Burning Rock Reports First Quarter 2023 Financial Results

GUANGZHOU, China, May 30, 2023 (GLOBE NEWSWIRE) -- Burning Rock Biotech Limited (NASDAQ: BNR and LSE: BNR, the “Company” or “Burning Rock”), a company focused on the application of next generation sequencing (NGS) technology in the field of precision oncology, today reported financial results for the three months ended March 31, 2023.

Recent Business Updates

Minimal Residual Disease (MRD)
- Results of the MEDAL (MEthylation Based Dynamic Analysis for Lung Cancer) study were published at the American Association for Cancer Research Annual Meeting 2023 (“AACR 2023”). Through parallel testing and comparison of Burning Rock’s personalized MRD test brPROPHET™ and fixed MRD assays, the objective of this study was to establish the best technique and application strategy of dynamic MRD detection for prognosis prediction and disease assessment among NSCLC patients. It shows that brPROPHET™ detected more MRD events with ultra-low ctDNA abundance yet meaningful prognostic significance. In addition, the dynamic change of longitudinal MRD was evaluated to explore the positive predictive value (PPV) and negative predictive value (NPV) of MRD detections over time, providing important insights for guiding the standardization of future surveillance applications.
- The results of the clinical performance of brPROPHET™ in patients with resectable gastric cancer and biliary tract cancer were also released at AACR 2023.
Pharma Services
- Total value of new contracts entered into during the first quarter of 2023 amounted to RMB75 million, representing a 27% increase from the same period in 2022.

First Quarter 2023 Financial Results

Revenues were RMB142.5 million (US$20.8 million) for the three months ended March 31, 2023, representing a 5.2% increase from RMB135.5 million for the same period in 2022.

Revenue generated from central laboratory business was RMB61.8 million (US$9.0 million) for the three months ended March 31, 2023, representing a 16.7% decrease from RMB74.2 million for the same period in 2022, primarily attributable to a drop in the number of tests performed resulting from the impact of COVID-19 pandemic in January and the Company’s focus on its in-hospital business.
Revenue generated from in-hospital business was RMB51.6 million (US$7.5 million) for the three months ended March 31, 2023, representing a 5.3% increase from RMB49.0 million for the same period in 2022, driven by an increase in sales volume.
Revenue generated from pharma research and development services was RMB29.2 million (US$4.3 million) for the three months ended March 31, 2023, representing a 135.5% increase from RMB12.4 million for the same period in 2022, primarily attributable to a further increased testing volume performed and higher average total contract value from our existing and new customers.

Cost of revenues was RMB43.7 million (US$6.4 million) for the three months ended March 31, 2023, representing a 8.8% decrease from RMB47.9 million for the same period in 2022, primarily due to a decrease in cost of central laboratory business, which was in line with the decrease in revenue generated from this business.

Gross profit was RMB98.8 million (US$14.4 million) for the three months ended March 31, 2023, representing a 12.8% increase from RMB87.6 million for the same period in 2022. Gross margin was 69.3% for the three months ended March 31, 2023, compared to 64.6% for the same period in 2022. By channel, gross margin of central laboratory business was 77.8% for the three months ended March 31, 2023, compared to 68.1% during the same period in 2022, primarily due to a decrease in inventory write down and royalty fee; gross margin of in-hospital business was 66.7% for the three months ended March 31, 2023, compared to 68.2% during the same period in 2022; gross margin of pharma research and development services was 55.8% for the three months ended March 31, 2023, compared to 29.2% during the same period of 2022, primarily due to an increase in test volume of higher margin projects.

Non-GAAP gross profit, which excludes depreciation and amortization expenses, was RMB107.9 million (US$15.7 million) for the three months ended March 31, 2023, representing a 16.4% increase from RMB92.7 million for the same period in 2022. Non-GAAP gross margin was 75.7% for the three months ended March 31, 2023, compared to 68.4% for the same period in 2022.

Operating expenses were RMB287.2 million (US$41.8 million) for the three months ended March 31, 2023, representing a 18.0% decrease from RMB350.4 million for the same period in 2022. The decrease was primarily driven by budget control measures and headcount reduction to improve the Company’s operating efficiency.

Research and development expenses were RMB94.4 million (US$13.7 million) for the three months ended March 31, 2023, representing an 21.0% decrease from RMB119.5 million for the same period in 2022, primarily due to (i) a decrease in research and development personnel’s staff cost, and (ii) a decrease in royalty and license fee.
Selling and marketing expenses were RMB64.8 million (US$9.4 million) for the three months ended March 31, 2023, representing a 27.4% decrease from RMB89.2 million for the same period in 2022, primarily due to (i) a decrease in staff cost resulted from the reorganization of the sales department and improvement in operating efficiency; (ii) a decrease in entertainment and travel expenses; and (iii) a decrease in advertising and marketing fee.
General and administrative expenses were RMB128.0 million (US$18.6 million) for the three months ended March 31, 2023, representing a 9.7% decrease from RMB141.7 million for the same period in 2022, primarily due to (i) a decrease in general and administrative personnel’s staff cost, and (ii) a decrease in operating lease expense as a portion of the expense started to be recognized as cost of revenue following the commencement of production activities in the relevant parts of the property in the first half of 2022; (iii) a decrease in amortized expense on share-based compensation.

Net loss was RMB185.3 million (US$27.0 million) for the three months ended March 31, 2023, compared to RMB261.4 million for the same period in 2022.

Cash, cash equivalents, restricted cash and short-term investments were RMB803.1 million (US$116.9 million) as of March 31, 2023.

2023 Financial Guidance

We reiterate our 2023 full-year revenue guidance of approximately 20% growth over 2022.

Conference Call Information

Burning Rock will host a conference call to discuss the first quarter 2023 financial results at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Hong Kong time) on May 30, 2023.

Please register in advance of the conference using the link provided below and dial in 15 minutes prior to the call, using participant dial-in numbers and unique registrant ID which would be provided upon registering.

PRE-REGISTER LINK: https://register.vevent.com/register/BI70acdaea8afc4d3e8f3eec70e5cc3fa7 .

Additionally, a live and archived webcast of the conference call will also be available on the company’s investor relations website at http://ir.brbiotech.com or through link https://edge.media-server.com/mmc/p/p3h6zb7y .

A replay of the webcast will be available for 12 months via the same link above.

About Burning Rock

Burning Rock Biotech Limited (NASDAQ: BNR and LSE: BNR), whose mission is to guard life via science, focuses on the application of next generation sequencing (NGS) technology in the field of precision oncology. Its business consists of i) NGS-based therapy selection testing for late-stage cancer patients, and ii) cancer early detection, which has moved beyond proof-of-concept R&D into the clinical validation stage.

For more information about Burning Rock, please visit: ir.brbiotech.com.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “target,” “confident” and similar statements. Burning Rock may also make written or oral forward-looking statements in its periodic reports to the SEC, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Burning Rock’s beliefs and expectations, are forward-looking statements. Such statements are based upon management’s current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Burning Rock’s control. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those contained in any such statements. All information provided in this press release is as of the date of this press release, and Burning Rock does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

Non-GAAP Measures

In evaluating the business, the company considers and uses non-GAAP measures, such as non-GAAP gross profit and non-GAAP gross margin, as supplemental measures to review and assess operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The company defines non-GAAP gross profit as gross profit excluding depreciation and amortization. The company defines non-GAAP gross margin as gross margin excluding depreciation and amortization.

The company presents these non-GAAP financial measures because they are used by management to evaluate operating performance and formulate business plans. The company believe non-GAAP gross profit and non-GAAP gross margin excluding non-cash impact of depreciation and amortization reflect the company’s ongoing business operations in a manner that allows more meaningful period-to-period comparisons.

Contact: IR@brbiotech.com

Selected Operating Data

	For the three months ended
	March 31, 2022	June 30, 2022	September 30, 2022	December 31, 2022	March 31, 2023
Central Laboratory Channel:
Number of patients tested	7,743	8,060	7,989	6,419	6,139
Number of ordering physicians ⁽¹⁾	994	767	897	797	792
Number of ordering hospitals ⁽²⁾	318	264	257	238	241

⁽¹⁾ Represents physicians who on average order at least one test from us every month during a relevant period in the central laboratory channel.
⁽²⁾ Represents hospitals whose residing physicians who on average order at least one test from us every month during a relevant period in the central laboratory channel.

	As of
	March 31, 2022	June 30, 2022	September 30, 2022	December 31, 2022	March 31, 2023
In-hospital Channel:
Pipeline partner hospitals ⁽¹⁾	24	25	22	28	29
Contracted partner hospitals ⁽²⁾	41	43	47	49	49
Total number of partner hospitals	65	68	69	77	78

⁽¹⁾ Refers to hospitals that are in the process of establishing in-hospital laboratories, laboratory equipment procurement or installation, staff training or pilot testing using the Company’s products.
⁽²⁾ Refers to hospitals that have entered into contracts to purchase the Company’s products for use on a recurring basis in their respective in-hospital laboratories the Company helped them establish. Kit revenue is generated from contracted hospitals.

Selected Financial Data

	For the three months ended
Revenues	March 31, 2022	June 30, 2022	September 30, 2022	December 31, 2022	March 31, 2023
	(RMB in thousands)
Central laboratory channel	74,211	78,597	89,992	71,970	61,804
In-hospital channel	48,957	34,177	49,636	42,526	51,561
Pharma research and development channel	12,356	18,072	15,003	27,741	29,151
Total revenues	135,524	130,846	154,631	142,237	142,516

	For the three months ended
Gross profit	March 31, 2022	June 30, 2022	September 30, 2022	December 31, 2022	March 31, 2023
	(RMB in thousands)
Central laboratory channel	50,574	57,575	69,991	54,507	48,090
In-hospital channel	33,396	20,012	31,593	26,999	34,409
Pharma research and development channel	3,610	5,015	7,010	19,757	16,273
Total gross profit	87,580	82,602	108,594	101,263	98,772

	For the three months ended
Share-based compensation expenses	March 31, 2022	June 30, 2022	September 30, 2022	December 31, 2022	March 31, 2023
	(RMB in thousands)
Cost of revenues	365	441	481	496	353
Research and development expenses	12,299	11,923	13,978	14,673	13,612
Selling and marketing expenses	1,774	2,158	2,346	2,247	1,606
General and administrative expenses	65,715	62,615	61,041	74,232	62,595
Total share-based compensation expenses	80,153	77,137	77,846	91,648	78,166

Burning Rock Biotech Limited Unaudited Condensed Statements of Comprehensive Loss (in thousands, except for number of shares and per share data)

	For the three months ended
	March 31, 2022		June 30, 2022		September 30, 2022		December 31, 2022		March 31, 2023		March 31, 2023
	RMB		RMB		RMB		RMB		RMB		US$
Revenues	135,524		130,846		154,631		142,237		142,516		20,752
Cost of revenues	(47,944	)	(48,244	)	(46,037	)	(40,974	)	(43,744	)	(6,370	)
Gross profit	87,580		82,602		108,594		101,263		98,772		14,382
Operating expenses:
Research and development expenses	(119,496	)	(92,112	)	(109,433	)	(100,827	)	(94,417	)	(13,748	)
Selling and marketing expenses	(89,211	)	(105,634	)	(90,275	)	(85,174	)	(64,774	)	(9,432	)
General and administrative expenses	(141,733	)	(150,316	)	(143,530	)	(132,705	)	(128,039	)	(18,644	)
Total operating expenses	(350,440	)	(348,062	)	(343,238	)	(318,706	)	(287,230	)	(41,824	)
Loss from operations	(262,860	)	(265,460	)	(234,644	)	(217,443	)	(188,458	)	(27,442	)
Interest income	1,832		2,685		2,001		2,838		3,144		458
Interest expenses	119		(29	)	12		-		-		-
Other income (expense), net	298		127		(189	)	(84	)	599		87
Foreign exchange (loss) gain, net	(777	)	624		1,337		365		(116	)	(17	)
Loss before income tax	(261,388	)	(262,053	)	(231,483	)	(214,324	)	(184,831	)	(26,914	)
Income tax expenses	-		(84	)	-		(1,901	)	(422	)	(61	)
Net loss	(261,388	)	(262,137	)	(231,483	)	(216,225	)	(185,253	)	(26,975	)
Net loss attributable to Burning Rock Biotech Limited’s shareholders	(261,388	)	(262,137	)	(231,483	)	(216,225	)	(185,253	)	(26,975	)
Net loss attributable to ordinary shareholders	(261,388	)	(262,137	)	(231,483	)	(216,225	)	(185,253	)	(26,975	)
Loss per share for class A and class B ordinary shares:
Class A ordinary shares - basic and diluted	(2.50	)	(2.50	)	(2.23	)	（2.11	)	(1.81	)	(0.26	)
Class B ordinary shares - basic and diluted	(2.50	)	(2.50	)	(2.23	)	（2.11	)	(1.81	)	(0.26	)
Weighted average shares outstanding used in loss per share computation:
Class A ordinary shares - basic and diluted	87,179,752		87,532,539		86,585,322		85,051,882		85,065,585		85,065,585
Class B ordinary shares - basic and diluted	17,324,848		17,324,848		17,324,848		17,324,848		17,324,848		17,324,848
Other comprehensive income (loss), net of tax of nil:
Foreign currency translation adjustments	(3,065	)	29,715		20,646		(5,950	)	(5,659	)	(824	)
Total comprehensive loss	(264,453	)	(232,422	)	(210,837	)	(222,175	)	(190,912	)	(27,799	)
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders	(264,453	)	(232,422	)	(210,837	)	(222,175	)	(190,912	)	(27,799	)

Burning Rock Biotech Limited Unaudited Condensed Consolidated Balance Sheets (In thousands)

	As of
	December 31, 2022		March 31, 2023		March 31, 2023
	RMB		RMB		US$
ASSETS
Current assets:
Cash and cash equivalents		905,451		793,484		115,540
Restricted cash		19,817		9,658		1,406
Accounts receivable, net		109,954		125,554		18,282
Contract assets, net		41,757		48,887		7,118
Inventories, net		130,321		113,895		16,584
Prepayments and other current assets, net		51,462		47,209		6,874
Total current assets		1,258,762		1,138,687		165,804
Non-current assets:
Equity method investment		690		599		87
Convertible note receivable		5,105		5,105		743
Property and equipment, net		251,829		220,342		32,084
Operating right-of-use assets		48,205		39,351		5,730
Intangible assets, net		1,986		1,701		248
Other non-current assets		20,890		11,583		1,687
Total non-current assets		328,705		278,681		40,579
TOTAL ASSETS		1,587,467		1,417,368		206,383

Burning Rock Biotech Limited Unaudited Condensed Consolidated Balance Sheets (Continued) (in thousands)

	As of
	December 31, 2022			March 31, 2023			March 31, 2023
	RMB			RMB			US$
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		50,947			23,593			3,435
Deferred revenue		147,633			154,317			22,470
Accrued liabilities and other current liabilities		173,832			146,697			21,361
Customer deposits		1,803			1,197			174
Current portion of operating lease liabilities		37,236			32,312			4,705
Total current liabilities		411,451			358,116			52,145
Non-current liabilities:
Non-current portion of operating lease liabilities		13,551			9,144			1,331
Other non-current liabilities		4,124			4,545			661
Total non-current liabilities		17,675			13,689			1,992
TOTAL LIABILITIES		429,126			371,805			54,137
Shareholders’ equity:
Class A ordinary shares		117			117			17
Class B ordinary shares		21			21			3
Additional paid-in capital		4,582,790			4,660,924			678,683
Treasury stock		(58,919	)		(58,919	)		(8,579	)
Accumulated deficits		(3,199,946	)		(3,385,199	)		(492,923	)
Accumulated other comprehensive loss		(165,722	)		(171,381	)		(24,955	)
Total shareholders’ equity		1,158,341			1,045,563			152,246
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		1,587,467			1,417,368			206,383

Burning Rock Biotech Limited Unaudited Condensed Statements of Cash Flows (in thousands)

	For the three months ended
	March 31, 2022		March 31, 2023		March 31, 2023
	RMB		RMB		US$
Net cash used in operating activities	(144,361	)	(113,143	)	(16,475	)
Net cash used in investing activities	(13,011	)	(4,059	)	(591	)
Net cash used in financing activities	(3,934	)	(32	)	(5	)
Effect of exchange rate on cash, cash equivalents and restricted cash	(2,931	)	(4,892	)	(712	)
Net decrease in cash, cash equivalents and restricted cash	(164,237	)	(122,126	)	(17,783	)
Cash, cash equivalents and restricted cash at the beginning of period	1,439,112		925,268		134,729
Cash, cash equivalents and restricted cash at the end of period	1,274,875		803,142		116,946

Burning Rock Biotech Limited Reconciliations of GAAP and Non-GAAP Results

			For the three months ended
	March 31, 2022		June 30, 2022		September 30, 2022		December 31, 2022		March 31, 2023
			(RMB in thousands)
Gross profit:
Central laboratory channel	50,574		57,575		69,991		54,507		48,090
In-hospital channel	33,396		20,012		31,593		26,999		34,409
Pharma research and development channel	3,610		5,015		7,010		19,757		16,273
Total gross profit	87,580		82,602		108,594		101,263		98,772
Add: depreciation and amortization:
Central laboratory channel	2,553		2,545		3,138		3,609		2,567
In-hospital channel	93		1,428		2,479		2,449		2,582
Pharma research and development channel	2,493		4,327		2,805		3,065		3,974
Total depreciation and amortization included in cost of revenues	5,139		8,300		8,422		9,123		9,123
Non-GAAP gross profit:
Central laboratory channel	53,127		60,120		73,129		58,116		50,657
In-hospital channel	33,489		21,440		34,072		29,448		36,991
Pharma research and development channel	6,103		9,342		9,815		22,822		20,247
Total non-GAAP gross profit	92,719		90,902		117,016		110,386		107,895
Non-GAAP gross margin:
Central laboratory channel	71.6	%	76.5	%	81.3	%	80.8	%	82.0	%
In-hospital channel	68.4	%	62.7	%	68.6	%	69.2	%	71.7	%
Pharma research and development channel	49.4	%	51.7	%	65.4	%	82.3	%	69.5	%
Total non-GAAP gross margin	68.4	%	69.5	%	75.7	%	77.6	%	75.7	%