Centogene N.V. (CNTG) on Q4 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by and welcome to CENTOGENE Q4 and full-year 2021 Earning Results Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. . I will now like to hand the conference over to your speaker today. Mr. Lennart Streibel, please go ahead, sir.
Lennart Streibel: Thanks, Roberto. Hello and thank you for joining us for today's Q4 and fiscal year 2021 financial results and business update conference call. This morning, we issued a press release on our results highlighting recent accomplishments and the outlook for the upcoming year. The fully release can be found on the Investors section of the CENTOGENE website at centogene.com. Before we begin, I would like to remind everyone that statements we make on this conference call will include forward-looking statements within the meaning of the U.S. Securities laws, including those regarding our strategic plans, development programs, and future 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, March 30, 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 regarding these statements appear in our SEC filings. Joining us on today's call are Kim Stratton, CENTOGENE's CEO and Miguel Coego Rios, EVP Finance and Appointed Interim CFO. We will first begin with a general business update, followed by a summary of our financial results for 2021. We will then open up the call to Q&A session. The call is audio only. I would now like to turn the call over to Kim Stratton, CENTOGENE CEO. Kim, over to you.
Kim Stratton: Thank you, Lennart, and hello everyone. We are grateful for you joining us today, and I'm also really grateful to be here representing CENTOGENE, as the CEO. Probably, I should start off with the acknowledgment of my predecessor, Andrin, thanking him for his contributions and wishing him continued success personally, and also, professionally in the future. I would also like to thank everyone here at CENTOGENE for their dedicated work to build and evolve the company, and for the very warm welcome I received since joining. Since assuming the CEO role, I've met many great people, a great group of diverse and exceptionally capable professionals. All of them deeply dedicated to improving the lives of hundreds of millions of people suffering from genetic, and especially, rare diseases. So I joined CENTOGENE in an interim role in January, and I was excited at the opportunity to assume the role permanently as of last month. I've realized, it's really important that my experience with the company date back to 2013 with my responsibility then, as the International Head for Commercial Business at Shire, where much of my role was focused on rare diseases. I see our successful collaboration with Shire, now, Takeda, as a blueprint for CENTOGENE 's tremendous ability to partner with leading biopharma partners, to provide great value for partners and rare disease patients alike. I think this serves as a prime example of where I see CENTOGENE excelling, differentiating and positioning for future growth. But first let's discuss the 2021 results. Let me highlight the key messages for the for the day. So we're really encouraged by the progress achieved in the fourth quarter of 2021. In Q4, we recorded solid quarter-over-quarter revenue growth in both core businesses of Diagnostics and Pharma. This growth has exceeded our prior guidance given for the full-year 2021. And I think overall shows the annual core business growth of 11%. And we are positioned to strengthen our core business over the course of 2022. The management team and I are really focused on expanding and adding partnership with, with BioPharma, both pipeline building and also execution. In the fourth quarter, we added approximately 24 thousand new individual samples to our extensive set CENTOGENE Bio/Databank. This is a steady increase towards our goal of reaching 1 million individuals overall in the CENTOGENE Bio/Databank. And even though we are strategically shifting out of the COVID business, and this is on track by the way, the COVID segment still has contributed better-than-planned in quarter four. Recent highlights since 2021 also include the successful closing of combined equity and debt financing, raising approximately $62 million to strengthen our balance sheet, strategic management appointments completed, and also expanded pharma collaborations. You saw the Pfizer announcement just this month and we're expecting another key extension announcement to come out over the next couple of weeks. These milestones reflect effective execution by our overall team, setting a strong foundation that we can build upon, throughout 2022. Now, let's look a bit closer at the 2021 results. For the purposes of today, I will focus on the core business, and Miguel will later comment on the COVID-19 business separately. The core business encompasses our Diagnostic and our Pharma business. These are the two key drivers of CENTOGENE 's continued growth. In the fourth quarter, we reported core business revenue growth of 34% versus the same quarter last year for 2020. This was the third consecutive quarter reporting core business growth overall. However, it was the first quarter since the start of the pandemic, where we observed both growth in Diagnostics and Pharma. So let's first cover our Diagnostics business. The Diagnostics business grew 30% in the fourth quarter and 26% in the full-year 2021 versus full-year 2020. And I think it's important to talk about a couple of operational highlights. In Q4, we reported order intake of approximately 15,000 test requests. This represents a 30% increase compared to 12,000 in the same period for 2020. We believe we offer the broadest diagnostic testing portfolio for rare diseases globally and we cover over 19,000 genes. in quarter 4 2021, we signed the collaboration with Twist Bioscience for the development and the commercialization of custom assay kits for rare diseases. And in January 2022, we released the CentoCloud globally. It's our cloud-based bioinformatic solution, which enables decentralized analysis, interpretation, and quality reporting for laboratories all over the world. I think it's important to note that our diagnostics business was a broccoli and significantly impacted in quarter 2 of 2020, with sales decline of almost 50%. Since then, Diagnostic revenues have grown consecutively each quarter to recover to the current level of €7.5 million. Please note that this is at the same level as of quarter 1 2020, which was the record quarter in Diagnostic sales in the company's history. I think we can report that we have now recovered to pre -pandemic levels in our Diagnostics business. I would like to take this opportunity to thank, Maximilian Schmid and our Diagnostics team, as well as, Florian Vogel and our laboratory team for this turnaround performance. And we will not stop here, our Diagnostic business remains a key pillar of our strategy and will provide a stable base for our business. It keeps us close to both patients and physicians and it will continue to fuel CENTOGENE Bio/Databank. Now let's turn to our Pharma business. Our Pharma business grew 40% in the fourth quarter versus Q4 2020. For the full-year 2021 Pharma revenue were €15.6 million, yet, it was still below the prior year. We believe this year-over-year trend reflects a longer recovery time in the Pharma segment just compared to Diagnostics. It's important to remember that prior to the pandemic, CENTOGENE had been on a solid growth trajectory, averaging around 20% annual revenue growth in the years leading up to 2019, the impact of COVID-19 pandemic on CENTOGENE in 2021 and 2020 was twofold. Internally, the company deployed great assets to setup and opportunistically pioneer commercial COVID-19 testing in Europe. It was really needed. This was a significant driver of revenue, and it certainly was also a service to the health system and to society. However, it did also mean that some of the focus shifted away from execution in the core diagnostics and Pharma businesses. Externally, the pandemic also slowed down or stalled commercial and clinical development programs and studies at BioPharma company, leading to a contraction of the company's business pipeline. While CENTOGENE experienced this decline, we know this impact was also felt by the broader industry. For example, in 2021, the annual sponsor survey by Jefferies reported that 60% of new trials and 40% of existing trials were either delayed or paused due to pandemic-related disruption. Looking forward our return to normality provides an opportunity for CENTOGENE in 2022 and beyond, a potential tailwind for catch-up and additional activities in the industry. And we are positioning the company to proactively identify the relevant trial and policies and address them as part of our business development and partnership pipeline expansion. The key 2021 Pharma highlights are: Q4 revenues was the first comparative growth quarter since Q1 2020. We also announced the following. We enrolled the first patients in the clinical study, partnered with Alector, targeting data-rich genetic testing for more than 3,000 frontotemporal dementia or FTD patients. We expanded the clinical development partnership with Agios Pharmaceuticals to provide genomics and central lab support for Agios three global pivotal trials in Thalassemia and sickle cell disease. And more recently, a few more milestones. As we announced just a couple of weeks ago, we expanded the data access and collaboration R&D agreement with Pfizer, to advance the discovery and validation of novel genetic targets, as candidates for the development of new therapies for rare diseases. We know that providing insight into these types of partnerships is of tremendous value for our investors and for the public, and we're committed to improving transparency in this regard. On the research side, we have joined forces with Insilico Medicine. The partnership is leveraging the CENTOGENE Bio/Databank and opposition intelligent together with Insilico 's AI-based drug discovery platform, to identify new targets and accelerate orphan drug development. In this case, for Niemann-Pick type-C or NPC, which is an ultra rare disease, for which no FDA approved treatment exists at the moment. So we're looking forward to the outcomes in the second half of 2022. Now, before handing to Miguel for the financial section, I would like to take a moment to recognize Rene Just, our outgoing CFO. On behalf of the company and the Board, I would like to thank Rene for his contributions during his tenure, including internal process improvements, the cost reduction process, accelerating our annual reporting cycle, and also to thank him for securing a strong financial foundation for CENTOGENE with the financing that closed in February. Rene has been fully engaged with the transition of CFO responsibilities to Miguel, including the preparation of our 2021 report. We wish Rene all the best in his future endeavors. And in the same period, it's a privilege to welcome Miguel Coego Rios to the CENTOGENE team as Interim CFO. I've worked with Miguel in previous roles and with his more than a decade of experience in senior finance roles in the biopharma sector, I can personally attest that Miguel brings great expertise for the role. And with that, I would like to turn over to Miguel. Miguel.
Miguel Coego Rios: Thank you, Kim and hello, everyone. Before we start, I would like to emphasize how excited I am to join in CENTOGENE at this time. The company has set a solid financial foundation with the financings completed in the first quarter of this year. And we are in a strong position to deliver on the next step in the evolution of these strategy. I am looking forward to announcing the value generation of CENTOGENE by ensuring optimal resource allocation on our strategic path forward. I now will turn to the fiscal year 2021 financial results. Our fiscal year 2021 revenues increased by over 48% to €190 million in full year 2021 compared to €128.4 million in 2020. This development was mainly driven by the COVID-19 testing, generating €146.4 million in the year, up €57 million from last year. Importantly, the growth also reflects our return to one of our growth in the core business. I will discuss the COVID business separately in a moment and first focus on the core business, which consists of our Diagnostics on Pharma segments. The core business expanded by 11% in full-year 2021 to €43.5 million compared to €39.1 million in full year 2020. disclose was largely driven by the material uptake of our Diagnostics business. The core business would pick-up significantly towards the end of 2021, demonstrated by a 34% increase in core business revenues in the fourth quarter. For the Diagnostics segment, we recorded €27.9 million in diagnostic revenues in 2021 compared to the €22.1 million in 2020, representing revenue growth of 26% for the business segment. We are proud to report that this is a record year. The Diagnostics segment received an order intake of 57,000 tests request in 2021, representing an increase of 37%, 36% as compared to the 42,000 test requests receiving full year 2020. Increasing revenues were primarily due to the surge in order intakes for panel testing, exome and genome screening during 2021. Total revenues from panel testing exome and genome augmented to approximately €20 million in 2021, representing an increase of 25% as compared to €15.9 million in 2020. The diagnostics segment revenue increase was mainly from increased demand in the Middle East in our region. This leads to an increase in segment gross margin by over 22 percentage points, which you will also see reflected in the segment on adjusted EBITDA. In Q4, Diagnostic revenues were €7.5 million, up 30% versus Q4 2020. It is important to note that this is about the same as the prior record quarter in the Diagnostics segment before the pandemic in Q1 2020. So it is fair to say that the Dx business is truly . Turning to the Pharma segment, Pharma revenues decreased 8% year-over-year from €16.9 million in 2020 to €15.6 million in 2021. The annual comparison in Pharma revenues reflect the impact of the COVID pandemic and related slowdown, as Kim mentioned in the earlier. However, I will talk later about the positive performance in the fourth-quarter. And also, on the value of Pharma contract signed in 2021, which significantly exceeds the value of deal assignment in 2020. This is extremely encouraging as our partnership agreements are major growth catalyst for the Pharma sector. We have started a number of initiatives to accelerate the Pharma recovery and growth for the year 2022. In 2021, we enter it into 18 new collaborations and completed 39, resulting in a total of 45 API collaboration per year-end 2021. Revenues from our new collaborations totaled €2.3 million in 2021, with upfront payments of €0.5 million related to setup fees. In the prior year, revenues from new collaboration totaled approximately €1 million, with no upfront fees included. The main drivers of pharma segment revenues were partnerships in patient identification and clinical development. This is something we expect will continue. However, we will strive to improve in a range of areas, including first, focus on the contribution margin per contract. For example, by providing more upfront fees into the proposal and contracts, we believe this is going to capture the value of the platform we have built and invested in. And second, improve our portfolio definition. For example, in the category of patient identification, we are actually providing a lot more value than just finding a patient, so we will work to position our set of distinct offerings under the umbrella of market access and expansion. In Q4, pharma revenues were up €6.5 million compared to €4.6 million in Q4 2020. So this is an increase of 40%, showing great end-of-the-year momentum. Turning to our COVID business. Post Q3, 2021, CENTOGENE made the executive determination to begin phasing out this business segment, which was communicated to our stakeholders on the last quarterly update call in November. The segment adjusted EBITDA contribution from the COVID segment was still €20.7 million in full-year 2021, a decrease by €16.5 million year-over-year. Revenue generated for the year of 2021 amounted to €146.4 million with approximately 2.3 million tests request received within the year. The segment gross margin was significantly lower in 2021 compared to 2020, which also caused the overall company growth margin to drop. The significant change was driven by a range of factors, including the ship to shop contractors to increase flexibility, changes in government contract structures, downturn of COVID testing in the second half of 2021, accelerated depreciation amount and amortization expenses and cost related to the shutdown of our Hamburg lab and unprofitable testing sites. As a result, gross margin for the segment declined from 43% last year to 9% this year. This impact was specifically felt in Q3 2021. Afterwards, we were able to streamline operation by closing unprofitable testing sites, this resulted in improved contribution from the segment. The COVID business is some planted phase out by the end of the current quarter. The long-term plan is being diligently executed and Q4 was actually better than Planet. At the end of this activity, COVID-19 testing, we have generated over €250 million revenues for CENTOGENE, mainly through airport test centers supporting and enabling international travel, another contract supporting local and state governments, which massively disturbs the solution capacity. The business will have definitely delivered a total adjusted EBITDA contribution of roughly €60 billion and positive cash contribution of about €50 million. We look forward to now refocusing our airports to further build and scale our core business. Going further down in our per annum and gross margin by segment, overall gross margin for the company was 15% in 2021 compared to 35% in full-year 2020. As discussed, this decline was caused by the COVID margins, but the core business improved. Our core business segment diagnostic and pharma combined generated total gross margin of 34% of revenues, a significant increase versus our core business gross margin of 14% in the prior year. This improvement mainly reflects the improved goal to gross margin in the diagnostic segment which brought margin of 38% versus 16% in the prior year, mainly reflecting the product mix toward higher margin products. The margins in the pharma segment improved from 12% in 2020 to 26% in 2021. To note, the prior year comparable reflects an impairment of €4 7 million due to the capitalized biomarkers included in cost of sales. The total segment adjusted EBITDA was €29.5 million in full-year 2021, compared to €31 million in full-year 2020. Again, the decline was caused by COVID as discussed. But the core business improved year-over-year and showed a stronger adjusted EBITDA contribution. Core business segment adjusted EBITDA that said, the sum of the adjusted EBITDA in the diagnostic and pharma segments was €8.9 million in full-year 2021, compared to €3.8 million in full year 2020. The picture for our two core business segment is mixed. Adjusted EBITDA for the diagnostics segment, turn from minus €2.4 million in full year 2020, into a positive adjusted EBITDA of €4 million. The adjusted EBITDA for our pharma segment was €4.8 million compared to €6.2 million in full year 2020. And the decrease was primarily attributable to lower revenues. The segment adjusted EBITDA leaps out the so-called corporate expenses. And I will go through the remainder of the P&L. Our expenses, including other operating income, total approximately €74 million for the year 2021, an increase of €9.3 million compared to last year. General administrative expenses increased by €6.6 million deploy €6.7 million, the increase was mainly due to an increase in personal costs, included management additions, on severance cost related to the restructuring announced in November 2021. G&A also include share-based compensation expenses of €8 million in 2021, an increase of €2.4 million, as compared to €5.7 million for the year of 2020. In addition, we saw increased cost relating to being publicly listed company, as well as an additional investment in IT support and data center costs. Second, our R&D expenses were €19.3 million, approximately €4.4 million higher than in 2020. This increase mainly represents software enhancement costs on a research cost related to bio market development projects that don't qualify for capitalization. On a related note, in 2021, we booked an impairment of approximately €1 million on bio-market that have been the de -prioritized, as we focus on the development of bio-market directly linked to ongoing Pharma projects or our project pipeline. The R&D expenses include extended investments in additional intelligence and database development in 2021 and associated amortizations. We believe we will see a decline of overall corporate costs in 2022, with the effects of the restructuring fully implemented on Florida assessments and action we are reviewing. We will share more of these in the future. Thirdly, our selling expenses including sales and marketing expenses for the year were €9.8 million, an increase of €1.7 million, mainly reflecting an increase in personnel expenses, online service expenses, as well as travel expenses due to the easing of travel restrictions from the COVID-19 pandemic. We believe investing in sales force is the right step. In total, our operating loss was €46 million, a decrease of €26.3 million compared to a loss of €19.7 million in 2020. The main driver was the lower gross profit generated in the COVID-19 testing business. Looking at profitability overall, I would like to comment that we, as the incoming management, are and will be focusing on our spending, ensuring that we are operating efficiently and spending with great accountability and investing wisely. We have kicked off a number of the review initiatives to drive efficiencies in our lab and IT operations as well as our administrative functions. It is too early for us to provide any media guidance, but it is our clear target to lower our corporate expenses, while supporting the businesses with great potential. Turning to cash flow and balance sheet highlights, as of December 31st, 2021, we have a €17.8 million of cash and cash equivalents on our balance sheet. With regard to our overall debt, I would like to remind you that as of the end of December, this includes approximately €19 million of lease liabilities. Looking at the movements, cash flow used in operating activities was €21.7 million, an increase of €30.1 million compared to cash generated from operating activities of €8.5 million. This change was mainly driven by the lower contribution from the COVID-19 business segment in 2021 I discussed. Notably, contribution from COVID should be positive in Q1 2022. In 2021, class cash flow used in investing activities was €5.4 million as compared to cash flow used in investing of €16.2 million improved year in 2020. Consistently, our decision on the COVID business, the decrease is mainly due to a reduction in COVID-19 related investments. Cash flow used in financing activities was €3.2 million in 2021, compared to cash generated of €14.8 million in full-year 2020. Here, 2020 mainly reflecting the follow-on equity offering, with contributed €22 million in Q3 2020. Excuse me, one second. Sorry. Again, let me reiterate at one of our clear targets for this year, is to improve our expense structure. And therefore, improving our core business operational cash flow for 2022 on the job. Please note that after the end of the year, we successfully secure, approximately €55 million in aggregate equity and debt financing. These include €15 million of pipe financing from existing investor, as well as approximately $40 million in a debt financing from Oxford Finance. The financing was important to address the going concern qualification we published in the third quarter last year, and I'm confident that this has indeed been addressed. CENTOGENE now, has sustained the balance sheet to transition into our next phase of growth and execution. With that, I would like to hand the call back over to Kim for discussion on outlook, strategy, and guidance. Thank you.
Kim Stratton: Thanks, Miguel. Okay. So now we've looked to 2021 financials in depth. I'd really like to give an outlook on where we see the business going. We're looking forward to a solid emergence in 2022, a strong focus on growth, on execution, making sure we put a fit for purpose, organization, and in line with our three strategic pillars. So our biopharma partnerships, strengthening the CENTOGENE Bio/Databank, and keeping the focus on our Diagnostics business. The let me touch on each of these key drivers in terms of the mid-term success. We believe we have the largest real-world Bio/Databank for rare and neurodegenerative diseases. The CENTOGENE Bio/Databank is a leading global proprietary platform. It's based on real-world data and it has a biological repository representing over 650,000 individuals from over 120 countries. So our platform includes epidemiologic, phenotypic, genetic, and multiomics data that reflect a glue -- a truly global population across all ethnicities, and we believe this represents the only platform that comprehensively analyses multilevel data to improve the understanding of rare and neurodegenerative hereditary diseases. Out of the estimated 7,000 rare diseases they say that 5,600 of these have a genetic origin. And in our CENTOGENE Bio/Databank, we have over 2500 diseases covered. It's important to remember that new genetic variance associated with rare diseases are discovered every year. And as a result, rare genetic diseases that can be diagnosed needs to be updated continuously with the new information. We have most of these variances updated in our CENTOGENE Bio/Databank. Our capabilities enable us to deeply characterize patients with rare genetic variants, including R&A and transcriptomic analysis, proteomic analysis, metabolomic analysis. And this helps to significantly delineate mechanisms of disease and thereby characterized molecular markers of disease beyond the variance captured through DNA sequencing. In 2021, we added 94,000 individuals to our leading CENTOGENE Bio/Databank. And we are seeing growth trends in terms of depths of atypical information, as well as the optional research consents rate. Additionally, our network of active physicians is now over 29,000. It's truly a unique asset. We plan to continue growing our repository of information and biological examples through the identification of additional patients by expanding our clinical network and with our current biopharma partnerships even further. We are also working on better packaging our capabilities into solutions for biopharma partners. And I think one example offering these solutions is the data access and collaboration agreement with Pfizer, which utilizes the CENTOGENE Bio/Databank. Our Chief Data Officer, Bettina Goerner will join us also for the Q&A session later if you have any further questions on that topic. In terms of biopharma partnerships, we use the CENTOGENE Bio/Databank and we are able to add significant value to biopharma partners along their entire development plan, accelerating and hopefully de -risking pharma projects. Rare diseases affect over 350 million patients globally, and less than 5% have of an FDA -approved treatment. The rare disease drug market is expected to grow at about 11% annually to $207 billion in 2024. And to note, these rare disease drugs will capture approximately 18% of worldwide prescription sales by 2024. And if you add the neurodegenerative diseases base here, the numbers are much, much larger. The introduction of new treatments in the development of drugs in this space is still constrained by a number of factors. And lack of high-quality information regarding the clinical heterogeneity of medical symptoms, the lack of comprehensive and curated medical data, the difficulties in the early identification of patients, a lack of biomarkers, and also difficulties and understanding the market size and epidemiology. Out services span the full spectrum of Diagnostics, drug discovery and development, clinical development, including natural history studies, biomarker development, as well as patient recruitment, identification, market access, and market expansion. December 31, 2021 we collaborated with 33 pharmaceutical partners on projects targeting over 46 different rare diseases. There is an ongoing trends that data-driven intelligence is helping grow the use of real-world evidence. And this can improve the current clinical model and advance health studies are designed and executed. As I said, helping to de -risk and to accelerate. CENTOGENE 's capabilities aligned well in this context already, but we have initiated and advanced several initiatives to capitalize on the opportunity. First of these, is a complete horizon scan of the market, including the growing number of gene therapy development projects. This tracks over 120 companies with many more assets. The second is to strengthen our bandwidth for outreach, contracting in our operational project delivery by adding the needed resources. Now, our Diagnostics truly also differentiated products and services that support efficient and timely diagnosis of rare and neurodegenerative diseases leading to better treatment in health outcomes. We have a differentiated product portfolio focused on high quality genetic testing with leading whole exomes and genomes sequencing, and we're on the leading edge of the Multiomics. It is our goal to provide the best diagnostic yield. For example, with the enhanced CentoXome, we actually increased the diagnostic yield up to 20%. This means more patients are getting the results on their test. The CentoCloud is our proprietary dry blood spots solution, it provides easy logistics and central testing and it's registered in over 50 countries around the world. With the highly advanced technology, the CENTOGENE Bio/Databank, with our team of medical experts and geneticists, we deliberately report back to the physicians that contain critical genetic, proteomic, metabolomic information or a combination depending upon what is most salient for each case. And we also put this data back into the CENTOGENE Bio/Databank. In Diagnostics, we are building on a strong performance in 2021, striving to a gain reach above the market growth, which we estimate at 11% by focusing on two strategic drivers. The first one is capturing the opportunity in decentralization. In January, we released the CentoCloud globally, and we are already working with early customers. Next steps to this year are the launch of the kits developed in partnership with Twist, which allows for global decentralization and standardization, and we expect to roll out in the second half of 2022. Driving innovation out of the core laboratory, we're focusing on multiomics as a key value driver for Diagnostics of rare neurodegenerative diseases. We recently launched several new products that build on our strong existing multiomic portfolio. For example, CentoMetabolic, where we just presented our first dataset of over 3,700 patients at the ACMG, the American College of Medical Genetics. This multiomic product not only present the high diagnostic yield, but for nearly 1400 patients, it is expected to lead to benefits in treatment and/or counseling for the families. We truly believe that we're one of the pioneers that's putting actual commercial multiomic products onto the market today. Max Schmid, our Chief Commercial Officer of Diagnostics will also join us for the Q&A session today if you have any more questions around this. So let’s round up today's call, we'd like to provide an outlook for 2022 with specific guidance for the calendar year. We expect our core business revenues to grow between 15% to 20% year-over-year in 2022. We expect revenues derived from COVID-19 testing to be approximately €18 million, all in the first quarter of 2022, in line with the phase-out at the end of the first quarter. As a result, our annual total revenues guidance for the fiscal year 2022 is in the range of €68 million to €70 million. To put this into perspective, the company has historically been on a solid growth trajectory, averaging around 20% growth in the years leading up to 2019. The COVID pandemic erodes in 2020, and we've discussed the impact to the business in the pipeline. In 2022 with the new team onboard, we kicked off a range of initiatives to drive biopharma partnerships. Realistically, it will take some time for these initiatives to kick in. And I think as a result, for Q1 2022 is expected to be relatively flat or with minor growth in the core business as the Pharma segment will have a stronger acceleration towards the second half of 2022. In summary, we're really excited about the opportunity here at CENTOGENE. We are committed to driving financial performance to deliver increased value to our shareholders. We are really focused on growth and execution with a fit-for-purpose organization. And with that, I'd like to hand back to our operator, Roberto for our Q&A. Thanks, Roberto.
Operator: Ladies and gentlemen, we will now begin the question-and-answer session. The first question from Chad Wiatrowski from SVB Leerink. Please go ahead. Your line is open.
Chad Wiatrowski: Hi. Good morning. This is Chad Wiatrowski for Puneet Souda. Thanks for the call. I was just wondering on regarding cash burn. Could you speak to your top spending priorities this year? And what is that cash burn expectation in 2022? And just given the recent release, how much visibility in runway do you see going forward?
Miguel Coego Rios: Thanks, Chad. Thanks, Chad, for your question. Just give me couple of seconds here, please. Because you are coming about the cash burn. Okay. So look, when the company embarked on the financing, the goal was to finance the company for a couple of years. That was the initial the initial target. Then with the efforts that we did and we managed to drive at this financing, we were -- well, we should be able to extend this runway. We didn't come specifically with a guide on cash burn, and the intention is that as we were saying, it is on one side of revenue progression, but also this exercise that we are doing on cost. We expect that we would be able to come with more specific details in the next communications.
Chad Wiatrowski: That's helpful. Thanks. And just in terms of the pharma business, last quarter we saw recycling of roughly 40,000 samples. Was that a one-time event? And can you give a timeline on that long-term goal of 1 million samples in the bio bank?
Kim Stratton: Maybe Bettina or do you want to talk about this samples that are actually in the databank specifically?
Bettina Goerner: Yes. Sure. Hello. Thanks for your question and thanks for having me today. So we see a healthy growth of all our Bio/Databank in the last quarter with 284,000 individuals added and then full-year 2021, around 94,000 individuals added. We think we are well on track to achieving that mid-term goal of 1 million patients and everything Kim described is in the sense, a positive feedback loop, right? As she said, all future partnerships will continue to feed the Bio/Databank and Bio/Databank gets rich and richer, our partnership value proposition gets richer and richer, which then in turn accelerates the growth of the Bio/Databank.
Chad Wiatrowski: Thanks for taking the questions.
Bettina Goerner: Thank you.
Operator: Thank you for your question. We have the next question from the line of Sung Ji Nam from BTIG. Please go ahead.
Sung Ji Nam: Hi, thanks for taking the questions. Just a few clarification questions. In terms of your guidance for 2022, 15% to 20% core revenue growth. And can you provide some color in terms of, for the biopharma, just trying to better understand kind of for the Diagnostics versus -- the core Diagnostics versus Pharma. What's embedded in your assumptions, in terms of overall growth within the 15% to 20%?
Kim Stratton: Yes, I mean look, as for the diagnostics, we said some G that we're -- we want to continue to grow above the market rate, which is at about 11%. And I think historically, if you go back and look at the loss numbers, I think it was about the core business, about two sides was Diagnostics one -- maybe a bit over a third was Pharma. And obviously, we want to see Pharma actually increasing the kind of share of that core business to around the 60/40. So I think that would be the -- where we would be headed.
Sung Ji Nam: Got you. And then in terms of your gross margins for your core business, good to see that continuing to improve. But what's kind of the expectations for 2022 are -- and what are the drivers for potential margin expansion into 2022 for the core business?
Miguel Coego Rios: Thank you. Thank you for your question. So as you could see, there was a good recovery in '21 versus '20 on the overall gross margin. And for this year, we plan to have similar levels when it comes to Dx, despite of the market price pressure that we kind have set by our product mix. And what we see on Pharma, we believe that we could improve it. I mean, that with come demonstrating the value proposition of our company and the products, combined it with some internal process and cost optimization. So I would say flattish in the case of Dx and improving on Pharma.
Sung Ji Nam: Got you. And then last thing for -- go ahead.
Kim Stratton: -- just on the kind of Pharma and the Diagnostics kind of mix as well. I think it's important to remember that Diagnostics is a much more kind of smoother business and as you know, with Pharma, it can be a bit lumpier. So and also, I think it takes a much longer to restore. So as I also said in my comments, I think we're, for quarter one, we'll expect it to be kind of flat or with some modest growth. But then you should see it actually pick up as the year progresses in the second half.
Sung Ji Nam: Got you. That's very helpful. And then lastly for me, for your biopharma business, you talked about, for 2021, the overall -- the total contracts for the value, if you will, of that business increased significantly year-over-year. Could we anticipate that type of trajectory? I know that may not translate into revenues in the near term, but could we anticipate that type of trajectory to continue into 2022? It's from the contract value standpoint.
Kim Stratton: Yes. I mean, I think it is, as you say, with some of these contracts, they spend multiyear. But yes, that's the intention to keep that kind of growth going in 2022. Absolutely.
Sung Ji Nam: Fantastic. Thank you so much.
Kim Stratton: Thank you.
Operator: Thank you for your question.
Operator: The next question is from Catherine Schulte from Baird. Please go ahead.
Catherine Schulte: Hi. Thanks for the question. I guess first, can you just talk to the trends that you've seen in the core diagnostics business so far in the first quarter? To your point, COVID has been a big disruptor to core diagnostics over the last couple of years. But did you see any disruption from the Omicron wave or was the business fairly resilient, and how do you view your positioning in potential future COVID wave?
Kim Stratton: Thanks, Catherine. Maybe Max, you're probably best to answer that here.
Maximilian Schmid: Thank you, Catherine, this is Max. So we don't comment yet on, obviously, in our Q1 performance. Having said this, at the moment, businesses has been developing stable, and the impact of Omicron so far has most been a significant.
Catherine Schulte: Okay, great. And then Kim, you talked about, I think adding resources to increase your Pharma outreach team. Can you just talk to the size of that team today and what kind of additions you envision going forward.
Kim Stratton: Yes. I mean, the team, it's kind of -- obviously, the team is quite broad and it's spread out through the Bio/Databank, the genomics group and also in part, I guess in Diagnostics. But I was specifically talking about increasing our sales team, increasing the project management team. So that we can really have a much stronger outreach to, as I said, there's 120 companies out there that are doing -- that are currently developing products or have in-line products in either rare neurodegenerative or gene therapy. So we need to have a stronger kind of outreach and make sure we have a stronger lead generation that we have a beefed-up kind of sales team. And also, that we're able to kind of manage these projects in a very kind of professional and kind of excellent in execution internally. So it's about adding resources, but it's also about fine tuning our operations and our processes going forward, as well.
Catherine Schulte: Okay. Thank you.
Operator: Thank you for your question. There are no further question at the moment. Ladies and gentlemen, that's everything for today. Thank you for -- You can now disconnect.
Kim Stratton: Okay. Thanks, everybody for joining us. Thank you for your question. Thank you to the CENTOGENE team. Thank you.
Miguel Coego Rios: Thank you.
Kim Stratton: Bye bye.
Miguel Coego Rios: Thank you everyone, bye.
