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Burning Rock Reports Second Quarter 2021 Financial Results

·19 min read

GUANGZHOU, China, Aug. 31, 2021 (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 June 30, 2021.

Business Updates

  • Early Detection

    • Technology foundation manuscript was published in Nature Biomedical Engineering (article link here). The results demonstrate that our proprietary technology of deep methylation sequencing, aided by a machine-learning classifier of methylation patterns, enables ultrasensitive detection of circulating tumor DNA.

    • We continued to conduct an early-access program (over 2,000 volunteers tested) to prepare for operational readiness of our 6-cancer early detection product.

    • 2022 commercialization is well on track. We are entering into contract signing stage with 6 hospitals where our 6-cancer test will be offered at the health check-up departments of those hospitals.

  • New products for early-stage cancer patients

    • Development of minimal residual disease (MRD) products is on track. Products are targeted to be launched in 2022. Lung-cancer data read-out is likely to take place in the first half of 2022. Clinical trials on colon, esophageal and other cancers are also under planning.

  • Pharma Services

    • Biopharma service contracts backlog grew rapidly. Total value of the contracts entered into during the first half of 2021 amounted to RMB98.2 million, three times the amount in full-year 2020.

    • We are jointly developing, together with IMPACT Therapeutics, companion diagnostics (CDx) for a targeted oncology drug, Senaparib, (IMP4297), a PARP inhibitor, for the treatment of prostate cancer globally. Senaparib’s pivotal clinical study under the FDA pathway is in progress. This project uses our Clinical Laboratory Improvement Amendments (CLIA)-certified and College of American Pathologists (CAP)-accredited laboratory in California, US.

  • Therapy Selection

    • Continued to strategically focus on the in-hospital channel. The volume of in-hospital NGS-based test kits grew 70% year-over-year to over 10,000 tests in the second quarter of 2021.

Second Quarter 2021 Financial Results

Revenues were RMB127.3 million (US$19.7 million) for the three months ended June 30, 2021, representing a 19.0% increase from RMB107.0 million for the same period in 2020, or a 19.4% sequential increase from RMB106.6 million for the three months ended March 31, 2021.

  • Revenue generated from central laboratory business was RMB80.0 million (US$12.4 million) for the three months ended June 30, 2021, representing a 7.2% increase from RMB74.6 million for the same period in 2020, primarily attributable to the year-over-year volume growth of the central laboratory business. Number of patients tested in the central laboratory channel was 8,155 for the three months ended June 30, 2021, representing a 12.5% increase from 7,252 for the same period in 2020.

  • Revenue generated from in-hospital business was RMB40.5 million (US$6.3 million) for the three months ended June 30, 2021, representing a 46.8% increase from RMB27.6 million for the same period in 2020, primarily attributable to the year-on-year volume growth of 70% of the in-hospital business. Number of contracted partner hospitals in the in-hospital channel increased to 34 as of June 30, 2021 from 32 as of March 31, 2020 and 24 as of June 30, 2020.

  • Revenue generated from pharma research and development services was RMB6.8 million (US$1.0 million) for the three months ended June 30, 2021, representing a 41.9% increase from RMB4.8 million for the same period in 2020, primarily attributable to the building of pipeline of pharmaceutical projects.

Cost of revenues was RMB37.0 million (US$5.7 million) for the three months ended June 30, 2021, representing a 29.7% increase from RMB28.6 million for the same period in 2020, which was generally in line with the Company’s continued business growth.

Gross profit was RMB90.2 million (US$14.0 million) for the three months ended June 30, 2021, representing a 15.1% increase from RMB78.4 million for the same period in 2020. Gross margin was 70.9% for the three months ended June 30, 2021, compared to 73.3% for the same period in 2020.

Operating expenses were RMB292.3 million (US$45.3 million) for the three months ended June 30, 2021, representing a 93% increase from RMB151.4 million for the same period in 2020. The increase was primarily driven by headcount growth and increase in other costs to support business expansion.

  • Research and development expenses were RMB108.1 million (US$16.7 million) for the three months ended June 30, 2021, representing a 51.8% increase from RMB71.2 million for the same period in 2020, primarily due to an increase in research and development personnel’s staff cost and other costs incurred in research and development projects.

  • Selling and marketing expenses were RMB68.1 million (US$10.5 million) for the three months ended June 30, 2021, representing a 79.1% increase from RMB38.0 million for the same period in 2020, primarily due to an increase in staff cost of sales and marketing personnel.

  • General and administrative expenses increased significantly to RMB116.1 million (US$18.0 million) for the three months ended June 30, 2021 from RMB42.3 million for the same period in 2020, primarily due to an increase in general and administrative personnel’s staff cost and share-based compensation expenses.

Net loss was RMB203.7 million (US$31.5 million) for the three months ended June 30, 2021, compared to RMB71.1 million for the same period in 2020.

Cash, cash equivalents, restricted cash and short-term investments were RMB1,918.8 million (US$297.2 million) as of June 30, 2021.

Appointment of VP of Regulatory Affairs (US and Europe) and Quality Assurance

Dr. Sharon Liang joined Burning Rock as the VP of Regulatory Affairs (US and Europe) and Quality Assurance in late June this year. She is a human genetics expert with nearly two decades of experience in molecular cancer diagnostic medical device product development and regulatory in academia, government and industry. She was the US FDA committee member for the US President’s Precision Medicine Initiative (PMI) Project leading Bioinformatics group. She led and contributed to the development of many molecular diagnostic devices approved by the FDA, including the first NGS sequencer, first NGS Oncopanel, first NGS tumor profiling assay, first Direct-to-Consumer test, first microarray genetic tests, and companion diagnostics. Before joining Burning Rock, Dr. Liang worked at GRAIL, a cancer early detection diagnostic company, primarily responsible for regulatory strategy and execution.

2021 Financial Guidance

For the third quarter of this year, COVID-related travel restrictions in multiple major cities in China will impact our central-laboratory testing volumes and, to a lesser extent, the growth of our in-hospital testing volumes. The relatively stronger growth expected for in-hospital testing will also be driven by the industry structural shift from central-laboratory towards in-hospital testing. We believe that we are well-positioned in the in-hospital segment, and we view the revenues from in-hospital as higher quality, given our product and competitive advantages, leading to stickier revenues. As the testing mix of our therapy selection business transitions towards the in-hospital segment, our blended average sales price will decline, due to lower prices of IVD testing kits that we supply to hospitals in the in-hospital segment, compared with prices of LDT testing service that we charge to patients in the central-laboratory segment. This will result, during this transition period, in a lower revenue growth rate compared with volume growth rate, for our therapy selection business. As such, the Company adjusts its 2021 full-year revenue guidance to approximately RMB500 million.

Conference Call Information

Burning Rock will host a conference call to discuss the second quarter 2021 financial results at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Hong Kong time) on August 31, 2021.

Details of the conference call are as follows:

International:

+65 67135090

U.S.:

+1 8456750437

U.K.:

+44 2036214779

Hong Kong:

+852 30186771

China Mobile:

4006208038

China Landline:

8008190121

Conference ID:

2309539

A replay of the conference call will be available for one week (dial-in number: +61 2 8199 0299; same conference ID as shown 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, with the leading market share in China and over 273,000 tissue and liquid-based tests completed cumulatively, 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.

Selected Operating Data

For the three months ended

March 31,
2020

June 30,
2020

September 30,
2020

December 31,
2020

March 31,
2021

June 30,
2021

Central Laboratory Channel:

Number of patients tested

4,680

7,252

8,644

7,989

7,716

8,155

Number of ordering physicians(1)

810

1,175

1,194

1,114

1,082

1,013

Number of ordering hospitals(2)

232

284

289

294

303

300

_____________________

(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,
2020

June 30,
2020

September 30,
2020

December 31,
2020

March 31,
2021

June 30,
2021

In-hospital Channel:

Pipeline partner hospitals(1)

23

23

22

23

22

22

Contracted partner hospitals(2)

21

24

25

29

32

34

Total number of partner hospitals

44

47

47

52

54

56

____________________

(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,
2020

June 30,
2020

September 30,
2020

December 31,
2020

March 31,
2021

June 30
2021

(RMB in thousands)

Central laboratory channel

46,141

74,607

89,899

86,695

74,561

79,999

In-hospital channel

17,123

27,588

31,704

41,457

28,994

40,502

Pharma research and development channel

4,065

4,776

2,278

3,570

3,068

6,778

Total revenues

67,329

106,971

123,881

131,722

106,623

127,279


For the three months ended

Gross profit

March 31,
2020

June 30,
2020

September 30,
2020

December 31,
2020

March 31,
2021

June 30
2021

(RMB in thousands)

Central laboratory channel

32,434

56,556

67,804

66,588

55,212

58,681

In-hospital channel

10,126

19,269

22,410

30,218

20,070

29,426

Pharma research and development channel

2,224

2,573

1,373

2,347

1,658

2,124

Total gross profit

44,784

78,398

91,587

99,153

76,940

90,231


For the three months ended

Share-based compensation expenses

March 31,
2020

June 30,
2020

September 30,
2020

December 31,
2020

March 31,
2021

June 30,
2021

(RMB in thousands)

Cost of revenues

176

183

160

277

339

406

Research and development expenses

2,072

25,314

10,572

11,843

22,404

20,825

Selling and marketing expenses

253

491

341

2,372

2,633

2,809

General and administrative expenses

1,665

1,639

57,805

58,057

59,382

59,369

Total share-based compensation expenses

4,166

27,627

68,878

72,549

84,758

83,409


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,
2020

June 30,
2020

September 30,
2020

December 31,
2020

March 31,
2021

June 30,
2021

June 30,
2021

RMB

RMB

RMB

RMB

RMB

RMB

US$

Revenues

67,329

106,971

123,881

131,722

106,623

127,279

19,713

Cost of revenues

(22,545)

(28,573)

(32,294)

(32,569)

(29,683)

(37,048)

(5,738)

Gross profit

44,784

78,398

91,587

99,153

76,940

90,231

13,975

Operating expenses:

Research and development expenses

(40,016)

(71,176)

(69,330)

(83,418)

(77,414)

(108,071)

(16,738)

Selling and marketing expenses

(29,815)

(37,992)

(44,174)

(56,606)

(55,130)

(68,058)

(10,541)

General and administrative expenses

(34,295)

(42,272)

(102,731)

(114,502)

(116,259)

(116,130)

(17,986)

Total operating expenses

(104,126)

(151,440)

(216,235)

(254,526)

(248,803)

(292,259)

(45,265)

Loss from operations

(59,342)

(73,042)

(124,648)

(155,373)

(171,863)

(202,028)

(31,290)

Interest income

3,985

44

698

1,341

787

681

105

Interest expense

(1,178)

1,939

(776)

(652)

(510)

(565)

(88)

Other (expense) income, net

(151)

122

(176)

(682)

118

433

67

Foreign exchange gain (loss), net

611

(118)

(2,228)

(1,112)

57

(560)

(87)

Change in fair value of warrant liability

3,503

-

-

-

-

-

-

Loss before income tax

(52,572)

(71,055)

(127,130)

(156,478)

(171,411)

(202,039)

(31,293)

Income tax expenses

-

-

-

-

-

(1,626)

(252)

Net loss

(52,572)

(71,055)

(127,130)

(156,478)

(171,411)

(203,665)

(31,545)

Net loss attributable to Burning Rock Biotech Limited’s shareholders

(52,572)

(71,055)

(127,130)

(156,478)

(171,411)

(203,665)

(31,545)

Accretion of convertible preferred shares

(26,288)

(38,400)

-

-

-

-

-

Net loss attributable to ordinary shareholders

(78,860)

(109,455)

(127,130)

(156,478)

(171,411)

(203,665)

(31,545)

Loss per share:

Ordinary shares - basic and diluted

(3.15)

-

-

-

-

-

Class A ordinary shares - basic and diluted

-

(2.68)

(1.22)

(1.51)

(1.65)

(1.96)

(0.30)

Class B ordinary shares - basic and diluted

-

(2.68)

(1.22)

(1.51)

(1.65)

(1.96)

(0.30)

Weighted average shares outstanding used in loss per share computation:

Ordinary shares - basic and diluted

25,031,575

-

-

-

-

-

-

Class A ordinary shares - basic and diluted

-

23,461,319

86,479,686

86,511,799

86,721,263

86,764,260

86,764,260

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 (loss) income, net of tax of nil:

Foreign currency translation adjustments

11,422

(2,336)

(91,093)

(94,881)

14,080

(34,980)

(5,418)

Total comprehensive loss

(41,150)

(73,391)

(218,223)

(251,359)

(157,331)

(238,645)

(36,963)

Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders

(41,150)

(73,391)

(218,223)

(251,359)

(157,331)

(238,645)

(36,963)


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

For the six months ended

June 30,
2020

June 30,
2021

June 30,
2021

RMB

RMB

USD

Revenues

174,300

233,902

36,226

Cost of revenues

(51,118)

(66,731)

(10,336)

Gross profit

123,182

167,171

25,890

Operating expenses:

Research and development expenses

(111,192)

(185,485)

(28,728)

Selling and marketing expenses

(67,807)

(123,188)

(19,079)

General and administrative expenses

(76,567)

(232,389)

(35,992)

Total operating expenses

(255,566)

(541,062)

(83,799)

Loss from operations

(132,384)

(373,891)

(57,909)

Interest income

4,029

1,468

227

Interest expense

761

(1,075)

(166)

Other (expense) income, net

(29)

551

85

Foreign exchange gain (loss), net

493

(503)

(78)

Change in fair value of warrant liability

3,503

-

-

Loss before income tax

(123,627)

(373,450)

(57,841)

Income tax expenses

-

(1,626)

(252)

Net loss

(123,627)

(375,076)

(58,093)

Net loss attributable to Burning Rock Biotech Limited’s shareholders

(123,627)

(375,076)

(58,093)

Accretion of convertible preferred shares

(64,688)

-

-

Net loss attributable to ordinary shareholders

(188,315)

(375,076)

(58,093)

Loss per share:

Class A ordinary shares - basic and diluted

(5.73)

(3.60)

(0.56)

Class B ordinary shares - basic and diluted

(5.73)

(3.60)

(0.56)

Weighted average shares outstanding used in loss per share computation:

Class A ordinary shares - basic and diluted

15,540,502

86,742,880

86,742,880

Class B ordinary shares - basic and diluted

17,324,848

17,324,848

17,324,848

Other comprehensive income (loss), net of tax of nil:

Foreign currency translation adjustments
Foreign currency translation adjustments

9,086

(20,900)

(3,237)

Total comprehensive loss

(114,541)

(395,976)

(61,330)

Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders

(114,541)

(395,976)

(61,330)


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

As of

December 31,
2020

June 30,
2021

June 30,
2021

RMB

RMB

US$

ASSETS

Current assets:

Cash and cash equivalents

1,895,308

1,852,927

286,982

Restricted cash

29,898

30,338

4,699

Short-term investment

362,132

35,531

5,503

Accounts receivable

88,218

78,141

12,103

Contract assets

22,534

28,345

4,390

Amounts due from related parties

212

628

97

Inventories

68,021

114,434

17,724

Prepayments and other current assets

57,329

76,157

11,795

Total current assets

2,523,652

2,216,501

343,293

Non-current assets:

Equity method investment

1,417

1,261

195

Property and equipment, net

111,481

198,324

30,716

Operating Right-of-use assets

-

89,307

13,832

Intangible assets, net

3,457

4,882

756

Other non-current assets

23,021

29,284

4,536

Total non-current assets

139,376

323,058

50,035

TOTAL ASSETS

2,663,028

2,539,559

393,328


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

As of

December 31,
2020

June 30,
2021

June 30,
2021

RMB

RMB

US$

LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY

Current liabilities:

Accounts payable

35,482

47,983

7,432

Deferred revenue

74,402

101,517

15,723

Capital lease obligations, current

4,816

-

Accrued liabilities and other current liabilities

83,648

79,773

12,356

Customer deposits

1,120

1,042

161

Short-term borrowing

7,370

7,370

1,141

Current portion of long-term borrowings

34,695

30,118

4,665

Current portion of operating lease liabilities

-

32,789

5,078

Current portion of financing lease liabilities

-

2,169

336

Total current liabilities

241,533

302,761

46,892

Non-current liabilities:

Deferred government grants

263

-

-

Operating lease liabilities

-

63,132

9,778

Other non-current liabilities

228

226

35

Total non-current liabilities

491

63,358

9,813

TOTAL LIABILITIES

242,024

366,119

56,705



Shareholders’ equity:

Class A ordinary shares

116

116

18

Class B ordinary shares

21

21

3

Treasury stock

-

(4,270

)

(661

)

Additional paid-in capital

4,006,616

4,173,154

646,339

Accumulated deficits

(1,418,160

)

(1,807,092

)

(279,883

)

Accumulated other comprehensive loss

(167,589

)

(188,489

)

(29,193

)

Total shareholders’ equity

2,421,004

2,173,440

336,623

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

2,663,028

2,539,559

393,328


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

For the three months ended

June 30, 2020

June 30, 2021

June 30, 2021

RMB

RMB

US$

Net cash generated from (used in) operating activities

61,124

(118,998

)

(18,433

)

Net cash generated from (used in) investing activities

296,102

(67,577

)

(10,463

)

Net cash generated from (used in) financing activities

1,845,953

(8,961

)

(1,388

)

Effect of exchange rate on cash, cash equivalents and restricted cash

(1,487

)

(34,085

)

(5,279

)

Net increase cash, cash equivalents and restricted cash

2,201,692

(229,621

)

(35,563

)

Cash, cash equivalents and restricted cash at the beginning of period

364,544

2,112,886

327,244

Cash, cash equivalents and restricted cash at the end of period

2,566,236

1,883,265

291,681


For the six months ended

June 30, 2020

June 30, 2021

June 30, 2021

RMB

RMB

US$

Net cash generated from (used in) operating activities

54,168

(232,143

)

(35,952

)

Net cash generated (used in) investing activities

292,489

220,752

34,188

Net cash generated from (used in) financing activities

2,118,181

(13,123

)

(2,032

)

Effect of exchange rate on cash, cash equivalents and restricted cash

3,154

(17,427

)

(2,699

)

Net increase cash, cash equivalents and restricted cash

2,467,992

(41,941

)

(6,495

)

Cash, cash equivalents and restricted cash at the beginning of period

98,244

1,925,206

298,176

Cash, cash equivalents and restricted cash at the end of period

2,566,236

1,883,265

291,681