Burning Rock Reports Second Quarter 2022 Financial Results

Guangzhou, CHINA


GUANGZHOU, China, Aug. 31, 2022 (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, 2022.

Recent Business Updates

  • Therapy Selection and Minimal Residual Disease (MRD)

    In-hospital and MRD driving growth uplift, but patient volumes negatively impacted by Covid related restrictions.
    • For the in-hospital channel, we experienced severe Covid related impact in Shanghai and to a lesser extent in Beijing. However, other regions combined grew over 60% year-over-year in the second quarter of 2022 in terms of testing volume;
    • For the central-lab channel, new product sales contributed 7% of the central laboratory segmental revenues in the second quarter of 2022.
  • Early Detection  
    • PROMISE study (2,035 participants) for 9-cancer test completed, reading out at European Society for Medical Oncology (ESMO) Congress 2022 in September;
    • PREVENT study, China’s first multi-cancer prospective interventional study, involving 12,500 participants, launched in the second quarter of 2022.
  • Pharma Services
    • Continued revenue growth, with 166.6% revenue growth year-on-year in the second quarter of 2022. Pharma service contract backlog continues to build rapidly;
    • The total value of new contracts we entered into amounted to RMB158 million from January to July 2022, representing approximately 49% increase from the same period of 2021.

Second Quarter 2022 Financial Results

Revenues were RMB130.8 million (US$19.5 million) for the three months ended June 30, 2022, representing a 2.8% increase from RMB127.3 million for the same period in 2021.

  • Revenue generated from central laboratory business was RMB78.6 million (US$11.7 million) for the three months ended June 30, 2022, representing a 1.8% decrease from RMB80.0 million for the same period in 2021. Covid related negative impact was partially offset by growth from newly launched products. Sequentially, central laboratory revenues increased by 5.9% compared to the first quarter of 2022, driven by new product launches.
  • Revenue generated from in-hospital business was RMB34.2 million (US$5.1 million) for the three months ended June 30, 2022, representing a 15.6% decrease from RMB40.5 million for the same period in 2021, primarily attributable to severe declines in testing volume in Shanghai due to Covid-19 lockdown, and to a lesser extent, declines in testing volume in Beijing; other regions outside of Shanghai and Beijing showed strong growth.
  • Revenue generated from pharma research and development services was RMB18.1 million (US$2.7 million) for the three months ended June 30, 2022, representing a 166.6% increase from RMB6.8 million for the same period in 2021, primarily attributable to the increased services performed for our pharma customers as we executed our contracted pharma service projects.

Cost of revenues was RMB48.2 million (US$7.2 million) for the three months ended June 30, 2022, representing a 30.2% increase from RMB37.0 million for the same period in 2021, primarily due to the increased depreciation in relation to our new laboratory and inventory write downs.

Gross profit was RMB82.6 million (US$12.3 million) for the three months ended June 30, 2022, representing a 8.5% decrease from RMB90.2 million for the same period in 2021. Gross margin was 63.1% for the three months ended June 30, 2022, which decreased from 70.9% for the same period in 2021, primarily due to increased depreciation in relation to our new laboratory and inventory write downs.

Non-GAAP gross profit was RMB90.9 million (US$13.6 million) for the three months ended June 30, 2022, representing a 0.3% increase from RMB90.7 million for the same period in 2021. Non-GAAP gross margin was 69.5% for the three months ended June 30, 2022, compared to 71.2% for the same period in 2021 primarily due to a 0.7% decrease of gross margin resulting from increase of RMB0.9 million in inventory write down.

Operating expenses were RMB348.1 million (US$52.0 million) for the three months ended June 30, 2022, representing a 19.1% increase from RMB292.3 million for the same period in 2021.

  • Research and development expenses were RMB92.1 million (US$13.8 million) for the three months ended June 30, 2022, representing a 14.8% decrease from RMB108.1 million for the same period in 2021, primarily due to a decrease in research and development project cost and a decrease in share-based compensation.
  • Selling and marketing expenses were RMB105.6 million (US$15.8 million) for the three months ended June 30, 2022, representing a 55.2% increase from RMB68.1 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 marketing related expenditures, such as entertainment expense, conference fee and marketing expense and (iii) an increase in amortized expense on modification for Employee Share Incentive Plan. Sequentially, headcount cost, excluding one-off items such as organizational restructuring expenses, decreased in the second quarter of 2022 compared to the first quarter.
  • General and administrative expenses were RMB150.3 million (US$22.4 million) for the three months ended June 30, 2022, representing a 29.4% increase from RMB116.1 million for the same period in 2021, primarily due to (i) an increase in depreciation expenses for new office space; (ii) an increase in amortized expense on modification for Employee Share Incentive Plan.

Net loss was RMB262.1 million (US$39.1 million) for the three months ended June 30, 2022, compared to RMB203.7 million for the same period in 2021.

Net cash used in operating activities was RMB109.3 million (US$16.3 million) for the three months ended June 30, 2022, compared to RMB119.0 million for the same period in 2021. The balance of cash, cash equivalents, restricted cash and short-term investments was RMB1,153.1 million (US$172.1 million) as of June 30, 2022.

2022 Financial Guidance

Second quarter business volumes have been significantly impacted by Covid related restrictions, with severe volume drops in Shanghai and Beijing; however, pharma service revenues, new products and the in-hospital business outside of Shanghai and Beijing have shown strong growth momentum. Burning Rock therefore retains its full year 2022 revenue guidance of approximately RMB620 million (US$92.6 million) for now, and would like to highlight the risks of further Covid related impact in the second half of 2022 which is beyond the Company's control and inherently difficult to forecast.

Share Repurchases

Further to the Company's announcement on June 21, 2022 of a US$10 million share repurchase program, we are pleased to announce that the repurchase program has been completed in full. The Company has repurchased a total of 3,023,138 Class A ordinary shares in the form of ADSs under the share repurchase program. The repurchased shares will be retained as treasury shares and have not been taken out of the calculation of loss per share for the second quarter 2022 financial results.

Conference Call Information

Burning Rock will host a conference call to discuss the second quarter 2022 financial results at 8:30 a.m. U.S. Eastern Time (8:30 p.m. Hong Kong time) on August 31, 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/BI1f6043e15b804286b8c6f5db40d78456.

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/57gam4s5.

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.


Selected Operating Data

  For the three months ended 
 March 31,
2021
 June 30,
2021
 September 30,
2021
 December 31,
2021
 March 31,
2022
 June 30,
2022
 
Central Laboratory Channel:            
Number of patients tested7,716 8,155
 7,808 8,235 7,743 8,060 
Number of ordering physicians(1)1,082 1,013 920 917 994 767 
Number of ordering hospitals(2)303 300 287 306 318 264 

(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
 June 30,
2022
 
In-hospital Channel:            
Pipeline partner hospitals(1)22 22 24 23 24 25 
Contracted partner hospitals(2)32 34 34 41 41 43 
Total number of partner hospitals 54 56 58 64 65 68 

(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
 June 30,
2022
 
 (RMB in thousands)
Central laboratory channel 74,561 79,999 78,817 85,976 74,211 78,597 
In-hospital channel 28,994 40,502 43,714 51,906 48,957 34,177 
Pharma research and development channel 3,068 6,778 4,084 9,463 12,356 18,072 
Total revenues 106,623 127,279 126,615 147,345 135,524 130,846 


  For the three months ended 
Gross profit
March 31,
2021
 June 30,
2021
 September 30,
2021
 December 31,
2021
 March 31,
2022
 June 30,
2022
 
 (RMB in thousands)
Central laboratory channel55,212 58,681 58,387 65,985 50,574 57,575 
In-hospital channel20,070 29,426 31,111 34,194 33,396 20,012 
Pharma research and development channel1,658 2,124 2,098 5,200 3,610 5,015 
Total gross profit
76,940 90,231 91,596 105,379 87,580  82,602 


  For the three months ended 
Share-based compensation expenses
March 31,
2021
 June 30,
2021
 September 30,
2021
 December 31,
2021
 March 31,
2022
 June 30,
2022
 
 (RMB in thousands)
Cost of revenues339 406 267  492  365 441 
Research and development expenses22,404 20,825 (9,559) (4,033) 12,299 11,923 
Selling and marketing expenses2,633 2,809 2,044  2,126  1,774 2,158 
General and administrative expenses59,382 59,369 60,803  62,126  65,715 62,615 
Total share-based compensation expenses
84,758 83,409 53,555  60,711  80,153 77,137 


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
  June 30,
2022
  June 30,
2022
 
 RMBRMBRMBRMBRMBRMBUS$
Revenues106,623  127,279  126,615   147,345  135,524   130,846   19,534  
Cost of revenues(29,683) (37,048) (35,019) (41,966) (47,944) (48,244) (7,203)
Gross profit76,940  90,231  91,596   105,379  87,580   82,602  12,331 
Operating expenses:       
Research and development expenses(77,414) (108,071) (69,649) (112,724) (119,496) (92,112) (13,752)
Selling and marketing expenses(55,130) (68,058) (76,687) (103,221) (89,211) (105,634) (15,771)
General and administrative expenses(116,259) (116,130) (116,304) (141,563) (141,733) (150,316) (22,442)
Total operating expenses(248,803 ) (292,259) (262,640) (357,508) (350,440) (348,062) (51,965)
Loss from operations (171,863 ) (202,028) (171,044) (252,129) (262,860) (265,460) (39,634)
Interest income787  681  958  1,031  1,832  2,685  401 
Interest expenses(510) (565) (367) (94) 119  (29) (4)
Other income (expense), net118  433  20  (372) 298  127  19 
Foreign exchange gain (loss), net57  (560) 380  (731) (777) 624  93 
Loss before income tax(171,411 ) (202,039) (170,053) (252,295) (261,388) (262,053) (39,125)
Income tax (expenses) benefits-  (1,626) (424) 1,151  -  (84) (13)
Net loss(171,411 ) (203,665) (170,477) (251,144) (261,388) (262,137) (39,138)
Net loss attributable to Burning Rock Biotech Limited’s shareholders(171,411) (203,665) (170,477) (251,144) (261,388) (262,137) (39,138)
Net loss attributable to ordinary shareholders(171,411 ) (203,665) (170,477) (251,144) (261,388) (262,137) (39,138)
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) (2.50) (0.37)
Class B ordinary shares - basic and diluted(1.65) (1.96) (1.64) (2.40) (2.50) (2.50) (0.37)
Weighted average shares outstanding used in loss per share computation:        
Class A ordinary shares - basic and diluted86,721,263  86,764,260  86,908,975  87,128,297  87,179,752  87,532,539  87,532,539 
Class B ordinary shares - basic and diluted17,324,848  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 adjustments14,080  (34,980) 6,146  (24,726) (3,065) 29,715  4,436 
Total comprehensive loss(157,331 ) (238,645) (164,331) (275,870) (264,453) (232,422) (34,702)
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders(157,331) (238,645) (164,331) (275,870) (264,453) (232,422) (34,702)


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,
2021
  June 30,
2022
  June 30,
2022
 
 RMBRMBUS$
Revenues233,902   266,370   39,768  
Cost of revenues(66,731) (96,188 ) (14,361 )
Gross profit167,171   170,182   25,407  
Operating expenses:   
Research and development expenses(185,485) (211,608) (31,592)
Selling and marketing expenses(123,188) (194,845) (29,090)
General and administrative expenses(232,389) (292,049) (43,602)
Total operating expenses(541,062) (698,502) (104,284)
Loss from operations (373,891) (528,320) (78,877)
Interest income1,468  4,517  674 
Interest expenses(1,075) 90  13 
Other income, net551  425  63 
Foreign exchange loss, net(503) (153) (23)
Loss before income tax(373,450) (523,441) (78,150)
Income tax expenses(1,626) (84) (13)
Net loss(375,076) (523,525) (78,163)
Net loss attributable to Burning Rock Biotech Limited’s shareholders(375,076) (523,525) (78,163)
Net loss attributable to ordinary shareholders(375,076) (523,525) (78,163)
Loss per share for class A and class B ordinary shares:   
Class A ordinary shares - basic and diluted(3.60) (5.00) (0.75)
Class B ordinary shares - basic and diluted(3.60) (5.00) (0.75)
Weighted average shares outstanding used in loss per share computation:    
Class A ordinary shares - basic and diluted86,742,880  87,357,120  87,357,120 
Class B ordinary shares - basic and diluted17,324,848  17,324,848  17,324,848 
Other comprehensive income (loss), net of tax of nil:   
Foreign currency translation adjustments(20,900) 26,650  3,979 
Total comprehensive loss(395,976) (496,875) (74,184)
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders(395,976) (496,875) (74,184)


Burning Rock Biotech Limited

Unaudited Condensed Consolidated Balance Sheets

(In thousands)

 As of
 December 31,
2021
 June 30,
2022
 June 30,
2022
 RMB  RMB US$
ASSETS     
Current assets:     
Cash and cash equivalents1,431,317 1,148,597 171,481
Restricted cash7,795 4,453 665
Short-term investments63,757 - -
Accounts receivable, net92,197 100,960 15,073
Contract assets, net42,391 44,593 6,657
Inventories, net123,210 129,637 19,355
Prepayments and other current assets, net60,279 34,845 5,205
Total current assets1,820,946   1,463,085   218,436
Non-current assets:     
Equity method investment910 733 109
Convertible note receivable- 5,000 746
Property and equipment, net325,438 301,249 44,975
Operating right-of-use assets81,007 66,655 9,951
Intangible assets, net5,150 3,354 500
Other non-current assets45,136 21,198 3,165
Total non-current assets457,641 398,189 59,446
TOTAL ASSETS  2,278,587  1,861,274 277,882


Burning Rock Biotech Limited

Unaudited Condensed Consolidated Balance Sheets (Continued)

(in thousands)

 As of
 December 31,
2021
  June 30,
2022
  June 30,
2022
 
 RMB RMBUS$
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable63,080  56,495  8,434 
Deferred revenue142,871  163,093  24,349 
Accrued liabilities and other current liabilities127,892  98,435  14,696 
Customer deposits972  1,052  157 
Short-term borrowing2,370  2,370  354 
Current portion of operating lease liabilities34,999  38,005  5,674 
Total current liabilities372,184  359,450  53,664 
Non-current liabilities:   
Non-current portion of operating lease liabilities49,316  32,349  4,830 
Other non-current liabilities11,776  37,242  5,560 
Total non-current liabilities61,092  69,591  10,390 
TOTAL LIABILITIES433,276  429,041  64,054 


Shareholders’ equity:
   
Class A ordinary shares116  116  18 
Class B ordinary shares21  21  3 
Additional paid-in capital4,280,956  4,431,603  661,621 
Contra equity-prepayment for equity forward-  (66,850) (9,980)
Accumulated deficits(2,228,713) (2,752,238) (410,898)
Accumulated other comprehensive loss(207,069) (180,419) (26,936)
Total shareholders’ equity1,845,311  1,432,233  213,828 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY2,278,587  1,861,274  277,882 


Burning Rock Biotech Limited

Unaudited Condensed Statements of Cash Flows

(in thousands)

 For the three months ended
 June 30, 2021
 June 30, 2022
 June 30, 2022
 RMB RMBUS$
Net cash used in operating activities(118,998) (109,274) (16,318)
Net cash (used in) generated from investing activities(67,577) 30,729  4,590 
Net cash used in financing activities(8,961) (69,559) (10,384)
Effect of exchange rate on cash, cash equivalents and restricted cash(34,085) 26,279  3,924 
Net decrease in cash, cash equivalents and restricted cash (229,621) (121,825) (18,188)
Cash, cash equivalents and restricted cash at the beginning of period2,112,886  1,274,875  190,334 
Cash, cash equivalents and restricted cash at the end of period1,883,265   1,153,050   172,146  
    


 For the six months ended
 June 30, 2021
 June 30, 2022
 June 30, 2022 
 RMB RMBUS$
Net cash used in operating activities(232,143) (253,634) (37,871)
Net cash generated from investing activities220,752  17,718  2,649 
Net cash used in financing activities(13,123) (73,493) (10,971)
Effect of exchange rate on cash, cash equivalents and restricted cash(17,427) 23,347  3,485 
Net decrease in cash, cash equivalents and restricted cash (41,941) (286,062) (42,708)
Cash, cash equivalents and restricted cash at the beginning of period1,925,206  1,439,112  214,854 
Cash, cash equivalents and restricted cash at the end of period1,883,265   1,153,050   172,146  
    

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
 June 30,
2022
  
 (RMB in thousands)
Gross profit:
 
Central laboratory channel55,212 58,681 58,387 65,985 50,574 57,575  
In-hospital channel20,070 29,426 31,111 34,194 33,396 20,012  
Pharma research and development channel1,658 2,124 2,098 5,200 3,610 5,015  
Total gross profit
76,940 90,231 91,596 105,379 87,580  82,602  
Add: depreciation and amortization:        
Central laboratory channel117 284 1,254 995 2,553 2,545  
In-hospital channel79 113 109 130 93 1,428  
Pharma research and development channel10 40 19 856 2,493 4,327  
Total depreciation and amortization included in cost of revenues
206   437   1,382   1,981   5,139   8,300   
Non-GAAP gross profit:       
Central laboratory channel55,329 58,965 59,641 66,980 53,127 60,120  
In-hospital channel20,149 29,539 31,220 34,324 33,489 21,440  
Pharma research and development channel1,668 2,164 2,117 6,056 6,103 9,342  
Total non-GAAP gross profit 77,146   90,668   92,978   107,360   92,719  90,902  
Non-GAAP gross margin:       
Central laboratory channel74.2%73.7%75.7%77.9%71.6%76.5% 
In-hospital channel69.5%72.9%71.4%66.1%68.4%62.7% 
Pharma research and development channel54.4%31.9%51.8%64.0%49.4%51.7% 
Total non-GAAP gross margin72.4%71.2%73.4%72.9%68.4%69.5% 




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