BeOne Medicines - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered strong topline and margin expansion: total revenue rose 42% year over year to $1.315B on BRUKINSA momentum; GAAP diluted EPS per ADS was $0.84 and non-GAAP diluted EPS per ADS was $2.25, reflecting operating leverage and improved product mix.
• Results beat Wall Street consensus: revenue $1.315B vs $1.240B consensus (+6.1%) and GAAP EPS per ADS $0.84 vs $0.26 consensus; 11 and 7 estimates, respectively. Significant beat driven by BRUKINSA demand, mix, and net pricing tailwinds in the U.S. and share gains in Europe.
• Guidance tightened higher on revenue and raised on gross margin: FY25 revenue now $5.0–$5.3B (from $4.9–$5.3B) and GAAP gross margin guided to mid-to-high 80% (from mid-80%), while expense guidance maintained; FCF positive for FY25.
• Pipeline catalysts: management reiterated 20+ R&D milestones over the next 18 months across hematology and solid tumors, with pivotal readouts and new trial initiations near term (sonrotoclax, BGB-16673, TEVIMBRA expansions).

What Went Well and What Went Wrong

What Went Well

• BRUKINSA execution and share gains: global BRUKINSA revenues rose 49% to $950M; U.S. sales up 43% to $684M and Europe up 85% to $150M on broadened uptake across indications and markets.
• Margin and cash inflection: GAAP gross margin expanded to 87.4% (adjusted 88.1%), and non-GAAP operating income rose sharply to $274.9M; Free Cash Flow improved to $219.8M in Q2.
• Strategic milestones: multiple regulatory wins (TEVIMBRA EC approvals; BRUKINSA tablet formulations FDA/CHMP), plus redomiciliation and rebranding completed to BeOne Medicines.

Selected management quote: “Our strong second quarter performance reinforces our trajectory as a global oncology powerhouse... BRUKINSA... continues to set the standard as the best-in-class BTK inhibitor... Building on this momentum, our two additional Phase 3 hematology assets... have the potential to further expand our franchise leadership.” — John V. Oyler, Co-Founder, Chairman and CEO.

What Went Wrong

• Elevated operating spend: GAAP R&D ($524.9M, +15% YoY) and SG&A ($537.9M, +21% YoY) remained high as the company invests in global commercial expansion and pipeline progression; albeit SG&A as % of product sales improved to 41% vs 48%.
• Tax expense headwind: income tax expense was $5.2M vs $14.5M YoY; discrete tax items impacted adjusted net income reconciliation (-$14.2M).
• Q2 call transcript unavailable in our corpus; limits ability to evaluate Q&A tone shifts and granular guidance nuances.

Transcript

Speaker 0

Good day, everyone.

Speaker 1

Welcome to BeOne Medicines Q2 2025 earnings call webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. At this time, I would like to turn the call over to the company. Hello and welcome.

Speaker 0

Thanks for joining us today. I'm Dan Maller, Head of Investor Relations at BeOne Medicines.

Speaker 1

Before we begin, please note that you.

Speaker 0

can find additional materials including a replay of today's webcast and presentation on the Investor Relations section of our website ir.beonemedicines.com. I would like to remind all participants.

Speaker 1

During this call may make forward.

Speaker 0

Forward-looking statements regarding, among other things, the company's future prospects and business strategy. Actual results may differ materially from those indicated in the forward-looking statements as a result of various factors, including those risks discussed in the most recent periodic report filed with the SEC. Please also carefully review the forward-looking statements disclaimer in the slide deck that accompanies this presentation. Reconciliations between GAAP and non-GAAP financial measures discussed on this call are provided in the appendix to our presentation, which is posted to our investor relations website along with our instruments. All information in this presentation is as of the date of this presentation. We undertake no duty to update such information unless required by law. Now turning to today's call, as outlined on Slide 3, our Co-Founder, Chairman, and CEO will provide a business update.

Our CFO will provide an update on our second quarter financial results and financial guidance, and our Global Head of R&D will discuss our R&D and pipeline progress. We will then open the call to questions.

Speaker 1

I'll now pass the call over to.

Speaker 0

John John.

Speaker 2

Thank you, Dan, and welcome everyone to our Q2 earnings call. We had a spectacular second quarter. Our revenue reached $1.3 billion, which represents 42% year-over-year growth. GAAP earnings per ADS grew $2 from Q2 of last year, and we generated $220 million of free cash flow in Q2. This is an absolute increase of over $400 million versus last year. From a commercial perspective, BRUKINSA has cemented itself as the number one BTK inhibitor in the U.S. market this quarter. We also hosted an R&D day where we shared three takeaways with you. First, why we believe our internal capabilities and our sense of urgency will drive superior returns on R&D. Second, how our hematology franchise is poised for sustained leadership into the next decade, and three, why you should pay close attention to our prolific and differentiated solid tumor pipeline.

I want to come back now to BRUKINSA, the cornerstone of our CLL franchise. BRUKINSA's best-in-class profile has resulted in rapid adoption by patients and physicians across the U.S. despite launching in CLL nine years after ibrutinib. Here we see the U.S. revenue performance of the three approved covalent BTK inhibitors since BRUKINSA's CLL approval. The chart speaks for itself. The gap between us and the competition continues to widen. BRUKINSA is both the market share leader and it's the fastest growing brand, and it's the only BTK to be approved in five indications. Now, the success of BRUKINSA is not an accident. It's the direct result of an overwhelming body of evidence accumulated over more than a decade. This evidence is remarkable both for its strength as well as its consistency.

When we designed BRUKINSA, our preclinical hypothesis was that sustained inhibition of BTK in the disease compartment and improved selectivity for BTK over off-target kinases would translate to a differentiated medicine for patients. Since then, BRUKINSA has treated thousands of patients in clinical trials and over 200,000 patients commercially. BRUKINSA has differentiated itself each and every step of the way, from human PK to clinical response to PFS, and now in the market where it continues to generate compelling real-world data. As you know, the goal in oncology drug development is to hit the target hard and to never let up, never give the cancer an opportunity to grow. As you can see on this slide, the prior generation BTK inhibitors only hit the target for a fraction of the day. BRUKINSA is different. It was designed to inhibit BTK 24 hours a day, seven days a week.

We hypothesized that BRUKINSA's superior target coverage would translate to superior clinical benefits for patients. As you can see on this slide, in the ALPINE trial BRUKINSA drove higher responses compared to ibrutinib. This result was clear at the earliest data cut, and more importantly, it was maintained with longer follow-up. Next, we followed the data to see whether the collective and consistent results across preclinical human PK and tumor shrinkage would be associated with improved and sustained PFS. Clearly, it was. BRUKINSA is the only BTK inhibitor to demonstrate superior PFS and favorable safety in a head-to-head trial against ibrutinib. In the ALPINE trial, BRUKINSA exhibited a 34% reduced risk of progression or death and lower cardiac toxicity versus ibrutinib. There were zero cardiac deaths in the BRUKINSA arm versus six on the ibrutinib arm in the deletion 17p and TP53 subpopulations, which are the toughest patients to treat.

BRUKINSA's treatment effect was even more pronounced. BRUKINSA showed a remarkable 52% reduced risk of progression or death versus ibrutinib. The ALPINE data showed that BRUKINSA is the best-in-class option for all types of patients regardless of mutation or risk status. Fast forward to today, patient and physician adoption has driven BRUKINSA to be the top BTK inhibitor in the U.S. This slide shows two examples of recent presentations and publications supporting BRUKINSA's differentiation versus both acalabrutinib and ibrutinib. On the left is a real-world study that demonstrated that patients treated with BRUKINSA had longer time to discontinuation, lower discontinuation rates, and less healthcare resource utilization than those treated with acalabrutinib and ibrutinib across all patients, and this was even more pronounced in the population of older patients over 65, as shown here.

On the right is just one example of another recent publication by a leading CLL KOL that recognizes BRUKINSA's differentiated data and how BRUKINSA can provide the best outcome for their patients. Looking beyond, BeOne Medicines stands out as the only company with fully owned, differentiated, and potentially best-in-class assets across all three foundational MOAs in CLL. We're already combining these assets in multiple phase three trials with the goal of improving outcomes for CLL patients. Even further, we believe our relentless focus on serial innovation in CLL positions us as the only company that can address the full scope of unmet patient need across all lines of therapy and subpopulations. With that said, we're far more than a CLL company, we're a global oncology company and we have a wealth of upcoming milestones on the horizon.

By the end of 2026, we expect the initial global approval of sonrotoclax and potentially pivotal data for our BTK CDAC. Our internal clinical team will be running more than 20 phase 3 trials, and we anticipate more than 10 proof of concept data readouts, and our research organization will again advance more than 10 NMEs into the clinic. With that, I'll pass it over to Aaron Rosenberg to provide the financial update.

Speaker 0

Thanks John. Product revenue reached $1.3 billion in the second quarter, representing 41% year-over-year growth. BRUKINSA global revenues were $950 million, growing 49% year-over-year, driven by strong performance across all geographies. As John mentioned, BRUKINSA is now the clear value share leader in the growing U.S. BTK market and we continue to grow volume at a robust rate across all approved indications. This was seen again in Q2 with demand growth of 35% year-over-year and 10% sequentially, driven by the quality and differentiation of our long-term clinical data across all patient types. With our strengthening market position, we have seen competition aggressively discount. Despite this, given our broad access strategy and having protected class status, the vast majority of patients have unfettered access to BRUKINSA and an even greater number achieve access upon appeal.

We strongly believe in open access policy, which is clearly in the best interest for patients and preferred by doctors. Moving forward, we will continue to pursue contracting strategies that seek to achieve this goal while preserving the value of our clinically differentiated innovative medicines for the long term. From a pricing perspective, Q2 performance includes a mid-single-digit benefit largely associated with the annual increase taken at the beginning of the year, and as mentioned last quarter, we also see some modest additional benefits on net pricing from Medicare Part D reform. Given our designation as a specified small manufacturer, we are confident in our long-term market leadership position for BRUKINSA and our revenue guidance fully factors in current market conditions. Meanwhile, TEVIMBRA reported a 22% increase, reflecting continued market leadership in China supplemented by early contributions from launch markets. Our in-licensed products also showed continued strength, growing 27% year-over-year.

Our China team launched danyelza datamab in the quarter, providing an important new treatment option for patients with HER2 high expression biliary tract cancer, a historically underserved patient population. Our geographically diverse product revenue mix continues to fuel strong growth across all key regions. The U.S. remains our largest market, generating $685 million with year-over-year growth of 43%. China revenue totaled $429 million, a 23% increase supported by TEVIMBRA and BRUKINSA's market leadership and growth from our in-licensed assets. Europe contributed $152 million with 87% year-over-year growth as we continue our launch trajectory with increased share across all major markets, and rest of world markets grew 168% driven by market expansions and new launches. BRUKINSA launched in Japan in March and had the largest uptake in the class in the three months since.

TEVIMBRA is also launching in key markets including Japan, South Korea, and Brazil, and we are encouraged by early market response. Turning to our Q2 2025 GAAP P&L, which illustrates our focus on top line growth with meaningful margin expansion, total revenue for the quarter was $1.3 billion, the drivers of which I previously highlighted. Gross margin improved to approximately 87% from 85% in the prior quarter. This improvement reflects the benefits from favorable product mix, price, and production cost efficiencies. Operating expenses grew by 18%, totaling $1.1 billion as we are investing smartly to support our commercial growth and rapidly advance our innovative pipeline. Income tax expense of $5 million for the quarter includes discrete adjustments of approximately $14 million, primarily related to updated provision estimates for R&D tax spreads.

Our continued focus on margin expansion has translated to net income reaching $94 million in the quarter, representing diluted earnings per ADS of $0.84, a significant improvement as compared to the same quarter last year. Our non-GAAP P&L includes adjustments for typical items with a full reconciliation provided in the Appendix. Non-GAAP net income reached $253 million, reflecting an increase of $230 million compared to the previous year. This performance translated to diluted non-GAAP earnings per ADS of $2.25 for the second quarter. Given our execution, we are updating our full year 2025 guidance with total revenue expectations now ranging between $5 billion and $5.3 billion. The mid to high 80% range for GAAP gross margin reflects favorable mix dynamics and the earlier realization of cost of goods efficiencies for TEVIMBRA. It also accounts for recent anticipated approval for BRUKINSA's tablet formulation.

The tablet achieves a lower cost of goods in addition to the many patient benefits that this new formulation affords, including reduced pill burden and size with improved support of dosing flexibility. Operating expense guidance is unchanged. We project operating expenses between $4.1 billion and $4.4 billion. We remain committed to achieving positive GAAP operating income, and we expect to generate positive free cash flow for the year. Free cash flow is a broader measure of cash generation, accounting for both operational activities as well as capital expenditures. We are pleased with our execution in the first half of 2025 and remain focused on full year delivery across all financial performance measures. With that, I'd like to pass it over to Lion.

Speaker 1

Thank you, Aaron. Hello everyone. Thanks for joining us today. As John mentioned, we recently hosted an investor day. In addition to a data and a portfolio update, we talked about how BeOne Medicines is at a pivotal moment in its journey. Over the years, we have built a strong research, internalized global clinical development, and manufacturing capabilities from the ground up, allowing us to discover, develop, and deliver novel oncology medicines faster and more cost effectively than industry standards. Our strategically advantaged capabilities are now at a scale and fully functional across R&D. You all know we have built a strong CLL franchise, but it took us a long time. Now, with all these newly built capabilities, we believe we can reproduce our success in CLL across our disease areas of focus and, more importantly, do it much faster. This is very exciting.

Our goal is to build a deep pipeline in each of these disease areas to create strong in-portfolio synergy. Next, some highlights from our R&D progress. In the second quarter, we have filed sonrotoclax initial NDAs with the first two in China for relapsed/refractory CLL and the relapsed/refractory mantle cell. The plan is to file mantle cell lymphoma globally later this year with a longer follow-up. We presented over 60 abstracts from our hematology portfolio at ASCO, EHA, and ICML and initiated new phase 3 studies for sonrotoclax and our BTK CDAC in relapsed/refractory CLL. In addition, we provided updates from our solid tumor portfolio at ASCO and an R&D day for the CDK4 program. We're actively planning phase 3 trials for both first-line and second-line hormone receptor positive breast cancers. In the next few slides, I will walk you through our progress in CLL.

We have built a comprehensive registration program that spans the full spectrum of CLL from treatment-naive to the relapsed/refractory settings. In the frontline setting, BRUKINSA has already established itself as a leading BTK inhibitor. With a combination of BRUKINSA plus sonrotoclax, we are advancing what we believe will be the best-in-class fixed-duration regimen for relapsed/refractory patients. Our BTK degrader should become a cornerstone of continuous therapy. We're also advancing fixed-duration regimens including sonrotoclax and CD20 antibodies. In addition, while evaluating sonrotoclax plus BTK CDAC which can potentially be used for all patients in second line regardless of what frontline treatment was used, we're determined to offer CLL patients important options throughout their treatment journey. Sonrotoclax, our next generation BCL2 inhibitor, has key characteristics that position this product to be potentially best in class. Sonrotoclax is 14 times more potent than venetoclax, which may translate into superior efficacy in the clinic.

In addition, improved selectivity, shorter half-life, and the lack of drug accumulation could offer a more favorable overall safety profile. Perhaps most importantly, sonrotoclax offers the opportunity for a more patient-friendly ramp up with potentially only one clinical visit. Yes, only one clinical visit during ramp up compared to up to eight visits for venetoclax. Sonrotoclax has a broader development program with three phase 2s for accelerated approvals and three ongoing phase 3 studies. Diving into the combination data, the zanubrutinib plus sonrotoclax ZS regimen achieved a very high rate of undetectable MRD at 10^-4, 92% in the 320 milligram cohort regardless of the risk status with a median follow up of 25.5 months. No PFS events have occurred in the 320 milligram cohort and only one event occurred in the 160 milligram cohort.

There are a total of 137 patients treated in these two cohorts combined, not a small data set. 35 patients have elected to stop the therapy after week 96 and all remain in remission with some beyond 12 months without treatment. I would like to draw your attention to the table shown on this slide. With the normal caveats of a cross-trial comparison, ZS has demonstrated the highest UMRD rate and unmatched PFS for the respective follow up when compared to other venetoclax-based fixed-duration therapies. There are some important deficiencies with other fixed-duration therapies like the low 34% rate of UMRD and underwhelming 3-year PFS rate of 77% observed with AV despite the ultra-fit population studied in the Amplified trial. For the new treatment paradigm in frontline CLL, safety and convenience are as important as efficacy.

ZS showed a favorable safety profile with fewer high-grade adverse events and no deaths associated with the intravenous use of obinutuzumab and the cardiac toxicity and the death associated with ibrutinib. In terms of patient convenience, we did not observe any clinical or laboratory TLS and we are very optimistic that for the vast majority of patients only one clinical visit during ramp up will be required for after xanulating. In conclusion, we believe that ZS combination has the potential to be the game changer for a fixed duration option for CR patients. Moving to the third asset in our HEME franchise, our BTK CDAC is the most advanced BTK degrader in the clinic with the best in class features. As a mechanism, degradation can overcome and prevent emergent resistance mutations and disrupt the scaffolding function of BTK proteins.

Long half life in the clinic has resulted in sustained BTK degradation with daily dosing. We have a broader development program ongoing including two pivotal phase 2s for accelerated approval, two ongoing phase 3s and one more in startup. We provide an update on BTK CDAC Phase 1 results. In the graph on the left you can see our BTK CDAC trending towards almost two years of median PFS in heavily pretreated CLL patients, which looks favorable to the recently published pirtobrutinib data from BRUIN2's 321 study shown on the right. With the usual caveats of a cross trial comparison, the head to head trial versus PRTO will start soon.

Going beyond CLL, here we present an overview of the broader clinical development plan and the clinical studies across our HEME franchise in non-CLL indications designed to maximize the clinical and commercial value of Potensa, Cyrentriclex and BTK CDAC as part of our strategy for our B cell malignancy franchise and beyond. Moving on to the Solid Tumor, our serotonin pipeline includes diverse modalities and mechanisms across three disease areas: breast and gynecological cancers, lung cancers and GI cancers. We revamped our entire solid tumor pipeline over the last two years. Every single asset you see on this slide either entered the clinic in the past two years or will be in the clinic by the end of this year. This showcases our ability to quickly establish a deep and highly competitive pipeline in disease areas of focus. The portfolio synergies created by this molecule should not be underestimated.

Finally, I'd like to highlight a few key milestones within our pipeline. We have successfully achieved the critical goals we set at the beginning of the year, with some completed ahead of schedule, such as the CLL and mantle cell filings for SOL in China in the latter half of the year. We anticipate several significant milestones, including the global funding of sonrotoclax in relapsed/refractory mantle cell lymphoma. In addition, we expect potentially pivotal data from our BTK CDAC in unrelapsed/refractory CLL and the initiation of global findings in 2026. Turning to our early stage pipeline, as you have heard, we have a number of proof of concept catalysts expanded across multiple modalities and disease franchises. We're also actively moving some of these assets into late stage development, including our CDK4 inhibitor and the B7-H4 ADC.

We look forward to sharing more data in future updates, and with that I will turn the call back to Dan. Thanks, Lai.

Speaker 0

We are now ready for Q&A.

Speaker 1

Joining us for the Q&A.

Speaker 0

Portion of the call is Xiaobin Wu, President and Chief Operating Officer, Matt Shaulis, our General Manager of North America, and Mark Lanasa, Chief Medical Officer for Solid Tumors. I kindly ask participants to limit the number of questions to ensure we have time to hear from as many attendees today as possible. Operator, we are ready for the first question.

Speaker 1

If you would like to ask a question, please use the raise hand icon, which can be found at the bottom of the webinar application. When you are called upon, please unmute your line and ask your question. We will now take a moment for the queue to assemble. Our first question comes from Jessica Macomber Fye with JP Morgan. Please unmute your line and ask your question.

Speaker 2

Hey guys, good morning. Congrats on a strong quarter. Thanks for taking our questions on BRUKINSA.

Speaker 0

I think in the beginning of the.

Speaker 2

You mentioned you expect flat U.S. net price this year.

Speaker 0

Has that expectation evolved at all now?

Speaker 2

That we're halfway through the year.

Speaker 0

Were there any inventory changes at the.

Speaker 2

End of 2Q relative to the end.

Speaker 0

Of Q1 you might be able to quantify.

Speaker 2

Second, what was your reaction to the BRUIN CLL-314 data for pirtobrutinib versus Imbruvica in that mixed frontline and relapsed population?

Speaker 1

What are you going to be?

Speaker 2

Watching for when those details are eventually presented?

Speaker 1

Lastly, for the CDK4, I think.

Speaker 2

At the R&D day you talked about starting the second-line phase 3 trial as soon as 4Q 2025, and I see that's now in the press release as 2026. I guess recognizing that the like as.

Speaker 0

Early as framing doesn't definitively mean you.

Speaker 2

Are going to start it in late 2025. What's the additional information you hope to gain prior to initiating that second line phase three trial? Can you confirm we should expect.

Speaker 0

To see updated clinical data for that asset this year?

Speaker 1

Thank you.

Speaker 0

Thanks, Jessica, for the question.

Speaker 1

We have three parts to that question.

Speaker 0

I think the first on BRUKINSA and net pricing. Maybe I'll ask Matt to comment on that. Sure.

Speaker 1

Thanks for the question, Jessica. We anticipate stable pricing through the remainder of the year and similarly have no significant inventory levels to comment on. The second part of that question was the BRUKINSA reaction line, if I point.

Speaker 0

That one to you?

Speaker 1

Yeah, thank you for that question. It is important to note that in the BRUIN 314 study, OR 330 was not formally tested, therefore it is not statistically significant. I also want to point out including the treatment-naive patients is likely to help the OR difference. Our ALPINE study of BRUKINSA versus ibrutinib in the relapsed/refractory CLL still remains the only head-to-head trial to demonstrate the superiority of one BTK inhibitor over another based on the PFS endpoint, and the PFS endpoint is the gold standard in CLL. We believe in this setting a positive readout on non-inferiority compared to ibrutinib is highly unlikely to be practice changing for the following reasons. Number one, there's no PFS data yet. Number two, it is compared to ibrutinib. We believe any new continuous BTK inhibitor needs to demonstrate superiority over BRUKINSA, not ibrutinib.

BRUKINSA should be the true standard now in treatment-naive settings. Number three, I think it is still very early data for BTK inhibitor. You really need a long follow-up to demonstrate your therapeutic benefit. We also expect pirtobrutinib will primarily be sequenced after the covalent BTK inhibitor, particularly if we start thinking about the entire treatment journey for CLL patients. It is hard to imagine this data set will convince physicians that a better option is to go with pirtobrutinib versus BRUKINSA given the results from BRUKINSA. Just a final note, I think the BRUIN 314 alone is not sufficient for regulatory filing. As Lilly stated in their press release, it will be combined with 313 to form the basis for regulatory submission. BRUIN 313 study is pirtobrutinib versus doctor in treatment-naive CLL without 17p deletion.

I think the key question here is whether BR is still a valid control and when it is filed for NDA in, let's say, 2026 if the trial reads positive. Also, OS, I think, will be another important element to watch out. I'll probably pass this on to Mark to address the CDK4 question.

Speaker 0

Thank you, Lai. Thank you, Jess. Good morning. We set an ambitious target for our first phase three start by the end of 2025.

Speaker 1

As the data are now coming in.

Speaker 0

We believe it would be prudent to let the data mature just a little bit more to inform our Phase 3 dose level selection. The magnitude of delay will be very modest, but it happens to move it from late 2025 into early 2026, which is why we're providing this updated guidance. I would also highlight for the first time we're disclosing our intent to start a frontline study with our CDK4 inhibitor in 2026. We remain very excited about that program. To your other question, we intend to share the data from dose optimization in combination with fulvestrant at this year's San Antonio Breast Cancer Symposium.

Speaker 2

Thank you.

Speaker 1

Our next question comes from Sean Larman at Morgan Stanley. Please unmute your line and ask your question. Good morning everyone. Hope everyone's well and thank you for taking my question on the celestial TNCL trial, I think it's 303. Ultimately, if you prove successful there, how do you think that the market plays out? Do you look at the VO combo as the initial target market and how do you think about pricing if you're selling BRUKINSA and sonrotoclax into that market? What do you see or how should we think about, you know, the time based therapy, you know, bleeding over into the normal course of operations or the rest of the market? Thanks, that's my first one. Sure, happy to address that one Sean.

I would say that we're very optimistic about the prospects or, you know, zanubrutinib plus sonrotoclax and you've heard from Lai some of the clinical underpinnings of that. Certainly when it comes to our overall approach to driving adoption in CLL, we think that that's going to be one of the primary drivers. From a pricing standpoint, we're going to look at various different comparators for it. When it comes to fixed-duration overall, I can say that so far we haven't really seen much uptake of initial fixed-dose utilization. VEN plus BTK isn't approved in the U.S. at the current time, so usage is off label. We think that frankly, given what.

Speaker 0

We've seen that the data so far.

Speaker 1

In comparison to continuous BTK, it would be inappropriate to see fixed duration use right now. As we've spoken many times, what we've seen of the current regimens that are available is that they're in very young, fit populations, and here I'm speaking about AV, that also have limited risk factors, and we think that the benchmark really hasn't been met for deep and durable responses, strong PFS, and safety and tolerability. However, to your point with Celestial, we believe that ZANU plus sonrotoclax is going to satisfy those benchmarks. We don't see substantial fixed dose or fixed duration uptake in the near term. We see that BTK mono is going to continue to be strong, and later, when we see the ZANU plus sonrotoclax data, we see that there will be bigger opportunities for fixed duration then. Great, great, thank you.

Just on the pirtobrutinib equation, many KOLs we speak to show sort of reticence to say that they will see pirtobrutinib moving to 1L even on good data because they're potentially losing that second line option. Just to grab your latest thoughts on the resistance mechanisms associated with pirtobrutinib versus BRUKINSA and just frame the risk for us there. That would be very useful.

Speaker 0

Yeah, Lai, why don't you take that one?

Speaker 1

Yeah, I can probably take that question. In terms of the resistance mechanisms, it's still evolving and clearly pirtobrutinib can work on covalent BTK inhibitor failed population, especially for the cystidine 481 mutations. There are several other sets of mutations pirtobrutinib can work on. Unless there's a really strong data set demonstrating, I think a covalent BTK inhibitor works after pirtobrutinib. I do believe a physician would want to keep that option with the pirtobrutinib to be treated, to be used after the covalent BTK inhibitors. For the other things which I mentioned early on, the data for 314 is still very, very early and it's only or non-inferiority. We are also eagerly waiting for that data to mature. Most importantly, I think if something wants to go into the front line, it really needs to compare to BRUKINSA, not in between it anymore. Thank you.

In the interest of time, that's all I have for now. Thank you. Our next question comes from Zhen with Goldman Sachs. Please unmute your line and ask your question. Congratulations on a very strong quarter. Thank you for taking my questions. Just two questions on financials and also the year's tariff. We actually see sort of the gross margin has been improved.

Speaker 0

Notably in second quarter compared to first quarter.

Speaker 1

While the product revenue will have seen 18% quarter over quarter growth, the absolute dollar amount for the cost of.

Speaker 0

Goods sold in second quarter was flattish versus first quarter.

Speaker 1

Could you help us understand a.

Speaker 0

Bit more about how you have been controlling the manufacturing costs and optimizing that? This is really not being explained by product mix change. We guess definitely in terms of manufacturing.

Speaker 1

BRUKINSA, there has been some improvement. Another question is really on the U.S. tariff impact on the gross margin.

Speaker 0

Because regarding the potential U.S. tariff on the pharmaceutical imports, which I think President Trump said that there will be initially small tariff, then eventually it goes.

Speaker 1

Up to 150% in 18 months and getting up to 250%.

Speaker 0

Does our guidance on the gross margin, which has been raised from mid-80s to mid to high-80s, reflect that potential tariff?

Speaker 1

How should we look at the.

Speaker 0

Gross margin assumptions going forward?

Speaker 1

Thank you.

Speaker 0

Great. This is Aaron, thank you so much for the question. I'll take it in two parts. You're right, we've seen some improvement in gross margin on a quarter over quarter basis and certainly relative to last year. As I mentioned in my prepared remarks, that's really coming from improved production efficiencies, particularly for TEVIMBRA. We have a bit of price and also from mix, but we're certainly making efforts across our manufacturing and supply chain to continue to drive efficiency improvements. Largely in this quarter, it's TEVIMBRA. I also did mention as we think about the full year guide, the potential improvements for BRUKINSA. It's a great question relative to the U.S. tariffs. We've talked about in the past how our current guidance contemplates what we know today about tariffs, and that impact has largely been mitigated by how we globalize and regionalize our supply chain.

That includes our U.S. production for BRUKINSA and our investment in our Hopewell facility, where I sit today, where we are qualifying this facility for TEVIMBRA production. As you mentioned, the big uncertainty remains around the current Section 232 investigation. We've all seen the headlines. We will monitor and obviously be very agile in our response to ensure both financial efficiency as well as, most importantly, operational efficiency as we supply our life-saving medicines for patients. As I said, our 2025 guide includes what we know today. Candidly, any announcements beyond that would likely not have a significant influence on our 2025 results, just the way in which inventory is positioned and how that flows through the P&L. Future impacts, while we believe would be manageable within the context of our P&L, it's just really too early to say to provide a forward outlook. Thank you. Thank you for that.

Just a quick one, look at the.

Speaker 1

Filing you mentioned about second quarter.

Speaker 0

Saw benefit in net pricing for BRUKINSA.

Speaker 1

In the U.S., could you elaborate?

Speaker 0

Bit more on that?

Speaker 1

What has been the benefit and how should we look at the net pricing going forward?

Speaker 0

Thank you. Great question. As we talked about historically, we do see relatively stable net pricing. That is what we have seen in our current results. In my prepared remarks, we talked about mid single digit pricing in the U.S. This is largely the pull through of our early year price increases, which is consistent with market practice and well within what the requirements under the IRA mandates. We do see some incremental benefit on a year-over-year basis relative to Part D reform. I think we talked about at the last quarter the prior year including the manufacturing liability around the donut hole, which goes away and that's replaced this year by the manufacturer liability under cost share.

In our case, we do benefit from the specified small manufacturer designation, so the combination of those two leads you to our mid single digit performance on a year-over-year basis for this year. I would say that modest benefit you see in the changes from Part D reform is something that you see more significantly in the front half of the year, given the lapping of the donut hole, which largely occurs the first half just based on that prior regime. Got it.

Speaker 1

Thank you so much.

Speaker 0

That's all my questions.

Speaker 1

Our next question comes from Kelly Shi with Jefferies. Please unmute your line and ask your question. Congrats on another great quarter. Thanks for taking my questions. First one for the revenue guidance remains to $5 to $5.3 billion. What drove to this low end bump.

Speaker 0

Specifically, which product is underpinning that outlook? Second, you point to 20.

Speaker 1

Plus expected R&D milestones over the next 18 months. Could you provide more granularity on which ones might be the most impactful events?

Speaker 0

What are the newest.

Speaker 1

Learnings from any translational studies regarding how BeOne Medicines' BTK CDAC resistance mutations are acquired from first-generation BTK inhibitors differently from pirtobrutinib? Thank you.

Speaker 0

Great. Maybe this is Aaron, maybe I'll start. Thanks for the question. Our update to our revenue guidance $2.5 billion to $5.3 billion really just reflects our confidence and execution in the first half of the year. We don't provide product revenue guidance, but I would just say as you see in our current quarter performance as well as Q1 across the portfolio, both from a product perspective and a geographic perspective, we're pleased with our performance and this update just signals our confidence in our execution on that. Maybe I'll hand it over to Lai on the R&D question.

Speaker 1

Yeah, I'll probably address the third question first about BTK degrader in terms of the resistance versus let's say pirtobrutinib. There are two well known resistance to pirtobrutinib which after the covalent BTK inhibitor, one of them is L528W. Another one is T474 mutations. So far BTK degrader can really work well with those mutations and we're still at the early stage in terms of the experience of the BTK degrader in the clinic. There haven't been that many patients really progressed. We're actively following what kind of mutation, well resistant mutation were emerging from the BTK degraders. Having said that, it does look much more promising in terms of being able to overcome a broader spectrum of the BTK mutation for degrader versus the pirtobrutinib. Also, we have done some translational work using the cell line, use animal model.

It does seem like the degrader can probably have longer tumor suppression compared to let's say a covalent BTK inhibitor or other covalent BTK inhibitors. The other question is about the exciting milestones. Maybe I will talk about what's on the heme side of it. I'll pass this over to Mark to comment on the solid tumor side of it. On the heme side of it, I think certainly being able to reach globally, this will mark the really important critical step for our clinical. We are truly excited about this molecule. For everything we have seen in the clinic, the combination of spontaneous clocks plus sonrotoclax is outstanding. Its own activity right now in the mantle cell lymphoma, which is the monotherapy study we did globally, and the data looks really interesting. This really formed the basis for the initial global filing.

We're also now seeing activities for this one in the multiple myeloma, et cetera. It's not listing here, but certainly we're moving very aggressively about that one, the potential pivotal stage as well. On the degrader side of it, we're very excited to get the protease trial going. Probably will be next couple months. We'll get the protease trials going and I think that one will potentially bring a better drug for patients in the relapsed/refractory settings. Mark, thanks again, Lai again.

Speaker 0

For the solid tumor, the most important data disclosure that we're likely to have for the remainder of 2025 will be our CDK4 data at San Antonio Breast Cancer Symposia. Many of the new molecules that Lai highlighted in the solid tumor portfolio will have early data emerging. We're very pleased with the progress of the portfolio, and we are hopeful that we'll be able to share data from multiple programs in the first half of 2026. As Lai mentioned at the R&D day, we highlighted four programs including CDK4, B7-H4 ADC, PRMT5 inhibitor, and FGFR2B that are showing very encouraging early data. We look forward to disclosing more data from those programs, likely in the first half of next year.

Speaker 1

Thanks for coming. Sorry, maybe I just add I forgot to mention, which is that degrader will have the pivotal phase two readout next year and the hope that we're leading to also a global filing for the degrader. That one is definitely a very important milestone as well. Thanks. Our next question comes from Yigal Dov Nochomovitz from Citigroup. Please unmute your line and ask your question. Yeah, hi, thank you very much. Just a few questions, a couple on BRUKINSA and then one on the pipeline. Regarding BRUKINSA, you mentioned the majority of patients have unfettered access and there's a step up in access on appeal.

I'm wondering if you could just provide a little more specifics in terms of the numbers associated with the access out of the gates and then what the access on an appeal and then more generally just in terms of the overall business globally, obviously it shifted ex China. I'm just wondering if you've reached a point where it's essentially steady state in terms of the product mix, revenue mix, China, Europe, U.S. and you're going to see steady growth across the board if there's still an expectation of movement of revenue more ex China. And then lastly maybe for Lai, could.

Speaker 0

You comment more specifically on some of.

Speaker 1

The powering assumptions on PFS with respect to the CDAC versus Piro phase three? Thank you. Super. Hey, thanks for the question. I'll start out and then hand things over to Aaron for revenue mix. Regarding your question around access out of the gate and then appeals, I think all of the access conversations start with our continued belief in Rakinsa as a differentiated asset that's best in class amongst the BTKs and has this overwhelming body of evidence that John described, including thousands of cases in clinical trials. We continue to evolve that with real world evidence and other data. We're seeing a preference for Rakinsa with HCPs and with patients. When it comes to the access component, oncology is a protected class and Rakinsa continues to be listed on all Medicare Part D formularies.

When it comes to that appeals process, it's important to remember that any preference or step edits don't impact existing patients at all.

Speaker 0

It's limited to new patient starts.

Speaker 1

It is also important to remember that the majority of our claims are filled initially, and if an appeals process is needed, we've been very successful in supporting accounts to work through that process. Going forward, we're really confident in continued access, in growing demand, and extending our value share. Aaron, over to you for the next question.

Speaker 0

Right, I'll just really quickly invite Xiaobin for his perspective. Certainly, we're growing globally and, as we think about the mix of business, every region is growing at different paces. We're still quite early in many parts of the world in our launch trajectory. We've historically talked about Europe being earlier. Rest of world markets, including really important markets globally, are even earlier in their launch cycle. We would expect our revenue mix to continue to diversify over time. That's coming from a position of growth in all regions, including our China business. Xiaobin, maybe I'll invite you for your perspective.

Speaker 1

Yeah, sure. As Aaron mentioned before, the biggest revenue driver today is U.S. and we achieved $685 million with growth rate of 43%. China is the second biggest contributor and grew also 23%. We just got the publication of the ACUA data and we move up one position to be sixth biggest oncology company in China. We grow very fast outside the U.S. and also China. In Europe we grow close to 90%. In the rest of the world, meaning new markets and also Japan, we grow 170%. You can see the dynamic in China, we grow, continues to be very strongly and far above the market. Outside China we grow even much faster including U.S., Europe, and the rest of the world.

Speaker 2

That is a very healthy dynamic.

Speaker 1

We grow actually everywhere. Maybe to the last question about our degrader PFS. I think on the slide number 28, if you take a look, there was also a table under that PFS curve to point out the patient population we treated. Our cadence 101 study had a more prolonged therapy. More importantly, the double exposed patient population was higher. We even have some patients who are triple exposed when there was that kind of the worst prognostic patient population. We are seeing this nice PFS trend give us the confidence. I don't have much more data than what you can see here because the data cut here was about March. Certainly, we have a bit more data but overall I think it's definitely trending towards the right direction. Again, I want to point out this is cross trial comparison. Thank you.

Our next question comes from Reni John Benjamin at Citizens JMP. Please unmute your line and ask your question.

Speaker 0

Hey, thanks guys. Congratulations on an amazing quarter and thanks for taking the questions. Maybe just two. You're approved in 75 markets globally. Can you just remind us, you know, what's the total number of markets you'll be approved at in peak? Should this playbook be repeated for TEVIMBRA and sonrotoclax, or are there other factors that may impact which markets you go into with either of those two drugs? Just talking about the tablet formulation, which you've mentioned in the prepared remarks, is this something that could materially impact sales going forward, or does it really just impact the cost of goods, and does this ultimately replace the current formulation?

Speaker 1

Thanks. For the first one, Dr. Wood, would you like to respond to total number.

Speaker 0

Of markets at peak and how it might differ?

Speaker 1

Sure. Our regulatory approval in so many countries I can't remember anymore. We have a bunch of lists, over 70 countries including all the major markets for both product TEVIMBRA and BRUKINSA, U.S., EU, UK, Switzerland, and many other major markets. In addition to those major markets, we got also quite some regulatory approval in the emerging markets like India and Indonesia, Thailand, so many others, Brazil and Israel and many other countries. It's a bunch of lists. If you want, we can send it to you, the concrete list. In most of those countries, we launched product already and we are also launching product in new markets. I'll gladly address the tablet question. This is primarily our commitment to patients and ultimately this tablet will be a.

Speaker 0

More convenient and easier to use formulation.

Speaker 1

With regard to impacting sales in a material way, we think that this will continue to solidify our market leadership position on a commercial basis. I think you also ask a great question around will the formulation ultimately replace the capsule. In due course, we will move to simply having the tablet available for those patient-focused reasons.

Speaker 0

Got it. I'm sorry, just as a quick follow-up to Xiaobin's answer, is the 75 markets that you're currently or greater than 70 markets that you're currently globally marketing in, is that it? Does this, you know, is there even more to be expected, right? Or have we penetrated as many and now it's just growing in those markets? That's important.

Speaker 1

Yeah, great question. We continue to expand our footprint. Just remember our mission, and BeOne Medicines is set up also to our mission, which is to reach out to many more patients to provide innovative and affordable medicine. Therefore, our mission continues, and we definitely want to expand to more markets. In addition to that, we also get some new indications in this already registered market and expand to new indications. For the 70+ registered countries, we do not have every indication yet in TEVIMBRA, and also even for BRUKINSA, we continue registering new indications. Expanding continues.

Speaker 0

Thank you very much and congrats again.

Speaker 1

Our final question comes from Michael Werner Schmidt with Guggenheim Partners. Please unmute your line and ask your question. Hey guys, thanks for taking my questions and congrats on the great second quarter. Here, bigger picture question on the covalent BTK inhibitor market in the U.S.

Speaker 0

Which is still growing at 10% right now here in the first half of 2025. Just curious if you.

Speaker 1

Could comment on what is driving overall market growth right now in the COVID and BTK space. Is it duration of treatment versus additional.

Speaker 0

Patients coming onto therapy, and how should we think about the peak potential for the class, especially as we think about potential fixed-duration combinations coming in.

Speaker 1

The future and then how big of a near term growth driver is the first line mantle cell lymphoma opportunity for BeOne Medicines based on the Mangrove data later this year.

Speaker 0

Lastly, we're getting questions just on how you feel about expanding the.

Speaker 1

BTK degrader development into autoimmune indications and inflammatory conditions.

Speaker 0

I know you mentioned you have a CSU study up and running now, but how should we think about the long term potential of the degrader in autoimmune inflammatory? Thanks so much.

Speaker 1

I'm happy to start out with questions around covalent case and the market as well as frontline mantle cell in Mangrove, and then maybe pass it over to Lai. I fully agree with your viewpoint that we see opportunities for longer dot among the drivers. Certainly, if you look at Alpine or.

Speaker 0

Other data sources you'll see that you.

Speaker 1

Know BRUKINSA's duration of therapy is longer, and of course that goes hand in hand with better PFS. We do see that there'll be some growth potential within BTK. For those reasons and for some of what we described earlier, we think that the current fixed-duration regimens, including AV, don't offer the deep and durable responses, the high PFS, and the safety and tolerability that really is the benchmark for treatment. We'll see what we believe will continue to be continued mono BTK growth in the market moving forward. Now for mantle cell and MANGROVE, we're certainly very encouraged. We think that'll be a strong data set. Of course, mantle cell has limitations to the overall size of the patient prevalence and the opportunity for treatment. We'll certainly see growth potential, but CLL will continue to be our main driver with that. Lai, over to you.

Yes, thanks for the question. I think the question is related to, you know, how do we view BTK degrader in non-cancer indications, especially for autoimmune? As you point out, we have started a study, a Phase 1B study in the CSU. I want to point out two features about our BTK degrader. One of them is probably three features. Number one, it has really long half-life. This potentially can support different dosing frequency, which for certain disease that might be very beneficial. Number two, it has brain penetration. I think that will be also applicable for certain autoimmune disease. Number three, I think this one, like the degrader mechanism, can destroy scaffold function and the force in disease area. That's also very important. We're actively exploring different potentials for this molecule in the autoimmune disease. Stay tuned. At this time, we've reached the end of the question and answer.

I'll turn the call over to John V. Oyler for closing remarks.

Speaker 2

Thank you. In closing, our second quarter results demonstrate exceptional execution across our key priorities. Our success is due to the sense of urgency and dedication of our more than 11,000 colleagues across the globe and the joint efforts of the patients, clinicians, advocacy groups, regulators, and investors who have united with us in a joint effort and shared commitment to fight cancer. Globally, BeOne Medicines has already helped more than 1.8 million cancer patients, and I truly believe this is just the very beginning of what we will accomplish. I'm looking forward to sharing more updates and milestones with you as we progress through the year, and I would like to thank you all for joining us today and for your thoughtful questions. Thank you.