Core views
BeiGene achieved rapid revenue growth in H1 in 2024, and profit losses continued to be drastically reduced. Adjusted profit reversed losses for the first time in the second quarter, exceeding expectations. Baiyueze's global sales in the field of hematologic oncology increased dramatically. In addition, the company revealed many new molecules for hematoma and solid tumors. In the second half of 2024, you can pay attention to: (1) Baiyueze added 16 new global approvals; (2) Baizean 1L ESCC potentially approved in the US and Australia, 2L ESCC and 2L NSCLC potentially approved in Brazil, potential approval for new adjuvant/adjuvant treatment NSCLC in China; (3) SABCS conference data readings, etc.
occurrences
The company released a quick report on its 2024 semi-annual results. In the first half of 2024, the company achieved total revenue of 11.996 billion yuan, an increase of 65.4% year on year; of these, product revenue was 11.908 billion yuan, an increase of 77.8% year on year. Net profit attributable to mother - 2.877 billion yuan, a loss of 2.342 billion yuan; after deducting non-net profit - 3.125 billion yuan, a loss of 2.377 billion yuan.
Brief review
1. Revenue and profit all exceeded expectations. Adjusted operating profit was corrected for the first half of 2024 in the second quarter. The company's total revenue was 11.996 billion yuan, up 65.44% year-on-year from 7.251 billion yuan the previous year. Among them, product revenue was 11.908 billion yuan, compared to 6.696 billion yuan in the same period last year, up 77.8% year on year, and revenue exceeded expectations.
The increase in product revenue was mainly due to sales growth of self-developed products Baiyue Ze and Baizean and Amgen authorized products: in the first half of 2024, Baiyuze's global sales were 8.018 billion yuan, and global sales for the same period last year were 3.612 billion yuan, an increase of 122.0% over the previous year. Currently, 5 of the 6 indications approved by Baiyueze in China have all been included in the national health insurance catalogue. In the first half of 2024, Baizean's sales were 2.191 billion yuan, compared with sales of 1.836 billion yuan in the same period last year, an increase of 19.4% over the previous year.
Currently, Baizean has been approved for 1 indication in the US and the UK, 2 indications have been approved in the EU and Australia, and 13 indications have been approved in China, 11 of which have been included in the national health insurance catalogue. In the first half of 2024, total sales of Amgen products in China were approximately 1.156 billion yuan, an increase of 91.39% over the previous year.
SG&A fee/product revenue for the first half of 2024 was 52.23%, down 22.83 pcts from the same period in 2023. R&D expenses/product revenue was 54.86%, down 31.38 pcts from the same period in 2023. The two main expenses were effectively controlled, and the cost rate fell more than expected.
In the second quarter of 2024, adjusted operating income turned positive, with revenue reaching 48.464 million US dollars. The loss for the same period in 2023 was 0.193 billion US dollars. This reversal of loss was due to continued growth in product revenue and effective control of expenses, and profit exceeded expectations.
2. Baiyuze (zebutinib): Global sales have increased dramatically, strengthening its leading position in the field of hematology
Baiyueze, a BTK inhibitor independently developed by the company, is marketed and sold in the US, China, the European Union, the United Kingdom, Canada, Australia and other international markets. In the first half of 2024, Baiyuze's total global sales were $1.1259 billion, up 116.7% year over year. Among them, sales in the US totaled $0.8308 billion, up 129.3% year over year. Among all new patients with approved indications in the US, Baiyueze is gradually becoming the preferred Bruton's tyrosine kinase inhibitor (BtKI) drug, which highlights the increase in TN CLL market share and the BtKI category leader in the newly diagnosed CLL patient market. At the same time, Baiyueze is also the only BTKi that achieved superior efficacy compared to ibutinib in head-to-head tests. Baiyuezer's sales in Europe totaled $0.1,482 billion, an increase of 223.5% over the same period last year, thanks to continued growth in market share in major markets. Baiyueze has been approved by the US FDA, the European Commission, Health Canada, and the China National Drug Administration (NMPA) to treat adult R/R follicular lymphoma (FL) patients who have received at least two lines of systematic treatment. It is also the first BTK inhibitor approved for this indication so far. It is also the most widely applicable BTK inhibitor in the US, EU, and China.
Baiyueze can follow the following events:
(1) 2024H2: Approximately 16 additional global approvals have been added;
(2) 2024H2: Submission of applications for new tablet dosage forms in the US and EU; (3) 2024H2: approved for the treatment of WM and CLL/SLL in Japan;
(4) 2025H1: About 10 new items have been approved globally;
(5) 2025H1: Approved in the UK to treat R/R MCL;
(6) 2025H1: New tablet dosage forms approved in the UK and US; (7) 2025H2: about 10 additional global approvals;
(8) 2025H2: Approved in Brazil for the treatment of R/R FL and CLL.
3. Baizeam (tirelizumab): Multiple indications are expected to be approved, benefiting global patient companies to independently develop an anti-PD-1 antibody immunotherapy to treat various solid tumors and hematologic tumors, and marketed in the US, the European Union and China. In the first half of 2024, Baizean's sales in China totaled 0.3035 billion US dollars, compared to 0.2643 billion US dollars in the same period last year, an increase of 14.8% over the same period last year. Demand for new patients brought about by the expansion of medical insurance reimbursement coverage, as well as a further expanded sales team and an increase in the number of drugs admitted to hospitals, have continued to drive Baizean's market penetration rate and market share expansion. Recently, Baizean was approved for first-line treatment of widespread small cell lung cancer in China. So far, 13 indications have been approved in China. Additionally, Baizean was recently approved for first-line and second-line NSCLC treatment in the European Union and Australia, and approved for second-line ESCC treatment in the US and Australia. The US and Europe are reviewing marketing applications for new indications for first-line treatment of ESCC and first-line treatment of gastric cancer. Australia, Japan, and Brazil are reviewing marketing applications for new indications. Baizean is preparing to launch in 5 continents for multiple indications and is expected to receive multiple global approvals in 2024.
Baizean can follow the following events:
(1) 2024H2: approved for new adjuvant/adjuvant treatment of NSCLC in China; (2) 2024H2: application for first-line treatment of NPC submitted in the EU; (3) 2024H2: application for first-line treatment of ES-SCLC submitted in the EU; (4) 2024H2: application for new adjuvant/adjuvant treatment of NSCLC in the EU; (5) 2024H2: approved for first-line treatment of ESCC in the US; (6) 2024H2: approved for first-line treatment of GC/GEJC in the US; (7) 2025H1:4 additional global approvals added;
(8) 2025H1: approved for second-line treatment of ESCC once every two weeks in the US; approved for second-line treatment of ESCC in Japan; (9) 2025H1: approved for first-line GC treatment in Australia and the European Union; (10) 2025H2: about 13 additional items approved globally;
(11) 2025H2: approved for first-line NPCs in Australia; (12) 2025H2: approved in the European Union for the treatment of first-line ES-SCLC, new adjuvant/adjuvant treatment NSCLC, and first-line NPCs.
4. BCL2 inhibitor sonrotoclax: Key projects are steadily advancing BeiGene is continuing to advance four registered clinical trials of Sonrotoclax, including a global critical phase III clinical trial for first-line treatment of CLL patients with Sonrotoclax, two potential global registrable phase II clinical trials for R/R WM and R/R MCL, and a potential phase II clinical trial for R/R CLL. Among them, global clinical trials for R/R MCL have been completed, and R/R WM and R/R MCL indications have obtained US FDA Fast Track Qualification.
At the 2024 European Hematology Association (EHA) annual meeting, BeiGene presented first-phase study data on the combined treatment of R/RCLL/SLL and R/R MCL with Sonrotoclax, showing deep, long-lasting relief and tolerable safety characteristics; sonrotoclax as a single agent to treat R/R WM, in combination with azacitidine to treat TN and R/R acute myeloid leukemia and R/R multiple myeloma with dexamethasone As a result of the data, satisfactory results were also obtained in terms of remission rate and safety characteristics. The phase III clinical trial of Sonrotoclax for the treatment of R/R CLL and R/R MCL is expected to enroll the first subjects in the fourth quarter of 2024 or the first quarter of 2025.
5. BTK CDAC: Clinical progress is progressing rapidly, which is expected to solve patients' resistance to BTK inhibitors
At the 2024 EHA annual meeting, BeiGene presented good preliminary efficacy and safety data for BGB-16673 in R/R CLL/SLL.
BTK CDAC (BGB-16673) continues to enroll patients in the two potentially registrable expansion cohorts for the treatment of R/R MCL and R/R CLL. Currently, more than 300 subjects have been enrolled. Among them, R/R MCL indications have obtained US FDA Fast Track Qualification. The company anticipates that the phase III clinical trial of BGB-16673 for the treatment of R/R CLL/SLL will enroll the first subjects in the fourth quarter of 2024 or the first quarter of 2025.
6. Other pipelines: The company vigorously promotes the global progress and layout of other pipeline products
In the field of solid tumors, the company is promoting potentially differentiated projects targeting key cancer types such as lung cancer, breast cancer, and gastrointestinal cancer with deep scientific research capabilities and various technical platforms. In the second quarter of 2024, BeiGene will advance a solid tumor innovation pipeline with more than 15 molecules under development, including ADC, multispecific antibodies, and targeted therapies for lung cancer, breast cancer, and gastrointestinal cancer. In the first half of 2024, BeiGene advanced five new molecular entities into the clinical phase, including BGB-C354 (B7H3 ADC), BGB-R046 (IL-15 precursor drug), BG-68501 (CDK2 inhibitor), BG-C9074 (B7H4 ADC), and BGB-43035 (IRAK4 CDAC). The main pipeline developments in solid tumors are as follows:
(1) Zanubrutinib (HER2): NMPA has accepted the New Drug Marketing License Application (BLA) for Zanubrutinib for second-line treatment of biliary tract cancer and is expected to be approved in China in the second half of 2025; together with Baiyue Zehe Chemotherapy, a phase III clinical trial for 1L HER2+GEA is currently being enrolled; the phase II clinical trial for 2L+BTC has entered the summary stage.
(2) Tarlatamab (bispecific antibody T-cell conjugator targeting DLL3 and CD3): In phase III clinical enrollment for ES-SCLC, recurrent SCLC, and LSSCLC; phase II clinical trials for 3L+SCLC have started in China.
(3) Ociperlimab (anti-TIGIT antibody): Phase III clinical trial with Baize'an on 1L NSCLC (PDL1H) has entered the implementation phase.
(4) Pamiparib (PARP inhibitor): Phase III clinical trials for platinum-sensitive recurrent ovarian cancer have entered the implementation phase.
(5) Other early research and development: BGB-C354 (B7H3 ADC) and BGB-R046 (IL-15 precursor drug) have initiated dose escalation studies; pan-KRAS inhibitors, MTA co-PRMT5 inhibitors, and EGFR CDAC are expected to enter clinical development in the second half of 2024; the BGB-43395 single drug treatment group and the combination treatment group with fluvizil and letrozole continue to increase doses within the expected effective dose range. More than 60 patients have been enrolled so far. Phase 1 trial data is expected to be released for the first time in the fourth quarter of 2024; BG-68501 and B7H4 ADCBG-C9074 continue single-agent dose escalation studies; CEA ADC, FGFR2b ADC, and GPC3x4-1bb bispecific antibodies are expected to enter clinical development in the second half of 2024; and the IRAK4 CDAC BGB-43035 has begun clinical development.
7. Financial analysis: cost ratio reduced, net loss narrowed
According to US GAAP, in the first half of 2024, the company's operating expenses were 1.786 billion US dollars, up 14.86% year over year from 1.555 billion US dollars in the same period of 2023. Among them, R&D expenses were 0.915 billion US dollars, up 10.11% year over year from 0.831 billion US dollars in the same period in 2023. R&D expenses/product revenue was 54.86%, down 31.38 pcts from the same period in 2023. The increase in external R&D expenses is mainly due to the increase in development milestone costs and the increase in Amgen co-development costs, but with the gradual completion of certain projects and the reduction in external clinical trial costs due to the internalization of continuous R&D trials, the increase in external R&D expenses was offset to a certain extent; the main reason for the increase in internal R&D expenses was the expansion of global R&D institutions and the increase in clinical and pre-clinical drug candidates, as well as continued investment in internal research and clinical trial activities.
In the first half of 2024, the company's GAAP SG&A expenses were US$0.871 billion, up 20.4% year-on-year from US$0.724 billion in the same period in 2023. SG&A fee/product revenue was 52.23%, down 22.83 pcts from the same period in 2023. The increase in SG&A expenses is mainly due to investments to expand Baiyue's commercial activities in the US and Europe to support product launches.
In terms of net loss, according to GAAP, the net loss for the semi-year 2024 was 0.372 billion US dollars, the net loss for the same period in 2023 was 0.73 billion US dollars, and the net loss narrowed by 0.358 billion US dollars.
In the second quarter of 2024, adjusted operating income turned positive, with revenue of $48.464 million, and loss of $0.193 billion for the same period of 2023.
8. Profit forecast and valuation
The company's revenue for 2024-2026 is 25.29, 32.619, and 38.333 billion yuan, respectively, with corresponding growth rates of 45%, 29%, and 18%. Net profit losses due to mother are expected to narrow and reverse losses. The 2024-2026 forecast is -4.087, 0.075, and 2.323 billion 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 design requirements, price changes, volume procurement policy changes, and changes in the scope and ratio of medical insurance reimbursement due to industry policy adjustments.
Risk of development 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 outcome 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 scattered epidemics, intensified competitive landscape, insufficient logistics capacity, and insufficient production capacity.
Health insurance negotiation risk: There is a risk of uncertainty about the decline brought about by health insurance negotiations.