Cancer Research Highlight: BeiGene Also Showed Up At ASH With Potentially Crucial Checkpoint Data

About: BeiGene (BGNE), Includes: BMY, MRK, REGN, SGEN
by: Zach Hartman

BeiGene continued to surprise with a rare update of its PD-1 program at ASH 2018.

Early data suggest that their PD-1 inhibitor has the potential to be a best-in-class therapy.

Approval in Hodgkin is likely in China, but is that enough to warrant a buy?

Please note that I am affiliated with Avisol Capital Partners and their Total Pharma Tracker service. They have also covered the companies in this article in their writings, and I wanted to make readers aware of the potential for overlapping coverage.

BeiGene (BGNE) is a Chinese biotech company looking to become a juggernaut by developing its own versions of established targeted and immunologic therapies. Recently, I highlighted findings presented by the company at the 2018 American Society for Hematology Meeting for its ibrutinib-mimicking drug zanabrutinib. BGNE was able to show some highly promising results in mantle cell lymphoma, likely supporting their approval in China, and possibly elsewhere in the world.

But one of BGNE's big draws, aside from its massive cash coffers after two IPOs, is the depth of its pipeline. Arguably, the crown jewel is a drug called tislelizumab, which targets PD-1, similar to peers developed by Bristol-Myers Squibb (BMY), Merck (MRK), and Regeneron (REGN) (those would be nivolumab, pembrolizumab, and cemiplimab, respectively). BGNE has high hopes of being a pioneer in the use of these agents in China, a therapeutic market that has long been insulated from foreign companies.

The news

BGNE presented findings from its pivotal phase 2 study for tislelizumab in relapsed/refractory classical Hodgkin lymphoma at the 2018 American Society for Hematology (ASH) Congress.

Patients experienced an overall response rate of 86%, with 61% reaching a complete response. The median duration of response has not yet been reached, with 84% of patients remaining disease free after 9 months. Furthermore, as with other PD-1 antibodies, tislelizumab was well tolerated, with low-grade systemic effects being predominant (eg, fatigue, weight gain, pyrexia).

These are the findings that went into the New Drug Application that went to Chinese regulators and was accepted for review earlier this year.

Looking forward

If you go take another look at findings from studies investigating nivolumab in relapsed Hodgkin lymphoma, you see that tislelizumab compares well, at least nominally. We need to be extremely careful about making cross-trial comparisons, but nivolumab yielded an 87% response rate, with only 17% achieving complete remission. Pembrolizumab's phase 2 study showed response rates ranging from 64% to 74%, depending on what kinds of treatments the patients had been exposed to.

In a larger study for nivolumab, published in Lancet Oncology, 66% of patients responded to therapy. This was in patients who failed both stem cell transplant and Seattle Genetics (SGEN) brentuximab vedotin. Out of the 13 patients in BGNE's study with prior stem cell transplantation, 12 achieved an objective response.

These findings have the underpinnings of potentially being able to outperform even other PD-1 inhibitors in the field, which would be an incredible feat, considering the absolute dominance that MRK and BMY have built out of their PD-1 inhibitors.

But we shouldn't consider everything roses, either. While China is relatively untapped by PD-1 inhibitors, BMY and MRK are making progress there. Furthermore, nivolumab still has a huge advantage as it moves further up in the treatment continuum, now showing promise for combination therapy with drugs like brentuximab vedotin.

Needless to say, BGNE will have a lot of competition for a relatively small space if and when they venture outside of the Chinese market.

Key investment takeaways

If the zanabrutinib news didn't get you excited for some reason, then this should. Even if they sit pat in China, with a PD-1 inhibitor that has the potential to dominate the market, they'll be sitting on a potential mega-blockbuster of their own. We can't predict pricing or access to treatment in China by any stretch, but BGNE stands to make at least hundreds of millions in revenue in China alone.

Couple that with the other successful developments they're still pursuing, and it looks to me like the $8.9 billion market cap BGNE currently has looks like a steal. If they can successfully launch their BTK, PARP, and PD-1 inhibitors in China, then I don't see any reason that they can't double within the next few years. News like this is a significant de-risking event for me, personally, no matter how difficult it can be to predict how well a company can do in China.

BGNE does have the advantage of being a Chinese company, however, unlike some of the small-cap bios you might follow where shareholders are hoping for a Chinese approval. This, along with the Chinese government's increasing aggression with respect to getting caught up in drug approvals to the US, suggest that BGNE has a pretty easy way forward, and these drugs have already demonstrated their strong marketability. Time will tell what China has to offer in terms of an oncology market.

For now, I consider BGNE a very strong contender in the midcap range, one with good upside and relatively little downside at this time, given the clinical ground they're treading.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.