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BeiGene Shares Climb Nearly 50% After Amgen Deal

It's a good bet that not many who follow the pharmaceutical industry were familiar with the Chinese company BeiGene (NASDAQ:BGNE). They should be now. Biotech giant AMGEN (NASDAQ:AMGN) recently spent $2.7 billion for 20% ownership of the Beijing-based company.

The agreement calls for BeiGene to help Amgen commercialize its cancer treatments in China. In addition, it will take part in research and development work on 20 Amgen oncology drugs. Amgen said the deal would enable it to significantly speed up its oncology presence in China and would involve both companies advancing its pipeline there, according to an article in MedCity News. Amgen already has Xgeva approved in China, along with the cholesterol drug Repatha.


Since the deal was announced, BeiGene shares have shot up nearly 50% to more than $203. During the same period, Amgen stock has climbed nearly $29 and now trades just pennies off its 52-week high of $234.89.

About two weeks ago, BeiGene gained accelerated approval for its drug Bruskina to treat a certain type of lymphoma. That made it the first drug discovered by a Chinese company to get the Food and Drug Administration's OK. Next month, the company will release study data showing how its medication stacks up against AbbVie (NYSE:ABBV) and Johnson & Johnson's (NYSE:JNJ) drug Imbruvica for a rare type of cancer that starts in the white blood cells. Right now, Imbruvica is the only approved drug to treat the disease.

MedCity reported that in a note, Cowen analyst Yaron Werber acknowledged that investors might be skittish about the deal since disappointing Bruskina study results could sink BeiGene's stock. He allayed their concerns somewhat by pointing out that share prices are seldom a factor in strategic partnerships.

"In our view, this deal is highly strategic to Amgen as it affords entry into the lucrative Chinese market with a company that is culturally similar and is equally versed in Western business practices while being locally scaled in China," Werber wrote.

BeiGene, which went public in 2016, raised more than $900 million through a Hong Kong listing last year and has put together a 600-person clinical development group, according to an article in FierceBiotech. The moves gave BeiGene the opportunity to serve as a conduit for Western companies that want to break into the Chinese cancer market, which is projected to be highly profitable, but is difficult for outsiders to crack.

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Analysts at Jefferies gave kudos to Amgen for the deal. "The [BeiGene] partnership and investment is a positive as there is clear, good rationale to get exposure to this rapidly-growing geography," Michael Yee wrote in a note to investors. He thinks Amgen will gain more than $1 billion in revenues over the long haul.

BeiGene is headed by its founder, John Oyler, an American entrepreneur. He based his decision to start the company on the belief that China's health care system was probably going to change, most likely from the reimbursement standpoint, according to an early November article in Life Science Leader.

"When I started considering how reimbursement was shifting from less evidence-based medicine to the latest and best medicines in the world, I saw the incredible opportunity China held for our industry," he said. "The country had the capability to pour tens of billions of dollars back into the global industry to help pay for more research, which would not only make drugs more affordable in China, but across the globe. That could be transformative for patients and the industry. So, to me, it seemed like an incredible opportunity and time to build a company that could play a role in that, especially if focused on oncology."

Disclosure: The author holds positions in Amgen and Johnson & Johnson.

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This article first appeared on GuruFocus.