BNR - Burning Rock Reports Second Quarter 2022 Financial Results

August, 31 2022 05:29 AM Burning Rock Biotech Limited

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
%

Company Name:	Burning Rock Biotech Limited
Stock Symbol:	BNR
Market:	NASDAQ
Website:	brbiotech.com

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