New Substances Have Potential to Generate Technology Transfer Deals
The author is an analyst of KB Securities. He can be reached at kimtaehee@kbfg.com. -- Ed.
Maintain BUY; trim target price (KRW72,000→KRW70,000)
We trim our TP (KRW72,000→KRW70,000) on Yuhan to reflect changes to 2023 ERP (5.41%), RFR (3.32%) and earnings estimates following the 4Q22 earnings release. We maintain BUY based on:
(1) anticipation of Leclaza-Rybrevant co-admin trial results conducted by Janssen;
(2) the smooth progress of clinical trials for YH25724 (NASH treatment) licensed out to Boehringer Ingelheim, YH14618 (degenerative arthritis treatment) licensed out to Spine BioPharma and other key candidate substances; and
(3) expected profit margin improvement from efficient spending.
4Q22 revenue in line with estimates; improvement in profit margins
Yuhan posted 4Q22 consolidated revenue of KRW450.5bn (+6.3% YoY) and OP of KRW17.5bn (+268.8% YoY), which is in line with the lowered market consensus. Royalties and Household & Healthcare saw their top lines retreat YoY, but growth was sustained by Pharmaceuticals (KRW361.3bn; +18.3% YoY). OPM came in at 3.9%, the highest level in the past six quarters; cutbacks in ad spending and a drop in clinical trial costs following the conclusion of Leclaza’s multinational Phase III trials were more than enough to cover COGS increases stemming from a jump in merchandise sales.
Leclaza-Rybrevant co-admin data pending
We forecast 2023 revenue at KRW1.89tn (+6.4% YoY) and OP at KRW61.0bn (+69.5% YoY). The Leclaza-Rybrevant results will be key. In terms of efficacy and safety, the results should be comparable to those of Tagrisso (main competitor). Other new substances, incl. YH35324 (allergy treatment; co-developed with GI Innovation) and YH32369 (immune-oncology drug; with ABL Bio), have potential to generate technology transfer deals.