Expanding Healthcare Access In China Will Enlarge Rare Disease Markets

Key Takeaways

• Accelerated uptake of NEFECON and strong market positioning support outsized near-term revenue growth and sustained premium margins.
  
• Focus on specialty innovations and operational efficiency enables expansion into high-value markets and long-term, durable earnings growth.
  
• Everest Medicines faces profit and margin pressures from reliance on external partnerships, regional risks, intense competition, and global pricing controls in its key markets.

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.

• Analyst consensus sees NRDL listing of NEFECON as a revenue driver, but the rapid pace of hospital onboarding, strong prescription ramp (over 10,000 new patients prescribed in less than 3 months), expanding sales force, and multiple upcoming guideline inclusions point to a much larger and faster patient uptake than broadly anticipated, driving outsized near-term revenue growth.
  
• While consensus highlights the risk of overestimating NEFECON's exclusivity window, the unique first-mover advantage, multiyear headstart with NRDL reimbursement, and accumulating real-world evidence create a virtuous cycle that boosts hospital and physician adoption, positioning Everest to capture a dominant market share and sustain premium net margins over several years.
  
• The company's focus on specialty and rare diseases with high unmet need, in the context of rising healthcare spending and growing prevalence of chronic conditions in China and Asia-Pacific, supports consistently expanding the addressable market and premium pricing, translating into robust multi-year revenue and margin expansion.
  
• Everest's integrated research, clinical, and manufacturing infrastructure-especially in proprietary mRNA and CAR-T platforms-enables the launch of high-value, globally innovative products, unlocking new long-term growth drivers and high-margin revenue streams beyond the current portfolio.
  
• Regularly achieving commercial-level profitability amidst rapid revenue growth and significant operational efficiency improvement, along with a strong balance sheet and accelerated path to cash flow breakeven by end-2025, positions Everest to reinvest in pipeline assets and strategic partnerships, ensuring durable earnings growth and reducing downside risk.

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 83.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -147.4% today to 18.4% in 3 years time.
• The bullish analysts expect earnings to reach CN¥798.1 million (and earnings per share of CN¥2.27) by about August 2028, up from CN¥-1.0 billion 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 48.1x on those 2028 earnings, up from -21.8x today. This future PE is greater than the current PE for the HK Biotechs industry at 48.0x.
• Analysts expect the number of shares outstanding to grow by 7.0% 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 company's heavy dependence on in-licensing and external partnerships for key commercial products like NEFECON, XERAVA, and etrasimod exposes Everest Medicines to unfavorable royalty structures and limits margin expansion, which in turn could suppress net profits as competition and royalty burdens increase.
  
• Despite recent revenue growth, Everest continues to operate at a significant net loss, narrowing to RMB 537.6 million in 2024, and operates with negative operating cash flow, making the company reliant on external capital and vulnerable to share dilution or high financing costs as global capital access for Chinese firms tightens.
  
• Everest's commercial and clinical concentration in Greater China exposes the company to region-specific regulatory shifts, pricing pressures from government reimbursement authorities (as with NRDL for NEFECON), and local market volatility, any of which could sharply decrease revenues and erode earnings if adverse conditions emerge.
  
• Intensifying competition from both multinational pharmaceutical giants and rapidly advancing domestic Chinese biotech firms in core disease areas, combined with anticipated launches of rival IgAN drugs with different mechanisms of action, threatens Everest's market share, pricing power, and future revenue trajectory.
  
• Global trends toward drug affordability and increasingly strict value-based healthcare policies are likely to accelerate downward pressure on pharmaceutical pricing and patient access, creating risks of lower peak sales, compressed gross margins, and subdued long-term earnings for Everest's portfolio in both China and ex-China markets.

Valuation

• The assumed bullish price target for Everest Medicines is HK$79.89, 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$79.89, and the most bearish reporting a price target of just HK$25.61.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be CN¥4.3 billion, earnings will come to CN¥798.1 million, and it would be trading on a PE ratio of 48.1x, assuming you use a discount rate of 6.9%.
• Given the current share price of HK$70.6, the bullish analyst price target of HK$79.89 is 11.6% 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.