GUANGZHOU, China, Nov. 15, 2022 (GLOBE NEWSWIRE) -- Burning Rock Biotech Limited (NASDAQ: BNR and LSE: 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 September 30, 2022.

Recent Business Updates

• Corporate
  • Listed on the Main Market of the London Stock Exchange (the "LSE") by way of a direct listing on November 1, 2022, while Burning Rock’s ADSs will continue to be listed and traded on the Nasdaq Global Market, with those ADSs being fully fungible with the ADSs listed on the LSE.
• Therapy Selection and Minimal Residual Disease (MRD)
  • In-hospital strategy continues to drive growth uplift despite negative Covid impact. In-hospital volumes grew 24% year-over-year in the third quarter of 2022.
  • MRD volumes continue to ramp up following commercial launch in March 2022, with approximately 700 tests completed in the third quarter of 2022, more than doubling the volumes in the second quarter of 2022.
• Early Detection
  • PROMISE study (2,035 participants) for 9-cancer test results presented at European Society for Medical Oncology (ESMO) Congress 2022 in September 2022. Overall sensitivity achieved 83.7% for 9 cancers at specificity of 98.3%, with methylation contributing majority of positive detections compared to protein and mutation. Tissue origin prediction accuracy achieved 90.9% for the top 2 organs.
  • Commercialization of our blood-based, 6-cancer early detection test gaining initial traction, with product onboarding completed at a few hospitals.
• Pharma Services
  • The total value of new contracts we entered into from January to September 2022 amounted to RMB198 million, representing approximately 38% increase from the same period of 2021.
  • Starting to work with BeiGene on initial clinical studies using our personalized MRD test brPROPHET^TM .
  • New companion diagnostics (CDx) development announced with Eli Lilly and Company in China, for the RET inhibitor selpercatinib.

Third Quarter 2022 Financial Results

Revenues were RMB154.6 million (US$21.7 million) for the three months ended September 30, 2022, representing a 22.1% increase from RMB126.6 million for the same period in 2021.

• Revenue generated from central laboratory business was RMB90.0 million (US$12.7 million) for the three months ended September 30, 2022, representing a 14.2% increase from RMB78.8 million for the same period in 2021, driven by revenue increase from monitoring packages that consist of multiple tests per package.
• Revenue generated from in-hospital business was RMB49.6 million (US$7.0 million) for the three months ended September 30, 2022, representing a 13.5% increase from RMB43.7 million for the same period in 2021, primarily attributable to in-hosiptal sales volume growth in Shanghai and Beijing as COVID impact lessened in the third quarter of 2022.
• Revenue generated from pharma research and development services was RMB15.0 million (US$2.1 million) for the three months ended September 30, 2022, representing a 267.4% increase from RMB4.1 million for the same period in 2021, primarily attributable to increased development and testing services performed for our pharma customers.
  

Cost of revenues was RMB46.0 million (US$6.5 million) for the three months ended September 30, 2022, representing a 31.5% increase from RMB35.0 million for the same period in 2021, primarily due to an increase in testing and selling volume as well as rental expense and renovation depreciation in relation to our new laboratory that commenced use in January 2022.

Gross profit was RMB108.6 million (US$15.3 million) for the three months ended September 30, 2022, representing a 18.6% increase from RMB91.6 million for the same period in 2021. Gross margin was 70.2% for the three months ended September 30, 2022, which decreased from 72.3% for the same period in 2021, primarily due to an increased income from monitoring packages, offset by an increased depreciation in relation to our new laboratory.

Non-GAAP gross profit, which excludes depreciation and amortization expenses, was RMB117.0 million (US$16.4 million) for the three months ended September 30, 2022, representing a 25.8% increase from RMB93.0 million for the same period in 2021. Non-GAAP gross margin was 75.7% for the three months ended September 30, 2022, compared to 73.4% for the same period in 2021.

Operating expenses were RMB343.2 million (US$48.3 million) for the three months ended September 30, 2022, representing a 30.7% increase from RMB262.6 million for the same period in 2021.

• Research and development expenses were RMB109.4 million (US$15.4 million) for the three months ended September 30, 2022, representing a 57.2% increase from RMB69.6 million for the same period in 2021, primarily due to (i) an increase in clinical program expenses for early cancer detection; and (ii) an increase in amortized expense on share-based compensation, offset in part by a decrease in staff cost due to organizational restructuring.
• Selling and marketing expenses were RMB90.3 million (US$12.7 million) for the three months ended September 30, 2022, representing a 17.7% increase from RMB76.7 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 conference fee and (iii) an increase amortized expense on share-based compensation. Sequentially, selling and marketing expenses in the third quarter decreased by 14.5% compared to the second quarter of 2022, as our sales reorganization and operating efficiency improvement initiative started to generate initial results. We will continue to focus on improving operating efficiency going forward.
• General and administrative expenses were RMB143.5 million (US$20.2 million) for the three months ended September 30, 2022, representing a 23.4% increase from RMB116.3 million for the same period in 2021, primarily due to (i) an increase in depreciation expenses for a new building; (ii) an increase in allowance for credit loss in relation to accounts receivables; and (iii) an increase amortized expense on share-based compensation.
  

Net loss was RMB231.5 million (US$32.5 million) for the three months ended September 30, 2022, compared to RMB170.5 million for the same period in 2021.

Net cash used in operating activities was RMB135.5 million (US$19.0 million) for the three months ended September 30, 2022, compared to RMB133.4 million for the same period in 2021. The balance of cash, cash equivalents, restricted cash and short-term investments was RMB1,014.0 million (US$142.5 million) as of September 30, 2022.

Revised 2022 Financial Guidance

We believe that we have achieved strong, above-industry growth in the first nine months of 2022, generating revenues of RMB421 million, an increase of 17% compared to the same period of 2021. This is below the implied full-year growth rate of our initial guidance at the beginning of the year, primarily due to an out-sized Covid impact in Shanghai in the second quarter and to a lesser extent, Covid-related disruptions in other regions of China from time to time. We have observed another significant wave of Covid cases sweeping through many large cities in China since the start of October, particularly in Guangzhou, which is one of our key markets and where our central lab is located. We are taking a cautious view now and project a drop in revenues in the fourth quarter compard to the same period last year, which was a strong quarter and relatively free of large Covid impacts. We therefore revise our 2022 full-year revenue guidance to a growth of approxiately 5% compared to 2021.

Transition of Chief Operating Officer to Chief Scientific Officer

Effective November 2022, Shannon Chuai, our chief operating officer, is taking on a new role of chief scientific officer of Burning Rock. In her new role, Shannon will lead key projects of our pipeline development, provide senior oversight on our early cancer detection clinical programs and our engagement on product registration with the NMPA and other medical regulatory bodies. Shannon continues to serve as a director on our board. The company's respective business units will report directly to our CEO, Yusheng Han.

Conference Call Information

Burning Rock will host a conference call to discuss the third quarter 2022 financial results at 8:30 a.m. U.S. Eastern Time (9:30 p.m. Hong Kong time) on November 16, 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/BI96c581babaf44021ab6c34af9f7ce42b.

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/8fj2edsi.

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; LSE: 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		September 30, 2022
Central Laboratory Channel:
Number of patients tested		7,716		8,155		7,808		8,235		7,743		8,060		7,989
Number of ordering physicians(1)		1,082		1,013		920		917		994		767		897
Number of ordering hospitals(2)		303		300		287		306		318		264		257
(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		September 30, 2022
In-hospital Channel:
Pipeline partner hospitals(1)		22		22		24		23		24		25		22
Contracted partner hospitals(2)		32		34		34		41		41		43		47
Total number of partnerhospitals		54		56		58		64		65		68		69
(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		September 30, 2022
		(RMB in thousands)
Central laboratory channel		74,561		79,999		78,817		85,976		74,211		78,597		89,992
In-hospital channel		28,994		40,502		43,714		51,906		48,957		34,177		49,636
Pharma research and development channel		3,068		6,778		4,084		9,463		12,356		18,072		15,003
Total revenues		106,623		127,279		126,615		147,345		135,524		130,846		154,631

		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		September 30, 2022
		(RMB in thousands)
Central laboratory channel		55,212		58,681		58,387		65,985		50,574		57,575		69,991
In-hospital channel		20,070		29,426		31,111		34,194		33,396		20,012		31,593
Pharma research and development channel		1,658		2,124		2,098		5,200		3,610		5,015		7,010
Total gross profit		76,940		90,231		91,596		105,379		87,580		82,602		108,594

		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		September 30, 2022
		(RMB in thousands)
Cost of revenues		339		406		267		492		365		441		481
Research and development expenses		22,404		20,825		(9,559)		(4,033)		12,299		11,923		13,978
Selling and marketing expenses		2,633		2,809		2,044		2,126		1,774		2,158		2,346
General and administrative expenses		59,382		59,369		60,803		62,126		65,715		62,615		61,041
Total share-based compensation expenses		84,758		83,409		53,555		60,711		80,153		77,137		77,846

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		September 30, 2022		September 30, 2022
		RMB		RMB		RMB		RMB		RMB		RMB		RMB		US$
Revenues		106,623		127,279		126,615		147,345		135,524		130,846		154,631		21,738
Cost of revenues		(29,683)		(37,048)		(35,019)		(41,966)		(47,944)		(48,244)		(46,037)		(6,471)
Gross profit		76,940		90,231		91,596		105,379		87,580		82,602		108,594		15,267
Operating expenses:
Research and development expenses		(77,414)		(108,071)		(69,649)		(112,724)		(119,496)		(92,112)		(109,433)		(15,384)
Selling and marketing expenses		(55,130)		(68,058)		(76,687)		(103,221)		(89,211)		(105,634)		(90,275)		(12,691)
General and administrative expenses		(116,259)		(116,130)		(116,304)		(141,563)		(141,733)		(150,316)		(143,530)		(20,177)
Total operating expenses		(248,803)		(292,259)		(262,640)		(357,508)		(350,440)		(348,062)		(343,238)		(48,252)
Loss from operations		(171,863)		(202,028)		(171,044)		(252,129)		(262,860)		(265,460)		(234,644)		(32,985)
Interest income		787		681		958		1,031		1,832		2,685		2,001		281
Interest expenses		(510)		(565)		(367)		(94)		119		(29)		12		2
Other income (expense), net		118		433		20		(372)		298		127		(189)		(27)
Foreign exchange gain (loss), net		57		(560)		380		(731)		(777)		624		1,337		188
Loss before income tax		(171,411)		(202,039)		(170,053)		(252,295)		(261,388)		(262,053)		(231,483)		(32,541)
Income tax (expenses) benefits		-		(1,626)		(424)		1,151		-		(84)		-		-
Net loss		(171,411)		(203,665)		(170,477)		(251,144)		(261,388)		(262,137)		(231,483)		(32,541)
Net loss attributable to Burning Rock Biotech Limited’s shareholders		(171,411)		(203,665)		(170,477)		(251,144)		(261,388)		(262,137)		(231,483)		(32,541)
Net loss attributable to ordinary shareholders		(171,411)		(203,665)		(170,477)		(251,144)		(261,388)		(262,137)		(231,483)		(32,541)
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)		(2.23)		(0.31)
Class B ordinary shares - basic and diluted		(1.65)		(1.96)		(1.64)		(2.40)		(2.50)		(2.50)		(2.23)		(0.31)
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		86,585,322		86,585,322
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		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		20,646		2,902
Total comprehensive loss		(157,331)		(238,645)		(164,331)		(275,870)		(264,453)		(232,422)		(210,837)		(29,639)
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders		(157,331)		(238,645)		(164,331)		(275,870)		(264,453)		(232,422)		(210,837)		(29,639)

Burning Rock Biotech Limited Unaudited Condensed Statements of Comprehensive Loss (in thousands, except for number of shares and per share data)
		For the nine months ended
		September 30, 2021		September 30, 2022		September 30, 2022
		RMB		RMB		US$
Revenues		360,517		421,001		59,183
Cost of revenues		(101,750)		(142,225)		(19,993)
Gross profit		258,767		278,776		39,190
Operating expenses:
Research and development expenses		(255,134)		(321,041)		(45,131)
Selling and marketing expenses		(199,875)		(285,120)		(40,082)
General and administrative expenses		(348,693)		(435,579)		(61,233)
Total operating expenses		(803,702)		(1,041,740)		(146,446)
Loss from operations		(544,935)		(762,964)		(107,256)
Interest income		2,426		6,518		916
Interest expenses		(1,442)		102		14
Other income, net		571		236		33
Foreign exchange loss, net		(123)		1,184		166
Loss before income tax		(543,503)		(754,924)		(106,127)
Income tax expenses		(2,050)		(84)		(12)
Net loss		(545,553)		(755,008)		(106,139)
Net loss attributable to Burning Rock Biotech Limited’s shareholders		(545,553)		(755,008)		(106,139)
Net loss attributable to ordinary shareholders		(545,553)		(755,008)		(106,139)
Loss per share for class A and class B ordinary shares:
Class A ordinary shares - basic and diluted		(5.24)		(7.23)		(1.02)
Class B ordinary shares - basic and diluted		(5.24)		(7.23)		(1.02)
Weighted average shares outstanding used in loss per share computation:
Class A ordinary shares - basic and diluted		86,798,854		87,097,027		87,097,027
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		(14,754)		47,296		6,649
Total comprehensive loss		(560,307)		(707,712)		(99,490)
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders		(560,307)		(707,712)		(99,490)

Burning Rock Biotech Limited Unaudited Condensed Consolidated Balance Sheets (In thousands)
		As of
		December 31, 2021		September 30, 2022		September 30, 2022
		RMB		RMB		US$
ASSETS
Current assets:
Cash and cash equivalents		1,431,317		1,009,790		141,954
Restricted cash		7,795		4,216		593
Short-term investments		63,757		-		-
Accounts receivable, net		92,197		102,385		14,393
Contract assets, net		42,391		46,591		6,550
Inventories, net		123,210		150,428		21,147
Prepayments and other current assets, net		60,279		41,220		5,794
Total current assets		1,820,946		1,354,630		190,431
Non-current assets:
Equity method investment		910		644		91
Convertible note receivable		-		5,000		703
Property and equipment, net		325,438		288,499		40,556
Operating right-of-use assets		81,007		58,379		8,207
Intangible assets, net		5,150		2,774		390
Other non-current assets		45,136		21,369		3,004
Total non-current assets		457,641		376,665		52,951
TOTAL ASSETS		2,278,587		1,731,295		243,382

Burning Rock Biotech Limited Unaudited Condensed Consolidated Balance Sheets (Continued) (in thousands)
		As of
		December 31, 2021		September 30, 2022		September 30, 2022
		RMB		RMB		US$
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		63,080		71,045		9,988
Deferred revenue		142,871		168,260		23,654
Accrued liabilities and other current liabilities		127,892		82,512		11,600
Customer deposits		972		403		57
Short-term borrowing		2,370		-		-
Current portion of operating lease liabilities		34,999		38,632		5,431
Other current liabilities		-		2,557		359
Total current liabilities		372,184		363,409		51,089
Non-current liabilities:
Non-current portion of operating lease liabilities		49,316		22,865		3,214
Other non-current liabilities		11,776		46,079		6,478
Total non-current liabilities		61,092		68,944		9,692
TOTAL LIABILITIES		433,276		432,353		60,781
Shareholders’ equity:
Class A ordinary shares		116		117		16
Class B ordinary shares		21		21		3
Additional paid-in capital		4,280,956		4,499,491		632,528
Treasury stock		-		(57,193)		(8,040)
Accumulated deficits		(2,228,713)		(2,983,721)		(419,445)
Accumulated other comprehensive loss		(207,069)		(159,773)		(22,461)
Total shareholders’ equity		1,845,311		1,298,942		182,601
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		2,278,587		1,731,295		243,382

Burning Rock Biotech Limited Unaudited Condensed Statements of Cash Flows (in thousands)
		For the three months ended
		September 30, 2021		September 30, 2022			September 30, 2022
		RMB		RMB			US$
Net cash used in operating activities		(133,394)		(135,467)			(19,042)
Net cash used in investing activities		(72,085)		(20,148)			(2,832)
Net cash used in financing activities		(32,995)		(2,671)			(375)
Effect of exchange rate on cash, cash equivalents and restricted cash		4,919		19,242			2,703
Net decrease in cash, cash equivalents and restricted cash		(233,555)		(139,044)			(19,546)
Cash, cash equivalents and restricted cash at the beginning of period		1,883,265		1,153,050			162,093
Cash, cash equivalents and restricted cash at the end of period		1,649,710		1,014,006			142,547

		For the nine months ended
		September 30, 2021		September 30, 2022		September 30, 2022
		RMB		RMB		US$
Net cash used in operating activities		(365,537)		(389,101)		(54,700)
Net cash generated from (used in) investing activities		148,667		(2,430)		(339)
Net cash used in financing activities		(46,118)		(76,164)		(10,707)
Effect of exchange rate on cash, cash equivalents and restricted cash		(12,508)		42,589		5,986
Net decrease in cash, cash equivalents and restricted cash		(275,496)		(425,106)		(59,760)
Cash, cash equivalents and restricted cash at the beginning of period		1,925,206		1,439,112		202,307
Cash, cash equivalents and restricted cash at the end of period		1,649,710		1,014,006		142,547

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		September 30, 2022
		(RMB in thousands)
Gross profit:
Central laboratory channel		55,212		58,681		58,387		65,985		50,574		57,575		69,991
In-hospital channel		20,070		29,426		31,111		34,194		33,396		20,012		31,593
Pharma research and development channel		1,658		2,124		2,098		5,200		3,610		5,015		7,010
Total gross profit		76,940		90,231		91,596		105,379		87,580		82,602		108,594
Add: depreciation and amortization:
Central laboratory channel		117		284		1,254		995		2,553		2,545		3,138
In-hospital channel		79		113		109		130		93		1,428		2,479
Pharma research and development channel		10		40		19		856		2,493		4,327		2,805
Total depreciation and amortization included in cost of revenues		206		437		1,382		1,981		5,139		8,300		8,422
Non-GAAP gross profit：
Central laboratory channel		55,329		58,965		59,641		66,980		53,127		60,120		73,129
In-hospital channel		20,149		29,539		31,220		34,324		33,489		21,440		34,072
Pharma research and development channel		1,668		2,164		2,117		6,056		6,103		9,342		9,815
Total non-GAAP gross profit		77,146		90,668		92,978		107,360		92,719		90,902		117,016
Non-GAAP gross margin：
Central laboratory channel		74.2%		73.7%		75.7%		77.9%		71.6%		76.5%		81.3%
In-hospital channel		69.5%		72.9%		71.4%		66.1%		68.4%		62.7%		68.6%
Pharma research and development channel		54.4%		31.9%		51.8%		64.0%		49.4%		51.7%		65.4%
Total non-GAAP gross margin		72.4%		71.2%		73.4%		72.9%		68.4%		69.5%		75.7%