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What changed in Burning Rock Biotech Ltd's 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of Burning Rock Biotech Ltd's 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+571 added−549 removedSource: 20-F (2024-04-29) vs 20-F (2023-04-20)

Top changes in Burning Rock Biotech Ltd's 2023 20-F

571 paragraphs added · 549 removed · 458 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

210 edited+34 added−33 removed631 unchanged
Biggest changeThe delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.” 5 Table of Contents Results of Operations, Financial Position and Cash Flows of the VIE and Its Subsidiaries The tables below set forth the results of operations of the VIE and subsidiaries of the VIE included in our consolidated statements of comprehensive loss for 2020, 2021 and 2022: For the years ended December 31, 2020 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Revenues 65,312 432,142 (67,551 ) 429,903 Net loss 161,059 244,765 1,411 407,235 For the years ended December 31, 2021 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Revenues 77,234 526,071 (95,443 ) 507,862 Net loss 277,034 508,803 10,860 796,697 For the years ended December 31, 2022 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total Consolidated Total RMB RMB RMB RMB US$ Revenues 186,658 557,667 (181,087 ) 563,238 81,662 Net loss 370,725 605,934 (5,426 ) 971,233 140,815 The tables below set forth the condensed consolidated schedule of financial position of the VIE and subsidiaries of the VIE as of the dates indicated: As of December 31, 2021 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Cash and cash equivalents 1,245,467 185,850 — 1,431,317 Restricted cash 7,795 — — 7,795 Inter-company receivables 897,633 75,560 (973,193 ) — Total current assets 2,237,927 556,212 (973,193 ) 1,820,946 Total non-current assets 354,409 103,232 — 457,641 Total assets 2,592,336 659,444 (973,193 ) 2,278,587 Inter-company payables 631,582 897,633 (1,529,215 ) — Total liabilities 747,025 1,215,466 (1,529,215 ) 433,276 Total shareholders’ (deficit) equity 1,845,311 (556,022 ) 556,022 1,845,311 Total liabilities, mezzanine equity and shareholders’ (deficit) equity 2,592,336 659,444 (973,193 ) 2,278,587 As of December 31, 2022 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total Consolidated Total RMB RMB RMB RMB US$ Cash and cash equivalents 528,716 376,735 — 905,451 131,278 Restricted cash 9,540 10,277 — 19,817 2,873 Inter-company receivables 1,601,116 245,391 (1,846,507 ) — — Total current assets 2,187,606 917,663 (1,846,507 ) 1,258,762 182,504 Total non-current assets 230,109 98,596 — 328,705 47,658 Total assets 2,417,715 1,016,259 (1,846,507 ) 1,587,467 230,162 6 Table of Contents As of December 31, 2022 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total Consolidated Total RMB RMB RMB RMB US$ Inter-company payables 1,127,041 1,601,116 (2,728,157 ) — — Total liabilities 1,259,374 1,897,909 (2,728,157 ) 429,126 62,218 Total shareholders’ (deficit) equity 1,158,341 (881,650 ) 881,650 1,158,341 167,944 Total liabilities, mezzanine equity and shareholders’ (deficit) equity 2,417,715 1,016,259 (1,846,507 ) 1,587,467 230,162 The tables below set forth the cash flows of the VIE and subsidiaries of the VIE included in our consolidated statements of cash flows for 2020, 2021 and 2022: For the years ended December 31, 2020 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Net cash (used in) generated from operating activities (232,106 ) 158,563 — (73,543 ) Net cash used in investing activities (99,517 ) (9,795 ) — (109,312 ) Net cash generated from (used in) financing activities 2,196,599 (30,880 ) — 2,165,719 For the years ended December 31, 2021 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Net cash used in operating activities (220,380 ) (257,506 ) — (477,886 ) Net cash (used in) generated from investing activities (222,038 ) (11,265 ) 315,000 81,697 Net cash (used in) generated from financing activities (42,522 ) 304,623 (315,000 ) (52,899 ) For the years ended December 31, 2022 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total Consolidated Total RMB RMB RMB RMB US$ Net cash used in operating activities (317,427 ) (139,381 ) — (456,808 ) (66,232 ) Net cash (used in) generated from investing activities 29,625 (37,088 ) — (7,463 ) (1,082 ) Net cash (used in) generated from financing activities (83,868 ) 377,630 (380,000 ) (86,238 ) (12,504 ) The typical structure of cash flows through our organization is as follows: (i) we transfer funds to our WFOE, Beijing Burning Rock Biotech Limited, through either capital contributions or loans from our Hong Kong subsidiary, BR Hong Kong Limited; (ii) our WFOE makes loans to the VIE, Burning Rock (Beijing) Biotechnology Co.
Biggest changeThe delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.” Results of Operations, Financial Position and Cash Flows of the VIE and Its Subsidiaries The tables below set forth the results of operations of the VIE and subsidiaries of the VIE included in our consolidated statements of comprehensive loss for 2021, 2022 and 2023: For the year ended December 31, 2021 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Revenues 77,234 526,071 (95,443 ) 507,862 Net loss (277,034 ) (508,803 ) (10,860 ) (796,697 ) For the year ended December 31, 2022 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Revenues 186,658 557,667 (181,087 ) 563,238 Net loss (370,725 ) (605,934 ) 5,426 (971,233 ) For the year ended December 31, 2023 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total Consolidated Total RMB RMB RMB RMB US$ Revenues 87,759 537,502 (87,826 ) 537,435 75,696 Net loss (318,484 ) (340,575 ) 5,370 (653,689 ) (92,070 ) 5 Table of Contents The tables below set forth the condensed consolidating schedule of financial position of the VIE and subsidiaries of the VIE as of the dates indicated: As of December 31, 2022 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Cash and cash equivalents 528,716 376,735 — 905,451 Restricted cash 9,540 10,277 — 19,817 Inter-company receivables 1,601,116 245,391 (1,846,507 ) — Total current assets 2,187,606 917,663 (1,846,507 ) 1,258,762 Total non-current assets 230,109 98,596 — 328,705 Total assets 2,417,715 1,016,259 (1,846,507 ) 1,587,467 Inter-company payables 1,127,041 1,601,116 (2,728,157 ) — Total liabilities 1,259,374 1,897,909 (2,728,157 ) 429,126 Total shareholders’ equity (deficit) 1,158,341 (881,650 ) 881,650 1,158,341 Total liabilities and shareholders’ equity (deficit) 2,417,715 1,016,259 (1,846,507 ) 1,587,467 As of December 31, 2023 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total Consolidated Total RMB RMB RMB RMB US$ Cash and cash equivalents 300,372 314,724 — 615,096 86,634 Restricted cash 100 20 — 120 17 Inter-company receivables 1,693,577 343,342 (2,036,919 ) — — Total current assets 2,035,306 885,709 (2,036,919 ) 884,096 124,523 Total non-current assets 103,412 52,493 — 155,905 21,959 Total assets 2,138,718 938,202 (2,036,919 ) 1,040,001 146,482 Inter-company payables 1,317,825 1,693,577 (3,011,402 ) — — Total liabilities 1,370,308 1,912,685 (3,011,402 ) 271,591 38,253 Total shareholders’ equity (deficit) 768,410 (974,483 ) 974,483 768,410 108,229 Total liabilities and shareholders’ equity (deficit) 2,138,718 938,202 (2,036,919 ) 1,040,001 146,482 The tables below set forth the cash flows of the VIE and subsidiaries of the VIE included in our consolidated statements of cash flows for 2021, 2022 and 2023: For the year ended December 31, 2021 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Net cash used in operating activities (220,380 ) (257,506 ) — (477,886 ) Net cash (used in) generated from investing activities (222,038 ) (11,265 ) 315,000 81,697 Net cash (used in) generated from financing activities (42,522 ) 304,623 (315,000 ) (52,899 ) For the year ended December 31, 2022 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Net cash used in operating activities (317,427 ) (139,381 ) — (456,808 ) Net cash generated from (used in) investing activities 29,625 (37,088 ) — (7,463 ) Net cash (used in) generated from financing activities (83,869 ) 377,630 (380,000 ) (86,239 ) For the year ended December 31, 2023 Non-VIE entities VIE and VIE’s subsidiaries Eliminations Consolidated Total Consolidated Total RMB RMB RMB RMB US$ Net cash used in operating activities (253,015 ) (2,768 ) — (255,783 ) (36,026 ) Net cash used in investing activities (8,694 ) (606 ) — (9,300 ) (1,310 ) Net cash (used in) generated from financing activities (48,832 ) (68,894 ) 68,894 (48,832 ) (6,878 ) 6 Table of Contents The typical structure of cash flows through our organization is as follows: (i) we transfer funds to our WFOE, Beijing Burning Rock Biotech Limited, through either capital contributions or loans from our Hong Kong subsidiary, BR Hong Kong Limited; (ii) our WFOE makes loans to the VIE, Burning Rock (Beijing) Biotechnology Co.
Specifically, we may be subject to PRC laws relating to the collection, use, sharing, retention security, and transfer of confidential and private information, such as personal information and other data.
Specifically, we may be subject to PRC laws relating to the collection, use, sharing, retention security, and transfer of confidential and private information, such as personal information and other data.
These PRC laws apply not only to third-party transactions, but also to transfers of information between us and our wholly foreign-owned enterprises in China, and other parties with which we have commercial relations.
These PRC laws apply not only to third-party transactions, but also to transfers of information between us and our wholly foreign-owned enterprises in China, and other parties with which we have commercial relations.
These PRC laws and their interpretations and enforcement continue to develop and are subject to change, and the PRC government may adopt other rules and restrictions in the future. We are exposed to legal and operational risks associated with our operations in China.
These PRC laws and their interpretations and enforcement continue to develop and are subject to change, and the PRC government may adopt other rules and restrictions in the future. We are exposed to legal and operational risks associated with our operations in China.
The PRC government has significant authority to exert influence on the ability of a company with operations in China, including us, to conduct its business. Changes in China’s economic, political or social conditions or government policies could materially and adversely affect our business and results of operations.
The PRC government has significant authority to exert influence on the ability of a company with operations in China, including us, to conduct its business. Changes in China’s economic, political or social conditions or government policies could materially and adversely affect our business and results of operations.
We are subject to risks due to the uncertainty of the interpretation and the application of the PRC laws and regulations, including but not limited to the risks of uncertainty about any future actions of the PRC government on U.S. listed companies.
We are subject to risks due to the uncertainty of the interpretation and the application of the PRC laws and regulations, including but not limited to the risks of uncertainty about any future actions of the PRC government on U.S. listed companies.
Any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in companies having operations in China, including us, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the value of our securities to significantly decline or become worthless.
Any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in companies having operations in China, including us, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the value of our securities to significantly decline or become worthless.
These China-related risks could result in a material change in our operations and/or the value of our securities, or could significantly limit or completely hinder our ability to offer securities to investors in the future and cause the value of such securities to significantly decline or become worthless.
These China-related risks could result in a material change in our operations and/or the value of our securities, or could significantly limit or completely hinder our ability to offer securities to investors in the future and cause the value of such securities to significantly decline or become worthless.
The PRC government may exert, at any time, substantial intervention and influence over the manner of our operations.
The PRC government may exert, at any time, substantial intervention and influence over the manner of our operations.
Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews and new laws and regulations related to data security, and expanding the efforts in anti-monopoly enforcement.
Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews and new laws and regulations related to data security, and expanding the efforts in anti-monopoly enforcement.
NPO is not defined in the Measures and even if a company has been identified as NPO, whether such a company needs to be subject to cybersecurity review depends on whether its data processing activities will “affect or may affect national security.” As of the date of this annual report, we have not experienced any major information security incident in relation to the theft, leakage, damage, illegal use or illegal export of data or personal information.
NPO is not defined in the Measures and even if a company has been identified as NPO, whether such a company needs to be subject to cybersecurity review depends on whether its data processing activities will “affect or may affect national security.” As of the date of this annual report, we have not experienced any major information security incident in relation to the theft, leakage, damage, illegal use or illegal export of data or personal information.
In addition, all the user data collected by us in business operation are stored in mainland China; (iii). We process no more than one million users’ personal information; And (iv).
In addition, all the user data collected by us in business operation are stored in mainland China; (iii). We process no more than one million users’ personal information; And (iv).
However, according to article 16 of the Measures, the member unit of the cybersecurity review work mechanism (the “Cybersecurity Member Unit”) has the right to initiate review on network products and services and data processing activities that it deems as “affect or may affect national security” at its own discretion.
However, according to article 16 of the Measures, the member unit of the cybersecurity review work mechanism (the “Cybersecurity Member Unit”) has the right to initiate review on network products and services and data processing activities that it deems as “affect or may affect national security” at its own discretion.
If the Cybersecurity Member Unit decides to take a cybersecurity review on us and we fail such review, it could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or become worthless.
If the Cybersecurity Member Unit decides to take a cybersecurity review on us and we fail such review, it could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or become worthless.
Currently, the cybersecurity laws and regulations have not directly affected our business and operations, but in anticipation of the strengthened implementation of cybersecurity laws and regulations and the expansion of our business, we face potential risks if we are deemed as a CIIO under applicable laws.
Currently, the cybersecurity laws and regulations have not directly affected our business and operations, but in anticipation of the strengthened implementation of cybersecurity laws and regulations and the expansion of our business, we face potential risks if we are deemed as a CIIO under applicable laws.
In such case, we must fulfill certain obligations as required under the Cybersecurity Law and other applicable laws, including, among others, storing personal information and important data collected and produced within the PRC territory during our operations in China, which we are already doing in our business, and we may be subject to review when purchasing internet products and services.
In such case, we must fulfill certain obligations as required under the Cybersecurity Law and other applicable laws, including, among others, storing personal information and important data collected and produced within the PRC territory during our operations in China, which we are already doing in our business, and we may be subject to review when purchasing internet products and services.
As of the date of this annual report, we have not been involved in any investigations on cybersecurity review made by the CAC on such basis, and we have not received any inquiry, notice, warning, or sanctions in such respect.
As of the date of this annual report, we have not been involved in any investigations on cybersecurity review made by the CAC on such basis, and we have not received any inquiry, notice, warning, or sanctions in such respect.
Based on the foregoing, we and our PRC legal counsel, Tian Yuan Law Firm, do not expect that, as of the date of this annual report, the current applicable PRC laws on cybersecurity would have a material adverse impact on our business.
Based on the foregoing, we and our PRC legal counsel, Tian Yuan Law Firm, do not expect that, as of the date of this annual report, the current applicable PRC laws on cybersecurity would have a material adverse impact on our business.
As of the date of this annual report, we have not been involved in any investigations on data security compliance made in connection with the PRC Data Security Law, and we have not received any inquiry, notice, warning, or sanctions in such respect.
As of the date of this annual report, we have not been involved in any investigations on data security compliance made in connection with the PRC Data Security Law, and we have not received any inquiry, notice, warning, or sanctions in such respect.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
As these opinions were recently issued, official guidance and related implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions from the CSRC or any other PRC government authorities.
As these opinions were recently issued, official guidance and related implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions from the CSRC or any other PRC government authorities.
The Overseas Listing Trial Measures regulate both direct and indirect overseas offering and listing of PRC domestic companies’ securities by adopting a filing-based regulatory regime. Pursuant to the Overseas Listing Trial Measures, initial public offering or listings in overseas markets shall be filed with the CSRC within three working days after the relevant application is submitted overseas.
The Overseas Listing Trial Measures regulate both direct and indirect overseas offering and listing of PRC domestic companies’ securities by adopting a filing-based regulatory regime. Pursuant to the Overseas Listing Trial Measures, initial public offering or listings in overseas markets shall be filed with the CSRC within three working days after the relevant application is submitted overseas.
Furthermore, it is stipulated, among others, that an overseas offering and listing shall be prohibited under any of the following circumstances: (i) where such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (ii) where the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) where the PRC domestic company intending to make the securities offering and listing, or its controlling shareholders and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation or property or undermining the order of the socialist market economy during the last three years; (iv) where the PRC domestic company intending to make the securities offering and listing is suspected of committing crimes or major violations of laws and regulations, and is under investigation according to law, and no conclusion has been made thereof; (v) where there are material ownership disputes over equity held by the PRC domestic company’s controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller.
Furthermore, it is stipulated, among others, that an overseas offering and listing shall be prohibited under any of the following circumstances: (i) where such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (ii) where the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) where the PRC domestic company intending to make the securities offering and listing, or its controlling shareholders and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation or property or undermining the order of the socialist market economy during the last three years; (iv) where the PRC domestic company intending to make the securities offering and listing is suspected of committing crimes or major violations of laws and regulations, and is under investigation according to law, and no conclusion has been made thereof; (v) where there are material ownership disputes over equity held by the PRC domestic company’s controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller.
The Overseas Listing Trial Measures also provide that any overseas offering and listing made by an issuer that meets both the following conditions will be determined as indirect overseas offering and listing of PRC domestic companies: (i) 50% or more of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted for by PRC domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main places of business are located mainland China, or the senior management personal in charge of its business operation and management are mostly Chinses citizens or domiciled in mainland China.
The Overseas Listing Trial Measures also provide that any overseas offering and listing made by an issuer that meets both the following conditions will be determined as indirect overseas offering and listing of PRC domestic companies: (i) 50% or more of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted for by PRC domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main places of business are located mainland China, or the senior management personal in charge of its business operation and management are mostly Chinses citizens or domiciled in mainland China.
On February 17, 2023, the CSRC issued the Notice on the Administrative Arrangements for the Filing of Overseas Listings by Domestic Enterprises.
On February 17, 2023, the CSRC issued the Notice on the Administrative Arrangements for the Filing of Overseas Listings by Domestic Enterprises.
The CSRC clarified that on March 31, 2023, the effective date of the Overseas Listing Trial Measures, the PRC domestic companies that have been listed overseas by March 31, 2023 are not required to file immediately, and filing should be made as required if they involve refinancing and other filing matters.
The CSRC clarified that on March 31, 2023, the effective date of the Overseas Listing Trial Measures, the PRC domestic companies that have been listed overseas by March 31, 2023 are not required to file immediately, and filing should be made as required if they involve refinancing and other filing matters.
As the requirements under Overseas Listing Trial Measures are new and evolving, there remains substantial uncertainties as to their interpretation and implementation and how they may impact our ability to raise or utilize fund and business operation.
As the requirements under Overseas Listing Trial Measures are new and evolving, there remains substantial uncertainties as to their interpretation and implementation and how they may impact our ability to raise or utilize fund and business operation.
In particular, there are uncertainties as to the form and substance of regulatory requirements and we cannot assure you that, when required, we can complete the requisite filing with such form and content satisfactory to the relevant regulators in a timely manner.
In particular, there are uncertainties as to the form and substance of regulatory requirements and we cannot assure you that, when required, we can complete the requisite filing with such form and content satisfactory to the relevant regulators in a timely manner.
Any delays in completing the filing requirements may adversely affect our ability to complete our capital raising activities from the capital markets in the future.
Any delays in completing the filing requirements may adversely affect our ability to complete our capital raising activities from the capital markets in the future.
Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, our ability to accept foreign investments and conduct follow-on offerings, and listing or continuing listing on a U.S. or other foreign exchanges.
Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, our ability to accept foreign investments and conduct follow-on offerings, and listing or continuing listing on a U.S. or other foreign exchanges.
As a result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to use their Renminbi revenues to pay dividends to us.
As a result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to use their Renminbi revenues to pay dividends to us.
Historically, in response to the persistent capital outflow and the Renminbi’s depreciation against the U.S. dollar in 2016, the People’s Bank of China, or the PBOC, and the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments.
Historically, in response to the persistent capital outflow and the Renminbi’s depreciation against the U.S. dollar in 2016, the People’s Bank of China, or the PBOC, and the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments.
The PRC government may continue to strengthen its capital controls and our PRC subsidiary’s dividends and other distributions may be subjected to tighter scrutiny.
The PRC government may continue to strengthen its capital controls and our PRC subsidiary’s dividends and other distributions may be subjected to tighter scrutiny.
Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE, by complying with certain procedural requirements.
Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE, by complying with certain procedural requirements.
However, approval from or registration with appropriate governmental authorities or commercial banks authorized by such authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses, such as the repayment of loans denominated in foreign currencies.
However, approval from or registration with appropriate governmental authorities or commercial banks authorized by such authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses, such as the repayment of loans denominated in foreign currencies.
Furthermore, as the interpretation and implementation of these foreign exchange regulations has been constantly evolving, it is unclear how these regulations, and any future regulations concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities.
Furthermore, as the interpretation and implementation of these foreign exchange regulations has been constantly evolving, it is unclear how these regulations, and any future regulations concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities.
For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations.
For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations.
In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations.
In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations.
On December 15, 2022, the PCAOB issued a report that vacated its previous determination issued on December 16, 2021 and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
On December 15, 2022, the PCAOB issued a report that vacated its previous determination issued on December 16, 2021 and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor.
On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor.
In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCA Act following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021.
In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCA Act following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021.
On December 15, 2022, the PCAOB issued a report that vacated its previous determination issued on December 16, 2021 and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
On December 15, 2022, the PCAOB issued a report that vacated its previous determination issued on December 16, 2021 and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to overseas parties.
Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to overseas parties.
We cannot assure you that we will be able to comply with all Nasdaq Listing Rules at all times in the future or regain compliance in a timely manner in case of a default and avoid any subsequent adverse action taken by Nasdaq, including delisting.
We also cannot assure you that we will be able to comply with all Nasdaq Listing Rules at all times in the future or regain compliance in a timely manner in case of a default and avoid any subsequent adverse action taken by Nasdaq, including delisting.
Risk Factor Summary Risks Relating to Our Business and Industry • We are a cancer diagnostics company with a limited operating history, which may make it difficult to evaluate our current business and predict our future performance. • We have incurred net losses historically, and may not be able to achieve and maintain profitability. • Failure to maintain significant commercial market acceptance for our cancer therapy selection products and services, or any future products and services may harm our business and results of operations. • We may be unable to develop and commercialize our early cancer detection products, MRD products or new cancer therapy selection products on a timely basis, or at all. • If we fail to keep up with industry and technology developments in a timely and cost-effective manner, we may be unable to compete effectively and our business and prospects could suffer. • If our products or services do not perform as expected, our operating results, reputation and business could suffer. • If we were to be sued for product liability or professional liability, we could face substantial liabilities that exceed our resources. • If we cannot maintain or develop relationships with hospitals and physicians, our results of operations and prospects could be adversely affected. • We require substantial funding for our operations.
Risk Factor Summary Risks Relating to Our Business and Industry • We are a cancer diagnostics company with a limited operating history, which may make it difficult to evaluate our current business and predict our future performance. • We have incurred net losses historically, and may not be able to achieve and maintain profitability. • Failure to maintain significant commercial market acceptance for our cancer therapy selection products and services, or any future products and services may harm our business and results of operations. • We may be unable to develop and commercialize our early cancer detection products, MRD products or new cancer therapy selection products on a timely basis, or at all. • If we fail to keep up with industry and technology developments in a timely and cost-effective manner, we may be unable to compete effectively and our business and prospects could suffer. 9 Table of Contents • If our products or services do not perform as expected, our operating results, reputation and business could suffer. • If we were to be sued for product liability or professional liability, we could face substantial liabilities that exceed our resources. • If we cannot maintain or develop relationships with hospitals and physicians, our results of operations and prospects could be adversely affected. • We require substantial funding for our operations.
In addition, increased protectionism and the risk of global trade war, which result in weaker global trade and lower levels of economic activity, could reduce the demand for our tests and adversely affect our business. 32 Table of Contents In addition to trade disputes, political tensions between the United States and China have escalated in recent years due to, among other things, the COVID-19 outbreak, data security and privacy, emerging technologies, “dual-use” commercial technologies, applications that could be deployed for surveillance or military purposes, import/export of technology, sanctions imposed by the U.S.
In addition, increased protectionism and the risk of global trade war, which result in weaker global trade and lower levels of economic activity, could reduce the demand for our tests and adversely affect our business. 33 Table of Contents In addition to trade disputes, political tensions between the United States and China have escalated in recent years due to, among other things, the COVID-19 outbreak, data security and privacy, emerging technologies, “dual-use” commercial technologies, applications that could be deployed for surveillance or military purposes, import/export of technology, sanctions imposed by the U.S.
These types of uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China, could adversely affect our business and impede our ability to continue our operations, and may further affect the legal remedies and protections available to investors, which may, in turn, adversely affect the value of your investment. 33 Table of Contents We may be classified as a “PRC resident enterprise” for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.
These types of uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China, could adversely affect our business and impede our ability to continue our operations, and may further affect the legal remedies and protections available to investors, which may, in turn, adversely affect the value of your investment. 34 Table of Contents We may be classified as a “PRC resident enterprise” for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.
In response to this pandemic, hospitals and physicians across China focused their efforts on treating COVID-19 patients and prioritized resources toward containing the virus, resulting in many diagnostic procedures and cancer therapy selection testing being deferred.
In response to this pandemic, hospitals and physicians across China also focused their efforts on treating COVID-19 patients and prioritized resources toward containing the virus, resulting in many diagnostic procedures and cancer therapy selection testing being deferred.
Adverse changes in the Chinese or global economic, political and social conditions as well as government policies could adversely affect our business and prospects. • Geopolitical tensions have led to a worsening relationship between China and the United States and this adverse trend may continue to deteriorate, which could negatively affect our business and results of operations. • Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us. • The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections. • Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely our current auditor.
Adverse changes in the Chinese or global economic, political and social conditions as well as government policies could adversely affect our business and prospects. • Geopolitical tensions have led to a worsening relationship between China and the United States and this adverse trend may continue to deteriorate, which could negatively affect our business and results of operations. 10 Table of Contents • Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us. • The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections. • Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely our current auditor.
After consulting with our PRC legal counsel, Tian Yuan Law Firm, we believe that we are in compliance with regulations or policies that have been issued by the CAC as of the date of this annual report in all material aspects, on the following bases: (i) we have set up internal cybersecurity regulations, including data backup and recovery measures and disaster recovery measures; (ii) we have completed the Grade III information security protection filing as required by the relevant regulations and policies issued by relevant authorities; (iii) we inform our users and obtain their consent before collecting their personal information; (iv) we store relevant information in our own servers within the PRC; (v) we have not been investigated or received any request from any CAC authorities as of the date of this annual report; (vi) we have not been subject to any administrative penalties regarding cybersecurity or data security issues as of the date of this annual report; and (vii) we have not been a party to any litigation or arbitration regarding with cybersecurity or data security issues as of the date of this annual report.
After consulting with our PRC legal counsel, Tian Yuan Law Firm, we believe that we are in compliance with regulations or policies that have been issued by the CAC as of the date of this annual report in all material aspects, on the following bases: (i) we have set up internal cybersecurity regulations, including data backup and recovery measures and disaster recovery measures; (ii) we have completed the Grade III information security protection filing for major software as required by the relevant regulations and policies issued by relevant authorities; (iii) we inform our users and obtain their consent before collecting their personal information; (iv) we store relevant information in our own servers within the PRC; (v) we have not been investigated or received any request from any CAC authorities as of the date of this annual report; (vi) we have not been subject to any administrative penalties regarding cybersecurity or data security issues as of the date of this annual report; and (vii) we have not been a party to any litigation or arbitration regarding with cybersecurity or data security issues as of the date of this annual report.
As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer, and it may be more difficult for overseas regulators to conduct investigation or collect evidence within China. 46 Table of Contents The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of the underlying Class A ordinary shares which are represented by your ADSs.
As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer, and it may be more difficult for overseas regulators to conduct investigation or collect evidence within China. 48 Table of Contents The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of the underlying Class A ordinary shares which are represented by your ADSs.
If the PRC government determines that we are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate our business, the relevant PRC regulatory authorities, including the NHC, would have broad discretion in dealing with such violations or failures, including, but not limited to: 25 Table of Contents • revoking our business and operating licenses; • discontinuing or restricting our operations; • imposing fines or confiscating any of our income that they deem to have been obtained through illegal operations; • imposing conditions or requirements with which we or WFOE and the VIE may not be able to comply; • requiring us, WFOE and the VIE to restructure the relevant ownership structure or operations; • restricting or prohibiting our use of the proceeds from our initial public offering and the concurrent private placement or other of our financing activities to finance the business and operations of the VIE and its subsidiaries; or • taking other regulatory or enforcement actions that could be harmful to our business.
If the PRC government determines that we are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate our business, the relevant PRC regulatory authorities, including the NHC, would have broad discretion in dealing with such violations or failures, including, but not limited to: • revoking our business and operating licenses; • discontinuing or restricting our operations; • imposing fines or confiscating any of our income that they deem to have been obtained through illegal operations; • imposing conditions or requirements with which we or WFOE and the VIE may not be able to comply; • requiring us, WFOE and the VIE to restructure the relevant ownership structure or operations; • restricting or prohibiting our use of the proceeds from our initial public offering and the concurrent private placement or other of our financing activities to finance the business and operations of the VIE and its subsidiaries; or • taking other regulatory or enforcement actions that could be harmful to our business.
We may not have sufficient experience or resources to address risks frequently encountered in this industry, which include, among other things, our potential failure to: • acquire and retain customers and increase adoption of our cancer therapy selection products and services by hospitals, physicians, patients, pharmaceutical companies and others in the medical community; • timely respond to changing market conditions and keep up with evolving industry and technological standards and regulatory developments; • obtain and maintain the regulatory approvals required for us to further market and sell our cancer therapy selection products and services and commercialize our early cancer detection products and services; • manage our relationships with our suppliers, customers and research partners; • protect proprietary technologies and intellectual property rights; and • attract, train, motivate and retain research and development and other qualified personnel.
We may not have sufficient experience or resources to address risks frequently encountered in this industry, which include, among other things, our potential failure to: • acquire and retain customers and increase adoption of our cancer therapy selection products and services by hospitals, physicians, patients, pharmaceutical companies and others in the medical community; • timely respond to changing market conditions and keep up with evolving industry and technological standards and regulatory developments; • obtain and maintain the regulatory approvals required for us to further market and sell our cancer therapy selection products and services and commercialize our early cancer detection products and services; 11 Table of Contents • manage our relationships with our suppliers, customers and research partners; • protect proprietary technologies and intellectual property rights; and • attract, train, motivate and retain research and development and other qualified personnel.
If a third-party claims that we infringe upon a third-party’s intellectual property rights, we may have to: • seek to obtain licenses that may not be available on commercially reasonable terms, if at all; • abandon any product alleged or held to infringe, or redesign our products or processes to avoid potential assertion of infringement; • pay substantial damages including, in exceptional cases, treble damages and attorneys’ fees, if a court decides that the device, test or proprietary technology at issue infringes upon or violates the third-party’s rights; • pay substantial royalties or fees or grant cross-licenses to our technology; and • defend litigation or administrative proceedings that may be costly whether we win or lose, and which could result in a substantial diversion of our financial and management resources.
If a third-party claims that we infringe upon a third-party’s intellectual property rights, we may have to: • seek to obtain licenses that may not be available on commercially reasonable terms, if at all; • abandon any product alleged or held to infringe, or redesign our products or processes to avoid potential assertion of infringement; 20 Table of Contents • pay substantial damages including, in exceptional cases, treble damages and attorneys’ fees, if a court decides that the device, test or proprietary technology at issue infringes upon or violates the third-party’s rights; • pay substantial royalties or fees or grant cross-licenses to our technology; and • defend litigation or administrative proceedings that may be costly whether we win or lose, and which could result in a substantial diversion of our financial and management resources.
A non-U.S. corporation will be a passive foreign investment company, or PFIC, for any taxable year if either (i) at least 75% of its gross income for such year consists of certain types of “passive” income; or (ii) at least 50% of the value of its assets (generally based on a quarterly average) during such year is attributable to assets that produce passive income or are held for the production of passive income (the “asset test”).
A non-U.S. corporation will be a passive foreign investment company, or PFIC, for any taxable year if either (i) at least 75% of its gross income for such year consists of certain types of “passive” income; or (ii) at least 50% of the value of its assets (generally based on a quarterly average) during such year is attributable to assets that produce passive income or are held for the production of passive income.
Based on the foregoing, we do not expect that, as of the date of this annual report, the PRC Data Security Law would have a material adverse impact on our business. 2 Table of Contents On July 6, 2021, the relevant PRC governmental authorities published the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
Based on the foregoing, we do not expect that, as of the date of this annual report, the PRC Data Security Law would have a material adverse impact on our business. 31 Table of Contents On July 6, 2021, the relevant PRC governmental authorities published the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
Unrelated to those services as stipulated under the Exclusive Business Operation Agreement, the agreement that allows the Company to receive economic benefits from the VIE, our WFOE, Beijing Burning Rock Biotech Limited, charges service fee to the VIE for certain operating expenses that it bears on behalf of the VIE for the business operations of the VIE and its subsidiaries.
Unrelated to those services as stipulated under the Exclusive Business Cooperation Agreement, the agreement that allows the Company to receive economic benefits from the VIE, our WFOE, Beijing Burning Rock Biotech Limited, charges service fee to the VIE for certain operating expenses that it bears on behalf of the VIE for the business operations of the VIE and its subsidiaries.
However, such protection is limited and may not adequately protect our rights. For example, some of the trademark applications for the labels we use in our products have been rejected by the Trademark Office of National Intellectual Property Administration as they have been preemptively registered by an independent third party.
However, such protection is limited and may not adequately protect our rights. For example, some of the trademark applications for the labels we use in our products have been rejected by the Trademark Office of National Intellectual Property Administration (the “Trademark Office”) as they have been preemptively registered by an independent third party.
As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules promulgated by SEC, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 using criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules promulgated by SEC, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023 using criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. 8 Table of Contents In addition, there are limitations on our ability to settle amounts owed by the VIE under the relevant VIE agreements to us.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. 7 Table of Contents In addition, there are limitations on our ability to settle amounts owed by the VIE under the relevant VIE agreements to us.
Based on our financial statements, the manner in which we conduct our business, the trading price of our Class A ordinary shares and ADSs, the value and nature of our assets, and the sources and nature of our income we do not believe we were a PFIC for our prior taxable year.
Based on our financial statements, the manner in which we conduct our business, the trading price of our Class A ordinary shares and ADSs, the value and nature of our assets, and the sources and nature of our income we believe we were a PFIC for our prior taxable year.
Any cyber-attacks could negatively affect our reputation, damage our network infrastructure and our ability to deploy our products and services, harm our relationship with customers and research partners, and expose us to significant financial liabilities. Moreover, we may not be able to prevent third parties from illegally obtaining and misappropriating personal data of the tested patients that we collect.
Any cyber- attacks could negatively affect our reputation, damage our network infrastructure and our ability to deploy our products and services, harm our relationship with customers and research partners, and expose us to significant financial liabilities. 19 Table of Contents Moreover, we may not be able to prevent third parties from illegally obtaining and misappropriating personal data of the tested patients that we collect.
Based on this assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2022. In addition, our independent registered public accounting firm attested to the effectiveness of our internal control and reported that our internal control over financial reporting was effective as of December 31, 2022.
Based on this assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2023. In addition, our independent registered public accounting firm attested to the effectiveness of our internal control and reported that our internal control over financial reporting was effective as of December 31, 2023.
Failure to maintain significant commercial market acceptance for our cancer therapy selection products and services, or any future products and services may harm our business and results of operations. Our cancer therapy selection products and services contributed substantially all of our revenue for 2020, 2021 and 2022.
Failure to maintain significant commercial market acceptance for our cancer therapy selection products and services, or any future products and services may harm our business and results of operations. Our cancer therapy selection products and services contributed substantially all of our revenue for 2021, 2022 and 2023.
No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder. 49 Table of Contents Certain judgments obtained against us by our shareholders may not be enforceable.
No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder. Certain judgments obtained against us by our shareholders may not be enforceable.
Any intervention by the government of China in the affairs of Hong Kong, in breach of the “one country, two systems” principle, may adversely affect our business and ability to raise capital. 42 Table of Contents Risks Relating to The ADSs The trading price of ADSs has been and may continue to be volatile, which could result in substantial losses to investors.
Any intervention by the government of China in the affairs of Hong Kong, in breach of the “one country, two systems” principle, may adversely affect our business and ability to raise capital. Risks Relating to The ADSs The trading price of ADSs has been and may continue to be volatile, which could result in substantial losses to investors.
As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our financial condition and results of operations. We may be subject to litigation and other claims and legal proceedings, and may not always be successful in defending ourselves against these claims or proceedings.
As a result, our expenses associated with share- based compensation may increase, which may have an adverse effect on our financial condition and results of operations. 21 Table of Contents We may be subject to litigation and other claims and legal proceedings, and may not always be successful in defending ourselves against these claims or proceedings.
Failure to comply with existing or future HGR laws and regulations, including the HGR Regulation and the Biosecurity Law, may subject us to penalties, including fines, suspension of related activities and confiscation of related HGR and gains generated from conducting these activities. The evolving government regulations may place additional burdens on our efforts to commercialize our products and services.
Failure to comply with existing or future HGR laws and regulations, including the HGR Regulation and the Biosecurity Law, may subject us to penalties, including fines, suspension of related activities and confiscation of related HGR and gains generated from conducting these activities. 23 Table of Contents The evolving government regulations may place additional burdens on our efforts to commercialize our products and services.
Future increases in China’s inflation may adversely affect our profitability and results of operations. 35 Table of Contents PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from making loans or additional capital contributions to our subsidiaries, which could adversely affect our liquidity and our ability to fund and expand our business.
Future increases in China’s inflation may adversely affect our profitability and results of operations. PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from making loans or additional capital contributions to our subsidiaries, which could adversely affect our liquidity and our ability to fund and expand our business.
Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade in the U.S. or U.K. Shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities.
Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade in the U.S. or U.K. 44 Table of Contents Shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities.
Therefore, you should not rely on an investment in the ADSs as a source for any future dividend income. 44 Table of Contents Our board of directors has complete discretion as to whether to distribute dividends, subject to our memorandum and articles of association and certain requirements of Cayman Islands law.
Therefore, you should not rely on an investment in the ADSs as a source for any future dividend income. Our board of directors has complete discretion as to whether to distribute dividends, subject to our memorandum and articles of association and certain requirements of Cayman Islands law.
Therefore, our contractual arrangements may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be. In addition, the Company and its investors may never directly hold equity interests in the businesses that are conducted by the VIE and its subsidiaries.
Therefore, our contractual arrangements may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be. 8 Table of Contents In addition, the Company and its investors may never directly hold equity interests in the businesses that are conducted by the VIE and its subsidiaries.
Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or investigate completely our current auditor. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Pursuant to the U.S.
Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or investigate completely our current auditor. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. Inflation in the PRC could negatively affect our profitability and growth. The economy of China has experienced significant growth, which has from time to time lead to significant inflation. China’s overall economy is expected to continue to grow.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. 36 Table of Contents Inflation in the PRC could negatively affect our profitability and growth. The economy of China has experienced significant growth, which has from time to time lead to significant inflation. China’s overall economy is expected to continue to grow.
We adopted two share incentive plans in May 2020 and October 2021, which we refer to as the 2020 Plan and 2021 Plan, respectively, in this annual report, to grant share-based compensation awards to employees, directors, consultants and senior management to incentivize their performance and align their interests with ours.
We adopted three share incentive plans in May 2020, October 2021 and May 2023, which we refer to as the 2020 Plan, 2021 Plan and 2023 Plan, respectively, in this annual report, to grant share-based compensation awards to employees, directors, consultants and senior management to incentivize their performance and align their interests with ours.
Such a determination could ultimately lead to the delisting of the ADSs from the Nasdaq or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of the ADSs in the United States. Risks Relating to Hong Kong You may have difficulty enforcing judgments in Hong Kong.
Such a determination could ultimately lead to the delisting of the ADSs from the Nasdaq or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of the ADSs in the United States. 43 Table of Contents Risks Relating to Hong Kong You may have difficulty enforcing judgments in Hong Kong.
In addition, there is no assurance that any such cross-market transfers and settlement will be completed in accordance with the timelines investors may anticipate. You may be subject to limitations on transfer of your ADSs. Your ADSs are transferable on the books of the depositary.
In addition, there is no assurance that any such cross-market transfers and settlement will be completed in accordance with the timelines investors may anticipate. 50 Table of Contents You may be subject to limitations on transfer of your ADSs. Your ADSs are transferable on the books of the depositary.
Yusheng Han, our founder, chairman of the board of directors and chief executive officer holds 45.9% of the equity interests in the VIE as of March 31, 2023. Mr.
Yusheng Han, our founder, chairman of the board of directors and chief executive officer holds 45.9% of the equity interests in the VIE as of March 31, 2024. Mr.
Failure to comply with laws or regulations may subject us to penalties, including fines, confiscation of these equipment, products and software and suspension of business, and our business and results of operations could be adversely affected. We are subject to ongoing obligations and continued regulatory review.
Failure to comply with laws or regulations may subject us to penalties, including fines, confiscation of these equipment, products and software and suspension of business, and our business and results of operations could be adversely affected. 22 Table of Contents We are subject to ongoing obligations and continued regulatory review.
Since our inception, over 6,004 physicians from 802 hospitals across China had ordered our tests. To generate demand, we will need to continue to educate physicians at an increasing number of hospitals on the clinical utility, benefits and value of our tests through clinical trials, published papers, presentations at scientific conferences and one-on-one education by our in-house sales force.
Since our inception, over 6,700 physicians from 829 hospitals across China had ordered our tests. To generate demand, we will need to continue to educate physicians at an increasing number of hospitals on the clinical utility, benefits and value of our tests through clinical trials, published papers, presentations at scientific conferences and one-on-one education by our in-house sales force.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeAs of the same date, we had 25 pending patent applications in China, twelve pending patent applications in Hong Kong, five pending patent applications in the United States, three pending patent applications in European Patent Office, two pending patent applications in Japan, two pending patent application in Canada, two pending patent applications in Brazil, one pending patent application in Singapore, two pending patent applications in Australia, and fourteen international applications strategically filed under the Patent Cooperation Treaty, or PCT, of which two are the basis of pending registration for our MSI (MicroSatellite Instability) calling algorithms in the U.S., European Patent Office and Japan, two are the basis of pending registration for brELSA ™ , our targeted DNA-methylation based library preparation method for early cancer detection, in the U.S., Canada, Brazil, Singapore, Australia, China, Hong Kong, Japan and the European Patent Office, four are for OverC ™ , our multi-cancer detection blood test for early cancer testing, and another one is for brPROPHET ™ , our MRD (Minimal Resideal Disease) algorithms. 68 Table of Contents The table below sets forth details of our key patents: Description of patent Use and application Jurisdiction Expiration date A library preparation method and associated reagents (HS library preparation technology) Our cancer therapy selection tests China 2036 A composition of matter that detects the presence of MSI in liquid biopsy samples (related to bMSISEA) Tests such as ColonCore and pan-cancer tests China, Hong Kong 2038 A automation method of the management and reporting of quality control of laboratory processes Our laboratory information management system China 2035 A NGS-based method to simultaneously detect MSI and genomic mutations in liquid biopsy samples (bMSISEA) Our cancer therapy selection tests that detect MSI in liquid biopsy samples, such as ColonCore China, Hong Kong 2038 A NGS-based method to simultaneously detect MSI and genomic mutations in tissue samples (prettyMSI) Our cancer therapy selection tests that detect MSI in tissue samples, such as OncoScreen ™ IO China, Japan 2037, 2038 The table below sets forth details of our key pending patent applications: Description of patent application Use and application Jurisdiction Expected expiration date A NGS-based method to simultaneously detect MSI and genomic mutations in liquid biopsy samples (bMSISEA) Our cancer therapy selection tests that detect MSI in liquid biopsy samples, such as ColonCore PCT (currently under review by patent offices in Japan, the U.S., Canada, Brazil, Australia and the European Patent Office) 2039 A NGS-based method to simultaneously detect MSI and genomic mutations in tissue samples (prettyMSI) Our cancer therapy selection tests that detect MSI in tissue samples, such as OncoScreen ™ IO Hong Kong, PCT (currently under review by patent offices in Japan, the U.S. and the European Patent Office) 2038 Compositions and methods for preparing nucleic acid libraries (brELSA ™ ) Our targeted DNA-methylation based library preparation method for early cancer detection PCT (currently under review by the patent office in China, Hong Kong, the U.S., Japan, Canada, Brazil, Australia, Singapore and the European Patent Office) 2039 A detection method for variant nucleic acid (brPROPHET ™ ) Our MRD detection assay and bioinformatics algorithms China, PCT (to be entered into national phases by 2024) 2041 Methylation sequencing method and device (OverC ™ ) Our multi-cancer detection blood test for early cancer testing China, PCT (to be entered into national phases by 2023) 2042 As of December 31, 2022, we have also registered seven software copyrights related to our laboratory process quality control management, report automation, and sequencing result analysis.
Biggest changeThe table below sets forth details of our key patents: Description of patent Use and application Jurisdiction Expiration date A library preparation method and associated reagents (HS library preparation technology) Our cancer therapy selection tests China 2036 A composition of matter that detects the presence of MSI in liquid biopsy samples (related to bMSISEA) Tests such as ColonCore and pan-cancer tests China, Hong Kong 2038 A automation method of the management and reporting of quality control of laboratory processes Our laboratory information management system China 2035 A NGS-based method to simultaneously detect MSI and genomic mutations in liquid biopsy samples (bMSISEA) Our cancer therapy selection tests that detect MSI in liquid biopsy samples, such as ColonCore China, Hong Kong, Brazil 2038, 2039 A NGS-based method to simultaneously detect MSI and genomic mutations in tissue samples (prettyMSI) Our cancer therapy selection tests that detect MSI in tissue samples, such as OncoScreen™ IO China, Japan 2037, 2038 A NGS-based method to multi-cancer detection for early cancer testing in A NGS-based in blood Our multi-cancer detection blood test for early cancer testing, such as OverC™ China, Hong Kong 2042 70 Table of Contents The table below sets forth details of our key pending patent applications: Description of patent application Use and application Jurisdiction Expected Expiration date A NGS-based method to simultaneously detect MSI and genomic mutations in liquid biopsy samples (bMSISEA) Our cancer therapy selection tests that detect MSI in liquid biopsy samples, such as ColonCore PCT (currently under review by patent offices in Japan, the U.S., Canada, Brazil, Australia and the European Patent Office) 2039 A NGS-based method to simultaneously detect MSI and genomic mutations in tissue samples (prettyMSI) Our cancer therapy selection tests that detect MSI in tissue samples, such as OncoScreen™ IO Hong Kong, PCT (currently under review by patent offices in Japan, the U.S. and the European Patent Office) 2038 Compositions and methods for preparing nucleic acid libraries (brELSA™) Our targeted DNA-methylation based library preparation method for early cancer detection PCT (currently under review by the patent office in China, Hong Kong, the U.S., Japan, Canada, Brazil, Australia, Singapore and the European Patent Office) 2039 A detection method for variant nucleic acid (brPROPHET™) Our MRD detection assay and bioinformatics algorithms China, PCT (to be entered into national phases by 2024) 2041 Methylation sequencing method and device (OverC™) Our multi-cancer detection blood test for early cancer testing China, PCT (to be entered into national phases by 2023) 2042 Aa high-precision gene hybridization capture probe for hybridizing and capturing methylation variation regions related to various cancers Our multi-cancer detection blood test for early cancer testing, such as OverC™ China, Hong Kong, PCT (to be entered into national phases by 2024) 2042 As of December 31, 2023, we have also registered 11 software copyrights related to our laboratory process quality control management, report automation, and sequencing result analysis.
The ADSs will be offered through or to Cowen and Company, LLC as the sales agent pursuant to a sales agreement dated November 7, 2022 between us and Cowen. Our principal executive offices are located at No. 5, Xingdao Ring Road North, International Bio Island, Guangzhou, the People’s Republic of China.
The ADSs will be offered through or to Cowen and Company, LLC as the sales agent pursuant to a sales agreement dated November 7, 2022 between us and Cowen and Company, LLC. Our principal executive offices are located at No. 5, Xingdao Ring Road North, International Bio Island, Guangzhou, the People’s Republic of China.
It has been validated in multiple studies in China on NGS-based detection of MSI from both tissue and plasma samples. According to a 2018 March Journal of Molecular Diagnostics article titled “ A novel and reliable method to detect microsatellite instability in colorectal cancer by next-generation sequencing ,” the specificity and sensitivity of ColonCore were 100% and 97.9%, respectively.
It has been validated in multiple studies in China on NGS-based detection of MSI from both tissue and plasma samples. According to a 2018 March Journal of Molecular Diagnostics article titled “A novel and reliable method to detect microsatellite instability in colorectal cancer by next-generation sequencing,” the specificity and sensitivity of ColonCore were 100% and 97.9%, respectively.
Shaokun (Shannon) Chuai, our chief scientific officer. Contractual Arrangements Investment in China by foreign investors is subject to certain restriction under PRC laws and regulations, in particular, the Catalog of Industries for Encouraging Foreign Investment, and the Special Administrative Measures for Access of Foreign Investment (2021 Edition), or the Negative List.
Shaokun (Shannon) Chuai, our former chief scientific officer. Contractual Arrangements Investment in China by foreign investors is subject to certain restriction under PRC laws and regulations, in particular, the Catalog of Industries for Encouraging Foreign Investment, and the Special Administrative Measures for Access of Foreign Investment (2021 Edition), or the Negative List.
The diagram below illustrates the significant improvements in complexity and overall quality of DNA libraries derived from clinical FFPE samples of different quality levels (from the highest level “A+” to the lowest level “C”) using our HS library preparation technology, each as compared with conventional library preparation methods: Comparison of FFPE DNA library complexity and quality at 500X raw depth 53 Table of Contents The diagram below illustrates the improvements (denoted as “after”) in library complexity of liquid biopsy ctDNA samples achieved using our HS library preparation technology: Liquid Biopsy Technologies—Enabling Super-High Sensitivity in ctDNA Samples Through Signal-Noise Ratio Enhancement Compared to tissue biopsies, NGS-based ctDNA liquid biopsies require higher technological capabilities and expertise because of the low concentrations of ctDNA in liquid biopsy samples.
The diagram below illustrates the significant improvements in complexity and overall quality of DNA libraries derived from clinical FFPE samples of different quality levels (from the highest level “A+” to the lowest level “C”) using our HS library preparation technology, each as compared with conventional library preparation methods: Comparison of FFPE DNA library complexity and quality at 500X raw depth 55 Table of Contents The diagram below illustrates the improvements (denoted as “after”) in library complexity of liquid biopsy ctDNA samples achieved using our HS library preparation technology: Liquid Biopsy Technologies—Enabling Super-High Sensitivity in ctDNA Samples Through Signal-Noise Ratio Enhancement Compared to tissue biopsies, NGS-based ctDNA liquid biopsies require higher technological capabilities and expertise because of the low concentrations of ctDNA in liquid biopsy samples.
The WFOE may at its sole discretion unilaterally terminate this agreement prior to its expiration upon notice to the VIE. 83 Table of Contents Agreements that Provide Us with Effective Control over the VIE Equity Interest Pledge Agreement Pursuant to the equity interest pledge agreement, as amended and restated on October 21, 2019, which was entered into among WFOE, the VIE and its shareholders, each shareholder of the VIE has pledged all of its respective equity interests in the VIE to the WFOE to guarantee the performance of the VIE and its shareholders of their respective obligations under the exclusive business cooperation agreement, the exclusive option agreement, the agreement for power of attorney as well as their respective liabilities arising from any breach of any obligation thereunder.
The WFOE may at its sole discretion unilaterally terminate this agreement prior to its expiration upon notice to the VIE. 84 Table of Contents Agreements that Provide Us with Effective Control over the VIE Equity Interest Pledge Agreement Pursuant to the equity interest pledge agreement, as amended and restated on October 21, 2019, which was entered into among WFOE, the VIE and its shareholders, each shareholder of the VIE has pledged all of its respective equity interests in the VIE to the WFOE to guarantee the performance of the VIE and its shareholders of their respective obligations under the exclusive business cooperation agreement, the exclusive option agreement, the agreement for power of attorney as well as their respective liabilities arising from any breach of any obligation thereunder.
Our products are recognized by the medical, pharmaceutical and scientific communities, as evidenced by (i) the use of our products by oncology key opinion leaders in clinical trials and research studies they initiate, and (ii) our collaborations on clinical trials and research studies with leading pharmaceutical companies including AstraZeneca (NYSE: AZN), Bayer (ETR: BAYN), Johnson & Johnson (NYSE: JNJ), CStone (HKEX: 2616), BeiGene (HKEX: 6160), Abbisko Therapeutics (HKEX: 2256), IMPACT Therapeutics and Merck KGaA (ETR: MRK), primarily by providing central laboratory services and companion diagnostics development services to these pharmaceutical companies.
Our products are recognized by the medical, pharmaceutical and scientific communities, as evidenced by (i) the use of our products by oncology key opinion leaders in clinical trials and research studies they initiate, and (ii) our collaborations on clinical trials and research studies with leading pharmaceutical companies including AstraZeneca (NYSE: AZN), Bayer (ETR: BAYN), Johnson & Johnson (NYSE: JNJ), CStone (HKEX: 2616), BeiGene (HKEX: 6160), Abbisko Therapeutics (HKEX: 2256), IMPACT Therapeutics, Boehringer Ingelheim and Merck KGaA (ETR: MRK), primarily by providing central laboratory services and companion diagnostics development services to these pharmaceutical companies.
In this study, the specificity of OncoCompass ™ Target for all targeted genomic alterations was higher than 99%, and the sensitivity of OncoCompass ™ Target was 87.2% for all targeted genomic alterations and 96.2% for the known actionable driver mutations among the 7 NCCN-recommended genes. 59 Table of Contents • Our OncoCompass ™ Target was applied in the exploratory biomarker sub-study within the BENEFIT study, which was an innovatively designed prospective study where patients were tested for EGFR mutations based solely on liquid biopsy and recruited to test the efficacy of Gefitinib among EGFR-mutant patients.
In this study, the specificity of OncoCompass™ Target for all targeted genomic alterations was higher than 99%, and the sensitivity of OncoCompass™ Target was 87.2% for all targeted genomic alterations and 96.2% for the known actionable driver mutations among the 7 NCCN-recommended genes. 62 Table of Contents • Our OncoCompass™ Target was applied in the exploratory biomarker sub-study within the BENEFIT study, which was an innovatively designed prospective study where patients were tested for EGFR mutations based solely on liquid biopsy and recruited to test the efficacy of Gefitinib among EGFR-mutant patients.
In order to form collaborations with pharmaceutical companies, we must go through their rigorous quality assurance audits and technical validations to demonstrate that the design, specification and performance of our tests as well as our testing workflow meet their quality and technical requirements. 64 Table of Contents Distribution We pioneered a two-pronged commercial infrastructure, consisting of both central and in-hospital laboratories, to maximize market penetration and create higher barriers to entry: • Central laboratory model .
In order to form collaborations with pharmaceutical companies, we must go through their rigorous quality assurance audits and technical validations to demonstrate that the design, specification and performance of our tests as well as our testing workflow meet their quality and technical requirements. 66 Table of Contents Distribution We pioneered a two-pronged commercial infrastructure, consisting of both central and in-hospital laboratories, to maximize market penetration and create higher barriers to entry: • Central laboratory model.
This algorithm combines numerous random and scarce methylation patterns to address challenges arising from low circulating levels of tumor DNA in early-stage cancer patients. 56 Table of Contents The graphs below show that our brELSA ™ technology enables higher recovery of circulating DNA in library preparation and sequencing as compared to two commercially available kits.
This algorithm combines numerous random and scarce methylation patterns to address challenges arising from low circulating levels of tumor DNA in early-stage cancer patients. 59 Table of Contents The graphs below show that our brELSA™ technology enables higher recovery of circulating DNA in library preparation and sequencing as compared to two commercially available kits.
Development and validation of MRD detection products . Building upon brPROPHET ™ , we are continuously conducting analytical and clinical validation studies on our UMI-based liquid biopsy products for their sensitivity and utility for MRD detection, which could demonstrate clinical benefits for early-stage patients by predicting their risk of recurrence after treatment.
Development and validation of MRD detection products . Building upon brPROPHET™, we are continuously conducting analytical and clinical validation studies on our UMI-based liquid biopsy products for their sensitivity and utility for MRD detection, which could demonstrate clinical benefits for early-stage patients by predicting their risk of recurrence after treatment. Development of early cancer detection technologies and products.
Our NGS-based cancer therapy selection tests are also regularly used by leading pharmaceutical companies, such as AstraZeneca, Bayer, Johnson & Johnson, CStone, Abbisko Therapeutics and Merck, in their clinical studies and clinical trials or as CDx development for their respective drug candidates.
Our NGS-based cancer therapy selection tests are also regularly used by leading pharmaceutical companies, such as AstraZeneca, Bayer, Johnson & Johnson, CStone, Abbisko Therapeutics, Boehringer Ingelheim, and Merck, in their clinical studies and clinical trials or as CDx development for their respective drug candidates.
Early cancer detection can substantially increase the chances of successful treatment and therefore presents enormous market opportunities. However, it is extremely difficult to develop liquid biopsy-based early cancer detection tests with the sensitivity and specificity needed for the tests to be clinically useful.
Early cancer detection can substantially increase the chances of successful treatment, and accordingly presents enormous market opportunities. However, it is extremely difficult to develop liquid biopsy-based early cancer detection tests with the sensitivity and specificity needed for the tests to be clinically useful.
In addition to detecting the genomic alternations of the targeted genes, OncoScreen ™ IO and OncoCompass ™ IO also detect important immune-oncology biomarkers including TMB and MSI, as well as rare but clinically actionable biomarkers, such as NTRK fusions, which provide important insights for therapy selection. 58 Table of Contents The table below sets forth the key specifications of OncoScreen ™ IO and OncoCompass ™ IO: Product and Operational Specifications OncoScreen ™ IO/ OncoCompass ™ IO Number of genes 520 Immunotherapy biomarkers TMB, MSI Limit of detection (on hot-spot mutations) 1.7-2 % Maximum turnaround time (1) 10 days (1) For the year ended December 31, 2022.
In addition to detecting the genomic alternations of the targeted genes, OncoScreen™ IO and OncoCompass™ IO also detect important immune-oncology biomarkers including TMB and MSI, as well as rare but clinically actionable biomarkers, such as NTRK fusions, which provide important insights for therapy selection. 61 Table of Contents The table below sets forth the key specifications of OncoScreen™ IO and OncoCompass™ IO: Product and Operational Specifications OncoScreen™ IO/ OncoCompass™ IO Number of genes 520 Immunotherapy biomarkers TMB, MSI Limit of detection (on hot-spot mutations) 1.7-2 % Maximum turnaround time (1) 10 days (1) For the year ended December 31, 2023.
Organizational Structure The chart below sets forth our corporate structure and identifies our principal subsidiaries as of the date of this annual report: 82 Table of Contents (1) Shareholders of Burning Rock (Beijing) Biotechnology Co., Ltd., the VIE, include (i) Mr.
Organizational Structure The chart below sets forth our corporate structure and identifies our principal subsidiaries as of the date of this annual report: 83 Table of Contents (1) Shareholders of Burning Rock (Beijing) Biotechnology Co., Ltd., the VIE, include (i) Mr.
It generally takes 12 to 30 months for hospitals to progress from pipeline partner hospitals to contracted partner hospitals, which generate recurring revenue from the sale of reagent kits. Operations We primarily perform cancer therapy selection using both tissue and liquid biopsy tests under the central laboratory model in our NCCL- and CLIA-certified, CAP-accredited central laboratory in Guangzhou.
It generally takes 12 to 30 months for hospitals to progress from pipeline partner hospitals to contracted partner hospitals, which generate recurring revenue from the sale of reagent kits. 68 Table of Contents Operations We primarily perform cancer therapy selection using both tissue and liquid biopsy tests under the central laboratory model in our NCCL- and CLIA-certified, CAP-accredited central laboratory in Guangzhou.
Alternatively, persons whose trade secrets are being misappropriated may file lawsuits in a Chinese court for loss and damages incurred due to the misappropriation. 77 Table of Contents The measures to protect trade secrets include oral or written non-disclosure agreements or other reasonable measures to require the employees of, or persons in business contact with, legal owners or holders to keep trade secrets confidential.
Alternatively, persons whose trade secrets are being misappropriated may file lawsuits in a Chinese court for loss and damages incurred due to the misappropriation. The measures to protect trade secrets include oral or written non-disclosure agreements or other reasonable measures to require the employees of, or persons in business contact with, legal owners or holders to keep trade secrets confidential.
The Ministry of Industry and Information Technology is the main regulatory body responsible for the administration of PRC internet domain names. As of December 31, 2022, we had four registered domain names, including our official website.
The Ministry of Industry and Information Technology is the main regulatory body responsible for the administration of PRC internet domain names As of December 31, 2023, we had four registered domain names, including our official website.
According to CIC, our MSI calling algorithms have higher sensitivity than substantially all other published MSI algorithms. 54 Table of Contents In 2018, our prettyMSI algorithm was clinically validated in an MSI detection study with the results published in a 2018 March Journal of Molecular Diagnostics article “ A novel and reliable method to detect microsatellite instability in colorectal cancer by next-generation sequencing .” In 2020, our bMSISEA algorithm was clinically validated in an MSI detection study, the result of which will be published in an article titled “ Detection of microsatellite instability from circulating tumor DNA by targeted deep sequencing ”, that has been submitted to and accepted by the same journal.
According to CIC, our MSI calling algorithms have higher sensitivity than substantially all other published MSI algorithms. 56 Table of Contents In 2018, our prettyMSI algorithm was clinically validated in an MSI detection study with the results published in a 2018 March Journal of Molecular Diagnostics article “A novel and reliable method to detect microsatellite instability in colorectal cancer by next-generation sequencing.” In 2020, our bMSISEA algorithm was clinically validated in an MSI detection study, the result of which will be published in an article titled “Detection of microsatellite instability from circulating tumor DNA by targeted deep sequencing”, that has been submitted to and accepted by the same journal.
The table below sets forth the key specifications of OncoCompass ™ Target: Product and Operational Specifications OncoCompass ™ Target Number of genes 168 Immunotherapy biomarkers MSI Limit of detection (defined at 80% sensitivity) 0.2 % Percentage of samples processed within 7 days (1) > 95 % (1) For the year ended December 31, 2022.
The table below sets forth the key specifications of OncoCompass™ Target: Product and Operational Specifications OncoCompass™ Targe Number of genes 168 Immunotherapy biomarkers MSI Limit of detection (defined at 80% sensitivity) 0.2 % Percentage of samples processed within 7 days (1) 95 % (1) For the year ended December 31, 2023.
Our suppliers generally grant us a credit term of 30 to 90 days, and are responsible for the repair and maintenance of the laboratory equipment and supplies they supply. 67 Table of Contents Research and Development Our research and development efforts are primarily focused on the following areas: Development of, and improvement on, NGS-based cancer therapy selection products .
Our suppliers generally grant us a credit term of 30 to 90 days, and are responsible for the repair and maintenance of the laboratory equipment and supplies they supply. Research and Development Our research and development efforts are primarily focused on the following areas: Development of, and improvement on, NGS-based cancer therapy selection products .
Manufacturers not meeting relevant legal requirements are not permitted to commence manufacturing activities. 79 Table of Contents Pursuant to the Administrative Measures Governing the Production Quality of Pharmaceutical Products effective on March 1, 2011, manufacturers of pharmaceutical products must establish production safety and labor protection measures in connection with the operation of their manufacturing equipment and manufacturing process.
Manufacturers not meeting relevant legal requirements are not permitted to commence manufacturing activities. Pursuant to the Administrative Measures Governing the Production Quality of Pharmaceutical Products effective on March 1, 2011, manufacturers of pharmaceutical products must establish production safety and labor protection measures in connection with the operation of their manufacturing equipment and manufacturing process.
For example, our OncoCompass ™ Target was used in the following research studies: (1) a research study that resulted in the 2018 January Annals of Oncology article titled “ Unique genetic profiles from cerebrospinal fluid cell-free DNA in leptomeningeal metastases of EGFR- mutant non-small-cell lung cancer: a new medium of liquid biopsy ,” which we jointly published with Professor Yi-Long Wu; (2) a research study that resulted in the 2018 July Journal of Thoracic Onology article titled “ First-in-human Phase I study of AC0010, a mutant-selective EGFR inhibitor in non-small cell lung cancer: safety, efficacy and potential mechanism of resistance ,” which we jointly published with Professor Li Zhang; (3) a research study that resulted in the 2020 February Journal of Thoracic Cancer article titled “ Detection of non-reciprocal/reciprocal ALK translocation as poor predictive marker in first-line crizotinib-treated ALK-rearranged non-small cell lung cancer patients ,” which we jointly published with Professor Nong Yang; (4) a research study that resulted in the 2019 December Translational Lung Cancer Research article titled “ Parallel serial assessment of somatic mutation and methylation profile from circulating tumor DNA predicts treatment response and impending disease progression in osimertinib-treated lung adenocarcinoma patients ,” which we jointly published with Professor Yuan Chen; and (5) a research study that resulted in the 2020 April Translational Lung Cancer Research article titled “ Circulating tumor DNA clearance predicts prognosis across treatment regimen in a large real-world longitudinally monitored advanced non-small cell lung cancer cohort ”, which we jointly published with Professor Shun Lu.
For example, our OncoCompass™ Target was used in the following research studies: (1) a research study that resulted in the 2018 January Annals of Oncology article titled “Unique genetic profiles from cerebrospinal fluid cell-free DNA in leptomeningeal metastases of EGFR-mutant non-small-cell lung cancer: a new medium of liquid biopsy,” which we jointly published with Professor Yi-Long Wu; (2) a research study that resulted in the 2018 July Journal of Thoracic Onology article titled “First-in-human Phase I study of AC0010, a mutant-selective EGFR inhibitor in non-small cell lung cancer: safety, efficacy and potential mechanism of resistance,” which we jointly published with Professor Li Zhang; (3) a research study that resulted in the 2020 February Journal of Thoracic Cancer article titled “Detection of non-reciprocal/reciprocal ALK translocation as poor predictive marker in first-line crizotinib-treated ALK-rearranged non-small cell lung cancer patients,” which we jointly published with Professor Nong Yang; (4) a research study that resulted in the 2019 December Translational Lung Cancer Research article titled “Parallel serial assessment of somatic mutation and methylation profile from circulating tumor DNA predicts treatment response and impending disease progression in osimertinib-treated lung adenocarcinoma patients,” which we jointly published with Professor Yuan Chen; and (5) a research study that resulted in the 2020 April Translational Lung Cancer Research article titled “Circulating tumor DNA clearance predicts prognosis across treatment regimen in a large real-world longitudinally monitored advanced non-small cell lung cancer cohort”, which we jointly published with Professor Shun Lu.
Our gross profit margin was 73.0%, 71.7% and 67.5% in 2020, 2021, and 2022 respectively. 52 Table of Contents Our Technologies NGS-Based Cancer Therapy Selection Technologies The adoption of NGS-based cancer therapy selection in China presents a number of challenges, including (i) library preparation and probe hybridization using the low-quality FFPE samples containing degraded or low quantities of DNA that are common in China, and (ii) Chinese hospitals typically prefer to perform tests in-house rather than outsourcing to third parties, but lack the required expertise, knowledge and skills to perform NGS-based cancer therapy selection tests.
Our gross profit margin was 71.7%, 67.5% and 67.6% in 2021, 2022, and 2023 respectively. 54 Table of Contents Our Technologies NGS-Based Cancer Therapy Selection Technologies The adoption of NGS-based cancer therapy selection in China presents a number of challenges, including (i) library preparation and probe hybridization using the low-quality FFPE samples containing degraded or low quantities of DNA that are common in China, and (ii) Chinese hospitals typically prefer to perform tests in-house rather than outsourcing to third parties, but lack the required expertise, knowledge and skills to perform NGS-based cancer therapy selection tests.
A software copyright owner may authorize others to exercise that copyright, and is entitled to receive remuneration. As of December 31, 2022, we had seven software copyrights. Domain Names Domain names are protected under the Administrative Measures on the Internet Domain Names promulgated by the Ministry of Industry and Information Technology.
A software copyright owner may authorize others to exercise that copyright, and is entitled to receive remuneration. As of December 31, 2023, we had eleven software copyrights. Domain Names Domain names are protected under the Administrative Measures on the Internet Domain Names promulgated by the Ministry of Industry and Information Technology.
The NCCL is the supervising authority of NGS laboratories in China. Our central laboratory in Guangzhou was the second and one of the only three NGS laboratories in China to have passed comprehensive review by the provincial centers for clinical laboratories led by the NCCL.
Our central laboratory in Guangzhou was the second and one of the only three NGS laboratories in China to have passed comprehensive review by the provincial centers for clinical laboratories led by the NCCL.
Class I medical devices are medical devices with low risks, and the safety and effectiveness of which can be ensured through routine administration. Class II medical devices are medical devices with moderate risks, which are strictly controlled and administered to ensure their safety and 72 Table of Contents effectiveness.
Class I medical devices are medical devices with low risks, and the safety and effectiveness of which can be ensured through routine administration. Class II medical devices are medical devices with moderate risks, which are strictly controlled and administered to ensure their safety and effectiveness.
The BENEFIT study was published in the Lancet Respiratory Medicine titled “ Detection of EGFR mutations in plasma circulating tumor DNA as a selection criterion for first-line gefitinib treatment in patients with advanced lung adenocarcinoma (BENEFIT): a phase 2, single-arm, multicenter clinical trial ”.
The BENEFIT study was published in the Lancet Respiratory Medicine titled “Detection of EGFR mutations in plasma circulating tumor DNA as a selection criterion for first-line gefitinib treatment in patients with advanced lung adenocarcinoma (BENEFIT): a phase 2, single-arm, multicenter clinical trial”.
As of the same date, we had 25 pending patent applications in China, 12 pending patent applications in Hong Kong, five pending patent applications in the United States, three pending patent applications in European Patent Office, two pending patent applications in Japan, two pending patent applications in Canada, two pending patent applications in Brazil, one pending patent application in Singapore, two pending patent applications in Australia, and 14 international applications strategically filed under the Patent Cooperation Treaty, or PCT, of which one is the basis of pending registration for our MSI calling algorithms in the U.S., European Patent Office and Japan two are the basis of pending registration for brELSA ™ , our targeted DNA-methylation based library preparation method for early cancer detection, in the U.S., Canada, Brazil, Singapore, Australia, China, Hong Kong, Japan and the European Patent Office, four are for OverC ™ , our multi-cancer detection blood test for early cancer testing, and another one is for brPROPHET ™ , our MRD (Minimal Resideal Disease) algorithms.
As of the same date, we had 30 pending patent applications in China, twelve pending patent applications in Hong Kong, five pending patent applications in the United States, three pending patent applications in European Patent Office, two pending patent applications in Japan, two pending patent application in Canada, one pending patent applications in Brazil, one pending patent application in Singapore, two pending patent applications in Australia, and 17 international applications strategically filed under the Patent Cooperation Treaty, or PCT, of which two are the basis of pending registration for our MSI (MicroSatellite Instability) calling algorithms in the U.S., European Patent Office and Japan, two are the basis of pending registration for brELSA™, our targeted DNA-methylation based library preparation method for early cancer detection, in the U.S., Canada, Brazil, Singapore, Australia, China, Hong Kong, Japan and the European Patent Office, six are for OverC™, our multi-cancer detection blood test for early cancer testing, and another one is for brPROPHET™, our MRD (Minimal Resideal Disease) algorithms.
As of December 31, 2022, we have partnered with 77 hospitals in 37 cities across China. We have invested and expect to continue investing substantially in our in-hospital model, as we expect it to become an increasingly important segment of China’s NGS-based cancer therapy selection market.
As of December 31, 2023, we have partnered with 87 hospitals in 40 cities across China. We have invested and expect to continue investing substantially in our in-hospital model, as we expect it to become an increasingly important segment of China’s NGS-based cancer therapy selection market.
Our OncoCompass ™ Target demonstrates consistently high sensitivity in liquid biopsies for biomarkers that are difficult to detect using conventional methods. For example, our OncoCompass ™ Target can detect actionable mutations among treatment-naive stage IV NSCLC patients with sensitivity of 96% and specificity greater than 99%.
Our OncoCompass™ Target demonstrates consistently high sensitivity in liquid biopsies for biomarkers that are difficult to detect using conventional methods. For example, our OncoCompass™ Target can detect actionable mutations among treatment-naive stage IV NSCLC patients with sensitivity of 96% and specificity greater than 99%. In a separate study, OncoCompass™ Target detected ALK fusion with a sensitivity of 79%.
The Trademark Office of CNIPA is responsible for the registration and administration of trademarks throughout the PRC. The Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. As of December 31, 2022, we had 492 registered trademarks and 107 pending trademark applications in the PRC.
The Trademark Office of CNIPA is responsible for the registration and administration of trademarks throughout the PRC. The Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. As of December 31, 2023, we had 579 registered trademarks and 37 pending trademark applications in the PRC.
Building upon brELSA ™ , our targeted DNA methylation-based library preparation method, and brMERMAID ™ , our machine learning algorithm, we will keep improving the biochemistry behind our technologies to enhance background noise suppression, allowing for more accurate qualification and enabling our tests to be compatible with more sequencers, as well as improving our early detection prediction models for cancer detection sensitivity, specificity and tissue origin determination accuracy.
Building upon brELSA™, our targeted DNA methylation-based library preparation method, and brMERMAID™, our machine learning algorithm, we will keep improving the biochemistry behind our technologies to enhance background noise suppression, allowing for more accurate qualification and enabling our tests to be compatible with more sequencers, as well as improving our early detection prediction models for cancer detection sensitivity, specificity and tissue origin determination accuracy. 69 Table of Contents Development of automation solutions for current and future products .
We are one of the pioneers in China’s cancer genotyping industry, and have worked with regulators to share our insights on the nature of the NGS technology while seeking comprehensive approvals, setting high industry standards. We have obtained the following certifications in China: 61 Table of Contents NCCL certification .
We are one of the pioneers in China’s cancer genotyping industry, and have worked with regulators to share our insights on the nature of the NGS technology while seeking comprehensive approvals, setting high industry standards. We have obtained the following certifications in China: NCCL certification. The NCCL is the supervising authority of NGS laboratories in China.
Since our inception, over 6,004 physicians from 802 hospitals across China have ordered our cancer therapy selection tests under our central laboratory model.
Since our inception, over 6,700 physicians from 829 hospitals across China have ordered our cancer therapy selection tests under our central laboratory model.
We held one patent in Japan, which will expire in 2038.
We held one patent in Japan, which will expire in 2038. We held one patent in Brazil, which will expire in 2039.
In a separate study, OncoCompass ™ Target detected ALK fusion with a sensitivity of 79%. From a real-world cohort of 1016 patients with paired tissue and plasma samples tested simultaneously, OncoCompass ™ Target could detect at least one actionable mutation among 74% patients from tissues samples, 61% from plasma samples, or 76% from either.
From a real-world cohort of 1016 patients with paired tissue and plasma samples tested simultaneously, OncoCompass™ Target could detect at least one actionable mutation among 74% patients from tissues samples, 61% from plasma samples, or 76% from either.
Our patents and patents applications are primarily related to our proprietary library preparation technologies, algorithms and laboratory equipment and processes. As of December 31, 2022, we held 26 patents in China, which will expire between 2025 and 2041. We held two patents in Hong Kong, which will expire in 2038.
Our patents and patents applications are primarily related to our proprietary library preparation technologies, algorithms and laboratory equipment and processes. As of December 31, 2023, we held 29 patents in China, which will expire between 2025 and 2042. We held five patents in Hong Kong, which will expire between 2038 and 2042.
In the opinion of Tian Yuan Law Firm, our PRC counsel: • the ownership structure of the VIE and our WFOE in China currently does not violate any applicable PRC laws or regulations currently in effect; and 84 Table of Contents • the contractual arrangements among our WFOE, VIE and the shareholders of the VIE governed by PRC law are valid, binding and enforceable in accordance with their terms and applicable PRC laws or regulations currently in effect and currently do not and will not violate any applicable PRC laws or regulations currently in effect.
In the opinion of Tian Yuan Law Firm, our PRC counsel: • the ownership structure of the VIE and our WFOE in China currently does not violate any applicable PRC laws or regulations currently in effect; and • the contractual arrangements among our WFOE, VIE and the shareholders of the VIE governed by PRC law are valid, binding and enforceable in accordance with their terms and applicable PRC laws or regulations currently in effect and currently do not and will not violate any applicable PRC laws or regulations currently in effect. 85 Table of Contents However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules.
The applicant must apply to the CNIPA for a substantive examination within three years from the date of application. 76 Table of Contents The PRC Patent Law provides that, for an invention or utility model completed in China, any applicant (not limited to Chinese companies and individuals), before filing a patent application outside of China, must first submit it to the CNIPA for a confidential examination.
The PRC Patent Law provides that, for an invention or utility model completed in China, any applicant (not limited to Chinese companies and individuals), before filing a patent application outside of China, must first submit it to the CNIPA for a confidential examination.
As of December 31, 2022, we had registered 492 trademarks in China, including “ ”, “BURNING ROCK DX”, “ ” and product and service names, and 107 trademark applications pending in China.
As of December 31, 2023, we had registered 579 trademarks in China, including “ ”, “BURNING ROCK DX”, “ ” and product and service names, and 37 trademark applications pending in China.
We had registered six trademarks, including “BURNING ROCK DX”, “ONCOSCREEN” AND “ONCOCOMPASS” in European Union, the U.K. and Australia, and thirteen trademark applications pending in the US, European Union, the U.K., Japan, Australia and Brazil. We also own four registered domain names, including our official website.
We had registered 20 trademarks, including “BURNING ROCK DX”, “ONCOSCREEN” , “CanCatch” , “OverC” AND “ONCOCOMPASS” in European Union, the U.K, United States, Japan. and Australia, and twelve trademark applications pending in the US, Canada, Japan,and Brazil. We also own four registered domain names, including our official website.
Guangzhou Burning Rock Dx Co., Ltd., a subsidiary of the VIE, obtained a Medical Institution Practice License in September 2017, with a five-year validity from March 2015 to March 2020. This license was renewed in February 2020, and the renewed license has a five-year validity until February 2025.
Guangzhou Burning Rock Dx Co., Ltd., a subsidiary of the VIE, obtained a Medical Institution Practice License in September 2017, with a five- year validity from March 2015 to March 2020.
The table below sets forth the cumulative numbers of our partner hospitals as of the dates indicated: As of December 31, 2018 2019 2020 2021 2022 Pipeline partner hospitals (1) 14 21 23 23 28 Contracted partner hospitals (2) 12 19 29 41 49 Total number of partner hospitals 26 40 52 64 77 (1) Refers to hospitals that have established in-hospital laboratories, completed laboratory equipment installation and commenced pilot testing using our products.
The table below sets forth the cumulative numbers of our partner hospitals as of the dates indicated: As of December 31, 2021 2022 2023 Pipeline partner hospitals (1) 23 28 28 Contracted partner hospitals (2) 41 49 59 Total number of partner hospitals 64 77 87 (1) Refers to hospitals that have established in-hospital laboratories, completed laboratory equipment installation and commenced pilot testing using our products.
This model has enabled us to become China’s largest provider of NGS-based cancer therapy selection tests while building relationships with over 6,004 physicians from 802 hospitals across China. Our central laboratory also supports our collaborations with pharmaceutical companies. We are the leader in the central laboratory segment of China’s NGS-based cancer therapy selection market.
This model has enabled us to become China’s largest provider of NGS-based cancer therapy selection tests while building relationships with over 6,700 physicians from 829 hospitals across China. Our central laboratory also supports our collaborations with pharmaceutical companies.
The table below sets forth the sensitivity of our 6-cancer test for the detection of stage I-IV lung, colorectal, liver, ovarian, pancreatic and esophageal cancers at 98.3% specificity: We have started the development and analytical validation for our pan-cancer test, including to initiate two prospective, multi-center studies, the PREDICT study and the PRESCIENT study to further develop and validate our pan-cancer early detection test. 57 Table of Contents The PRESCIENT study, which was launched in May 2021, was the first blood-based, pan-cancer early-detection study in China using a multi-omics approach.
The table below sets forth the sensitivity of our 6-cancer test for the detection of stage I-IV lung, colorectal, liver, ovarian, pancreatic and esophageal cancers at 98.3% specificity. 60 Table of Contents We have started the development and analytical validation for our pan-cancer test, including to initiate two prospective, multi-center studies, the PREDICT study and the PRESCIENT study to further develop and validate our pan-cancer early detection test.
The table below sets forth the key operating data for our central laboratory model for the periods presented: Year ended December 31, 2019 2020 2021 2022 Number of patients tested (1) 23,075 25,262 28,199 27,353 Number of ordering physicians (2) 1,632 1,318 1,105 949 Number of ordering hospitals (3) 335 312 339 272 65 Table of Contents (1) A patient who took multiple tests in different quarters of a given period is counted only once.
The table below sets forth the key operating data for our central laboratory model for the periods presented: Year ended December 31, 2021 2022 2023 Number of patients tested (1) 28,199 27,353 20,129 Number of ordering physicians (2) 1,105 949 745 Number of ordering hospitals (3) 339 272 228 (1) A patient who took multiple tests in different quarters of a given period is counted only once.
We have also obtained Conformite Europeenne (“CE”) marking for certain of our products, including OncoScreen ™ IO, OncoCompass ™ Target and OncoScreen ™ Focus, enabling us to sell these products within the European Union and certain other jurisdictions recognizing CE marking.
We have also obtained Conformite Europeenne (“CE”) marking for certain of our products, including OncoScreen™ IO, OncoCompass™ Target and OncoScreen™ Focus, enabling us to sell these products within the European Union and certain other jurisdictions recognizing CE marking. We have also obtained the NCCL certification for our central laboratory and the NMPA approval for two NGS-based reagent kits.
February 2015 NHC The NHC published Guidelines for Personalized Medical Testing Applications of Sequencing Technology , which provides guidance on sample collection, transportation, receiving, processing, testing and inspection of project development, verification, and validation, basic principles of quality control, result reporting, and the possible problems and countermeasures, to provide standardized guidance on precision medicine based on sequencing technology application. 74 Table of Contents Date Authority Key messages July 2015 NHC The NHC published Guidelines for Individualized Treatment and Detection of Tumors , which provides for the standardization of testing technology, laboratory access and quality assurance.
February 2015 NHC The NHC published Guidelines for Personalized Medical Testing Applications of Sequencing Technology, which provides guidance on sample collection, transportation, receiving, processing, testing and inspection of project development, verification, and validation, basic principles of quality control, result reporting, and the possible problems and countermeasures, to provide standardized guidance on precision medicine based on sequencing technology application.
The Measures for the Administration of Clinical Testing Laboratories in Medical Institutions, which was promulgated by the MOH in February 2006 and became effective in June 2006 and was revised in July 2020, provides regulations on the examination, establishment, quality management and safety practice of clinical testing laboratories in medical institutions.
This license was renewed in February 2020, and the renewed license has a five-year validity until February 2025. 73 Table of Contents The Measures for the Administration of Clinical Testing Laboratories in Medical Institutions, which was promulgated by the MOH in February 2006 and became effective in June 2006 and was revised in July 2020, provides regulations on the examination, establishment, quality management and safety practice of clinical testing laboratories in medical institutions.
In the Special Conference on Advances in Liquid Biopsies hosted by AACR in 2020, we presented our data regarding early detection of lung, colorectal and liver cancers with brELSA ™ and brMERMAID ™ in a poster titled “ Multiplatform analysis of early-stage cancer signatures in blood .” At the AACR Virtual Annual Meeting II, we presented our new data regarding early detection of ovarian cancer in a poster titled “ Methylation profiling of circulating tumor DNA for the detection of ovarian cancer .” At the European Society for Medical Oncology (ESMO) Asia Virtual Congress 2020, we presented our new data regarding early detection of lung, colorectal, liver, ovarian, pancreatic, and esophageal cancers in a presentation titled “ Early detection and localization of multiple cancers using a blood-based methylation assay (ELSA-seq) .” At the AACR Annual Meeting 2022, we presented a poster titled “ Analytical performance of ELSA-seq, a blood-based test for early detection of multiple cancers ,” in which we evaluated the analytical performance of a refined test version of ELSA-seq and demonstrated the high sensitivity of the detection data. 55 Table of Contents The diagram below illustrates our early cancer detection workflow incorporating brELSA ™ and brMERMAID ™ : Step (A) Sample preparation : 8-10 ml of venous blood is collected and processed to isolate circulating cell-free DNA, or cfDNA, which is a cancer biomarker.
In the Special Conference on Advances in Liquid Biopsies hosted by AACR in 2020, we presented our data regarding early detection of lung, colorectal and liver cancers with brELSA™ and brMERMAID™ in a poster titled “Multiplatform analysis of early-stage cancer signatures in blood.” At the AACR Virtual Annual Meeting II, we presented our new data regarding early detection of ovarian cancer in a poster titled “Methylation profiling of circulating tumor DNA for the detection of ovarian cancer.” At the European Society for Medical Oncology (ESMO) Asia Virtual Congress 2020, we presented our new data regarding early detection of lung, colorectal, liver, ovarian, pancreatic, and esophageal cancers in a presentation titled “Early detection and localization of multiple cancers using a blood-based methylation assay (ELSA-seq).” At the AACR Annual Meeting 2022, we presented a poster titled “Analytical performance of ELSA-seq, a blood-based test for early detection of multiple cancers,” in which we evaluated the analytical performance of a refined test version of ELSA-seq and demonstrated the high sensitivity of the detection data.
In addition, the EIT Law provides that a non-resident enterprise refers to an entity established under foreign law whose “de facto management body” is not within the PRC, but has an establishment or place of business in the PRC, or does not have an establishment or place of business in the PRC but has income sourced within the PRC. 81 Table of Contents The Implementation Rules of the EIT Law provide that since January 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident enterprise investors that do not have an establishment or place of business in the PRC, or have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC.
The Implementation Rules of the EIT Law provide that since January 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident enterprise investors that do not have an establishment or place of business in the PRC, or have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC.
Normally, the CNIPA publishes an application for an invention patent within 18 months after the filing date, which may be shortened at the request of applicant.
Normally, the CNIPA publishes an application for an invention patent within 18 months after the filing date, which may be shortened at the request of applicant. The applicant must apply to the CNIPA for a substantive examination within three years from the date of application.
Concurrently with our initial public offering, we raised US$25 million from Lake Bleu Prime Healthcare Master, in a private placement. On December 8, 2020, we completed a registered follow-on public offering by certain selling shareholders of 2,243,000 ADSs at a public offering price of US$25.75 per ADS. We did not receive any proceeds from the follow-on public offering.
On December 8, 2020, we completed a registered follow-on public offering by certain selling shareholders of 2,243,000 ADSs at a public offering price of US$25.75 per ADS. We did not receive any proceeds from the follow-on public offering.
We have also obtained the NCCL certification for our central laboratory and the NMPA approval for two NGS-based reagent kits. We are the first company in China that has an NGS laboratory that has been certified by the CLIA and the NCCL and accredited by the CAP. We are also the first company in China with NMPA-approved NGS-based reagent kits.
We are the first company in China that has an NGS laboratory that has been certified by the CLIA and the NCCL and accredited by the CAP. We are also the first company in China with NMPA-approved NGS-based reagent kits. We have two NMPA- approved NGS-based reagent kits as of the date of this annual report.
However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules. Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to or otherwise different from the above opinion of our PRC legal counsel. See “Item 3. Key Information—D.
Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to or otherwise different from the above opinion of our PRC legal counsel. See “Item 3. Key Information—D.
We support the TCFD and its recommendations and we are committed to assessing the impacts of climate risks in the coming financial years. Competition We are China’s number one NGS-based cancer therapy selection company. China’s cancer genotyping industry is highly competitive. Our major competitors include domestic NGS-based cancer therapy selection and MRD companies, such as AmoyDx, BGI and Geneseeq.
We support the TCFD and its recommendations and we are committed to assessing the impacts of climate risks in the coming financial years. 71 Table of Contents Competition We are China’s number one NGS-based cancer therapy selection company. China’s cancer genotyping industry is highly competitive.
On December 26, 2019, the State Council promulgated the Implementation Rules to the Foreign Investment Law, which became effective on January 1, 2020. The implementation rules further clarify that the state encourages and promotes foreign investment, protects the lawful rights and interests of foreign investors, regulates foreign investment administration, continues to optimize foreign investment environment, and advances a higher-level opening.
The implementation rules further clarify that the state encourages and promotes foreign investment, protects the lawful rights and interests of foreign investors, regulates foreign investment administration, continues to optimize foreign investment environment, and advances a higher- level opening.
Foreign entities, individuals and such entities established or actually controlled thereby are not allowed to collect or preserve China’s human genetic resources (including organs, tissues, cells and other genetic materials of human genome and gene) or provide human genetic resources abroad, while they are prohibited from using China’s human genetic resources unless they have obtained an approval from relevant PRC government authority or have filed with relevant government authority for international cooperation with a Chinese entity.
Foreign entities, individuals and such entities established or actually controlled thereby are not allowed to collect or preserve China’s human genetic resources (including organs, tissues, cells and other genetic materials of human genome and gene) or provide human genetic resources abroad, while they are prohibited from using China’s human genetic resources unless they have obtained an approval from relevant PRC government authority or have filed with relevant government authority for international cooperation with a Chinese entity. 72 Table of Contents Biosecurity Law On October 17, 2020, the Standing Committee of the National People’s Congress adopted the Biosecurity Law of the People’s Republic of China, or the Biosecurity Law, which became effective on April 15, 2021.
Jie Wang, head of department of medicine in the Cancer Hospital of Chinese Academy of Medical Sciences, vice president of CSCO Lancet Respiratory Medicine Detection of EGFR mutations in plasma circulating tumor DNA as a selection criterion for first-line Gefitinib treatment in patients with advanced lung adenocarcinoma (BENEFIT): a phase 2, single-arm, multicenter clinical trial Our OncoCompass ™ Target was used for the NGS-based cancer therapy selection of plasma ctDNA in the study 62 Table of Contents Collaborating Key Opinion Leaders Journal Title Article Title Our Products Qing Zhou, deputy head of the Lung Research Institute of Guangdong Provincial People’s Hospital, secretary of CTONG EBioMedicine Analysis of resistance mechanisms to Abivertinib, a third-generation EGFR tyrosine kinase inhibitor, in patients with EGFR T790M- positive non-small cell lung cancer from a phase I trial Our OncoScreen was selected in the biomarker study Ying Yuan, deputy head of department of medicine of the Second Affiliated Hospital of Zhejiang University School of Medicine, member and secretary of the Committee of Colorectal Cancer of China Anti-Cancer Association Journal of Molecular Diagnostics A novel and reliable method to detect microsatellite instability in colorectal cancer by next-generation sequencing Our ColonCore and the corresponding MSI calling algorithm were used in the validation study Naixin Liang, oncologist residing in Peking Union Medical College Hospital, Peking Union Medical College and Chinese Academy of Medical Sciences Nature Biomedical Engineering Ultrasensitive detection of circulating tumour DNA via deep methylation sequencing aided by machine learning Our ELSA-seq was used for study of circulating tumor DNA methylation markers for the early detection of lung cancer 63 Table of Contents Collaborations with Pharmaceutical Companies We collaborate with leading international and domestic pharmaceutical companies on clinical trials and research studies, primarily by providing central laboratory services and companion diagnostics development services.
We form academic collaborations with oncology key opinion leaders where our products are used in clinical trials and research studies on cancer targeted therapies and immunotherapies, the results of which have been published in over 200 peer-reviewed articles in the Journal of Clinical Oncology, Lancet Respiratory Medicine, Clinical Cancer Research, Journal of Thoracic Oncology, Annals of Oncology and other academic journals. 65 Table of Contents The table below highlights some of our publication collaborations with influential oncology key opinion leaders based on these clinical trials and research studies: Collaborating Key Opinion Leaders Journal Title Article Title Our Products Qiang Gao and Jia Fan, oncologists residing in Zhongshan Hospital, Fudan University Annals of Oncology Unintrusive multi-cancer detection by circulating cell-free DNA methylation sequencing (THUNDER): development and independent validation studies Our OverC™ was validated in the THUNDER study, a large- scale prospective six-cancer case-control study Juan Zhou and Minwei Bao, oncologists residing in the Shanghai Pulmonary Hospital & Thoracic Cancer Institute, Tongji University School of Medicine BMC Medicine Increased blood-based intratumor heterogeneity (bITH) is associated with unfavorable outcomes of immune checkpoint inhibitors plus chemotherapy in non-small cell lung cancer Our products: Our OncoCompass™ IO was applied to discover a novel liquid-based predictive biomarker for immunotherapy Jie Wang, head of department of medicine in the Cancer Hospital of Chinese Academy of Medical Sciences, vice president of CSCO Lancet Respiratory Medicine Detection of EGFR mutations in plasma circulating tumor DNA as a selection criterion for first-line Gefitinib treatment in patients with advanced lung adenocarcinoma (BENEFIT): a phase 2, single-arm, multicenter clinical trial Our OncoCompass™ Target was used for the NGS-based cancer therapy selection of plasma ctDNA in the study Qing Zhou, deputy head of the Lung Research Institute of Guangdong Provincial People’s Hospital, secretary of CTONG EBioMedicine Analysis of resistance mechanisms to Abivertinib, a third-generation EGFR tyrosine kinase inhibitor, in patients with EGFR T790M- positive non-small cell lung cancer from a phase I trial Our OncoScreen was selected in the biomarker study Ying Yuan, deputy head of department of medicine of the Second Affiliated Hospital of Zhejiang University School of Medicine, member and secretary of the Committee of Colorectal Cancer of China Anti-Cancer Association Journal of Molecular Diagnostics A novel and reliable method to detect microsatellite instability in colorectal cancer by next- generation sequencing Our ColonCore and the corresponding MSI calling algorithm were used in the validation study Naixin Liang, oncologist residing in Peking Union Medical College Hospital, Peking Union Medical College and Chinese Academy of Medical Sciences Nature Biomedical Engineering Ultrasensitive detection of circulating tumour DNA via deep methylation sequencing aided by machine learning Our ELSA-seq was used for study of circulating tumor DNA methylation markers for the early detection of lung cancer Collaborations with Pharmaceutical Companies We collaborate with leading international and domestic pharmaceutical companies on clinical trials and research studies, primarily by providing central laboratory services and companion diagnostics development services.
In May 2018, we were certified by, and received NGS laboratory certification from, the Guangdong branch of the NCCL, and the certificate is valid for five years. Our central laboratory also renewed our clinical PCR testing laboratory certificate issued by Guangdong Branch of the NCCL in May 2021, and the certificate is valid for five years. NMPA approval .
In May 2018, we were certified by, and received NGS laboratory certification from, the Guangdong branch of the NCCL, and the certificate is valid for five years.
Since 2014, we have offered our cancer therapy selection tests under a central laboratory model. Under this model, cancer patients’ tissue and liquid biopsy samples are delivered to our central laboratory in Guangzhou for processing, and we issue test reports generally within six days from our receipt of the tissue and liquid biopsy samples, respectively.
Under this model, cancer patients’ tissue and liquid biopsy samples are delivered to our central laboratory in Guangzhou for processing, and we issue test reports generally within six days from our receipt of the tissue and liquid biopsy samples, 25 days for samples for our MRD products and nine days for samples for our early detection products.
Three months ended March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 Number of patients tested 7,716 8,155 7,808 8,235 7,743 8,060 7,989 6,419 Number of ordering physicians (1) 1,082 1,013 920 917 994 767 897 797 Number of ordering hospitals (2) 303 300 287 306 318 264 257 238 (1) Represents physicians who on average order at least one test from us every month during a relevant period under the central laboratory model.
Three months ended March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Number of patients tested 7,743 8,060 7,989 6,419 6,139 6,585 5,502 5,156 Number of ordering physicians (1) 994 767 897 797 792 725 643 620 Number of ordering hospitals (2) 318 264 257 238 241 225 213 202 (1) Represents physicians who on average order at least one test from us every month during a relevant period under the central laboratory model.
At the American Association of Cancer Research (AACR) Annual Meeting 2019, we presented a poster that demonstrated the data of early detection of lung cancer using our methylation profiling method combining brELSA ™ and brMERMAID ™ .
The combination of brELSA™ and brMERMAID™ enables highly sensitive, accurate and robust early cancer detection results that are on par with global leaders. 58 Table of Contents At the American Association of Cancer Research (AACR) Annual Meeting 2019, we presented a poster that demonstrated the data of early detection of lung cancer using our methylation profiling method combining brELSA™ and brMERMAID™.
Medical Devices Subject to Cold Chain Management According to the Guidelines for Cold Chain (Transport & Storage) Management of Medical Devices, as promulgated by the CFDA in September 2016, medical devices subject to cold chain management, such as our reagent kits, are medical devices requiring refrigeration and frozen management in the process of transportation and storage in accordance with relevant instructions and labels.
Guangzhou Burning Rock Medical Devices Co., Ltd. obtained a medical device operation license for Class III medical devices in December 2020, with a term of five years. 75 Table of Contents Medical Devices Subject to Cold Chain Management According to the Guidelines for Cold Chain (Transport & Storage) Management of Medical Devices, as promulgated by the CFDA in September 2016, medical devices subject to cold chain management, such as our reagent kits, are medical devices requiring refrigeration and frozen management in the process of transportation and storage in accordance with relevant instructions and labels.
According to the Supervision and Administration of Medical Devices, entities are prohibited from using or operating unregistered or unfiled, expired, invalid or obsolete medical devices or those without a certificate of conformity. 73 Table of Contents Pursuant to the Notice on Strengthening the Administration of Import and Use of Pharmaceutical and Medical Devices, as promulgated by the CFDA in October 2010, medical institutions may only purchase qualified medical devices from enterprises with a medical device manufacture license or a medical device operation license.
Pursuant to the Notice on Strengthening the Administration of Import and Use of Pharmaceutical and Medical Devices, as promulgated by the CFDA in October 2010, medical institutions may only purchase qualified medical devices from enterprises with a medical device manufacture license or a medical device operation license.
Our ColonCore was also endorsed and recommended in Chinese Experts Consensus on MSI Testing . Key Prognosis Prediction Tests brPROPHET ™ brPROPHET ™ , which we have launched in March 2022, is our self-developed MRD product based on personalized approach.
Our ColonCore was also endorsed and recommended in Chinese Experts Consensus on MSI Testing. Key Prognosis Prediction Tests brPROPHET™ brPROPHET™, which we have launched in March 2022, is our self-developed MRD product based on personalized approach. It has demonstrated superior sensitivity and specificity to fixed panel in pre-operative ctDNA detection and post-operative MRD calling among relapsed patients.
The Administrative Measures for the Registration of Medical Devices, or the Medical Devices Registration Measures, as promulgated by the CFDA in October 2014, provide that Class I medical devices are subject to record-filing, while Class II and Class III medical devices are subject to registration.
Specific administrative measures shall be formulated by the medical products administration of the State Council in conjunction with the competent department of health of the State Council. 74 Table of Contents The Administrative Measures for the Registration of Medical Devices, or the Medical Devices Registration Measures, as promulgated by the CFDA in October 2014, provide that Class I medical devices are subject to record-filing, while Class II and Class III medical devices are subject to registration.
In June 2022, we launched PREVENT (a Prospective multi-canceR Early-detection and interVENTional) study, China’s first prospective interventional study to evaluate the performance of OverC ™ in the asymptomatic population. The study is expected to enroll 12,500 asymptomatic individuals, to evaluate the performance of OverC ™ in detecting six types of cancers, including lung, liver, colorectal, esophageal, pancreatic and ovarian cancers.
The study is expected to enroll 12,500 asymptomatic individuals, to evaluate the performance of OverC™ in detecting six types of cancers, including lung, liver, colorectal, esophageal, pancreatic and ovarian cancers.
Our central laboratory currently has an annual capacity of over 100,000 tests, which is expected to increase to 200,000 tests by the end of 2023 through the adoption of automation systems and laboratory expansions. We achieve a median turnaround time of six days for both of our liquid biopsy and tissue-based tests.
Our central laboratory currently has an annual capacity of over 100,000 tests, which is expected to increase to 200,000 tests by the end of 2024 through the adoption of automation systems and laboratory expansions.
Revenue from our central laboratory model has accounted for a substantial majority of our revenue, and we expect it to continue to grow. • In-hospital model : Chinese hospitals generally prefer to conduct laboratory tests in-house.
Accordingly, while revenue from our central laboratory model has accounted for, and is expected to continue to account for, a substantial part of our total revenue, we expect revenue from our central laboratory model to be more stable in the future. • In-hospital model : Chinese hospitals generally prefer to conduct laboratory tests in-house.
Our in-depth cancer genomics insights, accumulated from the large number of tests we have performed since our inception, enable us to process and accurately analyze genomic information and achieve a median turnaround time of 6 days. 51 Table of Contents We offer a broad spectrum of NGS-based products.
Our in-depth cancer genomics insights, accumulated from the large number of tests we have performed since our inception, enable us to process and accurately analyze genomic information.
Having a central laboratory conducting tests for our collaborating physicians and hospitals and manufacturing facilities for the production of reagent kits, we acknowledge our potential environmental impacts and social responsibilities on environmental protection. 69 Table of Contents We target to implement a number of company-wide measures to ensure compliance with the stringent regulatory requirements and standard operating procedures relating to emissions of air, water and other materials, bio-waste generation and treatment, handling, use, storage, treatment and disposal of hazardous substances, worker health and safety requirements, and emergency planning and response.
We target to implement a number of company-wide measures to ensure compliance with the stringent regulatory requirements and standard operating procedures relating to emissions of air, water and other materials, bio-waste generation and treatment, handling, use, storage, treatment and disposal of hazardous substances, worker health and safety requirements, and emergency planning and response.
Magnis BR and its associated reagents are particularly suitable for Chinese hospitals because they fully automate the NGS library preparation process and convert DNA samples into sequencing-ready libraries in around nine hours, which help partner hospitals streamline their testing workflow, reduce manual labor and minimize risks. 66 Table of Contents Through our strategic focus—supported by our high-quality products and industry-leading technological capabilities—we have become the market leader in the in-hospital segment of China’s NGS-based cancer therapy selection market.
Magnis BR and its associated reagents are particularly suitable for Chinese hospitals because they fully automate the NGS library preparation process and convert DNA samples into sequencing-ready libraries in around nine hours, which help partner hospitals streamline their testing workflow, reduce manual labor and minimize risks.
We have two NMPA-approved NGS-based reagent kits as of the date of this annual report. In particular, in March 2022, the NMPA approved our human nine-gene mutation joint detection kit (reversible termination sequencing) (LungCure ™ CDx) for non-small cell lung cancer as a class III medical device.
In particular, in March 2022, the NMPA approved our human nine-gene mutation joint detection kit (reversible termination sequencing) (LungCure™ CDx) for non-small cell lung cancer as a class III medical device. This approval demonstrates our industry-leading capability of working with the NMPA on bringing an innovative NGS-based diagnostic product to the China market.
As of December 31, 2022, we held 26 patents in China, which will expire between 2025 and 2041. We held two patents in Hong Kong, which will expire in 2038.
As of December 31, 2023, we held 29 patents in China, which will expire between 2025 and 2042. We held five patents in Hong Kong, which will expire between 2038 and 2042. We held one patent in Brazil, which will expire in 2039.
Regulations Relating to Dividend Distributions The principal regulations governing distributions of dividends paid by wholly foreign-owned enterprises include: • Company Law of the PRC (1993), as amended in 1999, 2004, 2005, 2013, and 2018; • Foreign Investment Law of the PRC; and • Implementation Rules to the Foreign Investment Law. 80 Table of Contents Under these laws and regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
If the employees fail to pay, or the PRC subsidiaries fail to withhold, their IIT in accordance with relevant laws, rules and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC government authorities. 81 Table of Contents Regulations Relating to Dividend Distributions The principal regulations governing distributions of dividends paid by wholly foreign-owned enterprises include: • Company Law of the PRC (1993), as amended in 1999, 2004, 2005, 2013, and 2018; • Foreign Investment Law of the PRC; and • Implementation Rules to the Foreign Investment Law.
The Civil Code of the PRC provides that the defective product that causes any property damage or physical injury to any person may subject the manufacturer or vendor of that product to civil liability for such damage or injury. 75 Table of Contents On February 22, 1993, the Product Quality Law of the PRC, or the Product Quality Law, was promulgated to supplement the General Principles of the Civil Law of the PRC aiming to protect the legitimate rights and interests of the end-users and consumers and to strengthen the supervision and control of the quality of products.
On February 22, 1993, the Product Quality Law of the PRC, or the Product Quality Law, was promulgated to supplement the General Principles of the Civil Law of the PRC aiming to protect the legitimate rights and interests of the end-users and consumers and to strengthen the supervision and control of the quality of products.
Following the establishment of the SFDA in 2003, the MOH was put in charge of the overall administration of national health in the PRC excluding the pharmaceutical industry. 71 Table of Contents Medical Institutions Laws and Regulations The Regulation on the Administration of Medical Institutions as promulgated by the State Council in 1994 and revised in 2016 and 2022 provides the requirements for the establishment and administration of medical institutions.
Medical Institutions Laws and Regulations The Regulation on the Administration of Medical Institutions as promulgated by the State Council in 1994 and revised in 2016 and 2022 provides the requirements for the establishment and administration of medical institutions.
Pursuant to the Law of Manufacturing Safety of the PRC, effective on November 1, 2002 and amended on August 27, 2009, August 31, 2014 and June 10, 2021, manufacturers must establish a comprehensive management system to ensure manufacturing safety in accordance with applicable laws, regulations, national standards, and industrial standards.
Employers are also required to truthfully inform prospective employees of the job description, working conditions, location, occupational hazards and status of safe production as well as remuneration and other conditions as requested by the PRC Employment Contract Law. 80 Table of Contents Pursuant to the Law of Manufacturing Safety of the PRC, effective on November 1, 2002 and amended on August 27, 2009, August 31, 2014 and June 10, 2021, manufacturers must establish a comprehensive management system to ensure manufacturing safety in accordance with applicable laws, regulations, national standards, and industrial standards.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs a result, if we use significantly different assumptions or estimates when valuing our options, our share-based compensation expense could be materially different. 94 Table of Contents Recent accounting pronouncements A list of recent relevant accounting pronouncements is included in Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this annual report. 95 Table of Contents Results of Operations The following table sets forth our results of operations for the periods indicated: Year ended December 31, 2020 2021 2022 RMB % of Revenues RMB % of Revenues RMB US$ % of Revenues (in thousands, except for %) Revenues: Revenues from services 311,184 72.4 342,465 67.4 391,548 56,769 69.5 Revenues from sales of products 118,719 27.6 165,397 32.6 171,690 24,893 30.5 Total revenues 429,903 100.0 507,862 100.0 563,238 81,662 100.0 Cost of revenues (1) : Cost of services (80,132 ) (18.6 ) (93,401 ) (18.4 ) (119,903 ) (17,384 ) (21.3 ) Cost of goods sold (35,849 ) (8.3 ) (50,315 ) (9.9 ) (63,296 ) (9,177 ) (11.2 ) Total cost of revenues (115,981 ) (26.9 ) (143,716 ) (28.3 ) (183,199 ) (26,561 ) (32.5 ) Gross profit 313,922 73.1 364,146 71.7 380,039 55,101 67.5 Operating expenses : Research and development expenses (1) (263,940 ) (61.4 ) (367,858 ) (72.4 ) (421,868 ) (61,165 ) (74.9 ) Selling and marketing expenses (1) (168,587 ) (39.2 ) (303,096 ) (59.7 ) (370,294 ) (53,688 ) (65.7 ) General and administrative expenses (1) (293,800 ) (68.3 ) (490,256 ) (96.5 ) (568,284 ) (82,393 ) (100.9 ) Total operating expenses (726,327 ) (168.9 ) (1,161,210 ) (228.6 ) (1,360,446 ) (197,246 ) (241.5 ) Loss from operations (412,405 ) (95.8 ) (797,064 ) (156.9 ) (980,407 ) (142,145 ) (174.0 ) Interest income, net 5,401 1.3 1,921 0.4 9,458 1,371 1.7 Other (expense) income, net (887 ) (0.2 ) 199 — 152 22 — Foreign exchange (loss) gain, net (2,847 ) (0.7 ) (854 ) (0.2 ) 1,549 225 0.3 Change in fair value of a warrant liability 3,503 0.8 — — — — — Loss before income tax (407,235 ) (94.6 ) (795,798 ) (156.7 ) (969,248 ) (140,527 ) (172.0 ) Income tax expenses — — (899 ) (0.2 ) (1,985 ) (288 ) (0.4 ) Net loss (407,235 ) (94.6 ) (796,697 ) (156.9 ) (971,233 ) (140,815 ) (172.4 ) (1) Share-based compensation expenses were allocated as follows: Year ended December 31, 2020 2021 2022 RMB RMB RMB US$ Cost of revenues 796 1,504 1,783 258 Research and development expenses 49,801 29,637 52,873 7,666 Selling and marketing expenses 3,457 9,612 8,525 1,236 General and administrative expenses 119,166 241,680 263,603 38,219 Total 173,220 282,433 326,784 47,379 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenues Our revenues increased by 10.9% to RMB563.2 million (US$81.7 million) for 2022 from RMB507.9 million for 2021, primarily attributable to an increase in revenues generated from services to RMB391.5 million (US$56.8 million) for 2022 from RMB342.5 million for 2021 and to a lesser extent, revenues from sales of products to RMB171.7 million (US$24.9 million) for 2022 from RMB165.4 million for 2021.
Biggest changeResults of Operations The following table sets forth our results of operations for the periods indicated: Year ended December 31, 2021 2022 2023 RMB % of total revenues RMB % of total revenues RMB US$ % of total revenues (in thousands, except for%) Revenues: Revenues from services 342,465 67.4 391,548 69.5 345,030 48,596 64.2 Revenues from sales of products 165,397 32.6 171,690 30.5 192,405 27,100 35.8 Total revenues 507,862 100.0 563,238 100.0 537,435 75,696 100.0 Cost of revenues (1) : Cost of services (93,401 ) (18.4 ) (119,903 ) (21.3 ) (101,638 ) (14,315 ) (18.9 ) Cost of goods sold (50,315 ) (9.9 ) (63,296 ) (11.2 ) (72,570 ) (10,222 ) (13.5 ) Total cost of revenues (143,716 ) (28.3 ) (183,199 ) (32.5 ) (174,208 ) (24,537 ) (32.4 ) Gross profit 364,146 71.7 380,039 67.5 363,227 51,159 67.6 Operating expenses: Research and development expenses (1) (367,858 ) (72.4 ) (421,868 ) (74.9 ) (347,016 ) (48,876 ) (64.6 ) Selling and marketing expenses (1) (303,096 ) (59.7 ) (370,294 ) (65.7 ) (247,711 ) (34,889 ) (46.1 ) General and administrative expenses (1) (490,256 ) (96.5 ) (568,284 ) (100.9 ) (437,821 ) (61,666 ) (81.5 ) Total operating expenses (1,161,210 ) (228.6 ) (1,360,446 ) (241.5 ) (1,032,548 ) (145,431 ) (192.1 ) Loss from operations (797,064 ) (156.9 ) (980,407 ) (174.0 ) (669,321 ) (94,272 ) (124.5 ) Interest income, net 1,921 0.4 9,458 1.7 17,956 2,529 3.3 Other income, net 199 — 152 — 484 68 0.1 Foreign exchange (loss) gain, net (854 ) (0.2 ) 1,549 0.3 (420 ) (59 ) (0.1 ) Loss before income tax (795,798 ) (156.7 ) (969,248 ) (172.0 ) (651,301 ) (91,734 ) (121.2 ) Income tax expenses (899 ) (0.2 ) (1,985 ) (0.4 ) (2,388 ) (336 ) (0.4 ) Net loss (796,697 ) (156.9 ) (971,233 ) (172.4 ) (653,689 ) (92,070 ) (121.6 ) (1) Share-based compensation expenses were allocated as follows: Year ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in thousands) Cost of revenues 1,504 1,783 2,313 326 Research and development expenses 29,637 52,873 53,474 7,532 Selling and marketing expenses 9,612 8,525 9,658 1,360 General and administrative expenses 241,680 263,603 195,274 27,504 Total 282,433 326,784 260,719 36,722 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenues Our revenues decreased by 4.6% to RMB537.4 million (US$75.7 million) for 2023 from RMB563.2 million for 2022, primarily due to a decrease in revenues generated from services to RMB345.0 million (US$48.6 million) for 2023 from RMB391.5 million for 2022, offset by an increase in revenues from sales of products to RMB192.4 million (US$27.1 million) for 2023 from RMB171.7 million for 2022.
We do not provide rights of return for the reagent kits sold other than returns of defective products. Returns for defective products were not material for the periods presented. The contracts with customers from reagent kit sales of in-hospital business often contain bundles of reagent kits to customers. Each kit represents a single performance obligation.
We do not provide rights of return for the reagent kits sold other than returns of defective products. Returns for defective products were not material for the periods presented. The contracts with hospital customers from reagent kit sales of in-hospital business often contain bundles of reagent kits to customers. Each kit represents a single performance obligation.
We assess credit loss by reviewing accounts receivable and contract assets on a collective basis where similar characteristics exist, primarily based on similar business segments, service or product offerings and on an individual basis when we identify specific customers with known disputes or collectability issues.
We assess credit loss by reviewing accounts receivable and contract assets on a collective basis where similar characteristics exist, primarily based on similar business segments, service or product offerings and on an individual basis when we identify specific customers with known disputes or collectability issues.
Hong Kong has an anti-fragmentation measure under which a corporate group must nominate only one company in the group to benefit from the progressive rates. No Hong Kong profit tax has been levied on us as we did not have assessable profit that was earned in or derived from our Hong Kong subsidiary in 2020, 2021 or 2022.
Hong Kong has an anti-fragmentation measure under which a corporate group must nominate only one company in the group to benefit from the progressive rates. No Hong Kong profit tax has been levied on us as we did not have assessable profit that was earned in or derived from our Hong Kong subsidiary in 2021, 2022 or 2023.
Gross profit for in-hospital business was RMB112.0 million (US$16.2 million) for 2022, representing a 2.4% decrease from RMB114.8 million for 2021, primarily due to the volume growth in Shanghai and Beijing as COVID-19 impact lessened in 2022, partially offset by the increased depreciation in relation to our new laboratory.
Gross profit for in-hospital business was RMB112.0 million for 2022, representing a 2.4% decrease from RMB114.8 million for 2021, primarily due to the volume growth in Shanghai and Beijing as COVID-19 impact lessened in 2022, partially offset by the increased depreciation in relation to our new laboratory.
Gross profit for pharma research and development services was RMB35.4 million (US$5.1 million) for 2022, representing a 218.9% increase from RMB11.1 million for 2021, primarily due to the increased testing services performed for pharma customers. Our gross margin for pharma research and development services remained relatively stable at 48.4 % and 47.4% for 2022 and 2021, respectively.
Gross profit for pharma research and development services was RMB35.4 million for 2022, representing a 218.9% increase from RMB11.1 million for 2021, primarily due to the increased testing services performed for pharma customers. Our gross margin for pharma research and development services remained relatively stable at 48.4 % and 47.4% for 2022 and 2021, respectively.
Gross Profit and Gross Margin Our gross profit increased by 4.4% to RMB380.0 million (US$55.1 million) for 2022 from RMB364.1 million for 2021, primarily due to increased testing under our pharma research and development services performed for our pharma customers and growth in companion diagnostics development services. Our gross margin decreased to 67.5% for 2022 from 71.7% for 2021.
Gross Profit and Gross Margin Our gross profit increased by 4.4% to RMB380.0 million for 2022 from RMB364.1 million for 2021, primarily due to increased testing under our pharma research and development services performed for our pharma customers and growth in companion diagnostics development services. Our gross margin decreased to 67.5% for 2022 from 71.7% for 2021.
We estimate standalone selling price by using market conditions, entity-specific factors, including that product mix sold to customers remains over time and our expected gross margin for different customers. Changes in these assumptions and inputs could directly affects the amount and timing of revenue recognized under these arrangements. 103 Table of Contents F.
We estimate standalone selling price by using market conditions, entity-specific factors, including that product mix sold to customers remains over time and our expected gross margin for different customers. Changes in these assumptions and inputs could directly affects the amount and timing of revenue recognized under these arrangements. F.
Cost of revenue for pharma research and development services was RMB37.8 million (US$5.5 million) for 2022, representing a 207.3% increase from RMB12.3 million for 2021, which was in line with the revenue growth of this segment.
Cost of revenue for pharma research and development services was RMB37.8 million for 2022, representing a 207.3% increase from RMB12.3 million for 2021, which was in line with the revenue growth of this segment.
We record revenue on a net basis at the point in time when we have completed our facilitation services. Revenue from pharma research and development services We provide pharma research and development services to pharmaceutical companies for developing new targeted therapies and immunotherapies on various types of cancers and to hospitals for their studies on cancer diagnosis and treatment.
We record revenue on a net basis at the point in time when we have completed our facilitation services. 91 Table of Contents Revenue from pharma research and development services We provide pharma research and development services to pharmaceutical companies for developing new targeted therapies and immunotherapies on various types of cancers and to hospitals for their studies on cancer diagnosis and treatment.
Under this model, we have partnered with 77 hospitals to establish in-hospital laboratories, enabling our partner hospitals to perform NGS-based cancer therapy selection on their own using our reagent kits.
Under this model, we have partnered with 87 hospitals to establish in-hospital laboratories, enabling our partner hospitals to perform NGS-based cancer therapy selection on their own using our reagent kits.
In addition, revenue from this model depends on our partner hospitals’ clinical needs and budgets for cancer therapy selection products and services, which are beyond our control. 86 Table of Contents Our Ability to Successfully Develop Early Cancer Detection Products Investing in the research and development of new products is critical to our long-term competitiveness.
In addition, revenue from this model depends on our partner hospitals’ clinical needs and budgets for cancer therapy selection products and services, which are beyond our control. Our Ability to Successfully Develop Early Cancer Detection Products Investing in the research and development of new products is critical to our long-term competitiveness.
Cost of revenue for in-hospital business was RMB63.3 million (US$9.2 million) for 2022, representing a 25.8% increase from RMB50.3 million for 2021, primarily due to the increased selling volume as well as rental expense and renovation depreciation in relation to our new laboratory. • Pharma research and development services .
Cost of revenue for in-hospital business was RMB63.3 million for 2022, representing a 25.8% increase from RMB50.3 million for 2021, primarily due to the increased selling volume as well as rental expense and renovation depreciation in relation to our new laboratory. • Pharma research and development services .
Gross profit for central laboratory business was RMB232.6 million (US$33.7 million) for 2022, representing a 2.4% decrease from RMB238.3 million for 2021, primarily attributable to the increased depreciation in relation to our new laboratory and inventory write-downs, partially offset by the increased revenue from our monitoring packages.
Gross profit for central laboratory business was RMB232.6 million for 2022, representing a 2.4% decrease from RMB238.3 million for 2021, primarily attributable to the increased depreciation in relation to our new laboratory and inventory write-downs, partially offset by the increased revenue from our monitoring packages.
Operating Expenses Research and development expenses Our research and development expenses increased by 14.7% to RMB421.9 million (US$61.2 million) for 2022 from RMB367.9 million for 2021, primarily due to (i) an increase in expenditure for early cancer detection research, (ii) an increase in depreciation expenses for new buildings; and (iii) an increase in amortized expense on share-based compensation.
Operating Expenses Research and development expenses Our research and development expenses increased by 14.7% to RMB421.9 million for 2022 from RMB367.9 million for 2021, primarily due to (i) an increase in expenditure for early cancer detection research, (ii) an increase in depreciation expenses for new buildings; and (iii) an increase in amortized expense on share-based compensation.
We expect our general and administrative expenses to continue increasing to support our business growth, but we expect that they will eventually decrease as a percentage of our revenues as we achieve increased economies of scale. Taxation Cayman Islands We are an exempted company incorporated in the Cayman Islands.
We expect our general and administrative expenses to continue increasing to support our business growth, but we expect that they will eventually decrease as a percentage of our revenues as we achieve increased economies of scale. 89 Table of Contents Taxation Cayman Islands We are an exempted company incorporated in the Cayman Islands.
Each cancer therapy selection test represents a single performance obligation. Revenue is allocated to each performance obligation based on the relative standalone selling price method. We record revenue at a point in time when each cancer therapy selection testing report is delivered to the patient. We launched cancer therapy selection testing packages (“Monitoring Packages”) in 2017.
Revenue is allocated to each performance obligation based on the relative standalone selling price method. We record revenue at a point in time when each cancer therapy selection testing report is delivered to the patient. We launched cancer therapy selection testing packages (“Monitoring Packages”) in 2017.
Our revenue generated from in-hospital business increased by 6.2% to RMB175.3 million (US$25.4 million) for 2022 from RMB165.1 million for 2021, primarily attributable to (i) increased demand from existing hospitals and (ii) demand from eight new contracted partner hospitals added to our in-hospital channel in 2022.
Our revenue generated from in-hospital business increased by 6.2% to RMB175.3 million for 2022 from RMB165.1 million for 2021, primarily attributable to (i) increased demand from existing hospitals and (ii) demand from eight new contracted partner hospitals added to our in-hospital channel in 2022.
Cost of revenue for central laboratory business was RMB82.1 million (US$11.9 million) for 2022, representing a 1.2% increase from RMB81.1 million for 2021, primarily due to the increased depreciation in relation to our new laboratory and inventory write-downs. • In-hospital business .
Cost of revenue for central laboratory business was RMB82.1 million for 2022, representing a 1.2% increase from RMB81.1 million for 2021, primarily due to the increased depreciation in relation to our new laboratory and inventory write-downs. • In-hospital business .
We record revenue on the sales of reagent kits at a point in time when the reagent kits are delivered to hospitals. For the facilitation services, we purchase the laboratory equipment from third-party suppliers when a hospital submits purchase request and resells the laboratory equipment to the hospital.
We recognize revenue on the sales of reagent kits at a point in time when the reagent kits are delivered to hospitals customers. For the facilitation services, we purchase the laboratory equipment from third-party suppliers when a hospital submits purchase request and resells the laboratory equipment to the hospital.
We recognize revenue using an output method to measure progress, utilizing cancer therapy selection testing performed to-date as our measure of progress. 91 Table of Contents We also provide companion diagnostics development service to pharmaceutical companies. We recognize revenue using an input method to measure progress for these arrangements.
We recognize revenue using an output method to measure progress, utilizing cancer therapy selection testing performed to-date as our measure of progress. We also provide companion diagnostics development service to pharmaceutical companies. We recognize revenue using an input method to measure progress for these arrangements.
Interest Income, Net Our interest income, net increased by 392.3% to RMB9.5 million (US$1.4 million) for 2022 from RMB1.9 million for 2021, primarily due to the increase in interest income as a result of the U.S. interest rate hike.
Interest Income, Net Our interest income, net increased by 392.3% to RMB9.5 million for 2022 from RMB1.9 million for 2021, primarily due to the increase in interest income as a result of the U.S. interest rate hike.
Net Loss Our net loss increased by 21.9% to RMB971.2 million (US$140.8 million) for 2022 from RMB796.7 million for 2021, primarily due to an increase in operating expenses as mentioned above, which was in line with the continued growth of our business. The increase in net loss was partially offset by our increased total revenues.
Net Loss Our net loss increased by 21.9% to RMB971.2 million for 2022 from RMB796.7 million for 2021, primarily due to an increase in operating expenses as mentioned above, which was in line with the continued growth of our business. The increase in net loss was partially offset by our increased total revenues. B.
Upon adoption of ASC326, We record the allowance for credit losses as an offset to accounts receivable and contract assets, with estimated credit losses charged to “General and administrative expenses” in the consolidated statements of comprehensive loss.
We record the allowance for credit losses as an offset to accounts receivable and contract assets, with estimated credit losses charged to “General and administrative expenses” in the consolidated statements of comprehensive loss.
Our revenue generated from pharma research and development services increased by 212.8% to RMB73.2 million (US$10.6 million) for 2022 from RMB23.4 million for 2021, primarily attributable to increased development and testing services performed for our pharma customers. Cost of Revenues Our cost of revenues increased by 27.5% to RMB183.2 million (US$26.6 million) for 2022 from RMB143.7 million for 2021.
Our revenue generated from pharma research and development services increased by 212.8% to RMB73.2 million for 2022 from RMB23.4 million for 2021, primarily attributable to increased development and testing services performed for our pharma customers. Cost of Revenues Our cost of revenues increased by 27.5% to RMB183.2 million for 2022 from RMB143.7 million for 2021.
The table below sets forth a breakdown of our gross profit and gross profit margin for the periods indicated: Year ended December 31, 2021 2022 RMB Gross profit margin (%) RMB US$ Gross profit margin (%) (in thousands, except %) Central laboratory business 238,265 74.6 232,647 33,731 73.9 In-hospital business 114,801 69.5 112,000 16,239 63.9 Pharma research and development services 11,080 47.4 35,392 5,131 48.4 Total 364,146 71.7 380,039 55,101 67.5 • Central laboratory business .
The table below sets forth a breakdown of our gross profit and gross profit margin for the periods indicated: Year ended December 31, 2021 2022 RMB Gross profit margin (%) RMB Gross profit margin (%) (in thousands, except %) Central laboratory business 238,265 74.6 232,647 73.9 In-hospital business 114,801 69.5 112,000 63.9 Pharma research and development services 11,080 47.4 35,392 48.4 Total 364,146 71.7 380,039 67.5 • Central laboratory business .
In 2020, 2021 and 2022, revenue from sale of cancer therapy selection tests under our central laboratory model contributed 69.2%, 62.9% and 55.9% of our total revenues, respectively. In 2016, we became China’s first NGS-based cancer therapy selection company to offer an in-hospital model, providing turn-key solutions to address Chinese hospitals’ challenges in adopting NGS-based cancer therapy selection.
In 2021, 2022 and 2023, revenue from sale of cancer therapy selection tests under our central laboratory model contributed 62.9%, 55.9% and 43.3% of our total revenues, respectively. In 2016, we became China’s first NGS-based cancer therapy selection company to offer an in-hospital model, providing turn-key solutions to address Chinese hospitals’ challenges in adopting NGS-based cancer therapy selection.
Pharma research and development services We provide pharmaceutical research and development services to international and domestic pharmaceutical companies primarily in relation to the development of targeted therapies and immunotherapies for various types of cancer, and to hospitals for their studies on cancer diagnosis and treatment. We also provide companion diagnostics development service to pharmaceutical companies.
Pharma research and development services We provide pharmaceutical research and development services to international and domestic pharmaceutical companies primarily in relation to the development of targeted therapies and immunotherapies for various types of cancer, and to hospitals for their studies on cancer diagnosis and treatment.
We primarily offer cancer therapy selection tests under our central laboratory model, where our central laboratory processes cancer patients’ tissue and liquid biopsy samples delivered to us from hospitals across China and issues test reports. In 2020, 2021 and 2022, 25,262, 28,199 and 27,353 patients took our tests, respectively.
We primarily offer cancer therapy selection tests under our central laboratory model, where our central laboratory processes cancer patients’ tissue and liquid biopsy samples delivered to us from hospitals across China and issues test reports. In 2021, 2022 and 2023, 28,199, 27,353 and 20,129 patients took our tests, respectively.
In 2020, 2021 and 2022, revenue from fees we received for facilitating the hospitals’ purchases of laboratory equipment and sales of reagent kits and laboratory equipment under the in-hospital model contributed 27.4%, 32.5%, and 31.1% of our total revenues, respectively.
In 2021, 2022 and 2023, revenue from fees we received for facilitating the hospitals’ purchases of laboratory equipment and sales of reagent kits and laboratory equipment under the in-hospital model contributed 32.5%, 31.1% and 35.1% of our total revenues, respectively.
We incurred net loss of RMB407.2 million, RMB796.7 million and RMB971.2 million (US$140.8 million) in 2020, 2021 and 2022, respectively. 85 Table of Contents Key Factors Affecting Our Results of Operations We believe there are several important factors that have impacted and that we expect will continue to impact our operating performance and results of operations, including: • market adoption of our cancer therapy selection products and services; • testing volume and hospital coverage under our central laboratory model; • success of our in-hospital model; and • our ability to successfully develop early cancer detection products.
We incurred net loss of RMB796.7 million, RMB971.2 million and RMB653.7 million (US$92.1 million) in 2021, 2022 and 2023, respectively. 86 Table of Contents Key Factors Affecting Our Results of Operations We believe there are several important factors that have impacted and that we expect will continue to impact our operating performance and results of operations, including: • market adoption of our cancer therapy selection products and services; • testing volume and hospital coverage under our central laboratory model; • success of our in-hospital model; and • our ability to successfully develop early cancer detection products.
In 2020, 2021 and 2022, revenue from sale of cancer therapy selection tests under our central laboratory model contributed 69.2%, 62.9% and 55.9% of our total revenues, respectively. We expect the central laboratory model to continue to contribute a significant portion of our revenue going forward.
In 2021, 2022 and 2023, revenue from sale of cancer therapy selection tests under our central laboratory model contributed 62.9%, 55.9% and 43.3% of our total revenues, respectively. We expect the central laboratory model to continue to contribute a significant portion of our revenue going forward.
Our gross margin for central laboratory business decreased to 73.9% for 2022 from 74.6% for 2021, primarily due to the same reason. 97 Table of Contents • In-hospital business .
Our gross margin for central laboratory business decreased to 73.9% for 2022 from 74.6% for 2021, primarily due to the same reason. • In-hospital business .
As such, our results of operations are affected, and will continue to be affected, by the volume of testing and hospital coverage under our central laboratory model. In 2020, 2021 and 2022, 25,262, 28,199 and 27,353 patients took our tests, respectively.
As such, our results of operations are affected, and will continue to be affected, by the volume of testing and hospital coverage under our central laboratory model. In 2021, 2022 and 2023, 28,199, 27,353 and 20,129 patients took our tests, respectively.
The difference was primarily due to adjustment for non-cash and non-operating items of RMB525.6 million (US$76.2 million), primarily including share-based compensation of RMB326.8 million (US$47.4 million), depreciation and amortization of RMB124.1 million (US$18.0 million), non-cash lease expense of RMB37.4 million (US$5.4 million), and changes in working capital.
The difference was primarily due to adjustment for non-cash and non-operating items of RMB525.6 million, primarily including share-based compensation of RMB326.8 million, depreciation and amortization of RMB124.1 million, non-cash lease expense of RMB37.4 million, and changes in working capital.
We derived our revenues from three sources: 96 Table of Contents • Central laboratory business . Our revenue generated from central laboratory business decreased by 1.4% to RMB314.8 million (US$45.6 million) for 2022 from RMB319.4 million for 2021. In 2022, 27,353 patients took our tests, compared to 28,199 patients in 2021. • In-hospital business .
We derived our revenues from three sources: • Central laboratory business . Our revenue generated from central laboratory business decreased by 1.4% to RMB314.8 million for 2022 from RMB319.4 million for 2021. In 2022, 27,353 patients took our tests, compared to 28,199 patients in 2021. • In-hospital business .
Cost of Revenues Our cost of revenues consists of cost of services and cost of goods sold and are incurred from three sources: (i) the cost of revenues for our central laboratory business, which primarily includes cost of laboratory consumables used in cancer therapy selection testing, the manufacturing cost of our reagent kits, personnel cost and depreciation and amortization, (ii) the cost of revenues for our in-hospital business, which primarily includes the cost of materials, manufacturing costs of our reagent kits and personnel cost, and (iii) the cost of revenues for pharma research and development services, which primarily includes costs of laboratory consumables used in pharma research and development services.
We also provide companion diagnostics development service to pharmaceutical companies. 88 Table of Contents Cost of Revenues Our cost of revenues consists of cost of services and cost of goods sold and are incurred from three sources: (i) the cost of revenues for our central laboratory business, which primarily includes cost of laboratory consumables used in cancer therapy selection testing, the manufacturing cost of our reagent kits, personnel cost and depreciation and amortization, (ii) the cost of revenues for our in-hospital business, which primarily includes the cost of materials, manufacturing costs of our reagent kits and personnel cost, and (iii) the cost of revenues for pharma research and development services, which primarily includes costs of laboratory consumables used in pharma research and development services.
Information on the Company—B. Business Overview—Research and Development” and “—Intellectual Property”. D.
Information on the Company—B. Business Overview—Research and Development” and “—Intellectual Property”. 99 Table of Contents D.
We allocate the total transaction consideration to each performance obligation based on a relative standalone selling price basis using the expected cost plus a margin method. We estimate standalone selling price by using market conditions, entity-specific factors, including the product mix sold to customers over time and our expected gross margin for different customers.
We allocate the transaction price to each kit on a relative standalone selling price basis using the expected cost plus a margin method. We estimate the standalone selling price based on its pricing strategies considering market conditions, entity-specific factors, product mix sold to customers over time and our expected gross margin for different customers.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Revenues Our revenues increased by 18.1% to RMB507.9 million for 2021 from RMB429.9 million for 2020, primarily attributable to an increase in revenues from sales of products to RMB165.4 million for 2021 from RMB118.7 million for 2020 and to a lesser extent, revenues generated from services to RMB342.5 million for 2021 from RMB311.2 million for 2020.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenues Our revenues increased by 10.9% to RMB563.2 million for 2022 from RMB507.9 million for 2021, primarily attributable to an increase in revenues generated from services to RMB391.5 million for 2022 from RMB342.5 million for 2021 and to a lesser extent, revenues from sales of products to RMB171.7 million for 2022 from RMB165.4 million for 2021.
Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled.
Substantially all of our revenues in the foreseeable future are likely to continue to be denominated in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled.
Our gross profit margin was 73.0%, 71.7% and 67.5% in 2020, 2021 and 2022, respectively.
Our gross profit margin was 71.7%, 67.5% and 67.6% in 2021, 2022 and 2023, respectively.
Safe Harbor See “Forward-Looking Statements” in this annual report.
Safe Harbor See “Forward-Looking Statements” in this annual report. 100 Table of Contents
Selling and marketing expenses Our selling and marketing expenses increased by 22.2% to RMB370.3 million (US$53.7 million) for 2022 from RMB303.1 million for 2021, primarily due to (i) an increase in staff cost of sales and marketing personnel in anticipation of the commercialization of our early detection products and pharma research and development services; (ii) an increase in conference fee and marketing fees; and (iii) an increase in amortized expense on share-based compensation.
Selling and marketing expenses Our selling and marketing expenses increased by 22.2% to RMB370.3 million for 2022 from RMB303.1 million for 2021, primarily due to (i) an increase in staff cost of sales and marketing personnel in anticipation of the commercialization of our early detection products and pharma research and development services; (ii) an increase in conference fee and marketing fees; and (iii) an increase in amortized expense on share- based compensation. 96 Table of Contents General and administrative expenses Our general and administrative expenses increased by 15.9% to RMB568.3 million for 2022 from RMB490.3 million for 2021, primarily due to (i) an increase in depreciation expenses for new buildings, and (ii) an increase in allowance for credit loss in relation to accounts receivables; and (iii) an increase in amortized expense on share-based compensation.
We may, however, decide to expand our business through additional equity and debt financing. The issuance and sale of additional equity would result in further dilution to our shareholders.
We may, however, decide to expand our business through additional equity and debt financing. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations.
For businesses that enter primarily short-term contracts, we apply the practical expedient which allows costs to obtain a contract to be expensed when incurred if the amortization period of the assets that would otherwise have been recognized is one year or less. 90 Table of Contents Revenue from central laboratory business Revenue from central laboratory business is primarily generated through the sales of our cancer therapy selection test to individual patient customers.
For businesses that enter primarily short-term contracts, we apply the practical expedient which allows costs to obtain a contract to be expensed when incurred if the amortization period of the assets that would otherwise have been recognized is one year or less.
The assumptions used to estimate the fair value of the share options granted are as follows: For the year ended December 31, 2020 2021 2022 Risk-free interest rate 0.51%–1.90% 0.97%–2.07% 1.52%–3.94% Dividend yield 0% 0% 0% Expected volatility range 44.9%–49.3% 47.67%–72.98% 48.20%–56.00% Exercise multiple 2.20 N/A 2.80 Contractual life 10 years 10 years 10 years Fair market value per ordinary share as at valuation dates (1) US$9.41– US$27.15 US$9.53– US$30.50 US$0.013– US$9.29 (1) In January 2020, we effected a 2-for-1 reverse share split.
The assumptions used to estimate the fair value of the share options granted are as follows: For the year ended December 31, 2021 2022 2023 Risk-free interest rate 0.97%–2.07% 1.52%–3.94% 3.48%–4.61% Dividend yield 0% 0% 0% Expected volatility range 47.67%–72.98% 48.20%–56.00% 47.90%–50.69% Exercise multiple N/A 2.80 N/A Contractual life 10 years 10 years 10 years Fair market value per ordinary share as at valuation dates US$9.53– US$30.50 US$0.013– US$9.29 US$0.93– US$3.11 92 Table of Contents These assumptions represented our best estimates, but the estimates involve inherent uncertainties and the application of our judgment.
The binomial, option valuation model, Black-Scholes models and Monte Carlo Simulation model all require subjective assumptions, including the grant date fair value of the ordinary shares, expected volatility, the exercise multiple, the risk-free rate and the dividend yield.
The Black-Scholes models and Monte Carlo Simulation model all require subjective assumptions, including the grant date fair value of the ordinary shares, expected volatility, the exercise multiple, the risk-free rate and the dividend yield. We used the grant date closing ADS price quoted on NASDAQ exchange to determine the fair value of our ordinary shares.
Financing Activities Net cash used in from financing activities for 2022 was RMB86.2 million (US$12.5 million), primarily due to our purchase of ADSs from the open market of RMB71.8 million. Net cash used in from financing activities for 2021 was RMB52.9 million, primarily due to the cash outflow of repayment of long-term borrowings of RMB34.7 million.
Net cash used in financing activities for 2022 was RMB86.2 million, primarily due to our purchase of ADSs from the open market of RMB71.8 million.
Concurrently with our initial public offering, we also raised US$25 million from Lake Bleu Prime Healthcare Master Fund Limited, by selling 1,515,151 Class A ordinary shares to it in a private placement.
Concurrently with our initial public offering, we also raised US$25 million from Lake Bleu Prime Healthcare Master Fund Limited, by selling 1,515,151 Class A ordinary shares to it in a private placement. As of December 31, 2023, we had cash and cash equivalents and restricted cash of RMB615.2 million (US$86.6 million), primarily consisting of bank deposits.
Year ended December 31, 2020 2021 2022 RMB RMB RMB US$ (in thousands) Operating Expenses: Research and development expenses 263,940 367,858 421,868 61,165 Selling and marketing expenses 168,587 303,096 370,294 53,688 General and administrative expenses 293,800 490,256 568,284 82,393 Total operating expenses 726,327 1,161,210 1,360,446 197,246 88 Table of Contents Research and Development Expenses Our research and development expenses primarily consist of (i) expenses incurred for clinical and non-clinical activities performed by third-party contract research organizations, and (ii) salaries and benefits for research and development personnel and the cost of materials for our research and development projects and products.
Year ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in thousands) Operating expenses: Research and development expenses 367,858 421,868 347,016 48,876 Selling and marketing expenses 303,096 370,294 247,711 34,889 General and administrative expenses 490,256 568,284 437,821 61,666 Total operating expenses 1,161,210 1,360,446 1,032,548 145,431 Research and Development Expenses Our research and development expenses primarily consist of (i) expenses incurred for clinical and non-clinical activities performed by third-party contract research organizations, and (ii) salaries and benefits for research and development personnel and the cost of materials for our research and development projects and products.
This increase was primarily attributable to an increase in cost of services to RMB119.9 million (US$17.4 million) for 2022 from RMB93.4 million for 2021, and to a lesser extent, an increase in cost of goods sold to RMB63.3 million (US$9.2 million) for 2022 from RMB50.3 million for 2021.
This increase was primarily attributable to an increase in cost of services to RMB119.9 million for 2022 from RMB93.4 million for 2021, and to a lesser extent, an increase in cost of goods sold to RMB63.3 million for 2022 from RMB50.3 million for 2021. 95 Table of Contents The increase in cost of revenues from 2021 to 2022 was primarily due to an increase in the cost of revenues for our in-hospital business and pharma research and development services. • Central laboratory business .
For further information, see Note 10 to our audited consolidated financial statements included elsewhere in this annual report. 102 Table of Contents The following table sets forth our contractual obligations by specified categories as of December 31, 2022: Payments due by period Total less than 1 year 1-3 years 3-5 years more than 5 years (RMB in thousands) Operating lease obligations 53,386 39,605 13,781 — — Other than those shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2022.
The following table sets forth our contractual obligations by specified categories as of December 31, 2023: Payments due by period Total less than 1 year 1-3 years 3-5 years more than 5 years (RMB in thousands) Operating lease obligations 12,900 9,091 3,809 — — Other than those shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2023.
The table below sets forth a breakdown of our revenues in absolute amount and as a percentage of our total revenues for the periods indicated: Year ended December 31, 2020 Central laboratory business In-hospital business Pharma research and development services Total revenues RMB % of total revenues RMB % of total revenues RMB % of total revenues RMB % of total revenues (in thousands, except for%) Revenues from services 297,342 69.2 (847 ) (0.2 ) 14,689 3.4 311,184 72.4 Revenues from sales of products — — 118,719 27.6 — — 118,719 27.6 297,342 69.2 117,872 27.4 14,689 3.4 429,903 100.0 Year ended December 31, 2021 Central laboratory business In-hospital business Pharma research and development services Total revenues RMB % of total revenues RMB % of total revenues RMB % of total revenues RMB % of total revenues (in thousands, except for%) Revenues from services 319,353 62.9 (281 ) (0.1 ) 23,393 4.6 342,465 67.4 Revenues from sales of products — — 165,397 32.6 — — 165,397 32.6 319,353 62.9 165,116 32.5 23,393 4.6 507,862 100.0 Year ended December 31, 2022 Central laboratory business In-hospital business Pharma research and development services Total revenues RMB US$ % of total revenues RMB US$ % of total revenues RMB US$ % of total revenues RMB US$ % of total revenues (in thousands, except for %) Revenues from services 314,770 45,637 55.9 3,606 523 0.6 73,172 10,609 13.0 391,548 56,769 69.5 Revenues from sales of products — — — 171,690 24,893 30.5 — — — 171,690 24,893 30.5 314,770 45,637 55.9 175,296 25,416 31.1 73,172 10,609 13.0 563,238 81,662 100.0 87 Table of Contents Central laboratory business Central laboratory business revenue is generated from sales of our cancer therapy selection tests to individual patients.
The table below sets forth a breakdown of our revenues in absolute amount and as a percentage of our total revenues for the periods indicated: Year ended December 31, 2021 Central laboratory business In-hospital business Pharma research and development services Total revenues RMB % of total revenues RMB % of total revenues RMB % of total revenues RMB % of total revenues (in thousands, except for%) Revenues from services 319,353 69.2 (281 ) (0.1 ) 23,393 4.6 342,465 67.4 Revenues from sales of products — — 165,397 32.6 — — 165,397 32.6 319,353 69.2 165,116 32.5 23,393 4.6 507,862 100.0 Year ended December 31, 2022 Central laboratory business In-hospital business Pharma research and development services Total revenues RMB % of total revenues RMB % of total revenues RMB % of total revenues RMB % of total revenues (in thousands, except for%) Revenues from services 314,770 55.9 3,606 0.6 73,172 13.0 391,548 69.5 Revenues from sales of products — — 171,690 30.5 — — 171,690 30.5 314,770 55.9 175,296 31.1 73,172 13.0 563,238 100.0 Year ended December 31, 2023 Central laboratory business In-hospital business Pharma research and development services Total revenues RMB US$ % of total revenues RMB US$ % of total revenues RMB US$ % of total revenues RMB US$ % of total revenues (in thousands, except for%) Revenues from services 232,812 32,791 43.3 (3,704 ) (522 ) (0.7 ) 115,922 16,327 21.6 345,030 48,596 64.2 Revenues from sales of products — — — 192,405 27,100 35.8 — — — 192,405 27,100 35.8 232,812 32,791 43.3 188,701 26,578 35.1 115,922 16,327 21.6 537,435 75,696 100.0 Central laboratory business Central laboratory business revenue is generated from sales of our cancer therapy selection tests to individual patients.
Year ended December 31, 2020 2021 2022 RMB RMB RMB US$ (in thousands) Cost of revenues: Central laboratory business 73,960 81,088 82,123 11,907 In-hospital business 35,849 50,315 63,296 9,176 Pharma research and development services 6,172 12,313 37,780 5,478 Total cost of revenues 115,981 143,716 183,199 26,561 Operating Expenses Our operating expenses include research and development expenses, selling and marketing expenses and general and administrative expenses.
Year ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in thousands) Cost of revenues: Central laboratory business 81,088 82,123 49,473 6,968 In-hospital business 50,315 63,296 72,570 10,221 Pharma research and development services 12,313 37,780 52,165 7,348 Total cost of revenues 143,716 183,199 174,208 24,537 Operating Expenses Our operating expenses include research and development expenses, selling and marketing expenses and general and administrative expenses.
Effective from November 1, 2015, the above-mentioned approval requirement has been abolished, but a Hong Kong entity is still required to file an application package with the relevant tax authority, and settle the overdue taxes if the preferential 5% tax rate is denied based on the subsequent review of the application package by the relevant tax authority. 89 Table of Contents If our holding company in the Cayman Islands or any of our subsidiaries outside of China is deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it will be subject to enterprise income tax on its worldwide income at a rate of 25%.
Effective from November 1, 2015, the above- mentioned approval requirement has been abolished, but a Hong Kong entity is still required to file an application package with the relevant tax authority, and settle the overdue taxes if the preferential 5% tax rate is denied based on the subsequent review of the application package by the relevant tax authority.
The determination of whether we have accumulated sufficient historical experience to determine breakage amount and changes in the actual patients’ usage rates may significantly impact the amount of breakage revenue recognized for the period.
The determination of whether we have accumulated sufficient historical experience to determine breakage amount and changes in the actual patients’ usage rates may significantly impact the amount of breakage revenue recognized for the period. We recognized breakage income of RMB14.2 million, RMB26.4 million and RMB10.9 million (US$1.5 million) for the years ended December 31, 2021, 2022 and 2023, respectively.
We believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.
We believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments. 90 Table of Contents The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual report.
We write off accounts receivable and contract assets are deemed uncollectible when after all collection efforts have ceased. 93 Table of Contents Fair Value of Share Options Prior to the completion of our initial public offering, we determined the fair value of share-based payment awards granted without market conditions using the binomial option valuation model with the assistance from an independent third-party appraiser.
We write off accounts receivable and contract assets are deemed uncollectible when after all collection efforts have ceased. Fair Value of Share Options We determined the fair value of share-based payment awards granted without market conditions using the Black-Scholes model and determined the fair value of share-based payment awards granted with market conditions using the Monte Carlo Simulation model.
Individual patients prepay the consideration in full, and the transaction price for each contract is fixed at contract inception. Patients can choose to purchase a single cancer therapy selection test or a package which consists of multiple cancer therapy selection tests of the same type or a combination of different types of cancer therapy selection tests.
Patients can choose to purchase a single cancer therapy selection test, as a package which consists of multiple cancer therapy selection tests of the same type or a combination of different types of cancer therapy selection tests. Each cancer therapy selection test represents a single performance obligation.
We also generate a small portion of revenue from pharma research and development services we provide to pharmaceutical companies and hospitals, which contributed 3.4%, 4.6% and 13.0% of our total revenues in 2020, 2021 and 2022, respectively. We have achieved rapid growth since commercializing our first cancer therapy selection test in 2014.
We also generate a small portion of revenue from pharma research and development services we provide to pharmaceutical companies and hospitals, which contributed 4.6%, 13.0% and 21.6% of our total revenues in 2021, 2022 and 2023, respectively. Our revenue increased by 10.9% from RMB507.9 million in 2021 to RMB563.2 million in 2022.
Cost of revenue for in-hospital business was RMB50.3 million for 2021, representing a 40.4% increase from RMB35.8 million for 2020, which was in line with the revenue growth of this segment. • Pharma research and development services .
Cost of revenue for pharma research and development services was RMB52.2 million (US$7.3 million) for 2023, representing a 38.1% increase from RMB37.8 million for 2022, in line with the revenue growth of this segment.
The following table sets forth selected cash flow statement information for the periods indicated: Year ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$ (in thousands) Net cash used in operating activities (73,543 ) (477,886 ) (456,808 ) (66,232 ) Net cash (used in) generated from investing activities (109,312 ) 81,697 (7,463 ) (1,082 ) Net cash generated from (used in) financing activities 2,165,719 (52,899 ) (86,239 ) (12,504 ) Effect of exchange rate changes on cash and cash equivalents and restricted cash (155,902 ) (37,006 ) 36,666 5,317 Net increase in cash and cash equivalents and restricted cash 1,826,962 (486,094 ) (513,844 ) (74,501 ) Cash and cash equivalents and restricted cash at the beginning of year 98,244 1,925,206 1,439,112 208,652 Cash and cash equivalents and restricted cash at the end of year 1,925,206 1,439,112 925,268 134,151 Operating Activities Net cash used in operating activities for 2022 was RMB456.8 million (US$66.2 million), while our net loss for the same period was RMB971.2 million (US$140.8 million).
The following table sets forth selected cash flow statement information for the periods indicated: Year ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in thousands) Net cash used in operating activities (477,886 ) (456,808 ) (255,783 ) (36,026 ) Net cash generated from (used in) investing activities 81,697 (7,463 ) (9,300 ) (1,309 ) Net cash used in financing activities (52,899 ) (86,239 ) (48,832 ) (6,878 ) Effect of exchange rate changes on cash and cash equivalents and restricted cash (37,006 ) 36,666 3,863 543 Net decrease in cash, cash equivalents and restricted cash (486,094 ) (513,844 ) (310,052 ) (43,670 ) Cash, cash equivalents and restricted cash at the beginning of year 1,925,206 1,439,112 925,268 130,321 Cash, cash equivalents and restricted cash at the end of year 1,439,112 925,268 615,216 86,651 97 Table of Contents Operating Activities Net cash used in operating activities for 2023 was RMB255.8 million (US$36.0 million), while our net loss for the same period was RMB653.7 million (US$92.1 million).
Net cash used in investing activities for 2020 was RMB109.3 million, primarily due to purchase of short-term investment of RMB348.4 million and purchase of property and equipment of RMB60.3 million, partially offset by the proceeds from maturity of short-term investment of RMB318.0 million.
Investing Activities Net cash generated from investing activities for 2023 was RMB9.3 million (US$1.3million), primarily due to purchase of property and equipment of RMB8.1 million. Net cash used in investing activities for 2022 was RMB7.5 million, primarily due to proceeds from maturity of short-term investment of RMB65.6 million, partially offset by purchase of property and equipment of RMB70.3 million.
Revenue is allocated to each cancer therapy selection test using a relative standalone selling price basis.
Revenue is allocated to each cancer therapy selection test using a relative standalone selling price basis. We record revenue at a point in time, when each cancer therapy selection test result is delivered to the pharmaceutical companies and hospitals.
The increase in cost of revenues from 2021 to 2022 was primarily due to an increase in the cost of revenues for our in-hospital business and pharma research and development services. • Central laboratory business .
The decrease in cost of revenues from 2022 to 2023 was primarily due to a decrease in the cost of revenues for our central laboratory business, as we shifted our focus to the in-hospital business. • Central laboratory business.
Key Components of Results of Operations Revenues Our revenues consist of revenues from services and revenues from sales of products, and are derived from three sources: (i) central laboratory business; (ii) in-hospital business; and (iii) pharma research and development services.
Developing early cancer detection product candidates requires a significant investment of resources over a prolonged period of time, and we expect to continue to make sustained investment in this area. 87 Table of Contents Key Components of Results of Operations Revenues Our revenues consist of revenues from services and revenues from sales of products, and are derived from three sources: (i) central laboratory business; (ii) in-hospital business; and (iii) pharma research and development services.
As of December 31, 2022, we did not have any long-term borrowings. Capital Expenditures Our capital expenditures were RMB64.3 million, RMB206.9 million and RMB70.5 million (US$10.2 million) for 2020, 2021 and 2022, respectively. These capital expenditures included the purchase of property, equipment and computer software.
Capital Expenditures Our capital expenditures were RMB206.9 million, RMB70.5 million and RMB9.4 million (US$1.3 million) for 2021, 2022 and 2023, respectively. These capital expenditures included the purchase of property, equipment and computer software. We will continue to make capital expenditures to meet the needs of our business’ expected growth.
We will continue to make capital expenditures to meet the needs of our business’ expected growth. We intend to fund our future capital expenditure with our existing cash balance and proceeds from our initial public offering and the concurrent private placement.
We intend to fund our future capital expenditure with our existing cash balance and proceeds from our initial public offering and the concurrent private placement. Material Cash Requirements Our material cash requirements as of December 31, 2023 and any subsequent interim period primarily included our operating lease obligations.
In 2016, we started our research and development on the use of targeted DNA methylation in early cancer detection. Developing early cancer detection product candidates requires a significant investment of resources over a prolonged period of time, and we expect to continue to make sustained investment in this area.
In 2016, we started our research and development on the use of targeted DNA methylation in early cancer detection.
We record revenue at a point in time, when each cancer therapy selection test result is delivered to the pharmaceutical companies and hospitals. 92 Table of Contents Accounts Receivable, Contract Assets and Allowance for Credit Losses We recognize contract assets when we satisfy our performance obligations before the customer pays consideration or before payment is due.
Accounts Receivable, Contract Assets and Allowance for Credit Losses We recognize contract assets when we satisfy our performance obligations before the customer pays consideration or before payment is due. We transfer contract assets to “accounts receivable” when its right to payment becomes unconditional.
We derived our revenues from three sources: • Central laboratory business . Our revenue generated from central laboratory business increased by 7.4% to RMB319.4 million for 2021 from RMB297.3 million for 2020. In 2021, 28,199 patients took our tests, compared to 25,262 patients in 2020. 98 Table of Contents • In-hospital business .
We derived our revenues from three sources: • Central laboratory business. Our revenue generated from central laboratory business decreased by 26.0% to RMB232.8 million (US$32.8 million) for 2023 from RMB314.8 million for 2022. In 2023, 20,129 patients took our tests, compared to 27,353 patients in 2022. 93 Table of Contents • In-hospital business.
Our revenue increased by 18.1% from RMB429.9 million in 2020 to RMB507.9 million in 2021, and further increased by 10.9% to RMB563.2 million (US$81.7 million) in 2022. Our gross profit increased by 16.0% from RMB313.9 million in 2020 to RMB364.1 million in 2021, and further increased by 4.4% to RMB380.0 million (US$55.1 million) in 2022.
Our revenue underwent a 4.6% decline from RMB563.2 million to RMB537.4 million (US$75.7 million) in 2023. Similarly, our gross profit increased by 4.4% from RMB364.1 million in 2021 to RMB380.0 million in 2022, followed by a decrease by 4.4% from RMB380.0 million to RMB363.2 million (US$ 51.2 million) in 2023.
Net cash used in operating activities for 2020 was RMB73.5 million, while our net loss for the same period was RMB407.2 million. The difference was primarily due to adjustment for non-cash and non-operating items of RMB221.6 million, primarily including share-based compensation of RMB173.2 million, depreciation and amortization of RMB33.3 million, and changes in working capital.
The difference was primarily due to adjustment for non-cash and non-operating items of RMB450.1 million (US$63.4 million), primarily including share-based compensation of RMB260.7 million (US$36.7 million), depreciation and amortization of RMB133.4 million (US$18.8 million), non-cash operating lease expenses of RMB35.2 million (US$5.0 million), and changes in working capital.
Our gross margin for pharma research and development services decreased to 47.4% for 2021 from 58.0% for 2020, primarily due to increased depreciation and staff cost in relation to our newly established laboratory in the U.S.
Our gross margin for in-hospital business decreased to 61.5% for 2023 from 63.9% for 2022, primarily due to the increased depreciation in relation to our laboratories. • Pharma research and development services.
Material Cash Requirements Our material cash requirements as of December 31, 2022 and any subsequent interim period primarily included our operating lease obligations. Our operating lease obligations primarily represent our obligations for leasing office premises, which include all future cash outflows under ASC Topic 842, Leases.
Our operating lease obligations primarily represent our obligations for leasing office premises, which include all future cash outflows under ASC Topic 842, Leases . For further information, see Note 10 to our audited consolidated financial statements included elsewhere in this annual report.
Our revenue generated from in-hospital business increased by 40.1% to RMB165.1 million for 2021 from RMB117.9 million for 2020, primarily attributable to the expansion of our in-hospital business. The number of our contracted partner hospitals increased from 29 as of December 31, 2020 to 41 as of December 31, 2021. • Pharma research and development services .
The number of our contracted partner hospitals increased from 49 as of December 31, 2022 to 59 as of December 31, 2023. • Pharma research and development services.
This increase was primarily attributable to an increase in cost of goods sold to RMB50.3 million for 2021 from RMB35.8 million for 2020, and to a lesser extent, an increase in cost of services to RMB93.4 million for 2021 from RMB80.1 million for 2020.
This decrease was primarily attributable to a decrease in cost of services to RMB101.6 million (US$14.3 million) for 2023 from RMB119.9 million for 2022, and offset by an increase in cost of goods sold to RMB72.6 million (US$10.2 million) for 2023 from RMB63.3 million for 2022.
The table below sets forth a breakdown of our gross profit and gross profit margin for the periods indicated: Year ended December 31, 2020 2021 RMB Gross profit margin (%) RMB Gross profit margin (%) (in thousands, except %) Central laboratory business 223,382 75.1 238,265 74.6 In-hospital business 82,023 69.6 114,801 69.5 Pharma research and development services 8,517 58.0 11,080 47.4 Total 313,922 73.0 364,146 71.7 • Central laboratory business.
The table below sets forth a breakdown of our gross profit and gross profit margin for the periods indicated: Year ended December 31, 2022 2023 RMB Gross profit margin (%) RMB US$ Gross profit margin (%) (in thousands, except %) Central laboratory business 232,647 73.9 183,339 25,823 78.7 In-hospital business 112,000 63.9 116,131 16,357 61.5 Pharma research and development services 35,392 48.4 63,757 8,979 55.0 Total 380,039 67.5 363,227 51,159 67.6 • Central laboratory business.
Cost of revenue for pharma research and development services was RMB12.3 million for 2021, representing a 99.5% increase from RMB6.1 million for 2020, primarily attributable to increased depreciation and staff cost in relation to our newly established laboratory in the U.S., which focuses on pharma research and development projects.
Cost of revenue for in-hospital business was RMB72.6 million (US$10.2 million) for 2023, representing a 14.7% increase from RMB63.3 million for 2022, primarily due to the increased selling volume as well as renovation depreciation in relation to our new laboratory. • Pharma research and development services.

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Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeOrdinary Shares Beneficially Owned Class A Ordinary Shares Class B Ordinary Shares Total Ordinary Shares % of Beneficial Ownership† % of Aggregate Voting Power†† Directors and Executive Officers**: Yusheng Han (1) 27,175 17,324,848 17,352,023 16.9 % 54.9 % Shaokun (Shannon) Chuai (2) 2,150,572 — 2,150,572 2.1 % 1.1 % Leo Li — — — * * Gang Lu — — — — — Feng Deng (3) 11,880,245 — 11,880,245 11.6 % 6.3 % Wendy Hayes — — — — — Min-Jui Richard Shen * — * * * Licen Lisa Xu — — — — — Zhihong (Joe) Zhang * — * * * All Directors and Executive Officers as a Group 14,493,036 17,324,848 31,817,884 31.2 % 62.6 % Principal Shareholders : Quantum Boundary Holdings Limited (1) 27,175 17,324,848 17,352,023 16.9 % 54.9 % Northern Light Venture Capital III, Ltd .(4) 11,880,245 — 11,880,245 11.6 % 6.3 % Entities affiliated with LYFE Capital (5) 8,338,381 — 8,338,381 8.1 % 4.4 % Sequoia Capital China (6) 6,846,567 — 6,846,567 6.7 % 3.6 % Investment funds affiliated with CMB (7) 7,017,385 — 7,017,385 6.8 % 3.7 % Kynam Capital Management, LP (8) 7,391,581 — 7,391,581 7.2 % 3.9 % 111 Table of Contents * Less than 1% of our total ordinary shares outstanding as of March 31, 2023. ** Except as otherwise indicated below, the business address of our directors and executive officers is No. 5, Xingdao Ring Road North, International Bio Island, Guangzhou, China. † For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the total number of shares outstanding, and the number of shares such person or group has the right to acquire upon exercise of an option, warrant or other right within 60 days after March 31, 2023.
Biggest change(3) 11,880,245 — 11,880,245 11.6 % 6.3 % Entities affiliated with LYFE Capital (4) 8,338,381 — 8,338,381 8.1 % 4.4 % Sequoia Capital China (5) 6,846,567 — 6,846,567 6.7 % 3.6 % Investment funds affiliated with CMB (6) 7,017,385 — 7,017,385 6.8 % 3.7 % Kynam Capital Management, LP (7) 8,694,426 — 8,694,426 8.5 % 4.6 % 109 Table of Contents * Less than 1% of our total ordinary shares outstanding as of March 31, 2024. ** Except as otherwise indicated below, the business address of our directors and executive officers is No. 5, Xingdao Ring Road North, International Bio Island, Guangzhou, China. † For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the total number of shares outstanding, and the number of shares such person or group has the right to acquire upon exercise of an option, warrant or other right within 60 days after March 31, 2024.
Dr. Xu served as a vice president on strategic product management and lifecycle management at Roche Diagnostics, a subsidiary of Roche Holding AG for the development of diagnostic tests, instruments and digital solutions, and a vice president on strategic marketing and product management at Illumina Inc. Dr.
Xu served as a vice president on strategic product management and lifecycle management at Roche Diagnostics, a subsidiary of Roche Holding AG for the development of diagnostic tests, instruments and digital solutions, and a vice president on strategic marketing and product management at Illumina Inc. Dr.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Mr. Gang Lu, Ms. Wendy Hayes and Mr. Yusheng Han. Mr. Gang Lu is the chairman of our nomination committee. We have determined that Ms. Wendy Hayes satisfies the “independence” requirements of the Listing Rules of the Nasdaq Stock Market.
Our nominating and corporate governance committee consists of Mr. Gang Lu, Ms. Wendy Hayes and Mr. Yusheng Han. Mr. Gang Lu is the chairman of our nomination committee. We have determined that Ms. Wendy Hayes satisfies the “independence” requirements of the Listing Rules of the Nasdaq Stock Market.
The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. F.
(5) Represents (i) 6,013,684 Class A ordinary shares (in the form of ADSs) held by LYFE Capital Stone (Hong Kong) Limited, a Hong Kong private company limited by shares, (ii) 1,597,425 Class A ordinary shares (in the form of ADSs) held by LYFE Mount Whitney Limited, a Hong Kong private company limited by shares, and (iii) 727,272 Class A ordinary shares (in the form of ADSs) represented by 727,272 ADSs held by LYFE Capital Fund II, L.P., a Cayman Islands partnership, as reported in the Schedule 13G filed on February 7, 2022.
(4) Represents (i) 6,013,684 Class A ordinary shares (in the form of ADSs) held by LYFE Capital Stone (Hong Kong) Limited, a Hong Kong private company limited by shares, (ii) 1,597,425 Class A ordinary shares (in the form of ADSs) held by LYFE Mount Whitney Limited, a Hong Kong private company limited by shares, and (iii) 727,272 Class A ordinary shares (in the form of ADSs) represented by 727,272 ADSs held by LYFE Capital Fund II, L.P., a Cayman Islands partnership, as reported in the Schedule 13G filed on February 7, 2022.
Our board of directors has the authority to amend or terminate the 2022 Plan, but no amendments, alternation or discontinuation made by the board of director, (a) without the approval (but only to extent such approval is required by the principal national securities exchange on which the shares are listed or admitted to trading, and subject to certain other exceptions) of the shareholders of our company, if such action would increase the total number of shares reserved for the purposes of our 2022 107 Table of Contents Plan or change the maximum number of shares for which awards may be granted to any participant under the 2022 Plan, (b) such action may diminish any of the rights of the participant under any award pursuant to the 2022 Plan unless agreed by the participant.
Our board of directors has the authority to amend or terminate the 2022 Plan, but no amendments, alternation or discontinuation made by the board of director, (a) without the approval (but only to extent such approval is required by the principal national securities exchange on which the shares are listed or admitted to trading, and subject to certain other exceptions) of the shareholders of our company, if such action would increase the total number of shares reserved for the purposes of our 2022 Plan or change the maximum number of shares for which awards may be granted to any participant under the 2022 Plan, (b) such action may diminish any of the rights of the participant under any award pursuant to the 2022 Plan unless agreed by the participant.
(4) Represents (i) 10,542,529 Class A ordinary shares held by Northern Light Venture Fund III, L.P., or NLVF III, a Cayman Islands exempted limited liability partnership, (ii) 1,188,025 Class A ordinary shares held by Northern Light Strategic Fund III, L.P., or NLSF III, a Cayman Islands exempted limited liability partnership, and (iii) 149,691 Class A ordinary shares held by Northern Light Partners Fund III, L.P., or NLPF III, a Cayman Islands exempted limited liability partnership, as reported in the Schedule 13G filed on February 13, 2023.
(3) Represents (i) 10,542,529 Class A ordinary shares held by Northern Light Venture Fund III, L.P., or NLVF III, a Cayman Islands exempted limited liability partnership, (ii) 1,188,025 Class A ordinary shares held by Northern Light Strategic Fund III, L.P., or NLSF III, a Cayman Islands exempted limited liability partnership, and (iii) 149,691 Class A ordinary shares held by Northern Light Partners Fund III, L.P., or NLPF III, a Cayman Islands exempted limited liability partnership, as reported in the Schedule 13G filed on February 13, 2023.
Yusheng Han is our founder, chairman of the board of directors and chief executive officer. Mr. Han has 18 years of experience in life science. From June 2011 to November 2013, he was an associate in Northern Light Venture Capital where he focused on investment in the healthcare industry and helped the firm invest in successful companies.
Yusheng Han is our founder, chairman of the board of directors and chief executive officer. Mr. Han has 19 years of experience in life science. From June 2011 to November 2013, he was an associate in Northern Light Venture Capital where he focused on investment in the healthcare industry and helped the firm invest in successful companies.
The nominating and corporate governance committee is responsible for, among other things: 109 Table of Contents • selecting and recommending to the board nominees for election by the shareholders or appointment by the board; • reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; • making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and • advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
The nominating and corporate governance committee is responsible for, among other things: • selecting and recommending to the board nominees for election by the shareholders or appointment by the board; • reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; • making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and • advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
Lu holds a bachelor’s degree in electromagnetic engineering from Xidian University and a Master of Business Administration degree from Tsinghua University. Mr. Feng Deng has served as our director since August 2016. Mr. Deng has over 22 years of experience in venture capital, computer science and telecommunication industry.
Lu holds a bachelor’s degree in electromagnetic engineering from Xidian University and a Master of Business Administration degree from Tsinghua University. Mr. Feng Deng has served as our director since August 2016. Mr. Deng has over 20 years of experience in venture capital, computer science and telecommunication industry.
Share Ownership Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2023 by: • each of our directors and executive officers; • each person known to us to own beneficially more than 5% of our ordinary shares.
Share Ownership Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2024 by: • each of our directors and executive officers; • each person known to us to own beneficially more than 5% of our ordinary shares.
The registered address of LYFE Capital Stone (Hong Kong) Limited is Suite 1113A, 11/F, Ocean Centre, Harbour City, 5 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong.
The registered address of LYFE Capital Stone (Hong Kong) Limited is Suite 1113A, 11/F, Ocean Centre, Harbour City, 5 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong. The registered address of LYFE Mount Whitney Limited is Suite 1113A, 11/F, Ocean Centre, Harbour City, 5 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong.
Awards may not be transferred in any manner by the participant other than in accordance with the exceptions provided in the 2022 Plan or the relevant award agreement or otherwise determined by the Compensation Committee, such as transfers by will or the laws of descent and distribution. Termination and Amendment .
Awards may not be transferred in any manner by the participant other than in accordance with the exceptions provided in the 2022 Plan or the relevant award agreement or otherwise determined by the Compensation Committee, such as transfers by will or the laws of descent and distribution. 105 Table of Contents Termination and Amendment.
He holds a bachelor’s and a master’s degree in electronic engineering from Tsinghua University, a master’s degree in computer engineering from the University of Southern California, and a Master of Business Administration degree from the Wharton Business School of the University of Pennsylvania. 104 Table of Contents Ms. Wendy Hayes has served as our independent director since June 2020. Ms.
He holds a bachelor’s and a master’s degree in electronic engineering from Tsinghua University, a master’s degree in computer engineering from the University of Southern California, and a Master of Business Administration degree from the Wharton Business School of the University of Pennsylvania. Ms. Wendy Hayes has served as our independent director since June 2020. Ms.
Allocation and Plan administration . As approved by our board of directors and shareholders, the Awards consist of three tranches of options (the “Pool I Awards”, “Pool II Awards” and “Pool III Awards”) and will be allocated as follows: • Pool I Awards: 0 to Mr.
As approved by our board of directors and shareholders, the Awards consist of three tranches of options (the “Pool I Awards”, “Pool II Awards” and “Pool III Awards”) and will be allocated as follows: • Pool I Awards: 0 to Mr.
The compensation committee is responsible for, among other things: • reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; • reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; • reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and • selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.
The compensation committee is responsible for, among other things: • reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; • reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; • reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and • selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management. 107 Table of Contents Nominating and Corporate Governance Committee.
We have entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we may agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.
Under these agreements, we may agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.
As of March 31, 2023, we granted certain number of restricted share units under our 2020 Plan to an independent director, which represent less than 1% of our total outstanding ordinary shares as of the same date. Other Share Incentive Awards We also granted options to our directors, officers and employees other than under our 2020 Plan and 2022 Plan.
As of March 31, 2024, we granted certain number of restricted share units under our 2020 Plan to three independent directors, which represent approximately 1% of our total outstanding ordinary shares as of the same date. Other Share Incentive Awards We also granted options to our directors, officers and employees other than under our 2020 Plan and 2022 Plan.
The executive officers have also agreed to disclose in confidence to us all information with economic value, including but not limited to inventions, works and software, which they conceive, develop or reduce to practice during the executive officer’s employment with us and one year following the last date of employment, and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for information with economic value.
The executive officers have also agreed to disclose in confidence to us all information with economic value, including but not limited to inventions, works and software, which they conceive, develop or reduce to practice during the executive officer’s employment with us and one year following the last date of employment, and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for information with economic value. 103 Table of Contents We have entered into indemnification agreements with each of our directors and executive officers.
As of March 31, 2023, there were 11,010,345 ordinary shares underlying outstanding options granted to our executive officers and employees under our 2022 Plan. 2020 Share Incentive Plan In May 2020, our board of directors and shareholders approved our 2020 Share Incentive Plan, or the 2020 Plan, to provide incentives to employees, directors and consultants and promote the success of our business.
As of March 31, 2024, there were 9,893,478 ordinary shares underlying outstanding options granted to our executive officers and employees under our 2022 Plan. 2020 Share Incentive Plan In May 2020, our board of directors and shareholders approved our 2020 Share Incentive Plan, or the 2020 Plan, to provide incentives to employees, directors and consultants and promote the success of our business.
(8) Represents 7,391,581 Class A ordinary shares (in the form of ADSs) held Kynam Capital Management, LP, as reported in the Schedule 13G filed on February 10, 2023. Kynam Capital Management, LP is a Delaware company and its address is 221 Elm Road. Princeton, NJ 08540, U.S.
(7) Represents 8,694,426 Class A ordinary shares (in the form of ADSs) held Kynam Capital Management, LP, as reported in the Schedule 13G filed on February 14, 2024. Kynam Capital Management, LP is a Delaware company and its address is 221 Elm Road. Princeton, NJ 08540, U.S.
The 2022 Plan and the grant of the awards thereunder replaced our 2021 Long-term Equity Incentive Plan, or the 2021 Plan, and the share incentive awards granted thereunder, which were approved by our board of directors in November 2021 and shareholders in December 2021.Following the approval of the 2022 Plan, the 2021 Plan and all awards granted thereunder were automatically and immediately cancelled.
The 2022 Plan and the grant of the awards thereunder replaced our 2021 Long-term Equity Incentive Plan, or the 2021 Plan, and the share incentive awards granted thereunder, which were approved by our board of directors in November 2021 and shareholders in December 2021.
The general partner of Sequoia Capital China Venture Fund VI, L.P. is SC China Venture VI Management, L.P., whose general partner is SC China Holding Limited. SC China Holding Limited is wholly-owned by SNP China Enterprises Limited, which in turn is wholly-owned by Mr. Neil Nanpeng Shen.
HSG Venture VI Holdco, Ltd. is wholly-owned by HongShan Capital Venture Fund VI, L.P. The general partner of HongShan Capital Venture Fund VI, L.P. is HSG Venture VI Management, L.P., whose general partner is HSG Holding Limited. HSG Holding Limited is wholly-owned by SNP China Enterprises Limited, which in turn is wholly-owned by Mr. Neil Nanpeng Shen.
The total number of ordinary shares issued and outstanding as of March 31, 2023 is 102,675,392, including 85,350,544 Class A ordinary shares and 17,324,848 Class B ordinary shares. † † For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our Class A and Class B ordinary shares as a single class.
The total number of ordinary shares issued and outstanding as of March 31, 2024 is 102,587,260, including 85,262,412 Class A ordinary shares and 17,324,848 Class B ordinary shares. †† For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our Class A and Class B ordinary shares as a single class.
(7) Represents (i) 5,964,435 Class A ordinary shares (including 3,829,927 Class A ordinary shares in the form of ADSs) held by EverGreen SeriesC Limited Partnership, a Cayman Islands exempted limited partnership, and (ii) 1,052,950 Class A ordinary shares(including 800,000 Class A ordinary shares in the form of ADSs) held by CMBI Private Equity Series SPC on behalf of and for the account of Biotechnology Fund IV SP, a segregated portfolio company incorporated under the law of Cayman Islands, whose management shares wholly owned by CMB International Private Investment Limited, an exempted company with limited liability incorporated under the law of Cayman Islands, as reported in the Schedule 13G filed on February 13, 2023.
Shen is Suite 3613, 36/F Two Pacific Place, 88 Queensway, Hong Kong. 110 Table of Contents (6) Represents (i) 5,964,435 Class A ordinary shares (including 3,829,927 Class A ordinary shares in the form of ADSs) held by EverGreen SeriesC Limited Partnership, a Cayman Islands exempted limited partnership, and (ii) 1,052,950 Class A ordinary shares(including 800,000 Class A ordinary shares in the form of ADSs) held by CMBI Private Equity Series SPC on behalf of and for the account of Biotechnology Fund IV SP, a segregated portfolio company incorporated under the law of Cayman Islands, whose management shares wholly owned by CMB International Private Investment Limited, an exempted company with limited liability incorporated under the law of Cayman Islands, as reported in the Schedule 13G filed on February 13, 2023.
The calculations in the table below are based on 102,675,392 ordinary shares issued and outstanding as of March 31, 2023, comprising (i) 85,350,544 Class A ordinary shares, excluding (a) 441,456 Class A ordinary shares issued to our depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of awards granted under share incentive plans, and (b) 3,023,138 Class A Ordinary Shares as treasury stock, and (ii) 17,324,848 Class B ordinary shares.
The calculations in the table below are based on 102,587,260 ordinary shares issued and outstanding as of March 31, 2024, comprising (i) 85,262,412 Class A ordinary shares, excluding (a) 708,828 Class A ordinary shares issued to our depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of awards granted under share incentive plans, and (b) 3,023,138 Class A Ordinary Shares as treasury stock, and (ii) 17,324,848 Class B ordinary shares.
Han received a bachelor’s degree in biochemistry from Jilin University in July 2000, and a master’s degree in cell biology in Peking Union Medical College in June 2003. He obtained a Master of Business Administration degree from Columbia Business School in May 2011. Dr. Shaokun (Shannon) Chuai has served as our director since August 2016. Dr.
Han received a bachelor’s degree in biochemistry from Jilin University in July 2000, and a master’s degree in cell biology in Peking Union Medical College in June 2003. He obtained a Master of Business Administration degree from Columbia Business School in May 2011. Dr.
The 2022 Plan will grant options to senior management and employees. The maximum number of shares that may be issued pursuant all awards under our 2022 Plan is 11,775,525 Class A ordinary shares (the “Awards”). The following paragraphs describe the principal terms of the 2022 Plan: Type of awards . The 2022 Plan permits the awards of options.
The maximum number of shares that may be issued pursuant all awards under our 2022 Plan is 11,775,525 Class A ordinary shares (the “Awards”). 104 Table of Contents The following paragraphs describe the principal terms of the 2022 Plan: Type of awards . The 2022 Plan permits the awards of options. Allocation and Plan administration.
Compensation In 2022, we paid an aggregate of approximately RMB7.2 million (US$1.0 million) in cash to our directors and executive officers.
B. Compensation In 2023, we paid an aggregate of approximately RMB6.1 million (US$0.9 million) in cash to our directors and executive officers.
The registered address of SCC Venture V Holdco I, Ltd. and SCC Venture VI Holdco, Ltd. is Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The address for Mr. Shen is Suite 3613, 36/F Two Pacific Place, 88 Queensway, Hong Kong.
The registered address of SCC Venture V Holdco I, Ltd. and SCC Venture VI Holdco, Ltd. is Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The address for Mr.
Directors and Executive Officers Age Position/Title Yusheng Han 44 Founder, chairman of the board of directors and chief executive officer Shaokun (Shannon) Chuai 43 Director and chief science officer Leo Li 38 Director and chief financial officer Gang Lu 51 Director Feng Deng 59 Director Wendy Hayes 53 Independent director Min-Jui Richard Shen 58 Independent director Licen Lisa Xu 57 Independent director Zhihong (Joe) Zhang 47 Chief technology officer Mr.
Directors and Executive Officers Age Position/Title Yusheng Han 45 Founder, chairman of the board of directors and chief executive officer Zhihong (Joe) Zhang 48 Director and chief technology officer Leo Li 39 Director and chief financial officer Gang Lu 52 Director Feng Deng 60 Director Wendy Hayes 54 Independent director Min-Jui Richard Shen 59 Independent director Licen Lisa Xu 58 Independent director Mr.
Li is a Chartered Financial Analyst. Mr. Gang Lu has served as our director since June 2014. In 2009, Mr. Lu joined Legend Star, a venture capital headquartered in Beijing, and he is now a partner of Legend Star and leads investment in healthcare, specialized in the fields of innovative medicine, biological and genetic technology, and innovative medical service. Mr.
Lu joined Legend Star, a venture capital headquartered in Beijing, and he is now a partner of Legend Star and leads investment in healthcare, specialized in the fields of innovative medicine, biological and genetic technology, and innovative medical service. Mr.
Hayes has served as an independent director of Tuanche Limited (NASDAQ: TC) since November 2018, iHuman Inc. (NYSE: IH) since October 2020, Gracell Biotechnologies Inc. (NASDAQ: GRCL) since January 2021, SciClone Pharmaceuticals (Holdings) Limited (HKEX: 6600) since March 2021, TuSimple Holdings Inc. (NASDAQ: TSP) since December 2022, and Apollomics Inc. (NASDAQ: APLM) since March 2023.
Hayes has served as an independent director of Tuanche Limited (NASDAQ: TC) since November 2018, iHuman Inc. (NYSE: IH) since October 2020, SciClone Pharmaceuticals (Holdings) Limited (HKEX: 6600) since March 2021, Apollomics Inc. (NASDAQ: APLM) since March 2023 and SharkNinja, Inc. (NYSE: SN) since July 2023. Between May 2013 and September 2018, Ms.
Board Diversity Matrix (As of date of this annual report) Country of Principal Executive Offices China Foreign Private Issuer Yes Disclosure Prohibited under Home Country Law No Total Number of Directors 8 Female Male Non-Binary Did No Disclose Gender Part I: Gender Identity Directors 3 5 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 105 Table of Contents B.
Nasdaq Board Diversity Matrix (As of date of this annual report) Country of Principal Executive Offices China Foreign Private Issuer Yes Disclosure Prohibited under Home Country Law No Total Number of Directors 8 Female Male Non-Binary Did No Disclose Gender Part I: Gender Identity Directors 2 6 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 UK FCA Diversity Disclosures (As at December 31, 2023) As at December 31, 2023, 100% of the members of the board of directors identified as having a minority ethnic background.
To our knowledge, as of March 31, 2023, 52,455,131 issued and outstanding Class A ordinary shares, representing approximately 51.1% of our total issued and outstanding ordinary shares, were held by two record shareholder with registered addresses in the United States. None of our outstanding Class B ordinary shares are held by record holders in the United States.
To our knowledge, as of March 31, 2024, 56,075,045 issued and outstanding Class A ordinary shares, representing approximately 54.7% of our total issued and outstanding ordinary shares, were held by three record shareholders with registered addresses in the United States. None of our outstanding Class B ordinary shares are held by record holders in the United States.
The following table sets forth the number of our employees by function as of December 31, 2022. 110 Table of Contents As of December 31, 2022 Number % of Total Employees Functions: Technology, Research and Development 220 19.3 % Medical Affairs 127 11.2 % Operations and Quality Assurance 261 22.9 % Sales and Marketing 408 35.9 % General and Administration 122 10.7 % Total number of employees 1,138 100.0 % As required by PRC laws and regulations, we participate in various employee social security plans that are organized by municipal and provincial governments, including pension, medical insurance and unemployment insurance and housing fund.
As of December 31, 2023 Number % of Total Employees Functions: Technology, Research and Development 174 22.1 % Medical Affairs 84 10.7 % Operations and Quality Assurance 177 22.5 % Sales and Marketing 271 34.5 % General and Administration 80 10.2 % Total number of employees 786 100.0 % As required by PRC laws and regulations, we participate in various employee social security plans that are organized by municipal and provincial governments, including pension, medical insurance and unemployment insurance and housing fund.
Han; 33% to our other officers and employees; and the remaining 22% will be reserved for future grants to our officers and employees (none of the reserved portion will be granted to Mr. Han), details of which will be determined by the compensation committee. Award agreement .
Han), details of which will be determined by the compensation committee. • Pool III Awards: 45% (or options to purchase 1,766,329 Class A ordinary shares) to Mr. Han; 33% to our other officers and employees; and the remaining 22% will be reserved for future grants to our officers and employees (none of the reserved portion will be granted to Mr.
Our officers are appointed by and serve at the discretion of the board of directors, and may be removed by our board of directors. D. Employees As of December 31, 2020, 2021 and 2022, we had 938, 1,394 and 1,138 employees, respectively. Most of our employees are located in China, with a small number located in the United States.
Our officers are appointed by and serve at the discretion of the board of directors, and may be removed by our board of directors. 108 Table of Contents D. Employees As of December 31, 2021, 2022 and 2023, we had 1,394, 1,138 and 786 employees, respectively.
The registered address of LYFE Mount Whitney Limited is Suite 1113A, 11/F, Ocean Centre, Harbour City, 5 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong. 112 Table of Contents (6) Represents (i) 3,004,874 Class A ordinary shares held by SCC Venture V Holdco I, Ltd., an exempted company with limited liability incorporated under the law of the Cayman Islands, (ii) 3,840,808 Class A ordinary shares (including 212,121 Class A ordinary shares in the form of ADSs) held by SCC Venture VI Holdco, Ltd., an exempted company with limited liability incorporated under the law of the Cayman Islands, and (iii) 885 Class A ordinary shares held by Mr.
(5) Represents (i) 3,004,874 Class A ordinary shares held by HSG Venture V Holdco I, Ltd., an exempted company with limited liability incorporated under the law of the Cayman Islands, (ii) 3,840,808 Class A ordinary shares (including 212,121 Class A ordinary shares in the form of ADSs) held by HSG Venture VI Holdco, Ltd., an exempted company with limited liability incorporated under the law of the Cayman Islands, and (iii) 885 Class A ordinary shares held by Mr.
In December 2020, we issued an aggregate of 743,955 restricted shares at purchase prices between US$13.2000 and US$20.0229 per share to certain employees. These restricted shares are subject to a three-year lock-up period. 108 Table of Contents C. Board Practice Board of Directors Our board of directors consists of nine directors.
These options bear a per share exercise price of US$0.0002 or US$13.6184, and will expire between September 30, 2025 and January 31, 2032. 106 Table of Contents In December 2020, we issued an aggregate of 743,955 restricted shares at purchase prices between US$13.2000 and US$20.0229 per share to certain employees. These restricted shares are subject to a three-year lock-up period.
Shen was Chief Product Officer and then the President of Omniome, a privately held start-up that was acquired by Pacific Biosciences of California, Inc. in 2021. Dr. Shen worked at Illumina, Inc., a life sciences tools provider, from 2000 to 2016. He served in many roles at Illumina, the last of which was vice president for oncology research and development.
Shen served as the senior vice president of research and development at Pacific Biosciences of California, Inc., a leading provider of high-quality and accurate sequencing platforms. From 2020 to 2021, Dr. Shen was Chief Product Officer and then the President of Omniome, a privately held start-up that was acquired by Pacific Biosciences of California, Inc. in 2021. Dr.
Neil Nanpeng Shen. SCC Venture V Holdco I, Ltd. is wholly-owned by Sequoia Capital China Venture Fund V, L.P. The general partner of Sequoia Capital China Venture Fund V, L.P. is SC China Venture V Management, L.P., whose general partner is SC China Holding Limited. SCC Venture VI Holdco, Ltd. is wholly-owned by Sequoia Capital China Venture Fund VI, L.P.
Neil Nanpeng Shen, as reported in the Schedule 13G filed on February 14, 2024. HSG Venture V Holdco I, Ltd. is wholly-owned by HongShan Capital Venture Fund V, L.P. The general partner of HongShan Capital Venture Fund V, L.P. is HSG Venture V Management, L.P., whose general partner is HSG Holding Limited.
Xu has over 16 years of experience in driving the productization and lifecycle for life science and biomedical products, from product concept and research to development and commercialization. She is the chief commercial officer of FlashDx Inc., a molecular diagnostics sample-to-answer solution company, and an independent board member of Ribbon Biolab, a company specialized in the production of synthetic DNAs.
She is the chief commercial officer of FlashDx Inc., a molecular diagnostics sample-to-answer solution company, and an independent board member of Ribbon Biolab, a company specialized in the production of synthetic DNAs. Dr.
(3) Consists of the shares listed in footnote (4) below. For purpose of this section, Mr. Feng Deng, one of our directors, beneficially owns the shares held by Northern Light Venture Capital III, Ltd.
The register address of Quantum Boundary Holdings Limited is at Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. (2) Consists of the shares listed in footnote (3) below. For purpose of this section, Mr. Feng Deng, one of our directors, beneficially owns the shares held by Northern Light Venture Capital III, Ltd.
Between May 2013 and September 2018, Ms. Hayes served as the inspections leader at the Public Company Accounting Oversight Board in the United States. Prior to that, Ms. Hayes was an audit partner at Deloitte (China). Ms.
Hayes served as the inspections leader at the Public Company Accounting Oversight Board in the United States. Prior to that, Ms. Hayes was an audit partner at Deloitte (China). Ms. Hayes received her bachelor’s degree in international finance from University of International Business and Economics in 1991, and her executive MBA from Cheung Kong Graduate School of Business in 2012.
A director is not required to hold any shares in our company by way of qualification.
By August 2023, we had repurchased all these shares from these employees. C. Board Practice Board of Directors Our board of directors consists of nine directors. A director is not required to hold any shares in our company by way of qualification.
Leo Li has served as our chief financial officer since the third quarter of 2019 and our director since the first quarter of 2020. Prior to joining us, Mr. Li served as the chief financial officer of Weidai Ltd., a NYSE-listed leading auto-backed financing solution provider in China. Prior to Weidai Ltd., Mr.
Prior to joining us, Mr. Li served as the chief financial officer of Weidai Ltd., a NYSE-listed leading auto-backed financing solution provider in China. Prior to Weidai Ltd., Mr. Li served as an investment director and later an executive director of Vision Knight Capital, or VKC, a private equity fund focusing on China’s internet-driven sectors. Prior to VKC, Mr.
Xu has a Ph.D. degree in molecular biology from University of Zurich and a master of science degree in biophysics from Tsinghua University, and completed the business executive education program from Wharton Business School, University of Pennsylvania. Dr. Zhihong (Joe) Zhang served as our chief technology officer since March 2016. Prior to joining us, Dr.
Xu has a Ph.D. degree in molecular biology from University of Zurich and a master of science degree in biophysics from Tsinghua University, and completed the business executive education program from Wharton Business School, University of Pennsylvania. Board Diversity Disclosure The following information was provided by our directors on a voluntary basis.
Share Incentive Awards 2022 Long-term Equity Incentive Plan In August 2022, our board of directors approved our 2022 Long-term Equity Incentive Plan, or the 2022 Plan, which was subsequently approved by our shareholders in the annual general meeting in September 2022.
As of March 31, 2024, there were 1,243,667 ordinary shares underlying outstanding options granted to our executive officers and employees under our 2023 Plan. 2022 Long-term Equity Incentive Plan In August 2022, our board of directors approved our 2022 Long-term Equity Incentive Plan, or the 2022 Plan, which was subsequently approved by our shareholders in the annual general meeting in September 2022.
Before joining Illumina, Dr. Shen worked at Myriad Genetics, Inc., a molecular diagnostics company, from 1998 to 2000. Dr. Shen earned his bachelor’s degree in biochemistry from University of California, Los Angeles, and his Ph.D. degree in biochemistry and molecular biology from Louisiana State University Medical Center. Additionally, Dr.
Shen earned his bachelor’s degree in biochemistry from University of California, Los Angeles, and his Ph.D. degree in biochemistry and molecular biology from Louisiana State University Medical Center. Additionally, Dr. Shen is a member of the External Advisory Board of the Parker H. Petit Institute for Bioengineering and Bioscience at the Georgia Institute of Technology. Dr.
(1) Represents (i) 27,175 Class A Ordinary Shares, and (ii) 17,324,848 Class B ordinary shares directly held by Quantum Boundary Holdings Limited, a British Virgin Island company. Quantum Boundary Holdings Limited is indirectly wholly owned and ultimately controlled by a family trust, a trust established under the laws of the Republic of Singapore and managed by J.P.
Quantum Boundary Holdings Limited is indirectly wholly owned and ultimately controlled by a family trust, a trust established under the laws of the Republic of Singapore and managed by J.P. Morgan Trust Company (Singapore) Pte. Ltd as the trustee. Mr. Han is the settlor of the trust. Mr. Han and his family members are the beneficiaries of the trust.
Shen is the managing director of RS Technology Ventures, LLC, a strategic advisory and investment company that he founded in 2016. From 2021 to 2022, Dr. Shen served as the senior vice president of research and development at Pacific Biosciences of California, Inc., a leading provider of high-quality and accurate sequencing platforms. From 2020 to 2021, Dr.
Ms. Hayes is a certified public accountant in the United States (California) and China. 101 Table of Contents Dr. Min-Jui Richard Shen has served as our independent director since June 2020. Dr. Shen is the managing director of RS Technology Ventures, LLC, a strategic advisory and investment company that he founded in 2016. From 2021 to 2022, Dr.
As of March 31, 2023, there were 6,805,710 ordinary shares underlying outstanding options granted to our directors, officers and employees outside our 2020 Plan and 2022 Plan. These options bear a per share exercise price of US$0.0002 or US$13.6184, and will expire between September 30, 2025 and January 31, 2032.
As of March 31, 2024, there were 6,227,135 ordinary shares underlying outstanding options granted to our directors, officers and employees outside our 2020 Plan and 2022 Plan.
Li served as an investment director and later an executive director of Vision Knight Capital, or VKC, a private equity fund focusing on China’s internet-driven sectors. Prior to VKC, Mr. Li worked at Morgan Stanley Asia Ltd. Mr. Li attended University of Oxford from 2004 to 2008 and received a four-year Master of Physics degree. Mr.
Li worked at Morgan Stanley Asia Ltd. Mr. Li attended University of Oxford from 2004 to 2008 and received a four-year Master of Physics degree. Mr. Li is a Chartered Financial Analyst. Mr. Gang Lu has served as our director since June 2014. In 2009, Mr.
Zhang was a staff scientist of Illumina, Inc., and a senior fellow of Howard Hughes Medical Institute and University of Washington. He obtained a bachelor’s and master’s degree in biochemistry and molecular biology from Fudan University in 1997 and 2000, and a Ph.D. degree in molecular genetics and microbiology from Duke University in 2005.
He obtained a bachelor’s and master’s degree in biochemistry and molecular biology from Fudan University in 1997 and 2000, and a Ph.D. degree in molecular genetics and microbiology from Duke University in 2005. Mr. Leo Li has served as our chief financial officer since the third quarter of 2019 and our director since the first quarter of 2020.
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Chuai joined us as chief technology officer in May 2014. She was appointed the chief operating officer in March 2016 and the chief scientific officer in November 2022.
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Zhihong (Joe) Zhang has served as our chief technology officer in March 2016 and our director since June 2023. Prior to joining us, Dr. Zhang was a staff scientist of Illumina, Inc., and a senior fellow of Howard Hughes Medical Institute and University of Washington.
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Prior to joining us, she worked at China Novartis Institutes for BioMedical Research (CNIBR), responsible for the bioinformatics and translational research platform, and Novartis Oncology as the principal statistician for phase III clinical trials of targeted drugs.
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Shen worked at Illumina, Inc., a life sciences tools provider, from 2000 to 2016. He served in many roles at Illumina, the last of which was vice president for oncology research and development. Before joining Illumina, Dr. Shen worked at Myriad Genetics, Inc., a molecular diagnostics company, from 1998 to 2000. Dr.
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From June 2003 to June 2005, she worked at Memorial Sloan-Kettering Cancer Center as research statistician, responsible for omics data mining and clinical trial design. Dr. Chuai holds a bachelor’s degree from Nankai University, a master’s degree in statistics and applied mathematics from Texas A&M University, and a Ph.D. degree in biostatistics from the University of Pennsylvania. Mr.
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Licen Lisa Xu has served as our independent director since June 2022. Dr. Xu has 17 years of experience in driving the productization and lifecycle for life science and biomedical products, from product concept and research to development and commercialization.
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Hayes received her bachelor’s degree in international finance from University of International Business and Economics in 1991, and her executive MBA from Cheung Kong Graduate School of Business in 2012. Ms. Hayes is a certified public accountant in the United States (California) and China. Dr. Min-Jui Richard Shen has served as our independent director since June 2020. Dr.
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Nonetheless, we acknowledge that the Company does not, at this time, meet all of the diversity targets specified in FCA Policy Statement PS22/3 on diversity and inclusion on company boards and executive management.
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Shen is a member of the External Advisory Board of the Parker H. Petit Institute for Bioengineering and Bioscience at the Georgia Institute of Technology. Dr. Licen Lisa Xu has served as our independent director since June 2022. Dr.
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Specifically: • None of the following senior positions are held by women: chairman of the board of directors, chief executive officer, senior independent director or chief financial officer; and • Less than 40% of the individuals on the board of directors are women.
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Board Diversity Disclosure The following information was provided by our directors on a voluntary basis.
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While the Company has not adopted a formal diversity policy, the Nominating and Corporate Governance Committee review annually the current composition of the board of directors with regards to characteristics such as independence, knowledge, skills, experience and diversity.
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Han), details of which will be determined by the compensation committee. 106 Table of Contents • Pool III Awards: 45% (or options to purchase 1,766,329 Class A ordinary shares) to Mr.
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In considering succession plans for senior positions, due attention will be given to the FCA board diversity targets set out in PS22/3, and we are confident that future appointments will, as a whole, continue to support the Company’s diversity aims. 102 Table of Contents The information presented in the following tables was collected on a self-reporting basis.
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Morgan Trust Company (Singapore) Pte. Ltd as the trustee. Mr. Han is the settlor of the trust. Mr. Han and his family members are the beneficiaries of the trust. The register address of Quantum Boundary Holdings Limited is at Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands.
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The board of directors were provided with the tables below, and asked to complete them based on how they identify. The Company’s approach to data collection is consistent for the purposes of all diversity-related reporting requirements under the UK Listing Rules and across all individuals in relation to whom data is being reported.
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(2) Represents 2,150,572 Class A ordinary shares (including 77,442 Class A ordinary shares in the form of ADSs) directly held by Loving Marvin Holdings Limited, a British Virgin Island company. Loving Marvin Holdings Limited is indirectly wholly owned and ultimately controlled by a family trust, a trust established under the laws of the Republic of Singapore and managed by J.P.
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Reporting on sex/gender representation as at December 31, 2023 Number of board of director members Percentage of the board of directors Number of senior positions on the board of directors Number in executive management (1) Percentage of executive management (1) Men 6 75 % 3 3 100 % Women 2 25 % 0 0 0 Not specified/ prefer not to say — — — — — (1) The Company’s executive management consists of the Chief Executive Officer, the Chief Financial Officer and the Chief Technology Officer, each of whom are also on the board of directors.
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Morgan Trust Company (Singapore) Pte. Ltd as the trustee. Dr. Shaokun (Shannon) Chuai is the settlor of the trust. Dr. Shaokun (Shannon) Chuai and her family members are the beneficiaries of the trust. The registered address of Loving Marvin Holdings Limited is at Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands.
Added
Reporting on ethnicity representation as at December 31, 2023 Number of board of director members Percentage of the board of directors Number of senior positions on the board of directors Number in executive management (1) Percentage of executive management (1) White British or other White (including minority-white groups) — — — — — Mixed/Multiple Ethnic Groups — — — — — Asian/ Asian British 8 100 % 3 3 100 % Black/African/Caribbean/Black British — — — — — Other ethnic group, including Arab — — — — — Not specified/ prefer not to say — — — — — (1) The Company’s executive management consists of the Chief Executive Officer, the Chief Financial Officer and the Chief Technology Officer, each of whom are also on the board of directors.
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Share Incentive Awards 2023 Equity Incentive Plan In June 2023, our board of directors approved our 2023 Equity Incentive Plan, or the 2023 Plan, to provide incentives to employees, directors and consultants and promote the success of our business.
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The maximum number of shares that may be issued pursuant all awards under our 2023 Plan is 4,755,000 Class A ordinary shares (the “Awards”). The following paragraphs describe the principal terms of the 2023 Plan: Type of awards. The 2023 Plan permits the awards of options, restricted shares, restricted share units that the plan administrator decides. Plan administration.
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Our compensation committee will administer the 2023 Plan. The compensation committee will determine the participants to receive awards, the time, type and number of awards to be granted to each participant, and the terms and conditions of each award grant. Award agreement.
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Awards granted under the 2023 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each award, which may include the term of the award, the provisions applicable in the event of the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award. Eligibility.
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Awards may not be transferred in any manner by the participant other than in accordance with the exceptions provided in the 2023 Plan or the relevant award agreement or otherwise determined by the plan administrator, such as transfers by will or the laws of descent and distribution. Termination and Amendment.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIn 2022, we paid service fees in the amount of RMB201.1 thousand (US$29.2 thousand) to EaSuMed, which was mainly related to consulting services EaSuMed provided to us. C. Interest of Experts and Counsel Not applicable.
Biggest changeIn 2023, we paid service fees in the amount of RMB18.0 thousand (US$3.0 thousand) to EaSuMed, which was mainly related to consulting services EaSuMed provided to us. C. Interest of Experts and Counsel Not applicable.
Neither can we register any other of our shares during such twelve-month period. 113 Table of Contents Piggyback Registration Right.
Neither can we register any other of our shares during such twelve-month period. 111 Table of Contents Piggyback Registration Right.