With the collaboration between Burning Rock Biotech (BNR.US) and BGI Genomics, along with the disclosure of Burning Rock Biotech's Q3 2024 Earnings Reports, Burning Rock Biotech experienced a rapid rise in market performance in November and December of this year.

According to Zhithong Finance APP, on December 5, during the trading session, Burning Rock Biotech's stock price reached a high of $7.47, returning to levels from late July and recovering from the price drop in the third quarter of this year. This round of market movement started on November 5, with Burning Rock Biotech's stock price cumulatively rising 1.76 times within a month.

However, after December 5, the upward momentum of Burning Rock Biotech's stock price seems to have come to an abrupt halt, entering a sideways state. As of the Christmas market closure, Burning Rock Biotech has had 13 trading days in this sideways period, and its future market direction has undoubtedly become a focal topic of concern for investors.

A brief equilibrium after an upward trend.

Looking back at the upward trend of Burning Rock Biotech in November, it is more accurate to say that the market rose under multiple bullish catalysts, rather than just the block orders opening up upward space.

Zhithong Finance APP has observed a notable characteristic of this round of upward movement in Burning Rock Biotech: it is a rise without volume. Extending the timeline to September 20 of this year, investors can easily see that after the declines in August and September, the already illiquid Burning Rock Biotech had reached the edge of liquidity exhaustion, with a trading volume of only 2,623 shares on that day and a turnover ratio of only 0.03%.

However, starting from the next day, a wave of funds began to gradually flow into Burning Rock Biotech. On September 23, the company's volume slightly increased to 0.017 million shares. Although the company's stock price experienced slight fluctuations in the following month, its daily trading volume generally remained above 0.01 million shares. Additionally, on October 4, October 11, and October 14, Burning Rock Biotech's daily trading volume reached 0.3215 million shares, 0.4261 million shares, and 246,300 shares respectively, with corresponding turnover ratios of 3.13%, 4.15%, and 2.40%, indicating a significant increase in trading activity compared to previous levels.

As mentioned earlier, at this time, Burning Rock Biotech was in a bottom consolidation phase. After a long decline in stock price, the trading volume had diminished to a low point. The price fluctuations became smaller, with light trading activity and little interest. Suddenly, the trading volume increased and significantly rose after several trading days. It can be seen that on October 4, during the trading session, the stock price of Burning Rock Biotech broke through previous highs to reach $5.65. After the breakout with increased volume, it retraced to the previous high again. Generally speaking, this is a signal of Block Orders entering the market, indicating that institutional funds have begun to intervene.

However, when Burning Rock Biotech experienced another volume breakthrough on October 11, the institutional funds chose not to directly push the price up but instead continued to buy at the lower end of the trading range until around November 5 when the market reported about Burning Rock Biotech's collaboration with BGI's smart manufacturing for overseas expansion, at which point they began to push the stock price upward.

During the price increase in November, the main funds of Burning Rock Biotech changed from the previous gradual style to a rapid upward strategy, continuously producing large bullish candles during the rally. Generally speaking, the institutional funds that adopt this rapid ascent strategy usually have strong financial backing and have accumulated a substantial amount of shares at low prices, achieving a high level of control. For example, on November 27 and November 29, Burning Rock Biotech's stock price surged 25.12% and 16.12% respectively, despite having daily trading volumes of only 22,816 shares and 20,225 shares, demonstrating the high level of control by the institutional funds.

It can be seen that during this round of rally, institutional funds did not opt for significant pullbacks or interim washouts, allowing Burning Rock Biotech's stock price to soar within a month. This not only conserved institutional funds but also reduced the time needed for the price to rise, while creating upward space.

However, it is noteworthy that this round of increase for Burning Rock Biotech did not involve significant volume. Although the daily trading volume was above 0.04 million shares from November 5 to 7 at the start of the trend, the highest daily trading volume during the entire increase was only 70,088 shares, far less than the high of 0.4261 million shares in October. Without significant volume, Burning Rock Biotech entered a range-bound state with flat prices and reduced trading volume after December 5. On December 23, the company's stock trading volume fell again to 6,183 shares.

From the performance of the stock price, it can currently be observed that although it has left the previous cost range, such volume is far from achieving profit realization. Overall, the stock price increase of Burning Rock Biotech in November, which occurred without volume, somewhat confirms that institutional funds have already intervened, the shares have been well locked in, and that they are currently raising the stock price. The subsequent appearance of reduced trading volume in a range-bound state may indicate that the institutional funds currently have no intention to sell, but are simply washing out temporarily, with a high probability of a trend continuation; investors may continue to be bullish on future market performance.

The "Overseas Milestone" may be a key node for the stock price increase.

According to Zhituo Finance APP, Burning Rock Biotech initially promoted its "in-hospital + out-of-hospital" dual-driven growth model when it was listed. However, as the Business gradually deepens, Burning Rock Biotech's focus has recently shifted entirely towards the in-hospital model.

In its view, the in-hospital model has incomparable competitiveness. In previous Earnings Reports, Burning Rock Biotech mentioned, "Once in-hospital laboratories, equipment, and systems are in place, we will regularly sell our reagent kits to them, thereby creating high entry barriers and high customer loyalty." This means that Burning Rock Biotech believes the in-hospital model is more stable, and the profit margins may also be higher.

Since the second half of 2022, Burning Rock has begun to vigorously promote the in-hospital channels, and the revenue gap between in-hospital and out-of-hospital business has gradually narrowed. By Q3 2023, the company's in-hospital channel revenue exceeded the out-of-hospital channel revenue for the first time. In Q1 and Q2 of this year, the proportion of its in-hospital channel revenue remained stable at around 55%.

Just when the market thought that its in-hospital business growth had stagnated, the recently disclosed Q3 2024 Earnings Report showed sustained progress. The data indicates that in Q3 2024, Burning Rock Biotech's in-hospital testing revenue was 63.77 million yuan, a year-on-year increase of 17.0% and a quarter-on-quarter increase of 6.5%; in contrast, the laboratory testing revenue from Burning Rock Biotech's central laboratory was 39.98 million yuan in the same quarter.

Additionally, thanks to the ongoing cost control measures in recent quarters, Burning Rock Biotech's profitability has also improved.

In Q3, Burning Rock Biotech achieved revenue of 0.129 billion yuan, a year-on-year increase of 1%. After deducting Non-GAAP gross profit from Non-GAAP selling, general and administrative expenses, the company reported a profit of 25.2 million yuan this quarter. Furthermore, Burning Rock Biotech has achieved profitability (Non-GAAP GP-SG&A) for three consecutive quarters, showing a continuous upward trend.

Although the company continually adjusts its business development strategy, it has still not been able to grow the company's overall performance. Burning Rock Biotech set a target of at least 20% revenue growth for the entire year in early 2023, but ultimately failed to achieve this. In 2023, the company's total revenue was 0.537 billion yuan, a decrease of 4.58% compared to 0.563 billion yuan in 2022. Against this backdrop, going abroad is particularly important for Burning Rock.

According to a new market research by The Insight Partners, the global genetic testing services market is experiencing significant growth due to the increase in the incidence of surgical site infections. It is forecasted that the global genetic testing services market will reach $12.48 billion by 2030 from $3.86 billion in 2022, with a compound annual growth rate of 15.8%. In terms of regional growth, the genetic testing services market in the Asia-Pacific region reached $0.65 billion in 2022 and is expected to reach $2.16 billion by 2030; the European genetic testing services market reached $0.93 billion in 2022 and is expected to reach $2.78 billion by 2030; while the North American market is projected to reach $4.98 billion by 2030.

The rapid expansion of the Global NGS market is significant for Burning Rock, which is still in a "standstill" phase. The overseas expansion initiative of BGI is undoubtedly a timely assistance for Burning Rock, which urgently needs to "grow the cake."

The Earnings Reports show that the company's revenue from pharmaceutical collaborations during the period was 24.9 million yuan, an increase of 27.1% year-on-year; additionally, during the period, Burning Rock successfully passed three CAP inter-laboratory assessments and accumulated over 270 instances of inter-laboratory assessments organized by authoritative institutions both domestically and internationally. This is also key to accelerating the clinical application of its advanced diagnostic technology and speeding up overseas expansion.

From the perspective of cash flow, as of September 30 this year, Burning Rock had cash, cash equivalents, restricted cash, and short-term investments amounting to 0.498 billion yuan, which should sustain its R&D and Operation for around 3 years.