01—Abstract
Summary
Summary of the 10-K filed February 25, 2021. Cited figures are marked; the original filing is the authoritative source.
BeiGene, Ltd. (NASDAQ: BGNE; HKEx: 06160) reported its FY2020 Form 10-K on February 25, 2021, describing a global, commercial-stage biotechnology company that is still in a heavy investment phase.
Total FY2020 revenue was $308.9 milliona, up 38.8% from product sales alone, but collaboration revenue fell to zero after the $150 million BMS termination payment in 2019, so total revenue declined 27.9% year over year. Net loss widened to $1.60 billion (EPS of -$1.47), driven by R&D of $1.29 billion (up 39.6%) and SG&A of $600 million (up 54.6%). The accumulated deficit reached $3.6 billion, and operating cash burn was $1.28 billion.
The balance sheet was substantially strengthened in 2020. Cash, equivalents and restricted cash plus short-term investments totaled roughly $4.66 billionb at year-end, and the Amgen share purchase ($2.78 billion for a 20.5% stake) and a July 2020 registered direct offering (about $2.07 billion net) funded the buildup. Total debt rose to $518.7 million, largely from short-term Chinese bank loans.
Management states that existing resources are sufficient for at least 12 months, but notes that they may not fully fund all planned global development and launches. The investment case rests on BRUKINSA (zanubrutinib) and tislelizumab, which are now marketed in China and, for BRUKINSA, the U.S. Key near-term catalysts include the January 2021 Novartis tislelizumab deal ($650 millionc upfront, expected to close in Q1 2021), NRDL reimbursement listing effective March 2021 (which the company expects to pressure near-term China pricing), and a planned STAR Market listing. Key risks include the ABRAXANE supply suspension in China, which has halted sales of that product, competition and generic pressure on BMS-licensed products, Amgen collaboration execution, dependence on China operations, and PCAOB/HFCA Act auditor-inspection exposure that could threaten ADS listing.
02—Key points
Key Highlights
- Revenue: Total revenue fell 27.9% to $308.9M, but product revenue grew 38.8% to $308.9M, driven by BRUKINSA and tislelizumab launches; collaboration revenue went to zero after the 2019 BMS termination payment.
- Losses: Net loss attributable to BeiGene was $1.60B (EPS -$1.47), with R&D up 39.6% to $1.29B and SG&A up 54.6% to $600M as the company scales commercial and clinical operations.
- Balance sheet: Cash plus short-term investments of about $4.66B at year-end 2020, following the $2.78B Amgen equity/cost-share transaction and about $2.07B of July 2020 equity; total debt $518.7M.
- Amgen collaboration: Amgen bought 20.5% of shares for $2.78B; BeiGene carries up to $1.25B of co-development funding and shares China profits on XGEVA, KYPROLIS and BLINCYTO, with $1.02B of co-funding remaining.
- Novartis deal: January 2021 tislelizumab license to Novartis for North America, Europe, Japan and other territories, with a $650M upfront payment, up to $1.3B in regulatory milestones and $250M in sales milestones; closing expected Q1 2021.
- Product catalysts: BRUKINSA received FDA accelerated approval for MCL (Nov 2019) and an sNDA for WM was accepted (PDUFA Oct 18, 2021); NRDL inclusion of BRUKINSA, tislelizumab and XGEVA takes effect March 2021 at lower prices.
- Key risks: ABRAXANE sales in China were suspended since March 2020 pending supply remediation, the Celgene/BMS arbitration is ongoing, and the company faces PCAOB inspection and HFCA Act delisting risk tied to its PRC-based auditor.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 25, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $308.87M$428.21M | −27.9% |
| Cost of Revenue | $70.66M$71.19M | −0.7% |
| Gross Profit | $238.22M$357.02M | −33.3% |
| R&D Expenses | $1.29B$927.34M | +39.6% |
| SG&A Expenses | $600.18M$388.25M | +54.6% |
| Operating Expenses | $1.97B$1.39B | +41.7% |
| Operating Income | -$1.66B-$959.89M | −72.7% |
| Interest Expense | $18.31M$15.15M | +20.8% |
| Net Income | -$1.63B-$950.58M | −71.3% |
| EPS (Basic) | $-1.47$-1.22 | −20.5% |
| EPS (Diluted) | $-1.50$-1.22 | −23.0% |
| Shares Outstanding (Basic) | 1.09B780.70M | +39.0% |
| Shares Outstanding (Diluted) | 1.09B780.70M | +39.0% |
05—Questions
Frequently Asked Questions
Why did total revenue decline in 2020 even though product sales grew?
In 2019 total revenue included $205.6M of collaboration revenue, mostly the $150M termination payment from BMS for tislelizumab and deferred revenue recognition. In 2020 there was no collaboration revenue, so the $86.3M gain in product revenue (to $308.9M) did not offset the $205.6M drop, leaving total revenue down $119.3M (27.9%).
How much runway does BeiGene have, and will it need more capital?
Management believes existing cash, cash equivalents and short-term investments (about $4.66B) are sufficient to fund operations for at least 12 months from the issuance of the financial statements. However, it says these resources may not be enough to complete all global development or launch all current medicines and candidates, so additional funding through equity, debt or partnerships may be needed. Net operating cash outflow was $1.28B in 2020.
What are the main risks to BRUKINSA and tislelizumab sales in China?
Both products are now listed on the NRDL effective March 1, 2021, which the company expects will lower net prices in the channel in Q1 2021 even as volumes are expected to rise. Both also face substantial competition from other BTK inhibitors and PD-1 antibodies in China. The company also notes that Chinese volume-based procurement and generic competition could affect its in-licensed BMS products.
What is the status of ABRAXANE in China and how does it affect results?
The NMPA suspended importation, sales and use of ABRAXANE in China in March 2020 following inspection findings at BMS's U.S. contract manufacturer, and BMS initiated a voluntary recall. The company recorded no ABRAXANE sales in 2020 and does not expect revenue until the suspension is lifted and qualified supply is available. ABRAXANE revenue fell from $111.3M in 2019 to $17.8M in 2020, and the company has filed an ICC arbitration against Celgene/BMS seeking damages.
What regulatory and listing risks could affect the U.S. ADS listing?
BeiGene's auditor, Ernst & Young Hua Ming, cannot be fully inspected by the PCAOB because of PRC restrictions. Under the Holding Foreign Companies Accountable Act, if the PCAOB cannot inspect the auditor for three consecutive years, the SEC could prohibit trading of the company's securities in the U.S., potentially delisting the ADSs from Nasdaq. The company is working to add non-PRC audit capabilities but states it cannot assure that these efforts will succeed.
06—Continue