The stock in BeiGene Ltd. (Nasdaq: BGNE) slipped an additional 6 percent by Friday afternoon, at a $20 drop from a week ago, after a short seller alleged that the company has been faking sales, spending irrationally and overstating its revenue and expenses.
J Capital Research USA LLC, which conducts independent research focusing on Chinese companies, released a report on Thursday where it said that the Beijing-based maker of biopharmaceuticals “has no future” and “management knows it.”
In a report titled “No Cure,” the short seller pointed to a number of issues it claimed to have found in the company’s financials.
J Capital alleged that BeiGene has been stuck with an unsellable product, Celgene, of which actual sales were 57 percent lower than it reported since September 2017. The short seller claimed the biotech company has invented more than $157 million in revenue and the sales of Celgene were just the tip of an iceberg. The company also “engaged in questionable spending on physical plant, on an acquisition in Beijing, and on massive external R&D,” J Capital wrote.
The report also claimed that BeiGene will not be able to complete the trials for its own drugs this year and that its drugs do not qualify for fast-track approval from regulators in China.
On the day the report became public, shares in the biotech company ended at $131.03 apiece, 7 percent down. Intraday on Friday, BGNE slid to $122.61 per share.
J Capital also noted that the top management of BeiGene, including its founder, has sold or seeks to sell, $322 million of the company’s stock.
The short seller report concluded by alleging that the nine-year old BeiGene has done little of what investors could find value in.
“We cannot find value in this speculative bubble of a company and blame market frenzy for driving the company “valuation” to $8.5 bln,” J Capital said.