Genetron (NASDAQ: GTH) Stock Rises 9% on Soaring Sales

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The stock in Genetron Holdings Ltd. (Nasdaq: GTH) jumped 9% in pre-market trading Monday after the company posted strong revenue growth and narrowed losses for the third quarter. The stock was up over 9% on the day as of mid-morning in New York. 

China’s leader in early cancer screening said in a statement today that its revenue in the three months through September reached $16.5 million, a 38% increase year-over-year. 

Revenues from laboratory-developed tests (LDT) was $10.5 million, up 18%, thanks to an increase in units sold and in the average price of the products. In-vitro diagnostic products (IVD) generated $4.4 million in revenue, up 217% year-over-year, according to the report. The IVD results were driven by an increase in the number of assays and sequencing platforms sold during the third quarter; specifically, the Genetron S5 instrument and Lung 8 Assay.

Sizhen Wang, Genetron’s co-founder and chief executive, said in the statement, “We are particularly encouraged by our IVD and early screening sales momentum and expect those to be the growth drivers heading into next year.”

Revenues from development services were $1.5 million, down nearly 8% from the third quarter of 2019. The solutions Genetron provides in this segment include biomarker evaluation for molecularly targeted therapy and immuno-therapy, clinical trial enrollment, companion diagnostics development and joint marketing post-drug approval. 

Losses narrowed significantly during the third quarter. Genetron reported net loss of $7.1 million, or 2 cents per share, compared with about $42 million in losses at the same time last year and $400.9 million in the second quarter of 2020. Non-IFRS loss, which excludes share-based compensation expenses, fair value change, and other loss of financial instruments with preferred rights, was $6.4 million, Genetron said.

Gross margin improved to 62.2% from 44.2% in the third quarter of 2019.

Genetron also noted the decrease in selling, general, and administrative expenses in the third quarter, while its R&D expenses rose 85.8% year-over-year. The precision oncology company continues to invest in product development and new technologies, as well as clinical trials.

The third quarter improvements occurred despite some hindrances from the second wave of the Covid-19 outbreak.

Wang said Genetron is set to accelerate the development of liquid biopsy-based solutions across the full-cycle cancer management, particularly in early screening and MRD. The company recently entered into global licensing agreement with ImmuQuad Biotechnologies to develop and commercialize minimal residual disease (MRD) assays in hematologic cancer.

Currently, Genetron is advancing the commercialization of its products for early screening for liver cancer in China. It is also preparing to launch clinical trials in the United States after receiving FDA breakthrough device designation for its blood-based NGS test, HCCscreenTM, for early detection of hepatocellular carcinoma. Genetron is working out the details of the plan with the FDA as it begins building a CLIA-certified lab and R&D center in Maryland.

Further, “We are progressing on a case control early screening study for colorectal cancer as well and expect to report preliminary data in 2021,” Wang said. “Genetron is also working on other MRD projects in solid tumors with an initial focus on liver and colorectal cancer.”

Among other developments during the third quarter, Genetron joined a project for early screening of lung and digestive system cancers led by the Ministry of Science and Technology in China. 

It also began clinical trials for companion diagnostic test in development for avapritinib with its strategic partner CStone Pharmaceuticals (OTC: CSPHF). Avapritinib is a kinase inhibitor discovered by CStone’s partner Blueprint Medicines Corp. (Nasdaq: BPMC).

Genetron, similar to the Silicon Valley-based GRAIL, explores the vast opportunities early cancer screening market. Genetron is primarily focused on the China market where it is the leader in the space. That market is estimated to reach $58 billion in 2023 by research firm EqualOcean. Last year, Genetron was among China’s top three providers of NGS-based molecular diagnosis of cancer by revenue, commanding a market share of 11.6%. 

In addition, the company said it was the leader in the number of IVD products approved by the National Medical Products Administration (NMPA). And as the adoption of cancer molecular profiling grows, not only in China, but globally, Genetron has set far-reaching goals.

“We expect that in a few years, the market could be gearing towards a more government reimbursement-based model and we could see higher volume and lower price,” Wang said in a call with analysts on Monday.

Wang continued: “We have carefully prepared for that and deliberately design our products with that in mind to offer a compelling cost proposition to our customers while achieving excellent gross margins.”

The results sent the stock in Genetron soaring. As of mid-morning trading, the stock was up over 9% on the day. 

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