Our DCF-based target price of HK$65 is derived from our 10-year DCF model. In our model, we forecast earnings out to 2035E and thereafter assume a terminal growth rate of 2.0%, discounting back using a WACC of 9.7% (beta of 1.2).

We rate Everest Medicines shares as High Risk given the company’s short operating history as well as the risk factors cited below. Key downside risks include: 1) Risks of in-license agreements – The company's rights to develop and commercialize drug candidates are subject to the terms and conditions of licenses and sublicenses. The licenses may not grant Everest exclusive rights to use intellectual property in all aspects of drug development and in all planned territories. 2) Limited operating history and lack of track record of sales capability. 3) Risk of R&D failures – Everest substantially relies on the success of drug candidates in clinical development, which may fail in the R&D phase. The company also cooperates with third-party CROs to monitor and manage data for some of their ongoing clinical programs. Key upside risks include: 1) better-than-expected Nefecon sales; and 2) clinical success of EVER001. Any of these risk factors could cause the shares to deviate from our target price.