Blue Whale Finance Tu Jun

On April 26, 2024, BeiGene (688235.SH) released the 2023 A-share annual report. In 2023, BeiGene's global revenue was 17.423 billion yuan, up 82.1% year on year. During the reporting period, the company's net profit decreased year on year, and the corresponding realized net profit was about -6.716 billion yuan, an increase of 50.77% year on year.

Financial reports show that in 2023, its core product zebutinib is a representative of China's innovative drugs going overseas. Global sales were 138.7% compared to the same period last year, reaching 9.138 billion yuan (about 1.3 billion US dollars), making it the first domestically produced innovative drug with annual sales exceeding 1 billion US dollars.

In terms of research and development, BeiGene continues to rise high. After surpassing 10 billion yuan for the first time in 2022, it grew again to 12.813 billion yuan in 2023, an increase of 14.90% compared with the same period last year

Zebutinib became the first “billion-dollar molecule”, and overseas revenue surpassed domestic revenue

BeiGene currently has 3 self-developed product lines on the market. In addition, it has been authorized to commercialize another 14 approved drugs in the Chinese market.

In terms of revenue composition, self-developed products are the most important source of revenue. The three self-developed products are Baiyuezer (zebutinib, a small molecule inhibitor of Bruton's tyrosine kinase (BTK) for the treatment of various hematologic tumors), baizeam (tirelizumab, an anti-PD-1 antibody immunotherapy used to treat various solid tumors and hematological tumors), and Palmipalil (a selective PARP1 and PARP2 small molecule inhibitor).

Among them, the most important product was Baiyue Ze, with total global sales of 9.138 billion yuan, an increase of 138.7% over the previous year, accounting for more than 50% of total revenue. And this year is the first time since its launch in the US in 2019 that its annual sales have broken through the 1 billion US dollar mark, officially joined the “1 billion dollar molecule club”, and became a “bombshell” drug.

As a representative of innovative drugs going overseas, Baiyueze may have inspired the industry. In terms of market expansion, zebutinib has now been approved for multiple indications in 70 markets around the world. It is the BTK inhibitor with the widest range of similar drug indications. It not only covers mainstream pharmaceutical markets in Europe and America, but also enters many developing countries and emerging markets including Nicaragua, Thailand, Ecuador, and Uruguay.

It is worth mentioning that the annual report shows that by region, BeiGene's overseas revenue was 9.622 billion yuan, up 147.27% year on year; domestic revenue was 7.8 billion yuan, up 37.46% year on year.

In other words, BeiGene's overseas revenue is already higher than domestic revenue, and the growth rate of overseas revenue is significantly higher than domestic revenue, which reflects the benefits that pharmaceuticals bring to enterprises.

In terms of sales expenses, financial reports show that in 2023, sales expenses were 7.3 billion yuan, up 21.7% from 5.997 billion in the same period last year, and sales expenses accounted for 41.92% of revenue. However, the good news is that the growth rate of its sales expenses is less than the growth rate of revenue,

According to financial reports, sales of Baizean (tirelizumab), another self-developed anti-PD-1 antibody drug, totaled 3.806 billion yuan in 2023, an increase of 33.1% over the previous year.

Notably, on March 15, 2024, BeiGene announced that the US Food and Drug Administration (FDA) has approved Baizean as a single agent to treat unresectable or metastatic esophageal squamous cell carcinoma (ESCC) after previous systemic chemotherapy (without PD1/L1 inhibitors). Tirelizumab is expected to be available in the US in the second half of 2024.

The overseas expansion of this PD-1/L1 inhibitor is worth watching.

R&D expenses reached a record high, so they chose decroization

In terms of R&D expenses, BeiGene has always been known in the industry for being “exalted”. After surpassing 10 billion yuan (11.034 billion yuan) for the first time in 2022, it grew again to 12.813 billion yuan in 2023, an increase of 14.90% compared with the same period last year

In addition to not **** on research and development costs, and various drugs have entered clinical development, BeiGene is also simultaneously expanding the scale of drug candidates. It is expected to push at least 10 new molecular entities into the first clinical trial in 2024.

Furthermore, it is worth mentioning that unlike many pharmaceutical companies, BeiGene chose to “CRO” in terms of R&D, which is probably another factor in its high R&D costs.

BeiGene stated in its financial report that we recognize the importance of clinical trial activities to the industry and the challenges posed by outsourcing them to third-party contract research institutes (CRO), so we have built an internal global clinical team of more than 3,000 people and have basically achieved decrotization. Judging from the number of R&D personnel, there was an increase of 3,744 in the current period compared to 3,315 in the previous period.

Furthermore, financial reports show that it has independently carried out more than 130 clinical trials and enrolled more than 22,000 test subjects in about 45 countries and regions. These clinical trials include more than 40 critical or potentially registerable clinical trials for its product portfolio.

Regarding break-even, it has always been a point where the market questions the “BeiGene Shenzhou” model. BeiGene stated in its financial report that as of December 31, 2023, its cumulative uncompensated losses amounted to RMB 57.688 billion. “As the company continues to develop drug candidates and seek approval from regulators, expand production and manufacturing facilities, and commercialize drugs under development (including drugs under development independently developed and licensed by the company), there is a risk that the company will continue to lose money in the future, and such losses may expand further in the near future.”

However, judging from its financial data, the narrowing of net losses this year is a good sign.