The company achieved 50% YoY revenue growth in 2024, but core product sales have slowed, with ZEJULA remaining flat (+0.4% QoQ) and VYVGART growth moderating (+9.9% QoQ). While operating loss narrowed (-23% YoY) and the company maintains US$880m in cash, the potential risk of revenue stagnation in 2025 highlights the importance of commercialising late-stage products. Zai Lab targets US$560m-$590m in revenue for 2025 (+40%-48% YoY) and aims to achieve non-GAAP profitability in 4Q25. Success in reaching these goals will depend on expanding market penetration for existing products while regulatory approvals and commercialisation of KarXT, bemarituzumab, and tivdak will also be critical. We suggest investors monitor mid-year revenue growth trends and the launch progress of late-stage products.
　　Key Factors for Rating
　　Slowing core product growth. Zai Lab reported full-year revenue of US$399m (+50% YoY), driven by VYVGART (US$93.6m), ZEJULA (+11% YoY), and NUZYRA (+99% YoY). In 4Q24, revenue reached US$109m (+66% YoY, +6.6% QoQ). While growth continued, core product expansion has slowed, particularly for ZEJULA (+0.4% QoQ), signaling stagnation. Meanwhile, VYVGART and VYVGART Hytrulo generated US$30m (+9.9% QoQ), growing at a slower pace than in prior quarters. These trends suggest core products may be approaching a plateau, increasing the need for accelerating new product launches to sustain revenue growth in 2025.
　　On the profitability front, operating loss improved to US$282m (-23% YoY), and net loss narrowed to US$257m, reflecting cost efficiencies. The US$880m cash position provides sufficient funding for commercial execution and R&D investments.
　　FY2025 guidance. For 2025, Zai Lab projects US$560m-$590m in revenue (+40%-48% YoY), aiming to achieve non-GAAP profitability in 4Q25. However, given the slowing growth in core products, the company will need to expand market penetration and optimise pricing strategies, alongside new product approvals and label expansions, to meet its targets.
　　Key upcoming catalysts: KarXT’s potential NDA approval for schizophrenia in late 2025; bemarituzumab’s PhIII results for gastric cancer expected in 1H25, followed by a China NDA submission; ZL-1310 (DLL3 ADC)’s PhI data for SCLC to be presented at a major medical conference in 1H25; additional China NDA filings for tivdak, repotrectinib, and TTFields to broaden the oncology portfolio.
　　Key Risks for Rating
　　1) Slower-than-expected product sales ramp-up; 2) failure or delay in clinical development for key pipeline; 3) disruptions to key partnerships.
　　Valuation
　　We fine-tuned earnings forecasts and slightly lowered DCF-TP (WACC 13.2%, terminal growth 2.5%) to HK$35/US$45 for H/ADR shares. Maintain BUY.