Burning Rock Reports First Quarter 2023 Financial Results

GUANGZHOU, China, May 30, 2023 (GLOBE NEWSWIRE) -- Burning Rock Biotech Limited (NASDAQ: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), 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: [email protected]

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	%