01—Abstract
Summary
Summary of the 10-K filed March 2, 2020. Cited figures are marked; the original filing is the authoritative source.
BeiGene, Ltd. (Nasdaq: BGNE; HKEx: 06160) reported its Form 10-K for fiscal 2019, filed March 2, 2020, as a commercial-stage oncology company in transition.
Revenue rose 116% to $428.2 milliona, driven by $222.6 million in product revenue (mainly BMS-licensed ABRAXANE, REVLIMID and VIDAZA in China, plus first U.S. BRUKINSA sales after the November 2019 FDA accelerated approval) and $205.6 million of collaboration revenue, which includes a one-time $150 million payment from BMS on termination of the tislelizumab collaboration. Despite the revenue growth, the company remains deeply loss-making: net loss widened to $950.6 million, R&D rose to $927.3 million, SG&A to $388.2 million, and the accumulated deficit reached $2.0 billion. Operating cash burn was $750.3 million.
The balance-sheet picture changes materially after year-end. On January 2, 2020, Amgen closed a collaboration under which it bought a 20.5% stake for about $2.78 billionb at $174.85 per ADS, and BeiGene agreed to co-fund up to $1.25 billion of development for 20 Amgen pipeline assets while commercializing XGEVA, KYPROLIS and BLINCYTO in China. Cash, cash equivalents and short-term investments were $985.5 million at December 31, 2019, so this infusion is significant.
Management states that existing resources fund operations for at least 12 months, and the company also licensed SYLVANT and QARZIBA from EUSA for a $40 millionc upfront payment. Investors should weigh a clear commercial ramp and a substantial pipeline (tislelizumab, zanubrutinib, pamiparib, lifirafenib) against high cash burn, dependence on China pricing and reimbursement (including the centralized procurement that will cut ABRAXANE prices), and material disclosure of COVID-19 disruption to China operations. The filing also flags regulatory, PRC legal and tax uncertainties and the ASPEN Phase 3 trial, which missed its primary endpoint of superiority over ibrutinib in Waldenström's macroglobulinemia.
02—Key points
Key Highlights
- Total revenue grew 116% to $428.2 million in 2019 from $198.2 million, with product revenue up 70% to $222.6 million.
- Collaboration revenue of $205.6 million included a one-time $150 million payment from BMS on termination of the tislelizumab collaboration.
- Net loss widened to $950.6 million (from $674.0 million) as R&D expense rose 37% to $927.3 million and SG&A rose 99% to $388.2 million.
- Operating cash outflow was $750.3 million; cash, equivalents and short-term investments totaled $985.5 million at year-end 2019.
- Amgen closed a strategic collaboration on January 2, 2020, buying a 20.5% stake for about $2.78 billion, with BeiGene committing up to $1.25 billion toward development of 20 Amgen pipeline assets.
- BRUKINSA received FDA accelerated approval on November 14, 2019 for relapsed/refractory mantle cell lymphoma; tislelizumab received NMPA approval on December 26, 2019 for classical Hodgkin's lymphoma.
- The Phase 3 ASPEN trial in Waldenström's macroglobulinemia did not meet its primary endpoint of superiority over ibrutinib, although zanubrutinib showed more VGPRs and a better safety profile.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed March 2, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $428.21M$198.22M | +116.0% |
| Cost of Revenue | $71.19M$28.70M | +148.0% |
| Gross Profit | $357.02M$169.51M | +110.6% |
| R&D Expenses | $927.34M$679.00M | +36.6% |
| SG&A Expenses | $388.25M$195.38M | +98.7% |
| Operating Expenses | $1.39B$903.99M | +53.6% |
| Operating Income | -$959.89M-$705.77M | −36.0% |
| Interest Expense | $15.15M$13.15M | +15.3% |
| Net Income | -$950.58M-$674.03M | −41.0% |
| EPS (Basic) | $-1.22$-0.93 | −31.2% |
| EPS (Diluted) | $-1.22— | — |
| Shares Outstanding (Basic) | 780.70M720.75M | +8.3% |
| Shares Outstanding (Diluted) | 780.70M— | — |
05—Questions
Frequently Asked Questions
Is BeiGene close to profitability, and how much capital does it need?
No. The company reported a $950.6 million net loss in 2019 and an accumulated deficit of $2.0 billion, with negative operating cash flow of $750.3 million. The approximately $2.78 billion Amgen investment received in January 2020 substantially strengthens the balance sheet, and management says existing resources fund operations for at least 12 months. However, the filing warns that losses will increase near term and that additional financing may be needed.
What drove the increase in revenue in 2019?
Most of the increase came from collaboration revenue, which rose to $205.6 million mainly because of the $150 million BMS termination payment, and from product revenue, which grew to $222.6 million. Product sales were primarily ABRAXANE, REVLIMID and VIDAZA in China, with first U.S. BRUKINSA sales beginning after November 2019. Part of the 2019 total is therefore non-recurring.
What are the main risks to the commercial outlook in China?
ABRAXANE was selected in China's centralized procurement, with a price reduction expected to take effect in Q2 2020. Management expects volume to rise significantly, but at a much lower price. The filing also cites COVID-19 disruption to China operations, including commercial revenue, clinical trial recruitment and regulatory interactions, particularly in Q1 2020. Regulatory and reimbursement uncertainty, and the lack of PRC patent-term extension, linkage and data exclusivity, add to the risk.
What happened with the ASPEN trial, and why does it matter?
ASPEN compared zanubrutinib with ibrutinib in relapsed/refractory and treatment-naive Waldenström's macroglobulinemia. It did not achieve statistical significance on its primary endpoint of superiority in CR and VGPR rates. Zanubrutinib did show higher VGPR rates (28.4% vs. 19.2% overall) and a more favorable safety profile, including lower atrial fibrillation and major hemorrhage rates. The result weakens the head-to-head efficacy case for zanubrutinib, though the company plans further regulatory discussions in 2020.
06—Continue