China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>BeiGene (BGNE) reported C1Q23 top line 7% and gross margin 1.5ppt above our estimates, leading to non-GAA operating loss 23% narrower than our estimate. </li>
<li>We raise BRUKINSA’s peak year sales from US$5bn to US$5.8bn while cutting Tislelizumab’s peak sales from US$1.5bn to US$1.2bn. </li>
<li>With transition to a biopharma complete, BGNE should enjoy a higher multiple; We raised TP from US$219 to US$254 and maintain BUY.</li>
</ul>


BeiGene (BGNE) reported C1Q23 top line 7% and gross margin 1.5ppt above our estimates, leading to non-GAA operating loss 23% narrower than our estimate. 
We raise BRUKINSA’s peak year sales from US$5bn to US$5.8bn while cutting Tislelizumab’s peak sales from US$1.5bn to US$1.2bn. 
With transition to a biopharma complete, BGNE should enjoy a higher multiple; We raised TP from US$219 to US$254 and maintain BUY.


[BeiGene, LTD. (BGNE US) Target Price Change]: Valuation Adjustment Can Drive the Stock Upside

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>As of 8 May, we see three potential changes to the <a href="https://www.smartkarma.com/entities/ishares-china-large-cap-etf" target="_blank" data-smartkarma-citation="entities:766:1" rel="noopener">iShares China Large-Cap (FXI) (FXI US)</a> at the June rebalance. This is mainly driven by the inclusions.</li>
<li>There is over 1 day of ADV to trade on all stocks with the largest impact on <a href="https://www.smartkarma.com/entities/beigene-ltd" target="_blank" data-smartkarma-citation="entities:27352:1" rel="noopener">BeiGene Ltd (6160 HK)</a> at nearly 4 days of ADV.</li>
<li>Short interest has been increasing on the potential adds as they have run up a lot in the last few months.</li>
</ul>


As of 8 May, we see three potential changes to the iShares China Large-Cap (FXI) (FXI US) at the June rebalance. This is mainly driven by the inclusions.
There is over 1 day of ADV to trade on all stocks with the largest impact on BeiGene Ltd (6160 HK) at nearly 4 days of ADV.
Short interest has been increasing on the potential adds as they have run up a lot in the last few months.


FXI Rebalance Preview: Three Potential Changes in June

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Strong sales growth continued in 1Q23, mainly driven by zanubrutinib’s overseas sales. In 1Q23, BeiGene recorded US$410mn product sales (+21% QoQ or +57% YoY).</li><li>Zanubrutinib maintained a strong sales momentum, with sales increasing 20% QoQ or 103% YoY to US$211mn in 1Q23 (accelerating from +13% QoQ in 4Q22).</li><li>The sales of zanubrutinib in the US increased by 11% QoQ to US$139mn, and sales in China rose by 18% QoQ to US$48mn, while the sales in the overseas market other than the US recorded remarkable 147% QoQ growth to US$25mn. </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Strong sales growth continued in 1Q23, mainly driven by zanubrutinib’s overseas sales. In 1Q23, BeiGene recorded US$410mn product sales (+21% QoQ or +57% YoY).Zanubrutinib maintained a strong sales momentum, with sales increasing 20% QoQ or 103% YoY to US$211mn in 1Q23 (accelerating from +13% QoQ in 4Q22).The sales of zanubrutinib in the US increased by 11% QoQ to US$139mn, and sales in China rose by 18% QoQ to US$48mn, while the sales in the overseas market other than the US recorded remarkable 147% QoQ growth to US$25mn. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

BeiGene (BGNE US) – Improving cost efficiency with rapid sales growth

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>A significant change in 23Q1 was not just a narrowing of net loss, but a sudden turnaround in sales profit under the rapid revenue growth, which was an important leap.</li>
<li>BeiGene’s commercialization capabilities largely rely on high expense level that significantly deviating from the industry average, making eventual commercialization success more difficult. BeiGene is an "outlier" even among global peers.</li>
<li>How to control expenses while ensuring sustained sales growth and long-term competitiveness is an important issue for BeiGene. If no new blockbuster product emerges ultimately, high valuation would not last.</li>
</ul>


A significant change in 23Q1 was not just a narrowing of net loss, but a sudden turnaround in sales profit under the rapid revenue growth, which was an important leap.
BeiGene’s commercialization capabilities largely rely on high expense level that significantly deviating from the industry average, making eventual commercialization success more difficult. BeiGene is an "outlier" even among global peers.
How to control expenses while ensuring sustained sales growth and long-term competitiveness is an important issue for BeiGene. If no new blockbuster product emerges ultimately, high valuation would not last.


BeiGene (6160.HK/BGNE.US) 23Q1 - Qualitative Changes Are Taking Place

Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

<ul>
<li>In my previous insight in Mid-March 2023, we had a look at the potential index changes and the resultant capping flows for the HSCEI Index in June 2023.</li>
<li>Since then, our flow expectations have changed with changes in prices and/or float and total share counts.</li>
<li>Here are our latest flow expectations based on the current prices.</li>
</ul>


In my previous insight in Mid-March 2023, we had a look at the potential index changes and the resultant capping flows for the HSCEI Index in June 2023.
Since then, our flow expectations have changed with changes in prices and/or float and total share counts.
Here are our latest flow expectations based on the current prices.


Quiddity HSCEI Jun 23 Flow Expectations Update: Two Expected Changes, US$608mn One-Way Flow

China

BeiGene, Ltd. operates as a commercial stage biopharmaceutical company. The Company focuses on discovery, development, and commercialization of molecularly targeted and immuno-oncology drugs for the treatment of cancer. BeiGene serves patients worldwide.

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BeOne (ONC US)

[BeiGene, LTD. (BGNE US) Target Price Change]: Valuation Adjustment Can Drive the Stock Upside

We raise BRUKINSA’s peak year sales from US$5bn to US$5.8bn while cutting Tislelizumab’s peak sales from US$1.5bn to US$1.2bn. We raised TP from...

Blue Lotus Research Institute

FXI Rebalance Preview: Three Potential Changes in June

There could be 3 changes for the FXI in June. Some stocks are close to the add/delete zone, so relative perf needs to be watch. Passive trackers...

Brian Freitas

BeiGene (BGNE US) – Improving cost efficiency with rapid sales growth

Strong sales growth continued in 1Q23, mainly driven by zanubrutinib’s overseas sales. In 1Q23, BeiGene recorded US$410mn product sales (+21% QoQ...

CMB International

BeiGene (6160.HK/BGNE.US) 23Q1 - Qualitative Changes Are Taking Place

BeiGene made breakthrough in sales profit in 23Q1.But to achieve overall breakeven needs the success of the 3rd blockbuster drug.When such...

Xinyao (Criss) Wang

Quiddity HSCEI Jun 23 Flow Expectations Update: Two Expected Changes, US$608mn One-Way Flow

There seem to be 5 inflow names (including the two expected ADDs) and 47 outflow names (including the two expected DELs). My latest estimate for...

Janaghan Jeyakumar, CFA

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