CICC: Maintain ZAI LAB (09688) with "Outperform" rating, target price of HK$28.1.

China Gold Securities released a research report stating that it maintains the "outperform industry" rating for ZAI LAB (09688) and keeps the ex-rights target price unchanged at 28.10 Hong Kong dollars/36.12 US dollars. The bank maintains the company's profit forecast for 2024 and 2025 unchanged, and introduces a profit forecast of $29 million for 2026. The bank remains optimistic about the future domestic commercialization potential of Pove, as the company has validated its sales capabilities in the field of self-immunity through the successful commercialization of Egamode's. Event: On January 10, 2025, ZAI LAB announced that it had reached an exclusive cooperation and licensing agreement with Vertex Pharmaceuticals Incorporated (Vertex) to obtain the rights to develop and commercialize Povetacicept (Pove) in Greater China and Singapore. The main points of China Gold Securities are as follows: Pove is currently the most optimal BAFF/APRIL therapy for IgA nephropathy According to Vertex's announcement, Pove significantly increases the affinity of BAFF and APRIL compared to other BAFF and/or APRIL antagonists through the engineered TACI domain. In November 2024, Vertex announced the Phase II clinical data of Pove for the treatment of IgA nephropathy in the RUBY-3 trial. The study included 54 patients with primary IgA nephropathy, UPCR 0.5 g/g, eGFR 30 mL/min/1.73 m2, who had received maximum dose RASi therapy for at least 12 weeks prior to treatment. 21 patients received 80mg Pove SC Q4W, while 33 patients received 240mg Pove SC Q4W. The data showed that at week 48, the average reduction in UPCR in the 80mg treatment group was 66.0%, and in the 240mg group it was about 80%. More importantly, the average eGFR reduction in the 80mg treatment group at week 48 was only 1.1 mL/min/1.73 m2, indicating that Pove can effectively maintain stable kidney function in patients. Additionally, unlike Tocilizumab and Atacicept, which are administered subcutaneously once a week, Pove is administered subcutaneously once every four weeks, which is expected to significantly improve patient compliance. Currently, there are several BAFF and/or APRIL targeting drugs in Phase III clinical trials globally for IgA nephropathy, including Pove, Tocilizumab, Atacicept, Zigakibart, and Sibeprenlimab, all of which have shown positive Phase II clinical data. It is recommended to pay attention to the subsequent data readouts, especially the effect of reducing proteinuria and the long-term benefits of treatment on glomerular filtration rate and kidney function improvement. The research and commercialization layout of Pove is highly synergistic with Egamode, and future commercialization is promising. According to data from the National Kidney Foundation, there are millions of patients with IgA nephropathy in China, and approximately 20%-40% of IgA nephropathy patients will progress to end-stage kidney disease within 10-20 years after diagnosis, requiring long-term dialysis or kidney transplantation to maintain life. There is currently no specific therapy approved in China for IgA nephropathy. China has joined the Phase III MRCT study of Pove, and the company's participation is expected to further accelerate clinical trials domestically. In addition, the company has validated its sales capabilities in the field of self-immunity through the successful commercialization of Egamode, thus holding an optimistic attitude towards the future domestic commercialization potential of Pove.