Business context and reporting period
BeiGene, Ltd. (the registrant named in the filing; not “Beone Medicines”) is a global, commercial-stage biotechnology company. This unaudited Form 10-Q covers the three months ended March 31, 2021, with comparisons to the three months ended March 31, 2020. Amounts below are in U.S. dollars; financial statement amounts are converted to millions where shown.
BeiGene markets BRUKINSA in the United States and China and tislelizumab in China, alongside licensed products. The company reported more than 45 medicines and candidates in commercial or clinical development.
Key financial metrics
| Metric | Q1 2021 | Q1 2020 / prior date |
|---|---|---|
| Total revenue | $605.9m | $52.1m |
| Product revenue, net | $106.1m | $52.1m |
| Collaboration revenue | $499.8m | — |
| Operating expenses | $535.7m | $425.8m |
| Income (loss) from operations | $70.2m | $(373.8)m |
| Net income (loss) attributable to BeiGene | $66.5m | $(363.7)m |
| Basic / diluted EPS | $0.06 / $0.05 | $(0.36) / $(0.36) |
| Product gross margin | 69% | 73% |
| Cash from operating activities | $125.1m | $(341.9)m |
| Cash, cash equivalents and restricted cash | $1,910.4m | $1,390.0m at Dec. 31, 2020 |
| Short-term investments | $2,910.5m | $3,268.7m at Dec. 31, 2020 |
| Total debt | $598.1m | $518.7m at Dec. 31, 2020 |
At March 31, 2021, current assets were $5,141.0m and current liabilities were $1,112.5m. Accumulated deficit was $3,486.3m. Operating cash flow was positive in the quarter, but included a substantial increase in deferred revenue from Novartis. Investing activities provided $291.9m, mainly from investment sales and maturities; financing activities provided $107.4m, mainly from borrowing and employee equity proceeds.
Material changes versus the prior comparable period
- Revenue rose by $553.8m, driven mainly by the new Novartis collaboration, which contributed $484.6m of license revenue and $15.1m of R&D service revenue. Product revenue increased 103.8% to $106.1m.
- Product sales growth included tislelizumab at $48.9m, BRUKINSA at $22.1m and XGEVA at $14.5m. ABRAXANE sales were zero, versus $17.1m a year earlier; REVLIMID and VIDAZA sales were $16.6m and $3.7m, respectively.
- The company moved from a net loss to net income, primarily reflecting the one-time recognition of Novartis license revenue. The filing cautions that interim results are not necessarily indicative of full-year results.
- R&D expense increased 5.4% to $320.7m, including higher internal personnel and development costs, partly offset by lower upfront license fees. Selling, general and administrative expense increased 70.1% to $182.1m as the company expanded commercial and administrative operations.
- Product gross margin declined to 69% from 73%, primarily due to distributor compensation for products remaining in the channel when NRDL price reductions took effect. The related rebate and returns accrual was $45.7m at quarter-end, including $24.2m for this NRDL adjustment.
- Total debt increased $79.4m from year-end, while cash and restricted cash rose $520.4m. Cash plus short-term investments totaled about $4.81bn at March 31, 2021.
Outlook, commentary, risks and unusual items
- Management expected product revenue growth in 2021, driven by higher sales volumes as launches progress. It anticipated product gross margin would normalize during the rest of 2021 and be consistent with the prior year as sales mix evolves; NRDL price reductions may be partly mitigated by changes to patient assistance programs. No quantified full-year revenue or earnings guidance is provided.
- Management expected R&D and SG&A spending to increase as clinical programs, manufacturing capacity and global commercialization expand. It expected existing cash, cash equivalents and short-term investments to fund operating expenses and capital needs for at least 12 months after issuance of the financial statements, while noting future funding may still be needed for broader development and launches.
- In February 2021, BeiGene closed its Novartis tislelizumab collaboration and received a $650m upfront cash payment. The filing recognized $484.6m for the license and allocated $165.4m to R&D services, of which $15.1m was recognized in Q1. It is eligible for up to $1.30bn in regulatory milestones, $250m in sales milestones and future royalties; milestone amounts were excluded from the initial transaction price because achievement was uncertain.
- NRDL inclusion of tislelizumab, BRUKINSA and XGEVA became effective March 1, 2021. Management reported increased patient demand, but reduced prices and channel-related rebates weigh on revenue and margins. ABRAXANE remains subject to China’s import, sales and use suspension; timing of resumption is unknown.
- Liquidity and execution risks include continued expected losses, substantial R&D and commercialization spending, clinical and regulatory uncertainty, competition, reimbursement and pricing pressure, reliance on third-party manufacturers, COVID-19 disruption, and currency and China regulatory risks. The company reported $964.4m remaining under its Amgen co-development funding cap. Purchase commitments were $141.2m and capital commitments were $51.4m.
- BeiGene is pursuing a proposed STAR Market offering of up to 132.3m ordinary shares, subject to market conditions, shareholder approval and regulatory approvals; completion is not assured. Management reported disclosure controls and procedures effective at a reasonable assurance level and no material change in internal control over financial reporting during the quarter.
- BeiGene is pursuing ICC arbitration against Celgene/BMS over the ABRAXANE supply suspension and seeking damages in an amount to be determined. Celgene counterclaimed for approximately $17m in recall costs; BeiGene disputes the counterclaim. A hearing was scheduled for June 2022. The filing states no other present legal proceeding was expected, individually or together, to have a material adverse effect.
Important facts for investors to verify
- How much of Q1 profit and operating cash flow reflects the nonrecurring Novartis upfront payment, and how much future collaboration revenue remains deferred.
- Whether volume growth for tislelizumab, BRUKINSA and XGEVA offsets NRDL price reductions, rebates and lower gross margin.
- Progress and timing of ABRAXANE supply restoration, including the regulatory suspension and the related arbitration and counterclaim.
- Cash burn and funding needs as R&D, commercial operations, manufacturing expansion and the $964.4m remaining Amgen co-development commitment progress.
- Status and potential dilution or compliance effects of the proposed STAR Market offering, as well as PRC-related audit-inspection and listing risks disclosed in the filing.