Burning Rock Reports Second Quarter 2023 Financial Results

Burning Rock Biotech Limited

GUANGZHOU, China, Aug. 31, 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 June 30, 2023.

Recent Business Updates

• Therapy Selection and Minimal Residual Disease (MRD)

  • Presented study results on extensive-stage small-cell lung cancer and ovarian cancer at the ASCO in June 2023. “A Multicenter Phase I/II trial of Induction Chemotherapy Followed by Camrelizumab, Apatinib plus Chemotherapy as First-line Treatment for Extensive-stage Small-cell Lung Cancer” and “DNA methylation patterns between tissue and blood samples in ovarian cancers”.

  • Precision oncology diagnostics product supports advancement in late-stage breast cancer treatment, with results published in the New England Journal of Medicine in June 2023. The study, CAPItello-291, sponsored by our pharma client AstraZeneca, is a phase 3 trial that assessed the efficacy and safety of Capivasertib–fulvestrant therapy in advanced breast cancer patients with hormone receptor positive (HR+), human epidermal growth factor receptor 2 negative (HER2-) cancer whose disease had progressed during or after aromatase inhibitor therapy. The study demonstrated that Capivasertib–fulvestrant combination therapy resulted in significantly longer progression-free survival than treatment with fulvestrant alone.

  • Results of the study “Pharmaco-proteogenomic characterization of liver cancer organoids for precision oncology” were published at the Science Translational Medicine in August 2023. Through integrative analyses of LICOB pharmaco-proteogenomics data, we identified the molecular features associated with drug responses and predicted potential drug combinations for personalized patient treatment. The synergistic inhibition effect of mTOR inhibitor temsirolimus and the multitargeted tyrosine kinase inhibitor lenvatinib was validated in organoids and patient-derived xenografts models.

• Pharma Services

  • New companion diagnostics (CDx) development for breast and prostatic cancer announced with AstraZeneca in China.

  • Total value of new contracts for the provision of pharma services entered into during the second quarter of 2023 amounted to RMB88 million, representing a 60% year-over-year increase.
    

Second Quarter 2023 Financial Results

Revenues were RMB146.3 million (US$20.2 million) for the three months ended June 30, 2023, representing a 11.8% increase from RMB130.8 million for the same period in 2022.

• Revenue generated from central laboratory business was RMB66.2 million (US$9.1 million) for the three months ended June 30, 2023, representing a 15.7% decrease from RMB78.6 million for the same period in 2022, primarily due to a drop in the number of tests, as the Company continued to focus on its in-hospital business.

• Revenue generated from in-hospital business was RMB53.8 million (US$7.4 million) for the three months ended June 30, 2023, representing a 57.5% increase from RMB34.2 million for the same period in 2022, driven by an increase in sales volume.

• Revenue generated from pharma research and development services was RMB26.2 million (US$3.6 million) for the three months ended June 30, 2023, representing a 44.9% increase from RMB18.1 million for the same period in 2022, primarily attributable to a further increased testing volume performed and higher average contract value from existing and new customers.
  

Cost of revenues was RMB45.8 million (US$6.3 million) for the three months ended June 30, 2023, representing a 5.0% decrease from RMB48.2 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 RMB100.4 million (US$13.8 million) for the three months ended June 30, 2023, representing a 21.6% increase from RMB82.6 million for the same period in 2022. Gross margin was 68.7% for the three months ended June 30, 2023, compared to 63.1% for the same period in 2022. By channel, gross margin of central laboratory business was 78.3% for the three months ended June 30, 2023, compared to 73.3% during the same period in 2022, and such increase was primarily due to a decrease in inventory write down and royalty fee; gross margin of in-hospital business was 62.0% for the three months ended June 30, 2023, compared to 58.6% during the same period in 2022, and such increase was primarily due to an increase in sales volume to high margin hospitals; gross margin of pharma research and development services was 58.0% for the three months ended June 30, 2023, compared to 27.8% during the same period of 2022, and such increase was primarily due to an increase in test volume of higher margin projects.

Non-GAAP gross profit, which excludes depreciation and amortization expenses, was RMB109.4 million (US$15.1 million) for the three months ended June 30, 2023, representing a 20.3% increase from RMB90.9 million for the same period in 2022. Non-GAAP gross margin was 74.8% for the three months ended June 30, 2023, compared to 69.5% for the same period in 2022.

Operating expenses were RMB236.1 million (US$32.6 million) for the three months ended June 30, 2023, representing a 32.2% decrease from RMB348.1 million for the same period in 2022. The decrease was primarily driven by budget control measures and headcount reduction aimed at improving the Company’s operating efficiency.

• Research and development expenses were RMB95.8 million (US$13.2 million) for the three months ended June 30, 2023, representing a 4.0% increase from RMB92.1 million for the same period in 2022, primarily due to (i) an increase in research and development project cost due to the temporary disruption of R&D activities during Covid lock-down in 2022, and partially offset by (ii) a decrease in research and development personnel’s staff cost.

• Selling and marketing expenses were RMB70.8 million (US$9.8 million) for the three months ended June 30, 2023, representing a 32.9% decrease from RMB105.6 million for the same period in 2022, primarily due to (i) a decrease in staff cost resulted from the reorganization of our sales department and improved operating efficiency, and (ii) a decrease in marketing and conference fee.

• General and administrative expenses were RMB69.5 million (US$9.6 million) for the three months ended June 30, 2023, representing a 53.7% decrease from RMB150.3 million for the same period in 2022, primarily due to (i) a decrease in amortized expense on share-based compensation; (ii) a decrease in general and administrative personnel’s staff cost, and (iii) a decrease in allowance for doubtful accounts resulting from accelerated settlement with customers with longer accounts receivable.
  

Net loss was RMB131.2 million (US$18.1 million) for the three months ended June 30, 2023, compared to RMB262.1 million for the same period in 2022.

Cash, cash equivalents, restricted cash and short-term investments were RMB733.3 million (US$101.1 million) as of June 30, 2023.

Conference Call Information

Burning Rock will host a conference call to discuss the second quarter 2023 financial results at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Hong Kong time) on August 31, 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/BI6587397828874b24931eb99fd4fb1c15.

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/t4sgbsfb.

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
	June 30, 2022		September 30, 2022		December 31, 2022		March 31, 2023		June 30, 2023
Central Laboratory Channel:
Number of patients tested	8,060		7,989		6,419		6,139		6,585
Number of ordering physicians(1)	767		897		797		792		725
Number of ordering hospitals(2)	264		257		238		241		225

⁽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
	June 30, 2022		September 30, 2022		December 31, 2022		March 31, 2023		June 30, 2023
In-hospital Channel:
Pipeline partner hospitals(1)	25		22		28		29		30
Contracted partner hospitals(2)	43		47		49		49		50
Total number of partner hospitals	68		69		77		78		80

⁽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	June 30, 2022		September 30, 2022		December 31, 2022		March 31, 2023		June 30, 2023
	(RMB in thousands)
Central laboratory channel	78,597		89,992		71,970		61,804		66,239
In-hospital channel	34,177		49,636		42,526		51,561		53,835
Pharma research and development channel	18,072		15,003		27,741		29,151		26,194
Total revenues	130,846		154,631		142,237		142,516		146,268

	For the three months ended
Gross profit	June 30, 2022		September 30, 2022		December 31, 2022		March 31, 2023		June 30, 2023
	(RMB in thousands)
Central laboratory channel	57,575		69,991		54,507		48,090		51,876
In-hospital channel	20,012		31,593		26,999		34,409		33,353
Pharma research and development channel	5,015		7,010		19,757		16,273		15,193
Total gross profit	82,602		108,594		101,263		98,772		100,422

	For the three months ended
Share-based compensation expenses	June 30, 2022		September 30, 2022		December 31, 2022		March 31, 2023		June 30, 2023
	(RMB in thousands)
Cost of revenues	441		481		496		353		627
Research and development expenses	11,923		13,978		14,673		13,612		15,301
Selling and marketing expenses	2,158		2,346		2,247		1,606		3,389
General and administrative expenses	62,615		61,041		74,232		62,595		18,502
Total share-based compensation expenses	77,137		77,846		91,648		78,166		37,819

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
	June 30, 2022			September 30, 2022			December 31, 2022			March 31, 2023			June 30, 2023			June 30, 2023
	RMB			RMB			RMB			RMB			RMB			US$
Revenues	130,846			154,631			142,237			142,516			146,268			20,172
Cost of revenues	(48,244	)		(46,037	)		(40,974	)		(43,744	)		(45,846	)		(6,323	)
Gross profit	82,602			108,594			101,263			98,772			100,422			13,849
Operating expenses:
Research and development expenses	(92,112	)		(109,433	)		(100,827	)		(94,417	)		(95,779	)		(13,209	)
Selling and marketing expenses	(105,634	)		(90,275	)		(85,174	)		(64,774	)		(70,842	)		(9,770	)
General and administrative expenses	(150,316	)		(143,530	)		(132,705	)		(128,039	)		(69,525	)		(9,588	)
Total operating expenses	(348,062	)		(343,238	)		(318,706	)		(287,230	)		(236,146	)		(32,567	)
Loss from operations	(265,460	)		(234,644	)		(217,443	)		(188,458	)		(135,724	)		(18,718	)
Interest income	2,685			2,001			2,838			3,144			5,255			725
Interest expenses	(29	)		12			-			-			-			-
Other income (expense), net	127			(189	)		(84	)		599			(118	)		(16	)
Foreign exchange (loss) gain, net	624			1,337			365			(116	)		（210	）		（29	）
Loss before income tax	(262,053	)		(231,483	)		(214,324	)		(184,831	)		(130,797	)		(18,038	)
Income tax expenses	(84	)		-			(1,901	)		(422	)		(445	)		(61	)
Net loss	(262,137	)		(231,483	)		(216,225	)		(185,253	)		(131,242	)		(18,099	)
Net loss attributable to Burning Rock Biotech Limited’s shareholders	(262,137	)		(231,483	)		(216,225	)		(185,253	)		(131,242	)		(18,099	)
Net loss attributable to ordinary shareholders	(262,137	)		(231,483	)		(216,225	)		(185,253	)		(131,242	)		(18,099	)
Loss per share for class A and class B ordinary shares:
Class A ordinary shares - basic and diluted	(2.50	)		(2.23	)		（2.11	)		(1.81	)		(1.28	)		(0.18	)
Class B ordinary shares - basic and diluted	(2.50	)		(2.23	)		（2.11	)		(1.81	)		(1.28	)		(0.18	)
Weighted average shares outstanding used in loss per share computation:
Class A ordinary shares - basic and diluted	87,532,539			86,585,322			85,051,882			85,065,585			85,151,052			85,151,052
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	29,715			20,646			(5,950	)		(5,659	)		14,829			2,045
Total comprehensive loss	(232,422	)		(210,837	)		(222,175	)		(190,912	)		(116,413	)		(16,054	)
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders	(232,422	)		(210,837	)		(222,175	)		(190,912	)		(116,413	)		(16,054	)

Burning Rock Biotech Limited
Unaudited Condensed Statements of Comprehensive Loss
(in thousands, except for number of shares and per share data)
	For the six months ended
	June 30, 2022			June 30, 2023			June 30, 2023
	RMB			RMB			US$
Revenues	266,370			288,784			39,825
Cost of revenues	(96,188	)		(89,590	)		(12,355	)
Gross profit	170,182			199,194			27,470
Operating expenses:
Research and development expenses	(211,608	)		(190,196	)		(26,229	)
Selling and marketing expenses	(194,845	)		(135,616	)		(18,702	)
General and administrative expenses	(292,049	)		(197,564	)		(27,245	)
Total operating expenses	(698,502	)		(523,376	)		(72,176	)
Loss from operations	(528,320	)		(324,182	)		(44,706	)
Interest income	4,517			8,399			1,158
Interest expenses	90			-			-
Other income, net	425			481			67
Foreign exchange loss, net	(153	)		(326	)		(45	)
Loss before income tax	(523,441	)		(315,628	)		(43,526	)
Income tax expenses	(84	)		(867	)		(120	)
Net loss	(523,525	)		(316,495	)		(43,646	)
Net loss attributable to Burning Rock Biotech Limited’s shareholders	(523,525	)		(316,495	)		(43,646	)
Net loss attributable to ordinary shareholders	(523,525	)		(316,495	)		(43,646	)
Loss per share for class A and class B ordinary shares:
Class A ordinary shares - basic and diluted	(5.00	)		(3.09	)		(0.43	)
Class B ordinary shares - basic and diluted	(5.00	)		(3.09	)		(0.43	)
Weighted average shares outstanding used in loss per share computation:
Class A ordinary shares - basic and diluted	87,357,120			85,108,555			85,108,555
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	26,650			9,170			1,265
Total comprehensive loss	(496,875	)		(307,325	)		(42,381	)
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders	(496,875	)		(307,325	)		(42,381	)

Burning Rock Biotech Limited
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
	As of
	December 31, 2022		June 30, 2023		June 30, 2023
	RMB		RMB		US$
ASSETS
Current assets:
Cash and cash equivalents	905,451		732,568		101,026
Restricted cash	19,817		710		98
Accounts receivable, net	109,954		143,322		19,765
Contract assets, net	41,757		58,813		8,111
Inventories, net	130,321		101,625		14,015
Prepayments and other current assets, net	51,462		52,998		7,309
Total current assets	1,258,762		1,090,036		150,324
Non-current assets:
Equity method investment	690		505		70
Convertible note receivable	5,105		5,105		704
Property and equipment, net	251,829		191,017		26,342
Operating right-of-use assets	48,205		31,037		4,280
Intangible assets, net	1,986		1,204		166
Other non-current assets	20,890		11,852		1,634
Total non-current assets	328,705		240,720		33,196
TOTAL ASSETS	1,587,467		1,330,756		183,520

Burning Rock Biotech Limited
Unaudited Condensed Consolidated Balance Sheets (Continued)
(in thousands)
	As of
	December 31, 2022			June 30, 2023			June 30, 2023
	RMB			RMB			US$
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	50,947			24,568			3,388
Deferred revenue	147,633			147,313			20,315
Accrued liabilities and other current liabilities	173,832			156,526			21,586
Customer deposits	1,803			1,197			165
Current portion of operating lease liabilities	37,236			23,400			3,227
Total current liabilities	411,451			353,004			48,681
Non-current liabilities:
Non-current portion of operating lease liabilities	13,551			7,128			983
Other non-current liabilities	4,124			3,016			416
Total non-current liabilities	17,675			10,144			1,399
TOTAL LIABILITIES	429,126			363,148			50,080
Shareholders’ equity:
Class A ordinary shares	117			117			16
Class B ordinary shares	21			21			3
Additional paid-in capital	4,582,790			4,705,734			648,950
Treasury stock	(58,919	)		(65,271	)		(9,001	)
Accumulated deficits	(3,199,946	)		(3,516,441	)		(484,938	)
Accumulated other comprehensive loss	(165,722	)		(156,552	)		(21,590	)
Total shareholders’ equity	1,158,341			967,608			133,440
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	1,587,467			1,330,756			183,520

Burning Rock Biotech Limited
Unaudited Condensed Statements of Cash Flows
(in thousands)
	For the three months ended
	June 30, 2022			June 30, 2023			June 30, 2023
	RMB			RMB			US$
Net cash used in operating activities	(109,274	)		(79,204	)		(10,923	)
Net cash generated from (used in) investing activities	30,729			(2,928	)		(404	)
Net cash used in financing activities	(69,559	)		(1,003	)		(138	)
Effect of exchange rate on cash, cash equivalents and restricted cash	26,279			13,271			1,831
Net decrease in cash, cash equivalents and restricted cash	(121,825	)		(69,864	)		(9,634	)
Cash, cash equivalents and restricted cash at the beginning of period	1,274,875			803,142			110,758
Cash, cash equivalents and restricted cash at the end of period	1,153,050			733,278			101,124

	For the six months ended
	June 30, 2022			June 30, 2023			June 30, 2023
	RMB			RMB			US$
Net cash used in operating activities	(253,634	)		(192,347	)		(26,526	)
Net cash generated from (used in) investing activities	17,718			(6,987	)		(964	)
Net cash used in financing activities	(73,493	)		(1,035	)		(143	)
Effect of exchange rate on cash, cash equivalents and restricted cash	23,347			8,379			1,157
Net decrease in cash, cash equivalents and restricted cash	(286,062	)		(191,990	)		(26,476	)
Cash, cash equivalents and restricted cash at the beginning of period	1,439,112			925,268			127,600
Cash, cash equivalents and restricted cash at the end of period	1,153,050			733,278			101,124

Burning Rock Biotech Limited
Reconciliations of GAAP and Non-GAAP Results
				For the three months ended
	June 30, 2022			September 30, 2022			December 31, 2022			March 31, 2023			June 30,  2023
				(RMB in thousands)
Gross profit:
Central laboratory channel	57,575			69,991			54,507			48,090			51,876
In-hospital channel	20,012			31,593			26,999			34,409			33,353
Pharma research and development channel	5,015			7,010			19,757			16,273			15,193
Total gross profit	82,602			108,594			101,263			98,772			100,422
Add: depreciation and amortization:
Central laboratory channel	2,545			3,138			3,609			2,567			2,645
In-hospital channel	1,428			2,479			2,449			2,582			2,637
Pharma research and development channel	4,327			2,805			3,065			3,974			3,665
Total depreciation and amortization included in cost of revenues	8,300			8,422			9,123			9,123			8,947
Non-GAAP gross profit：
Central laboratory channel	60,120			73,129			58,116			50,657			54,521
In-hospital channel	21,440			34,072			29,448			36,991			35,990
Pharma research and development channel	9,342			9,815			22,822			20,247			18,858
Total non-GAAP gross profit	90,902			117,016			110,386			107,895			109,369
Non-GAAP gross margin：
Central laboratory channel	76.5	%		81.3	%		80.8	%		82.0	%		82.3	%
In-hospital channel	62.7	%		68.6	%		69.2	%		71.7	%		66.9	%
Pharma research and development channel	51.7	%		65.4	%		82.3	%		69.5	%		72.0	%
Total non-GAAP gross margin	69.5	%		75.7	%		77.6	%		75.7	%		74.8	%