Leading domestic biopharmaceutical company
- We think BeiGene’s near-term revenue growth momentum is supported by sales ramp-up for Brukinsa and tislelizumab, and future new indication approvals globally.
- Meanwhile, its long-term prospects are underlined by its deep innovative pipeline with multiple potential blockbuster candidates and global marketing capability, in our view.
- We forecast FY23F/24F/25F revenue growth of 70%/23%/29% and we think BeiGene could reach net profit breakeven in 2026F.
- Initiate coverage with an Add rating and TP of HK$169.7, using a DCF-based valuation method (WACC: 9.8%, terminal growth rate: 3%).
Emerging leader in haematology
Thanks to its superior efficacy and reduced cardiotoxicity vs. Ibrutinib, which is developed by Abbvie (ABBV. US, NR, CP: US$162.4) and is the biggest competitor for zanbrutinib, according to ALPINE clinical results in 2021, BeiGene’s zanubrutinib (sold under the brand name Brukinsa) has received approvals in over 65 markets for the treatment of various types of lymphomas; we believe the drug is a strong FY24F revenue growth catalyst for BeiGene. BeiGene also manufactures a BCL-2 inhibitor candidate, called sonrotoclax, and BTK CDAC, a chimeric degradation activation compound, which could overcome acquired resistance observed with BTK inhibitors. With the efficacy synergy between zanubrutinib, sonrotoclax and BTK CDAC, we think BeiGene will emerge as a haematology industry leader and gain market share in the haematology treatment market globally.
Building up a solid tumour drug pipeline
BeiGene is developing a comprehensive tumour drug portfolio centred around tislelizumab, an anti-PD-1 antibody. Tislelizumab has obtained approvals in China for 12 indications. In Dec 2023, it was approved by the European Commission (EC) for esophageal squamous cell carcinoma (ESCC) treatment and is pending approval in the US for ESCC; Tislelizumab will drive BeiGene’s overseas market revenue growth, in our view. We also believe tislelizumab shows promise as a valuable combination therapy partner in pantumour immune-oncology. BeiGene has a range of innovative candidates, including mono antibodies, bispecific antibodies and antibody-drug conjugates, that can combine with tislelizumab for enhanced efficacy. We believe future approval of these candidates will support BeiGene’s long-term prospects.
Competitive advantages
We think BeiGene’s competitive advantages are: a) ability to run global multi-centre clinical trials to support global marketing approvals; b) large commercial teams in China and overseas to promote its medications, and c) a deep and innovative oncology R&D pipeline with multiple blockbuster candidates.
Initiate coverage with an Add rating, TP of HK$169.7
We initiate coverage on BeiGene with an Add rating due to its solid revenue growth momentum. Our TP is derived using a DCF-based valuation (WACC: 9.8%, terminal growth rate: 3%). Near-term catalysts include new indications for zanubritinib and overseas approval of tislelizumab. Its long-term growth momentum could be driven by the continued delivery of innovative medications and global market expansion. We forecast 70%/23%/29% revenue growth for FY23F/24F/25F, with net loss of US$904m/US$853m/ US$219m. We think BeiGene will break even in 2026F. As at 18 Jan, the P/S of BeiGene’s A share (688235.CH), H share (6160.HK) and US share (BGNE.US) stood at 18.2x, 7.9x and 7.8x, respectively. Therefore, we think its H share and US share are cheaper than its A share. Downside risks: 1) new drug R&D may fail, which may hurt revenue growth; 2) failure to obtain marketing approvals, impacting revenue; and 3) intense competition.