Burning Rock Reports Third Quarter 2022 Financial Results

GUANGZHOU, China, Nov. 15, 2022 (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 September 30, 2022.

Recent Business Updates

• Corporate
  • Listed on the Main Market of the London Stock Exchange (the "LSE") by way of a direct listing on November 1, 2022, while Burning Rock’s ADSs will continue to be listed and traded on the Nasdaq Global Market, with those ADSs being fully fungible with the ADSs listed on the LSE.
• Therapy Selection and Minimal Residual Disease (MRD)
  • In-hospital strategy continues to drive growth uplift despite negative Covid impact. In-hospital volumes grew 24% year-over-year in the third quarter of 2022.
  • MRD volumes continue to ramp up following commercial launch in March 2022, with approximately 700 tests completed in the third quarter of 2022, more than doubling the volumes in the second quarter of 2022.
• Early Detection
  • PROMISE study (2,035 participants) for 9-cancer test results presented at European Society for Medical Oncology (ESMO) Congress 2022 in September 2022. Overall sensitivity achieved 83.7% for 9 cancers at specificity of 98.3%, with methylation contributing majority of positive detections compared to protein and mutation. Tissue origin prediction accuracy achieved 90.9% for the top 2 organs.
  • Commercialization of our blood-based, 6-cancer early detection test gaining initial traction, with product onboarding completed at a few hospitals.
• Pharma Services
  • The total value of new contracts we entered into from January to September 2022 amounted to RMB198 million, representing approximately 38% increase from the same period of 2021.
  • Starting to work with BeiGene on initial clinical studies using our personalized MRD test brPROPHETTM .
  • New companion diagnostics (CDx) development announced with Eli Lilly and Company in China, for the RET inhibitor selpercatinib.

Third Quarter 2022 Financial Results

Revenues were RMB154.6 million (US$21.7 million) for the three months ended September 30, 2022, representing a 22.1% increase from RMB126.6 million for the same period in 2021.

• Revenue generated from central laboratory business was RMB90.0 million (US$12.7 million) for the three months ended September 30, 2022, representing a 14.2% increase from RMB78.8 million for the same period in 2021, driven by revenue increase from monitoring packages that consist of multiple tests per package.
• Revenue generated from in-hospital business was RMB49.6 million (US$7.0 million) for the three months ended September 30, 2022, representing a 13.5% increase from RMB43.7 million for the same period in 2021, primarily attributable to in-hosiptal sales volume growth in Shanghai and Beijing as COVID impact lessened in the third quarter of 2022.
• Revenue generated from pharma research and development services was RMB15.0 million (US$2.1 million) for the three months ended September 30, 2022, representing a 267.4% increase from RMB4.1 million for the same period in 2021, primarily attributable to increased development and testing services performed for our pharma customers.
  

Cost of revenues was RMB46.0 million (US$6.5 million) for the three months ended September 30, 2022, representing a 31.5% increase from RMB35.0 million for the same period in 2021, primarily due to an increase in testing and selling volume as well as rental expense and renovation depreciation in relation to our new laboratory that commenced use in January 2022.

Gross profit was RMB108.6 million (US$15.3 million) for the three months ended September 30, 2022, representing a 18.6% increase from RMB91.6 million for the same period in 2021. Gross margin was 70.2% for the three months ended September 30, 2022, which decreased from 72.3% for the same period in 2021, primarily due to an increased income from monitoring packages, offset by an increased depreciation in relation to our new laboratory.

Non-GAAP gross profit, which excludes depreciation and amortization expenses, was RMB117.0 million (US$16.4 million) for the three months ended September 30, 2022, representing a 25.8% increase from RMB93.0 million for the same period in 2021. Non-GAAP gross margin was 75.7% for the three months ended September 30, 2022, compared to 73.4% for the same period in 2021.

Operating expenses were RMB343.2 million (US$48.3 million) for the three months ended September 30, 2022, representing a 30.7% increase from RMB262.6 million for the same period in 2021.

• Research and development expenses were RMB109.4 million (US$15.4 million) for the three months ended September 30, 2022, representing a 57.2% increase from RMB69.6 million for the same period in 2021, primarily due to (i) an increase in clinical program expenses for early cancer detection; and (ii) an increase in amortized expense on share-based compensation, offset in part by a decrease in staff cost due to organizational restructuring.
• Selling and marketing expenses were RMB90.3 million (US$12.7 million) for the three months ended September 30, 2022, representing a 17.7% increase from RMB76.7 million for the same period in 2021, primarily due to (i) an increase in staff cost resulted from increase in headcount; (ii) an increase in conference fee and (iii) an increase amortized expense on share-based compensation. Sequentially, selling and marketing expenses in the third quarter decreased by 14.5% compared to the second quarter of 2022, as our sales reorganization and operating efficiency improvement initiative started to generate initial results. We will continue to focus on improving operating efficiency going forward.
• General and administrative expenses were RMB143.5 million (US$20.2 million) for the three months ended September 30, 2022, representing a 23.4% increase from RMB116.3 million for the same period in 2021, primarily due to (i) an increase in depreciation expenses for a new building; (ii) an increase in allowance for credit loss in relation to accounts receivables; and (iii) an increase amortized expense on share-based compensation.
  

Net loss was RMB231.5 million (US$32.5 million) for the three months ended September 30, 2022, compared to RMB170.5 million for the same period in 2021.

Net cash used in operating activities was RMB135.5 million (US$19.0 million) for the three months ended September 30, 2022, compared to RMB133.4 million for the same period in 2021. The balance of cash, cash equivalents, restricted cash and short-term investments was RMB1,014.0 million (US$142.5 million) as of September 30, 2022.

Revised 2022 Financial Guidance

We believe that we have achieved strong, above-industry growth in the first nine months of 2022, generating revenues of RMB421 million, an increase of 17% compared to the same period of 2021. This is below the implied full-year growth rate of our initial guidance at the beginning of the year, primarily due to an out-sized Covid impact in Shanghai in the second quarter and to a lesser extent, Covid-related disruptions in other regions of China from time to time. We have observed another significant wave of Covid cases sweeping through many large cities in China since the start of October, particularly in Guangzhou, which is one of our key markets and where our central lab is located. We are taking a cautious view now and project a drop in revenues in the fourth quarter compard to the same period last year, which was a strong quarter and relatively free of large Covid impacts. We therefore revise our 2022 full-year revenue guidance to a growth of approxiately 5% compared to 2021.

Transition of Chief Operating Officer to Chief Scientific Officer

Effective November 2022, Shannon Chuai, our chief operating officer, is taking on a new role of chief scientific officer of Burning Rock. In her new role, Shannon will lead key projects of our pipeline development, provide senior oversight on our early cancer detection clinical programs and our engagement on product registration with the NMPA and other medical regulatory bodies. Shannon continues to serve as a director on our board. The company's respective business units will report directly to our CEO, Yusheng Han.

Conference Call Information

Burning Rock will host a conference call to discuss the third quarter 2022 financial results at 8:30 a.m. U.S. Eastern Time (9:30 p.m. Hong Kong time) on November 16, 2022.

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/BI96c581babaf44021ab6c34af9f7ce42b.

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/8fj2edsi.

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; 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