BeiGene announced its FY22 results with revenue rising to US$1.42bn (+20% YoY), of which product sales soared 98% to US$1.26bn, offsetting a decrease of collaboration revenue from US$542m in 2021 to US$161m in 2022. Product sales missed our expectation by 5%, due to the pandemic in 4Q22. Net loss widened from US$1.46bn in 2021 to US$2.0bn in 2022, missed our expectation by 8%, partly caused by a loss of US$224m on FX in 2022. We revised down our revenue forecasts for BeiGene by 4%/4%/3% for 2022/23E/24E and lowered our TP to HK$178/US$295 for HK/ADR shares (previous: HK$184/US$304).Considering the solid product sales growth in 2022 and our expected acceleration with CLL approvals in 2023, reiterate BUY.
　　Key Factors for Rating
　　Core products likely to sustain robust growth momentum. Core products zanubrutinib and tislelizumab recorded revenue of US$565m (+159% YoY) and US$423m (+66% YoY), respectively, and continued to be the key revenue drivers. Their proportion of total revenue rose from 41% in 2021 to 70% in 2022. We believe this growth momentum should continue, given that: 1) zanubrutinib is now approved in over 60 markets, and current zanubrutinib label addresses <15% of the global market, with significantly expansion potential for CLL approvals in 2023; 2) tislelizumab has been approved for ten indications, with nine being included in 2023 NRDL; tislelizumab’s additional two indications are under review for marketing by CDE; we expect tislelizumab’s penetration rate among patients to continue growing in 2023.
　　Continued expansion of differentiated or potential first-in-class pipeline. BeiGene’s pipeline has either differentiated efficacy (BTKi, PD-1, BCL- 2i, OX-40 Ab) or FIC potential (TIGIT Ab, BTK degrader, HPK-1 inhibitor, CEA- 41BB activator). We expect multiple milestones for BeiGene in 2023 are as follows. 1) Zanubrutinib: NDA to be approval in China for TN CLL/SLL in 1H2023. 2) Tislelizumab: regulatory decision in US for 2L ESCC in 1H2023; approvals in China for 1L ESCC in 1H23 and 1L HCC in 2H23; BLA submissions in US for 1L GC and 1L ESCC. 3) BGB-11417 (BCL-2i): data readouts and initiate global pivotal trial in 1L CLL in combo with Zanubrutinib in 2H23. 4) Ociperlimab (TIGIT Ab): Ph2 data readout in multiple solid tumors; complete enrollment in Ph3 in 1L NSCLC in 2H23. 5) BGB-16673 (BTK Degrader): initial data readout from Ph1.
　　Key Risks for Rating
　　1) Slower-than-expected sales growth; 2) delay or failure in core products R&D; 3) Break-down of core collaborations.
　　Valuation
　　Our DCF-based TP (WACC: 11.4%, terminal growth: 4.0%) is lowered from HK$184/US$304 to HK$178/US$295 for HK/ADR shares. Reiterate BUY.