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OFFON

BURNING ROCK BIOTECH LIMITED

(BNR)
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Burning Rock Reports Second Quarter 2021 Financial Results

08/31/2021 | 12:31am EST

GUANGZHOU, China, Aug. 31, 2021 (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, 2021.

Business Updates

  • Early Detection
    • Technology foundation manuscript was published in Nature Biomedical Engineering (article link here). The results demonstrate that our proprietary technology of deep methylation sequencing, aided by a machine-learning classifier of methylation patterns, enables ultrasensitive detection of circulating tumor DNA.
    • We continued to conduct an early-access program (over 2,000 volunteers tested) to prepare for operational readiness of our 6-cancer early detection product.
    • 2022 commercialization is well on track. We are entering into contract signing stage with 6 hospitals where our 6-cancer test will be offered at the health check-up departments of those hospitals.
  • New products for early-stage cancer patients
    • Development of minimal residual disease (MRD) products is on track. Products are targeted to be launched in 2022. Lung-cancer data read-out is likely to take place in the first half of 2022. Clinical trials on colon, esophageal and other cancers are also under planning.
  • Pharma Services
    • Biopharma service contracts backlog grew rapidly. Total value of the contracts entered into during the first half of 2021 amounted to RMB98.2 million, three times the amount in full-year 2020.
    • We are jointly developing, together with IMPACT Therapeutics, companion diagnostics (CDx) for a targeted oncology drug, Senaparib, (IMP4297), a PARP inhibitor, for the treatment of prostate cancer globally. Senaparib’s pivotal clinical study under the FDA pathway is in progress. This project uses our Clinical Laboratory Improvement Amendments (CLIA)-certified and College of American Pathologists (CAP)-accredited laboratory in California, US.
  • Therapy Selection
    • Continued to strategically focus on the in-hospital channel. The volume of in-hospital NGS-based test kits grew 70% year-over-year to over 10,000 tests in the second quarter of 2021.

Second Quarter 2021 Financial Results

Revenues were RMB127.3 million (US$19.7 million) for the three months ended June 30, 2021, representing a 19.0% increase from RMB107.0 million for the same period in 2020, or a 19.4% sequential increase from RMB106.6 million for the three months ended March 31, 2021.

  • Revenue generated from central laboratory business was RMB80.0 million (US$12.4 million) for the three months ended June 30, 2021, representing a 7.2% increase from RMB74.6 million for the same period in 2020, primarily attributable to the year-over-year volume growth of the central laboratory business. Number of patients tested in the central laboratory channel was 8,155 for the three months ended June 30, 2021, representing a 12.5% increase from 7,252 for the same period in 2020.
  • Revenue generated from in-hospital business was RMB40.5 million (US$6.3 million) for the three months ended June 30, 2021, representing a 46.8% increase from RMB27.6 million for the same period in 2020, primarily attributable to the year-on-year volume growth of 70% of the in-hospital business. Number of contracted partner hospitals in the in-hospital channel increased to 34 as of June 30, 2021 from 32 as of March 31, 2020 and 24 as of June 30, 2020.
  • Revenue generated from pharma research and development services was RMB6.8 million (US$1.0 million) for the three months ended June 30, 2021, representing a 41.9% increase from RMB4.8 million for the same period in 2020, primarily attributable to the building of pipeline of pharmaceutical projects.

Cost of revenues was RMB37.0 million (US$5.7 million) for the three months ended June 30, 2021, representing a 29.7% increase from RMB28.6 million for the same period in 2020, which was generally in line with the Company’s continued business growth.

Gross profit was RMB90.2 million (US$14.0 million) for the three months ended June 30, 2021, representing a 15.1% increase from RMB78.4 million for the same period in 2020. Gross margin was 70.9% for the three months ended June 30, 2021, compared to 73.3% for the same period in 2020.

Operating expenses were RMB292.3 million (US$45.3 million) for the three months ended June 30, 2021, representing a 93% increase from RMB151.4 million for the same period in 2020. The increase was primarily driven by headcount growth and increase in other costs to support business expansion.

  • Research and development expenses were RMB108.1 million (US$16.7 million) for the three months ended June 30, 2021, representing a 51.8% increase from RMB71.2 million for the same period in 2020, primarily due to an increase in research and development personnel’s staff cost and other costs incurred in research and development projects.
  • Selling and marketing expenses were RMB68.1 million (US$10.5 million) for the three months ended June 30, 2021, representing a 79.1% increase from RMB38.0 million for the same period in 2020, primarily due to an increase in staff cost of sales and marketing personnel.
  • General and administrative expenses increased significantly to RMB116.1 million (US$18.0 million) for the three months ended June 30, 2021 from RMB42.3 million for the same period in 2020, primarily due to an increase in general and administrative personnel’s staff cost and share-based compensation expenses.

Net loss was RMB203.7 million (US$31.5 million) for the three months ended June 30, 2021, compared to RMB71.1 million for the same period in 2020.

Cash, cash equivalents, restricted cash and short-term investments were RMB1,918.8 million (US$297.2 million) as of June 30, 2021.

Appointment of VP of Regulatory Affairs (US and Europe) and Quality Assurance

Dr. Sharon Liang joined Burning Rock as the VP of Regulatory Affairs (US and Europe) and Quality Assurance in late June this year. She is a human genetics expert with nearly two decades of experience in molecular cancer diagnostic medical device product development and regulatory in academia, government and industry. She was the US FDA committee member for the US President’s Precision Medicine Initiative (PMI) Project leading Bioinformatics group. She led and contributed to the development of many molecular diagnostic devices approved by the FDA, including the first NGS sequencer, first NGS Oncopanel, first NGS tumor profiling assay, first Direct-to-Consumer test, first microarray genetic tests, and companion diagnostics. Before joining Burning Rock, Dr. Liang worked at GRAIL, a cancer early detection diagnostic company, primarily responsible for regulatory strategy and execution.

2021 Financial Guidance

For the third quarter of this year, COVID-related travel restrictions in multiple major cities in China will impact our central-laboratory testing volumes and, to a lesser extent, the growth of our in-hospital testing volumes. The relatively stronger growth expected for in-hospital testing will also be driven by the industry structural shift from central-laboratory towards in-hospital testing. We believe that we are well-positioned in the in-hospital segment, and we view the revenues from in-hospital as higher quality, given our product and competitive advantages, leading to stickier revenues. As the testing mix of our therapy selection business transitions towards the in-hospital segment, our blended average sales price will decline, due to lower prices of IVD testing kits that we supply to hospitals in the in-hospital segment, compared with prices of LDT testing service that we charge to patients in the central-laboratory segment. This will result, during this transition period, in a lower revenue growth rate compared with volume growth rate, for our therapy selection business. As such, the Company adjusts its 2021 full-year revenue guidance to approximately RMB500 million.

Conference Call Information

Burning Rock will host a conference call to discuss the second quarter 2021 financial results at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Hong Kong time) on August 31, 2021.

Details of the conference call are as follows:

International:+65 67135090
U.S.:+1 8456750437
U.K.:+44 2036214779
Hong Kong:+852 30186771
China Mobile:4006208038
China Landline:8008190121
Conference ID:2309539

A replay of the conference call will be available for one week (dial-in number: +61 2 8199 0299; same conference ID as shown 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, with the leading market share in China and over 273,000 tissue and liquid-based tests completed cumulatively, 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.

Selected Operating Data

 For the three months ended  
 March 31,
2020
 June 30,
2020
 September 30,
2020
 December 31,
2020
 March 31,
2021
 June 30,
2021
Central Laboratory Channel:           
Number of patients tested4,680 7,252 8,644 7,989 7,716 8,155
Number of ordering physicians(1)810 1,175 1,194 1,114 1,082 1,013
Number of ordering hospitals(2)232 284 289 294 303 300

_____________________

(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,
2020
 June 30,
2020
 September 30,
2020
 December 31,
2020
 March 31,
2021
 June 30,
2021
In-hospital Channel:           
Pipeline partner hospitals(1)23 23 22 23 22 22
Contracted partner hospitals(2)21 24 25 29 32 34
Total number of partner hospitals44 47 47 52 54 56

____________________

(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
RevenuesMarch 31,
2020
 June 30,
2020
 September 30,
2020
 December 31,
2020
 March 31,
2021
 June 30
2021
 (RMB in thousands)
Central laboratory channel46,141 74,607 89,899 86,695 74,561 79,999
In-hospital channel17,123 27,588 31,704 41,457 28,994 40,502
Pharma research and development channel4,065 4,776 2,278 3,570 3,068 6,778
Total revenues67,329 106,971 123,881 131,722 106,623 127,279


 For the three months ended
Gross profitMarch 31,
2020
 June 30,
2020
 September 30,
2020
 December 31,
2020
 March 31,
2021
 June 30
2021
 (RMB in thousands)
Central laboratory channel32,434 56,556 67,804 66,588 55,212 58,681
In-hospital channel10,126 19,269 22,410 30,218 20,070 29,426
Pharma research and development channel2,224 2,573 1,373 2,347 1,658 2,124
Total gross profit
44,784 78,398 91,587 99,153 76,940 90,231


 For the three months ended 
Share-based compensation expenses
March 31,
2020
 June 30,
2020
 September 30,
2020
 December 31,
2020
 March 31,
2021
 June 30,
2021
  (RMB in thousands)
Cost of revenues176 183 160 277 339 406
Research and development expenses2,072 25,314 10,572 11,843 22,404 20,825
Selling and marketing expenses253 491 341 2,372 2,633 2,809
General and administrative expenses1,665 1,639 57,805 58,057 59,382 59,369
Total share-based compensation expenses
4,166  27,627   68,878  72,549  84,758 83,409


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,
2020
 June 30,
2020
 September 30,
2020
 December 31,
2020
 March 31,
2021
 June 30,
2021
 June 30,
2021
 RMB RMB RMB RMB RMB RMB US$
Revenues67,329 106,971 123,881  131,722  106,623 127,279 19,713
Cost of revenues(22,545) (28,573) (32,294) (32,569) (29,683) (37,048) (5,738)
Gross profit44,784  78,398  91,587  99,153 76,940 90,231 13,975
Operating expenses:             
Research and development expenses(40,016) (71,176) (69,330) (83,418) (77,414) (108,071) (16,738)
Selling and marketing expenses(29,815) (37,992) (44,174) (56,606) (55,130) (68,058) (10,541)
General and administrative expenses(34,295) (42,272) (102,731) (114,502) (116,259) (116,130) (17,986)
Total operating expenses(104,126) (151,440)  (216,235) (254,526)  (248,803)  (292,259) (45,265)
Loss from operations (59,342) (73,042)  (124,648) (155,373)  (171,863)  (202,028) (31,290)
Interest income3,985 44 698 1,341 787 681 105
Interest expense(1,178) 1,939 (776) (652) (510) (565) (88)
Other (expense) income, net(151) 122 (176) (682) 118 433 67
Foreign exchange gain (loss), net611 (118) (2,228) (1,112) 57 (560) (87)
Change in fair value of warrant liability3,503 - - - - - -
Loss before income tax(52,572) (71,055)  (127,130) (156,478)  (171,411)  (202,039) (31,293)
Income tax expenses- - - - - (1,626) (252)
Net loss(52,572) (71,055)  (127,130) (156,478)  (171,411)  (203,665) (31,545)
Net loss attributable to Burning Rock Biotech Limited’s shareholders(52,572) (71,055) (127,130) (156,478) (171,411) (203,665) (31,545)
Accretion of convertible preferred shares(26,288) (38,400) - - - - -
Net loss attributable to ordinary shareholders(78,860) (109,455) (127,130) (156,478) (171,411)  (203,665) (31,545)
Loss per share:             
Ordinary shares - basic and diluted(3.15) - - - - -  
Class A ordinary shares - basic and diluted- (2.68) (1.22) (1.51) (1.65) (1.96) (0.30)
Class B ordinary shares - basic and diluted- (2.68) (1.22) (1.51) (1.65) (1.96) (0.30)
Weighted average shares outstanding used in loss per share computation:              
Ordinary shares - basic and diluted25,031,575 - - - - - -
Class A ordinary shares - basic and diluted- 23,461,319 86,479,686 86,511,799 86,721,263 86,764,260 86,764,260
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
Other comprehensive (loss) income, net of tax of nil:             
Foreign currency translation adjustments11,422 (2,336) (91,093) (94,881) 14,080 (34,980) (5,418)
Total comprehensive loss(41,150) (73,391)  (218,223) (251,359) (157,331)  (238,645) (36,963)
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders(41,150) (73,391)  (218,223) (251,359) (157,331)  (238,645) (36,963)


Burning Rock Biotech Limited 
Unaudited Condensed Statements of Comprehensive Loss 
(in thousands, except for share and per share data)

   For the six months ended
 June 30,
2020
 June 30,
2021
 June 30,
2021
 RMB  RMB USD
Revenues174,300  233,902 36,226
Cost of revenues(51,118) (66,731) (10,336)
Gross profit123,182  167,171 25,890
Operating expenses:     
Research and development expenses(111,192) (185,485) (28,728)
Selling and marketing expenses(67,807) (123,188) (19,079)
General and administrative expenses(76,567) (232,389) (35,992)
Total operating expenses(255,566) (541,062) (83,799)
Loss from operations (132,384) (373,891) (57,909)
Interest income4,029 1,468 227
Interest expense761 (1,075) (166)
Other (expense) income, net(29) 551 85
Foreign exchange gain (loss), net493 (503) (78)
Change in fair value of warrant liability3,503 - -
Loss before income tax(123,627) (373,450) (57,841)
Income tax expenses- (1,626) (252)
Net loss(123,627) (375,076) (58,093)
Net loss attributable to Burning Rock Biotech Limited’s shareholders(123,627) (375,076) (58,093)
Accretion of convertible preferred shares(64,688) - -
Net loss attributable to ordinary shareholders(188,315) (375,076) (58,093)
      
Loss per share:     
Class A ordinary shares - basic and diluted(5.73) (3.60) (0.56)
Class B ordinary shares - basic and diluted(5.73) (3.60) (0.56)
      
Weighted average shares outstanding used in loss per share computation:      
Class A ordinary shares - basic and diluted15,540,502 86,742,880 86,742,880
Class B ordinary shares - basic and diluted17,324,848 17,324,848 17,324,848
      
Other comprehensive income (loss), net of tax of nil:     
Foreign currency translation adjustments
Foreign currency translation adjustments
9,086 (20,900) (3,237)
Total comprehensive loss(114,541) (395,976) (61,330)
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders(114,541) (395,976) (61,330)


Burning Rock Biotech Limited 
Unaudited Condensed Consolidated Balance Sheets 
(In thousands)

 As of
 December 31,
2020
 June 30,
2021
 June 30,
2021
 RMB  RMB US$
ASSETS     
Current assets:     
Cash and cash equivalents1,895,308 1,852,927 286,982
Restricted cash29,898 30,338 4,699
Short-term investment362,132 35,531 5,503
Accounts receivable88,218 78,141 12,103
Contract assets22,534 28,345 4,390
Amounts due from related parties212 628 97
Inventories68,021 114,434 17,724
Prepayments and other current assets57,329 76,157 11,795
Total current assets2,523,652  2,216,501 343,293
Non-current assets:     
Equity method investment1,417 1,261 195
Property and equipment, net111,481 198,324 30,716
Operating Right-of-use assets- 89,307 13,832
Intangible assets, net3,457 4,882 756
Other non-current assets23,021 29,284 4,536
Total non-current assets139,376 323,058 50,035
TOTAL ASSETS2,663,028  2,539,559 393,328


Burning Rock Biotech Limited 
Unaudited Condensed Consolidated Balance Sheets (Continued) 
(in thousands)

 As of
 December 31,
2020
 June 30,
2021
 June 30,
2021
 RMB  RMB
 US$
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY   
Current liabilities:   
Accounts payable35,482  47,983  7,432 
Deferred revenue74,402  101,517  15,723 
Capital lease obligations, current4,816  -  
Accrued liabilities and other current liabilities83,648  79,773  12,356 
Customer deposits1,120  1,042  161 
Short-term borrowing7,370  7,370  1,141 
Current portion of long-term borrowings34,695  30,118  4,665 
Current portion of operating lease liabilities-  32,789  5,078 
Current portion of financing lease liabilities-  2,169  336 
Total current liabilities241,533  302,761  46,892  
Non-current liabilities:   
Deferred government grants263  -  - 
Operating lease liabilities-  63,132  9,778 
Other non-current liabilities228  226  35 
Total non-current liabilities491  63,358  9,813 
TOTAL LIABILITIES242,024  366,119  56,705  


Shareholders’ equity:
   
Class A ordinary shares116  116  18 
Class B ordinary shares21  21  3 
Treasury stock-  (4,270) (661)
Additional paid-in capital4,006,616  4,173,154  646,339 
Accumulated deficits(1,418,160) (1,807,092) (279,883)
Accumulated other comprehensive loss(167,589) (188,489) (29,193)
Total shareholders’ equity2,421,004  2,173,440  336,623 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY2,663,028  2,539,559  393,328 


Burning Rock Biotech Limited 
Unaudited Condensed Statements of Cash Flows 
(in thousands)

 For the three months ended
 June 30, 2020 June 30, 2021 June 30, 2021
 RMB RMB US$
Net cash generated from (used in) operating activities61,124  (118,998) (18,433)
Net cash generated from (used in) investing activities296,102  (67,577) (10,463)
Net cash generated from (used in) financing activities1,845,953  (8,961) (1,388)
Effect of exchange rate on cash, cash equivalents and restricted cash(1,487) (34,085) (5,279)
Net increase cash, cash equivalents and restricted cash 2,201,692  (229,621) (35,563)
Cash, cash equivalents and restricted cash at the beginning of period364,544  2,112,886  327,244 
Cash, cash equivalents and restricted cash at the end of period2,566,236  1,883,265  291,681 
    


 For the six months ended
 June 30, 2020 June 30, 2021 June 30, 2021
 RMB  RMB US$
Net cash generated from (used in) operating activities54,168 (232,143) (35,952)
Net cash generated (used in) investing activities292,489 220,752  34,188 
Net cash generated from (used in) financing activities2,118,181 (13,123) (2,032)
Effect of exchange rate on cash, cash equivalents and restricted cash3,154 (17,427) (2,699)
Net increase cash, cash equivalents and restricted cash 2,467,992 (41,941) (6,495)
Cash, cash equivalents and restricted cash at the beginning of period98,244 1,925,206  298,176 
Cash, cash equivalents and restricted cash at the end of period2,566,236 1,883,265   291,681  
    

 


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Financials
Sales 2021 500 M 78,4 M 78,4 M
Net income 2021 -395 M -62,0 M -62,0 M
Net cash 2021 1 220 M 191 M 191 M
P/E ratio 2021 -21,8x
Yield 2021 -
Capitalization 8 654 M 1 357 M 1 357 M
EV / Sales 2021 14,9x
EV / Sales 2022 12,0x
Nbr of Employees 938
Free-Float 62,2%
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Mean consensus BUY
Number of Analysts 4
Last Close Price 82,77 CNY
Average target price 177,95 CNY
Spread / Average Target 115%
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Managers and Directors
Yu Sheng Han Chairman & Chief Executive Officer
Leo Li Chief Financial Officer & Director
Zhi Hong Zhang Chief Technology Officer
Shao Kun Chuai Chief Operating Officer & Director
Wendy Hayes Independent Director
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