GlobeNewswire Inc | Aug 31, 2021 12:31AM EDT

August 31, 2021

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 DetectionTechnology 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 patientsDevelopment 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 ServicesBiopharma 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. Senaparibs 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 SelectionContinued 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 Companys 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 personnels 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 personnels 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 Presidents 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 67135090U.S.: +1 8456750437U.K.: +44 2036214779Hong Kong: +852 30186771China Mobile: 4006208038China Landline: 8008190121Conference 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 Rocks beliefs and expectations, are forward-looking statements. Such statements are based upon managements 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 Rocks 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 June September December March June 31, 30, 30, 31, 31, 30, 2020 2020 2020 2020 2021 2021Central Laboratory Channel:Number of patients 4,680 7,252 8,644 7,989 7,716 8,155testedNumber of ordering 810 1,175 1,194 1,114 1,082 1,013physicians^(1)Number of ordering 232 284 289 294 303 300hospitals^(2)

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^ Represents physicians who on average order at least one test from us(1) every month during a relevant period in the central laboratory channel.

^ Represents hospitals whose residing physicians who on average order at(2) least one test from us every month during a relevant period in the central laboratory channel.

As of March31, June30, September30, December31, March31, June 2020 2020 2020 2020 2021 30, 2021In-hospital Channel:Pipelinepartner 23 23 22 23 22 22hospitals^(1)Contractedpartner 21 24 25 29 32 34hospitals^(2)Totalnumber of 44 47 47 52 54 56partnerhospitals

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^ Refers to hospitals that are in the process of establishing in-hospital(1) laboratories, laboratory equipment procurement or installation, staff training or pilot testing using the Company?s products. Refers to hospitals that have entered into contracts to purchase the^ Company?s products for use on a recurring basis in their respective(2) in-hospital laboratories the Company helped them establish. Kit revenue is generated from contracted hospitals.

Selected Financial Data

For the three months ended March June September December March June 30Revenues 31, 30, 30, 31, 31, 2021 2020 2020 2020 2020 2021 (RMB in thousands)Centrallaboratory 46,141 74,607 89,899 86,695 74,561 79,999channelIn-hospital 17,123 27,588 31,704 41,457 28,994 40,502channelPharmaresearch and 4,065 4,776 2,278 3,570 3,068 6,778developmentchannelTotal revenues 67,329 106,971 123,881 131,722 106,623 127,279

For the three months ended March June September December March JuneGross profit 31, 30, 30, 31, 31, 30 2020 2020 2020 2020 2021 2021 (RMB in thousands)Centrallaboratory 32,434 56,556 67,804 66,588 55,212 58,681channelIn-hospital 10,126 19,269 22,410 30,218 20,070 29,426channelPharma researchand development 2,224 2,573 1,373 2,347 1,658 2,124channelTotal gross 44,784 78,398 91,587 99,153 76,940 90,231profit

For the three months ended Share-based compensation March June September December March Juneexpenses 31, 30, 30, 31, 31, 30?? 2020 2020 2020 2020 2021 2021 (RMB in thousands)Cost of revenues 176 183 160 277 339 406Research and development 2,072 25,314 10,572 11,843 22,404 20,825expensesSelling and marketing 253 491 341 2,372 2,633 2,809expensesGeneral and 1,665 1,639 57,805 58,057 59,382 59,369administrative expensesTotal share-based 4,166 27,627 68,878 72,549 84,758 83,409compensation expenses

Burning Rock Biotech LimitedUnaudited Condensed Statements of Comprehensive Loss(in thousands, except for number of shares and per share data)

For the three months ended March 31, June 30, September December March 31, June 30, June 30, 2020 2020 30, 31, 2021 2021 2021 2020 2020 RMB RMB RMB RMB RMB RMB US$Revenues 67,329 106,971 123,881 131,722 106,623 127,279 19,713Cost of (22,545) (28,573) (32,294) (32,569) (29,683) (37,048) (5,738)revenuesGross profit 44,784 78,398 91,587 99,153 76,940 90,231 13,975Operating expenses:Research anddevelopment (40,016) (71,176) (69,330) (83,418) (77,414) (108,071) (16,738)expensesSelling andmarketing (29,815) (37,992) (44,174) (56,606) (55,130) (68,058) (10,541)expensesGeneral andadministrative (34,295) (42,272) (102,731) (114,502) (116,259) (116,130) (17,986)expensesTotaloperating (104,126) (151,440) (216,235) (254,526) (248,803) (292,259) (45,265)expensesLoss from (59,342) (73,042) (124,648) (155,373) (171,863) (202,028) (31,290)operationsInterest 3,985 44 698 1,341 787 681 105incomeInterest (1,178) 1,939 (776) (652) (510) (565) (88)expenseOther(expense) (151) 122 (176) (682) 118 433 67income, netForeignexchange gain 611 (118) (2,228) (1,112) 57 (560) (87)(loss), netChange in fairvalue of 3,503 - - - - - -warrantliabilityLoss before (52,572) (71,055) (127,130) (156,478) (171,411) (202,039) (31,293)income taxIncome tax - - - - - (1,626) (252)expensesNet loss (52,572) (71,055) (127,130) (156,478) (171,411) (203,665) (31,545)Net lossattributableto Burning (52,572) (71,055) (127,130) (156,478) (171,411) (203,665) (31,545)Rock BiotechLimited?sshareholdersAccretion ofconvertible (26,288) (38,400) - - - - -preferredsharesNet lossattributable (78,860) (109,455) (127,130) (156,478) (171,411) (203,665) (31,545)to ordinaryshareholdersLoss per share:Ordinaryshares - basic (3.15) - - - - - and dilutedClass Aordinary - (2.68) (1.22) (1.51) (1.65) (1.96) (0.30)shares - basicand dilutedClass Bordinary - (2.68) (1.22) (1.51) (1.65) (1.96) (0.30)shares - basicand dilutedWeightedaverage sharesoutstanding used in lossper sharecomputation:Ordinaryshares - basic 25,031,575 - - - - - -and dilutedClass Aordinary - 23,461,319 86,479,686 86,511,799 86,721,263 86,764,260 86,764,260shares - basicand dilutedClass Bordinary - 17,324,848 17,324,848 17,324,848 17,324,848 17,324,848 17,324,848shares - basicand dilutedOthercomprehensive(loss) income, net of tax ofnil:Foreigncurrency 11,422 (2,336) (91,093) (94,881) 14,080 (34,980) (5,418)translationadjustmentsTotalcomprehensive (41,150) (73,391) (218,223) (251,359) (157,331) (238,645) (36,963)lossTotalcomprehensivelossattributable (41,150) (73,391) (218,223) (251,359) (157,331) (238,645) (36,963)to BurningRock BiotechLimited?sshareholders

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

For the six months ended June 30, June 30, June 30, 2020 2021 2021 RMB RMB USDRevenues 174,300 233,902 36,226Cost of revenues (51,118) (66,731) (10,336)Gross profit 123,182 167,171 25,890Operating 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 income 4,029 1,468 227Interest expense 761 (1,075) (166)Other (expense) income, net (29) 551 85Foreign exchange gain (loss), net 493 (503) (78)Change in fair value of warrant 3,503 - -liabilityLoss 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 (123,627) (375,076) (58,093)Biotech Limited?s shareholdersAccretion of convertible preferred (64,688) - -sharesNet loss attributable to ordinary (188,315) (375,076) (58,093)shareholders Loss per share: Class A ordinary shares - basic and (5.73) (3.60) (0.56)dilutedClass B ordinary shares - basic and (5.73) (3.60) (0.56)diluted Weighted average shares outstanding used in loss per share computation:Class A ordinary shares - basic and 15,540,502 86,742,880 86,742,880dilutedClass B ordinary shares - basic and 17,324,848 17,324,848 17,324,848diluted Other comprehensive income (loss), net of tax of nil:Foreign currency translation adjustments 9,086 (20,900) (3,237)Foreign currency translation adjustmentsTotal comprehensive loss (114,541) (395,976) (61,330)Total comprehensive loss attributable toBurning Rock Biotech Limited?s (114,541) (395,976) (61,330)shareholders

Burning Rock Biotech LimitedUnaudited Condensed Consolidated Balance Sheets(In thousands)

As of December 31, June 30, June 30, 2020 2021 2021 RMB RMB US$ASSETS Current assets: Cash and cash equivalents 1,895,308 1,852,927 286,982Restricted cash 29,898 30,338 4,699Short-term investment 362,132 35,531 5,503Accounts receivable 88,218 78,141 12,103Contract assets 22,534 28,345 4,390Amounts due from related parties 212 628 97Inventories 68,021 114,434 17,724Prepayments and other current assets 57,329 76,157 11,795Total current assets 2,523,652 2,216,501 343,293Non-current assets: Equity method investment 1,417 1,261 195Property and equipment, net 111,481 198,324 30,716Operating Right-of-use assets - 89,307 13,832Intangible assets, net 3,457 4,882 756Other non-current assets 23,021 29,284 4,536Total non-current assets 139,376 323,058 50,035TOTAL ASSETS 2,663,028 2,539,559 393,328

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

As of December 31, June 30, June 30, 2020 2021 2021 RMB RMB US$LIABILITIES AND SHAREHOLDERS? (DEFICIT) EQUITYCurrent liabilities: Accounts payable 35,482 47,983 7,432 Deferred revenue 74,402 101,517 15,723 Capital lease obligations, current 4,816 - Accrued liabilities and other current 83,648 79,773 12,356 liabilitiesCustomer deposits 1,120 1,042 161 Short-term borrowing 7,370 7,370 1,141 Current portion of long-term borrowings 34,695 30,118 4,665 Current portion of operating lease - 32,789 5,078 liabilitiesCurrent portion of financing lease - 2,169 336 liabilitiesTotal current liabilities 241,533 302,761 46,892 Non-current liabilities: Deferred government grants 263 - - Operating lease liabilities - 63,132 9,778 Other non-current liabilities 228 226 35 Total non-current liabilities 491 63,358 9,813 TOTAL LIABILITIES 242,024 366,119 56,705

Shareholders? equity:Class A ordinary shares 116 116 18 Class B ordinary shares 21 21 3 Treasury stock - (4,270 ) (661 )Additional paid-in capital 4,006,616 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? equity 2,421,004 2,173,440 336,623 TOTAL LIABILITIES AND SHAREHOLDERS? 2,663,028 2,539,559 393,328 EQUITY

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

For the three months ended June 30, June 30, 2021 June 30, 2020 2021 RMB RMB US$Net cash generated from (used in) 61,124 (118,998 ) (18,433 )operating activitiesNet cash generated from (used in) 296,102 (67,577 ) (10,463 )investing activitiesNet cash generated from (used in) 1,845,953 (8,961 ) (1,388 )financing activitiesEffect of exchange rate on cash, (1,487 ) (34,085 ) (5,279 )cash equivalents and restricted cashNet increase cash, cash equivalents 2,201,692 (229,621 ) (35,563 )and restricted cashCash, cash equivalents andrestricted cash at the beginning of 364,544 2,112,886 327,244 periodCash, cash equivalents and 2,566,236 1,883,265 291,681 restricted cash at the end of period

For the six months ended June 30, June 30, June 30, 2020 2021 2021 RMB RMB US$Net cash generated from (used in) 54,168 (232,143 ) (35,952 )operating activitiesNet cash generated (used in) investing 292,489 220,752 34,188 activitiesNet cash generated from (used in) 2,118,181 (13,123 ) (2,032 )financing activitiesEffect of exchange rate on cash, cash 3,154 (17,427 ) (2,699 )equivalents and restricted cashNet increase cash, cash equivalents and 2,467,992 (41,941 ) (6,495 )restricted cashCash, cash equivalents and restricted 98,244 1,925,206 298,176 cash at the beginning of periodCash, cash equivalents and restricted 2,566,236 1,883,265 291,681 cash at the end of period