BeiGene, Ltd. — 2019 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2019; filed March 2, 2020. The filing is for BeiGene, Ltd. (not “Beone Medicines Ltd.”). Amounts below are in U.S. dollars.
Business context
BeiGene is a commercial-stage biotechnology company developing and selling cancer medicines. In 2019 it marketed three licensed products in China—ABRAXANE, REVLIMID and VIDAZA—and launched BRUKINSA in the United States after FDA accelerated approval for mantle cell lymphoma. China approved tislelizumab for classical Hodgkin’s lymphoma in December 2019; launch was planned for early 2020. The company reported more than 60 ongoing or planned clinical trials.
Financial performance and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Total revenue | $428.2 million | $198.2 million |
| Product revenue, net | $222.6 million | $130.9 million |
| Collaboration revenue | $205.6 million | $67.3 million |
| Research and development expense | $927.3 million | $679.0 million |
| Selling, general and administrative expense | $388.2 million | $195.4 million |
| Net loss | $950.6 million | $674.0 million |
| Net cash used in operating activities | $750.3 million | $547.7 million |
| Cash, cash equivalents and restricted cash, year-end | $620.8 million | $740.7 million |
| Short-term investments, year-end | $364.7 million | $1,068.5 million |
| Working capital, year-end | $862.4 million | $1,697.4 million |
Revenue rose 116%, while net loss widened 41%. Product revenue grew 70%, primarily from the three BMS-licensed China products. Collaboration revenue included a one-time $150 million payment following termination of the BMS tislelizumab collaboration. The filing reports no operating or net profit; annual loss per ordinary share was $1.22, versus $0.93 in 2018. No operating margin is meaningful while the company remains loss-making.
At year-end, bank loans were $83.3 million and a shareholder loan was $157.4 million, totaling approximately $240.7 million in those borrowings. Total liabilities were $633.9 million. Contractual obligations were $452.6 million, including purchase commitments of $128.5 million and capital commitments of $42.1 million; these figures include categories beyond debt and should not be added to borrowings as though they were all debt.
Cash from investing activities was $554.2 million, mainly reflecting net sales and maturities of investments, partly offset by investment purchases, licensing payments and capital expenditures. Capital expenditures were $89.6 million. In January 2020, after year-end, BeiGene received approximately $2.78 billion gross from Amgen’s purchase of a 20.5% equity stake.
Fourth-quarter detail and material changes
For the quarter ended December 31, 2019, revenue was $56.9 million versus $58.7 million in Q4 2018. Net loss was $387.9 million versus $266.7 million, and loss from operations was $388.0 million versus $280.8 million. Q4 2019 results included the substantial increase in research and commercial investment and should be read alongside the annual results.
- Annual R&D expense increased 37%, reflecting expanded trials, pipeline activity and staffing. SG&A increased 99%, including commercial-team expansion and selling and marketing spending.
- The company’s accumulated deficit increased to $2.0 billion from $1.0 billion. Operating cash use also rose year over year.
- BRUKINSA received U.S. accelerated approval in November 2019; tislelizumab received China approval in December 2019. These approvals broadened the internally developed commercial portfolio, but sales were only beginning.
- The Amgen collaboration became effective January 2, 2020. It covers China commercialization of three Amgen oncology products and joint global development of 20 pipeline assets; BeiGene may contribute up to $1.25 billion in development services and cash over the collaboration term.
Outlook, risks and unusual items
- Management expected product revenue to increase in 2020 as BRUKINSA and tislelizumab launches progressed and additional licensed products were introduced. It also expected substantial increases in R&D and commercialization spending and continued losses for the foreseeable future. No quantified revenue or earnings guidance was provided.
- BeiGene won a centralized-procurement tender for ABRAXANE in China, with a lower price expected to take effect in Q2 2020. Management anticipated higher demand but warned that the price reduction could materially affect commercialization and results.
- The Phase 3 ASPEN trial of zanubrutinib in Waldenström’s macroglobulinemia did not meet its primary endpoint of statistically significant superiority over ibrutinib for complete response/very good partial response rates. Zanubrutinib showed numerically higher VGPR rates and certain safety advantages.
- The filing warned that COVID-19 could disrupt Chinese clinical-trial recruitment, commercial activity, regulatory interactions and supply; the duration and financial impact were uncertain.
- Other material risks include clinical and regulatory uncertainty, competition, reimbursement and drug-price pressure, reliance on third-party manufacturers and distributors, patent and generic competition, China regulatory and foreign-exchange risks, and the company’s continuing cash burn. The filing reported no legal proceedings expected to have a material adverse effect.
- Auditors gave an unqualified opinion on the financial statements and internal control over financial reporting; management also concluded controls were effective as of year-end.
Most important facts for investors to verify
- Whether the January 2020 Amgen proceeds materially extend liquidity after accounting for the collaboration’s development commitments, spending plans and dilution from the 20.5% equity issuance.
- Subsequent sales, launch progress and reimbursement for BRUKINSA and tislelizumab, including performance in their initial approved indications.
- The realized ABRAXANE tender price, resulting sales volumes and net revenue impact, as well as any continuing supply constraints.
- Clinical and regulatory outcomes for key programs, particularly the required confirmatory work for BRUKINSA’s accelerated approval and the next steps following ASPEN.
- The extent and duration of COVID-19-related disruption and any resulting changes to trials, supply, commercial revenue or liquidity.
- Progress in controlling operating cash burn and the timing and terms of any additional financing or milestone commitments.