BeiGene, once a target for short sellers, attracts jumbo deal from Amgen, hedge fund eyeing China’s red-hot pharmaceutical sector

15-Jul-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

China’s red-hot pharmaceutical and biotechnology sector is drawing in billions of dollars from US investors.

No example is more surprising than the windfall that has come the way of cancer drugs developer BeiGene, a company once accused by a short seller of inflating its sales.

The Nasdaq-listed firm boosted its cash hoard by $2.1 billion in the latest fundraising round by placing out 145.8 million new shares a 14.3 per cent stake in the company to investors including California-based pharmaceutical giant Amgen and New York-based hedge fund Baker Bros Advisors, according to regulatory filings.

Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.

The stock placement is the fourth round of capital infusion to fund its research and development since the Beijing-based firm went public on Nasdaq in 2016, suggesting the world’s second-largest pharmaceutical market is indispensable, despite two years of US-China trade conflict and heightened geopolitical risks.

“To have investors like [Amgen] come back for more in such a big way is the strongest kind of [fundraising] a company can do,” said Brad Loncar, chief executive of Kansas-based investment firm Loncar Investments. “Today’s backing is commensurate with [Beigene's] global ambition.”

The Loncar China BioPharma Index, which tracks 37 Hong Kong and Nasdaq-listed Chinese pharmaceutical and biotechnology stocks, has risen 31 per cent since the start of the year, outpacing the 9 per cent slide in the Hang Seng Index.

BeiGene, which rose to prominence in 2017 in a $1.4 billion tie-up with Celgene, was accused by New York investment firm J Capital Research last September of inflating its sales by 60 per cent. The Beijing-based firm said the accusations were “without merit.”

In the latest fundraising, BeiGene sold about a fifth of the new shares to Amgen at $14.23 per share (HK$110.29), or the equivalent of $185 per American depositary share. It worked out to a 5.6 per cent discount to the closing price $196 on Friday, Beigene said in a Hong Kong exchange filing on Monday. It did not provide more details of at least five other subscribers.

Its shares rose 1.9 per cent to HK$121.60 on Monday, capping a 22 per cent gain in 2020.

“This additional investment reflects Amgen’s confidence in the progress the companies are making in their ongoing oncology collaboration in China,” Amgen said. Amgen also agreed to work and share profits with Beigene to accelerate plans to bring its osteoporosis and two blood cancer drugs to the Chinese market.

The jumbo deal followed recent completion of several popular initial public offerings in a sector viewed by investors as being more resilient amid the worst global economic downturn in decades caused by the coronavirus pandemic.

It was the second largest post-IPO stock sale of any Hong Kong-listed pharmaceutical or biotech firm, and second only to its own record when it sold a $2.7 billion, 20.5 per cent stake to Amgen in January this year, according to Refinitiv.

The proceeds far exceeded the $182 million raised from its Nasdaq IPO, $758 million from a follow-on stock offering, and $870 million from its Hong Kong listing in August last year.

BeiGene and Amgen are collaborating to advance the development of 20 of Amgen’s oncology drug candidates in China and globally. According to a company presentation uploaded on Monday, of 28 drug candidates under development by Beigene, 13 were in collaboration with Amgen.

The proceeds would fund BeiGene research and clinical development work, in-licensing of other firms’ technology, potential acquisitions of assets or businesses, drugs marketing and overseas expansion. The group plans to expand its research staff count to 650 from 350, according to its presentation.

After making four new drugs marketing applications and receiving six approvals in the past 10 months, it aims to make seven such applications in the next 18 months, it said.

Despite the sharp rally of Chinese and pharmaceutical stocks in Hong Kong, Carol Dou, UOB’s Kay Hian senior health care analyst, said she has yet to see signs the trend would reverse any time soon.

“Unless there is major policy change, positive sentiment towards the sector will sustain,” she said. “Ultimately, valuations will be determined by clinical trial results and there will certainly be some failures.”


Category: China

Print This Post