BNR — Q2 2026 Financial Report Analysis

Burning Rock is a Guangzhou-based company that reads the DNA of tumours. Using next-generation sequencing (NGS — machines that read many genes at once), it tests a cancer patient's tissue or blood sample for mutations, so a doctor can choose a drug that targets that specific mutation. It makes money three ways: running tests in its own central laboratories, selling test kits to hospitals that have set up their own sequencing labs ("in-hospital"), and doing testing work for drug companies running clinical trials ("pharma R&D services").

In the second quarter of 2026 (April–June), revenue fell 9.3% from a year earlier to RMB 134.8 million (about US$19.9 million), and the net loss nearly doubled to RMB 18.4 million. The drop came almost entirely from drug-company work, which fell by almost a third. The hospital kit business grew. Compared with a weak first quarter, revenue recovered 24.8%, which management called the "anticipated sequential recovery".

At a glance

• Revenue RMB 134.8m, down 9.3% year on year but up 24.8% on Q1. The year-on-year fall comes from pharma services (down 31.8%). Q1 had been the weakest quarter of the last five, at RMB 107.9m.
• In-hospital revenue RMB 67.1m, up 7.4% and the highest of the last five quarters. It is now half of all revenue, as the company moves away from testing samples in its own labs.
• Net loss RMB 18.4m vs RMB 9.7m. A 37% cut in R&D spending did not offset the lost pharma gross profit plus higher selling and administrative costs.

Results versus a year ago

All figures are in RMB millions except per-share and percentage figures. The release converts at RMB 6.7851 per US dollar.

Gross margin is the share of revenue left after the direct cost of running the tests. Operating margin is what remains after all running costs (research, sales staff, administration), before interest and tax. Here it is negative because the company spends more than it earns.

Where the revenue went

Pharma R&D services: RMB 30.8m, down 31.8%. The company says this was "primarily attributable to decreased testing services performed for our pharma customers". This line swings with the timing of drug companies' trials, and it has fallen fast: RMB 45.2m in Q2 2025, 42.0m in Q3, 31.3m in Q4, 22.8m in Q1 2026 and 30.8m now. It also lost profitability. Its gross margin fell from 56.8% to 47.2% "primarily due to a decrease in test volume of higher-margin projects". As a result, gross profit from pharma work dropped from RMB 25.7m to RMB 14.5m. That fall of RMB 11.1m is larger than the company's whole drop in gross profit (RMB 10.3m).

Revenue from overseas customers fell from RMB 37.5m to 17.9m in the same period. The release does not split overseas revenue by channel, so it doesn't say how much of that fall is pharma work. Mainland China revenue rose 5.2% to RMB 116.9m.

In-hospital: RMB 67.1m, up 7.4%, "driven by an increase in sales volume". Its gross margin improved from 74.4% to 77.1% as the mix shifted toward higher-margin products. The number of partner hospitals barely changed (64 contracted, 30 in the pipeline, 94 in total, against 93 a year ago). The growth therefore came from existing hospitals using more kits, not from new hospitals signing up.

Central laboratory: RMB 36.8m, down 10.0%, because fewer tests were run "as we continued our transition towards in-hospital business". Its gross margin is still the highest of the three channels at 85.7%, down from 87.9% because of higher depreciation.

Costs: R&D cut, sales and admin up

Total operating expenses fell only 3.2% (RMB 3.8m), because the three cost lines moved in different directions:

• Research and development: RMB 31.2m, down 37.3% (RMB 18.5m), described as "a temporary decrease across different research phases". This one cut kept the loss from being much larger. The word "temporary" means it could reverse.
• Selling and marketing: RMB 47.1m, up 22.7% (RMB 8.7m), "primarily due to an increase in staff costs".
• General and administrative: RMB 37.4m, up 19.2% (RMB 6.0m), "primarily due to an increase in allowance for credit loss in relation to accounts receivables". In other words, the company set aside more money for customer bills it may not collect. This was partly offset by lower share-based pay.

The net loss also suffered from below-the-line items. Interest income fell to RMB 1.4m from 2.2m as the cash pile shrank, and the foreign-exchange loss grew to RMB 1.3m from 0.6m.

What the headline numbers hide

• The cash burn halved, even as the loss grew. Operating activities used RMB 22.4m of cash in Q2 2026, against RMB 44.3m in Q2 2025 (worked out from the six-month and Q1 cash-flow statements). For the first half, cash used fell from RMB 67.9m to 51.7m, while the six-month net loss rose from RMB 23.2m to 35.9m. Part of the gap comes from inventories, which fell from RMB 48.6m at year-end to 34.1m. Running down inventory releases cash but can't be repeated forever. Accounts payable (money owed to suppliers) also fell, from RMB 40.7m to 18.0m, which used cash.
• Receivables are large and the credit-loss charge is rising. Accounts receivable were RMB 172.8m at June 30, slightly up from 169.6m at year-end, even though first-half revenue fell 13.8%. That is about four months of current sales still uncollected. The extra provision for bad debts is the main reason administrative costs rose 19%. This is the line to watch.
• The R&D cut flatters the operating loss. Without the RMB 18.5m fall in R&D, the operating loss would have been about RMB 36.5m, not 18.0m. Management calls the cut temporary, so the cost base may rise again.
• No adjusted-profit gap to worry about. Burning Rock's only non-GAAP measure is gross margin excluding depreciation (74.3% vs 74.4%), which is within 2 points of the reported figure. Share-based pay was small (RMB 2.0m in the quarter). The reported net loss is a fair measure of the business.
• Per share, dilution was minor. The weighted Class A share count rose about 1% (91.3m vs 90.4m). The wider loss per share comes from the wider loss itself.

Takeaway: Burning Rock's own China hospital business is growing (in-hospital kits +7.4%, at better margins), but drug-company testing, about 30% of revenue a year ago, has fallen by a third, and its margin fell with it. Even a 37% R&D cut, which management calls temporary, could not stop the loss from roughly doubling.

Balance sheet and runway

Cash, cash equivalents and restricted cash were RMB 419.1m (US$61.8m) at June 30, 2026, down from RMB 481.1m at the start of the year. Of that RMB 62.0m fall, RMB 7.4m was a currency translation effect rather than spending. Borrowings are almost nil (RMB 1.8m long-term). At the first half's operating burn of about RMB 52m per six months, current cash would last roughly four years. That gives the company time, though not unlimited time, to make its new kits pay off.

Outlook

The company gave no numeric revenue or profit guidance. CEO Yusheng Han said the company expects "sustainable and meaningful top-line growth over the long term" as new products win approval. The near-term regulatory steps the release lists are all at China's medical-device regulator (NMPA): the OncoScreen BCMatch tissue kit entered the Priority Review Channel; two CanCatch Custom kits (used for minimal residual disease (MRD) testing, which looks for traces of cancer left after treatment) entered the Special Review Procedure for innovative devices; and the OncoCompass liquid-biopsy kit's priority-review application was resubmitted and accepted in August 2026. New registration certificates are "expected in the coming quarters". None of these is an approval yet.

Our read is that the hospital channel is now the business to watch. It is growing, its margins are rising, and new kit approvals would add to it directly. But it grew only RMB 4.6m year on year this quarter, against a RMB 14.4m drop in pharma services. Pharma revenue rose from Q1's RMB 22.8m to RMB 30.8m, but it is still well below 2025 levels. Until that stabilises, or R&D stays low for longer than "temporary" implies, a return to last year's smaller losses looks unlikely. Two things to watch in Q3 2026: whether pharma services holds at or above RMB 30m a quarter, and whether receivables and the credit-loss provision stop climbing.

Source: Burning Rock Biotech Limited Form 6-K, Exhibit 99.1 (second quarter 2026 results), filed September 10, 2026. The interim figures are unaudited.