The Chinese biotech market is heating up and the stock of this company is rapidly gaining momentum.
BeiGene (BGNE)
From Cabot Emerging Markets Investor
BeiGene (BGNE) is a commercial-stage Chinese company with a market cap of $8.2 billion and revenue of $220 million., focused on developing and commercializing molecularly targeted and immuno-oncology treatments for cancer.
In July 2017, the company acquired a much stronger corporate sponsor in Celgene, the drug giant that owns a 5.6% stake in BeiGene. As part of that deal, Celgene acquired the rights to develop and commercialize BeiGene’s PD-1 inhibitor, BGB-A317, in markets outside Asia in patients with solid tumor cancers. BeiGene retained the rights to develop BGB-A317 for use against hematological cancers and received $263 million in cash with nearly $1 billion in potential payments if various milestones are attained.
Then in September, came positive Phase I clinical trial results that confirmed BGB-A317’s anti-tumor activity and patient tolerance. In a separate deal, Celgene gave BeiGene exclusive rights to commercialize Abraxane, Revlimid and Vidaza, three of Celgene’s therapies that are already approved in China. BeiGene got $413 million in licensing fees and other investments from Celgene in the last half of 2017 and conducted a very successful secondary stock offering in January.
It’s worth noting that investors responded positively to the offering, bidding the price up, which is unusual, as secondary offerings are usually considered dilutive to value. With the cash now on hand and the revenue from Celgene’s profitable drugs, BeiGene should be able to fund its development activities for a couple of years at least.
BGNE made fitful progress from its IPO in February 2016 until it blasted off in the first week of July 2017, when it ripped from 45 to 70. Another rally in September pushed BGNE above 100. The stock pulled back to support at 80 in October and November, then rose steadily through the middle of January, when it got another burst of energy, soaring to 140 before negative market action dropped it back to support at 122. BGNE started a new rally on February 14 and briefly topped 160 before pulling back slightly.
With the Cabot Emerging Markets Timer positive, we will add a half position in BGNE to the portfolio tomorrow. BUY A HALF.
Paul Goodwin, Cabot Emerging Markets Investor, www.cabotwealth.com, 978-745-5532, February 22, 2018