Yuhan Corp
The author is an analyst for NH Investment & Securities. He can be reached at pk.park@nhqv.com -- Ed.
GPM for domestic first-line NSCLC treatment sales is estimated at 62% of GPM for Janssen’s global Lazertinib royalties in 2028. When enrolled in insurance coverage, drug prices tend to fall on a hike in patient numbers, but market expansion can be sizable thanks to higher prices and longer treatment periods compared to pre-existing treatments.
EBITDA raised 12% amid domestic first-line treatment expansion
We maintain a Buy rating on Yuhan, but raise our TP by 11% to W100,000, as we reflect the likelihood of reimbursement following domestic first-line treatment approval. We raise 2027 domestic primary treatment sales forecasts by W161.1bn from the previous level, and size 2028 sales forecasts at W216bn. Of note, we raise discounted 2027F EBITDA by 12%.
GPM on domestic primary treatment sales should be more than half of the GPM from Janssen’s global Lazertinib royalties. In 2028, global sales are estimated at W2.9tn and domestic primary sales at W216bn. However, GPM excluding commissions to Oscotek should stand at W260.1bn and W162bn, respectively, and the contribution of domestic sales to profits is likely to be substantial due to the difference in commission rates in relation to milestone fee income from Janssen and domestic direct sales.
Key points: 1) insurance coverage; and 2) forecasting market expansion via drug price calculation
1) In order to expand market penetration, insurance coverage is essential. As Tagrisso, a similar third-generation TKI, passed the Cancer Disease Review Committee’s deliberation, Lazertinib is highly likely to be listed as a first-line therapy. 2) Lazertinib’s current drug price is W210,000/day, but the drug price can be lowered if it is listed under first-line reimbursement. A reduction of 20~40% is expected compared to the current price.
The estimated domestic primary market for first and second generation TKIs included under reimbursement is W90bn. If third-generation TKIs such as Tagrisso and Lenvima are included, there is the potential for significant market expansion with: 1) double the treatment period; and 2) higher drug prices (six times higher than existing drugs). We believe that the market would expand 9.6x with a 20% price cut and 7.2x with a 40% price cut (our estimate reflects a 50% cut). We draw attention to drug price negotiations for Tagrisso, which is currently under evaluation for reimbursement.