Centogene N.V. (CNTG) Q3 2021 Earnings Call Transcript

Centogene N.V. (CNTG -1.11%)
Q3 2021 Earnings Call
Nov 24, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Centogene Q3 2021 earnings results. At this time all participants are in a listen-only mode. After the speakers' presentation, there would be a question-and-answer session. I would now like to hand the conference over to your speaker today, Lennart Streibel.

Please go ahead, sir.

Lennart Streibel -- Investor Relations

Thanks, Roberto. Hello and welcome. Thank you for joining us to discuss our third quarter 2021 results, which we reported earlier today. You can view the presentation of the related press release on Centogene's website.

For those unable to view the webcast you'll find the corresponding slides at investors.centogene.com. Referring to Slide 2, 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 US securities laws. Including those regarding our strategic plans, development programs, 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 November 24th 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 appears in our SEC filings. If you turn to Slide 3, it is my pleasure to introduce you to today's speakers our chief executive officer, Andrin Oswald; and Rene Just, our chief financial officer. We will first begin with the general business update followed by a summary of our financial results for the last fiscal quarter ending September 30th.

We will then open up the call to the Q&A session before closing remarks. We kindly request already that you ask a maximum of three questions. I would now like to turn the call over to Andrin. Please turn to Slide 4.

Andrin?

Andrin Oswald -- Chief Executive Officer

Thank you, Lennart, and hello everyone. Thank you for joining. As Lennart said, I will start with the business update on our core business and also some updates on the progress we are making on implementing our strategy as presented at the June investor event. As it relates to our COVID business and our plan with that one going forward.

And also, how we plan to restructure the company to be fitter for future growth. Those two elements run with a great financial review. And then, we will end with an outlook and of course, the Q&A. So Q3, our Q3 performance reflects progress in our core business execution making meaningful strides on our strategic priorities, which we outlined at investor events.

As mentioned, we are continuously expanding our data-driven approach to reinventing rare diseases, drug discovery, and development. In this last quarter, we saw solid revenue performance delivering core business growth for the second consecutive quarter. At the core business, which is our Diagnosing and the Pharma segment together grew 13% versus Q3 of last year. We are very happy to see that core business is back to growth while COVID-19 testing revenues did not continue to contribute to our overall top-line, we are seeing a shift in COVID testing landscape and are acting correctively during our efforts are focused on our core business in Pharma diagnostics.

This is in line with what we had communicated previously. Foremost, we are excited about the continued growth of our core Diagnostics business segment observed in Q3. In that period, we added approximately 22,000 new individuals for our extensive Bio/Databank and continued to demonstrate our commitment to superior diagnostic offerings for rare diseases. This is a steady increase toward our goal of having 1 million patients in our Bio/Databank and in the next couple of years.

And I will now discuss it in more detail in the business segments. Please turn to Slide 6, here on the graph you can see the mentioned 13% revenue in our core business. More specifically on the Diagnostics segment, in Q3 reported an order intake of 14,770 and up 46% over the previous quarter. Within this segment, we have seen the business return to growth up 43% year-over-year.

We have indicated these trends in the last quarter and it is nice to see the business return with our fifth consecutive quarter of diagnostics segment growth. We believe, we currently offer the growth of this Diagnostics to a portfolio for rare diseases globally covering the widest range of genes with unique value propositions [Inaudible]. Turning to our Pharma segments, we are still experiencing a protracted recovery as compared to the Diagnostic segments. Pharmacy segment revenue is down year-over-year.

As we have highlighted in the past, this is mostly the result of the delay of revenues as it relates to the time it takes from signing a new contract with a Pharma partner until that contract translates into revenues. However, we have now 67 active collaborations to seek the new one started in recent quarters, and they all advance toward revenue generation. And so, we are quite confident that the Pharma business will return back to growth starting with Q4. I will share some further details on that, later on.

Please turn to Slide 7, here is a look at our knowledge repository. The number of sample ordering takes in our core business means Diagnostic and Pharma is up 12%. This growth was driven primarily by increasing in diagnostics patients that test requests were 46% versus the same period in 2022. The bulk in Pharma contributed.

Overall, we are making progress on growing our Bio/Databank, which includes samples as well as data in cell lines. On the graph on the right, you see the number of individuals in our data repositories. Over the course of 2021, we added about 70,000 disease individuals for our DC-centric databank. We believe our biodata bank to be the core of our differentiation and our basis for revolutionizing the development and eventually the discovery of rare diseases.

As stated in previous quarters, we kick off an initiative in 2021 to renew and upgrade the Bio/Databank. It's a Bio/Databank that by now has taken back the cost that goes by six years. So you can imagine that it was the right time to look at it, clean up, and strengthen its content in the way [Inaudible]. This improves setting up good data governance as well as making sure our approach to growing device Databank is truly strategic.

At our Investor event in June, our CEO and data officer, Bettina Ganesh, gave you insights on how we plan to upgrade our Databank. And I want to give you a base on that here, some first updates or insights into a Databank. In the past, we have communicated the number of patients at the summary nature with the newly defined Bio/Databank and will share some deeper insights going forward. As of today, November 24, we have about 650,000 patients, active patients, and samples in our depositories.

At the end of Q3, we speak about approximately 630,000. Some of you will remember that we had already communicated the number of about 650,000 previously. However, after the recent review and reclassification, the cleanup of the Bio/Databank and that we have now approved a more robust number ensuring that what is there in the way of the quality that we needed to have the ability to and conduct with valuable insights. Additionally, we are now also going to provide you with some more metrics as it relates to the content and the growth of the biobank.

Turn to Slide 8. Here, you can see some of the metrics we developed that we believe show more detail what's in the Databank and how it's progressing going forward. We have a total number of new, of course, as previously discussed. We had the dried blood spot, and that's why it's not the data but Bio/Databank.

So the dry blood, for example, the export in our Databanks that allows us also to go back to a sample and do further analysis. And we have the number of full genome and exome sequence versus data where we just have done a gene panel, for example. We also have the percentage of research content that allows us not to use the samples and the data just for Diagnostics and also for full research on the discovery Pharma side with the potential, of course, to commercialize that. Then we have our cell line and this is an important addition.

Cell lines are critical for our future discovery efforts. And of course, all this is built on an active network of physicians that we engage in and that work with us for giving access to pass those of future patients. You can see the numbers here on the slide and also how they developed in the recent quarter. With this, we are now also providing more details and we plan to do that going forward.

We believe that this is a way for you to better appreciate the relevance of the value of Bio/Databank going forward. Please turn to Slide 9. Here, you can see a closer look and in terms of where we have particularly strong data and samples as it relates to key areas. We did this in metabolomic and neurological diseases.

This is also reflected in the increasing number of Pharma partners that we have established in that area. As shown by the revenue contribution, most of our collaborations are relatively small in nature. And however, we believe it's something that will grow in the future. The partners may start with a rather multiple research question or a research collaboration that we have, which may be low in initial revenues, those partnerships while the research and the underlying drug discovery progress, we believe these partnerships will expand and so will our revenue.

Please turn to Slide 10. Shown that slide at our June event that I would like to highlight again why we think we are positioning the rare diseases. Here are some companies that are also in the data-driven insights space and we believe we clearly differentiate from them and add unique competitiveness. We have complete competitive advantages.

On one side, we are a rare disease company. We have 16 years ago in rare diseases and have started collecting samples and insights and has built a brand in the network over 16 years. Some of those other companies have also more recently expressed interest in rare diseases that they do not have the bandwidth, the brand, or the repository that we give. Secondly, I also want to highlight our geographic footprint and which makes us unique.

Of course, it is highly valuable to have a good strong presence in the US, especially as it relates to commercial revenues from the Diagnostic business. However, overall, we believe our geographic global footprint is absolutely critical for rare diseases. Rare diseases are, by nature, a global challenge, and to collect patient data and generate sufficient patient data with the right insight and a global footprint in other mines is required, and that's what we have. Let's go to Slide 11.

This is to remind you of our business model and our patient same-business model with the Bio/Databank at our core. And using that Bio/Databank and our [Inaudible] AI tools to generate insights for superior printer Diagnostics for Pharma services for a patient [Inaudible] including clinical trial support. And last, but not least, to develop a discovery platform to enable drug discovery, orphan drug discovery in the rare disease space. So let's go to Slide 12.

I just want to highlight a few updates along those businesses continuing what we have found in the recent quarter. Scientific progress and our Diagnostic footprint, the impact we have in Pharma, and what we are planning to do in discovery. So let's start with Slide 13. As you know, and I'm sure you've seen in the recent quarter, we have quite a leading present a number of scientific publications in the rare disease state.

I just want to highlight here a recent one Journal of Medicine. We view will contribute a better understanding of rare diseases at the core of our commitments to treat these patients around the world. Not all of those, of course, as for sure now and will need to translate into revenues, but I do believe that they highlight our scientific expertise, the depth of our Bio/Databanks, and of course, our attractiveness as a partner in rare disease discovered. Take a closer look at the separate here.

And the study we utilize data by Databank and our international team, including the Children's Institute of Genomic Medicine and that have analyzed data on the range of families, we find to create a deeper understanding of syndromic structure growth effects on Page 8 to advance treatment for that unique medical condition. Now it is a method and what has been demonstrated translates into robustness. It offers a unique opportunity for drug developers to capitalize on the insights. And with programs potentially creating new approaches to find treatments for to date are almost 4 million infantry years that are born with such growth defects.

We think that research highlights why intend databank can be a unique partner, not just for the academic institutions but also for pharmaceutical and organizations to collaborate to actually translate findings and translate them into drug development. Slide 14. In our Clinical Diagnostics business, we have signed an exciting partnership with Chris BioScience that we had recently announced. Together, we will develop and commercialize custom assay kits for rare disease genetic diagnostics.

The product offering will combine our rare disease expertise, powered by our databank with the manufacturing investments and cost in sequence to deliver multiple assets. We are excited to have picked up this collaboration, and the next major milestone will be progress on SAP development followed by a commercial launch together with this that we plan for next year. This collaboration enables us to address the ongoing trend of decentralization in the testing area. These are our beliefs that offering solutions and will play a pivotal role in making genetic testing more accessible and with the help of partner laboratories to deliver rapid and reliable top-quality genetic diagnostic for rare disease patients.

We expect some announcements around our efforts there related also to the progress of our central cloud product offer in the coming months. Now let's look at our Pharma progress on Slide 16. I had mentioned that the Pharma revenue recovery is clearly taking more time than the Diagnostics side, but that we are confident that we've recent partnerships, we are on track to get there. So one I want to highlight here is the partnership we have with Alector.

We signed the deal early in 2021 and we have announced that. We have now started patient enrollment just a couple of weeks ago for that large-scale 3,000 to 4,000 patient study. And it's an exciting study that I think highlights a few things from our side. First of all of course that takes time and from signing a contract to actually start seeing the enrollment of patients and mostly the revenues that are associated with that.

But also highlight that finding rare diseases to patients in the right rare disease patients is the key competitive advantage that Centogene to have that the customers have a high interest in. And it also highlights that our business model and while we do such collaborations actually allow us to accelerate our Bio/Databank. And this partnership here, for example, will help us to build up a unique cohort of frontotemporal dementia patients in our Bio/Databank similar to what we had on with Denali, the sort that can defer the mine and the further insights can be generated for future customers who are working with us in the neurological disease space. And overall, we have signed quite a number of new contracts to date in this year.

And actually, when you look at the cumulative value of the contracts, it is a multiple of what the company was able to sign in 2022. So that large volume of new contracts that we had signed, not just Alector to give you some confidence, for sure, it gives us that starting from Q4, we think that the Pharma business will also be back on the growth [Inaudible]. Please return to Slide 16. Here, just a short update on our discovery efforts and how we plan to use our Bio/Databank for discovery partnerships going forward.

And I would like to focus on the development of our rare disease and avatars. I mean we have mentioned to you this effort in our June event. And I think our aspiration and for us to be able to enable the cure of 100 rare diseases in the coming years. So with Patrice, we have made quite some progress to accelerate the work and make sure that his team is fully developed and onboard to accelerate the work we do in that regard.

What exactly is the rare disease avatar? You may have heard of sectorial twin which is essentially a virtual copy of a typical body structure that physicians can use, for example, to train surgery for the model, have a certain treatment impact the anatomy of the patient. So the disease avatar is the digital platform on a whole disease by which we have an aspiration to actually virtually model the whole disease such that we can be used by researchers to mine that data, to come up with a hypothesis on how the disease can be better diagnosed or potentially treated and then test those the actual model. We believe that we need at least 100 rare disease patients to be able to develop such an avatar. We, of course, won't stop when we have 100.

And when we think once we are above 100, we have enough diversity and data to start with avatars to really generate value. And as you know on some diseases, we have already clearly exceeded that milestone. And the disease avatar also is linked to cell models and we think at least 10, up to maybe 20 patient-derived cell models will be part of the avatar to actually make the digital model complete. At the forefront of this initiative is Patrice Denefle, our chief scientific officer, who you will introduce on our last earnings call.

And I would like to pass on his excitement around our disease avatar and have been able and recapitulate the human disease in [Inaudible]. Generating insights from hypotheses and validating these by real patient-derived cell models ultimately leads to a better understanding of this [Inaudible] and enables us to take hands to approach on testing drug candidates in rare diseases, even models the way you could never have done before. With these initiatives in place, Patrice strengthened the focus on our three key priority avatars, [Inaudible] and human piece genetic partners to accelerate the progress we make on those three in the coming quarters. All of these three will be significant opportunities for Centogene to drive short-term value and potentially partner those avatars with pharmaceutical partners.

We will, of course, not stop there. And on the success of those three, we have a range of prioritized diseases that we plan to work on and to accelerate in the next two years to come. With that overall update on our core business and the progress we make on our strategy, I would like to hand it over to Rene.

Rene Just -- Chief Financial Officer

Thank you, Andrin. Please turn to Slide 18. Our overall Q3 revenues declined by 17% year over year to EUR 30.2 million. This development was mainly driven by COVID-19 testings generating only EUR 20.2 million in revenue in Q3 2021 versus EUR 27.4 million in Q3 2020.

This reflects the decreasing importance of the non-COVID-19 business and on the other side the increasing importance of the core business. I will highlight the COVID business separately in a moment. With that, I would like to focus on the core business, which includes our Diagnostic and Pharma segments. The core business expanded by 13% in Q3 2021 year-over-year to EUR 10 million, compared to EUR 8.9 million for the same quarter of 2020.

This growth was mainly driven by the strong uptake of the clinical diagnostic business, which recorded EUR 7.3 million in Q3 2021 representing 43% growth compared to the same quarter in 2020. Pharma revenue decreased year-over-year from EUR 3.8 million to EUR 2.7 million in Q3 2021 reflecting a decrease of 28% compared to the previous year. The decrease was primarily due to the impact of the COVID-19 pandemic, which unfortunately slowed the clinical studies of our pharmaceutical partners. In principle, we believe the recovery in pharma takes longer due to the annual sales cycles.

However, the value of our Pharma contracts signed in the first nine months of 2021 already exceeds the value of the deal signed for the full year of 2020. So, we continue to see an acceleration in the Pharma revenues in the fourth quarter. We will now be looking at COVID before going into a more detailed review of the core business performance. Please turn to Slide 19.

I would like to take a few minutes to discuss our COVID business. In summary Q3 2021 represents the fourth quarter in a row where our portion of revenues generated by the core business increased and the portion from COVID decreased. A trend we foresee continuing. We have consistently spoken about the COVID-19 business as a non-core business, which has in the past contributed revenue and cash to send to Centogene to drive the strategic execution in our core business.

Looking at the EBITDA contribution from COVID-19, which has turned negative, we have made the executive determination to begin phasing out the business segment to focus on areas where contribution margin is anticipated to continue in order to optimize our cash spend. Very specifically this means that we will phase out most COVID-related projects by the end of the year and some specific airport centers will follow in the first quarter of 2022. We have informed sensitizing staff internally of disposition and related measures, which will undoubtedly be impactful as we had approximately 230 colleagues working on COVID-19 activities, which are now expected to ramp down through termination, attrition, and non-replacement of planned departures. We have agreed on an accelerated depreciation and amortization schedule for COVID19 related assets and have carefully examined related inventory.

As in previous quarters, the cost of the segment is mainly allocated to the cost of goods sold, which resulted in the unusual picture of a negative gross margin overall. To give some specific details, the cost of sales incurred by our COVID-19 segment for the three months ended September 30, 2021, represents 143% of the revenues from the segment. This was primarily due to the reduction of COVID-19 revenues. The initial steps in phasing out of the COVID business led to accelerated depreciation and amortization expenses of COVID-19 related assets.

Committed fixed overhead cost, as well as cost related to the shutdown of our Hamburg lab and unprofitable testing sites. Examples of fixed costs include the cost of premises including unprofitable sites that we have since shut down. IT cost and temporary wages at unprofitable sites, which have now been restructured. We are also consolidating our operations to only operate at sites that are still generating positive returns and streamlined our laboratory costs by shutting down the Hamburg lab and increasing the test outputs and efficiencies at all other labs in Rostock, Frankfurt, and Munich.

To ensure our cost going forward is streamlined to the needs of the segment, which will allow us to generate a positive EBITDA. As we phase out the COVID segment, we have reassessed the usual life of all COVID-related long live assets and according to our accounting policy, which resulted in a significant write-down of 3.2 million in form of accelerated depreciation and amortizations. We have also recorded all 0.6 million write-downs in COVID-related inventories in the quarter.  In summary, we will diligently manage the phase-out of the business as the management team is highly focused on executing the core business. With that please turn to Slide 20.

Pharma revenue recovery continues to be affected by the COVID-19 pandemic in the last quarter. We see in the graph that Pharma revenue decreased to EUR 9.2 million in the first nine months of 2021 compared to EUR 12.3 million in the same period 2020. The main drivers of Pharma revenues are patient identification and clinical trial report parts. The decline in 2021 year-to-date is mainly due to the successful completion of contracts by the end of 2020 and a slower rebound due to longer sales cycles and building contract backlog.

Andrin discussed earlier the increase of signed contract value we have seen in 2021, which is significantly above the full year 2020. So we remain confident in the acceleration of the Pharma revenues in Q4. During the first nine months of 2021, we entered into 16 new collaborations and successfully completed 25 collaborations resulting in a total of 57 active collaborations as of September 30, 2021. Revenues from our new collaboration totaled EUR 2.1 million for the three months ended September 30, 2021, with no upfront payments.

I previously mentioned the 57 active collaborations on the Pharma side. If you take a look at the pie chart and at the bottom of the right corner you will see that we currently have one large patient identification collaboration, which reflects disease fields where commercial state products are already available. In this case, our contract with Takeda. Most of our collaborations continue to be in the clinical development stage with clinical trial support.

All of these are based on the setup we already have. Clinical development states collaboration can be used to support clinical trials or clinical studies like we do with our Denali collaboration or the collaboration with Agios and Denali highlighted in recent press releases announcements. Andrin spoke about our R&D efforts on building the disease avatars earlier. So through levering, our Bio/Databank are unique data-driven insights, we expect to sign more collaboration in the R&D states in the future.

As discussed at our investor event in June in detail, this is an area where we will expand and expect to have the first value share deal added over the course of 2022. Those collaborations would generally include a value share for Centogene when historically these may have been small contracts only for distinct research questions. Please move to Slide 21, while the ramp-up in revenue in the Pharma segment appears protected, we are extremely pleased to see the strong growth in our Diagnostic business in Q3. Revenues from our Diagnostic segments were EUR 7.3 million for Q3 2021 an increase of EUR 2.2 million or 43% from EUR 5.1 million Q3 2020.

We received an order intake of approximately 14,770 in our Diagnostic segment in Q3 2021. Representing an increase of approximately 46% as compared to approximately 10,150 order intakes received in Q3 2020. The increase in revenue was primarily related to an increase in test requests for panel testing as well as whole-exome sequencing and whole-genome sequencing, during the three months ended September 30, 2021. Total revenues from panel testing, whole-exome sequencing, and whole-genome sequencing amounted to EUR 5.2 million representing an increase of 46% as compared to Q3 2020.

Panel testing, whole-exome sequencing, and whole-genome sequencing account for approximately 50% of the number of test requests in the Diagnostics segment 2021 year-to-date supported by a project win in the Middle East. Please turn to Slide 22 for a look at our segment-adjusted EBITDA. Here we see the segment adjusted EBITDA, which includes the contribution from the Pharma the Dex of COVID-19 segments. We report a segment adjusted EBITDA loss of EUR 2.5 million in Q3 2021, compared to a positive EUR 9.2 million for the same quarter last year.

Same as for revenue segment adjusted EBITDA was driven mainly by the decline in the COVID-19 business as discussed. Total core business segment adjusted EBITDA grew EUR 1.4 million up from negative EUR 0.4 million in Q3 2020. Reflecting the strong uptake in the diagnostic business of the COVID-19 hit in 2020. The picture of our two core business segments is mixed.

Adjusted EBITDA for the Diagnostic turned from minus EUR 1.2 million in Q3 2020 into a positive adjusted EBITDA of EUR 1.1 million. Adjusted EBITDA of our Pharma segment was EUR 0.3 million, compared to EUR 0.9 million in Q3 2020. The decrease was primarily attributable to lower revenues as well as product mix. Looking at profitability, I would also comment on our organizational alignment in the core business.

We will leverage the changes through the phase-out of COVID to also optimize our overall organizational footprint related to the core business to free up resources for investment into our core business. This streamlining is associated with the overall small employee base going forward but also based on an in-depth review by the new management team to ensure focus on improving processes and efficiency as well as streamlining our project portfolios. We expect the results to be saving of up to EUR 15 million annualized excluding restructuring costs consisting mainly of personal related and operational expenditures and a smaller contribution from capex. We expect a portion of the savings to be reinvested in the core business execution.

Overall, you should, therefore, expect to see D&A expenses decreasing and overtime R&D expenses increasing. Correspondingly, we expect to record restructuring charges of below EUR 2 million in the fourth quarter related to the core business realignment. Please turn to Slide 23 for a view of the P&L. Looking at our income statement, this slide shows you Q3 results on the left as well as year-to-date results on the right and we will focus on the quarterly results for the purpose of this discussion and compare year-over-year.

We have already discussed the revenue development in the quarter and highlighted the dynamic of core business whereas COVID-19. I do want to spend some time on the gross profit development as this requires some explanation. On gross profit, we reported a loss of EUR 5.4 million in Q3 2021, which compares to a gross profit of EUR 10.2 million in Q3 2020. A negative gross profit is, of course, unusual and the reason behind this is again the impact of the COVID-19 business as previously discussed.

Our expenses including other operating income increased by EUR 1 million for the quarter compared to Q3 last year. Let me comment on the biggest factors that drove the increase in expenses. Firstly, general administrative expenses increased by approximately EUR 2 million. The increase is principally due to the increased personal cost, administrative cost, and additional expenditure on IT support and data centers.

Additionally, the corporate expenses included share-based compensation expenses of EUR 1.9 million. An increase of EUR 0.7 million versus the prior-year quarter. Second, our R&D expenses for the quarter were approximately EUR 1 million lower than Q3 2020. This decrease was mainly represented by streamlining of personal cost IT-related development costs and then a change in the capitalization of costs last year, which led to an additional expense in the P&L.

Thirdly, our sales and marketing expenses for the quarter increased approximately EUR 0.9 million mainly reflecting an increase in personal expenses, online service expenses, as well as travel expenses due to the easing of travel restrictions from COVID-19 pandemic. In total, our operating loss was EUR 21.3 million a decrease of EUR 16.6 million, compared to a loss of EUR 4.7 million in Q3 2020. As previously discussed the main change is driven by the negative gross profit in the COVID business. Now please turn to Slide 24 for the cash flow and balance sheet highlights.

As of September 30, 2021, we have EUR 25.7 million of cash and cash equivalents on our balance sheet. In regards to our outstanding debt, I would like to remind you that as of the end of September this includes approximately EUR 19 million of lease liabilities. Looking at the movements, cash flow from operating activities improve compared to last year. The main drivers were the cash generated through our COVID-19 testing business segment in the first half of the year.

Having said that we do recognize the impact of the earlier this cost decrease and the COVID-19 business and negative and equalized profit leading to fading contribution from the segment compared to previous quarters. As discussed before we are managing that business on a cash basis to phase out. In 2021, year-to-date the cash flow used in investing activities was EUR 5.4 million as compared to a cash flow of EUR 11 million in the nine months 2020. Consistent with our aforementioned attention to the COVID business the decrease is mainly due to a reduction in COVID-19 related investments.

Cash flow from financing activities decreased compared to 2021 mainly reflecting the follow on equity offering, which contributed with EUR 22 million in Q3 2020. Based upon this cash development we have in our 6k also disclosed a going concern issue. With that let me hand it back to Andrin for our 2021 guidance and closing summary. Please turn to page -- Slide 25.

Andrin Oswald -- Chief Executive Officer

Thank you, Rene. So to round up today's call, let me touch on the financial guidance. You have seen that on the core business, we have a good recovery of our Diagnostics business. And we are also quite confident based on the contract values that we signed on the Pharma side that, that business will return to an attractive Q4.

We, of course, decline to have also a significant contribution this year from our COVID business. And accordingly, overall, we will adjust our top-line guidance and expect gross revenue for 2021 to be between 30% to 40% versus the prior year. This is mainly driven by COVID-19. However, we also expect our core business for the full year to be back to a growth of mid-to-high single digits after a decline of 20% in 2022.

Overall with exiting the COVID business the plan would be fully focused on our rare disease business strengthening execution, building capabilities, and attracting credit capital further strengthening our leading position in this rare disease space to create long-term value for our shareholders and stakeholders. With that, just a few summary points on Slide 27. Core business recovery of 13%, 43% growth in Diagnostics in the quarter. As mentioned, we plan to exit our COVID-19 testing business, and we have started to implement a program to reduce cash burn in our core business.

Overall, we remain confident in the step-by-step recovery we make on our core business, where the overall strategic priorities have not changed, accelerating our growth in clinical diagnostics and pharma services by leveraging our unique Bio/Databank. We strengthened our research capabilities to readily conform understanding and treatment of our diseases, starting with genetic partners. So in closing, I would just like to express our gratitude to our partners, our employees, and, of course, our shareholders have continued meeting this program pursued pure rare diseases. We remain committed to delivering the best part of the business performance for our shareholders while we are adapting and capitalizing on testing the rare disease landscape, continues to evolve and grow.

With that, I would like to hand you back to the operator for Q&A.

Questions & Answers:

Operator

Ladies and gentlemen, we now begin the question-and-answer session. [Operator instructions] Our first question is from Puneet Souda SVB Leerink. Please go ahead. Your line is open.

Puneet Souda -- SVB Leerink -- Analyst

Yeah. Hi, Andrin, Rene a couple of questions. Given the quarter obviously. So first on gross margin, do you point out your costs rose significantly as outlined due to COVID testing.

I mean I appreciate that you're shutting down your COVID testing operation in the first quarter. I don't think we were expecting your gross margin to be negative. So it appears to us that that would continue into the fourth quarter, but could you elaborate for us as we look at 2022. When do you think your gross margin can return to be positive? So that's my first question.

And then secondly on the cash runway, can you elaborate sort of given the current expenses R&D increase? How long do you think in terms of the cash runway how long do you have before further potential capital raises? Thank you.

Rene Just -- Chief Financial Officer

Maybe, I can comment on the first one. The reason you are seeing this drop in the gross profit that two twofold in or they're seeing the negative gross fold in the COVID business is mainly due to the development of COVID business. Our core business, which is very important is actually developing very positively compared to last year. So you see an increase in them in the quarter compared to last year and the gross profit in our core business from EUR 840,000 to EUR 3.2 million quarter versus quarter.

And year-to-date, the core has improved from EUR 8.1 million in gross profit last year to EUR 9.9 million this year. So the underlying business of our core activity is actually improving. Having said that it's, of course, correct as the gross profit in total is negative and that is mainly coming from the negative gross profit in core with EUR 8.6 million and that -- this is two reasons for that. As we have told you about the --how should I put it, the decreased level of activity as you have also seen in the presentation has basically decreased from Q4 2020 into Q1, Q2 in 2021 and this has also continued in Q3.

In Q3, we have then initiated, if I may put it like that, the ramp down of the activity and reducing the employer cost, and so on. Here we have not reacted fast enough compared to the revenue decline. But due to the revenue decline in Q3, we have then made the decision that we will ramp down the COVID business in full -- until year-end for the major part of the activities except to airports that will continue into Q1 2022. Having said that, then you can say, of course, will be a negative gross profit development continued due to this accelerated amortization and depreciation.

And then it's a little bit difficult for me to answer exactly, but I can tell you in the month of October we have seen increased activity in the COVID business. So we are actually very cash positive and EBITDA positive in the month of October. So and we expect this to continue for the Q4 in 2020 based upon the development in the infection rates and so on you see first of all of course in Germany, but also around the world. So we expect that this will be very cash positive in Q4.

So, no, I would not -- I mean this, how should I put it, this negative gross profit development you have seen. We do not expect that to continue on a cash basis. If I may put it like that into Q4 and Q1 of 2022. I believe that was the answer to your first question.

And then the second question was how long do you expect that our cash will last. If I may put it like that. First of all, I have to say that we have disclosed a going concern issue. This means that currently, our cash position cannot cover there that the burn rate for the coming year based upon the current activities.

Therefore, we have also started streamlining projects as I explained where we will reduce the cost by approximately EUR 15 million and this has also been kicked off today. This will be implemented right now and then over the Q4 and Q1 next year. So we do plan to reduce the burn rate significantly by EUR 15 million. Having said that then we also have EUR 26 million in cash so that should not be any issues.

I mean the EUR 26 million will not cover another full year, but at least it will cover as far into 2022 based upon the current burn rate. Finally, it's also important to say due to our reduced cash position, which is also typically normal for a biotech company like ours, we have, of course, also look into different, what do you call it, funding opportunities that we have. And we are currently in discussions with various strategic potential partners. We are in discussions with minority investors and maybe also some other potential investors, it could either be in terms of additional equity or in terms of issuing some debt.

So we are, how should I put it, on top of this and as soon as we have more information, we will, of course, disclose this to you.

Puneet Souda -- SVB Leerink -- Analyst

Got it. Thanks, Rene. On the Databank, you reported I believe 600,000 and some around 630,000, 632,000 patients in the database. That appears to be a step down from the 650,000 in the quarter.

And I recall Andrin talking about this database should continue to increase. Obviously, this is a core part of your offering. Can you just elaborate on exactly what -- why this decline happened and also on Pharma could you -- I totally appreciate that COVID is ongoing and that is impacting the recovery in that business, but obviously that's a core business development activity for you may just walk us through that. What are some of the parts there that are impacting the ground level? And when do you expect realistically for that the Pharma business to improve? Because obviously, that decline sequentially as well.

Andrin Oswald -- Chief Executive Officer

Yes, Puneet, the first one, the quarter-over-quarter, the new data coming into the Bio/Databank was increasing. So in Q3, again, I mean, we added a significant 50,000. It is on the slide -- quickly, put on that the exact number. On Slide 8, we added another 22,000 patients to the Databank in Q3 alone.

So the trend is robust. It's increasing quarter-over-quarter. The reason for that step down that you highlighted was historic nature. And we have with our new chief data officer started really as an overhaul of the Databank to not just take historical samples for granted but really validate what we have to kick out things that we think are no longer of value.

So that has led to a reset of the baseline by 40,000 patients, not in the form this year. I mean this is from a historic cleanup of the samples of patients that have been in that Databank coming from years ago. On the -- so just to summarize and the growth of the Bio/Databank samples has been very strong, and we expect it to accelerate. The trend as such remains absolutely robust.

And it's also not the secret that, of course, samples that come in today are much more valuable than samples that we have that maybe already 10 years old. We have much the research content, our research content at 80% level. And of course, we are also in a position today to do genomic analysis and also see the percentage of the full genome to exome sequence with the type patients that come in more recent times, of course, is much higher than it was a couple of years ago. So overall, the Bio/Databank remains on track to be strengthened quarter-over-quarter.

And for the Pharma. At this point in time, the recovery is not affected by the pandemic, at least not significantly. It is really the result of the fact that in 2020, the company has focused its whole team in commercial strength on COVID and such close to no new partnerships had been signed in 2020. And when we refocused on the core business, starting when I came on board, we started in progress and signed the first contract.

And as highlighted, a contract was signed in Q1 given that not only do we sign the contract, but mostly when we start recruiting the patients, you will see the revenues there to keep in [Inaudible]. But when I look, as we have emphasized and all the contracts we have signed already this year, we feel very good that, first of all, the growth is real. I mean the year is not over, but we are very encouraged by what we see now by November 24, that we will have a good Q4 for Pharma. And with the contracts that we have signed to date, we also believe that that growth continue into next year.

Puneet Souda -- SVB Leerink -- Analyst

OK. Thanks. I'll let others hop in.

Operator

Thank you for your question. The next question is from Cathy Schulte from Baird. Please go ahead.

Cathy Schulte -- Robert W. Baird and Company -- Analyst

Hey guys thanks for the questions. I guess first there have been some additional COVID lockdowns or restrictions lately across the world as these cases start to rise again. How do you view that impacting your fourth quarter both in terms of core Diagnostics and then clinical trial work for Pharma?

Andrin Oswald -- Chief Executive Officer

Yes. So thanks for the question. On COVID, we do see an uptick in testing volume. So we expect Q3 and Q4 to be stronger than Q3.

It's a little bit early to tell exactly how strong it will be given a lot depends, of course, on December. I mean last year, we had a tremendous uptick during the traveling season and holiday season, and a lot of travel will that happen this year or not. I mean, this will depend on how strong a potential lockdown would or would not be in Germany. If traveling continues, I think we will see growth and related cash generation.

Should the lockdown leads to a very strong travel restriction then normally the testing volume would go down again. But as I said, I think the -- we are on track, and we will execute the overall ramp down of the COVID business. But it might well be if the testing volumes continue to be high, that during went down, we generate some additional cash. As for the -- your second question, which was you have to remind me, unfortunately.

Cathy Schulte -- Robert W. Baird and Company -- Analyst

Yeah. It's more on the non-COVID side of the business. 

Andrin Oswald -- Chief Executive Officer

Yes. Correct. Sorry.

Cathy Schulte -- Robert W. Baird and Company -- Analyst

Just -- core diagnostics for the Pharma?

Andrin Oswald -- Chief Executive Officer

Correct. Up to now, we haven't seen any impact. In Europe, I think that now is somewhat the extent of the current pandemic, but that may change again in a month from now. And even here, we don't see an impact right now.

Should it get worse, the hospitals start to get significantly overcrowded so that they would be prioritized the more standard testing work that they do, we may have some impact or some slowdown on our testing or clinical trials, but that's pure speculation, we haven't seen any to-date. We also don't expect it to be, in any way immediately happened compared to how it was last year. I mean, we do have a global business, and we are not just over presented in one region. And given that there are different phases of the pandemic in different regions.

And overall do not expect to see a substantial impact even if in Europe compared to seeing a smaller slowdown in the months to come.

Cathy Schulte -- Robert W. Baird and Company -- Analyst

Okay. Got it. And can you just talk a little bit more about what you're doing with [Inaudible]? When will those custom kits be available? And how do you think they'll improve or differentiate your diagnostic?

Andrin Oswald -- Chief Executive Officer

Yes. So I cannot refer them to say we expect it to be rolled out next year. In terms of exactly what quarter and what when I think we -- given that this is in collaboration with I cannot do too much before we have alignment with them, but the teams are working on that, and we expect rapid progress. And as highlighted, we expect to have a further announcement on our central still easier than you think you also there some more insight into how we plan to accelerate the rollout of our decentralized solution.

Cathy Schulte -- Robert W. Baird and Company -- Analyst

All right. Great. Thank you.

Operator

To give you a question, we have the next question from Sung Ji Nam from BTIG. Please go ahead. Your line is open.

Sung Ji Nam -- BTIG -- Analyst

Hi. Thanks for taking the questions. Just out of curiosity of the new Pharma contracts that you signed this year, year-to-date or even the last. I would say 12 to 18 months or even two years.

Do you have a sense of roughly what percentage is coming from the existing 30 plus customers versus the percentage coming from new customers?

Andrin Oswald -- Chief Executive Officer

Yes. So with how you look at it in terms of the number of contracts, the majority are from new customers. In terms of value, some of the existing contracts, of course, have a significant size while some of the new ones are more from biotech companies and hence start smaller. And if you ask for a value split, roughly, I would say, about half, half.

Sung Ji Nam -- BTIG -- Analyst

OK. Gotcha. And for the ones that have not have completed their projects and have not signed on for new projects just got added curiously, what are the main drivers? Or do you have a sense if they're expecting -- yeah go-ahead.

Andrin Oswald -- Chief Executive Officer

Some of them are by key companies specifically working on a rare disease with a certain scientific approach. And then if that program fails, then, of course, the program stops, right? And the company given that it will be focused on one specific project, of course, would most likely exist or at least would have other priorities than it needed be starting the next collaboration with us. But overall, I would say that it is relatively rare. I mean, we have a lot of repeat customers.

And I think all the larger partnerships that we have, I think at least to date, I can, of course, not make a forward-looking statement. But today, these partnerships, by and large, tend to continue. 

Sung Ji Nam -- BTIG -- Analyst

Gotcha. And then just on the Diagnostics side on the core Diagnostics business side, do you know if the infrastructure in place currently in your view to be able to achieve kind of your long term growth rate target? Or are there kind of further efforts in place or a bit that are underway to be able to continue to drive growth there?

Andrin Oswald -- Chief Executive Officer

Infrastructure, I guess it depends on what you mean. As it relates to our laboratory capacity, I think we have what it takes, at least for to midterm. If we look at our center cloud, which is call it, infrastructure as it relates to working with decentralized labs. I mean that we are building up, and we will share, as I mentioned in a couple of months and where we stand and what we can expect.

The investments there are not significant, but still, I think it's an important project for us. And when you look at the commercial infrastructure, I would think, we have highlighted that in the past, where we do have the gap is in the US. I mean we do have a presence in the US, but we consider it not to be developed in the stages that we would like. And that's also why we are exploring partnership opportunities in the US because, of course, one option always strengthens ourselves, but I see a potential there to partner with someone who has that footprint already in the US and is interested in our rare disease value proposition to a co-commercialization partnership.

Sung Ji Nam -- BTIG -- Analyst

Great. Thank you for taking the questions.

Andrin Oswald -- Chief Executive Officer

All right. We're already a little bit over here, but for a minute. Should we take one more?

Operator

There are no further questions, sir.

Andrin Oswald -- Chief Executive Officer

Even better. Good. All right. I think, Lennart, we can close the call.

Lennart Streibel -- Investor Relations

Yup. Thanks very much for joining us and talk to you during the next quarter at Investor events as well. Thank you and goodbye.

Andrin Oswald -- Chief Executive Officer

Bye-bye, everyone. Thank you for your time.

Duration: 65 minutes

Call participants:

Lennart Streibel -- Investor Relations

Andrin Oswald -- Chief Executive Officer

Rene Just -- Chief Financial Officer

Puneet Souda -- SVB Leerink -- Analyst

Cathy Schulte -- Robert W. Baird and Company -- Analyst

Sung Ji Nam -- BTIG -- Analyst

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