Good day, ladies and gentlemen. Thank you for standing by, and welcome to Burning Rock 2022 Q1 earnings conference call. This presentation 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, expect, anticipate, future, intent, 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 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 presentation is as of today, 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. I would now like to turn the call over to your speaker host and CEO, Mr. Han. Please go ahead.
Thanks. Welcome to Burning Rock's 2022 Q1 conference call. I'm Yusheng Han, the CEO and founder of Burning Rock, and today we have our COO, Shannon, CTO, Joe, and CFO, Leo, in the meeting. First, I will recap our business fundamentals and then go through some important recent business program. Now, I believe that what our investors care about most, especially in the situation of COVID impact in the past five months, is, you know, the business. Since most of our product development efforts are moving forward as laid out in our previous call, we will directly go to CFO Leo, who will walk you through the financials and elaborate on our growth trend after my presentation.
Let's turn to page three. Burning Rock started with therapy selection business in 2014 and has grown to the market later in this segment. We were the first NGS company to cultivate the in-hospital channel and the first to have an oncology NGS-based kit approved by NMPA in China. Our initial strategy of developing this unique in-hospital channel in China has 10 years of our efforts that have really started to realize a rapid market growth in the past quarters. Its advantage has especially shown during the pandemic situation, and our leading position has laid a good foundation and given us advantage moving forward to new business of early detection, MRD, and pharmaceutical collaboration.
Our strong branding on technology and product quality also help us attract and remain key talent. That's what we are doing. Let's turn to page five to recent business program. The first thing I want to talk about is the strong policy push from the government on cancer early detection and NGS, which happened most recently in China's 14th Five-Year Plan, which is the most influential roadmap for China's industry and society, announced every five years. NGS and cancer early detection have both been spelled out as key development areas. We expect local healthcare department will adopt and act on our roadmap in the coming months, which will give the industry encouraging environment for development.
For patient testing business, including therapy selection and MRD, we believe we are gaining market share by in-hospital model and new product lines, including MRD, DetermaRx and myChoice+. We recorded 42% total volume increase in Q1 2022, with in-hospital volume growing 83% year-over-year. As you might know, China experienced a heavy COVID impact, and Shanghai has been locked down since the beginning of April. Despite such a heavy hit, we still see a total volume increase of 15%.
If you look at the in-hospital volume, that increased even more, I mean, like 60% in the month of April. It's also worthwhile to know that our new product, as I said, including MRD, DetermaRx and myChoice, contributed 7% among our central lab revenue. Considering March is just our first month of MRD product launch, we found that the number quite encouraging. As mentioned in our last quarter's call, the validation data of MRD technology for non-small cell lung cancer and CRC have been released at AACR. We saw state-of-the-art sensitivity and specificity performance of our MRD technology.
For multi-cancer early detection, we have released our analytical validation data in AACR as well, demonstrating the 0.02% to 0.1% LOD across different cancer types. We have completed our PROMISE study for our nine cancer products. The data readout is expected later this year. In the PREDICT trial, which is our case control validation study for the nine cancer products, including over 10,000 participants, has completed more than 50% enrollment. It's doing well. Our commercialization progress for early detection is ongoing with several hospitals starting generating revenues.
In terms of pharmaceutical pharma business, the trend of growth continued in Q1, with over 300% year-over-year backlog progress and RMB 59 million new contract value, which was 125% year-over-year growth. Let's turn to page five. On page five, I would like to highlight one of the recent events that Burning Rock Liquid Biopsy Conference. It's the first time we hold this conference under Burning Rock's own brand name, and that conference took place in early April.
It was a two-day conference, chaired by three fellows from Chinese Academy of Sciences and over 150 medical KOLs participating as speakers or panelists. The total audience for this virtual event was more than 36,000 people. The topics spanned from liquid biopsy, liquid-based companion diagnostic registration pathway to new technology such as MRD and MCED. A lot of these concepts are relatively new to the doctors in China, and market education is very important. Through this conference, we work with doctors group to promote awareness and understanding of new technology, while hosting heated discussion about how should they apply to Chinese patients. Now let's move to page six.
This graph here illustrates the promising growth trends of our pharma business. As mentioned just now, the contract value doubled year-over-year in the Q1 , which has been a continuous trend inherited from 2021. We will build on our rich pipelines. Global registration capability and excellent BD team are the key factors to pursue continuous growth of our pharma business. That's a brief of our recent progress, and I will pass to Leo about the financials.
Sure. Thanks, Yusheng. Just a quick highlight before we go into financials. On page nine, we did lay out our clinical program progress recently. For the nine cancer, which is under development, we have the PROMISE study, as Yusheng mentioned, that has completed enrollment and analysis. We are submitting that to a conference this year. We're looking to a readout of the PROMISE study this year. In addition, the PREDICT study, which is a larger study to follow, we do have over 50% enrollment despite the COVID challenges. Just wanna quickly highlight the clinical progress. Going on to our financials. We'd like to cover three topics today. First is a review of our Q1 .
The second topic on our latest trends and operating numbers, as COVID has been a concern, a focus, for everybody. Number three, our progress regarding our operating expenses optimization. Now let's go to page 22, which shows our quarterly volumes. We continued to deliver strong growth despite COVID challenges. In the Q1 , we saw very strong volume growth at 42% year-over-year. For the in-hospital segment, the volume grew over 83% year-over-year. Our growth rate has accelerated in the Q1 compared to the growth rate we saw in the Q4 of 2021. At that quarter, we saw overall volume growth at 33% year-over-year and in-hospital volume growth at 62% year-over-year.
The Q1 2022 accelerated further, compared to a good quarter that we delivered in the Q4 of 2021. We are very pleased to see continued strength in the in-hospital segment despite COVID challenges. As Yusheng Han mentioned earlier, we are happy to see new products contributing to our growth as well. Moving on to page 23. We like to provide greater granularity on our recent trend, given that COVID has had a very large impact in China in the recent months. Shanghai was affected starting the month of March, and the city came pretty much to a standstill during the month of April and May. In addition, Beijing saw school closures at the end of April, and partial lockdowns during May.
So looking at our monthly volumes, here shown on the table, we had a very strong start of the year. In January, overall volume grew over 74% year-over-year. In-hospital was up double-digit, and we started to see COVID impact in March. Overall volume growth was up 17% this month, and this trended lower to a positive growth of 15% in April. May was a horrific month with larger COVID impact compared to April, and you know, with grim sentiment. For us, for the month of May, we haven't closed the month yet, but our estimate is that we're likely to be down only single-digit in May.
Not a lot worse compared to April, you know, despite the severe COVID impact in the recent months. We can see in the bottom half of the table here that excluding Shanghai, other regions kept up strong growth for the month of April. If we exclude Shanghai, overall volume growth was up 33%, and in-hospital was up 37% overall, excluding Shanghai. In-hospital was up triple digits again, excluding Shanghai for the month of April. Strong growth outside of Shanghai even for the month of April. Given how bad COVID impact has been in China in the recent months, I think our numbers speak to the resilience of our growth. Moving on to financials on page 24.
In the Q1 of 2022, we closed the quarter in a strong position, I believe. Revenue grew 27% year-over-year in the quarter, which is a higher growth rate than we reported back in the Q4 2021, which was up 12% year-over-year. The accelerated growth rate in the Q1 this year was driven by volume growth as we walked through just on page 22. By segment, revenue growth was led by in-hospital, which grew 69% year-over-year, which again accelerated growth rate from the Q4 last year, which saw a year-over-year growth rate of 25%.
Pharma revenue continued to ramp, growing at triple digits, and a larger revenue compared to the Q4 last year, driven by strong pharma backlog that Yusheng Han just walked through on page six. Going to margins, first looking at gross margin this quarter was at 64.6%, excluding depreciation and amortization, so that gives us the non-GAAP gross profit margin. That was at 68.4%. The drop was primarily due to inventory write-offs. Excluding the impact of inventory write-offs, our gross profit margin in the Q1 and excluding depreciation and amortization, our GP margin for this quarter will be about 72%, which is on par with our typical gross margin level.
As we mentioned on our last earnings call, moving on to OpEx lines. As we mentioned before, our organizational and lab space build-out was largely complete at the end of 2021, and we would expect greater operating efficiencies going forward. Looking at our OpEx lines, the OpEx expense dropped on a sequential basis. Looking at these line by line, R&D expenses, excluding share-based compensation, decreased 8% QoQ, driven by decrease of expenses related to our clinical research project. I think Chinese New Year during February was the reason behind this sequential trend. There was also COVID impact in March.
As we mentioned on page nine, despite the challenges that COVID brings on enrollment, we do have large datasets already enrolled that will keep us busy on our early detection R&D work. Our sales and marketing expenses, again, excluding share-based compensation, that line dropped 14% QoQ on a sequential basis due to sequential staff expense decrease and also because of a drop in conference and meeting expenses. As COVID spread throughout China, oncologists are getting quite used to the virtual format, and we were able to continue good engagement with oncologists in this format.
Our Liquid Biopsy Conference, Yusheng Han mentioned, was a flagship event that attracted a large number of oncologists to attend, and we are happy that we can keep strong engagement but in a lower cost format. General and administrative expenses, excluding share-based compensation dropped slightly on a sequential basis as we reduced spend where we believe the efficiency delivered was not high enough. Lastly, on share-based compensation, the expense booking of most of our stock awards does not have a mark-to-market component. The value of the share-based compensation was mostly determined at the time of grant and amortized over a period of time going forward.
Most of the share-based compensation was predetermined, so to speak, while the market cap was higher back in time, and the number for this non-cash line will be relatively sticky. In terms of direction of travel for our OpEx lines, as we mentioned on our last call, we are putting greater focus on efficiency starting this year, and we would generally expect OpEx to gradually trend down going forward. Not necessarily a straight line, but as we put more focus on efficiency, we are expecting a drop of OpEx over time in terms of trend. Going to our guidance and given three factors. Number one, our Q1 outperformed.
Second, we did leave some buffer room for COVID's impact in setting our guidance. Number three, COVID impact appears to be reducing, or at least Shanghai is looking to reopen on the first of June. We believe that there is no need to change our full year guidance, assuming that COVID impact generally does trend down as we go forward. We're happy about the Q1 performance and we hope to catch up some of the pent-up demand as regions reopen, particularly Shanghai, which is an important market for us. We remain committed to our strong growth for the rest of the year. Lastly, on our cash position, we have a cash balance of RMB 1.34 billion or $220...
Sorry, $211 million, including short-term investment at the end of Q1 2022. Our net operating cash flow in the Q1 was RMB 144 million. So, I would say a reasonable burn rate, given where we are on our balance. So that concludes our prepared remarks. Operator, please open up for questions.
Ladies and gentlemen, if you'd like to ask a question at this time, please press the star then the one key on your touchtone telephone. Please stand by while we compile the Q&A roster. Our first question coming from the line of Max Masucci with Cowen. Your line is open.
Hi. Thanks for taking the questions. First one on biopharma. How much of the accelerating pharma growth is being driven by your MRD monitoring solutions versus therapy selection? And if you look at the mix of your prospective versus retrospective biopharma projects, you know, how should we think about the pace that you can convert, you know, the biopharma contract backlog to revenue here in 2022 compared to 2021?
So far, as you look at it, our pharma business is, you know, mainly contributed by therapy selection. As I said that we just launched the MRD in March. We think that MRD positive impact for the pharma business probably will be like several months later or even one year later, you know. Sometimes the China pharma pharmaceutical or biotech companies, they are relatively slower than their US peers. We think that we are very positive about the potential MRD has to the pharmaceutical contract and revenues. In terms of numbers, Leo can elaborate more. Sure.
For this year, I think we are expecting high double-digit growth out of the pharma segment. A lot of that is on the back of backlog projects that we have signed already, so some visibility into it. We are building the backlog as well, so we look to convert more. In terms of pacing, I think high double digits for this year that we have shown three good quarters, Q4 last year and Q1 this year as well.
Okay, great. Second one, just curious. You know, did the Chinese lung cancer clinician consensus highlight a specific data set, you know, or clinical evidence that spurred the guideline update for MRD monitoring in non-small cell lung cancer patients? Did the updated guidelines recommend MRD testing, you know, only for relapse risk prediction in patients that have completed, you know, any adjuvant therapy regimen and are in remission? Does it also include the use of MRD tests that are used to guide decisions about adjuvant therapy?
Shannon, can you?
Yeah. This is Shannon.
talk about it?
Sure. Yes. Thanks for the question. It's
Yeah, it's indeed a very interesting consensus, actually from almost two years ago. We were also very pleasantly surprised that the Chinese lung cancer patients are adopting the MRD concept so quickly. For the consensus itself, it's mostly for one, for relapse or prognosis prediction. It's not for adjuvant therapy guiding to differentiate adjuvant therapy paradigm yet, because there hasn't been enough interventional evidence that clinicians feel sufficient for the lung cancer in the lung cancer realm yet. For two, I think the consensus is also very encouraging in the area that it calls for more clinical trials or clinical studies or investigator-initiated studies in China to start embed the MRD dimension into as many as possible interventional clinical trials when collaborating with the drug companies.
You know, given that, down the road, I think that's where the clinicians really hope to start seeing a clear path on how to embed MRD into interventional trials and then generate evidence on that. I think it's only after they see the interventional type of evidence, that's when they will update the consensus or guidelines to upgrade it for adjuvant therapy direction as well.
That's very helpful. Thank you. One final question. You know, in April, it, central lab revenues, they took a dip, understandably so, but, you know, the in-hospital growth, you know, doubled to over 100% growth year-over-year compared to the prior month. I would just. It would be great to hear sort of, you know, how the central lab business and the in-hospital business are interacting. Is, you know, any of that growth, in-hospital coming, you know, at the expense of, the central lab business? Is there any, you know, cannibalization, and that would be great. Thanks.
Yeah, I can deal with that question. You know, in the very beginning of our business, there was no in-hospital model. For any new technology or new product introduced to the market, we have to start from the central lab model, you know, talk to physicians one by one. When the technology and product getting more and more mature, there will be more possibility for the product to transfer to in-hospital model. From our observation, you know, in a relatively long time, there will be a great synergy for these two model.
It means that for the central lab model, some physicians, you know, they just feel not that encouraging to send the samples outside the hospital. You know, the quite preferred in-hospital model make them relatively easy to prescribe on their computers. In most of the hospitals, when we put the platform into the hospital, we have found that both the central lab and the in-hospital model grew. That's a quite interesting thing. If you look at a little bit drop in the central lab model, I think that is because, you know, the COVID-19 impact actually influenced the central lab model.
In the long run, when more and more technology getting mature, I think that for the mature product pipeline, there will be some so-called cannibalization. If you look at the volume increase of the in-hospital model, actually, there is no cannibalization is a kind of a huge increase from the in-hospital model. I would say that in different stages of different product it depends, you know. To our understanding for any mature product, in-hospital model will take the mainstream in the future.
Great. Thanks for taking my questions and nice update.
Thanks. Bye.
Our next
Our next question coming from the line of Alexis Yan with Morgan Stanley. Your line is open.
Thanks for taking my question, and congrats on a good growth in the Q1 . I just have a few quick questions. First is on the in-hospital segment. Could you help us better understand the drivers behind the good growth in this segment? As in, for example, how much of it comes from the more revenue from our, like, flagship partner hospitals, and how much comes from the so-called, like, long-tail, like, midsize hospitals? And also, how much did the big panel NGS and also other new products contribute to the growth to this segment?
I think that the drivers for in-hospital, the first thing is the convenience. It's much more convenient for the doctor to prescribe. If you look at the big environment, the hospitals are encouraging doctors to send samples to the in-hospital lab. Some hospitals with the in-hospital lab are forbidding sending samples out of the hospitals. That is one of the drivers.
The other thing that you can see is that just more and more high price panels coming into the hospital, including middle-sized panel, big panel, and even some liquid biopsy panel coming into the hospital lab. That they are also the drivers for the new revenue. Is there a question?
Yes, yes, very helpful. My next question is on the pipeline. Just wondering if there are any potential like delay due to COVID impact in terms of patient recruitment or higher like recruitment cost, should we be expecting? Just maybe remind us of the key milestones we should be looking at.
Will Shannon take that question?
Yes. Uh-huh. Great. Thanks for the question. Yes, apparently the recruitments for both our early detection the PREDICT trial and also for the sixth cancer early detection product PREVENT trial, they have both been impacted by the COVID in some degree. We are seeing a few months of delay for the PREDICT recruitment. That's why we were initially expecting a data readout later by the end of this year or early next year. Now, we probably will see it a few months later. For the PREVENT trial, which was the prospective study for the sixth cancer type study, the initiation of the trial was delayed for a couple of months due to the COVID.
It's mainly, it's not related to the patient approval, et cetera, it's mainly the administrative process being delayed. We're expecting to initiate that study soon, maybe within weeks. So far, that's the visibility of the timeline delay. Yeah. It's manageable so far. Thank you.
Thank you. Just one last question from me. Do we have some color on like our bottom-line loss or our cash burn over the next few years?
Yeah. Looking at our cash balance and our burn rate, I think we are doing okay in terms of having a good around two years cash runway ahead of us. There is flexibility to make adjustments if the circumstances do require us to adjust. I think we are happy with the cash balance, and we are putting higher focus on our efficiency, higher focus towards EBITDA progress, also patient testing business, but we don't have formal guidance yet. I think for this year, we will see operating expenses as a trend to go down over time. Not necessarily a straight line, but that's the direction of travel that we should see.
That'll provide us with better visibility, so we can talk about it as we move along.
Sure. Understood. That's all from me. Thanks a lot.
Thank you.
I'm showing no further questions at this time. I would now like to turn the call back over to our speakers for any closing remarks.
Thank you, operator. Thanks everybody for attending today. Any questions, please do come back to us. Thanks again for your time.
Ladies and gentlemen, that does end the conference call for today.