BeiGene, Ltd. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited U.S. GAAP results; dollar amounts below are U.S. dollars. The filing identifies the registrant as BeiGene, Ltd.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $387.6M | $206.4M | $1,035.8M | $962.3M |
| Product revenue, net | $349.5M | $192.5M | $915.6M | $437.2M |
| Operating loss | $(438.4)M | $(462.3)M | $(1,321.0)M | $(867.0)M |
| Net loss | $(557.6)M | $(438.1)M | $(1,558.5)M | $(867.1)M |
| Operating cash flow | Not presented quarterly | $(1,178.4)M | $(790.9)M |
- Q3 product revenue grew 81.6%; nine-month product revenue grew 109.4%. BRUKINSA sales were $155.5M for the quarter and $388.6M year to date; tislelizumab sales were $128.2M and $320.7M, respectively.
- Collaboration revenue was $38.1M in Q3 and $120.2M year to date, versus $14.0M and $525.1M in the comparable 2021 periods. The nine-month comparison reflects $484.6M of tislelizumab license revenue recognized in 2021.
- Product gross margin was 78.1% in Q3 versus 75.4%; for nine months it was 76.7% versus 73.4%. Management attributed improvement to sales mix and lower unit costs, partly offsetting NRDL-related price reductions.
- R&D expense rose 21.1% in Q3 to $426.4M and 16.1% year to date to $1,194.5M. SG&A rose 19.9% in Q3 to $322.9M and 38.8% year to date to $948.9M.
- Q3 net loss increased year over year, despite a narrower operating loss, largely reflecting $125.6M of other expense, primarily foreign-exchange losses. Nine-month other expense was $243.3M, versus $26.5M of other income in 2021.
- At September 30, cash, cash equivalents and restricted cash were $4,200.5M; short-term investments were $872.0M. Total debt was $649.3M, including $441.3M short term and $208.1M long term. Cash plus short-term investments totaled approximately $5,072.5M.
- Cash and restricted cash declined $182.4M during the nine months. Investing activities provided $1,038.6M, mainly from investment maturities and sales; financing activities provided $91.4M. Capital expenditures were $204.1M.
Changes, outlook, and material matters
- Business and commercial progress: Management cited higher BRUKINSA and tislelizumab demand, including in China following NRDL inclusion, and expanding sales in the United States. Newer China product sales included POBEVCY and KYPROLIS. After quarter-end, the company reported additional BRUKINSA approvals and a positive EU regulatory opinion; these are company-reported developments, not Q3 revenue.
- Liquidity outlook: Management stated that cash, cash equivalents and short-term investments at September 30 were expected to fund operating expenses and capital requirements for at least 12 months after issuance of the statements. The company also cautioned that funds may not cover all anticipated global development and launch plans. No numerical revenue or earnings guidance is provided.
- Spending and commitments: Management expects R&D and SG&A costs to increase as clinical programs and commercialization expand. Contractual obligations totaled $2,066.3M, including $467.6M of capital commitments, $648.4M of remaining Amgen co-development funding, and $441.3M of short-term debt obligations.
- Accounting revision: The company recorded a full valuation allowance against net deferred tax assets after concluding its prior treatment was an error. It said the effect was immaterial to previously issued periods but that correcting the cumulative impact was significant to the 2022 statements. Deferred tax assets at September 30 were zero.
- Regulatory and execution risks: The FDA deferred action on the tislelizumab application for second-line ESCC, citing inability to complete inspections; it gave no new action date. FDA review of the BRUKINSA CLL/SLL application was extended to January 2023. The company also highlighted clinical, manufacturing, reimbursement, competition, China regulatory/data-transfer, currency and collaboration risks.
- Foreign exchange: The RMB depreciated about 11.6% against the U.S. dollar in the first nine months. Currency effects reduced ending cash by $133.9M; the company does not hedge its foreign-exchange exposure.
- Contingency: BeiGene’s arbitration against BMS-Celgene over ABRAXANE supply and termination remained unresolved after a June 2022 hearing. BMS-Celgene counterclaimed for approximately $30M; BeiGene disputes the claim.
- Audit/listing risk: The filing discussed HFCAA delisting exposure and uncertainty over PCAOB inspection access. BeiGene said Ernst & Young LLP in the U.S. would audit its 2022 statements and that it expected this to address inspection requirements, subject to applicable requirements.
Most important facts for investors to verify
- Whether product-sales growth—especially BRUKINSA and tislelizumab—continues to offset pricing pressure, rebates and rising commercial costs.
- Cash burn, cash runway assumptions, and the timing and funding of the $467.6M capital program and Amgen co-development commitment.
- Progress and timing of FDA and other regulatory reviews, including the deferred tislelizumab application and BRUKINSA CLL/SLL review.
- Foreign-exchange exposure and the impact of further RMB movements on earnings, cash and comprehensive loss.
- Resolution and potential financial consequences of the BMS-Celgene arbitration, and developments in PCAOB inspection and HFCAA compliance.
- The deferred-tax valuation allowance and revised prior-period figures; confirm treatment in subsequent filings.