- The company's (Burning Rock Biotech Ltd.,) (NASDAQ:BNR) development is beginning to take shape in NGS diagnostics market.
- The company start the made the MRD(minimum reacting dose) plan and open up the hundred billion Blue Sea market.
As the entire medical and health sector is getting more and more attention from the market, the cancer early screening industry has also ushered in a leapfrog development. From abroad to domestic, the market for early cancer screening is gradually heating up. This has also become an important market factor for the performance of Burning Rock Biotech Ltd.,(NASDAQ:BNR)to enter a rising period.
The company(Burning Rock Biotech Ltd.,) announced its Q2 quarter report this year recently. It shows that the company's Q2 revenue was $19.5M, a year-on-year increase of 19% and a month-on-month increase of 19.4%. In addition, the company's current gross profit was $13.88M, a year-on-year increase of 15.1%; gross profit margin was 70.9%, compared with 73.3% in the same period last year. In fact, behind the increase in revenue and gross profit is the rapid development of China's NGS(Next Generation Sequencing) companion diagnostic industry. As the downstream of the innovative drug industry chain, the companion diagnostic industry is a blue market in the medicine field, with an annual growth rate of over 30%. the company (BNR.US) is one of the biggest beneficiaries of industry development.
As more and more biomarkers are discovered, and the corresponding targeted therapies and immunotherapy are developed and approved, patients are more inclined to use a variety of NGS cancer companion diagnostic tests to find safer and more effective treatments, and that became the cornerstone of the company.
The growth of the Inside-Hospital model is accelerating, and the development is beginning to take shape
The company has established a comparative advantage in terms of scale in the industry and market cultivation. It has the first CLIA-certified ctDNA and tumor tissue NGS laboratory in China and the first tumor NGS test kit approved by the NMPA,The industry advantage is obvious.
In response to the different needs of different hospitals, the company adopted an innovative "Central-Laboratory + Inside-Hospital" model . Among them, the central laboratory model belongs to the Outside-Hospital market, and the Inside-Hospital laboratory is called the Inside-Hospital market. The difference between the two is that samples and fees in the Inside-Hospital market flow from patients to the hospital, while samples and fees in the Outside-Hospital market are directly delivered to third-party laboratories without going through the hospital.
As a leading NGS company in China, the company’s business structure includes the above two businesses at the same time. From the company’s last Q2 revenue composition, it was found that the current revenue of the Central-Laboratory model reached $12.3M, a year-on-year increase of 7.2%; at the same time, the company’s Inside-Hospital model revenue reached $6.2M, a year-on-year increase of 46.8%. It is not difficult to see that the current development trend of the company’s business is still based on the Central-Laboratory model, but the Inside-Hospital model is showing a rapid development trend.
In fact, this trend is in line with the overall development direction of the companion diagnostic industry. Because it is in the Out-Hospital market, Medical testing laboratories can receive specimens provided by other medical institutions and medical practitioners according to their application for testing or directly collect relevant specimens of the subject,and provide inspection reports to the applicants, Therefore, its market entry barriers are relatively low, it suitable for qualified participants to enter the track
Although in the case of low thresholds, the Outside-Hospital market competition environment is relatively "bad", but the company can still lead in this model. The company began to provide NGS-based cancer companion diagnostic services under the Central-Laboratory model in 2014, and has now become the market leader of the Central-Laboratory in the NGS cancer companion diagnostic market in China. The financial report shows that the number of patients tested by this channel in the first half of the year was 8,155, a year-on-year increase of 12.5%. Although the company takes the lead in the Outside-Hospital model, the company's strategy is mainly to develop the Inside-Hospital model
As a high-viscosity channel, hospitals have always been contested by pharmaceutical and device companies, and companion diagnosis is no exception. Generally speaking, once the hospital laboratory is put into use, the partner hospital will purchase the company's products and perform NGS cancer companion diagnosis on a regular basis. With the increase in the number of diagnoses, the hospital's replacement cost for companion diagnostic products will gradually become higher, making the channel more stable.
From the perspective of medical demand, although hospitals urgently need high-performance, highly standardized technologies and products, these technologies and products must meet strict quality requirements and operating procedures. Therefore, the Inside-Hospital model has a high barrier to entry, and this threshold lies in authoritative product certification.
The Inside-Hospital laboratory model represents a steady and growing income stream, including the initial cost of purchasing hospital laboratory equipment and the regular sales of company products. The financial report shows that the current number of the company's contracted cooperative hospitals has increased from 24 on June 30, 2020 to 34 on June 30, 2021.
However, in terms of cash flow, the company's cash and cash equivalents reached $295.2 in the current period, indicating that the company has sufficient cash flow to cope with future R&D and marketing promotion, and lay a solid foundation for the next step of innovative R&D and market expansion.
Start the MRD(minimum reacting dose) plan and open up the hundred billion Blue Sea market
In recent years, from the perspective of evaluating tumor burden, circulating tumor DNA (ctDNA) as a research object for evaluating minimal residual disease (MRD) or molecular residual disease has been accumulating evidence in lung cancer, and its value and application prospects are gradually being developed. Lung cancer MRD As an epoch-making marker, it has already gained momentum. As a leading domestic NGS company, the company has naturally included MRD in its innovative R&D queue, and its development plan was involved in the Q2 financial report.
Tumor recurrence is essentially due to residual microscopic lesions (MRD) that still exist at the location of the lesion after the patient has received standard treatment. After MRD was reactivated, it eventually led to the patient's tumor recurrence. Since the MRD cannot be directly observed, its existence can only be found through the signal releases.
Currently, the best method of discovery is ctDNA liquid biopsy based on NGS technology. The ctDNA released by MRD will inevitably carry tumor-specific low-frequency mutations. Through NGS sequencing, it is possible to more accurately find out which ctDNA from MRD is from the cfDNA in plasma, and then judge the existence of MRD based on the content of ctDNA .
From a formal point of view, the application of MRD is similar to early screening. It also discovers the occurrence and development of tumors without the user's awareness. However, due to the patient's previous diagnosis and treatment records, the purpose of the screening is more specific,and data from patients after surgery can also be used as a reference.
However, from the market perspective, although recurrence surveillance is relatively small group in the early screening, But this group has a strong willingness to pay, basically does not need to go through a long process of market education, and is more likely to achieve rapid growth. This also makes the market potential of recurrence monitoring recognized by many institutions.
According to the latest statistics for 2020 released by the International International Agency for Research on Cancer(IARC) of the World Health Organization, there will be 4.57 million new cancer cases in China in 2020. In the United States, there were 2.28 million new cancer cases in the same year. The number of new patients in China each year is about twice that of the United States, but considering the low five-year survival rate, the number of domestic cancer patients may reach 25 million. According to the consumption of $308 per patient every six months for MRD screening, the domestic MRD market is estimated to reach a hundred billion .
From the perspective of market competition, Adaptive's ClonoSEQ is the only liquid biopsy product approved by the FDA for MRD detection on a global scale, it was initially approved in 2018 . However, the coverage of ClonoSEQ is only limited to hematological tumors, and has not expanded to solid tumors until now.
The company(BNR.US) has released relatively little information about the MRD plan. The previously published MEDAL research plan shows that it uses the Tumor-agnostic MRD detection strategy, which is to detect ctDNA mutations in the blood after surgery. And ctDNA methylation-guided MRD to evaluate patients with disease recurrence. In addition, the company is also developing another Tumor-informed MRD product, brPRORHET, This product mainly customizes personalized detection panels based on the results of tumor tissue sequencing. The detection of LoD can reach 0.004%, which is 5 times of the 0.02% LoD of CTDNA-MRD.
Public information shows that the brPRORHET product is undergoing clinical verification of MEDAL NSCLC. Research data for lung cancer is expected to be released in the first half of 2022. Clinical trials for colon cancer and esophageal cancer are also planned. It is reported that brPRORHET may be listed and commercialized next year.
It is not difficult to see from the financial report that the company is currently still in a rapid expansion stage. As a leading company in NGS companion diagnostics in China, the company is expected to open up a new cancer early diagnosis market through continuous innovation and research and development, and expand market share through marketing to further master NGS Blue Sea market, the company's intrinsic value may continue to be released in the future.
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