Burning Rock Reports Second Quarter 2022 Financial Results

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.

Contact: IR@brbiotech.com

Selected Operating Data

⁽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.

⁽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

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Unaudited Condensed Statements of Comprehensive Loss
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Unaudited Condensed Consolidated Balance Sheets

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Unaudited Condensed Consolidated Balance Sheets (Continued)

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Unaudited Condensed Statements of Cash Flows

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Reconciliations of GAAP and Non-GAAP Results