On 4 August 2023, BeiGene, Ltd. (6160 HK/HK$125.80; BGNE US/US$202.27, BUY) held a post-results group conference call, and discussed their views on 1) termination of partnership with BMS, 2) healthcare anti-corruption policy, and 3) AbbVie’s lawsuit, and updated on clinical plans for key pipelines BCL-2i and BTK CDAC.
　　The Termination of Partnership with BMS Barely Impact Topline
　　On 2 August, BeiGene announced that it had signed a Settlement and Termination Agreement with Bristol-Myers Squib (BMS), relating to the termination of the parties’ ongoing contractual relationship and the corresponding settlement, in which BMS agreed to transfer back the 23m ordinary shares of BeiGene, equivalent to US$300m. Furthermore, the parties agreed to terminate the partnership, effective as of YE2023, subject to BeiGene’s right to continue selling all inventory of Revlimid and Vidaza until sold out or YE2024, whichever is earlier. The partnership will end two years ahead of schedule. Since both Vidaza and Revlimid have been included in the catalog of centralised procurement, and their sales proportion would be small (2-5% per our calculation) in the next two years, the termination of the partnership has basically no impact on the overall topline of BeiGene, according to the management.
　　Policy on Healthcare Anti-corruption will be Beneficial in the Long Run
　　BeiGene has placed great emphasis on compliance from the very beginning, since both the key management and compliance team came from multi-national companies (MNC). For marketing and commercial activities, the company set clear definition for the code of conduct of sales representatives and medical affairs. For example, the number of lectures each year for each speaker and the lecture fees paid are strictly limited; the payments to speakers must be placed via company account; compliance reviews, on-site inspections are taken for the lectures. In the past, BeiGene has cooperated with MNCs, including Amgen, Celgene, and Novartis. The most important for these cooperation is to carry out the compliance back-check and due diligence, and BeiGene all passed well.
　　Management believes that the recent vigorous anti-corruption efforts in China will benefit the company in the long run, as doctors will carefully select to attend compliant academic conferences for innovative drugs.
　　AbbVie’s Lawsuit Would Not Affect Zanubrutinib
　　For AbbVie’s lawsuit, management saw no concerns from the market and clinicians, especially in the US, since it is a very routine operation for the market first movers when their market shares are squeezed by newcomers. Besides, the suit is not against the BTK compound, but rather the use of the entire BTK class in Chronic Lymphoma Leukemia (CLL), which is quite broad. The management is very confident that the lawsuit would not affect zanubrutinib. In 2Q23, management saw growing uptake of zanubrutinib across all approved indications, among which CLL was growing particularly fast.
　　Updates on Clinical Plans for Key Pipeline BCL-2i and BTK CDAC
　　Sonrotoclax (BCL-2i)’s PhIII trial for the first-line CLL in combination with BTK, with fixed duration treatment
　　Experimental group: First use zanubrutinib mono for 3 months, then sonrotoclax + zanubrutinib combination for 12 months, with fixed duration treatment.
　　Control group: Gazyva (obinutuzumab, anti-CD20) + Venetoclax (first- generation BCL-2i) combination, fixed duration for 12 months.
　　Primary endpoint: PFS. Whereas, MRD-negativity data at the time of discontinuation of treatment will also be collected, since management believes that there is an opportunity to communicate with regulatory agencies to use MRD data for NDA approval.
　　Follow-up time: no specific, as the control group is already a very good therapy, and the trial needs a long enough follow-up time to achieve the final result.
　　Reasons for setting fixed duration: In the US, nearly 40% of CLL patients no longer use BTK inhibitors, and mainly use chemo + rituximab immunotherapy, with advantage of fixed duration. Management thinks it is a big market to tap into.
　　BTK CDAC’s potential indications for accelerated approval
　　The first is mantle cell lymphoma (MCL), where BTK CDAC has the opportunity to be approved for marketing as a single-arm trial in irreversible/reversible BTK- treated patient population.
　　The second is Waldenstrom Macroglobulinemia (WM).
　　CLL is also possible, but would require larger subject size and longer follow-up time, and it needs further communication with regulatory agencies to decide whether BTK CDAC can get accelerated approval as a single arm trial.