Under the sales promotion of Agamod and three potential blockbuster products listed, Haitong believes that the company may achieve a revenue growth of CAGR ~ 50% from 2023 to 2028. In terms of product structure, the operating income of 10-30 billion yuan products is 401/1288/60 million yuan respectively, with a year-on-year growth rate of + 45/34%.
Haitong International has released a research report stating that it maintains the 'outperform the market' rating of Zai Lab (09688). Based on the sales performance of Agemod and Eplerenone in the second quarter, the company revised its revenue forecast for 2024-2025 to USD 0.387/0.518 billion (previous value is USD 0.381/0.518 billion), with a year-on-year growth rate of + 45/34%. The company adjusted its net profit forecast for 2024-25 to -0.289/-0.159 billion US dollars (previous value is -0.288/-0.159 billion US dollars). Meanwhile, the target price was lowered by 2.65%, from HKD 67.51 to HKD 65.76.
Haitong International's main viewpoints are as follows:
Zai Lab announced the 2024 Q2 earnings report: The net income from product sales was USD 0.1 billion (+45%), of which Agamod was USD 23.2 million. Gross margin was 64.9% (-0.6pct); R&D expenses were USD 61.63 million (-19.6%), and R&D expenses accounted for 61.6% of product revenue (-49.8pct); SG&A expenses were USD 79.71 million (+17.4%), and SG&A expenses accounted for 79.6% of product sales (-19.0pct). The net loss was USD 80.28 million, compared with USD 0.12 billion in the same period last year. As of June 30, 2024, the company had USD 0.73 billion in hand cash, cash equivalents and restricted cash.
Agamod's sales within medical insurance continued to grow, and the annual guidance was raised to USD 80 million. In Q2 2024, Agamod's sales were USD 23.2 million, a 76% increase compared to Q1 2024 (USD 13.16 million). According to the earnings conference, as of Q2 2024, the goal of achieving 70% hospital coverage has been reached, and about 1,500 doctors have prescription experience. In terms of new patients, there were about 3,300 in Q2 2024, and combined with Q1 2024, there were about 1000+ new patients/month after being included in medical insurance. In addition, more patients have begun second and third cycles of treatment. Based on the good sales performance in the first half of the year, the company raised its annual guidance to USD 80 million (previous guidance: USD 70 million).
Agamod's medical insurance sales continued to grow, and the annual guidance was raised to USD 80 million.
In Q2 2024, Agamod's sales were USD 23.2 million, a 76% increase compared to Q1 2024 (USD 13.16 million). According to the earnings conference, as of Q2 2024, the goal of achieving 70% hospital coverage has been reached, and about 1,500 doctors have prescription experience. In terms of new patients, there were about 3,300 in Q2 2024, and combined with Q1 2024, there were about 1000+ new patients/month after being included in medical insurance. In addition, more patients have begun second and third cycles of treatment. Based on the good sales performance in the first half of the year, the company raised its annual guidance to USD 80 million (previous guidance: USD 70 million).
Agamod's CIPD indication was declared for listing, and there is potential for expanding into more indications.
Agamod's subcutaneous dosage form for CIDP indication was submitted for approval in China in May 2024, and the company expects to be listed in China in 2025. The indications for thyroid eye disease, serum negative gMG and ocular myasthenia gravis are expected to be added to global registration clinical trials from H2 2024 to early 2025. In addition, Agamod's subcutaneous dosage form for gMG indication has been approved for listing in China. The bank believes that the expansion of indications is expected to further release the commercial potential of Agamod, and different dosage forms choices may provide patients with drug flexibility and increase the competitive barrier of the product.
Potential blockbuster products are expected to be launched one after another, providing momentum for the company's growth in the next 3-5 years.
SUL-DUR, an antibiotic targeting Baumann stationary rod bacteria, was approved in China in May 2024. The company expects the product peak potential to be USD 0.5-1 billion. Key clinical trials of KarXT China bridge research are expected to be released in H2 2024 to help new potential drugs be listed for approval. The indications for psychiatric disorders caused by Alzheimer's disease will join the global phase III clinical trial. The company expects the product peak potential to be over USD 1 billion. Two phase III studies on Bemarituzumab targeting FGFR2b are ongoing. Among them, FORTITUDE-101 study has completed subject enrollment, and FORTITUDE-102 study is underway. The bank believes that under the sales promotion of Agamod and three potential blockbuster products listed, the company may achieve a revenue growth of CAGR ~ 50% from 2023 to 2028.
Expenses continue to be optimized, and the company reiterates its goal of overall break-even by the end of 2025.
In Q2 2024, the company's gross profit margin was 64.9% (-0.6pct). The bank expects gross profit margin to improve with the release of Agamod's production capacity. The three expenses are refined and controlled, and the expense ratio continues to decrease as revenue grows: In Q2 2024, R&D expenses were USD 61.63 million (-19.6%), and R&D expenses accounted for 61.6% of product revenue (-49.8pct); SG&A expenses were USD 79.71 million (+17.4%), and SG&A expenses accounted for 79.6% of product sales (-19.0pct), which were related to the increase in Agamod's sales personnel and expenses. In Q2 2024, the company's net loss was USD 80.28 million, compared with USD 0.12 billion in the same period last year. Under the conditions of rapid revenue growth and cost optimization, the company reiterates its goal of overall break-even by the end of 2025. The company will further expand and promote global equity pipeline research and development. In July 2024, the company reached a global licensing agreement with Merck to obtain global equity of ROR1ADC and expand its pipeline. According to the earnings conference, the company still has multiple undisclosed pipelines in the preclinical stage, with the goal of submitting at least one global new drug clinical research application every year. In the global pipeline: 1) IL-17A has conducted a global phase II study for mild to moderate chronic plaque psoriasis; 2) DLL3ADC is expected to publicize the dose escalation data for 2L+SCLC in late 2024 to early 2025; 3) CCR8 is expected to be presented for PK/PD analysis in ESMO2024.
Risk
Risks in new drug R&D; risks in new drug evaluation and approval; risks of commercialization not meeting expectations; risks related to partners; risks of technological upgrades; risks of sustained losses and inability to distribute cash dividends in the short term.
