Burning Rock Reports First Quarter 2022 Financial Results

GUANGZHOU, China, May 31, 2022 (GLOBE NEWSWIRE via SEAPRWire.com) — 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, 2022.

Recent Business Updates

  • Therapy Selection and Minimal Residual Disease (MRD)
    • Continued growth through (i) market share gain through continued focus on the in-hospital segment and (ii) new product launch. Achieved 42% overall testing volume growth year-on-year during the first quarter of 2022, driven by the 83% testing volume growth of in-hospital segment year-on-year during the same period, while the testing volume of central laboratory segment grew 0.3% year-on-year. New products’ sales contributed 7% of the central laboratory segmental revenues for March 2022;
      • Burning Rock Liquid Biopsy Conference was successfully held in April 2022. The 2-day online session was chaired by Professor Jia Fan, Jinming Yu and Xu Zhang, with participation from over 140 oncologists, during which the Consensus on NGS Clinical Report Interpretation was released;
      • MRD data was released at American Association for Cancer Research (AACR) Annual Meeting 2022 for non-small cell lung cancer (NSCLC) and colorectal cancer (CRC);
      • MRD product was commercially launched in March 2022.
  • Early Detection  
    • Data release at AACR on analytical validation;
    • Commercialization in progress, with a few hospitals having completed product on-boarding and generating revenues.
  • Pharma Services
    • Continued revenue growth, with 302.7% revenue growth year-on-year during the first quarter of 2022. Pharma service contract backlog continues to build rapidly. The total value of new contracts we entered into during the first quarter of 2022 amounted to RMB59 million, representing approximately 125% increase from the first quarter of 2021.

First Quarter 2022 Financial Results

Revenues were RMB135.5 million (US$21.4 million) for the three months ended March 31, 2022, representing a 27.1% increase from RMB106.6 million for the same period in 2021.

  • Revenue generated from central laboratory business was RMB74.2 million (US$11.7 million) for the three months ended March 31, 2022, representing a 0.5% decrease from RMB74.6 million for the same period in 2021.
  • Revenue generated from in-hospital business was RMB49.0 million (US$7.7 million) for the three months ended March 31, 2022, representing a 68.9% increase from RMB29.0 million for the same period in 2021, driven by in-hospital testing volume growth.
  • Revenue generated from pharma research and development services was RMB12.4 million (US$1.9 million) for the three months ended March 31, 2022, representing a 302.7% increase from RMB3.1 million for the same period in 2021, primarily attributable to increased testing performed for our pharma customers.

Cost of revenues was RMB47.9 million (US$7.6 million) for the three months ended March 31, 2022, representing a 61.5% increase from RMB29.7 million for the same period in 2021, primarily due to the Company’s continued business growth, increased depreciation in relation to our new laboratory and inventory write downs.

Gross profit was RMB87.6 million (US$13.8 million) for the three months ended March 31, 2022, representing a 13.8% increase from RMB76.9 million for the same period in 2021. Gross margin was 64.6% for the three months ended March 31, 2022, which decreased from 72.2% for the same period in 2021 primarily due to the increased depreciation in relation to our new laboratory and inventory write downs.

Non-GAAP gross profit, which excludes depreciation and amortization, was RMB92.7 million (US$14.6 million) for the three months ended March 31, 2022, representing a 20.2% increase from RMB77.1 million for the same period in 2021. Non-GAAP gross margin was 68.4% for the three months ended March 31, 2022, compared to 72.4% for the same period in 2021 primarily due to an increase of RMB4.8 million in inventory write downs (which resulted in a 3.5 percentage-point decrease of gross margin).

Operating expenses were RMB350.4 million (US$55.3 million) for the three months ended March 31, 2022, representing a 40.9% increase from RMB248.8 million for the same period in 2021. The increase was primarily driven by headcount growth to support our business expansion.

  • Research and development expenses were RMB119.5 million (US$18.9 million) for the three months ended March 31, 2022, representing a 54.4% increase from RMB77.4 million for the same period in 2021, primarily due to (i) an increase in research and development staff cost which resulted from an increase in headcount and (ii) and increase in costs for certain research and development for early detection.
  • Selling and marketing expenses were RMB89.2 million (US$14.1 million) for the three months ended March 31, 2022, representing a 61.8% increase from RMB55.1 million for the same period in 2021, primarily due to an increase in staff cost resulted from increase in headcount to strengthen our commercial presence in the therapy selection business and build up our early detection commercialization team.
  • General and administrative expenses were RMB141.7 million (US$22.4 million) for the three months ended March 31, 2022, representing a 21.9% increase from RMB116.3 million for the same period in 2021, primarily due to an increase in general and administrative personnel’s staff cost resulted from an increase in headcount.

Net loss was RMB261.4 million (US$41.2 million) for the three months ended March 31, 2022, compared to RMB171.4 million for the same period in 2021.

Cash, cash equivalents, restricted cash and short-term investments were RMB1,502.9 million and RMB1,338.4 million (US$211.1 million) as of December 31, 2021 and March 31, 2022, respectively.

2022 Financial Guidance

Given the strong first quarter business performance and assuming that the impact of COVID-19 dissipates over time in China, Burning Rock reiterates its full year 2022 revenue guidance of approximately RMB620 million (US$97.8 million), implying a 22% growth over full year 2021.

Conference Call Information

Burning Rock will host a conference call to discuss the first quarter 2022 financial results at 8:30 a.m. U.S. Eastern Time (8:30 p.m. Hong Kong time) on May 31, 2022.

Details of the conference call are as follows:

International: +65 67135640
U.S.: +1 3322089718
U.K.: +44 2036928124
Hong Kong: +852 30186768
China Mobile: 4008209615
China Landline: 8008207535
Conference ID: 8942518

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, 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,
2021
  June 30,
2021
  September 30,
2021
  December 31,
2021
  March 31,
2022
Central Laboratory Channel:  
Number of patients tested 7,716   8,155
1,013
300
  7,808   8,235   7,743
Number of ordering physicians(1) 1,082   1,013   920   917   994
Number of ordering hospitals(2) 303   300   287   306   318

(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,
2021
  June 30,
2021
  September 30,
2021
  December 31,
2021
  March 31,
2022
In-hospital Channel:  
Pipeline partner hospitals(1) 22   22   24   23   24
Contracted partner hospitals(2) 32   34   34   41   41
Total number of partnerhospitals 54   56   58   64   65

(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,
2021
  June 30,
2021
  September 30,
2021
  December 31,
2021
  March 31,
2022
  (RMB in thousands)
Central laboratory channel 74,561   79,999   78,817   85,976   74,211
In-hospital channel 28,994   40,502   43,714   51,906   48,957
Pharma research and development channel 3,068   6,778   4,084   9,463   12,356
Total revenues 106,623   127,279   126,615   147,345   135,524

  For the three months ended
Gross profit

March 31,
2021
  June 30,
2021
  September 30,
2021
  December 31,
2021
  March 31,
2022
  (RMB in thousands)
Central laboratory channel 55,212   58,681   58,387   65,985   50,574
In-hospital channel 20,070   29,426   31,111   34,194   33,396
Pharma research and development channel 1,658   2,124   2,098   5,200   3,610
Total gross profit

76,940   90,231   91,596   105,379   87,580

  For the three months ended
Share-based compensation expenses

March 31,
2021
  June 30,
2021
  September 30,
2021
  December 31,
2021
  March 31,
2022
  (RMB in thousands)
Cost of revenues 339   406   267     492     365
Research and development expenses 22,404   20,825   (9,559 )   (4,033 )   12,299
Selling and marketing expenses 2,633   2,809   2,044     2,126     1,774
General and administrative expenses 59,382   59,369   60,803     62,126     65,715
Total share-based compensation expenses 84,758   83,409   53,555     60,711     80,153

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,
2021
  June 30,
2021
  September 30,
2021
  December 31,
2021

  March 31,
2022
  March 31,
2022

 
  RMB RMB RMB RMB RMB US$
Revenues 106,623     127,279     126,615     147,345     135,524     21,379  
Cost of revenues (29,683 )   (37,048 )   (35,019 )   (41,966 )   (47,944 )   (7,563 )
Gross profit 76,940     90,231     91,596     105,379     87,580     13,816  
Operating expenses:            
Research and development expenses (77,414 )   (108,071 )   (69,649 )   (112,724 )   (119,496 )   (18,850 )
Selling and marketing expenses (55,130 )   (68,058 )   (76,687 )   (103,221 )   (89,211 )   (14,073 )
General and administrative expenses (116,259 )   (116,130 )   (116,304 )   (141,563 )   (141,733 )   (22,358 )
Total operating expenses (248,803 )   (292,259 )   (262,640 )   (357,508 )   (350,440 )   (55,281 )
Loss from operations (171,863 )   (202,028 )   (171,044 )   (252,129 )   (262,860 )   (41,465 )
Interest income 787     681     958     1,031     1,832     289  
Interest expenses (510 )   (565 )   (367 )   (94 )   119     19  
Other income (expense), net 118     433     20     (372 )   298     47  
Foreign exchange gain (loss), net 57     (560 )   380     (731 )   (777 )   (123 )
Loss before income tax (171,411 )   (202,039 )   (170,053 )   (252,295 )   (261,388 )   (41,233 )
Income tax (benefits) expenses     (1,626 )   (424 )   1,151          
Net loss (171,411 )   (203,665 )   (170,477 )   (251,144 )   (261,388 )   (41,233 )
Net loss attributable to Burning Rock Biotech Limited’s shareholders (171,411 )   (203,665 )   (170,477 )   (251,144 )  

(261,388

)

 

(41,233

)

Net loss attributable to ordinary shareholders (171,411 )   (203,665 )   (170,477 )   (251,144 )   (261,388 )   (41,233 )
Loss per share for class A and class B ordinary shares:            
Class A ordinary shares – basic and diluted (1.65 )   (1.96 )   (1.64 )   (2.40 )   (2.50 )   (0.39 )
Class B ordinary shares – basic and diluted (1.65 )   (1.96 )   (1.64 )   (2.40 )   (2.50 )   (0.39 )
Weighted average shares outstanding used in loss per share computation:            
Class A ordinary shares – basic and diluted 86,721,263     86,764,260     86,908,975     87,128,297     87,179,752     87,179,752  
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 14,080     (34,980 )   6,146     (24,726 )   (3,065 )   (483 )
Total comprehensive loss (157,331 )   (238,645 )   (164,331 )   (275,870 )   (264,453 )   (41,716 )
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders (157,331 )   (238,645 )   (164,331 )   (275,870 )   (264,453 )   (41,716 )

Burning Rock Biotech Limited

Unaudited Condensed Consolidated Balance Sheets

(In thousands)

 
  As of
  December 31,
2021
  March 31,
2022
  March 31,
2022
  RMB   RMB   US$
ASSETS          
Current assets:          
Cash and cash equivalents 1,431,317   1,265,792   199,674
Restricted cash 7,795   9,083   1,433
Short-term investments 63,757   63,482   10,014
Accounts receivable, net 92,197   103,616   16,345
Contract assets, net 42,391   43,923   6,928
Inventories, net 123,210   130,175   20,535
Prepayments and other current assets, net 60,279   69,331   10,937
Total current assets 1,820,946   1,685,402   265,866
Non-current assets:          
Equity method investment 910   773   122
Property and equipment, net 325,438   322,171   50,821
Operating right-of-use assets 81,007   72,501   11,437
Intangible assets, net 5,150   4,246   669
Other non-current assets 45,136   22,703   3,581
Total non-current assets 457,641   422,394   66,630
TOTAL ASSETS 2,278,587   2,107,796   332,496

Burning Rock Biotech Limited

Unaudited Condensed Consolidated Balance Sheets (Continued)

(in thousands)

 
  As of
  December 31,
2021

  March 31,
2022
  March 31,
2022
  RMB RMB US$
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable 63,080     97,892     15,442  
Deferred revenue 142,871     159,148     25,105  
Accrued liabilities and other current liabilities 127,892     104,092     16,420  
Customer deposits 972     972     153  
Short-term borrowing 2,370     2,370     374  
Current portion of operating lease liabilities 34,999     35,298     5,568  
Total current liabilities 372,184     399,772     63,062  
Non-current liabilities:      
Non-current portion of operating lease liabilities 49,316     39,811     6,280  
Other non-current liabilities 11,776     13,636     2,151  
Total non-current liabilities 61,092     53,447     8,431  
TOTAL LIABILITIES 433,276     453,219     71,493  

Shareholders’ equity:

     
Class A ordinary shares 116     116     19  
Class B ordinary shares 21     21     3  
Treasury stock     (3,258 )   (514 )
Additional paid-in capital 4,280,956     4,357,933     687,447  
Accumulated deficits (2,228,713 )   (2,490,101 )   (392,804 )
Accumulated other comprehensive loss (207,069 )   (210,134 )   (33,148 )
Total shareholders’ equity 1,845,311     1,654,577     261,003  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 2,278,587     2,107,796     332,496  

Burning Rock Biotech Limited

Unaudited Condensed Statements of Cash Flows

(in thousands)

 
  For the three months ended
  March 31,
2021

  March 31,
2022

  March 31,
2022

  RMB
  RMB
  US$
Net cash used in operating activities (113,145 )   (144,361 )   (22,772 )
Net cash generated from (used in) investing activities 288,329     (13,011 )   (2,050 )
Net cash used in financing activities (4,162 )   (3,934 )   (621 )
Effect of exchange rate on cash, cash equivalents and restricted cash 16,658     (2,931 )   (464 )
Net increase (decrease) in cash, cash equivalents and restricted cash 187,680     (164,237 )   (25,907 )
Cash, cash equivalents and restricted cash at the beginning of period 1,925,206     1,439,112     227,014  
Cash, cash equivalents and restricted cash at the end of period 2,112,886     1,274,875     201,107  
     

Burning Rock Biotech Limited

Reconciliations of GAAP and Non-GAAP Results

 
  For the three months ended
  March 31,
2021
  June 30,
2021
  September 30,
2021
  December 31,
2021
  March 31,
2022

  (RMB in thousands)
Gross profit

76,940     90,231     91,596     105,379     87,580  
Add: depreciation and amortization 206     437     1,382     1,981     5,139  
Non-GAAP gross profit 77,146     90,668     92,978     107,360     92,719  
Total revenues 106,623     127,279     126,615     147,345     135,524  
Gross margin 72.2 %   70.9 %   72.3 %   71.5 %   64.6 %
Non-GAAP gross margin 72.4 %   71.2 %   73.4 %   72.9 %   68.4 %