There hasn't been a bull in the China shop in recent weeks. Earlier this month, the U.S. Securities and Exchange Commission (SEC) identified five Chinese companies with listings on U.S. stock exchanges that could be delisted for not meeting audit requirements.
However, analysts remain very bullish about at least one of the companies on the list. This Chinese stock could skyrocket at least 85% over the next 12 months, according to Wall Street.
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First on the list
BeiGene (BGNE 3.08%) stood out as the first company on the SEC's list. The global biotech company is based in Beijing, China. Its American Depositary Shares (ADS) began trading on the Nasdaq stock exchange in 2016.
The Chinese biotech stock emerged as a huge winner over much of the last six years. By late September 2021, BeiGene's share price had soared more than 1,300% since its initial public offering (IPO) on the Nasdaq.
But those winning ways have come to a screeching halt in recent months. The sell-off of growth stocks that began late last year took a toll on BeiGene's share price. In the aftermath of the SEC's announcement earlier this month, the stock plunged more than 20%.
BeiGene's shares bounced close to 34% on March 16, primarily because of news that Chinese officials were working with the SEC to resolve the audit issues. However, the stock is still down more than 50% below its peak set in September 2020.
Why the stock could soar
Wall Street analysts don't think that BeiGene will recapture its previous high over the next 12 months. But they think it could get close.
Obviously, a resolution of the issue identified by the SEC is a critical prerequisite for the stock to soar again. The good news for BeiGene is that the China Securities Regulatory Commission and the Ministry of Finance seem to think that the issue will be resolved relatively quickly.
Beyond that, though, BeiGene also has several other potential catalysts on the way. The company awaits a U.S. approval decision on Brukinsa in treating chronic lymphocytic leukemia (CLL) and small lymphocytic leukemia with a PDUFA date set for Oct. 22, 2022. It also hopes to win approval from the European Medicines Agency for the drug in treating CLL and marginal zone lymphoma.
BeiGene and Novartis anticipate a U.S. Food and Drug Administration (FDA) approval decision for tislelizumab as a second-line treatment for esophageal squamous cell carcinoma by July 12, 2022. Novartis should file for U.S. and European approvals for the drug as a first-line treatment for nasopharyngeal carcinoma and non-small cell lung cancer this year, as well.
Meanwhile, business is booming. BeiGene's revenue in the fourth quarter of 2021 nearly doubled year over year to $196.8 million. Brukinsa is leading the way. However, BeiGene is also enjoying strong growth from Chinese sales of products that it has licensed from Amgen and Bristol Myers Squibb.
Significant risks
BeiGene still faces significant risks. There's no way that the stock will mount a sustained comeback if there isn't progress toward a resolution of the issues identified by the SEC. The company could also experience regulatory and/or clinical setbacks.
The stock trades at nearly 14 times expected sales. With such a steep valuation, any bumps in the road could prevent BeiGene from meeting Wall Street's one-year price target.
BeiGene could skyrocket as analysts predict. However, I think that there are other stocks that offer more attractive risk-reward profiles.
