Global innovation adds to the expectation of turning profits for the whole year, BEIGENE (06160) is about to perform a "Davis double-hit".

On January 14, BEIGENE (ONC.US; 06160; 688235.SH) achieved a significant volume increase in the A-share, Hong Kong stock, and US stock markets, with the A-share and Hong Kong stock prices rising by over 9% at one point during trading. At the same time, several investment banks, including CMB International and JPMorgan International, issued buy ratings for BEIGENE and raised their target prices. For example, CMB International raised BEIGENE's US stock target price to $282.71. The direct reason behind the collective shift of domestic and foreign funds towards BEIGENE is that the company has reached a key turning point where the annual operating profit has turned positive and a batch of innovative products in the FIC/BIC field have emerged. On January 14, BEIGENE announced that it participated in the 43rd Annual J.P. Morgan Healthcare Conference held on January 13, 2025 in the Eastern United States and made a presentation. During the conference, BEIGENE's Co-founder, Chairman, and CEO John V. Oyler stated that after 15 years of development, BEIGENE has become an innovator in the field of oncology and has reached a crucial turning point. The company is currently preparing to enter the next stage of global growth, with a projected positive annual operating profit by 2025. Benefiting from the impressive performance of its "cash cow" products and precise cost management, BEIGENE achieved a milestone in the third quarter of 2024 with a single-quarter revenue exceeding $1 billion and two consecutive quarters of non-GAAP operating profit. The positive development cycle under hematopoiesis has continued to improve. During the JPM conference, BEIGENE showcased the main directions of its 2025 strategic plan to the global industry, emphasizing its commitment to strengthening and consolidating its leadership in hematology and advancing a series of oncology research pipelines. This indicates that after crossing the financial breakeven point, BEIGENE's strong internal growth driven by global innovation will become a major catalyst in reshaping the company's valuation system and increasing its value. Further consolidating its leadership in hematologic cancer treatment, BEIGENE has strategically positioned itself in the field with its core product BTK inhibitor zanubrutinib showing strong global sales. The company's continued development in this area, with potential new products like the BCL-2 inhibitor sonrutoclax and the BTK CDAC compound BGB-16673, aims to further solidify its presence in the market. For example, BGB-16673, as the fastest progressing BTK degrader in the company's current clinical development, has the potential to overcome patient resistance issues and become an important treatment option for limited patient selection after the use of BTK inhibitors. It is expected to become a new generation BTK targeted drug. According to the JPM conference report, the company plans to initiate a Phase III clinical trial for BGB-16673 against patients with R/R CLL compared to ibrutinib (a non-covalent BTK inhibitor) later this year. Additionally, the differentiation of molecular combinations is expected to be the best United Therapeutics Corporation solution to meet various treatment needs. In the JPM report, the company stated that it is working on solidifying its strength in the CLL field through combinations like fixed-duration zanubrutinib + sonrutoclax (BCL-2 inhibitor), BTK CDAC +/- zanubrutinib/sonrutoclax, and other fixed-duration combination therapies. In the future, core drugs will continue to expand into new indications with significant unmet medical needs, such as acute myeloid leukemia/myelodysplastic syndrome, multiple myeloma, Richter's transformation, and large B-cell lymphoma. BEIGENE aims to become the only international company in the industry with global rights to BTK inhibitors, Bcl-2 inhibitors, and BTK degraders, further solidifying its leadership position in the treatment of hematologic cancers. Reaping long-term benefits from global innovation to drive value appreciation, BEIGENE, with strong R&D support, has built a comprehensive and uniquely innovative pipeline covering various technology platforms and drug modalities, such as monoclonal antibodies, bispecific/multispecifics, ADCs, cell therapies, mRNA, etc., establishing a strong pipeline of potential FIC/BIC products in the field of hematologic and solid tumors. At the JPM conference, BEIGENE revealed its latest R&D pipeline as of January 6, 2025, which includes over 25 early-stage pipeline products in Phase I clinical studies and more than 15 pipeline products in Phase II and III stages, covering various molecular types such as small molecules, antibodies, ADCs, CDACs, etc. Among these pipeline products, up to 7 products are expected to achieve peak sales of $2 billion or more, including several solid tumor pipeline products (small molecules, ADCs, degraders, etc.), and the IRAK4 CDAC product in the self-immunity field. For example, in the treatment of breast cancer and gynecologic cancers, BEIGENE's FIC-potential CDK4 inhibitor BGB-43395 has shown promising safety and efficacy in single-agent treatment and combination therapy with fluorouracil and letrozole. Compared to all approved and investigational CDK4/6 inhibitors (expected peak sales of over $18 billion), BGB-43395 is more potent, selective, and does not produce CDK6-mediated or off-target toxicity. Another B7H4 ADC drug, BG-C9074, is also slated to be a comprehensive treatment solution for various needs across different patient populations. In the JPM report, the company indicated that based on zanubrutinib, it is working on strengthening its position in the CLL field through combinations like the fixed-duration zanubrutinib + sonrotoclax, BTK CDAC +/- zanubrutinib/sonrotoclax, and other fixed-duration combination therapies. Moving forward, BEIGENE aims to continue expanding its core drugs to address significant unmet medical needs in new indications, such as acute myeloid leukemia/myelodysplastic syndrome, multiple myeloma, Richter's transformation, and diffuse large B-cell lymphoma. By then, BEIGENE will also become the only international company in the industry with simultaneous global rights to BTK inhibitors, Bcl-2 inhibitors, and BTK degraders, further consolidating its leadership position in the field of hematologic cancer treatment.Achieving high expression and differentiation in ADC design for breast cancer and gynecological tumors, demonstrating good effectiveness in heterogeneous (low and high expression) preclinical models.In fact, in the field of solid tumors, BEIGENE is rapidly advancing potential differentiated projects for key cancer types such as breast cancer, gastrointestinal cancer, and lung cancer with its deep research strength and multiple technology platforms. BEIGENE pointed out that more than 10 new molecules are expected to read out Proof of Concept (PoC) data within the next 6-18 months. In 2025-2026, the company will also have multiple late-stage clinical pipeline achieve new milestones. Cost reduction and efficiency improvement: the key to turning operating profit positive The reason why BEIGENE is able to achieve a positive development cycle under self-hematopoiesis is not only due to its "cash cow" product, but also due to the fine management of cost reduction and efficiency improvement in the global layout process. In recent years, through its extensive global layout, BEIGENE has established a global clinical team of over 3,000 people, basically achieving de-CRO-ization, and achieved self-control over clinical efficiency and costs, thereby enhancing the key capability of internal execution of global clinical operations and drug regulatory filings. This not only supports the company to independently and efficiently advance large-scale global clinical trials, but also supports the company to submit applications globally with international clinical data, improving approval efficiency and success rate. Under the leadership of this team, BEIGENE has independently conducted more than 140 clinical trials, with over 24,000 subjects enrolled in more than 45 countries and regions. The self-built global clinical team has brought significant cost reduction results for the company. At the JPM conference, BEIGENE publicly disclosed data showing that since 2019, the proportion of clinical trials executed by CROs has steadily decreased, from 77% to 5% by 2024. For NME entering the clinical development stage, BEIGENE is leading the industry in preclinical, dose escalation, and dose escalation to dose expansion durations. With internal efficient clinical support, the company has accelerated the process from preclinical candidate compounds to clinical Proof of Concept, significantly reducing development costs. Furthermore, since 2022, under fine management, BEIGENE has achieved a stable and decreasing sales expense ratio. In the first half of 2024, the company's current sales expenses were 4.17 billion RMB, and the sales expense ratio had decreased to approximately 34.76%, already below the current average level of the innovative drug industry. With the combined effects of economies of scale and cost reduction and efficiency improvement, in the third quarter of 2024, BEIGENE's adjusted operating profit reached USD 65.63 million, achieving non-GAAP operating profit for the second consecutive quarter. With continued contribution from core products and clear sales expectations for the pipeline, the company's path to sustainable profitability is clear. Recently, TD Cowen reiterated a "Buy" rating for BEIGENE, maintaining a target price of $260.00. Compared to the current price of the company's US stocks, there is a 30% upside potential, which is expected to lead to a "double-click by Davis".