After attracting over $1 billion in funding with a blockbuster product, is the "Loss King" BeiGene now looking to tighten its belt?

On February 27, BEIGENE (688235.SH) disclosed its financial data for 2023, with current revenue and net profit attributable to the parent company at 17.423 billion yuan and -6.716 billion yuan respectively, representing a year-on-year growth of 82.1% in revenue.

Excluding the financial data for the first three quarters of 2023, BEIGENE's revenue and net profit attributable to the parent company for the fourth quarter were 44.55 billion yuan and -30.61 billion yuan respectively, with a year-on-year revenue growth of 56.87%.

"The increase in total revenue for this quarter compared to the same period last year is mainly due to the growth in sales of the company's core market products," BEIGENE pointed out.

Specifically, the global sales of BEIGENE's core drugs, zanubrutinib and tislelizumab, reached 9.138 billion yuan and 3.806 billion yuan respectively, with year-on-year growth of 138.7% and 33.1% respectively.

It is worth mentioning that 2023 is also the first year that zanubrutinib's sales have exceeded 1 billion U.S. dollars.

The secondary market reacted positively to this report, with BEIGENE's stock closing up by 4.17% on February 27.

However, under the harsh conditions in the pharmaceutical industry, BEIGENE is also cutting its pipeline. On the same day, it announced the termination of the development and introduction of allogeneic NK cell therapy targeting 4 points, stating that this is the result of its "internal prioritization decision."

PD-1 drug expected to be launched in the U.S. this year

BEIGENE's performance remains strong.

In 2023, BEIGENE's product revenue reached 15.504 billion yuan, an 82.8% year-on-year increase, especially with both of its independently developed core drugs performing well.

In 2023, sales of the BTK small molecule inhibitor zanubrutinib for the treatment of CLL (chronic lymphocytic leukemia)/SLL (small lymphocytic lymphoma) and other indications exceeded 1 billion U.S. dollars for the first time, with sales reaching 1.3 billion U.S. dollars, equivalent to 9.138 billion yuan, a year-on-year increase of 138.7%, accounting for 58.94% of product revenue.

The U.S. is an important market for zanubrutinib. In 2023, sales in the U.S. reached 6.807 billion yuan, a year-on-year increase of 142.6%, accounting for 74.49% of the product revenue.

"The sales in the U.S. continued to grow during this period, benefiting from the approval of zanubrutinib for CLL and SLL adult patients," explained BEIGENE.

The growth of BEIGENE's other independently developed core drug, tislelizumab, is not as strong as zanubrutinib.

This may be due to the fact that while zanubrutinib competes head-to-head with ibrutinib in the U.S. market, tislelizumab's main market is still in China.

In 2023, sales of tislelizumab, a PD-L1 drug used for first-line treatment of squamous and non-squamous NSCLC and other indications, in China reached 3.863 billion yuan, a year-on-year increase of 26.9%. BEIGENE's monoclonal antibody, Toripalimab, has faced significant challenges in the past year.

In September 2023, BEIGENE announced the termination of its collaboration agreement with Novartis (NOVN.SIX), where Novartis returned the global development, production, and commercialization rights of Toripalimab in countries/regions such as the United States and European Union.

The core reason for the termination of their collaboration lies in the deteriorating competitive landscape of PD-1 drugs.

"Since we signed the agreement in January 2021, there have been significant changes in the PD-1 inhibitor landscape. Therefore, we have reassessed our strategy in this category and decided to terminate the agreement," responded Novartis.

BEIGENE is striving to expand the international presence of Toripalimab.

In the European market, Toripalimab was approved in September 2023 as a monotherapy for the treatment of adult patients with unresectable, locally advanced, or metastatic esophageal squamous cell carcinoma (ESCC) who have received prior platinum-based chemotherapy.

On January 26, 2024, BEIGENE also announced further approval by the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency for its use in three types of non-small cell lung cancer, providing additional growth opportunities in the European market.

Furthermore, BEIGENE has submitted a new drug application to the FDA for Toripalimab in patients with recurrent locally advanced or metastatic ESCC who have received prior systemic therapy, which has been accepted.

Regarding the most pressing question of "when will Toripalimab be launched in the U.S. market," BEIGENE expects the approval timeline for first-line and second-line treatment of ESCC in the U.S. to be in July 2024 and the first half of 2024, respectively.

Medical analysts believe that the chances of approval are high.

"We believe that Toripalimab has a high probability of approval in the U.S.," noted analysts from the healthcare team at Guotai Junan International.

However, entering the U.S. market is just the first step, and the ability to cover a broader range of indications is crucial for Toripalimab to succeed in the U.S. market.

As a benchmark drug for Toripalimab, Merck's Pembrolizumab (referred to as "Drug K") achieved sales of $25 billion in 2023, becoming the new global "drug king." The key to success lies in Drug K having up to 39 approved indications in the U.S., the highest among PD-1 monoclonal antibodies.

In contrast, Toripalimab, which has been approved for 12 indications domestically, remains an unknown factor in how much market share it can capture from Drug K in the U.S.

"Loss King" Streamlining Pipeline

From a gross profit perspective, BEIGENE has almost "made all the money it can make."

In 2023, BEIGENE's gross profit reached ¥14.965 billion, accounting for 85.89% of its revenue. During the same period, the product sales cost was only ¥2.735 billion, with a year-on-year increase of 32.6%, which is lower than the 49.5 percentage point increase in revenue during the same period. Despite the impact of expenses, BEIGENE still faces a huge loss.

In 2023, BEIGENE's net loss attributable to shareholders was -6.716 billion yuan, a reduction of over 50% compared to the previous year.

Specifically, in 2023, operating expenses including research and development, sales and management expenses, and intangible asset amortization totaled 23.661 billion yuan, an increase of 12.6% year-on-year.

Among them, research and development expenses remain the "major expense", reaching 12.806 billion yuan in the current period, accounting for over 70% of revenue, an 8.4% increase year-on-year.

This is the result of BEIGENE's cost control efforts.

"During the reporting period, the company's operating loss compared to the same period last year has decreased, mainly due to the growth in product revenue and expense management driving operational efficiency improvement," BEIGENE stated.

In fact, since 2023, the biopharmaceutical industry has been facing challenges. Cost reduction and efficiency improvement have become the industry's focus, with many biopharmaceutical companies emphasizing cost control in their financial reports.

For example, Junshi Biosciences (688180.SH) pointed out in its performance forecast, "In 2023, the company strengthened cost control, optimized resource allocation, and focused on a more promising research and development pipeline."

Although BEIGENE still has a total of 22.934 billion yuan in cash, cash equivalents, and restricted cash, under the shadow of non-profitability and the industry's winter, BEIGENE has also made cuts.

On February 27, 2024, BEIGENE announced the termination of the introduction of allogeneic NK cell therapy targeting four points developed by Shoreline Biosciences, Inc.

"After a strategic portfolio review, we have decided to terminate the collaboration with Shoreline Biosciences. We appreciate the effective cooperation with the Shoreline team. This termination is a result of BeiGene's internal prioritization decision and does not reflect any shortcomings in Shoreline's platform technology," BEIGENE pointed out.

As the undisputed "loss king" among domestic innovative drug companies, the question of when BEIGENE can remove the non-profitability label remains to be verified by time.