Burning Rock Reports Third Quarter 2020 Financial Results

GUANGZHOU, China, Nov. 20, 2020 (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 September 30, 2020.

Recent Business Highlights

• Early Detection. Validated a new version of ELSA-seq to expand from 3 cancer types (lung, liver, and colon/rectum) to 6 cancer types (esophagus, pancreas, and ovary added). This demonstrates Burning Rock's continued progress on its blood-based, pan-cancer early detection R&D.
  
  ° The new version of the ELSA-seq assay was able to detect more cancer types (liver, colon/rectum, esophagus, pancreas, lung, and ovary) at early stages (I-III), demonstrated higher specificity, and was able to predict the tissue of origin with high accuracy.
  
  ° The validation data was presented at ESMO Asia Virtual Congress 2020 ("ESMO Asia") in a mini oral presentation (Company presentation link here). At 99.5% specificity (95% confidence interval [95% CI] 96.7-100), the sensitivity from cross validation was 79.9% (95% CI 74.6-84.4). These results generally held in the pre-allocated independent validation set, which demonstrated 98.3% specificity (95% CI 95.8-99.4) and 80.6% sensitivity (95% CI 76.0-84.6). The results show a significant improvement of specificity compared to the earlier version of the test (presented in January 2020 at AACR Special Conference on Liquid Biopsy, poster link here), which showed 95.1% specificity (95% CI 91.2-97.4) and 80.8% sensitivity (95% CI 77.0-84.1).
  
  ° In terms of identifying the location of the malignancies, the test produced a tissue-of-origin result in 98.6% of cases, and 81.0% (95% CI 77.2-84.3) of these predictions were correct.
  
  
• Therapy Selection. Analytical validation data of Magnis BR using a 520-gene tissue-based panel and a 168-gene liquid-based panel was presented at the Association for Molecular Pathology (AMP) Annual Meeting in a platform presentation (abstract number TT04). Magnis BR demonstrated comparable testing accuracy, superior library quality repeatability, and shorter turnaround time compared to manual library preparation approach.
  
  ° Magnis BR, Burning Rock’s fully automated NGS library preparation system, is a key component of Burning Rock’s strategy of empowering hospitals to run NGS tests in-house with minimized lab space and staff requirement. Its fully automated “walk-away” 9-hour overnight library preparation procedure enables hospitals to generate NGS reports in as quickly as 3 days.
  
  ° As China’s first and only capture-based fully automated NGS library preparation system, Magnis BR further strengthens Burning Rock’s competitive position in the important in-hospital testing market.
  
  
• Licensed-in the Myriad myChoice test into China on an exclusive basis for collaborative drug development studies and clinics.
  
  ° Highly synergistic with Burning Rock's existing testing platforms, leveraging Burning Rock's strengths in oncology NGS testing and commercial access.
  
  ° This test offers significant benefits to Chinese patients with myChoice regarded as the ‘gold-standard’ for determining HRD status, as PARP inhibitors demonstrate increasing significance in a range of cancer types.

Third Quarter 2020 Financial Results

Revenues were RMB123.9 million (US$18.2 million) for the three months ended September 30, 2020, representing a 19.4% increase from RMB103.7 million for the same period in 2019, or a 28.8% increase compared to the average of 3Q19 and 4Q19. Sequentially, revenues increased by 15.8% from RMB107.0 million for the three months ended June 30, 2020.

• Revenue generated from central laboratory business was RMB89.9 million (US$13.2 million) for the three months ended September 30, 2020, representing a 29.7% increase from RMB69.3 million for the same period in 2019, or a 20.5% sequential increase from RMB74.6 million for the three months ended June 30, 2020, primarily attributable to resumed volume growth of the Company’s central laboratory business. Number of patients tested in the central laboratory channel was 8,644 for the three months ended September 30, 2020, representing a 27.7% increase from 6,769 for the same period in 2019, or a 19.2% increase from 7,252 for three months ended June 30, 2020.
  
  
• Revenue generated from in-hospital business was RMB31.7 million (US$4.7 million) for the three months ended September 30, 2020, representing a 3.3% increase from RMB30.7 million for the same period in 2019, or a 41.6% increase compared to the average of 3Q19 and 4Q19. Sequentially, revenue generated from in-hospital business increased by 14.9% from RMB27.6 million for the three months ended June 30, 2020. Number of contracted partner hospitals in the in-hospital channel increased to 25 as of September 30, 2020 from 24 as of June 30, 2020 and 19 as of December 31, 2019.
  
  
• Revenue generated from pharma research and development services was RMB2.3 million (US$0.3 million) for the three months ended September 30, 2020, representing a 38.7% decrease from RMB3.7 million for the same period in 2019, due to declined pharma testing volumes.

Cost of revenues was RMB32.3 million (US$4.8 million) for the three months ended September 30, 2020, representing a 26.5% increase from RMB25.5 million for the same period in 2019, which was generally in line with the Company’s continued business growth.

Gross profit was RMB91.6 million (US$13.5 million) for the three months ended September 30, 2020, representing a 17.1% increase from RMB78.2 million for the same period in 2019. Gross margin was 73.9% for the three months ended September 30, 2020, compared to 75.4% for the same period in 2019.

Operating expenses were RMB216.2 million (US$31.8 million) for the three months ended September 30, 2020, representing a 93.5% increase from RMB111.8 million for the same period in 2019.

• Research and development expenses were RMB69.3 million (US$10.2 million) for the three months ended September 30, 2020, representing an 81.1% increase from RMB38.3 million for the same period in 2019, primarily due to (i) an increase in staff cost of research and development personnel, and (ii) an increase in share-based compensation expenses for options granted to research and development personnel.
  
  
• Selling and marketing expenses were RMB44.2 million (US$6.5 million) for the three months ended September 30, 2020, representing a 3.7% increase from RMB42.6 million for the same period in 2019.
  
  
• General and administrative expenses increased significantly to RMB102.7 million (US$15.1 million) for the three months ended September 30, 2020 from RMB30.9 million for the same period in 2019, primarily due to (i) an increase in share-based compensation expenses for options granted to general and administrative personnel, and (ii) an increase in staff cost of general and administrative personnel.

Net loss was RMB127.1 million (US$18.7 million), compared to RMB32.2 million for the same period in 2019.

Cash, cash equivalents, restricted cash and short-term investments were RMB2.4 billion (US$353.8 million) as of September 30, 2020.

2020 Financial Guidance

The Company reiterates its 2020 full-year revenue guidance of approximately RMB420 million (US$61.9 million).

Conference Call Information

Burning Rock will host a conference call to discuss the third quarter 2020 financial results at 8:00 a.m. U.S. Eastern Time (9:00 p.m. Hong Kong time) on November 20, 2020.

Details of the conference call are as follows:

International:	[phone]
U.S.:	[phone]
U.K.:	[phone]
Hong Kong:	[phone]
China Mobile:	4006208038
China Landline:	8008190121
Conference ID:	5637209

A replay of the conference call will be available for one week (dial-in number: [phone]; 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 185,000 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, 2019		June 30, 2019		September 30, 2019		December 31, 2019		March 31, 2020		June 30, 2020		September 30, 2020
Central Laboratory Channel:
Number of patients tested	5,336		6,047		6,769		7,576		4,680		7,252		8,644
Number of ordering physicians(1)	984		1,059		1,155		1,222		810		1,175		1,194
Number of ordering hospitals(2)	249		265		281		304		232		284		289

 

________________________
(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, 2019		June 30, 2019		September 30, 2019		December 31, 2019		March 31, 2020		June 30, 2020		September 30, 2020
In-hospital Channel:
Pipeline partner hospitals(1)	17		20		21		21		23		23		22
Contracted partner hospitals(2)	14		15		19		19		21		24		25
Total number of partner hospitals	31		35		40		40		44		47		47

 

____________________________
(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, 2019		June 30, 2019		September 30, 2019		December 31, 2019		March 31, 2020		June 30, 2020		September 30, 2020
	(RMB in thousands)
Central laboratory channel	72,807		63,394		69,304		70,749		46,141		74,607		89,899
In-hospital channel	26,557		16,329		30,704		14,088		17,123		27,588		31,704
Pharma research and development channel	5,101		5,090		3,716		3,838		4,065		4,776		2,278
Total revenues	104,465		84,813		103,724		88,675		67,329		106,971		123,881

	For the three months ended
Gross profit	March 31, 2019		June 30, 2019		September 30, 2019		December 31, 2019		March 31, 2020		June 30, 2020		September 30, 2020
	(RMB in thousands)
Central laboratory channel	54,910		46,122		50,113		51,420		32,434		56,556		67,804
In-hospital channel	19,870		12,571		25,412		319		10,126		19,269		22,410
Pharma research and development channel	3,332		3,366		2,662		3,237		2,224		2,573		1,373
Total gross profit	78,112		62,059		78,187		54,976		44,784		78,398		91,587

	For the three months ended
Share-based compensation expenses	March 31, 2019		June 30, 2019		September 30, 2019		December 31, 2019			March 31, 2020		June 30, 2020		September 30, 2020
	(RMB in thousands)
Cost of revenues	143		177		180		178			176		183		160
Research and development expenses	722		708		1,486		6,461			2,072		25,314		10,572
Selling and marketing expenses	364		517		485		(131	)		253		491		341
General and administrative expenses	429		537		1,149		9,387			1,665		1,639		57,805
Total share-based compensation expenses	1,658		1,939		3,300		15,895			4,166		27,627		68,878

Burning Rock Biotech Limited Unaudited Condensed Statements of Comprehensive (Loss) Income  (in thousands, except for number of shares and per share data)
				For the three months ended
	March 31, 2019			June 30, 2019			September 30, 2019			December 31, 2019			March 31, 2020			June 30, 2020			September 30, 2020			September 30, 2020
	RMB			RMB			RMB			RMB			RMB			RMB			RMB			US$
Revenues	104,465			84,813			103,724			88,675			67,329			106,971			123,881			18,246
Cost of revenues	(26,353	)		(22,754	)		(25,537	)		(33,699	)		(22,545	)		(28,573	)		(32,294	)		(4,757	)
Gross profit	78,112			62,059			78,187			54,976			44,784			78,398			91,587			13,489
Operating expenses:
Research and   development expenses	(31,427	)		(34,992	)		(38,278	)		(52,238	)		(40,016	)		(71,176	)		(69,330	)		(10,211	)
Selling and   marketing expenses	(26,690	)		(34,929	)		(42,606	)		(49,109	)		(29,815	)		(37,992	)		(44,174	)		(6,506	)
General and   administrative expenses	(31,565	)		(20,614	)		(30,866	)		(49,112	)		(34,295	)		(42,272	)		(102,731	)		(15,131	)
Total operating expenses	(89,682	)		(90,535	)		(111,750	)		(150,459	)		(104,126	)		(151,440	)		(216,235	)		(31,848	)
Loss from operations	(11,570	)		(28,476	)		(33,563	)		(95,483	)		(59,342	)		(73,042	)		(124,648	)		(18,359	)
Interest income	128			3,806			3,686			3,541			3,985			44			698			103
Interest expense	(4,210	)		(1,826	)		(1,650	)		(1,303	)		(1,178	)		1,939			(776	)		(114	)
Other (expense) income, net	(176	)		(329	)		(37	)		(341	)		(151	)		122			(176	)		(26	)
Foreign exchange   (loss) gain, net	(101	)		1,142			800			(355	)		611			(118	)		(2,228	)		(328	)
Change in fair value   of warrant liability	64			(347	)		(1,403	)		(1,153	)		3,503			-			-			-
Loss before income tax	(15,865	)		(26,030	)		(32,167	)		(95,094	)		(52,572	)		(71,055	)		(127,130	)		(18,724	)
Income tax expenses	-			-			-			-			-			-			-			-
Net loss	(15,865	)		(26,030	)		(32,167	)		(95,094	)		(52,572	)		(71,055	)		(127,130	)		(18,724	)
Net loss attributable to   Burning Rock Biotech   Limited’s shareholders	(15,865	)		(26,030	)		(32,167	)		(95,094	)		(52,572	)		(71,055	)		(127,130	)		(18,724	)
Accretion of convertible   preferred shares	(50,296	)		(41,770	)		(33,772	)		(39,173	)		(26,288	)		(38,400	)		-			-
Net loss attributable to   ordinary shareholders	(66,161	)		(67,800	)		(65,939	)		(134,267	)		(78,860	)		(109,455	)		(127,130	)		(18,724	)
Loss per share:
Ordinary shares - basic   and diluted	(2.86	)		(2.93	)		(2.85	)		(5.49	)		(3.15	)		(2.68	)		-			-
Class A ordinary shares -   basic and diluted	-			-			-			-			-			-			(1.22	)		(0.18	)
Class B ordinary shares -   basic and diluted	-			-			-			-			-			-			(1.22	)		(0.18	)
Weighted average shares   outstanding used in loss   per share computation:
Ordinary shares - basic   and diluted	23,167,232			23,167,232			23,167,232			24,437,444			25,031,575			40,786,167			-			-
Class A ordinary shares -   basic and diluted	-			-			-			-			-			-			86,479,686			86,479,686
Class B ordinary shares -   basic and diluted	-			-			-			-			-			-			17,324,848			17,324,848
Other comprehensive   (loss) income, net   of tax of nil:
Foreign currency   translation adjustments	(278	)		(14,288	)		45,317			(6,647	)		11,422			(2,336	)		(91,093	)		(13,417	)
Total comprehensive   (loss) income	(16,143	)		(40,318	)		13,150			(101,741	)		(41,150	)		(73,391	)		(218,223	)		(32,141	)
Total comprehensive (loss)   income attributable to   Burning Rock Biotech   Limited’s shareholders	(16,143	)		(40,318	)		13,150			(101,741	)		(41,150	)		(73,391	)		(218,223	)		(32,141	)

Burning Rock Biotech Limited Unaudited Condensed Statements of Comprehensive (Loss) Income  (in thousands, except for number of shares and per share data)
	For the nine months ended
	September 30, 2019			September 30, 2020			September 30, 2020
	RMB			RMB			US$
Revenues	293,002			298,181			43,917
Cost of revenues	(74,644	)		(83,412	)		(12,286	)
Gross profit	218,358			214,769			31,631
Operating expenses:
Research and development expenses	(104,697	)		(180,522	)		(26,588	)
Selling and marketing expenses	(104,225	)		(111,981	)		(16,493	)
General and administrative expenses	(83,045	)		(179,298	)		(26,408	)
Total operating expenses	(291,967	)		(471,801	)		(69,489	)
Loss from operations	(73,609	)		(257,032	)		(37,858	)
Interest income	7,620			4,727			696
Interest expense	(7,686	)		(15	)		(2	)
Other expense, net	(542	)		(205	)		(30	)
Foreign exchange (loss) gain, net	1,841			(1,735	)		(256	)
Change in fair value of warrant liability	(1,686	)		3,503			516
Loss before income tax	(74,062	)		(250,757	)		(36,934	)
Income tax expenses	-			-			-
Net loss	(74,062	)		(250,757	)		(36,934	)
Net loss attributable to Burning Rock Biotech Limited’s shareholders	(74,062	)		(250,757	)		(36,934	)
Accretion of convertible preferred shares	(125,838	)		(64,688	)		(9,528	)
Net loss attributable to ordinary shareholders	(199,900	)		(315,445	)		(46,462	)
Loss per share for class A and class B ordinary shares: Ordinary shares - basic and diluted	(8.63	)		-			-
Class A ordinary shares - basic and diluted	-			(5.56	)		(0.82	)
Class B ordinary shares - basic and diluted	-			(5.56	)		(0.82	)
Weighted average shares outstanding used in loss per share computation: Ordinary shares - basic and diluted	23,167,232			-			-
Class A ordinary shares - basic and diluted	-			39,446,747			39,446,747
Class B ordinary shares - basic and diluted	-			17,324,848			17,324,848
Other comprehensive income (loss), net of tax of nil:
Foreign currency translation adjustments	30,751			(82,007	)		(12,078	)
Total comprehensive loss	(43,311	)		(332,764	)		(49,012	)
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders	(43,311	)		(332,764	)		(49,012	)

Burning Rock Biotech Limited Unaudited Condensed Consolidated Balance Sheets (In thousands)
	As of
	December 31, 2019		September 30, 2020					September 30, 2020
	RMB		RMB					US$
ASSETS
Current assets:
Cash and cash equivalents	94,235		2,061,566					303,636
Restricted cash	4,009		263					39
Short-term investment	313,988		340,505					50,151
Accounts receivable	88,822		93,839					13,821
Contract assets	909		20,257					2,984
Amounts due from related parties	74,368		-					-
Inventories	58,116		69,805					10,281
Prepayments and other current assets	72,340		60,970					8,980
Total current assets	706,787		2,647,205					389,892
Non-current assets:
Equity method investment	1,790		1,527					225
Long-term investment	38,369		37,456					5,517
Property and equipment, net	89,314		96,688					14,241
Intangible assets, net	343		3,455					509
Other non-current assets	10,954		16,162					2,380
Total non-current assets	140,770		155,288					22,872
TOTAL ASSETS	847,557		2,802,493					412,764

Burning Rock Biotech Limited Unaudited Condensed Consolidated Balance Sheets (Continued) (in thousands)
	As of
	December 31, 2019			September 30, 2020			September 30, 2020
	RMB			RMB			US$
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	12,348			30,284			4,460
Deferred revenue	49,539			67,109			9,884
Capital lease obligations, current	4,893			5,300			781
Accrued liabilities and other current liabilities	54,059			110,545			16,282
Customer deposits	4,104			16,076			2,368
Short-term borrowing	2,370			2,370			349
Current portion of long-term borrowings	37,129			37,208			5,480
Total current liabilities	164,442			268,892			39,604
Non-current liabilities:
Deferred government grants	991			263			39
Capital lease obligations	4,816			787			116
Long-term borrowings	18,266			-			-
Warrant liability	23,503			-			-
Total non-current liabilities	47,576			1,050			155
TOTAL LIABILITIES	212,018			269,942			39,759
Mezzanine equity:
Series A convertible preferred shares	186,991			-			-
Series B convertible preferred shares	466,983			-			-
Series C convertible preferred shares	873,059			-			-
Total mezzanine equity	1,527,033			-			-
Shareholders’ (deficit) equity:
Ordinary shares	31			-			-
Class A ordinary shares	-			114			17
Class B ordinary shares	-			21			3
Additional paid-in capital	45,640			3,866,806			569,519
Accumulated deficits	(946,464	)		(1,261,682	)		(185,826	)
Accumulated other comprehensive income (loss)	9,299			(72,708	)		(10,708	)
Total shareholders’ (deficit) equity	(891,494	)		2,532,551			373,005
TOTAL LIABILITIES, MEZZANIE EQUITY AND SHAREHOLDERS’ (DEFICIT) EQUITY	847,557			2,802,493			412,764

Burning Rock Biotech Limited Unaudited Condensed Statements of Cash Flows (in thousands)
	For the three months ended
	September 30, 2019			September 30, 2020			September 30, 2020
	RMB			RMB			US$
Net cash used in operating activities	(17,395	)		(37,052	)		(5,457	)
Net cash used in investing activities	(25,684	)		(365,373	)		(53,814	)
Net cash used in financing activities	(22,878	)		(20,939	)		(3,084	)
Effect of exchange rate on cash, cash equivalents and restricted cash	5,501			(81,043	)		(11,936	)
Net decrease cash, cash equivalents and restricted cash	(60,456	)		(504,407	)		(74,291	)
Cash, cash equivalents and restricted cash at the beginning of period	185,740			2,566,236			377,966
Cash, cash equivalents and restricted cash at the end of period	125,284			2,061,829			303,675

	For the nine months ended
	September 30, 2019			September 30, 2020			September 30, 2020
	RMB			RMB			US$
Net cash (used in) generated from operating activities	(177,905	)		17,116			2,519
Net cash used in investing activities	(368,922	)		(72,884	)		(10,734	)
Net cash generated from financing activities	570,643			2,097,242			308,891
Effect of exchange rate on cash, cash equivalents and restricted cash	6,134			(77,889	)		(11,471	)
Net increase cash, cash equivalents and restricted cash	29,950			1,963,585			289,205
Cash, cash equivalents and restricted cash at the beginning of period	95,334			98,244			14,470
Cash, cash equivalents and restricted cash at the end of period	125,284			2,061,829			303,675

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