Core views

BeiGene's performance in 2023 was outstanding, reaching a new high in revenue, and showing the momentum of continued rapid growth. Baiyueze's global sales in the field of hematologic oncology have increased dramatically, consolidating its leading position. Baizean continues to be promoted globally, and the US indications are also expected to be approved, expanding its influence. As a pioneer in innovative drugs going overseas, the company continues to promote the global progress of self-developed drugs. It has performed well in terms of finance, and achieved continuous loss reduction through diversified product and regional revenue portfolios and continuously improved operating leverage efficiency. In 2023, BeiGene made great strides towards its goal of becoming an influential next-generation oncology innovator, and the future looks promising.

occurrences

The company released its 2023 performance report. In 2023, the company achieved total revenue of 17.423 billion yuan, an increase of 82.1% over the previous year; of these, product revenue was 15.504 billion yuan, an increase of 82.8% over the previous year. Net profit attributable to mother - 6.716 billion yuan, a loss of 6.926 billion yuan; after deducting non-net profit - 9.682 billion yuan, a loss of 4.142 billion yuan.

Brief review

1. Performance slightly exceeded expectations, and overseas business continued to grow rapidly

In 2023, the company's total revenue was 17.423 billion yuan, up 82.1% year-on-year from 9.566 billion yuan in the previous year. Among them, product revenue was 15.504 billion yuan, and product revenue for the same period last year was 8.480 billion yuan, up 82.8% year on year. The increase in product revenue was mainly due to the increase in product sales in the company's core market: in 2023, Baiyueze's total global sales were 9.138 billion yuan, and total global sales for the same period last year were 38.29 billion yuan, an increase of 138.7% year on year, further consolidating its leading position in the field of hematologic oncology. Currently, all 5 indications approved by Baiyueze in China have been included in the national health insurance catalogue. In 2023, Baizean's sales totaled 3.806 billion yuan, and the total sales volume for the same period last year was 2,859 billion yuan, an increase of 33.1% over the previous year. Currently, Baizean has been approved for 1 indication in the European Union and the UK, and 12 indications have been approved in China, 11 of which have been included in the national health insurance catalogue. Sales of Amgen's authorized products for the full year of 2023 were US$188.3 million, up 64.31% from US$114.6 million in the same period of the previous year.

2. Baiyuze (zebutinib): Further consolidating its leadership position in the field of hematology Baiyuze, a BTK inhibitor independently developed by the company, has been approved for multiple indications in more than 65 markets, including the US, China, the European Union, the United Kingdom, Canada, Australia, South Korea and Switzerland. In the fourth quarter of 2023, Baiyuez's global sales reached US$413 million, up 135% year on year. Global sales for the full year of 2023 reached US$1.3 billion, up 129% year over year. The company has obtained approval from the US, the European Union and the UK to include the PFS efficacy results obtained in the Phase 3 ALPINE trial compared with Yike in adult R/R CLL/SLL patients (median follow-up time of 29.6 months), further consolidating Baiyueze's position as the preferred BTK inhibitor. Furthermore, Baiyuze has been approved by the European Commission and Health Canada to treat adult patients with R/R follicular lymphoma (FL) who have received at least two lines of systematic treatment. It is the first BTK inhibitor approved for this indication3 so far, and is also the BTK inhibitor with the widest range of approved indications among similar products. As a pioneer of innovative local drugs going overseas, the company continues to promote the global progress of self-developed drugs, improve treatment results and improve drug accessibility for patients, and the company will continue to expand Baiyueze's global pharmaceutical administration registration program.

Follow-up events to watch at Baiyue Ze:

(1) It is expected to be approved by the US FDA and NMPA in March and June 2024, respectively, for the treatment of adult R/R FL patients with otuzumab who have received at least two lines of systematic treatment in the past;

(2) It is expected that a marketing application for a new tablet form will be submitted to the EMA and Health Canada in the first half of 2024; the marketing application for this new dosage form will be submitted to the US FDA in the second half of 2024.

3. Baizeam (tirelizumab): Expanding global footprint and influence The company is continuously expanding the influence of the anti-PD-1 antibody baizeam (tirelizumab) in the world. Currently, Baizean has obtained approval in the European Union and the UK for second-line treatment of adult patients with esophageal squamous cell carcinoma (ESCC), accelerating the global registration strategy for this cornerstone therapy. Baizean has been approved for 12 indications in China, and its broad global clinical layout includes enrolling more than 13,000 subjects in more than 30 countries.

The company has regained the global rights to develop, produce and commercialize Baizean, strengthening the company's global product portfolio in the field of solid oncology.

On February 27, according to public reports, the US Food and Drug Administration (FDA) has accepted a biological product license application (BLA) for tirelizumab to treat patients with locally advanced unresectable or metastatic gastric or gastroesophageal junction (G/GEJ) adenocarcinoma in combination with fluoropyrimidine and platinum chemotherapy. The FDA is expected to decide on this BLA in December 2024.

Baizean can follow the following events:

(1) It is expected to be approved by the US FDA in the first half of 2024 for the treatment of second-line ESCC; (2) it is expected to be approved by the US FDA for first-line treatment of patients with unresectable, recurrent, locally advanced, or metastatic ESCC. The “Prescription Drug User Payment Act” (PDUFA) target review date is July 2024; (3) It is expected to be approved by EMA in the first half of 2024. Combination chemotherapy for first-line and monotherapy for second-line treatment of metastatic NSCLC is expected in the third quarter of 2024; (4) It is expected to be obtained in the third quarter of 2024 NMPA approved combination chemotherapy for treatment of previously untreated ES-SCLC; (5) It is expected to be approved by the NMPA in the second quarter of 2024 for first-line treatment of inoperable, locally advanced, or metastatic gastric or gastroesophageal junction (G/GEJ) adenocarcinoma;

(6) It is expected that marketing applications for first-line and second-line treatment of ESCC patients will be submitted to the Japan Pharmaceuticals and Medical Devices Administration (PMDA) in the first half of 2024;

(7) It is expected that a marketing application for first-line treatment of inoperable, locally advanced, or metastatic G/GEJ adenocarcinoma will be submitted to the EMA in the first quarter of 2024.

4. BCL2 inhibitor sonrotoclax: BCL2 inhibitor sonrotoclax: The leading position of BeiGene in the field of hematology has gradually become prominent. The BCL2 inhibitor sonrotoclax has the best potential in its class and has initiated 4 global registration tests, including a global phase 3 registration trial for first-line treatment of chronic lymphocytic leukemia (CLL). Sonrotoclax is expected to complete enrollment in a potentially registrable global phase 2 trial to treat R/R MCL in the second quarter of 2024.

5. BTK CDAC: Significant clinical remission and tolerable safety characteristics, aimed at benefiting a broad patient population At the American Society of Hematology (ASH) annual meeting held in December 2023, the company demonstrated leadership and strength in the field of hematology, including the publication of ongoing BTK CDAC (BGB-16673) first human clinical trial data: In treating patients with B-cell malignant tumors who have previously received too many lines of treatment (including patients resistant to BTK inhibitors), BTK CDAC showed significant clinical remission and tolerability safety characteristics. The differentiated BTKCDAC project BGB-16673 has initiated 2 global extended cohort studies targeting BTK inhibitor resistant patients and a wider patient population.

6. Other pipelines: The company is vigorously promoting the global progress and layout of other pipeline products (1) Zanidatamab: In collaboration with Jazz Pharmaceuticals and Zymeworks, it is expected to submit a marketing license application (BLA) to the NMPA in the second half of 2024 to treat inoperable and advanced or metastatic cholangiocarcinoma with HER2 amplification.

(2) Ospelizumab (anti-TIGIT antibody): Enrollment in the Phase 3 AdvanTIG-302 trial is expected to be completed in the first quarter of 2024 for first-line treatment of NSCLC.

(3) Tarlatamab3 (bispecific antibody T-cell conjugator targeting DLL3 and CD3): In collaboration with Amgen, enrollment in a global phase 3 trial for the treatment of limited-stage small cell lung cancer is expected to begin in China in the second half of 2024.

(4) Early research and development: It is expected that the first human clinical trial of at least 10 new molecular entities will be initiated in 2024, including pan-KRAS inhibitors, MTA co-PRMT5 inhibitors, EGFR degraders, CDK2 inhibitors, ADC, and bispecific immune cell linkers; in collaboration with Amgen, it is expected to enroll the first patients in China in the first half of 2024 to promote xaluritamig (AMG 509, an xMabT cell connecting molecule targeting STEAP1 and CD3) for treatment A phase 1 study of metastatic castration-resistant prostate cancer.

7. Financial analysis: stable cost control, net loss improvement

According to US GAAP, in 2023, the company's operating expenses were US$3.287 billion, up 13% year-on-year from US$2,919 billion in 2022. Of this, R&D expenses were US$1,779 million, up 8% year on year from US$164 million in 2022. R&D expenses all increased year over year, mainly due to investment in new technology platforms and drug models, which promoted pre-clinical and early-stage clinical projects to the later stages of development.

In 2023, the company's GAAP SG&A expenses were US$150 million, up 18% year-on-year from US$128 million in 2022. The increase in SG&A fees is mainly due to Baiyuezer's continued investment in commercializing listings around the world, particularly in the US and Europe.

In terms of net loss, for the fourth quarter and full year of 2023, in GAAP terms, net loss improved compared to the same period last year, mainly due to reduced operating losses and non-operating income of $362.9 million due to BMS arbitration settlements.

8. Profit forecast and valuation

The company's revenue for 2024-2026 is expected to be 221.18, 27.750, and 33.863 billion yuan, respectively, with corresponding growth rates of 27%, 25%, and 22%. The net profit loss to mother is expected to narrow, and 2024-2026 is expected to be -63.67, -26.63, and 171 million yuan. Considering that the company's overseas sales volume of BTK exceeded expectations, the potential subsequent launch of PD-1 and the continued implementation of major pipelines such as BCL-2 and BTK CDAC led to further commercialization, maintaining a “buy” rating.

Risk analysis

Industry policy risks: Risks such as changes in research and design requirements, price changes, volume procurement policy changes, and changes in the scope and proportion of medical insurance reimbursement due to industry policy adjustments.

Risk of falling short of expectations: In the process of developing new drugs, there are risks such as uncertain clinical enrollment progress and uncertain efficacy results and safety results data.

Risk that approval falls short of expectations: In the approval process, there are risks such as additional data and lengthening of the approval cycle due to factors such as additional data and changes in the approval process.

Risk of sales falling short of expectations: After the drug is marketed, the sales process will be affected by the spread of the epidemic, increased competition, insufficient logistics capacity, and insufficient production capacity.

Risk of health insurance negotiations: There is a risk of uncertainty about the decline brought about by health insurance negotiations.