Cancer treatment name Zai Lab is Wednesday's pick for IBD 50 Growth Stocks To Watch as the biopharmaceutical stock is forming a handle in a base.
The China-based company reports its second-quarter results Thursday before the market open. In its latest report, management forecast profitability by year-end.
The IBD 50 company focuses on developing products that address unmet needs in oncology, immunology, neuroscience, and infectious diseases. It has eight approved drugs in China and four approved by the U.S. Food and Drug Administration, and numerous drug candidates in its pipeline.
Its three main revenue generating drugs are Vyvgart, Zejula, and Nuzyra. Vyvgart is used to treat autoimmune diseases, and Zejula is used in ovarian cancer treatment. Nuzyra is prescribed for bacterial infections.
Zai Lab is in the Medical-Biomedical/Biotech industry group, which ranks No. 20 out of the 197 groups that Investor's Business Daily tracks.
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Zai Lab Stock Sets Up In A Base
Zai Lab stock is in an early-stage cup-with-handle base with a 41.20 buy point, according to MarketSurge pattern recognition. The biopharma stock is around 6% below the entry point.
Shares are above their 21-day exponential moving average and 50-day moving averages after testing the lines on Aug. 1.
Shares have gained 48% so far this year. It has outperformed 94% of names in the Investor's Business Daily's database. But with the stock trading just under 39, it has a monumental climb back to its all-time high of 193.54 reached Jan. 20, 2021.
Its 1.4 up/down volume ratio shows positive demand over the last 50 days, though mutual funds have lightened up their positions.
In June, 203 funds owned shares, down from 230 in March. But IBD Mutual Fund Index name Fidelity Contrafund bolstered its position to 1.4 million shares in June, from 1.2 million in March.
In addition, management owns 5% of shares, giving further incentive for the stock to do well.
Cancer Treatment Maker's Losses Shrink
For its second quarter, Zai Lab is expected to post a loss of 42 cents per share, narrower than its loss of 80 cents per share in the same quarter a year earlier.
Zai Lab on May 8 reported first-quarter sales of $106.49 million – which missed views – but its loss of 40 cents per share was smaller than expected.
It also reaffirmed its full-year 2025 revenue guidance of $560 million to $590 million.
"We continue to strengthen our financial position, achieving a 20% year-over-year reduction in operating loss and a 25% year-over-year reduction in adjusted operating loss, keeping us on track to achieve profitability in the fourth quarter of 2025," Zai Lab President Josh Smiley said in its first-quarter financial results release.
Analysts' full-year 2025 estimates now call for a loss of $1.36 per share and a profit of 64 cents per share in 2026.
Meanwhile, Wall Street sees Zai Lab's sales growth accelerating. Second-quarter revenue is projected to rise 25% and ramp up to 81% over the next four quarters.
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