01—Abstract
Summary
Summary of the 10-K filed February 28, 2019. Cited figures are marked; the original filing is the authoritative source.
BeiGene, Ltd. (the filing's company; the prompt labels it BeiOne/ONC, but the 10-K identifies it as BeiGene, Ltd., Nasdaq: BGNE and HKEx: 06160) reported its FY2018 Form 10-K on February 28, 2019.
The company is a commercial-stage oncology biotech with three late-stage internal candidates: zanubrutinib (BTK inhibitor), tislelizumab (anti-PD-1), and pamiparib (PARP1/2 inhibitor). It has three new drug applications under priority review or accepted in China, with U.S. zanubrutinib filings planned for 2019 or early 2020. Current revenue comes from marketing three in-licensed Celgene drugs in China (ABRAXANE, REVLIMID, VIDAZA), which generated $130.9Ma of net product revenue in 2018, up from $24.4M in 2017.
Financially, the company is far from profitability. Total revenue was $198.2Mb, down 17% from $238.4M, because 2017 included a one-time $211.4M Celgene license fee. R&D rose 152% to $679.0M and SG&A rose 212% to $195.4M, producing a net loss of $674.0M (EPS of -$0.93) versus $93.3M in 2017.
Operating cash burn was $547.7Mc, and the accumulated deficit reached $1.0B. Liquidity was strong after $1.6B of net equity raised in 2018 (a January ADS offering and an August dual listing and offering in Hong Kong). Cash, equivalents, restricted cash, and short-term investments totaled about $1.8B at year-end.
Management says this covers operations for at least 12 months but not all planned global launches. Key investor considerations include the pending Bristol-Myers Squibb acquisition of Celgene (expected Q3 2019), which could terminate the tislelizumab license and return full rights to BeiGene along with a termination fee; China pricing and reimbursement pressure, including generic competition to ABRAXANE, REVLIMID, and VIDAZA; and the high concentration of clinical and regulatory risk in a few pipeline assets. Other risks include PRC regulatory uncertainty and the Cayman Islands structure, along with the possibility of PFIC and PRC tax residency issues.
02—Key points
Key Highlights
- Net loss widened to $674.0M in 2018 (EPS -$0.93) from $93.3M in 2017, driven by R&D up 152% to $679.0M and SG&A up 212% to $195.4M.
- Total revenue fell 17% to $198.2M because 2017 included a one-time $211.4M Celgene license fee; net product revenue rose 436% to $130.9M from China sales of three in-licensed drugs.
- Operating cash outflow of $547.7M in 2018; accumulated deficit reached $1.0B.
- Raised about $1.6B in net proceeds in 2018 from a January ADS offering and an August Hong Kong listing and follow-on, leaving roughly $1.8B in cash and short-term investments at year-end.
- Pipeline includes three China NDAs (zanubrutinib in R/R MCL and R/R CLL/SLL, tislelizumab in R/R cHL) under priority review, and a U.S. zanubrutinib NDA planned for 2019 or early 2020; zanubrutinib received FDA Breakthrough Therapy designation for R/R MCL in January 2019.
- Celgene's pending acquisition by Bristol-Myers Squibb could terminate the tislelizumab license, returning full rights to BeiGene with a termination fee; the company says it is financially capable of advancing tislelizumab alone.
- Management expects product revenue to grow in 2019 but says current cash is insufficient to fully fund all global development and launches, implying future financing needs.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 28, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $198.22M$238.39M | −16.8% |
| Cost of Revenue | $28.70M$4.97M | +477.1% |
| Gross Profit | $169.51M$233.41M | −27.4% |
| R&D Expenses | $679.00M$269.02M | +152.4% |
| SG&A Expenses | $195.38M$62.60M | +212.1% |
| Operating Expenses | $903.99M$336.84M | +168.4% |
| Operating Income | -$705.77M-$98.46M | −616.8% |
| Interest Expense | $13.15M— | — |
| Net Income | -$674.03M-$93.11M | −623.9% |
| EPS (Basic) | $-0.93$-0.17 | −447.1% |
| Shares Outstanding (Basic) | 720.75M543.19M | +32.7% |
05—Questions
Frequently Asked Questions
How much cash does the company have and how long will it last?
At December 31, 2018, cash, cash equivalents, restricted cash, and short-term investments totaled about $1.8B, including roughly $149M held by the BeiGene Biologics joint venture. Management believes this is sufficient for at least the next 12 months, but says it will not be enough to fund all global development or commercial launches, so additional financing through equity, debt, or partnerships is expected.
What is driving the large increase in losses?
Losses are driven by rapid expansion of clinical programs and headcount. R&D expense rose $410M, including $89M of acquired in-process R&D from the Zymeworks, Mirati, and Merck KGaA transactions, and $81M more for tislelizumab trials. SG&A rose $133M as the company built a commercial organization in China, and share-based compensation nearly doubled to $87.1M.
What happens to tislelizumab if Bristol-Myers Squibb acquires Celgene?
The filing says that if the BMS-Celgene deal closes, which is expected in Q3 2019, the PD-1 License Agreement would likely terminate under its exclusivity provisions. BeiGene would then regain full rights to tislelizumab and receive a termination fee from Celgene. Until then, the agreed development plan and Celgene's funding of Basket Study trials continue.
What are the main regulatory catalysts for the next 12 to 18 months?
Key catalysts include NMPA decisions on zanubrutinib for R/R MCL and R/R CLL/SLL and on tislelizumab for R/R cHL, all under priority review, plus a planned zanubrutinib NDA in the U.S. in 2019 or early 2020. Other milestones include Phase 3 readouts for zanubrutinib (head-to-head against ibrutinib in WM and R/R CLL/SLL and against bendamustine plus rituximab in TN CLL/SLL) and a planned China NDA for zanubrutinib in WM.
What risks are specific to investing in this company?
Key risks include dependence on a few clinical-stage assets, uncertain Chinese regulatory and reimbursement policy, and generic competition to in-licensed products in China because the country lacks patent-term extension and data exclusivity. The company is a Cayman Islands holding company with ADSs and HK shares, faces possible PRC tax residency treatment, and is subject to PCAOB inspection limits on its auditor. Shareholders with about 52.6% ownership held by insiders and principal shareholders can exert significant influence.
06—Continue