Biotech stock Zai Lab slipped as investors digested the company's mixed fourth-quarter earnings report early Thursday. The stock is approaching a buy point.
Zai Lab — Thursday's pick for IBD 50 Stocks To Watch — posted a larger-than-expected fourth-quarter loss, although smaller than in the year-ago quarter.
Zai Lab's loss of 80 cents per share missed the FactSet consensus estimate of a loss of 60 cents a share. But it was an improvement over the loss of 98 cents in Q4 of 2023.
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Biotech's Sales Rise As Losses Dwindle
The IBD 50 company's fourth-quarter sales grew 66% to $109.1 million. The consensus FactSet estimate was $109.3 million. Although sales also missed estimates, that's an acceleration from gains of 39%, 46% and 48% the previous quarters.
Zai Lab's Q4 sales growth was driven by Vyvgart, its treatment used for an immune system disease that causes muscle weakness. It also saw continued growth in its Zejula ovarian cancer drug and its antibiotic, Nuzyra.
"We significantly improved our financial position, delivering a substantial reduction in operating loss and advancing towards our goal of achieving profitability in the fourth quarter of 2025," said Josh Smiley, president and CEO of Zai Lab, in an SEC filing.
Its net loss narrowed mainly thanks to revenue growth that outpaced net operating expenses.
Zai Lab develops treatments for unmet medical needs including lung and gastric cancer, immunology, neuroscience and infectious diseases. It serves patients in China, the U.S. and Europe. The China-based company has expanded its presence and now has three offices in the U.S.
The company has eight approved drugs and expects to launch three new treatments in 2025 to 2026 for schizophrenia, pancreatic cancer and gastric and esophageal cancers.
Analysts expect revenue to rise to the 27%-to-35% range over the next three quarters.
The company guided full-year 2025 revenue of $560 million to $590 million vs. FactSet's $563.2 million estimate.
Analysts expect diminishing losses over the next three quarters, with the company turning profitable in 2026.
Biotech Stock Builds Base Amid 8-Week Run
The biotech stock was little changed at midday Thursday in heavier-than-average volume. Zai Lab is in a cup-without-handle base with a 36.60 buy point, according to MarketSurge pattern recognition.
Zai Lab is on pace for eight straight weeks of gains as volume has increased. Its relative strength line hit a 52-week high as shown by the blue dot on its weekly IBD MarketSurge chart.
The biotech stock has an up/down volume ratio of 1.7, indicating strong demand over the last 50 days. Its IBD Accumulation/Distribution Rating of A- indicates fairly heavy buying over the last 13 weeks.
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