1 Stock Hillhouse Capital is Betting Big On. Here’s What You Should Know

This Chinese biotechnology company may be a winning stock in the long run. –

Hillhouse Capital is one of the most successful investment firms in the last decade thanks to its early bets in companies like Tencent,, Meituan Dianping, and others.

Lately, the fund has been betting heavily on healthcare company Beigene Ltd (SEHK: 6160). In this article, I’ll look into a few aspects to help investors better understand the company.

What it does

BeiGene is a global, commercial-stage biotechnology company focusing on the development of a diverse pipeline of novel therapeutics for cancer.

It currently markets two internally-developed products: BTK inhibitor BRUKINSA (zanubrutinib) in the US and China, and anti-PD-1 antibody tislelizumab in China.

The company also markets, or plans to market in China, oncology products licensed from Amgen (an investor in Beigene), Celgene Logistics, and EUSA Pharma.

Financially, Beigene has been growing at a rapid pace with revenue surging from US$1 million in 2016 to US$428 million in 2019. Of this, US$ 223 million came from product sales and the rest from collaboration revenue.

While growing its top line rapidly, Beigene continued to report a net loss in 2019 of US$949 million, up from a net loss of US$674 million in 2018.

Similarly, its cash used in operations jumped from US$547 million in 2018 to US$750 million in 2019.

Industry overview and prospects

Beigene operates mainly in the oncology drug market: a US$111 billion global industry that is expected to reach US$407 billion by 2030.

Similarly, the Chinese oncology drug market is predicted to grow almost five-fold from US$21 billion in 2017 to US$101 billion in 2030.

As a fully-integrated biotechnology company with capabilities in China and globally, Beigene is uniquely positioned to ride this trend, thanks to its focus on the increasingly popular molecularly-targeted and immuno-oncology drugs for the treatment of cancer.

These treatments are generally less harmful to cancer patients as compared to traditional methods such as surgery, radiotherapy, and chemotherapy.

To capitalise on the opportunity, Beigene plans to launch up to eight products in the next two years. To this end, two internally-developed drugs, BRUKINSA (zanubrutinib) and Tislelizumab have strong near-term commercial opportunities.

Moreover, the biotech player has 30+ products in its early-stage pipeline which could contribute significantly to its long-term growth.

Should you invest?

Overall, Beigene is favourably positioned thanks to its strong portfolio of approved drugs and early-stage drugs in a fast-growing targeted and immune-oncology industry.

Still, there are many risks that investors should consider before investing in the stock, especially since the business is still unprofitable. There is also no guarantee that the new drugs will be successful.

In other words, this is a high risk and (potentially) high return bet, and investors should carefully evaluate the risks and rewards before committing their capital.

More reading

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga does not own shares in any companies mentioned.

The Motley Fool Hong Kong Limited( 2020

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