According to UBS's recent report, the target price for Zai Lab (09688) is set at HK$33.5 based on a discounted cash flow (DCF) analysis, implying a 1x and 1.6x multiple on both unadjusted and adjusted peak sales. UBS indicates that the market appears to overlook Zai Lab's short-term growth potential, including the launch of VYVGART and new products, as well as the business development potential of products like DLL3ADC and ZL-1503 (IL-13/IL-31R). It is anticipated that Zai Lab's core product VYVGART will continue to expand its indications and increase sales revenue, while several promising drug candidates are expected to gain approval. The business development opportunities for ZL-1310 (DLL3ADC) and ZL-1503 (IL-13/IL-31R) are expected to drive recent growth. UBS believes the market is seemingly ignoring the group’s short-term growth and business development potential and initiates coverage with a "Buy" rating. UBS also believes that VYVGART, which has been commercialized by Zai Lab, is a first-in-class FcRn drug that has the potential to become a blockbuster in the immunology field, projecting peak sales of VYVGART in China to reach US$1.8 billion. Key potential blockbuster candidates in the product pipeline include Bemarituzumab (FGFR2b) for gastric cancer, Povetacicept (BAFF/APRIL) for autoimmune diseases, the recently licensed candidate VRDN-003 (IGF-1R) for thyroid eye disease, and KarXT for schizophrenia. UBS believes that Zai Lab will achieve profitability in the near term through revenue growth and improved operational efficiency, with guidance indicating a non-GAAP operating breakeven in the fourth quarter of 2025, and a full-year non-GAAP operating breakeven in 2026. In terms of gross margins, UBS expects that local manufacturing, reduced sales costs for VYVGART due to capacity expansion, and potential global product launches will enhance overall gross margins. Regarding expenditures, the company is prioritizing high-value projects to limit R&D spending growth, while sales, general, and administrative expenses are expected to grow modestly.