A. Operating Results You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” or in other parts of this annual report on Form 20-F. Overview We aim to transform precision oncology and early cancer detection. We are China’s leading NGS-based cancer therapy selection company. Our cancer therapy selection platform is built upon our advanced proprietary technologies, comprehensive portfolio of products and a two-pronged market-driven commercial infrastructure addressing both larger hospitals through our in-hospital model and smaller hospitals through our central laboratory model. 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 2023, 2024 and 2025, revenue from sale of cancer therapy selection tests under our central laboratory model contributed 43.3%, 34.1% and 29.7% 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. Under this model, we have partnered with 94 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 2023, 2024 and 2025, 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 35.1%, 43.5% and 41.5% of our total revenues, respectively. We also generate a portion of revenue from pharma research and development services we provide to pharmaceutical companies and hospitals, which contributed 21.6%, 22.4% and 28.8% of our total revenues in 2023, 2024 and 2025, respectively. Our revenues underwent a 4.0% decline from RMB537.4 million in 2023 to RMB515.8 million in 2024 and further increase by 4.6% to RMB539.6 million (US$77.2 million) in 2025. Our gross profit slightly decreased by 0.2% from RMB363.2 million 2023 to RMB362.4 million in 2024 and further increase by 11.2% to RMB402.9 million (US$57.6 million) in 2025. Our gross profit margin was 67.6%, 70.3% and 74.7% in 2023, 2024 and 2025, respectively. We incurred net loss of RMB653.7 million, RMB346.6 million and RMB55.3 million (US$7.9 million) in 2023, 2024 and 2025, respectively. 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. 103 Table of Contents Market Adoption of Our Cancer Therapy Selection Products and Services We currently derive substantially all of our revenues from the sale of our therapy selection tests. We expect our continued growth and business prospects to depend significantly on our ability to increase market adoption of our cancer therapy selection tests, as well as our ability to increase physician and patient awareness of cancer therapy selection in China in general. Although China’s cancer genotyping industry is expected to continue to grow rapidly, cancer therapy selection companies like us face challenges in raising awareness and adoption of their products and services by physicians, patients, hospitals and others in China’s medical community. Among these challenges are that cancer therapy selection tests can be prohibitively expensive and the interpretation of testing results can be time consuming and require knowledge and skills that are not yet widely available in China. We have approached these challenges by building and continually advancing a robust technology platform that we believe will allow us to address many of these challenges. To increase the market awareness and adoption of our cancer therapy selection tests, we conduct marketing activities to educate hospitals, physicians and pharmaceutical companies on the benefits of our cancer therapy selection products and services. We also participate in research studies and clinical trials in cooperation with oncology key opinion leaders and pharmaceutical companies that validate our cancer therapy selection tests and technologies. Testing Volume and Hospital Coverage under Our Central Laboratory Model Our revenues and results of operations are primarily dependent on testing volume and hospital coverage under our central laboratory model. In 2023, 2024 and 2025, revenue from sale of cancer therapy selection tests under our central laboratory model contributed 43.3%, 34.1% and 29.7% of our total revenues, respectively. We expect the central laboratory model to continue to contribute a meaningful portion of our revenues going forward. 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. To generate sufficient volumes of demand for our central laboratory business, we will need to maintain and continue to develop relationships with hospitals and physicians. We may need to hire additional sales and marketing staff to support our growth. Success of Our In-hospital Model Since 2016, we have been actively expanding our cancer therapy selection business under the in-hospital model, where we offer Chinese hospitals a turn-key solution that allows them to perform cancer therapy selection tests using our products in in-hospital laboratories that we help them establish. The in-hospital segment is expected to become an increasingly important segment of China’s NGS-based cancer therapy selection market. Although there are substantial challenges in getting hospitals to adopt the in-hospital model, once the in-hospital laboratories, equipment and systems are in place, we sell them our reagent kits on a recurring basis, creating high barrier to entry and high customer loyalty. Despite the large and rapidly growing demand and higher customer loyalty, establishing in-hospital laboratories usually involves long ramp-up periods—from laboratory design, tender, laboratory equipment sourcing and system installation to ongoing training and support. Accordingly, our in-hospital model requires significant upfront investment, which in turn may affect our short-term results of operations. 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. 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. 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. 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, 2023 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 232,812 43.3 (3,704 ) (0.7 ) 115,922 21.6 345,030 64.2 Revenues from sales of products — — 192,405 35.8 — — 192,405 35.8 232,812 43.3 188,701 35.1 115,922 21.6 537,435 100.0 104 Table of Contents Year ended December 31, 2024 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 175,649 34.1 (592 ) (0.1 ) 115,681 22.4 290,738 56.4 Revenues from sales of products — — 225,084 43.6 — — 225,084 43.6 175,649 34.1 224,492 43.5 115,681 22.4 515,822 100.0 Year ended December 31, 2025 Central laboratory business In-hospital business Pharma research and development services Total revenue 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 159,993 22,878 29.7 578 83 0.1 155,540 22,242 28.8 316,111 45,203 58.6 Revenues from sales of products — — 223,457 31,954 41.4 — — — 223,457 31,954 41.4 159,993 22,878 29.7 224,035 32,037 41.5 155,540 22,242 28.8 539,568 77,157 100.0 Central laboratory business Central laboratory business revenue is generated from sales of our cancer therapy selection tests to individual patients. Patients pay us for these tests with out-of-pocket payments after their physicians have ordered our tests. We recognize revenues upon the delivery of test reports to the individual patients. In-hospital business Under our in-hospital business, we (i) in some instances facilitate the hospitals’ procurement of laboratory equipment required to set up their in-hospital laboratories, for which we charge a fee, and (ii) sell our reagent kits to hospitals for them to perform cancer therapy selection testing in the in-hospital laboratories we helped them establish. Revenues from fees we receive for facilitating laboratory equipment purchases are recorded on a net basis when we have completed our facilitation services. Revenue from reagent kit sales are recorded on a gross basis when the reagent kits are delivered to hospitals. 105 Table of Contents 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. 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. The following table sets forth a breakdown of our cost of revenues for the periods indicated. Year ended December 31, 2023 2024 2025 RMB RMB RMB US$ (in thousands) Cost of revenues: Central laboratory business 49,473 33,808 22,417 3,205 In-hospital business 72,570 65,099 57,337 8,200 Pharma research and development services 52,165 54,515 56,900 8,137 Total cost of revenues 174,208 153,422 136,654 19,542 Operating Expenses Our operating expenses include research and development expenses, selling and marketing expenses and general and administrative expenses. The following table sets forth a breakdown of these expenses for the periods indicated. Year ended December 31, 2023 2024 2025 RMB RMB RMB US$ (in thousands) Operating expenses: Research and development expenses 347,016 232,290 166,494 23,808 Selling and marketing expenses 247,711 190,904 165,175 23,620 General and administrative expenses 437,821 261,638 126,090 18,031 Impairment loss on long-lived assets — 35,127 — — Total operating expenses 1,032,548 719,959 457,759 65,459 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. We expect that our research and development expenses will increase as we continue to invest in the research and development of our early cancer detection and cancer therapy selection products and technologies. 106 Table of Contents Selling and Marketing Expenses Our selling and marketing expenses primarily consist of staff costs for personnel engaged in sales and marketing functions, travel and entertainment expenses and conference expenses. Base salary of our sales and marketing personnel represents a very significant portion of staff costs, with the remainder being performance-based bonuses for these personnel. We expect that our selling and marketing expenses will increase as we continue to expand our sales and marketing teams and engage in sales and marketing activities to increase the adoption and market awareness of our products. General and Administrative Expenses Our general and administrative expenses primarily consist of staff costs for personnel engaged in general and administrative functions, professional service fees, depreciation and amortization and travel and office expenses. 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. Impairment Loss on Long-lived Assets Due to the continuing operating losses and cash outflows, we performed impairment test on long-lived assets and recognized an impairment loss of RMB35.1 million for the year ended December 31, 2024. We did not record such impairment loss for the year ended December 31, 2025. Taxation Cayman Islands We are an exempted company incorporated in the Cayman Islands. The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation, and there is currently no estate duty, inheritance tax or gift tax. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties that may be applicable on instruments executed in, or after execution brought within, the jurisdiction of the Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on dividend payments. Hong Kong Before April 1, 2018, our subsidiary incorporated in Hong Kong was subject to Hong Kong profit tax at a rate of 16.5%. Since April 1, 2018, our subsidiary incorporated in Hong Kong has been subject to Hong Kong profit tax at a rate of 8.25% on assessable profits up to HK$2,000,000 and 16.5% on any part of assessable profits over HK$2,000,000. 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 2023, 2024 or 2025. Hong Kong does not impose a withholding tax on dividends. China For our operations in the PRC, we are subject to a general PRC enterprise income tax rate of 25%. Guangzhou Burning Rock Dx Co., Ltd., a subsidiary of the VIE, has been qualified as a high and new technology enterprise, or HNTE, since November 2016, and accordingly is entitled to a reduced income tax rate of 15%. Burning Rock Biotechnology (Shanghai) Co. Ltd has been recognized as a qualified HNTE under the EIT Law by the relevant government authorities in December 2024 and is subject to a preferential rate of 15% for three years from 2024 to 2026. Dividends paid by our wholly foreign-owned subsidiaries in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless they qualify for an exemption. If our intermediary holding company in Hong Kong satisfies all the requirements under the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and receives approval from the relevant tax authority, then dividends paid to it by our wholly foreign-owned subsidiaries in China will be subject to a withholding tax rate of 5% instead. 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. 107 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%. Pursuant to applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We may be subject to adverse tax consequences and our consolidated results of operations may be adversely affected if the PRC tax authorities determine that the contractual arrangements among our PRC subsidiaries and their shareholders are not on an arm’s length basis and constitute favorable transfer pricing. Critical Accounting Polices, Judgments and Estimates An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Our accounting policies are more fully described in Note 2 of the consolidated financial statements. We base our estimates on historical experience and various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could materially differ from those estimates. 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. 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. When reviewing our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of these policies and (iii) the sensitivity of reported results to changes in conditions and assumptions. Revenue Recognition We derive revenue from our central laboratory business, in-hospital business and pharma research and development services. We recognize revenue to depict the transfer of promised products or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those products or services. 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. 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. Individual patients prepay the consideration in full, and the transaction price for each contract is fixed at contract inception. 108 Table of Contents 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. 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. Each monitoring package contains a fixed number of the same type cancer therapy selection tests which can be used up to two years from purchase date. The portion of the cancer therapy selection tests within the Monitoring Packages, which are not expected to be used by the patient prior to expiration based on historical usage rates, are referred to as a “breakage.” We recognize the expected breakage amount as revenue in proportion to the total number of tests expected to be performed for patients prior to the expiration date. If we are not expected to be entitled to a breakage amount due to the lack of historical experience, the expected breakage amount is recognized as revenue at the end of the two-year period when the monitoring package expires. We evaluate our breakage estimates periodically based upon our historical experience with each type of Monitoring Packages recent usage pattern prior to the expiration period. The historical usage rates may not be reflective of the actual usage rates due to changes in patient behavior and medical advancements. 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 RMB10.9 million, RMB7.7 million and RMB7.9 million (US$1.1 million) for the years ended December 31, 2023, 2024 and 2025, respectively. Revenue from in-hospital business Revenue from in-hospital business is primarily generated through reagent kit sales and providing facilitation services for laboratory equipment sold to hospitals. We manufacture the reagent kits and sell to the hospitals when the hospitals submit a purchase order. Each reagent 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 allocate the transaction price to each kit on a relative standalone selling price basis using the expected cost plus a margin method. 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 act as an agent in facilitating laboratory equipment sales as we do not control the laboratory equipment prior to its delivery to hospitals and do not have inventory risks. The facilitation services for each piece of laboratory equipment represent a single performance obligation. 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, primarily cancer therapy selection tests services, companion diagnostics development services, and other service agreements with the combination of various customized tests services and analytical validation services, to pharmaceutical companies for developing new drugs for targeted therapies, immunotherapies on various types of cancers and to hospitals for their studies on cancer diagnosis and treatment. Our contracts with biopharmaceutical customers and hospitals may include multiple distinct performance obligations, of which the transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Performance obligation is satisfied over time if such performance does not create an asset with an alternative use to us, and we have an enforceable right to payment for performance. We recognize revenue using an input method to measure progress for these arrangements, utilizing costs incurred to-date relative to total expected costs as its measure of progress. If a performance obligation is not satisfied over time, we record revenue at a point in time when the customer gains control of the service. 109 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. Results of Operations The following table sets forth our results of operations for the periods indicated: Year ended December 31, 2023 2024 2025 RMB % of total revenues RMB % of total revenues RMB US$ % of total revenues Revenues: Revenues from services 345,030 64.2 290,738 56.4 316,111 45,203 58.6 Revenues from sales of products 192,405 35.8 225,084 43.6 223,457 31,954 41.4 Total revenues 537,435 100.0 515,822 100.0 539,568 77,157 100.0 Cost of revenues(1): Cost of services (101,638 ) (18.9 ) (88,323 ) (17.1 ) (79,317 ) (11,342 ) (14.7 ) Cost of goods sold (72,570 ) (13.5 ) (65,099 ) (12.6 ) (57,337 ) (8,200 ) (10.6 ) Total cost of revenues (174,208 ) (32.4 ) (153,422 ) (29.7 ) (136,654 ) (19,542 ) (25.3 ) Gross profit 363,227 67.6 362,400 70.3 402,914 57,615 74.7 Operating expenses: Research and development expenses(1) (347,016 ) (64.6 ) (232,290 ) (45.0 ) (166,494 ) (23,808 ) (30.9 ) Selling and marketing expenses(1) (247,711 ) (46.1 ) (190,904 ) (37.0 ) (165,175 ) (23,620 ) (30.6 ) General and administrative expenses(1) (437,821 ) (81.5 ) (261,638 ) (50.7 ) (126,090 ) (18,031 ) (23.4 ) Impairment loss on long-lived assets — — (35,127 ) (6.8 ) — — — Total operating expenses (1,032,548 ) (192.1 ) (719,959 ) (139.6 ) (457,759 ) (65,459 ) (84.9 ) Loss from operations (669,321 ) (124.5 ) (357,559 ) (69.3 ) (54,845 ) (7,844 ) (10.2 ) Interest income 17,956 3.3 12,212 2.4 8,053 1,152 1.5 Interest expense — — — — (30 ) (4 ) (0.0 ) Other income (expense), net 484 0.1 4,706 0.9 (257 ) (37 ) (0.0 ) Foreign exchange loss, net (420 ) (0.1 ) (100 ) — (6,711 ) (960 ) (1.2 ) Loss before income tax (651,301 ) (121.2 ) (340,741 ) (66.1 ) (53,790 ) (7,693 ) (9.9 ) Income tax expenses (2,388 ) (0.4 ) (5,885 ) (1.1 ) (1,556 ) (223 ) (0.3 ) Net loss (653,689 ) (121.6 ) (346,626 ) (67.2 ) (55,346 ) (7,916 ) (10.2 ) (1) Share-based compensation expenses were allocated as follows: Year ended December 31, 2023 2024 2025 RMB RMB RMB US$ (in thousands) Cost of revenues 2,313 1,869 1,189 170 Research and development expenses 53,474 30,677 1,862 266 Selling and marketing expenses 9,658 5,010 2,761 395 General and administrative expenses 195,274 118,066 8,064 1,153 Total 260,719 155,622 13,876 1,984 Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Revenues Our revenues increased by 4.6% to RMB539.6 million for 2025 from RMB515.8 million for 2024, primarily due to an increase in revenues generated from services to RMB316.1 million for 2025 from RMB290.7 million for 2024, and a decrease in revenues from sales of products to RMB223.5 million for 2025 from RMB225.1 million for 2024. We derived our revenues from three sources: • Central laboratory business. Our revenue generated from central laboratory business decreased by 8.9% to RMB160.0 million for 2025 from RMB175.6 million for 2024, primarily attributable to a decrease in the number of tests, as we continued our transition towards in-hospital testing and pharma research and development services. 110 Table of Contents • In-hospital business. Our revenue generated from in-hospital business remained relatively stable to RMB224.1 million for 2025, compared to RMB224.5 million for 2024. • Pharma research and development services. Our revenue generated from pharma research and development services increased by 34.5% to RMB155.5 million for 2025 from RMB115.7 million for 2024, primarily attributable to an increased development and testing services performed for our pharma customers. Cost of Revenues Our cost of revenues decreased by 10.9% to RMB136.7 million for 2025 from RMB153.4 million for 2024. This decrease was primarily attributable to a decrease in cost of revenues for our central laboratory business, as we continued our transition towards in-hospital testing. • Central laboratory business. Cost of revenue for central laboratory business was RMB22.4 million for 2025, representing a 33.7% decrease from RMB33.8 million for 2024, primarily due to the decreased depreciation. • In-hospital business. Cost of revenue for in-hospital business was RMB57.3 million for 2025, representing an 11.9% decrease from RMB65.1 million for 2024, primarily due to the decreased depreciation and amortization and the reduction in material and labor costs resulted from cost optimization and control measures. • Pharma research and development services. Cost of revenue for pharma research and development services was RMB56.9 million for 2025, representing an 4.4% increase from RMB54.5 million for 2024, primarily due to a decreased depreciation. Gross Profit and Gross Margin Our gross profit remained relatively stable at RMB402.9 million (US$57.6 million) for 2025, compared to RMB362.4 million for the same period in 2024. Gross margin increased to 74.7% for 2025 from 70.3% for 2024. The table below sets forth a breakdown of our gross profit and gross profit margin for the periods indicated: Year ended December 31, 2024 2025 RMB Gross profit margin (%) RMB Gross profit margin (%) (in thousands, except%) Central laboratory business 141,841 80.8 137,576 86.0 In-hospital business 159,393 71.0 166,698 74.4 Pharma research and development services 61,166 52.9 98,640 63.4 Total 362,400 70.3 402,914 74.7 • Central laboratory business. Gross profit for central laboratory business was RMB137.6 million for 2025, representing a 3.0% decrease from RMB141.8 million for 2024. Our gross margin for central laboratory business increased to 86.0% for 2025 from 80.8% for 2024, primarily due to a decreased depreciation. 111 Table of Contents • In-hospital business. Gross profit for in-hospital business was RMB166.7 million for 2025, representing a 4.6% increase from RMB159.4 million for 2024. Our gross margin for in-hospital business increased to 74.4% for 2025 from 71.0% for 2024, primarily due to a decreased depreciation and amortization and the reduction in material and labor costs resulted from cost optimization and control measures. • Pharma research and development services. Gross profit for pharma research and development services was RMB98.6 million for 2025, representing a 61.3% increase from RMB61.2 million for 2024. Our gross margin for pharma research and development services increased to 63.4% for 2025 from 52.9% for 2024, primarily due to an increase in test volume of higher margin projects and a decreased depreciation. Operating Expenses Research and development expenses Our research and development expenses decreased by 28.3% to RMB166.5 million for 2025 from RMB232.3 million for 2024, primarily due to (i) a decrease in amortized expense on share-based compensation; (ii) a decrease in the expenditure for detection research; (iii) a decrease in staff cost resulted from the reorganization of our research and development department; and (iv) a decrease in depreciation and amortization expenses. Selling and marketing expenses Our selling and marketing expenses decreased by 13.5% to RMB165.2 million for 2025 from RMB190.9 million for 2024, primarily due to (i) a decrease in staff cost resulted from the reorganization of our sales department; (ii) a decrease in depreciation and amortization expenses; and (iii) a decrease in amortized expense on share-based compensation; offset by (iv) an increase in conference fee. General and administrative expenses Our general and administrative expenses decreased by 51.8% to RMB126.1 million for 2025 from RMB261.6 million for 2024, primarily due to (i) a decrease in amortized expense on share-based compensation; (ii) a decrease in staff cost resulted from the reorganization of our general and administrative department; (iii) a decrease in operating lease; and (iv) a decrease in depreciation and amortization expenses. Impairment loss on long-lived assets Due to the continuing operating losses and cash outflows, we performed impairment test on long-lived assets and recognized an impairment loss of RMB35.1 million for the year ended December 31, 2024. We did not record such impairment loss for the year ended December 31, 2025. Interest Income Our interest income decreased by 34.1% to RMB8.1 million for 2025 from RMB12.2 million for 2024, primarily due to the decrease in interest income as a result of the USD deposits. Net Loss Our net loss decreased by 84.0% to RMB55.3 million for 2025 from RMB346.6 million for 2024, primarily due to a decrease in operating expenses as mentioned above. Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Revenues Our revenues decreased by 4.0% to RMB515.8 million for 2024 from RMB537.4 million for 2023, primarily due to a decrease in revenues generated from services to RMB290.7 million for 2024 from RMB345.0 million for 2023, offset by an increase in revenues from sales of products to RMB225.1 million for 2024 from RMB192.4 million for 2023. We derived our revenues from three sources: • Central laboratory business. Our revenue generated from central laboratory business decreased by 24.6% to RMB175.6 million for 2024 from RMB232.8 million for 2023, primarily attributable to a decrease in the number of tests, as we continued our transition towards in-hospital testing. 112 Table of Contents • In-hospital business. Our revenue generated from in-hospital business increased by 19.0% to RMB224.5 million for 2024 from RMB188.7 million for 2023, driven by an increase in sales volume from existing hospitals and new contracted partner hospitals. • Pharma research and development services. Our revenue generated from pharma research and development services remained relatively stable to RMB115.7 million for 2024, compared to RMB115.9 million for 2023. Cost of Revenues Our cost of revenues decreased by 11.9% to RMB153.4 million for 2024 from RMB174.2 million for 2023. This decrease was primarily attributable to a decrease in cost of revenues for our central laboratory business, as we continued our transition towards in-hospital testing. • Central laboratory business. Cost of revenue for central laboratory business was RMB33.8 million for 2024, representing a 31.7% decrease from RMB49.5 million for 2023, which was in line with the revenue decrease of this segment. • In-hospital business. Cost of revenue for in-hospital business was RMB65.1 million for 2024, representing a 10.3% decrease from RMB72.6 million for 2023, primarily due to the decreased renovation depreciation in relation to our laboratory. • Pharma research and development services. Cost of revenue for pharma research and development services was RMB54.5 million for 2024, remaining relatively stable from RMB52.2 million for 2023.. Gross Profit and Gross Margin Our gross profit remained relatively stable at RMB362.4 million (US$49.6 million) for 2024, compared to RMB363.2 million for the same period in 2023. Gross margin increased to 70.3% for 2024 from 67.6% for 2023. The table below sets forth a breakdown of our gross profit and gross profit margin for the periods indicated: Year ended December 31, 2023 2024 RMB Gross profit margin (%) RMB Gross profit margin (%) (in thousands, except%) Central laboratory business 183,339 78.7 141,841 80.8 In-hospital business 116,131 61.5 159,393 71.0 Pharma research and development services 63,757 55.0 61,166 52.9 Total 363,227 67.6 362,400 70.3 • Central laboratory business. Gross profit for central laboratory business was RMB141.8 million for 2024, representing a 22.6% decrease from RMB183.3 million for 2023, primarily attributable to a decrease of revenue of this segment. Our gross margin for central laboratory business increased to 80.8% for 2024 from 78.7% for 2023, primarily due to the decreases in depreciation. 113 Table of Contents • In-hospital business. Gross profit for in-hospital business was RMB159.4 million for 2024, representing a 37.3% increase from RMB116.1 million for 2023, primarily due to the volume growth and the decreased depreciation in relation to our laboratories. Our gross margin for in-hospital business decreased to 71.0% for 2024 from 61.5% for 2023, primarily due to an increase in sales volume to high margin hospitals and decreased depreciation and rental cost in relation to our laboratory of Guangzhou headquarters. • Pharma research and development services. Gross profit for pharma research and development services was RMB61.2 million for 2024, representing a 4.1% decrease from RMB63.8 million for 2023. Our gross margin for pharma research and development services decreased to 52.9% for 2024 from 55.0% for 2023, which remained relatively stable. Operating Expenses Research and development expenses Our research and development expenses decreased by 33.1% to RMB232.3 million for 2024 from RMB347.0 million for 2023, primarily due to (i) a decrease in the expenditure for detection research; (ii) a decrease in amortized expense on share-based compensation; (iii) a decrease in staff cost resulted from the reorganization of our research and development department to improve operating efficiency; and (iv) a decrease in amortized expenses for office building. Selling and marketing expenses Our selling and marketing expenses decreased by 22.9% to RMB190.9 million for 2024 from RMB247.7 million for 2023, primarily due to (i) a decrease in staff cost resulted from the reorganization of our sales department to improve operating efficiency; (ii) a decrease in marketing and conference fee; (iii) a decrease in amortized expense on share-based compensation; and (iv) a decrease in travel expense. General and administrative expenses Our general and administrative expenses decreased by 40.2% to RMB261.6 million for 2024 from RMB437.8 million for 2023, primarily due to (i) a decrease in amortized expense on share-based compensation; (ii) a decrease in amortized expenses for office building; (iii) a decrease in staff cost resulted from the reorganization of our general and administrative department to improve operating efficiency; (iv) a decrease in operating lease; and (v) a decrease in impairment expenses for accounts receivables and contract assets resulting from accelerated settlement with customers with long accounts receivable. Impairment loss on long-lived assets Due to the continuing operating losses and cash outflows, we performed impairment test on long-lived assets and recognized an impairment loss of RMB35.1 million for the year ended December 31, 2024. Interest Income Our interest income decreased by 32.0% to RMB12.2 million for 2024 from RMB18.0 million for 2023, primarily due to the decrease in interest income as a result of the USD deposits. Net Loss Our net loss decreased by 47.0% to RMB346.6 million for 2024 from RMB653.7 million for 2023, primarily due to a decrease in operating expenses as mentioned above. 114 Table of Contents B. Liquidity and Capital Resources Our principal sources of liquidity have been proceeds from our initial public offering and concurrent private placement, equity contributions from our shareholders and bank borrowings. In June 2020, we completed our initial public offering in which we issued and sold an aggregate of 15,525,000 ADSs, representing 15,525,000 Class A ordinary shares, resulting in net proceeds to us of US$234.9 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. As of December 31, 2025, we had cash and cash equivalents and restricted cash of RMB481.1 million (US$68.8 million), primarily consisting of bank deposits. We believe that our cash and cash equivalents and restricted cash, together with our cash generated from financing activities, our initial public offering and private placement, will be sufficient to meet our current and anticipated needs for general corporate purposes for at least the next 12 months. We may, however, decide to expand our business through additional equity and debt financing. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. Substantially all of our revenues in the foreseeable future are likely to continue to be denominated in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, our PRC subsidiaries are allowed to pay dividends in U.S. dollars to us without prior SAFE approval by following these routine procedural requirements. However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses, such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. The following table sets forth selected cash flow statement information for the periods indicated: Year ended December 31, 2023 2024 2025 RMB RMB RMB US$ (in thousands) Net cash used in operating activities (255,783 ) (92,261 ) (28,443 ) (4,068 ) Net cash used in investing activities (9,300 ) (4,412 ) (4,391 ) (628 ) Net cash (used in) generated from financing activities (48,832 ) (72 ) 1,900 272 Effect of exchange rate changes on cash and cash equivalents and restricted cash 3,863 3,691 (10,140 ) (1,449 ) Net decrease in cash, cash equivalents and restricted cash (310,052 ) (93,054 ) (41,074 ) (5,873 ) Cash, cash equivalents and restricted cash at the beginning of year 925,268 615,216 522,162 74,668 Cash, cash equivalents and restricted cash at the end of year 615,216 522,162 481,088 68,795 115 Table of Contents Operating Activities Net cash used in operating activities for 2025 was RMB28.4 million (US$4.1 million), while our net loss for the same period was RMB55.3 million. The difference was primarily due to adjustment for non-cash and non-operating items of RMB86.3 million, primarily including share-based compensation of RMB13.9 million, depreciation and amortization of RMB21.8 million, non-cash operating lease expenses of RMB24.4 million, allowance for credit losses of RMB17.2 million and changes in working capital. The changes in working capital primarily reflected (i) a decrease in prepayments and other current assets of RMB6.4 million primarily attributable to the decrease of prepaid material procurement cost, and (ii) an increase in accounts payables of RMB7.2 million, primarily attributable to our strict settlement control measures, and partially offset by (i) an increase in accounts receivables of RMB31.0 million, primarily attributable to the continued growth of our pharma research and development services business, (ii) a decrease in operating lease liabilities of RMB25.1 million, primarily attributable to rental payments, and (iii) a decrease in deferred revenue of RMB10.1 million primarily as a result of our overall central laboratory business decline. Net cash used in operating activities for 2024 was RMB92.3 million, while our net loss for the same period was RMB346.6 million. The difference was primarily due to adjustment for non-cash and non-operating items of RMB290.9 million, primarily including share-based compensation of RMB155.6 million, depreciation and amortization of RMB52.2 million, impairment of long-lived assets of RMB35.1 million, non-cash operating lease expenses of RMB26.5 million, and changes in working capital. The changes in working capital primarily reflected (i) a decrease in prepayments and other current assets of RMB19.3 million primarily attributable to the decrease of prepaid annual maintenance fee and material procurement cost, and (ii) an increase in accounts payables of RMB18.9 million, primarily attributable to our strict settlement control measures, and partially offset by (i) an increase in accounts receivables of RMB32.6 million, primarily attributable to the continued growth of our in-hospital business, (ii) a decrease in operating lease liabilities of RMB27.6 million, primarily attributable to the rental payments, and (iii) a decrease in deferred revenue of RMB12.6 million primarily as a result of our overall central laboratory business decline. Net cash used in operating activities for 2023 was RMB255.8 million, while our net loss for the same period was RMB653.7 million. The difference was primarily due to adjustment for non-cash and non-operating items of RMB450.1 million, primarily including share-based compensation of RMB260.7 million, depreciation and amortization of RMB133.4 million, non-cash operating lease expenses of RMB35.2 million, and changes in working capital. The changes in working capital primarily reflected (i) a decrease in inventories of RMB57.3 million, primarily attributable to our adjustment in response to changes in order demand and improvement in inventory management level, and (ii) a decrease in prepayments and other current and non-current assets of RMB12.4 million, primarily attributable to the decrease of prepaid research and development expenses, and partially offset by (i) a decrease in operating lease liabilities of RMB37.7 million, primarily attributable to the termination of office leases, (ii) a decrease in accounts payable of RMB31.1 million, primarily attributable to the timely settlement of payment and reduction of inventories, and (iii) a decrease in accrued liabilities and other current liabilities of RMB19.2 million, primarily attributed to the settlement of guaranteed return for certain eligible employees under our ESOP plans. 116 Table of Contents Investing Activities Net cash used in investing activities for 2025 was RMB4.4 million (US$0.6 million), primarily due to purchase of property and equipment of RMB5.2 million (US$0.8 million). Net cash used in investing activities for 2024 was RMB4.4 million, primarily due to purchase of property and equipment of RMB5.4 million. Net cash used in investing activities for 2023 was RMB9.3 million, primarily due to purchase of property and equipment of RMB8.1 million. Financing Activities Net cash generated from financing activities for 2025 was RMB1.9 million (US$0.3 million), primarily due to proceeds from a long-term bank borrowings of RMB2 million (US$0.3 million). Net cash used in financing activities for 2024 was RMB0.1 million, primarily due to purchase of treasury shares of RMB0.1 million. Net cash used in financing activities for 2023 was RMB48.8 million, primarily due to refund of consideration for Employee Share Incentive Program of RMB41.8 million and purchase of treasury shares of RMB7.0 million. Long-term borrowings As of December 31, 2025, we had long-term bank borrowings in the total amount of RMB1.7 million (US$0.2 million). Capital Expenditures Our capital expenditures were RMB9.4 million, RMB6.0 million and RMB5.2 million (US$0.8 million) for 2023, 2024 and 2025, 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 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, 2025 and any subsequent interim period primarily included our operating lease obligations and bank borrowings obligations. 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. The following table sets forth our contractual obligations by specified categories as of December 31, 2025: 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 43,151 17,761 18,382 7,008 — Bank borrowings obligations 2,034 258 1,776 — — Other than those shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2025. 117 Table of Contents Holding Company Structure We are a holding company with no material operations of its own. We conduct our NGS-based cancer diagnostic business primarily through the VIE’s subsidiaries in China. As a result, our ability to pay dividends depends upon dividends paid by our WFOE. If our WFOE or any newly formed PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our WFOE is permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our WFOE, VIE and their respective subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, our WFOE and the VIE may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Our WFOE has not paid any dividends and will not be able to pay dividends until it generates accumulated profits and meets the requirements for statutory reserve funds. C. Research and Development, Patents and Licenses, etc. See “Item 4. Information on the Company—B. Business Overview—Research and Development” and “—Intellectual Property”. D. Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the current fiscal year that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. E. Critical Accounting Estimate We believe the following areas involve critical estimates: impairment of long-lived assets. For information on our critical accounting estimates, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies, Judgments and Estimates” and Note 2 to our consolidated financial statements included elsewhere in this annual report. Impairment of long-lived assets We evaluate the recoverability of our long-lived assets, including property and equipment, operating right-of-use assets and intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, we measure impairment by comparing the carrying amount of the assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, we recognize an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. The adjusted carrying amount of the assets is the new cost basis and is depreciated over the assets’ remaining useful lives. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. F. Safe Harbor See “Forward-Looking Statements” in this annual report.