Burning Rock Stock Up 35%+ As Loss Narrows

Benzinga_recent_news11-28

The cancer diagnostics company's revenue rose slightly in the third quarter, as its gross margin rose by nearly 4 percentage points As we head into the end of a banner year for Chinese stocks, we'll ...

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As we head into the end of a banner year for Chinese stocks, we'll take a closer look at the latest earnings from cancer diagnostic companyBurning Biotech Ltd., which is part of a small group whose shares have done especially well. We've previously called these stocks \"China Easter Eggs,\" because they seemed to be companies that had good growth prospects despite being neglected by investors.The company has been trying to focus more on its in-hospital business, which isn't affected by the government crackdown. It was having success boosting revenue from that segment until the latest quarter, when the figure fell 17.1% year-on-year to 52.8 million yuan  from 63.8 million yuan. The company only cited a \"de","collect":0,"end_time":0,"defaultTopTitle":"benzinga.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU2125909247.SGD":"Natixis Thematics Meta H-R/A SGD","LU0528227936.USD":"富达环球人口趋势基金A-ACC","BK4139":"生物科技","SY":"新氧","ZEPP":"华米科技","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0274383008.USD":"MANULIFE GF ASIAN SMALL CAP EQUITY \"AA\" (USD) INC","HERE":"奇梦岛","LU2041044095.USD":"Blackrock Circular Economy A2 USD","LU2357305700.SGD":"Allianz Global Artificial Intelligence ET H2-SGD","LU2092937221.SGD":"Blackrock Circular Economy A2 SGD-H","LU0342679015.USD":"ALLIANZ GLOBAL EQUITY UNCONSTRAINED \"AT\" (USD) ACC","LU2264538146.SGD":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","IE00B19Z8W00.USD":"FTGF CLEARBRIDGE US LARGE CAP GROWTH \"A\" INC","IE00B2B36J28.USD":"JANUS HENDERSON GLOBAL LIFE SCIENCES \"I1\" (USD) INC","LU1791710400.SGD":"Fidelity Global Demographics A-ACC-SGD","LU2125909593.SGD":"Natixis Thematics Meta R/A SGD","LU1064131342.USD":"Fullerton Lux Funds - Global Absolute Alpha A Acc USD","LU1720051108.HKD":"ALLIANZ GLOBAL ARTIFICIAL INTELLIGENCE \"AT\" (HKD) ACC","TMO":"赛默飞世尔","LU2125909916.SGD":"Natixis Thematics Safety R/A SGD","LU2298321311.HKD":"BGF CIRCULAR ECONOMY \"A\" (HKDHDG) ACC","IE00B19Z8X17.USD":"FTGF CLEARBRIDGE US LARGE CAP GROWTH  \"AG\" (USD) ACC","BK4588":"碎股","LU1712237335.SGD":"Natixis Mirova Global Sustainable Equity H-R-NPF/A SGD","LU1548497426.USD":"安联环球人工智能AT Acc","LU1923622291.USD":"Natixis Thematics Safety R/A USD","BK4548":"巴美列捷福持仓","IE00BJJMRZ35.SGD":"JANUS HENDERSON GLOBAL LIFE SCIENCES \"I2\" (SGDHDG) ACC","LU2125910179.SGD":"Natixis Thematics Water H-R/A SGD","LU1633808545.USD":"ALLIANZ GLOBAL EQUITY GROWTH \"AT\" (USD) ACC","IE00BKPKM429.USD":"NEUBERGER BERMAN GLOBAL SUSTAINABLE EQUITY \"A\" (USD) ACC","LU0208291251.USD":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) INC","BK4563":"昨日强势股","LU0114720955.EUR":"SUSTAINABLE GLOBAL HEALTH CARE \"A\" INC","LU1670628061.USD":"M&G (LUX) NORTH AMERICAN DIVIDEND \"A\" (USD) INC","LU2211814178.USD":"ALLIANZ CLEAN PLANET \"AT\" (USD) ACC","LU2764263203.CNY":"BGF GLOBAL UNCONSTRAINED EQUITY \"A2\" (CNYHDG) ACC","BK4581":"高盛持仓","BNR":"燃石医学","BK4121":"生命科学工具和服务","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0266013472.USD":"AXA WF - Framlington Longevity Economy A Cap USD","LU1923621640.USD":"Natixis Thematics Water R/A USD","BK4077":"互动媒体与服务","LU1057294990.SGD":"Blackrock World Healthscience A2 SGD-H","LU2764262908.HKD":"BGF GLOBAL UNCONSTRAINED EQUITY \"A2\" (HKD) ACC","LU1153585028.USD":"BGF GLOBAL LONG-HORIZON EQUITY  \"A4\" (USD) INC","BK4585":"ETF&股票定投概念","IE0034235188.USD":"PINEBRIDGE GLOBAL FOCUS EQUITY \"A\" (USD) ACC"},"translate_title":"随着亏损收窄，Burning Rock股价上涨35%以上","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"HERE":1,"SY":1,"BNR":1,"ZEPP":1,"TMO":1},"content_text":"The cancer diagnostics company's revenue rose slightly in the third quarter, as its gross margin rose by nearly 4 percentage points\nAs we head into the end of a banner year for Chinese stocks, we'll take a closer look at the latest earnings from cancer diagnostic company Burning Biotech Ltd. (NASDAQ:BNR), which is part of a small group whose shares have done especially well. We've previously called these stocks \"China Easter Eggs,\" because they seemed to be companies that had good growth prospects despite being neglected by investors.\nBut for Burning Rock, the case is less clear, since the company has been steadily losing money since its New York IPO in 2020, and its revenue wasn't growing very fast. The best explanation for a tripling of its stock this year seems to be its enviably high gross margins, which are well ahead of global peers. But the company's high operating expenses have kept Burning Rock squarely in the red.\nThe flow of red ink continued in the third quarter, though the company's loss narrowed sharply, hinting that Burning Rock may finally make it to the promised land of profitability in the not-too-distant future. The company doesn't seem in danger of a cash crunch anytime soon because a significant part of its expenses are from non-cash items like stock-based compensation and depreciation costs, giving investors one less thing to worry about.\nWhatever the reason, investors certainly seemed to like the company's latest financial report, released last week. The stock rose by about a third in the five trading days since then to reach a two-year high, giving it a market cap of $230 million.\nBurning Rock's enviably high gross margins aside, there are a few other positive developments that could explain recent investor enthusiasm towards the company, which we'll detail shortly. But the big gains this year could also owe simply to investors \"discovering\" the company after several years of neglect. Even after the stock's 207% gain this year, it still trades at a price-to-sales (P/S) ratio of 3.0, close to the 3.17 for France's bioMérieux (BIM.PA) but still quite a bit behind the 5.14 for the much larger Thermo Fisher Scientific (TMO).\nBurning Rock makes cancer diagnostic products that are used both by partner hospitals for in-hospital testing, as well as by individuals for at-home testing. The at-home testing products have higher margins, but have taken a hit in the last two years because they rely heavily on doctor referrals. But doctors have been providing such referrals less in the last two years following a government crackdown on the practice of medical device companies paying doctors for such referrals.\nThe company has been trying to focus more on its in-hospital business, which isn't affected by the government crackdown. It was having success boosting revenue from that segment until the latest quarter, when the figure fell 17.1% year-on-year to 52.8 million yuan ($7.45 million) from 63.8 million yuan. The company only cited a \"decrease in sales volume\" for the drop, without further explanation. And there wasn't any chance for investors to ask company officials directly about the decline, since it discontinued its quarterly earnings calls last year.\nThe company's at-home testing business, referred to as \"central lab\" business in its reports because test results are processed in a central laboratory, also fell 7.9% year-on-year to 36.8 million yuan from 40 million yuan a year earlier due to lingering effects from the crackdown.\nThe company's lone saving grace was a 69% jump in revenue from its R&D services, which rose to 42 million yuan from 24.9 million yuan a year earlier. While that looks like a potential source of excitement as a new growth engine, a look back at the company's recent reports shows this particular revenue source is quite unstable and can both rise and fall in any specific quarter.\nStill, the big jump in R&D revenue helped Burning Rock record an overall revenue increase of 2.3% in the third quarter, with the figure rising to 131.6 million yuan from 128.6 million yuan a year earlier.\nIts cost of revenue was also quite low and fell year-on-year for the quarter, giving the company a very attractive gross margin of 75.1% for the quarter, up nearly 4 percentage points from 71.4% a year earlier. By comparison, bioMérieux's gross margin for the last 12 months stood at 56.3%, while Thermo Fisher Scientific's was even lower at 41.3%.\nUnfortunately for Burning Rock, the company's expenses are quite high. That figure stood at 115 million yuan in the latest quarter, equal to about 87% of its revenue, though down 12% year-on-year. Still, such high expenses ultimately weighed on the company's bottom line, though its net loss narrowed sharply to 16.8 million yuan from 35.7 million yuan a year earlier, showing it could finally become profitable soon.\nIn one other positive development, the company announced that Japan had approved some of its products to be used as \"companion diagnostics\" for capivasertib, an oral breast cancer drug developed by AstraZeneca. But even here, we should point out Burning Rock's global business isn't doing particularly well, with its non-China revenue dropping to just 17.2 million yuan in the third quarter from 25.8 million yuan a year earlier.\nOther Chinese \"Easter Eggs\" we've written about this year include wearable device maker Zepp (NYSE:ZEPP), whose shares are up 10-fold since January, and So-Young (NASDAQ:SY), whose shares have tripled, as well as Here Group (NASDAQ:HERE), formerly known as QuantaSing, whose stock is up 150%. But all of those companies had relatively clear growth catalysts that were previously overlooked by investors.\nThe case is much hazier for Burning Rock, whose core business looks solid enough but isn't going anywhere fast. What's more, the company doesn't seem to have any major new growth catalysts in its pipeline. Its high gross margins and movement toward profitability are both encouraging signs. And we should also point out that even after this year's rally, the stock still trades at less than a tenth of the highs it reached in 2021 shortly after its IPO.\nBenzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"dataReport","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.35.9","shortVersion":"4.35.9","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2586339047","isCrawlerRequest":true}