It is hard to guard against hidden arrows.

"Investors Net" Cai Jun

Recently, Beigene (688235.SH, hereinafter referred to as the company) has been caught up in a rumor investigation.

On the afternoon of October 25th, the company issued a statement on WeChat official account, informing that an employee is assisting in the relevant investigation, and the matters involved are unrelated to the company.

Up to now, the company has reached a crucial point of achieving profitability balance. Any slight movement may affect its performance and strategic planning. As a leading group of domestic innovative drugs, the company's overseas markets are booming, while domestically it is catching up as well. But at a crucial moment, various negative factors and actions could potentially change the situation, especially considering the ongoing new round of national medical insurance negotiations.

Any slight movement

Although Beigene did not directly name the employee, on that morning, the news spread rapidly that Yin Min, the Chief Commercial Officer for Greater China, was taken away by the Shenzhen customs department.

Records show that from 2006 to 2021, Yin Min worked at Astrazeneca, holding positions such as Chief Financial Officer, Strategic Project Manager for Europe, Compliance Officer for Greater China, Vice President of Business and Channel, General Manager of Hong Kong and Macau, and General Manager of the China Oncology Division. Earlier, Bloomberg reported that five current and former employees of Astrazeneca were detained by Shenzhen police in connection with an investigation involving illegal collection of patient data.

From the afternoon statement, beigene indirectly responded to the rumors of Yin Min, focusing on matters unrelated to the company. At this moment, its situation seems somewhat delicate.

In the first half of this year, the company's revenue was 11.996 billion yuan, a year-on-year increase of 65.44%; the net income attributable to shareholders of listed companies was -2.877 billion yuan, significantly narrowing from -5.22 billion yuan in the same period of 2023. The performance growth was mainly driven by the sales of Baiyuezhe, Baize'an, and Amgen authorized products.

In other words, the company is just one step away from turning losses into profits. With the goal in sight, any slight change may act as a cold arrow, affecting the company's final sprint.

To make a leap forward, enhancing efficiency is a means, and cost reduction is also crucial. For innovative drug companies, commercial deployment and expansion of the R&D pipeline are inevitable, hence cost reduction mainly focuses on reducing the growth rate of expenses.

In the first half of this year, the company's sales, management, and R&D expenses were 4.17 billion yuan, 2.104 billion yuan, and 6.628 billion yuan respectively, with year-on-year growth rates of 22.4%, 22.7%, and 12.68%. The total of the three major expenses was 12.902 billion yuan, a 17.3% increase compared to the same period in 2023. Among them, the growth rates of investment in management and R&D have significantly decreased, while the sales expenses are being more aggressively invested.

Breaking down the sales expenses, employee salaries and benefits, and medical information promotion and market education expenses were 1.85 billion yuan and 1.448 billion yuan respectively, with year-on-year growth rates of 28.5% and 12.8%. The company explained that global commercial deployment is ongoing, with previous establishment of marketing teams in China, the USA, Europe, and other regions.

Not yet the leading domestic innovative drug company.

Half of beigene's sky is flourishing overseas, and half is uncertain domestically.

In the first half of this year, the company's revenue in the USA, China, and Europe were 5.903 billion yuan, 4.824 billion yuan, and 1.079 billion yuan respectively, with year-on-year growth of 134%, 28%, and 26.2% respectively. The USA is not only the market with the fastest growth in sales, but also the company's largest performance contributor. In the Chinese market, institutions are watching when the company can take the lead in innovative drugs.

The commercial competition of innovative drugs cannot bypass the support level of sales, depth of development, and breadth of channels. In the first half of this year, the company's sales expense ratio exceeded 34%, higher than Jiangsu Hengrui Pharmaceuticals' 30%; however, during the same period, Hengrui Pharmaceuticals' innovative drug revenue was 6.612 billion yuan, still higher than the company.

Another key point is consistent with the previous R&D strategy. There are two directions in the pipeline strategy of domestic innovative drugs, one represented by Beigene, focusing on digging deep into major single-drug indications, and the other is Jiangsu Hengrui Pharmaceuticals and Innovent Bio developing multiple single-drug products simultaneously. It is still inconclusive which route is more optimal.

So far, the company's sales are mainly supported by Bayezhuo and Baizean. These two major single-drug products belong to broad-spectrum drugs, meaning they can be developed for multiple indications and have been approved for broad patient coverage. During the reporting period, Bayezhuo's sales in China were 0.873 billion yuan, a year-on-year growth of 30.5%, with six indications approved and five included in the national health insurance.

In comparison, Jiangsu Hengrui Pharmaceuticals has a deeper foundation, and Innovent Bio, established for a shorter time, has a stronger reference value. In the first half of this year, Innovent Bio's total product revenue was 3.811 billion yuan, a year-on-year growth of 55.1%. Previously, the company set a goal of reaching 20 billion yuan in product revenue in the next five years by continuously launching new self-developed or imported drugs, such as sintilimab injection, atorvastatin, and marzudatide, covering areas including oncology, lipid-lowering, and weight loss.

Marathon-style overseas litigation.

If the current investigation event was unexpected, then Beigene's overseas litigation is like a marathon.

In March, the company announced filing a patent infringement lawsuit against Sandeshe, MSN in the US court, as the two defendants filed for the approval of generic drugs of Bayezhuo in the USA.

Baiyuzer is the company's flagship product, with global sales of 8.018 billion yuan in the first half of this year, a year-on-year increase of 122%. Among them, the United States achieved 5.903 billion yuan, a year-on-year increase of 134.4%, with over 60% of the quarterly sequential demand growth coming from the expansion used in the indication of chronic lymphocytic leukemia.

Simply put, if the defendant's new innovative drug cannot be stopped from going public, Beigene's U.S. market base will face a threat. Moreover, there are more than just two parties aiming at Baiyuzer.

In 2023, AbbVie sued the company in the United States, accusing Baiyuzer of infringing on the patent of the similar competitor, ibrutinib. Earlier, the two products underwent a "head-to-head" clinical trial, where Baiyuzer demonstrated superior efficacy in data such as PFS, ORR, and adverse event rates related to heart function.

In May, the United States Patent and Trademark Office approved the company's application to re-examine the patents involved in the lawsuit, and will make a final ruling within 12 months. The company stated that it has full confidence in the intellectual property of Baiyuzer and will continue to develop innovative cancer treatment solutions.

In August, the company also disclosed the new clinical developments of Baiyuzer in the United States. The drug is being used to treat two potential registration-enabling indications, R/R MCL and R/R CLL, with ongoing enrollment of patients, with over 300 subjects currently enrolled. The R/R MCL indication has received fast-track designation from the U.S. FDA; it is expected that the phase III clinical trial for R/R CLL/SLL will enroll the first subject in the fourth quarter of 2024 or the first quarter of 2025.

Another core drug, Baze An, is currently under review by multiple regulatory agencies in various countries and regions. This includes applications for market approval of two new indications in the United States, Europe, and Japan, focusing on first-line treatment of ESCC, first-line treatment of gastric or gastroesophageal junction adenocarcinoma, etc. (Produced by Sina Finance) ■