Shannon Jones: Alright, Simon. I'm excited to talk about this first stock.
This is one that you actually brought up to me a couple of years ago.
It should be no surprise in talking about hot biotech stocks to watch, immuno-oncology
is one of the hottest areas in biotech right now, whether you're in the U.S. or China.
Immuno-oncology is really about using the body's own immune system and super-charging
it to actually fight an attack cancer.
This is definitely a paradigm shift away from the chemo and the radiation.
Not necessarily a chemo killer at this point, but certainly a very intriguing area to invest.
Simon, there's one stock that you've been watching. Can you school us on, first, what is this stock?
And what was it about the stock that actually attracted you from beginning?
Simon Erickson: The first thing that attracted me to it was that it had an interesting name, Shannon.
The name of the company is BeiGene.
Not Beijing, as in the capital of China, but BeiGene as in the genetic-focused biotech company.
The ticker on this is BGNE.
This is a company that's really focusing on immuno-oncology drugs.
They're addressing several different forms of cancer.
It's getting a lot of attention because they've got what I would describe as some very key
partnerships which proved a lot of validation.
They're working with larger Western pharmaceutical companies.
Also, they have a really good pipeline of their own.
So, originally, it was probably the name that attracted me to them.
But then, when I started looking closer, I said, "Yes, this is actually a legitimate company,
and they're packing a heck of a punch of what they're working on back there, too."
Jones: Yeah.
This particular company is technically a commercial stage company, which is great for investors.
For a lot of us, we tend to like the pre-commercial stage biotechs, especially as we're watching clinical trials.
But, it was through a licensing deal with Celgene that actually, now, technically,
they are a commercial stage company. Simon, what was that deal all about?
Erickson: That's right.
Shannon, as you know, Celgene likes to partner with a lot of companies, doing a lot of neat
things all over the world.
With BeiGene, they have licensed their drugs Revlimid, Abraxane, and Vidaza to BeiGene.
By the way, the names sound similar. They both have that -gene at the end of it.
BeiGene has now licensed from Celgene the rights of those three drugs to sell in China.
These drugs are selling $10 billion globally right now at Celgene.
BeiGene is basically starting from scratch in China.
They did $38 million last quarter. That's a drop in the bucket compared to $10 billion globally.
But they're growing this at 150% per year. They're starting to get regulatory approvals for these.
The reimbursements are being approved for different indications, as well.
So, as you see these Celgene drugs, first of all, that are commercially available,
they're already being sold in China.
BeiGene is pushing for those in a variety of different blood cancers and serious disorders.
The reason this is so interesting to me in the first place is, let's just assume
in the longer-term, even though sales are pretty much non-existent in China today,
China's got a population that's five times larger than the United States.
If we assume that they can even get one-third of the sales of Revlimid in China as they did
in the United States, of multiple myeloma, that'd be $2 billion peak sales in China.
I think it's capable of much more than that, but let's just say $2 billion within the country's walls.
If you put maybe 4X peak sales on that, as an investor, which is pretty common in biotech,
4-5X peak sales, you're already looking at a company that should be worth $8 billion
in terms of valuation.
That is what BeiGene is valued at today, but they've still got an entire pipeline that's
being valued essentially at zero if you put that kind of multiple on it.
I think there's a lot of cool stuff going on in BeiGene's pipeline that's worth
a lot more than $0 for investors.
This is an asymmetrical risk-reward, in my opinion, that favors investors.
Jones: Absolutely.
I must say, there's one particular asset, BGB-A317, it's a checkpoint inhibitor being
studied in solid tumors.
This particular deal, especially with the pact with Celgene -- on Industry Focus, we've
talked about Celgene a lot.
As you know, they have become overly dependent on one drug.
63% of revenue is for Revlimid.
One of the things they haven't really drove into as much as they should have early on
was checkpoint inhibitors.
You've got Bristol Myers Squibb with Opdivo, you've got Merck with Keytruda.
This is potentially a $30 billion market with checkpoint inhibitors.
So, now you see Celgene positioning themselves to have one of these what I call foundational
drugs in their pipeline.
And really, the future of immunotherapy, the future of immuno-oncology,
I think, is going to be a lot of these combination therapies.
You have a checkpoint inhibitor, and then you add another drug from your pipeline to
make it even more effective.
So, I think for a lot of reasons, this makes sense for Celgene.
This certainly makes sense for BeiGene.
For those reasons and all the ones that you mentioned, Simon, this is definitely a stock to watch.
Erickson: Yeah.
The one that you mentioned that's in combination with the checkpoint inhibitors, Tislelizumab
is the name of that drug.
They're working with Celgene to commercialize that right now.
That's already filed.
They've got the NDA, and they're just waiting for approval in China.
If they get approval in China for this, which would target Hodgkin's lymphoma,
could be also used for advanced liver cancer, some pretty serious diseases right there, if it
works and it gets filed and approved in China, they want to also bring that to the U.S.,
which of course would be of interest to Celgene, as well.
It's a great partnership. Celgene took an equity stake in BeiGene last year.
They now own about 6% of the company because they see the potential for growing and getting
a foothold in China, and also developing, as you said, some great cocktails for their
own drugs that they're developing for a variety of different indications of cancer.
Jones: Absolutely.
Overall, this is definitely one of the safer, more mature companies out there in China right now.
But certainly, things to watch that we mentioned earlier on in the show that you want to be mindful of.