BeiGene pushes back on short seller report

BeiGene refuted claims by short seller J Capital that the company has reported “fake sales” of its cancer portfolio from Celgene.

John Oyler, CEO of BeiGene Ltd. (NASDAQ:BGNE; HKEX:6160), told BioCentury, “It’s easy to see the short-seller report for what it is, a collection of misleading statements with malicious assumptions.”

J Capital’s report sent shares of BeiGene down Friday HK$7.85 to HK$77.50 on the Hong Kong stock exchange and $10.42 to $120.61 on NASDAQ.

The stock was off a further HK$2.70 to HK$74.80 on Monday in Hong Kong but recouped some of Friday's losses in New York, ending the day up $4.84 to $125.45.

J Capital has claimed that BeiGene overstated its revenues for Abraxane nab-paclitaxel, Revlimid lenalidomide and Vidaza azacitidine since 4Q17. The firm suggested that BeiGene bought drugs back from its distributor in China because its sales do not cover purchasing commitments to Celgene.

Oyler said BeiGene was not buying drugs back from its distributor and its contract with Celgene does not include commitments for minimum purchases.

Last month, BeiGene reported 2Q19 revenues for the drugs were up 85% from 2Q18. BeiGene gained Chinese rights to the cancer drugs from Celgene in return for licensing its PD-1 inhibitor tislelizumab (BGB-A317) to the U.S. company under a July 2017 deal (see “Thinking Globally, Acting Locally”).

In an investor call before Hong Kong trading began Monday, BeiGene President and General Manager of China Xiaobin Wu confirmed the company’s reported revenues, pointing out that the figures are corroborated by distributor sales to hospitals and drug stores.

Shan He of Bernstein agreed in an analyst note that the reported sales are credible, citing in-hospital drug prescription data by the Chinese Pharmaceutical Association.

BeiGene’s shares became eligible for short selling in Hong Kong in February; however, the stock has been listed since 2016 on NASDAQ.

“Hong Kong trading is very light compared to NASDAQ,” Loncar Investments’ Brad Loncar told BioCentury. “NASDAQ has the deepest pool of BeiGene investors and the deepest pool of sophisticated life sciences investors so therefore the price is always going to be determined there.”

Oyler said, “It is healthy to have as many opinions as possible, but this is clearly a misleading report that’s full of false and inaccurate statements with a malicious purpose and I do not think that it contributes at all to keeping the market honest.”

J Capital has shorted other biotechs. Sorrento Therapeutics (NASDAQ:SRNE) dropped $1.70 (27%) to $4.6 on March 27, 2018, following a negative report on the company published by the firm. The company regained its losses two weeks later.

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