Lepu Biopharma (SEHK:2157): Valuation in Focus After Landmark EGFR-Targeted ADC Approval

Lepu Biopharma (SEHK:2157) just received conditional marketing approval from China's National Medical Products Administration for an innovative EGFR-targeted antibody-drug conjugate to treat recurrent or metastatic nasopharyngeal carcinoma. This milestone is expected to generate global attention and increased investor interest.

See our latest analysis for Lepu Biopharma.

Lepu Biopharma’s momentum has certainly kept investors on their toes this year. After surging to a 148% year-to-date share price return, excitement around innovative launches like the new EGFR-targeted therapy is offset by a steeper 36% share price decline over the last 90 days. While the past year’s total shareholder return of 76% signals strong long-term potential, recent volatility suggests the market is actively recalibrating its expectations as Lepu Biopharma navigates major milestones and leadership changes.

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With Lepu Biopharma’s shares still trading more than 30% below analyst price targets despite game-changing drug approvals, the question arises: is the market underestimating its upside, or are expectations for future growth already fully reflected in the share price?

Price-to-Sales Ratio of 14.7x: Is it justified?

Lepu Biopharma is trading at a price-to-sales (P/S) ratio of 14.7x, which is nearly in line with its peer group but stands out compared to the broader market. The last close price of HK$6.25 reflects optimism about future growth, but does it fully justify this elevated multiple?

The price-to-sales ratio measures how much investors are willing to pay per dollar of current sales and is especially relevant for high-growth, early-stage companies that are not yet profitable. In the biotech sector, where profitability might still be years away, investors often look to this metric to value expected future revenue streams.

Compared to its peers, Lepu Biopharma appears reasonably valued, as the average P/S among similar companies sits at 15x. However, when stacking up against the wider Hong Kong Biotechs industry, where the average P/S ratio is 13.4x, and the estimated fair price-to-sales ratio for Lepu Biopharma is 11.1x, the current multiple is clearly more expensive. The market could be factoring in high expectations for revenue growth. If broader sector sentiment shifts or growth expectations are not met, the share price might face pressure to adjust toward the fair level.

Explore the SWS fair ratio for Lepu Biopharma

Result: Price-to-Sales Ratio of 14.7x (OVERVALUED)

However, slower than expected revenue growth or continued annual net losses could challenge current optimism and lead the market to reassess Lepu Biopharma’s valuation.

Find out about the key risks to this Lepu Biopharma narrative.

Build Your Own Lepu Biopharma Narrative

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A great starting point for your Lepu Biopharma research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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