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United States securities and exchange commission logo
May 16, 2022
Yusheng Han
Chief Executive Officer
Burning Rock Biotech Ltd
No. 5 Xingdao Ring Road North
International Bio Island
Guangzhou, 510005 The People's Republic of China
Re: Burning Rock
Biotech Ltd
Registration
Statement on Form F-3
Filed April 29,
2022
File No. 333-264577
Dear Mr. Han:
We have limited our review of your registration statement to
those issues we have
addressed in our comments. In some of our comments, we may ask you to
provide us with
information so we may better understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form F-3 filed April 29, 2022
Cover page
1. We note your disclosure
that you are not a Chinese operating company but a holding
company incorporated in
the Cayman Islands and that you conduct operations primarily
through your
subsidiaries and through contractual arrangements with the variable interest
entity or VIE and its
subsidiaries. You state that these contractual arrangements enable
you to exercise
effective control of the VIE. You also state that you are the primary
beneficiary of the VIE.
Explain whether the VIE structure is used to provide investors
with exposure to
foreign investment in China-based companies where Chinese law
prohibits direct
foreign investment in the operating companies.
Yusheng Han
FirstName LastNameYusheng Han
Burning Rock Biotech Ltd
Comapany
May NameBurning Rock Biotech Ltd
16, 2022
May 16,
Page 2 2022 Page 2
FirstName LastName
2. Provide a description of how cash is transferred through your
organization and disclose
your intentions to distribute earnings or settle amounts owed under
the VIE
agreements. Provide cross-references to the condensed consolidating
schedule and the
consolidated financial statements. In addition, please add disclosure
discussing: (i)
restrictions on currency exchanges in China may limit your ability to
freely convert RMB
to fund any future business activities outside China or other payments
in U.S. dollars and
(ii) capital controls the Chinese government imposes may limit your
ability to use capital
from your subsidiaries located in China for business purposes outside
of China.
3. We note your disclosure that your independent registered public
accounting firm is not
currently inspected by the PCAOB. We note also that you are named on
the list of
Commission Identified Issuers available on our website at
https://www.sec.gov/hfcaa.
Please revise to provide related disclosure on the cover page, in the
summary and in the
Risk Factors section.
About this Prospectus, page 1
4. Please revise the definition of "China" or "PRC" so that it includes
Hong Kong and
Macau.
Prospectus Summary, page 8
5. We note your disclosure referencing your contractual agreements,
including the exclusive
business cooperation agreement, among others. Please ensure you
describe all contracts
and arrangements through which you claim to have economic rights and
exercise control
that results in consolidation of the VIE s operations and financial
results into your
financial statements. Identify clearly the entity in which investors
are purchasing their
interest and the entity(ies) in which the company s operations are
conducted. Describe the
relevant contractual agreements between the entities and how this type
of corporate
structure may affect investors and the value of their investment,
including how and why
the contractual arrangements may be less effective than direct
ownership and that the
company may incur substantial costs to enforce the terms of the
arrangements. Disclose
the uncertainties regarding the status of the rights of the Cayman
Islands holding company
with respect to its contractual arrangements with the VIE, its
founders and owners, and the
challenges the company may face enforcing these contractual agreements
due to legal
uncertainties and jurisdictional limits.
6. We note your disclosure that the Cayman Islands holding company
controls and receives
the economic benefits of the VIE s business operations through
contractual agreements
between the VIE and your Wholly Foreign-Owned Enterprise (WFOE). We
also note your
disclosure that the Cayman Islands holding company is the primary
beneficiary of the
VIE. However, neither the investors in the holding company nor the
holding company
itself have an equity ownership in, direct foreign investment in, or
control of, through such
ownership or investment, the VIE. Accordingly, please refrain from
implying that the
contractual agreements are equivalent to equity ownership in the
business of the VIE. Any
Yusheng Han
FirstName LastNameYusheng Han
Burning Rock Biotech Ltd
Comapany
May NameBurning Rock Biotech Ltd
16, 2022
May 16,
Page 3 2022 Page 3
FirstName LastName
references to control or benefits that accrue to you because of the
VIE should be limited to
a clear description of the conditions you have satisfied for
consolidation of the VIE under
U.S. GAAP. Additionally, your disclosure should clarify that you are
the primary
beneficiary of the VIE for accounting purposes. Please also disclose,
if true, that the VIE
agreements have not been tested in a court of law.
7. In your summary of risk factors, disclose the risks that your
corporate structure and being
based in or having the majority of the company s operations in China
poses to investors.
In particular, describe the significant regulatory, liquidity, and
enforcement risks with
cross-references to the more detailed discussion of these risks in the
prospectus. For
example, specifically discuss risks arising from the legal system in
China, including risks
and uncertainties regarding the enforcement of laws and that rules and
regulations in
China can change quickly with little advance notice; and the risk that
the Chinese
government may intervene or influence your operations at any time, or
may exert more
control over offerings conducted overseas and/or foreign investment in
China-based
issuers, which could result in a material change in your operations
and/or the value of the
securities you are registering for sale. Acknowledge any risks that
any actions by the
Chinese government to exert more oversight and control over offerings
that are conducted
overseas and/or foreign investment in China-based issuers could
significantly limit or
completely hinder your ability to offer or continue to offer
securities to investors and
cause the value of such securities to significantly decline or be
worthless.
For each summary risk factor related to doing business in China,
please add a cross-
reference to the more detailed discussion in the corresponding risk
factor in the Risk
Factors section.
8. Disclose each permission or approval that you, your subsidiaries, or
the VIEs are required
to obtain from Chinese authorities to operate your business and to
offer the securities
being registered to foreign investors. State whether you, your
subsidiaries, or VIEs are
covered by permissions requirements from the China Securities
Regulatory Commission
(CSRC), Cyberspace Administration of China (CAC) or any other
governmental agency
that is required to approve the VIE s operations, and state
affirmatively whether you have
received all requisite permissions or approvals and whether any
permissions or approvals
have been denied. Please also describe the consequences to you and
your investors if you,
your subsidiaries, or the VIEs: (i) do not receive or maintain such
permissions or
approvals, (ii) inadvertently conclude that such permissions or
approvals are not required,
or (iii) applicable laws, regulations, or interpretations change and
you are required to
obtain such permissions or approvals in the future.
9. Provide a clear description of how cash is transferred through your
organization. Disclose
your intentions to distribute earnings or settle amounts owed under
the VIE agreements.
Quantify any cash flows and transfers of other assets by type that
have occurred between
the holding company, its subsidiaries, and the consolidated VIEs, and
direction of transfer.
Quantify any dividends or distributions that a subsidiary or
consolidated VIE have made
Yusheng Han
FirstName LastNameYusheng Han
Burning Rock Biotech Ltd
Comapany
May NameBurning Rock Biotech Ltd
16, 2022
May 16,
Page 4 2022 Page 4
FirstName LastName
to the holding company and which entity made such transfer, and their
tax consequences.
Similarly quantify dividends or distributions made to U.S. investors,
the source, and their
tax consequences. Your disclosure should make clear if no transfers,
dividends, or
distributions have been made to date. Describe any restrictions on
foreign exchange and
your ability to transfer cash between entities, across borders, and to
U.S. investors.
Describe any restrictions and limitations on your ability to
distribute earnings from the
company, including your subsidiaries and/or the consolidated VIEs, to
the parent company
and U.S. investors as well as the ability to settle amounts owed under
the VIE agreements.
Please also disclose if you have specific cash management policies and
procedures in
place that dictate how funds are transferred through your organization
and if applicable,
describe these polices and procedures.
10. Disclose that trading in your securities may be prohibited under the
Holding Foreign
Companies Accountable Act if the PCAOB determines that it cannot
inspect or investigate
completely your auditor, and that as a result an exchange may
determine to delist your
securities. Disclose whether your auditor is subject to the
determinations announced by
the PCAOB on December 16, 2021.
Risk Factors
Risks Relating to Our Corporate Structure, page 11
11. Revise your risk factors to acknowledge that if the PRC government
determines that the
contractual arrangements constituting part of the VIE structure do not
comply with PRC
regulations, or if these regulations change or are interpreted
differently in the future, the
securities you are registering may decline in value or become
worthless if the
determinations, changes, or interpretations result in your inability
to assert contractual
control over the assets of your PRC subsidiaries or the VIEs that
conduct all or
substantially all of your operations.
Risks Relating to Doing Business in the PRC, page 12
12. We note your disclosure that the cybersecurity laws and regulations
have not directly
affected your business and operations and that you have not been
involved in any
investigations on cybersecurity review made by the CAC on such basis.
Please revise your
disclosure to explain how this oversight impacts your business and
your offering and to
what extent you believe that you are compliant with the regulations or
policies that have
been issued by the CAC to date.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
Yusheng Han
Burning Rock Biotech Ltd
May 16, 2022
Page 5
Please contact Christine Westbrook at 202-551-5019 or Celeste Murphy at
202-551-
3257 with any questions.
Sincerely,
FirstName LastNameYusheng Han
Division of Corporation
Finance
Comapany NameBurning Rock Biotech Ltd
Office of Life Sciences
May 16, 2022 Page 5
cc: Shuang Zhao, Esq.
FirstName LastName