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

		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 tested	7,716		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 channel	55,212		58,681		58,387		65,985		50,574		57,575
In-hospital channel	20,070		29,426		31,111		34,194		33,396		20,012
Pharma research and development channel	1,658		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 revenues	339		406		267			492			365		441
Research and development expenses	22,404		20,825		(9,559	)		(4,033	)		12,299		11,923
Selling and marketing expenses	2,633		2,809		2,044			2,126			1,774		2,158
General and administrative expenses	59,382		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
	RMB		RMB			RMB			RMB			RMB			RMB			US$
Revenues	106,623			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 profit	76,940			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 income	787			681			958			1,031			1,832			2,685			401
Interest expenses	(510	)		(565	)		(367	)		(94	)		119			(29	)		(4	)
Other income (expense), net	118			433			20			(372	)		298			127			19
Foreign exchange gain (loss), net	57			(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 diluted	86,721,263			86,764,260			86,908,975			87,128,297			87,179,752			87,532,539			87,532,539
Class B ordinary shares - basic and diluted	17,324,848			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 adjustments	14,080			(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
	RMB		RMB			US$
Revenues	233,902			266,370			39,768
Cost of revenues	(66,731	)		(96,188	)		(14,361	)
Gross profit	167,171			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 income	1,468			4,517			674
Interest expenses	(1,075	)		90			13
Other income, net	551			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 diluted	86,742,880			87,357,120			87,357,120
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	(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 equivalents	1,431,317		1,148,597		171,481
Restricted cash	7,795		4,453		665
Short-term investments	63,757		-		-
Accounts receivable, net	92,197		100,960		15,073
Contract assets, net	42,391		44,593		6,657
Inventories, net	123,210		129,637		19,355
Prepayments and other current assets, net	60,279		34,845		5,205
Total current assets	1,820,946		1,463,085		218,436
Non-current assets:
Equity method investment	910		733		109
Convertible note receivable	-		5,000		746
Property and equipment, net	325,438		301,249		44,975
Operating right-of-use assets	81,007		66,655		9,951
Intangible assets, net	5,150		3,354		500
Other non-current assets	45,136		21,198		3,165
Total non-current assets	457,641		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		RMB			US$
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	63,080			56,495			8,434
Deferred revenue	142,871			163,093			24,349
Accrued liabilities and other current liabilities	127,892			98,435			14,696
Customer deposits	972			1,052			157
Short-term borrowing	2,370			2,370			354
Current portion of operating lease liabilities	34,999			38,005			5,674
Total current liabilities	372,184			359,450			53,664
Non-current liabilities:
Non-current portion of operating lease liabilities	49,316			32,349			4,830
Other non-current liabilities	11,776			37,242			5,560
Total non-current liabilities	61,092			69,591			10,390
TOTAL LIABILITIES	433,276			429,041			64,054
Shareholders’ equity:
Class A ordinary shares	116			116			18
Class B ordinary shares	21			21			3
Additional paid-in capital	4,280,956			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’ equity	1,845,311			1,432,233			213,828
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	2,278,587			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			RMB						US$
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 period	2,112,886			1,274,875						190,334
Cash, cash equivalents and restricted cash at the end of period	1,883,265			1,153,050						172,146

	For the six months ended
	June 30, 2021			June 30, 2022						June 30, 2022
	RMB			RMB					US$
Net cash used in operating activities	(232,143	)		(253,634				)		(37,871	)
Net cash generated from investing activities	220,752			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 period	1,925,206			1,439,112						214,854
Cash, cash equivalents and restricted cash at the end of period	1,883,265			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 channel	55,212		58,681		58,387		65,985		50,574		57,575
In-hospital channel	20,070		29,426		31,111		34,194		33,396		20,012
Pharma research and development channel	1,658		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 channel	117		284		1,254		995		2,553		2,545
In-hospital channel	79		113		109		130		93		1,428
Pharma research and development channel	10		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 channel	55,329		58,965		59,641		66,980		53,127		60,120
In-hospital channel	20,149		29,539		31,220		34,324		33,489		21,440
Pharma research and development channel	1,668		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 channel	74.2	%	73.7	%	75.7	%	77.9	%	71.6	%	76.5	%
In-hospital channel	69.5	%	72.9	%	71.4	%	66.1	%	68.4	%	62.7	%
Pharma research and development channel	54.4	%	31.9	%	51.8	%	64.0	%	49.4	%	51.7	%
Total non-GAAP gross margin	72.4	%	71.2	%	73.4	%	72.9	%	68.4	%	69.5	%