Aging Asia And China Will Raise Demand For CAR-T Therapies

Key Takeaways

• Accelerated sales growth and profitability are expected from NEFECON and VELSIPITY, driven by strong demand, best-in-class profiles, and efficient localized manufacturing.
  
• Strategic partnerships, advanced therapy platforms, and expansion across Asia position Everest for long-term revenue growth and significant commercial opportunities beyond current expectations.
  
• Over-reliance on a few products, third-party partnerships, and the China market makes Everest Medicines vulnerable to competition, regulatory changes, and pricing pressures.

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.

• Analysts broadly agree NEFECON's NRDL listing and broad hospital access secures strong near-term revenue, but the exceptionally rapid patient uptake-driven by pent-up demand, expanding diagnosis rates, and inclusion in updated global and China treatment guidelines-points to the real probability of materially outsized sales growth and earlier operational profitability than consensus expects.
  
• Analyst consensus recognizes VELSIPITY as a blockbuster for ulcerative colitis, yet the underappreciated combination of best-in-class efficacy, highly favorable safety profile, and first-line positioning in major international guidelines positions it for higher-than-expected market penetration and sustained pricing power, leading to revenue and gross margin upside.
  
• Localized manufacturing of both NEFECON and VELSIPITY in Jiashan, together with the streamlined regulatory pathway for novel drugs in China and other emerging Asian markets, will enable Everest to rapidly scale production, reduce costs, and expand margins while accelerating time to revenue from these blockbuster franchises.
  
• Everest's advanced mRNA and in vivo CAR-T platforms, supported by a strong track record in regulatory approvals and robust financial resources, are positioned to capitalize on the surging demand for innovative oncology and autoimmune therapies across Asia's rapidly aging population, offering the potential for substantial future out-licensing opportunities and long-term earnings growth.
  
• The company's strategic expansion into multiple high-growth Asian markets beyond China, paired with synergistic partnerships and investments such as the I-Mab stake, creates a pipeline of commercial opportunities that substantially increases Everest's total addressable market and potential for recurring revenues and EPS compounding well above prevailing market expectations.

Everest Medicines Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Everest Medicines compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Everest Medicines's revenue will grow by 79.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -77.4% today to 24.5% in 3 years time.
• The bullish analysts expect earnings to reach CN¥1.2 billion (and earnings per share of CN¥3.48) 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 bullish analyst cohort, the company would need to trade at a PE ratio of 29.5x on those 2028 earnings, up from -29.5x today. This future PE is lower than the current PE for the HK Biotechs industry at 51.8x.
• 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

• Everest Medicines is heavily reliant on near-term revenue and growth from just a handful of products, particularly NEFECON and VELSIPITY, and such concentration creates significant vulnerability if competitive products enter the market, regulatory changes occur, or reimbursement policies tighten, potentially resulting in volatility or declines in revenue.
  
• The company's strategy continues to center on in-licensing and partnerships rather than developing a fully integrated and proprietary pipeline, which increases dependency on third-party licensors, elevates royalty and milestone payment obligations, and could limit net margin expansion and long-term earnings leverage.
  
• Everest Medicines is prioritizing expansion and sales in Greater China, meaning much of its sales exposure is in a single market with historically unpredictable regulatory, policy, and reimbursement environments, which increases the risk of abrupt changes negatively affecting revenue and earnings predictability.
  
• While the company is investing in innovative modalities such as mRNA vaccines and in vivo CAR-T, the industry is facing longer drug development timelines, heightened regulatory scrutiny (especially after recent mRNA vaccine controversies), and rising R&D costs, all of which are likely to pressure future operating margins and delay realization of revenue from its early-stage pipeline.
  
• Heightened global focus on controlling healthcare costs and drug prices, combined with growing local and foreign biotech and pharmaceutical competition, increases the likelihood of price reductions, restricted reimbursement, and potential market share erosion, which could substantially impact Everest's topline growth, profitability, and access to capital.

Valuation

• The assumed bullish price target for Everest Medicines is HK$87.95, which is the highest 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 bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of HK$87.95, and the most bearish reporting a price target of just HK$25.58.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be CN¥4.9 billion, earnings will come to CN¥1.2 billion, and it would be trading on a PE ratio of 29.5x, assuming you use a discount rate of 6.9%.
• Given the current share price of HK$60.2, the bullish analyst price target of HK$87.95 is 31.5% higher.
• 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.