Good day, and thank you for standing by. Welcome to Burning Rock's 2023 Q1 Earnings Conference Call. Before we begin, I would like to remind you that this conference call contains 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, targets, 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.
Forward-looking statements involve risks, uncertainties, and other factors that could cause actual results to differ materially from those contained in any such statements. Burning Rock does not undertake any obligation to revise forward-looking statements as a result of new information, future events, or otherwise, except as required under applicable law. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you need to press star one one on your telephone. Please be advised that today's conference call is being recorded. With that, I would now like to turn the call over to your first speaker today, Mr. Han, CEO of the company. Thank you. Please go ahead.
Thank you. Welcome to Burning Rock's 2023 Q1 Conference Call. I'm Yusheng Han, the CEO and founder of Burning Rock. Today we also have our CTO, Joe Zhang, and CFO, Leo Li, online. Before the presentation, I would say that this quarter's data, although not a lot of new information, but they are very important information, and they can are very exciting. Let's turn to page 3. In case there are some investors who are not very familiar with Burning Rock, I here illustrate what we do. Our business started from tissue-based therapy selection and then extend to multi directions of liquid biopsy, including liquid-based therapy selection, MRD, and multi-cancer early detection.
We have three business unit providing products and services to doctors, pharmas, and consumers. Let's turn to page 4. We set up our goals of 2023 and reported to the investors three months ago. The number one goal is profitability. That is, the goal we set is to break even excluding R&D during a quarter in 2023. The second goal is continued revenue growth. A healthy increase with proper profitability is what we want to achieve. Our initial outlook for 2023 revenue growth rate is at 20%. The third goal is to further our leading position in multi-cancer early detection as the number one player in China and a top player globally.
The main R&D spend will focus on multi-cancer early detection. Let me break down the goals in four parts. For therapy selection, we will continue to improve the sales product activity by strengthening the in-hospital model, and for MRD launch, install, and install personalized MRD in top hospitals. Due to the operation difficulties of personalized MRD, it is very challenging to install this method in hospitals. Since more and more top hospitals control the outstanding of tissue samples, and MRD baseline these tissue samples, only in-hospital model can bring the volume of MRD to the next level.
We have launched the in-hospital MRD product early May, and I believe that it will be a strong engine for Burning Rock OncoView and start to impact the Q4 this year. For pharma, this goal is continue its profitable growth with a new platform of MRD and more international orders, we are optimistic to the growth of our pharma business. For MCD, PREVENT study, which is a prospective study of over 10,000 subjects, we'll have a interim readout in second half year of 2023. We will continue the development study of 9- cancer and 22- cancer tests in PREDICT and PRESCIENT.
We will, we are building the regulatory pathways with FDA and NMPA, especially NMPA, so the commercialization will go on as selected top hospitals. That's where we set the goals of 2023. Let's see what's the result of our effort in Q1 2023 and turn to page six. As we illustrated, the number one goal this year is profit, profitability. The main indicator of commercial efficiency is non-GAAP gross profit minus SG&A. The number reaches its bottom in Q2 2022, we can see that it's quite bad at that time. It was at that time we initiated the updated optimization plan.
We can see that we are able to narrow down the loss from -RMB 84 million per quarter in Q2 2022 to -RMB 30 million in Q1 2023. We are very excited by this achievement. That means that we are in a good trend to break even. Let's turn to page 4, sorry, page 7, to see the other achievement. As we know, Q1 is quite challenging for most of the companies this year, especially January and early February, due to the pandemic impact. The reason we were able to narrow this loss is because a strong rebound of in-hospital in March and continued improved our sales efficiency.
For the progress of MRD, we launched the in-hospital model of our product in May. Since the installing of the platform to hospital really take time, we expect it to start the impact to revenue in Q4 this year. In terms of clinical study, we released data in AACR, and we will have more in the coming ASCO conference. MRD, in terms of no matter in commercial or in clinical trials, are all going on the chart. For Biopharma, the business continues to grow. Contract value grows 27% year-over-year, while revenues grows triple digit. That's also a good number. For early detection, all the clinical trials are on the chart, and the dialogues to NMPA and FDA continues.
We will let you know, if we have a new breaking news, at any moment. Next, I will pass to our CFO, Leo, to talk about the numbers in detail. Leo, please.
Thank you, Yusheng. For our financials, we have two key metrics to track for 2023. The first one is regarding our break-even profitability, defined as non-GAAP gross profit minus SG&A. Yusheng walked us over these numbers as demonstrated on page 5, so you can see them in our slide track on our slide pack. We are on track to hit breakeven on this metric at some quarter during 2023. The second metric we track is top line growth. Profitability and top line growth, two key metrics to track for this year. On growth, let's first visit our volume trend shown on page 7. Our testing volumes achieved strong rebounds in March.
Recall that in our previous results, that we said January and February combined, volumes were down 28% year-over-year. We had a strong double-digit growth in March, taking the whole quarter to down just 5% year-over-year. On a sequential basis, our volumes in first quarter was up 3% versus the fourth quarter last year. The strong rebound in March was led by the in-hospital segment, where we continued our lead in that channel, taking further market share. Let's move to our P&L, which is shown on page 8. First, on revenues. We grew our revenues by 5% year-over-year in the first quarter, despite a very tough start in February, in January and February. We had very good results, as Yusheng Han talked about in March.
The continued delivery of pharma projects was the biggest contributor, with pharma segment maintaining its triple digit revenue growth rate in the first quarter this year. In addition to strong growth rate in the current quarter, we have maintained good visibility into growth of the pharma segment for the future. As we mentioned, and Yusheng talked about on page 6, our pharma backlog continues to grow, with new contracts signed during the first quarter this year, up 27% compared to the same period last year. For our patient testing business, in-hospital showed strong growth in March, taking the whole quarter to a positive 5% year-over-year growth, despite a very challenging start for the January and February period, and we are pleased with our growth resilience in that segment.
We continue to win major tenders in April, so we are on a strong footing for that segment going forward as well. Moving down to the gross profit line. Gross profit grew 16% year-over-year, with non-GAAP gross profit margin, which excludes depreciation and amortization, at 75.7% in the first quarter this year. We believe our gross profit growth is strong and industry-leading. We have visibility into additional gross profit margin gains for the medium term as we execute on our cost saving initiatives. You have seen in the past that our gross profit margin have climbed steadily over the years, and we aim to even climb that a bit further down the road as well.
Moving down to the operating expenses lines, total operating expenses dropped 10% sequentially, and that continues our previous trend of declining operating expenses and improving efficiency. The largest improvement this quarter came from the sales and marketing line, which is very important as we demonstrate sales and marketing efficiency. This line trended down since the middle of 2022 as we executed on our efficiency gain programs that Yusheng alluded to earlier. Importantly, sales and marketing expenses as a percentage of revenues, stood at 42% in the first quarter this year, making us one of the most efficient operator in our industry, while peers' sales and marketing expenses were probably higher in a range of 60s or even above, based on published data. Our takeaway from our P&L for this quarter are mostly three points.
Number one, resilient top line growth, led by biopharma and in-hospital strength. Number two, strong gross profit growth, up 16% year-over-year in the first quarter this year. Number three, high selling efficiency, with sales and marketing at 42% of revenues. We strive to maintain our momentum in the above initiatives as we execute towards our corporate goals of breakeven and continuous top line growth. Moving on to guidance, we iterate our previous guidance of 20% top line growth in 2023 versus 2022. Moving on to page 9, which talks about our cash balance, and our cash runway projection remains unchanged from our previous results. Our burn in the first quarter is within the framework that we set out in the previous results call.
The losses from our commercial operations is dropping rapidly and approaching breakeven, while the vast majority of our burn is towards investment on future product development, on multi-cancer early detection, on MRD, and on product registration with China's NMPA. Our cash balance is sufficient to fund us for the next three years as we approach breakeven on our corporate on our commercial operations, and given that we retain discretion on how we want to invest towards product developments, we are happy with our cash runway, and we are not in any rush to raise capital at this stage. This concludes the financial section. Let me pass the call to Joe to talk about our pipeline updates.
Thanks, Leo. Let's move to page 11. Basically, this is a recap of early detection business and the development milestone we achieved in the past several years, including the paper published in Nature Biomedical Engineering in regards to the technology itself, as well as the major 6 cancer early, multi-cancer early detection clinical study published in Annals of Oncology this year in Q1. Basically, we also got the FDA Breakthrough Device Designation granted as the, for the multi-cancer early detection product. The page 12 basically lay out the roadmap of MCED product development so far. Right now we actually am actively developing a 22- cancer multi-cancer early detection product, which is the upgraded version of the 6- cancer we already published in Annals of Oncology earlier.
There's multiple different kind of trial name there, like Prevent, just mentioned by Yusheng Han, as well as Predict in the PRESCIENT, which is 22- cancer multi-cancer early detection. The page 13, I'm gonna skip this one. Basically, just talk about the difference between the 6- cancer and 22- cancer. Let's move to MRD business. For MRD, as a recap here, basically MRD has a page 16, basically talking about MRD test play a role for the multiple time points throughout the treatment journey, which is very important for early cancer or curable cancer patient. As you can see here, MRD can be used as a prognosis, which is nice to have.
It has a lot of potential for actionable therapies guidance, including the deescalate or escalate utilizing based on the MRD status. It has a lot of other utility that's being listed here at different stage of a treatment. For Burning Rock, in page 17, we basically launched this product called brPROPHET as our MRD solution. This MRD solution is based on whole exome sequencing, tumor profiling, and trying to getting the trackable up to 50 tracked mutation as trying to construct a personalized panel for each individual patient.
We're utilizing this personalized panel to perform the brPROPHET MRD assay, ctDNA, and we do ultra-deep sequencing, which is 100,000 extra raw depths, utilizing leveraging on the UMI error correction to estimate the MRD status, also estimate the tumor fraction, based on the observation of this 50 low site status. Right now, in page 18, we basically have multiple different kind of trial on different kind of cancer utilizing this technology we call brPROPHET. As you can see here, there's multiple different cancer data either being published as a poster in different meeting from last year AACR till this year's AACR. It will have more data.
We will have more data in this year's ESMO and ASCO later. Basically, there's several updates here. I just listed in the page 19, which is we just presented in AACR meeting last month in Orlando. This is basically the updated update of the MEDAL study. We enrolled about 200 non-small cell lung cancer patient, and we compare the brPROPHET methodology versus standard tumor-agnostic or fixed-panel tumor-informed methodology, utilizing look at the positive rate. On the left panel, basically, the orange bar showing the brPROPHET has high sensitivity, detection sensitivity on preoperative cancer patient, which showing the best performance in regards to the sensitivity.
Then we look at the in the middle panel, we basically look at the postoperative prognostic value on the landmark time point, which is a three-day or four weeks after the operation, and then we look at MRD status. If it's MRD negative, which is showing as a blue line, as you can see here, the DF ratio, DFS is significantly different from which is MRD positive, which is showing as a red line. As you can see here, the hazard ratio can reach as high as 16.4. This is give us a lot of confidence showing on this data that our technology has its prognostic value, which give us more confidence trying to pursue further interventional study.
Page 20, basically, that's another small cohort that we perform on the gastric cancer. We also presented this data in AACR meeting last month. In this study, we actually enrolled about 55 patients with gastric cancer, with stage 1, 2, 3. Out of these 55, we finally enrolled 19 for the brPROPHET personalized panel detection. For the remaining, we're just using the fixed panel to genotyping the all 55 patients, utilizing fixed panel tumor-informed way to call the MRD status. As you can see here in the middle table, they're showing the preoperative cancer, the sample, the ctDNA detection, the brPROPHET methodology, utilizing whole exome sequencing-based 50 individualized loci.
You can see it's reached much higher detection sensitivity compared to our fixed panel with tumor-informed calling, with a limited amount of mutation detected. On the RFS measurement in the Kaplan-Meier curve on the right, as you can see here, for the landmark, which is two to four weeks after operation, there's a 13 patient we got this sample tested by brPROPHET. As you can see here, for the negative, MRD negative patient, none of them actually disease recurred and then relapsed. For the positive, basically, there's about like three out of four they relapsed.
Basically, this is to give us a lot of confidence showing the brPROPHET technology, which is our MRD foundation of our MRD product, has value. There's multiple different kinds of trial being listed in page 18, I already mentioned there. I think that's concluded my introduction regards to positive elements related update. Thanks. Operator, let's open up for questions, please.
Certainly. We will now begin the question and answer session. To ask questions on the phone, please press star one one and wait for your name to be announced. If you'd like to cancel your request, you can press star one one. Once again, to ask question, please press star one one. One moment for the first question. We have a question from the line of Alexis Yan from Morgan Stanley. Please go ahead.
Thank you, Management, for taking my question. I just have a question on the commercialization of the MRD products. You mentioned that since early May, the MRD products started commercialization via the in-hospital channel as well. I'm just wondering, like, could you share more color on its current, for example, hospital coverage so far? If we look at the full year guidance of 20% revenue growth, how much of that roughly could come from the MRD portfolio? In probably in three to five years, any commercialization target that management could share at this stage, in terms of either, like, sales target, market share, hospital coverage, et cetera.
Second, just a housekeeping question. How has April and May performance been trending so far? Has the recent many waves of COVID impacted our business? That's it for me.
The first question, I can answer, and the second one, to Leo. In terms of, you have to be the model of MRD, you know, the R&D effort for that, is not easy. That's why, we launched that in May. I'm very proud of that. I think that we are the only one providing the in-hospital model of personalized MRD in the world. And the impact of that, the revenue, as I said, probably will start in Q4, because although we have a large base of in-hospital model hospitals, we still need to negotiate and attending tenders of different hospitals.
We know that the fastest period that you can win a chance to go into the hospital, probably need half, at least half year. That's why I say that probably the impact will start in Q4 this year. If you wanted to see the main wave of MRD in-hospital model, I think that we at least need from now on, at least one and one to two years to make the MRD fully available in our hospitals.
To look at it in three to five years, we believe that MRD will be a very important force, probably not less important than therapy selection, because it covers most of the cancers and not limited to targeting drugs. It can combine with chemotherapy, targeting drugs, and also immunotherapy. What's the second question?
Yeah, let me address that. Our recent trends, I think it's premature to conclude about Q2, as we haven't even closed out for May. For April, there was no surprise. We do benefit from a low base on year-over-year comparisons compared to last year. I would say April is on track. We'll keep monitoring for Q2. So far, no surprises.
Okay, that's clear. Thank you.
Thank you.
Thank you very much.
With that, there are no further questions at this time. I'd like to conclude the call. Thank you for participating. That does conclude the call. You may now disconnect the lines.