Chief Pharmaceutical Analyst Yang Jing resumed coverage of Zaiding Pharmaceutical (ZLAB.US/9688.HK), maintaining a “buy” rating, with a target price of $60/HK$47. Based on Zaiding Pharmaceuticals (Zaiding)'s strong commercialization capabilities and strong and efficient execution, we are confident that the company can complete management's 4Q25 guidelines to begin achieving profits and a compound annual revenue growth rate of more than 50% in 2023-2028.
We believe that the company's current market value of 2 billion US dollars clearly underestimates the long-term value of its series of differentiated blockbuster innovative drugs and the boosting effect of many short-term catalysts on stock prices.
Commercialization will accelerate dramatically over the next 5 years, which is expected to bring about a compound annual revenue growth rate of more than 50%:
According to management guidelines, it is expected that more than 7 new products or new indications will be launched in the next 3 years (2024-2026), and Zaiding Pharmaceutical is expected to have more than 15 commercialized products by the end of 2028. Thanks to a significant acceleration in commercialization, the 2023-2028 compound annual revenue growth rate is expected to exceed 50%.
4Q25 is expected to start to be profitable, and is expected to be one of the first Chinese biotech companies to achieve profit: benefiting from strong commercialization growth and a further decline in operating expenses due to scale effects, management believes that the company will be profitable starting 4Q25. We believe that if successfully achieved, Zaiding Pharmaceutical could become one of the first profitable Chinese biotech companies.
The commercialization process of Efgartigimod has been the most important catalyst in the past two years: Efgartigimod (intravenous dosage form) successfully added myasthenia gravis to health insurance through negotiations at the end of 2023, and is expected to be rapidly released in 2024. Compared to other competitors, we believe that Efgartigimod, as the first FcRn drug to be marketed, can enjoy an exclusive medical insurance period of at least 2 years. The first-mover advantage is remarkable, and the market can be quickly expanded through health insurance. Furthermore, the use of Efgartigimod's subcutaneous dosage for myasthenia gravis (gMG) and chronic inflammatory demyelinating polyneuropathy (CIDP) is expected to be approved in 2024 and 2025, further enriching existing dosage forms and boosting the commercialization process. We forecast that Efgartigimod will contribute RMB300,000,000/$1.2 billion in sales revenue in 2024/2025.
Other catalysts in 2024 include: (1) 4 drug indications for batch marketing: SUL-DUR (Acinetobacter baumann-Calcidobacter complex), Efgartigimod subcutaneous dosage form (gMG indication), Rotrectinib (ROS1+ non-small cell lung cancer), and Epshield (pleural mesothelioma indication); (2) 4 drug indications submitted for marketing applications in China: Efgartigimod subcutaneous dosage form (CIDP indication), Adasiagrb (second-line non-small cell lung cancer)), TIVDAK (second-line cervical cancer) and Epshield (non-small cell lung cancer); (3) Key clinical data readouts: Epshield first-line non-small cell lung cancer brain metastasis phase III data (1Q24) and first-line pancreatic cancer stage 3 data (4Q24), Adagrasib first-line non-small cell lung cancer stage 2 data, second-line non-small cell lung cancer stage 3 data, and second-line colorectal cancer stage 3 data.
Valuation: We forecast revenue for Zaideng 2023-25E of $270 million/360 million/$63 billion, respectively, mainly driven by the continued increase in penetration rate of existing products and the rapid release of new products, efgartigimod.
We valued the company based on the POS adjusted revenue forecast and DCF valuation model. Assuming WACC and sustainable growth rates of 10.2% and 3%, respectively, we obtained the target price of the company's USD/HK$47, corresponding to a market value of US$5.9 billion.
Investment risk: Efgartigimod sales fell short of expectations, and clinical progress of core drug candidates was delayed or commercialization fell short of expectations.