American multinational biopharmaceutical company Amgen announced last week that it will pay $2.7 billion for a 20.5 percent stake in Chinese biotech firm BeiGene, a move which is seen as part of Amgen’s efforts to position itself as a developer of oncology drugs for the Chinese market.
In recent years, BeiGene has grown to be a significant presence in the Chinese biotech field. The company raised $903 million via a Hong Kong listing last year and is currently building a 600-person clinical development group. Both BeiGene’s ample resources and its willingness to spend to expand its capabilities put the company in the position of being able to effectively act as an intermediary for Western companies looking to compete in the lucrative but difficult-to-enter Chinese market.
It’s these characteristics which drove Amgen to purchase a large stake in the Chinese biotech company at a 25 percent price premium. The terms of the companies’ deal dictate that BeiGene will help Amgen develop 20 cancer drugs in the latter’s pipeline specifically for the Chinese market.
BeiGene has also pledged to contribute as much as $1.25 billion to these R&D programs. In exchange, the Chinese company will hold the commercial rights to any developed drugs in China for the next seven years; after this period, BeiGene can retain the Chinese rights for up to six assets, though Amgen’s KRAS-G12C inhibitor AMG 510 is specifically excluded from the deal.
During the first seven year period, Amgen and BeiGene are set to split the profits from these developed drugs generated by Chinese sales, with BeiGene receiving royalties for another five years afterward. BeiGene is also eligible to receive royalties on all ex-China sales of the cancer drugs that it assists in developing—again excluding AMG 510.
Analysts observing the industry believe this deal is a smart move on Amgen’s part. Says Jefferies analyst Michael Yee, “the [BeiGene] partnership and investment is a positive as there is clear, good rationale to get exposure to this rapidly-growing geography….early investment and infrastructure should return an estimated $1B+ in revenues in the long-term.”
Following the deal’s announcement, BeiGene’s stock price shot up 25 percent in Nasdaq after-hours trading; the news also brought the company’s stock above its IPO price on its secondary Hong Kong listing for the first time.