Business context and reporting period
BeiGene, Ltd. (the registrant named in the filing) is a global oncology biotechnology company. This Form 10-Q covers the quarter and six months ended June 30, 2023; financial statement amounts are in U.S. dollars. The company sells internally developed medicines, including BRUKINSA and tislelizumab, as well as in-licensed products, and invests heavily in research, development and commercialization.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 |
|---|---|---|---|---|
| Total revenue | $595.3m | $341.6m | $1,043.1m | $648.2m |
| Product revenue, net | $553.7m | $304.5m | $964.0m | $566.1m |
| Operating loss | $(318.7)m | $(439.4)m | $(690.0)m | $(882.7)m |
| Net loss | $(381.1)m | $(565.7)m | $(729.6)m | $(1,000.9)m |
| Product gross margin | 82.7% | 76.6% | 81.6% | 75.9% |
Q2 BRUKINSA revenue was $308.3m, up 139.4%; tislelizumab was $149.5m, up 42.5%. For H1, BRUKINSA revenue grew 123.0% to $519.7m and tislelizumab grew 37.3% to $264.3m. Management attributed growth principally to BRUKINSA expansion, increased demand and market access, and sales of in-licensed medicines. Higher BRUKINSA sales mix and lower unit costs supported margin improvement, partly offset in H1 by lower China selling prices.
Operating expenses increased: Q2 R&D was $422.8m, up 11.8%, and selling, general and administrative expense was $395.0m, up 19.2%. For H1, R&D was $831.3m, up 8.2%, and SG&A was $723.5m, up 15.6%, reflecting expanding clinical and commercial activities, staffing and share-based compensation.
For H1, operating cash use was $857.7m, compared with $616.5m a year earlier. Investing activities provided $308.9m, including $567.5m of investment maturities or sales, while property and equipment purchases used $247.1m. Financing activities provided $146.2m. Cash, cash equivalents and restricted cash declined to $3,421.6m from $3,875.0m at year-end 2022; short-term investments were $105.7m. Total debt was $628.5m, including $421.1m short-term debt and $207.4m long-term bank loans. Current assets were $4,401.4m and current liabilities $1,405.1m at June 30.
Management said existing cash, cash equivalents and short-term investments were expected to fund operating expenses and capital requirements for at least 12 months after issuance of the financial statements. The company nevertheless expects continued substantial R&D and capital investment and may need additional financing to pursue all planned development and launches.
Material changes, outlook and risks
- In July 2023, BeiGene and Novartis mutually terminated the ociperlimab option and collaboration agreement; BeiGene regained global development, manufacturing and commercialization rights. The filing gives no clear value for the financial impact of termination.
- In August 2023, BeiGene and BMS-Celgene agreed to dismiss their ABRAXANE-related arbitration and settle related disputes. Subject to the agreement’s terms, BMS-Celgene will transfer 23,273,108 BeiGene ordinary shares for no payment. The license and quality agreements terminate December 31, 2023; BeiGene may sell existing REVLIMID and VIDAZA inventory until sold out or December 31, 2024, whichever occurs first.
- On July 28, the company entered into a $400m uncommitted, unsecured credit facility with China Merchants Bank; no borrowings were outstanding as of the report date. It carries floating-rate interest and financial and operating covenants.
- A June 2023 Pharmacyclics lawsuit alleges BRUKINSA infringes a patent and seeks unspecified damages and other relief. The company says it intends to defend the case. The filing also describes ongoing exposure to intellectual-property, regulatory, clinical-development, reimbursement, manufacturing, currency, China operating and data-security risks.
- The company revised comparative 2022 financial statements to correct a deferred-tax-asset valuation-allowance error. It said the error was immaterial to previously issued statements; revised Q2 2022 net loss is $565.7m. A full valuation allowance against net deferred tax assets remained in place at June 30, 2023.
- No numerical earnings guidance was provided. Management expects continued investment and cautions that interim results are not necessarily indicative of full-year results. It reported disclosure controls effective at a reasonable-assurance level and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether BRUKINSA and tislelizumab growth, reimbursement and market access can continue, and how China pricing and rebates affect net revenue and margins.
- Operating cash burn, planned capital spending, the Hopewell facility build-out, and whether the stated 12-month liquidity outlook remains adequate.
- The effects of ending the Novartis ociperlimab agreement, including future development costs, rights and potential revenue opportunities.
- Completion and accounting treatment of the BMS-Celgene share transfer, agreement terminations, inventory sell-through and arbitration dismissal.
- Developments in the BRUKINSA patent litigation and other legal, regulatory, clinical, manufacturing and cross-border China risks.
- The company’s debt maturities, credit-facility covenant headroom, deferred-tax-asset valuation allowance and any further financial-statement revisions.