Streibel:

Yes, I think we're at the end of the call. Thanks for joining everyone. We're looking forward to connecting later in the quarter either when we announced the Q1 results or at the Investor Event or in the Kempen Conference. So with that, I think we conclude the call.
Andrin Oswald:

Thank you everybody for participating. Appreciate your time. Thank you. Bye-bye.
Operator:

That does conclude your conference for today. Thank you for participating. You may all disconnect.

Centogene N.V. Q4 2020 Earnings Call Transcript

Other Centogene N.V. earnings call transcripts:

Centogene N.V.
Q4 2020 Earnings Call Transcript