Stricter Regulations And Chinese Pricing Pressures Will Limit Progress

Key Takeaways

• Regulatory roadblocks, price pressures, and deglobalization risks threaten revenue growth, margin expansion, and long-term pipeline refresh opportunities.
  
• Heavy reliance on in-licensed assets and equity financing constrains profitability and heightens shareholder dilution risk if R&D investments underperform.
  
• Robust product launches, advancing pipeline diversification, and strategic investments position the company for sustained revenue growth, operational profitability, and long-term financial resilience.

Catalysts

A biopharmaceutical company, engages in the discovery, license-in, development, and commercialization of therapies and vaccines to address critical unmet medical needs in Greater China and other Asia Pacific markets.

• Everest Medicines faces the risk of increasingly stringent global regulatory requirements and heightened scrutiny for new drug launches, which could lead to substantial delays and escalating costs for pipeline approvals-these bottlenecks threaten both long-term revenue growth and risk-adjusted pipeline value.
  
• The ongoing push from government and public health authorities to reduce drug prices, especially in China, is expected to squeeze gross margins for both current blockbusters like NEFECON (already seeing price reductions after NRDL inclusion) and pipeline launches, limiting future earnings and profitability gains even if headline revenue continues to grow.
  
• With rising geopolitical tensions and the possibility of further deglobalization, Everest may experience restricted access to Western innovation, global partnerships, and cross-border clinical development opportunities-this scenario would diminish the company's capacity to refresh and diversify its pipeline, placing downward pressure on its long-term growth profile and innovation-led revenue streams.
  
• Everest's reliance on in-licensed products (rather than entirely in-house discovery) exposes the company to high milestone and royalty payments on key assets, structurally capping net margins and limiting the long-term conversion of strong revenue growth into shareholder earnings.
  
• Persistent negative cash flow and high dependence on fresh equity financing significantly increase the risk of future dilution for current shareholders, especially if the expanding pipeline fails to convert R&D investments into sustainable, high-margin commercial returns-this directly threatens future earnings per share and the company's ability to maintain its current valuation.

Everest Medicines Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Everest Medicines compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Everest Medicines's revenue will grow by 53.9% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -77.4% today to 22.1% in 3 years time.
• The bearish analysts expect earnings to reach CN¥684.7 million (and earnings per share of CN¥2.0) by about September 2028, up from CN¥-658.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 15.1x on those 2028 earnings, up from -31.2x today. This future PE is lower than the current PE for the HK Biotechs industry at 46.5x.
• Analysts expect the number of shares outstanding to grow by 0.95% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.89%, as per the Simply Wall St company report.

Everest Medicines Future Earnings Per Share Growth

Risks

• The rapid and robust revenue growth of NEFECON, backed by its first-in-class status, nationwide NRDL reimbursement, and dramatic unmet market need in China, could drive sustained top-line expansion and operational profitability, refuting expectations of declining financial performance and supporting higher revenues and earnings.
  
• VELSIPITY is positioned to become a best-in-disease therapy for ulcerative colitis, with strong Phase III data, guideline endorsements, NDA approvals across multiple Asian markets, and a growing patient base, potentially underpinning blockbuster sales and improving company-wide revenue and net income.
  
• Everest's diversified and advancing late-stage pipeline-including civo (EVER001) with multibillion renminbi peak sales potential across multiple autoimmune indications and a growing antibacterial portfolio-mitigates dependency on any single product and could support long-term earnings growth and margin resilience.
  
• The company's investment in and validation of its proprietary AI-enabled mRNA platform, with multiple programs moving into clinical stages and high-profile global deals in the sector, provides a differentiated innovation engine that may yield globally competitive assets, boosting future revenue streams and valuation multiples.
  
• Recent capital raises, strong cash balances, and strategic partnerships or equity investments (such as in I-Mab) provide ample financial flexibility for ongoing R&D, commercialization, and business development, reducing liquidity risks and supporting long-term net margin expansion and shareholder value.

Valuation

• The assumed bearish price target for Everest Medicines is HK$25.58, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Everest Medicines's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of HK$87.94, and the most bearish reporting a price target of just HK$25.58.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be CN¥3.1 billion, earnings will come to CN¥684.7 million, and it would be trading on a PE ratio of 15.1x, assuming you use a discount rate of 6.9%.
  
• Given the current share price of HK$64.0, the bearish analyst price target of HK$25.58 is 150.2% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.