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Edited Transcript of CNTG.OQ earnings conference call or presentation 23-Apr-20 12:00pm GMT

Q4 2019 Centogene NV Earnings Call

May 4, 2020 (Thomson StreetEvents) -- Edited Transcript of Centogene NV earnings conference call or presentation Thursday, April 23, 2020 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Arndt Rolfs

Centogene N.V. - Founder, CEO, Chief Medical Officer & Member of Management Board

* Richard Stoffelen

Centogene N.V. - CFO & Member of Management Board

* Sun Kim

Centogene N.V. - Chief Strategy & IR Officer

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Conference Call Participants

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* Catherine Walden Ramsey Schulte

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Luke England Sergott

Evercore ISI Institutional Equities, Research Division - Associate

* Puneet Souda

SVB Leerink LLC, Research Division - MD of Life Science Tools & Diagnostics and Senior Research Analyst

* Sung Ji Nam

BTIG, LLC, Research Division - Director & Life Science and Diagnostic Tools Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Centogene Full Year 2019 Earnings Results Conference Call. (Operator Instructions)

I'm also advised that this conference is being recorded today, Thursday, 23rd of April 2020. I would now like to hand the conference over to first speaker today, the Chief Strategy and IR Officer, Mr. Sun Kim. Thank you. Please go ahead.

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Sun Kim, Centogene N.V. - Chief Strategy & IR Officer [2]

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Thank you, operator. Hello, and welcome. Thank you for joining us to discuss our full year 2019 results, which were issued earlier today. You can view this presentation and the related press release on Centogene's website. For those not able to view the webcast, you can find the relevant slides on www.investors.centogene.com.

Our speakers today are Centogene's Chief Executive Officer, Professor Arndt Rolfs; and Richard Stoffelen, Centogene's Chief Financial Officer. Before we begin, please refer to Slide 2 of our presentation, which provides information about certain statements to be made today that may be considered forward-looking statements within the meaning of the U.S. securities laws, including those regarding our strategic plans, development programs and future financial results. Statements made during this call that are not historical statements may be forward-looking statements and as such, may be subject to risks and uncertainties, which if they materialize, could materially affect our actual results. The forward-looking statements in this presentation speak only as of today, and we undertake no obligation to update or revise any of these statements to reflect future events or developments, except as required by the law. Additional information can be found in our SEC filings. Following our presentation, we will also open up the call to Q&A. (Operator Instructions)

I will now hand the presentation over to Arndt. Please turn to Slide 3.

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Arndt Rolfs, Centogene N.V. - Founder, CEO, Chief Medical Officer & Member of Management Board [3]

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Thank you, Sun, and hello, everyone. Thank you for joining our call today, especially during these unprecedented times. We hope everyone is healthy and safe, and our thoughts are with those affected by the COVID-19 virus.

Before we dive into our 2019 performance, let me quickly update you on how Centogene is dealing with the COVID-19 situation. In early March, we took the necessary steps so that approximately 75% of our employees could work from home with the exception of those needed to keep laboratory operations running to support customers that are critical to the health care ecosystem. Thanks to everyone's efforts to date, we have been able to operate our business through this crisis without too much disruption, and now we are taking efforts to reopen our offices in a carefully measured manner.

Now let us tell you about our significant achievements in 2019, which made the year a critical one in Centogene's evolution. This is also our first annual results call as a public company, and we are pleased to share with you our full year 2019 results demonstrating Centogene's strong execution across multiple parts of the business.

To begin, I'll start by sharing an overall business update, and then Richard will take you through the financials. Let's turn to Slide 4. Before diving you into our 2019 performance, let me remind you what Centogene aspires to achieve. Our ultimate goal is providing precise medical diagnosis of inherited diseases at the earliest possible moment, transforming medical expertise and analytical information into actionable results for physicians, patients and pharmaceutical partners.

We accomplished this by using a multidimensional approach to analyze patient's data and by harnessing our unsurpassed knowledge of rare diseases to help physicians more easily diagnose patients and support biotech and pharma companies to develop new treatment options. Everyone at Centogene is passionate about achieving this goal, and you will hear how we are following through this goal in every aspect of our business throughout the presentation.

Now let's dive into today's presentation starting on Slide 5. We would like to focus on how we have delivered on multiple fronts in 2019. First, we are proud of our strong financial and operational performance. We grew our top line by approximately 21% in 2019, driven by strong performance of our Pharma segment. I will share some additional key metrics on subsequent slides that demonstrate a solid operational execution beyond the financials.

Second, we have made great progress expanding our pharmaceutical collaboration agreements, particularly with notable industry partners. This is an important milestone for us as it not only demonstrates our continued efforts to expand our pharmaceutical business but also speaks to the deep expertise that Centogene has built up in the rare disease space. Finally, we are proud of our IPO in 2019, which was a pivotal milestone in our evolution and set up Centogene for further growth as a partner of choice for the industry.

Please turn to Slide 6. In 2019, revenue grew by approximately 21% compared to 2018 to approximately EUR 49 million. This was achieved by approximately 24% growth in the Pharma segment, with significant progress made in expanding our key partnerships. I will let Richard walk through this in further detail in the financial review section.

I would like to speak about the operating performance that drove this strong financial performance. I want to share with you key metrics to consider for both our Pharma and Clinical Diagnostics segment over the next few slides.

Please turn to Slide 7. Let me first focus on our Pharma business. While these operational metrics help explain the strong financial performance for 2019, they are also a leading indicator for what to expect going forward. The first metric is the continued expansion of our client base. We are listing the number of pharma collaborations as the metric to focus on going forward because as more and more companies are coming to us to expand existing partnerships, we believe this better reflects our operational growth. In some cases, we expand an existing collaboration to new therapeutic indications. In other cases, we expand the scope of collaboration to include new activities. We gained 28 new partnerships during 2019, demonstrating a significant acceleration on this front.

The second metric I would like to introduce is the number of disease areas under our partnerships. This is an important metric because only 5% of rare diseases have an approved therapy. We need to accelerate our knowledge in order to help develop and improve therapies. We have expanded into 11 new rare disease indications, that is 11 new groups of patients for which we could help provide a potential life-changing treatment option.

The third metric I would like to present is number of biomarker partnerships. Biomarkers are a crucial element of how we can help pharma partners because they generate the molecular insights that can be used to inform the development of targeted treatment options. At Centogene, we are working on the discovery of numerous biomarkers and the number of biomarker partnerships speaks to the potential utility by our pharma partners once developed. Some of these partnerships are related to the utilization of biomarkers already developed and some are related to development activities themselves. We have entered into 7 more biomarker partnerships in 2019, bringing the total to 35. We will continue to focus in this area and expand further.

Please turn to Slide 8, where I will speak about the progress made in key strategic partnerships. First, I want to speak about our research partnership with Pfizer. As a reminder, this agreement is a research collaboration agreement, leveraging Centogene's database and repository to potential discovery and validation of novel targets for new therapies in the rare disease space. While we have been working with Pfizer for a number of years, this new agreement is a much broader partnership, and it's a testament to the depth and robustness of CentoMD into our medical knowledge in this field. CentoMD with more than 400,000 curated cases is what we believe to be world's largest database of rare disease cases with genetic, proteomic, metabolomic and clinical information.

Also, the concentration of rare disease patients from a wide range of ethnic backgrounds across over 120 countries, the structured manner of clinical information allowing for easy query of the data and the multi-omic composition of the data makes CentoMD truly powerful. I look forward to the great innovation to come from this collaboration for rare disease patients.

Our partnership with Takeda, which stems from the Shire relationship, has been one of the longest and most important partnerships for Centogene. More importantly, it recognizes our value in helping to bring therapies to rare disease patients. In recent years, we expanded this relation to include hereditary angioedema, or HAE. This is a strong endorsement from our key partner and complements our long-standing partnership with Takeda in lysosomal storage disorders, which extends over multiple years.

Please turn to Slide 9. Now shifting gears to our clinical diagnostics business. As we continue to emphasize, our clinical diagnostics business is a critical part of our offering. It plays a fundamental role that enables us to gain access to data from which we then gain extremely valuable knowledge. This is why volume growth is so meaningful for us. As you can see from the chart on your left, we have added 120,000 patients to what we already believe is the largest database of rare disease patients. Some of this growth comes from the Pharma segment, but we are all expanding our reach with the traditional clinical diagnostics business in order to keep expanding the breadth of our database.

The acceleration of our volume growth is better depicted on the right-hand side. We grew our volume by 27% in 2019 compared to 2018, but I also want to add that this 27% growth is mildly tempered, given the reduction in our noninvasive prenatal testing volume as we shift focus to our core genetic testing business. I still think it's a good reference point to think about the testing volume growth going forward.

Now please turn to Slide 10 for a closer look at our key milestone event, our IPO in the U.S. As you all know, Centogene completed this initial public offering and listed its shares on NASDAQ on November 7. As the founder of this company, in 2006, I viewed this as one of the most important milestones for Centogene because of what it means going forward.

First, we are able to invest IPO proceeds in places where we can accelerate future growth. We are at a critical juncture in making the necessary investments will enable us to continue Centogene's strong momentum and allow us to take our company to the next level.

Another important aspect that the IPO brings to Centogene is the visibility of being a publicly listed company. We were already getting more active in our conversations with prospective pharma partners, and the increased visibility will only further fuel this trend. In addition, the credibility that comes along with meeting U.S. SEC requirements will go a long way in establishing us as a partner of choice.

Please turn to Slide 11 for other recent achievements. In February of this year, Centogene's biorepository in Rostock, Germany, received prestigious accreditation from the College of American Pathologists, CAP. We were the first biorepository to receive such accreditation outside the U.S., which demonstrates how we are raising industry standards. We believe our adherence to the high-quality standards sets us apart from other players in the global market.

I also want to particularly mention the global Rare Disease Day event that we hosted on February 29. This was our 13th Rare Disease Day, this time with simultaneous events in Lahore, Pakistan; Berlin; and Mexico City. Centogene joined hands with patients, physicians, researchers, politicians and other partners to improve our knowledge and identify solutions for the challenges that rare diseases post to patients, their families and our societies. We felt compelled to raise awareness around the world about the immense burden that rare diseases can have.

This is particularly the case for societies with a high consanguinity rate where a large number of undiagnosed patients coexist with a lack of diagnostic infrastructure and targeted medical training. This is something all of my colleagues and I at Centogene are passionate about and we are thrilled at the level of excitement from those who participated.

Now please turn to Slide 12. As the situation surrounding COVID-19 worsens, Centogene felt the need to support the global community and do its part in preventing further spread of the virus where possible. Earlier last month, we announced commencement of testing for COVID-19 using our advanced technical equipment and expert medical knowledge. We set up a cross functional team, all of whom I must personally commend on their efforts and commitment to getting the testing up and running.

Following testing of Centogene employees, we expanded our efforts by providing testing to essential workers, including firemen and women and healthcare workers in Rostock and the local region. It was very important to us at Centogene that we do our part in helping our community deal with this global crisis.

In April, we further increased testing. First, by working with multiple partners to support commercial testing across the Europe region; second, by adding our new Hamburg lab location, which for now will house our COVID testing. It is too early to provide a potential financial impact on the commercial testing, but it goes without saying that we are extremely pleased to be able to leverage our capabilities to help the global community.

Let me now hand it over to Richard, who will discuss our financials in more detail.

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [4]

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Thank you, Arndt. Now please turn to Slide 14. Looking at our performance in 2019, we have grown our top line by approximately 21% compared to 2018. Looking more specifically at individual business segments, the Diagnostics business grew at approximately 18% and the Pharma business grew at approximately 24% compared to 2018. This is in line with the guidance we gave for 2019 when we stated our combined total growth at approximately 20%, driven by a fast-growing Pharma segment. On the profitability side, you will notice that the Diagnostics business profitability remained relatively flat, yet the Pharma segment profitability came down by 10 percentage points in 2019.

While the Pharma business is clearly a profitable segment, let me provide a reason for the decline. In 2018, there were some revenues from upfront fees associated with the one-off transfer of Centogene's existing intellectual property, which did not happen in 2019. Our Pharma business profitability will always be a balance between the revenue coming in and the mix of services that we provide, and this may fluctuate to a certain degree. I believe we are at a steady state at this point in time, but the profitability could fluctuate depending on how fast we accelerate top line growth.

Now let's look a little more in detail at the revenue performance in 2019 on Slide 15. On the Pharma side, we want to give you a breakdown of the revenue that comes from new contract. This gives you a sense of how much new business we are bringing in and how the existing partnerships continue to grow.

Looking at the past year, we brought in EUR 7 million of new business, while the existing business grew at approximately 20% compared to the previous year. You will notice that the new business grew at a much faster rate of approximately 35% in 2019. As Arndt had mentioned before in speaking about what the recent IPO means for us, I think this is the area where we can benefit the most in terms of making necessary investments and gaining further visibility in the market.

On the diagnostics side, if you focus on the core genetic diagnostics, excluding NIPT, our growth rate was approximately 24% in 2019 compared to 2018. As we have mentioned before, the NIPT business is not the core of our business nor central to our mission of generating medical insights around rare diseases. Whilst we previously entered this space for certain strategic reasons, we have now shifted our focus to growing our core genetic diagnostics business. In summary, we're growing even faster in areas of focus for future growth, which is a great message for the company.

Now please turn to Slide 16 for our fourth quarter performance. Our fourth quarter 2019 revenue grew by approximately 52% compared to the fourth quarter 2018, driven by approximately 110% growth in our Pharma segment. I will caveat this by reiterating the lumpiness of our Pharma business when looking at quarterly performance. Therefore, I would encourage you to think about our Pharma segment growth more on an annual basis.

As you have just reviewed, our Pharma business growing at a healthy rate, supported by good fundamentals. Whether a big contract is signed before or after the quarter, close is less important to us. On the profitability side, you see the tale of two cities. Diagnostics business profitability saw an increase due to the reduction of the NIPT business; Pharma business profitability, while still having a healthy margin, did decline in line with what I explained for the annual performance. As a reminder, this has to do with contracts we signed in 2018 with certain upfront fees.

Please now turn to Slide 17. Slide 17 shows our Q4 and full year P&L. Our results for the full year 2019 were impacted by a few drivers, which I'll briefly review now. Firstly, G&A expenses increased by EUR 4.5 million, which consists of investments in IT infrastructure and security, organizational expansion and share-based payments. Secondly, an increase in R&D investments of EUR 3.3 million represents an acceleration of efforts such as biomarker development and data generation, which is directly linked to the future growth of the company. Third, the real estate transfer tax expense of EUR 1.2 million that we incurred were a result of the sale and leaseback of our Rostock headquarters building, as previously discussed in our Q3 earnings call.

In summary, our cost base grew faster than our top line for the year. As discussed previously in regard to the timing of our IPO, we are making investments to accelerate our growth, and we are confident this is the right time to make these investments.

Now please turn to Slide 18. On this slide, we're looking at key cash flow and balance sheet items. 2019 was a very positive year from the perspective of cash flow. We had EUR 14.2 million cash inflows from investing activities, representing the proceeds from the sale of the Rostock headquarters, and a net of investments in intangible assets and laboratory equipment. The cash flow from finance activities was driven in large by the IPO, but also reflects the repayment of loans and additional interest due to early repayment.

On the balance sheet as of December 31, 2019, our cash and cash equivalents include the proceeds from the IPO. As mentioned in the Q3 earnings call, the increase in debt does not actually mean that our debt increased, but rather that we must now account for the lease liability for the next 8 years according to IFRS 16, an accounting policy effective from January 1 of this year, this is roughly EUR 20 million.

Taking all these factors into account, you can see that our balance sheet is quite robust. As a CFO, having a robust balance sheet is a reliable asset, especially during uncertain times as these.

Before handing it back to Arndt, I did want to make a comment about our outlook for 2020. As with many companies around the world, given the uncertainty stemming from the current COVID-19 crisis, we will not be providing guidance for the upcoming year. As you may recall, we have previously provided general guidance that our revenue is expected to grow by 20% to 30% for the next few years. However, due to an unprecedented level of uncertainty in the market, we have decided to refrain from providing a forward-looking statement at this time. We understand that the COVID-19 situation is weighing on investors' mind, and we plan to update you once the potential impact on our business becomes clearer and more quantifiable. We look forward to providing updates once we gain more clarity.

With that, I'll turn the call back to Arndt.

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Arndt Rolfs, Centogene N.V. - Founder, CEO, Chief Medical Officer & Member of Management Board [5]

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Thank you, Richard. Please now turn to Slide 20. Let me briefly summarize 2019 and our expectations for the year ahead. 2019 was a transformative year for Centogene. We expected well against our priorities. And our strong financial and operational performance last year provides a solid foundation for growth in 2020. We achieved 21% revenue growth driven by our delivery on all key operational metrics in 2019. 2019 was also an important year in terms of setting the right foundation for future growth. Some key achievements included the expansion of strategic partnerships and our successful IPO.

Finally, I would like to leave you with an expectation for 2020. Richard already noted that we will not be providing any financial guidance at this point in time. I want to emphasize that while uncertainty exists in the market, we will continue to be focused on executing against our strategy as we always have. I think this is more important than ever during such challenging times.

In addition, I also want to emphasize our growing position as the partner of choice in the rare disease space. This is increasing recognition by biotech and pharma companies that Centogene is the strategic partner that can help them bring target treatments to patients with rare genetic diseases. We appreciate your support and will continue on our lifelong commitment to patients.

I personally want to thank you for joining our call during such uncertain times. I know this pandemic is taking a huge toll on all of us. But I also know that we will get through this and come out stronger and more resilient on the other side. Thank you, again, for all the actions you are each taking to support the well-being of all of us.

With that, I will now turn the call over to the operator for the Q&A portion of our call. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question comes from the line of Sung Ji Nam.

Okay. Your next question comes from the line of Catherine Schulte from Baird.

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Catherine Walden Ramsey Schulte, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [2]

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(technical difficulty)

is what are your expectations for how that number should trend over time? And any number you're targeting in terms of new collaborations that you'll add in 2020?

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [3]

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Catherine, I apologize. But in the beginning, you were not being heard at our end of the line. So could I kindly ask you to repeat your question?

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Catherine Walden Ramsey Schulte, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [4]

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Yes, absolutely. You just noted that the number of collaborations will be a key metric to pay attention to. So any expectations on how that number should trend or what you're targeting in terms of new collaborations that you'll add in 2020?

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [5]

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Thank you for asking that question. Indeed, a very important metric to us. Yet as we just mentioned, we refrain from exact guidance. So trending is upward. So there will be new partnerships. There will be additional partnerships. The exact number, we are not quantifying at this stage. As you can also see from our past, even the exact number of partnerships does not necessarily reflect the revenues per partnership either. But it is trending upward as we speak.

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Catherine Walden Ramsey Schulte, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [6]

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Okay. And maybe more qualitatively, from what we can tell on ClinicalTrials.gov. It doesn't look like any of your major trials have been formally suspended. Is that the case? And even so, how does COVID impact your thoughts on enrollment time lines for the clinical trials you're involved in?

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [7]

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Thank you for asking that question. And indeed, many of the releases in the press regarding clinical trials in general but also affecting rare diseases would indeed point at a slowing down, yet, the current information we're sharing is regarding year-end. So it's very hard to give you any clear indication at this point about what's happening in 2020, other than echoing what you see in those market announcements, that indeed, we would expect an impact from the clinical trials in general slowing down. And then I hand over to Arndt.

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Arndt Rolfs, Centogene N.V. - Founder, CEO, Chief Medical Officer & Member of Management Board [8]

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Richard, thank you. I guess Centogene is still doing a very nice job in the topic of the clinical studies, which is based on the one side and the huge expertise of our clinical study team. And on the other side, all of the technical solutions we have developed in the last years, like the simplicity in blood drawing, the simplicity of logistics for sending the DBS to CentoCard all over the globe and also standardization of the queries and the questionnaires we are addressing on labeling our clinical programs are the basis why Centogene is still doing very well in this actual crisis.

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Catherine Walden Ramsey Schulte, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [9]

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Okay. And last one for me. Understand you don't want to give potential revenue impact for COVID testing. But any color on the current testing capacity in your own lab and where that could ramp to over time?

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [10]

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We clearly see that we have been able to ramp up the testing capacity also by opening the new facility in Hamburg. The exact numbers are not distributed yet. And we also see a more and more commercial interest. As soon as we have more information on that, we will brief the market when it becomes at the level that we can actually communicate any expectations to be raised.

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Operator [11]

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And your next question comes from the line of Puneet Souda.

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Puneet Souda, SVB Leerink LLC, Research Division - MD of Life Science Tools & Diagnostics and Senior Research Analyst [12]

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Hopefully, you can hear me?

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [13]

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Yes, we can, Puneet. Thank you.

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Puneet Souda, SVB Leerink LLC, Research Division - MD of Life Science Tools & Diagnostics and Senior Research Analyst [14]

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Okay. Great. So first question on the CentoMD database. What's your expectation of expansion of the numbers in there, given the impact we're seeing from COVID in number of countries where patients are not able to visit their physicians? And what is the -- what's your expectation? Obviously, having a CentoCard makes it easier, but just help us understand what -- should we expect similar growth that you have seen in past continuing in the CentoMD database?

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Arndt Rolfs, Centogene N.V. - Founder, CEO, Chief Medical Officer & Member of Management Board [15]

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Thanks for the question. I guess you're addressing a really important topic. I can only repeat what I have easily drafted also for the clinical studies. The very well-developed logistic, the simplicity of the logistic, and also the easiness how to send the material all over the globe is obviously a very strong basis, while we are still doing very well. We do not see a significant effect on our business, actually. So we still believe that we are exactly following what we have mentioned and planned for the 2020.

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Puneet Souda, SVB Leerink LLC, Research Division - MD of Life Science Tools & Diagnostics and Senior Research Analyst [16]

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Okay. And then on COVID-19 testing. Can you actually provide us -- we don't have a great view into how the pricing is working in Germany, and sort of what sort of benefit there is per test, could you elaborate on that? And just help us educate a little bit about sort of testing that's worked relatively well in Germany compared to most other countries, and generally -- and couple of other European geographies as well? So could you -- if you could just give us a high-level view there and maybe something around pricing as to -- if you expect to see some benefit from such -- from that pricing?

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [17]

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Without being able to disclose any concrete pricing at this stage because it's still developing on a daily basis, I can comment based on all the commercial context that we're having. We do know that once we would disclose any such contracts, they will be at a positive gross margin. And that's as far as we can go at this stage, Puneet. As soon as we know more in that respect, we're happy to disclose. We understand the need from the market to start modeling, but we are not at a stage that we can disclose that at this moment.

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Arndt Rolfs, Centogene N.V. - Founder, CEO, Chief Medical Officer & Member of Management Board [18]

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Richard, thank you. And let me just add, Puneet, this is not just a Germany-based business we have started to develop. This is, in a meanwhile, a global business because as we are all aware, the need to have access to a higher numbers of testing capacity is a general and a global need. Therefore, the positioning of Centogene even though it's starting for sure in the German market, it's clearly focusing on the European, also the U.S. market.

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Puneet Souda, SVB Leerink LLC, Research Division - MD of Life Science Tools & Diagnostics and Senior Research Analyst [19]

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Yes. But my question was more specifically on COVID-19 testing wise. Can you give us more in terms of where Germany stands? It seems like they have managed testing better versus other countries, and in some pockets in Europe have managed those better. What is your expectation sort of going forward? Because is that testing -- is that testing going to have a longer productive tail to this? Or is the testing expected to decline in the sort of the second half as the pandemic or epidemic in individual countries is managed better?

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [20]

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It's a very interesting question. As it is an unprecedented situation, as disclosed also in the 20-F in our Risk Factor. It is very hard for any government we noticed to take the actions that would be, in hindsight, considered the most appropriate. You see a big distinction how every country is dealing with it. Even though some had a much earlier warning than others because the first people noted with the infection were only found or identified much later in certain countries. Wuhan being the place where it surfaced initially.

If you look, for example, at Sweden versus Denmark versus Germany versus U.K., again, very different responses and quite some similarities as well. Very similar press releases about the testing would be necessary to get your hand around the expansion of the number of patients and to make sure that you control, particularly the number of IC beds being occupied by such patients, eventually, if turned into a severe stage of the disease. Everybody seems to subscribe to the concept of more testing being the more appropriate response, yet that doesn't mean that, that is affected at the same speed that such utterings enter the press, and then I hand over to Arndt.

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Arndt Rolfs, Centogene N.V. - Founder, CEO, Chief Medical Officer & Member of Management Board [21]

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Richard, thank you. And Puneet, let me just remind you, I guess, it will be definitely a situation where we will need the virus detection tests based on the pharyngeal sampling will be a test that will be necessary at least for the next 12 to 18 months. Because at least in Europe and the U.S., we cannot expect that we have a very rapid conversion of the seropositivity for the virus, number one. Number two, Germany, indeed is doing a rather well job regarding the numbers of testing per the general population.

However, if we are thinking about the solutions how to restart the economy and how to protect best, especially nursing homes and elderlies who have a higher mortality, it's very clear we have to further upscale the testing. And that's exactly the responsibility on the one side of the market, on the other side, Centogene has it addressed. And again, we feel very well positioned with the simplicity of the solution and the simplicity of the logistics, we have developed very rapidly with our R&D team to address that topic.

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [22]

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Yes. Maybe to echo on that, I guess, what we mentioned earlier about why NIPT was strategic to us was to demonstrate we can ramp up very quickly, and that's exactly what we have just demonstrated again in a market situation where everybody was and is struggling to find all the resources necessary, including consumables, like the swap material and/or the reagents. We've actually been able to demonstrate to the market that we did pick that up very quickly, even though we were not a lab outfitted to do such a mass testing to begin with in that field. So I guess that should be considered a contribution or an exemplary of how we respond to specific situations where they become applicable.

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Puneet Souda, SVB Leerink LLC, Research Division - MD of Life Science Tools & Diagnostics and Senior Research Analyst [23]

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Okay. That's great. And then last one, if I could, on the -- in terms of business development activities, what are some of the changes that you're seeing from some of the pharma partners or new pharma partner recruiting or pharma partner conversations that you're entering into? How is that progressing? Is it as effective to do that virtually now versus doing it in person before? And help us just understand how that pipeline is potentially looking.

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [24]

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Thank you for that question. It's very obvious that what we're doing here right now as in a virtual conversation amongst people around the globe is what we are applying also to these pharma business development efforts. We very recently had, for one of our major partners, a virtual team meeting where we had as many of their sales staff, their business development staff on the phone as we had ever had before. So on the one hand, it is much more difficult to get people face-to-face, if not impossible, yet it is possible to do it virtually. And depending on the quality of the relationship existing before, it is easier or more difficult.

I can't give a generic answer there. But having so many, for example, of that partnership, salespeople available in that call, that was unprecedented. We would never have had that number of people in one meeting if we ever had done that in the past because those people would have been on the road. And now they're all in their home office, and thus they were available. So it's advantageous, it's disadvantageous. We cannot tell you yet how that balance will be stricken over time, what the effect will be on the revenues that we will be able to put into our books. But we do see everybody picking up this virtual reality in a very positive way and trying to see the bright side instead of just looking down into the dark.

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Operator [25]

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And your next question comes from the line of Luke Sergott.

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Luke England Sergott, Evercore ISI Institutional Equities, Research Division - Associate [26]

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I appreciate how you guys are focusing on the metrics of the collaborations and going to give us that going forward. Can you give us an idea of those 28 new collaborations? Just give a little more detail on how many are new relationships? How many of those new collaborations are extensions of past relationships that are growing in scope and size of the contract? And some type of pacing on how it shook out over the year? Like how many did you guys book in 4Q, 3Q? And how that's stacked up against 2018?

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [27]

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Thank you for asking the question, Luke. We have not stacked it up here now in preparation for this call on a quarterly basis, but we will go -- going forward, most likely report on that, as we have started doing in this 20-F for the first time. So please bear with us and give us some time to gather that detail in answering your question.

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Luke England Sergott, Evercore ISI Institutional Equities, Research Division - Associate [28]

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Okay. Great. I appreciate. I understand. And then I guess when you look at your 2019 targets. We're talking about the whole year here. Can you give us an idea of how you performed against those internal metrics?

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [29]

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Yes. The internal metrics we make have different aspects. One is obviously a cost control measure. I'm the CFO, I like to see that. And the other one is also the revenue growth, which is both Arndt and mine together. So we actually develop metrics where we say we want to exceed the revenue ones, and we're happy to undercut the cost control ones. In general, the cost control ones, we've been very effective in managing both towards execution, but also as in cost control. Regarding the revenues, we have outperformed the 20% target that we had given. So we have outperformed that. Obviously, we also make a very much -- a higher upside potential case, and we have done 20% plus, we've not done 30%.

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Luke England Sergott, Evercore ISI Institutional Equities, Research Division - Associate [30]

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Okay. That's helpful. And then I guess on the last one here. The EUR 4 million milestone from Denali and Evotec, can you give us an update on the progress with those relationships? When we can expect any other milestones? And any other new collaborations that over the next couple, let's say, 6 months, where we can expect more milestones from new collaborations?

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [31]

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As you can read in the 20-F, we had about EUR 1.9 million in similar fees throughout the year 2019 in comparison with Q3 2018 of EUR 4 million. So that's the only metric I can give you there. The other ones, as you would appreciate, in the final negotiations, such terms often change towards more favorable upfront type fees and revenue recognition opportunities as well as more backward pushing. So it's extremely hard to give you that guidance.

I would like to reiterate what I said earlier, that the lumpiness as well as the exact signing of a contract is not that relevant to us. We just want to make sure that we are predictable over that annualized figure, which we have demonstrated again. You might recall the Q3 call, where we mentioned that we were expecting some but didn't get them yet, and obviously, the high upside we realized in Q3 2018 was then a bummer in comparison with the, let's say, more normalized Q3 2019. Yet in Q4 2019, we've demonstrated a very nice growth to compensate for that, let's call it, shortcoming in this now, in Q3 2019.

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Operator [32]

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(Operator Instructions) And your question comes from the line of Sung Ji Nam.

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Sung Ji Nam, BTIG, LLC, Research Division - Director & Life Science and Diagnostic Tools Analyst [33]

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Apologies, I think my call got dropped. So I missed some of the questions. But was wondering, one, on the COVID testing. Did you guys talk about what type of platform you're using currently for that? Is it PCR, RT-PCR? Or are you able to leverage some of the next-gen sequencing capabilities?

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Richard Stoffelen, Centogene N.V. - CFO & Member of Management Board [34]

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Thank you. Great question. What we're doing is detection of the virus RNA. So we start for sure, first with the virus isolation followed by the RT-PCR and the detection on a very simple light cycle of Roche platform technology. We have decided to take this platform because there is no limitation in the equipment. So we would not expect to realize any shortage on the one side. And on the other side, it's a very well-established technology, and it's very easy to get upscaled. One of the messages Centogene is communicating to the market that we should not limit ourselves by the limit in some of the consumables actually specifically developed for the COVID testing. So our expertise is using their knowledge in the molecular biology and molecular genetics to easily upscale it.

For the NGS detection of COVID, we do not believe that this is, at least per today, the ideal platform because especially in the COVID testing, we need 100% sensitivity not to miss an individual patient. And especially in the early stage of the infection, it's so critical therefore to have the highest sensitivity in detection, one of the reasons why we strongly believe that the RT-PCR platform is actually the best one for the identification of the patients.

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Sung Ji Nam, BTIG, LLC, Research Division - Director & Life Science and Diagnostic Tools Analyst [35]

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Okay, great. And then apologies again if I missed this, but you have a pretty global business. So I was wondering from the COVID-19 impact thus far -- so far this year, are there any regions that are less affected potentially from your customer standpoint? And then you also alluded to starting to think about reopening the economy, obviously, slowly. Could you kind of talk to what that looks like, kind of which parts of your business you may see beginning to return to more normalcy kind of over the next several months?

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Arndt Rolfs, Centogene N.V. - Founder, CEO, Chief Medical Officer & Member of Management Board [36]

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Thank you. That's truly an excellent question. I guess we have access to all of the officially available epidemiological data. And these data are demonstrating that the Middle East area seems to be less affected at least based on the officially available data regarding the COVID-19 pandemic. What we are already realizing indeed is that the number of officially communicated affected patients and also patients passing away goes down significantly in the Middle East. So we strongly believe that there is a good tendency, only per today, to expect that there will be some normalcy in the Middle East area very quickly, maybe even faster than in Europe.

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Operator [37]

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There are no further questions at this time. Please continue.

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Sun Kim, Centogene N.V. - Chief Strategy & IR Officer [38]

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Great. Thank you, operator. Let me take this opportunity to thank all the audience for joining us and ask everyone to please stay safe. And thank you once again for joining our full year 2019 earnings call.

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Operator [39]

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And that does conclude the conference for today. Thank you for participating. You may all disconnect.