Broncus (02216.HK) announced interim results

The operating revenue had a year-on-year increase by 12.8% in 2022,and the loss narrowed by 62.8%,gradually forming a closed-loop model of "diagnosis + treatment+ chronic disease management" for major pulmonary diseases

HANGZHOU,China,Aug. 31,2022 -- On August 30,2022,Broncus (02216.HK),the leader in the field of interventional pulmonology in China,reported its interim result for the six months ended June 30,2022 (the "Reporting Period").

During the reporting period,the group's revenue jumped to USD 3.218 million,increasing by 12.8% over the same period in 2021. The gross profit was USD 2.462 million,increasing by 11.8% over the same period in 2021 with a gross profit rate of 76.5%. Although impacted by the pandemic in the first half of the year,sale of medical devices and consumables reached USD 2.972 million,with an increase of more than 13.1% over the same period,and the total revenue in Mainland China still reached USD 1.983 million,with a substantial increase of 199.5% over the same period in 2021.

Create long-term growth space for enterprise with innovative hard power

During the reporting period,Broncus maintains a continuous input in R&D. The R&D expense was USD 9.138 million,increased by 17.8%. Broncus has comprehensive pipelines in interventional diagnosis and treatment of lung diseases and leads the market of medical devices for pulmonary interventional. Taking clinical needs from the world's top medical centers as the source of innovation,the company's dual US-China R&D centers keeping close cooperation with well-known hospitals,laboratories and universities for in-depth medicine-engineering cooperation from idea to product. It has formed a mature development system and constantly expanded the pipelines of diagnosis and treatment products for lung diseases.

A total of 12 products of the company have been registered and approved by NMPA,FDA and CE,including three navigation systems and consumable products. Moreover,there are 5 products under different stages of R&D or clinical,covering the diagnosis and treatment fields of lung diseases such as lung cancer and COPD for the six months ended June 30,2022.

Among them,Broncus have completed the First In Man clinical trial for Targeted Lung Denervation (TLD) Radiofrequency Ablation System. It is used to treat acute exacerbation of chronic obstructive pulmonary disease,whereby 9 patients were enrolled,and expect to end the last subject follow-up in the third quarter of 2023 and launch the registeration clinical trial in the first quarter of 2023. In July 2022,Broncus have completed the product design and submit the type examination of InterVapor® for Lung Cancer.

Broncus reached a strategic cooperation agreement with Healium Medical Ltd.,an Israeli company and specializing in the R&D of ultrasound energy therapy and imaging monitoring,in February 2022. The cooperation integrates energy ablation and ultrasound technology,allowing the operator to monitor the status of the ablated tissues in real time,which enables the predictable outcomes of treatment,thus improving the safety of the operation,simplifying the operation procedures,and promoting the popularization of interventional technology in the treatment of pulmonological diseases. The cooperation has been approved by Israel IIA,and the R&D design input and output confirmation has been started in May 2022.

As at June 30,Broncus obtained 676 patents and patent applications which consisted of 254 issued patents (including pending announcements) and 266 patent applications in China and 102 issued patents and 54 patent applications overseas including key markets such as the U.S. and the EU. Among the patents obtained,96 and 30 of them are related to InterVapor® and RF-II,respectively.

The company's strength in R&D and strong patent portfolios have laid a solid foundation for the product innovation and iteration,and pipeline enrichment in the future,which consolidates the company's leading position in the field of interventional pulmonology. As a pioneer in technology,the company has continuously innovated in the field of interventional diagnosis and treatment of lung diseases and created a brand-new market. What's more,it has become the founder who set up the global industrial technical standards and is one of the manufacturers that will establish the competition pattern for respiratory intervention in the future.

International layout,and gradually form a closed-loop mode of "diagnosis + treatment + chronic disease management"

As of June 30,the company's product registration covers the international certification systems such as FDA,NMPA and CE. The products are sold to 33 countries and regions all over the world,including the United States,Britain,Germany,France,Australia and Japan.

In order to meet the requirements of market education and rapidly growing clinical needs,a professional and global marketing team consisting of people from marketing,sales and clinical technical support departments has been built by company. The local market education and academic promotion is carried out by the team,as well as patient discovery and operator development. The company earned a revenue of USD 2.972 million from the sale of medical devices and consumables during the reporting period,with an increase of more than 13.1% over the same period.

InterVapor®,the thermal vapor treatment system for COPD was registered and approved by the National Medical Products Administration on March 16,and the first group of patient's surgeriesusing InterVapor® were completed in Guangdong and Shaanxi province,after it was approved for marketing in China,and rapidly spread in Liaoning province and Beijing,with obvious clinical benefits for the patients.

The RF-II radiofrequency ablation system developed by the company is currently the only RFA system that specifically focuses on lung cancer treatment globally. The pre-market clinical trial of this product has completed 6-month follow-up. It is expected to be registered with NMPA in the first quarter of 2024,officially launched for commercial application.

The core products of the company for COPD and lung cancer have been marketed and commercialized successively,which will form a synergistic effect in the diagnostic navigation products offered,and build a closed-loop model of "diagnosis+ treatment + chronic disease management" for major pulmonary diseases,thereby benefiting the majority of patients.

In addition,the unveiling ceremony of "Multi-Disciplinary Diagnostic Station ofPulmonary Nodules" which is jointly establishedby Broncus and Shanghai United Family Healthcare was successfully held on July 21,2022. This cooperation promotes the market of high-end private medical institutions and covers the high-end commercial insurance population. This is the first step of the strategic cooperation between the two sides to jointly explore the new diagnosis and treatment service mode of respiratory intervention and other cutting-edge technologies targeting groups with high-end medical demands.

The product localization process goes smoothly

During the reporting period,the production centers in Hangzhou,China and San Jose,the United States,cover an area of 3,122 square meters and 863 square meters respectively,and it mainly produces consumables in China and produces navigation and InterVapor® in the United States.

In order to promote the localization process of products,the company gradually transferring the manufacture to China. It is expected that the NMPA registration for domestic LungPoint will be completed in first quarter of 2023; Localization of domestic LungPro has been initiated in April 2022,and the type examination report has been delivered in June. It is expected that the production process transfer of InterVapor® will be completed by the end of 2022.

China has sufficient resource guarantee and supply capacity,such as labor-intensity and low cost,and these advantages will be transformed into the cost advantages of enterprises in the future. As the localization process accelerates,the company started to optimize the ecological construction of the supply chain and select qualified and stable domestic suppliers for cooperation,to realize the localization process of procurement. It keeps optimizing the existing production process and technology,and improving the production capacity to achieve the scale effect as expected.

Mr. Zhan Guowei,chief executive officer of Broncus,introduced that,as a rare Chinese enterprise,it occupies an indispensable position in the global technical standards. Broncus will continue to devote itself to the development and commercialization of interventional pulmonology,providing innovative lung solutions in China and globally in the future as it is Broncus's vision is to be a global leader in the transformation of lung diseases treatments. The core strength of Broncus can be further enhanced and more innovative technologies can be brought to patients with lung diseases all over the world.