BeiGene, Ltd. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2020. Amounts below are U.S. dollars; “million” is used for readability. The filing identifies the registrant as BeiGene, Ltd.
Business context
BeiGene is a commercial-stage biotechnology company developing, manufacturing and marketing medicines, with operations primarily in China and the United States. Its marketed portfolio included internally developed BRUKINSA and tislelizumab, plus in-licensed products. XGEVA sales began in China in July 2020. ABRAXANE remained unavailable in China following an NMPA suspension and recall.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Product revenue, net | $91.1M | $50.1M | $208.8M | $165.7M |
| Collaboration revenue | $0 | $0 | $0 | $205.6M |
| Cost of sales | $21.1M | $20.1M | $49.6M | $53.2M |
| Gross margin | 76.8% | 59.9% | 76.3% | 67.9% |
| Research and development | $349.1M | $237.0M | $939.3M | $644.1M |
| Selling, general and administrative | $160.8M | $105.0M | $392.0M | $244.9M |
| Operating loss | $(440.1)M | $(312.3)M | $(1,172.8)M | $(571.9)M |
| Net loss attributable to BeiGene | $(425.2)M | $(307.4)M | $(1,124.2)M | $(560.6)M |
| Net loss per share | $(0.37) | $(0.39) | $(1.07) | $(0.72) |
- Q3 product revenue rose 81.6%, mainly from tislelizumab, BRUKINSA and initial XGEVA sales; nine-month product revenue increased 26.0%. Nine-month total revenue fell 43.8% because the prior-year period included $205.6M of BMS collaboration revenue, including a $150M termination payment.
- Q3 and nine-month operating losses widened as R&D and SG&A spending expanded. Nine-month R&D included $115.5M of license upfront and milestone payments and $87.5M of Amgen co-development expense. Nine-month SG&A rose 60.1%.
- Product mix shifted: nine-month tislelizumab revenue was $99.9M and BRUKINSA revenue was $23.4M. ABRAXANE revenue declined 79.4% to $17.4M, reflecting the suspension; REVLIMID declined 34.0% to $38.9M. VIDAZA increased to $26.2M, but the company later reported losing its volume-based procurement bid.
- Cash and cash equivalents were $1.464B and short-term investments were $3.254B at quarter-end; restricted cash was $5.2M. Combined cash, cash equivalents, restricted cash and short-term investments totaled approximately $4.724B. Current assets were $4.966B versus current liabilities of $645.7M.
- Operating cash use for the nine months was $951.1M, compared with $483.1M a year earlier. Investing activities used $3.081B, primarily reflecting purchases of investment securities, partly offset by maturities and sales. Financing provided $4.877B, primarily from the Amgen transaction and a July share offering.
- Recorded short- and long-term debt totaled approximately $201.8M; the prior $157.4M shareholder loan was repaid in September. The company also reported a $531.5M R&D cost-share liability to Amgen and a remaining co-development funding commitment of $1.077B, within a $1.25B cap. In October, it drew an additional $198.3M under loan facilities.
Material changes, outlook and risks
- Amgen purchased shares in January for $2.779B in cash proceeds, allocated between $2.162B of equity and $616.8M of R&D cost-share liability. A July registered direct offering generated approximately $2.070B net and issued 145.8M ordinary shares, increasing the share count and diluting existing holders.
- Management expected product revenue to increase during the remainder of 2020 and into 2021, while R&D and SG&A expenses were expected to rise substantially as clinical programs and commercial launches expanded. The filing gave no specific revenue or earnings guidance.
- Management believed available cash, cash equivalents and short-term investments would fund operating and capital needs for at least 12 months after issuance of the financial statements, while cautioning that assumptions could prove wrong and capital could be used sooner than expected.
- COVID-19 continued to pose risks to sales, regulatory interactions, inspections and clinical trial recruitment, despite reduced impact on China operations in the second and third quarters. A further wave could disrupt operations and supply.
- The ABRAXANE suspension remains unresolved. BeiGene initiated ICC arbitration against BMS, alleging supply-agreement breaches and seeking damages; BMS counterclaimed for approximately $17M of recall costs. The company said it could not predict the proceeding’s duration or outcome.
- Other material risks include generic competition and pricing pressure, including VIDAZA’s loss of VBP status; dependence on third-party manufacturing and distribution; clinical and regulatory uncertainty; substantial continuing cash burn and dilution risk; foreign-exchange and PRC regulatory risks. The filing also noted uncertainty around China’s new patent and biosecurity laws.
- No material legal proceedings other than the ABRAXANE arbitration were reported. Management stated disclosure controls were effective at a reasonable assurance level and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether commercial growth in tislelizumab, BRUKINSA and XGEVA can keep pace with rising R&D, selling and administrative costs.
- Timing and conditions for lifting the ABRAXANE suspension, restoring supply, and resolving the arbitration and BMS counterclaim.
- Actual cash burn and the pace of the $1.077B remaining Amgen co-development commitment, including the impact of subsequent borrowing.
- Pricing, reimbursement and market access for key products, including NRDL negotiations and VBP-related effects on VIDAZA and other products.
- Clinical-trial progress, regulatory decisions, and whether COVID-19 or manufacturing constraints cause delays or additional costs.
- Share-count changes, potential future financing needs, and the implications of the Amgen and July 2020 equity issuances for existing shareholders.