Earnings Labs

Burning Rock Biotech Limited (BNR)

Q3 2023 Earnings Call· Thu, Nov 30, 2023

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Transcript

Operator

Operator

Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the 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, expect, anticipate, future, intends, plans, believes, estimates, target, confident and similar statements. 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.

Yusheng Han

Management

Yes. Is it my turn? Well, this is Yusheng Han from Burning Rock, I'm the CEO and Founder. And today, we also have our CFO, Leo Li, and our CTO, Joe Zhang online. And today, we have a brief introduction of recent progress, and then I will hand over to Leo talking about the financials. And then Joe talking about our pipeline programs. So let's turn to Page 3, which shows what Burning Rock doing and we started from therapy selection and expect to expand it to early detection, MRD and biopharma business. And so far, that's our business construction. And let's turn to Page 4, which is the page that I think most of the investors care about most, that's about breakeven. And we set a goal to breakeven in terms of non-GAAP profit minus SG&A. And we say that in Q2 this year, we have -- this is the first time in Burning Rock to reach the goal. Well, in Q3, actually, there is some industry disruption. You know that even most of the medical conferences or meetings would hold anomaly. So in Q3, it's a little bit our -- impacted by this event and the profit dropped to the negative part, which is a negative RMB8.9 million. But we are still moving to the breakeven level. Especially, I think that this kind of volatility will pass by the end of this year. So let's turn to Page 5, that we set a goal to break even sometime this year. And we think that we are moving towards that direction very firmly and without the disruption. And in terms of the therapy selection, despite of the industry disruption, we still continue to growth in the – for the in-hospital model, which means that in-hospital revenues has a 10%…

Leo Li

Management

If we move on to Page 7. As Yusheng mentioned earlier, the whole China health care industry had a disruption during the quarter. And what that meant for us was actually two divergent trends, which actually accelerated the path that we were already on. So if you look at central lab, that was down -- heavily down 41% on a year-over-year basis in the third quarter. [Technical Difficulty] continued to grow, and it grew 10% year-over-year, which is rare in the diagnostics industry or at least in our specialty industry in China. So I think that continues to prove the value of the in-hospital segment where the real value or the profit is. At Central Lab, as we mentioned earlier, is being shifted more towards in-hospitals. So I think the events in the third quarter only accelerated that and that moved us even more on the right track in terms of moving the mainstream of our businesses towards the in-hospital segment. So at some point last year, we were in more in-hospital segments by volume. And you can see in the third quarter, where actually in-hospital represented the largest segment, overtaking central labs. So I think with that transition complete at some point down the road, our volume and revenue trends will match again as we complete this transition. Then moving on, we can see that pharma services still had a strong growth quarter in the third quarter. Revenues grew 31% on a year-over-year basis. So we're very pleased with that result. Our backlog continues to grow, particularly from multinational companies, and Yusheng gave an example of a recent win in his remarks. So we're very pleased with the progress and the outlook that we have in the sector. Overall, because of the industry impact and the drop in central…

Joe Zhang

Management

Thanks, Leo. So I'm going to present a little bit -- give you guys an introduction about the pipeline update, majorly focused on the MRD, which is minimal residual disease [indiscernible] disease. So let's turn to Page 10. So Page 10, basically representing -- presenting the Burning Rock MRD clinical publication. So basically, MRD has a lot of utilities. As shown in the picture showing here, basically, it can be done like before the [indiscernible] to look at the baseline ctDNA level. Then also we can do like after you adjust adjuvant therapy to look at treatment effectiveness, all like more commonly going to be use that like a postsurgical after resection to look at landmark MRD to get a prognosis or either some kind of a prediction value on the based on MRD status. There also could be a lot of treatment effectiveness assessment after the adjuvant therapy and also the longitudinal monitoring for the surveillance. So Burning Rock has a bunch of different kind of publication related to different cancer types, that's including the non-small cell lung cancer, as well as colorectal cancer, gastric cancer, pancreatic cancer, BTC, biliary tract cancer. So all the publications, most of them are actually shown in the poster format being presented in a different kind of [indiscernible] meeting or clinical meeting happened like within two years. So the major one I just wanted to give you guys a little bit more introduction about is the cancer cell publication, which is related to the non-small cell lung cancer. Let's turn to Page 11. So we -- the technology we've been using actually called brPROPHET, in brief, PROPHET. So basically, it's based on the whole exon sequencing. We got the tumor whole exon sequencing up to 50 mutation, which is a tumor-specific. Then we…

Operator

Operator

Thank you for participating in today's call. You may now disconnect. Everyone, have a great day.

Yusheng Han

Operator

Thank you. End of Q&A: