BeiGene, Ltd. — Q2 2020 Form 10-Q Summary
Business context and reporting period
BeiGene is a commercial-stage biotechnology company developing, manufacturing and commercializing cancer medicines. This unaudited report covers the three and six months ended June 30, 2020; financial amounts below are in U.S. dollars. Its portfolio includes internally developed BRUKINSA and tislelizumab, alongside products licensed from BMS and Amgen.
Financial performance and position
| Metric | Q2 2020 | Six months 2020 |
|---|---|---|
| Net product revenue | $65.6 million, up 12.9% year over year | $117.7 million, up 1.8% |
| Total revenue | $65.6 million, down 73.0% | $117.7 million, down 63.4% |
| R&D expense | $286.0 million, up 25.0% | $590.3 million, up 45.0% |
| SG&A expense | $124.0 million, up 50.8% | $231.1 million, up 65.2% |
| Net loss attributable to BeiGene | $335.2 million | $698.9 million |
| Operating cash used | Not separately presented in the supplied text | $604.9 million, versus $218.1 million in 2019 |
Q2 product revenue growth reflected sales of tislelizumab and BRUKINSA, partly offset by a steep decline in ABRAXANE sales. Approximate product gross margin, calculated as net product revenue less cost of sales, was 78% in Q2 and 76% for the six-month period; this is not a company-reported margin measure.
At June 30, cash and cash equivalents were $1.345 billion and short-term investments were $1.808 billion. Current assets were $3.392 billion versus current liabilities of $551.2 million. Bank loans totaled approximately $157.6 million and the shareholder loan was $160.2 million; the shareholder loan bears 8% interest and is due in 2023 unless converted earlier. Six-month operating cash use was funded principally by financing proceeds. Cash, cash equivalents and restricted cash at period-end were $1.350 billion.
Material changes versus the prior comparable period
- Total revenue fell sharply because the BMS tislelizumab collaboration had ended; 2019 included a $150 million termination payment and other collaboration revenue. Product revenue alone increased modestly year over year.
- For the six months, tislelizumab generated $49.9 million and BRUKINSA $7.7 million, while ABRAXANE revenue fell 71.9% to $17.4 million and REVLIMID fell 37.8% to $24.8 million.
- Operating losses widened as R&D and SG&A spending increased with clinical development and commercial expansion. Six-month net loss attributable to BeiGene rose to $698.9 million from $253.2 million.
- January’s Amgen transaction generated $2.779 billion in cash, allocated between $2.162 billion of equity and a $616.8 million R&D cost-share liability. BeiGene issued shares representing a 20.5% ownership stake to Amgen.
- In July, after quarter-end, BeiGene completed a registered direct offering that produced approximately $2.069 billion in net proceeds.
Outlook, commentary, risks and unusual items
- Management expects losses and expenses to continue and R&D costs to rise as trials progress; it also expects commercial and launch-related spending to increase. The filing provides no numerical revenue or earnings guidance.
- Management stated that cash, cash equivalents and short-term investments at June 30 were expected to fund operating expenses and capital expenditures for at least 12 months after issuance of the financial statements. The company cautioned that estimates rely on assumptions and capital could be used faster than expected.
- COVID-19 continued to pose risks to sales, regulatory interactions and inspections, clinical recruitment and participation, and supply chains, although its impact on China commercial activity eased in Q2.
- China’s NMPA suspended ABRAXANE importation, sales and use in March following manufacturing inspection findings; BMS recalled existing supply. BeiGene said it did not know when sales could resume and may incur recall-related costs.
- BeiGene had a remaining Amgen pipeline co-development funding commitment of $1.138 billion, within a $1.25 billion cap. Other commitments included $126.9 million of purchase commitments and $61.0 million of capital commitments.
- Unusual Q2 other income included a gain on MapKure deconsolidation and fair-value gains on investments. The 2019 comparison included the one-time BMS termination payment.
- Management identified risks including clinical and regulatory uncertainty, competition and pricing or reimbursement pressure, reliance on third-party manufacturing and distribution, foreign-exchange and China operating risks, and potential dilution. No legal proceedings were identified as likely to have a material adverse effect. Disclosure controls were reported effective as of June 30.
Most important facts for investors to verify
- Progress in restoring qualified ABRAXANE supply and the timing of any NMPA decision permitting sales to resume.
- Trends in product-level sales, especially uptake of BRUKINSA and tislelizumab and the impact of generic competition and China procurement pricing.
- Cash burn against the company’s 12-month liquidity assessment, including the use of Amgen and July offering proceeds.
- Execution and funding needs for the Amgen collaboration, including the remaining $1.138 billion co-development commitment and the commercial profit-sharing terms.
- Clinical, regulatory and commercialization milestones, and the effects of COVID-19 on trials, supply, and launches.
- Share dilution from the Amgen issuance, July offering, equity compensation and registered shares available for resale.