Morgan Stanley: Buy BeiGene's Global Upside

Morgan Stanley’s Matthew Harrison initiated coverage of Beigene Ltd (ADR) BGNE with an Overweight rating and a price target of $39, saying that China opportunity offers valuation support at around $25, while I/O combos offer upside in the global market.

“BeiGene is uniquely positioned among biotech companies. Unlike many of its China-based peers, it has a true innovative R&D focus to develop its own drugs which allows it to bring novel targets that are first to market in the local Chinese market; second, while it will not be first to market in the global market, management is focused on bringing potentially best-in-class molecules to the market,” analyst Stanley’s Matthew wrote.

Moreover, BeiGene has a broad pipeline, which it can leverage to improve single agent activity through combination therapies. This could position the company favorably even in the highly competitive global market, Matthew believes.

BeiGene has four major novel targets, namely PARP, PD-1, BTK and BRAF, and these have the potential to be first to market in China. Given this, China-only sales could be ~$1B at peak. “Thus, we see significant valuation support from China alone and relatively limited risk given that the mechanisms are known,” the analyst commented.