BeiGene, Ltd. (10-Q) — Quarter Ended March 31, 2020
Business context: BeiGene is a commercial-stage biotechnology company developing and marketing oncology medicines. In the quarter, it sold BRUKINSA in the U.S., launched tislelizumab in China, and distributed licensed cancer medicines in China. Unless noted otherwise, financial amounts below are in U.S. dollars; statement amounts are converted from thousands to millions.
Financial performance and position
| Metric | Q1 2020 | Q1 2019 | Change / context |
|---|---|---|---|
| Revenue | $52.1 million | $77.8 million | Down 33.1% |
| Product revenue, net | $52.1 million | $57.4 million | Down 9.3% |
| Gross profit / margin | $37.9 million / 72.8% | $42.2 million / 73.4% | Approximate, calculated from reported product revenue and product cost of sales |
| Research and development | $304.3 million | $178.4 million | Up 70.6% |
| Selling, general and administrative | $107.1 million | $57.6 million | Up 85.8% |
| Operating loss | $(373.8) million | $(173.8) million | Loss more than doubled |
| Net loss attributable to BeiGene | $(363.7) million | $(167.6) million | Loss increased 117.0% |
| Net loss per ordinary share / ADS | $(0.36) / $(4.70) | $(0.22) / $(2.81) | ADS represents 13 ordinary shares |
| Cash used in operations | $(341.9) million | $(172.0) million | Operating cash use nearly doubled |
| Cash, cash equivalents and restricted cash at quarter end | $2.0 billion | $788.4 million | Includes financing proceeds |
| Short-term investments at quarter end | $1.4 billion | $364.7 million at Dec. 31, 2019 | Primarily U.S. Treasury securities |
At March 31, 2020, current assets were $3.60 billion and current liabilities were $451.8 million (current ratio approximately 8.0). Total liabilities were $1.24 billion. Debt included $93.2 million in bank loans and a $157.3 million shareholder loan. The balance sheet also included a $589.2 million Amgen research and development cost-share liability. The company reported an accumulated deficit of $2.32 billion.
Q1 cash flows included $1.115 billion used in investing activities and $2.802 billion provided by financing activities. Financing was led by $2.779 billion of Amgen transaction proceeds, allocated between $2.162 billion of equity and $616.8 million of cost-share liability; the company also received $11.3 million from a short-term bank loan. Q1 capital expenditures were $21.5 million.
Material changes versus the prior period
- Revenue fell primarily because the BMS tislelizumab collaboration had ended; Q1 2019 included $20.4 million of collaboration revenue, versus none in Q1 2020.
- Licensed-product sales weakened: REVLIMID revenue declined 67.7% to $7.6 million, ABRAXANE declined 36.8% to $17.1 million, and VIDAZA declined 9.8% to $6.0 million. New product sales included $20.5 million of tislelizumab and $0.7 million of BRUKINSA.
- R&D rose by $126.0 million, reflecting clinical-program expansion, collaboration license payments and Amgen co-development costs. SG&A rose by $49.4 million, largely from added personnel, share-based compensation and commercial expansion.
- Shareholders’ equity increased substantially following the Amgen share purchase; ordinary shares outstanding rose to 1.008 billion at March 31, from 801.3 million at year-end 2019.
Outlook, commentary and risks
- Outlook: Management expects product revenue to increase during 2020 and plans further launches in 2020 and beyond. It also expects R&D and SG&A expenses to rise substantially as clinical development, commercialization and launches expand. BeiGene does not provide operating-results guidance in the filing.
- Liquidity: Management said existing cash, cash equivalents and short-term investments were expected to fund operating expenses and capital expenditures for at least 12 months after issuance of the filing. It cautioned that estimates depend on assumptions and that additional financing may be needed to complete all planned development and commercial programs.
- COVID-19: The company reported decreased demand for commercial products and anticipated potential disruption to clinical-trial recruitment, regulatory interactions and inspections, and commercial activity, particularly in the first half of 2020 and possibly longer.
- ABRAXANE: China’s NMPA suspended importation, sales and use in March 2020 following inspection findings at BMS’s contract manufacturing facility. BMS initiated a voluntary recall, and BeiGene said it could not predict when sales would resume. Q1 revenue recognized on recalled sales was not reversed because BeiGene did not expect to refund its customer, but recall-related financial settlements were incomplete and future costs remained possible.
- Amgen collaboration: BeiGene committed to co-fund global development of Amgen oncology pipeline assets up to $1.25 billion; $1.194 billion remained at quarter end. In April 2020, two pipeline assets were removed from the collaboration, and the parties expected the development portfolio to continue evolving.
- Other commitments and contingencies: Contractual obligations totaled $1.676 billion, including the remaining Amgen co-development commitment, $117.3 million of purchase commitments and $60.6 million of capital commitments. Management reported no legal proceedings believed likely to have a material adverse effect.
- Operating risks: The filing highlights ongoing losses and cash burn, clinical and regulatory uncertainty, commercialization and reimbursement risks, generic competition, dependence on third-party manufacturers and distributors, foreign-exchange and PRC regulatory risks, and potential supply disruption.
Most important facts for investors to verify
- Whether and when NMPA restrictions on ABRAXANE are lifted, qualified supply resumes, and recall-related costs or liabilities are finalized.
- Whether new internally developed product sales can offset declining licensed-product revenue and COVID-19-related demand disruption.
- The pace of R&D and commercial spending, operating cash burn, and the assumptions supporting management’s stated 12-month liquidity outlook.
- Actual cash funding and development progress under the Amgen agreement, including portfolio changes and the remaining commitment.
- Clinical, regulatory and commercial milestones for BRUKINSA, tislelizumab and other pipeline candidates, alongside competition, pricing and reimbursement developments.