BeiGene (688235. SH) is a well-known innovative pharmaceutical company in the A-share market. From 2017 to the first half of 2024, the company's R&D investment in all phases was the highest among A-share chemical pharmaceutical companies (Shenwan Level 2), with a total R&D expenditure of over 60 billion yuan.
But for BeiGene, the 'Sword of Damocles' of continuous losses has always hung high since its establishment. As of the end of the first half of this year, the company has not yet achieved profitability. On September 20th, the sponsor released a continuous supervision report stating that BeiGene has accumulated significant and sustained losses and may face the risk of delisting in the future.
Time Investment Research has found that the delisting risk of BeiGene is mainly due to the possibility of "significant loss of sustainable operation capability" in the future, which is closely related to the sales of its innovative drug products. However, the company's huge R&D investment has not achieved the expected results, and as of the end of the first half of the year, only three drugs have been approved for market.
In addition, the core drug that BeiGene relies on for survival, Zebutinib, has been embroiled in infringement lawsuits in the United States, and its operations may be affected; The market competition for the other product, Trastuzumab, is fierce, and it may be difficult to replicate the successful path of Zebutinib; From the perspective of the new drug varieties under review, it is difficult for the company to launch new drugs and contribute revenue in the short term.
On September 26-27, Time Investment Research sent a letter and called BeiGene to inquire about when to achieve profitability and whether there is a significant risk of delisting. As of press time, the other party has not responded yet.
Accumulated unrecovered losses exceeding 60 billion yuan, BeiGene may face delisting risks
According to the financial report, BeiGene is a company focused on the research and development, production, and commercialization of innovative drugs. It was founded in October 2010 and has been struggling with losses since its establishment. From 2017 to the first half of 2024, BeiGene's net profit attributable to its parent company was in a loss state, which is closely related to its high period expenses.
According to the financial report, as shown in Figure 1, from 2017 to the first half of 2024, BeiGene invested a total of 62.276 billion yuan in research and development expenses and 26.508 billion yuan in sales expenses. The combined proportion of these two expenses to the total revenue was 162.7%, and both showed a continuous growth trend.
In its 2024 interim report, BeiGene stated that its sales expenses increased by 22.4% year-on-year, mainly due to continued investment in global commercialization; The year-on-year increase of 12.68% in R&D expenses is mainly due to the expansion of the global R&D pipeline and the increase in R&D investment in clinical and preclinical candidate drugs.
However, from the results, compared to its peers, BeiGene's research and development efficiency is not high. As of the end of the first half of this year, BeiGene has independently developed and approved three drugs for market: Zebutinib, Trebizumab, and Zenidatuzumab.
According to the semi annual report, among peer companies, Junshi Biotechnology (688180. SH) has three innovative drug products on sale during the same period; Fosun Pharma (600196. SH) has 4 independently developed innovative drugs approved for market launch; Hengrui Pharmaceutical (600276. SH) has 13 innovative drugs that have been launched on the market; Kolombotai Biotech (6990. HK), which has only been on the market for one year, also stated that four innovative drugs will be launched in the second half of this year or the first half of next year.
As shown in Figure 2, in the first half of 2024, BeiGene's R&D expenses exceeded the total of the four peer companies mentioned above.
It is worth noting that after investing heavily in research and development for a long time but producing unsatisfactory results, BeiGene is facing the risk of delisting due to sustained losses.
On September 20th, China International Capital Corporation (CICC) (601995. SH) and Goldman Sachs (China) Securities Co., Ltd. issued a supervisory report stating that BeiGene has significant accumulated and sustained losses, and there is a risk of being unable to distribute cash dividends in the foreseeable future and may be subject to delisting procedures by the Shanghai Stock Exchange.
According to the Listing Rules of the Science and Technology Innovation Board of the Shanghai Stock Exchange, currently, BeiGene does not meet the requirements for major illegal forced delisting or trading forced delisting. The main risk is financial forced delisting, which includes situations where most of the main business is stagnant or the scale is extremely low, and the operating assets are significantly reduced, resulting in the inability to maintain daily operations and other "obvious loss of sustainable operating ability".
Therefore, in the need to maintain sustained high R&D investment, whether BeiGene can maintain its listing qualification mainly depends on the operation of its existing innovative drug products and whether it can timely launch new products to contribute revenue.
Core products are subject to patent litigation in the United States, and new drug projects under review are unable to contribute revenue in the short term
From the perspective of existing products, the semi annual report shows that in the first half of this year, among the three marketed drugs of BeiGene, Zebutinib and Trelizumab achieved revenue of 8.018 billion yuan and 2.191 billion yuan respectively, accounting for a total of 85.1% of the company's total revenue.
It can be seen that BeiGene has a significant business dependence on the above two drugs. Among them, Zebutinib, which contributes nearly 70% of the revenue, mainly comes from the United States region (sales revenue accounts for 73.62%), but the drug is currently involved in multiple lawsuits in the United States.
According to a semi annual report, in June 2023, a subsidiary of American pharmaceutical company ABBV.US filed a lawsuit against BeiGene and its wholly-owned subsidiaries in the Delaware District Court, claiming that BeiGene's Zebutinib product infringed on its own patent granted on June 13, 2023.
In early September, AbbVie filed a lawsuit against BeiGene in Chicago federal court, accusing it of illegally stealing its own trade secrets for the development of the Bruton tyrosine kinase (BTK) degradation agent project (i.e. Zebutinib product) targeting blood cancer.
On March 8, 2024, a subsidiary of BeiGene filed a patent infringement lawsuit against Sandoz and MSN, two generic drug companies, for selling generic versions of BeiGene products to the FDA (US Food and Drug Administration).
In addition, as Zebutinib faces both intellectual property lawsuits and potential generic drug competition, the prospects for another core product of BeiGene are also unclear.
In March 2024, BeiGene's Trastuzumab product was approved for new drug marketing by the FDA. The product is an anti-PD-1 antibody immunotherapy used to treat various solid and hematological tumors, and the market competition in the PD-1 track is extremely fierce.
At present, multiple anti-PD-1 drugs have been approved by the FDA worldwide, including pembrolizumab from pharmaceutical giant Merck&Co. (MRK. US) and nivolumab from Bristol Myers Squibb (BMY. US). Among them, the sales revenue of pembrolizumab in the first half of the year exceeded 14.2 billion US dollars.
On the domestic front, according to the "Medical Economy News" under the Southern Medical Economics Research Institute of the National Medical Products Administration, as shown in Figure 3, as of the first half of this year, 15 PD (L) -1 monoclonal antibodies have been approved for market in China.
From the perspective of new products, the semi annual report shows that apart from newly added indications for drugs already on the market, BeiGene has only entered the third phase of clinical trials with four new drug varieties. According to the Drug Evaluation Center of the National Medical Products Administration, as of September 26th, there is only one new drug under review, Sonrotoclax film coated tablets.
According to the Measures for the Administration of Drug Registration, the conventional variety approval process for market applications takes 200 working days. Therefore, BeiGene will not have a new drug contributing revenue until at least the second quarter of next year, and it is currently unknown whether it can help BeiGene overcome its business crisis.