SK Biopharm
The author is an analyst for NH Investment & Securities. He can be reached at pk.park@nhqv.com -- Ed.
Although SK Biopharm’s operating losses likely narrowed q-q in 2Q23, we believe that COGS-to-sales ratio returned to the previous high level, and SG&A expenses likely upped q-q on clinical costs. However, with June US prescription data showing encouraging growth for XCopri (compared to the market), strong operating leverage effects are expected from 2025.
2Q23 preview: To show slight narrowing in operating losses
We maintain a Buy rating and a TP of W105,000 on SK Biopharm. We estimate consolidated 2Q23 sales of W82.7bn (+55% y-y) and operating losses of W20.9bn (RR). While the size of operating losses likely narrowed q-q, we believe that COGS-to-sales ratio returned to the previous high level (after being low in 1Q23), and SG&A expenses likely upped q-q due to expenses such as clinical trials. However, sales for 2Q23 should show a 36% q-q hike thanks to both US prescription growth and a stronger dollar against the won.
Consolidated earnings contributions from Proteovant (60% stake) are to be reflected in earnest from 2H23. The biotechnology player boasts cash on hand of US$75mn, a sufficient amount to operate for at least two years. Even assuming that Proteovant generates no sales and that SG&A expenses of W40bn for it are reflected in consolidated earnings, we expect SK Biopharm to turn to the black (y-y) from 4Q23.
Prescription growth already underway; June prescription data further encourages
June US prescription data shows encouraging growth for XCopri. To date in 2023, US prescription data, including that for new drugs for epilepsy and domestic biosimilars, is repeating the pattern of sharp m-m increases for odd-numbered months and m-m slowdowns for even-numbered months (on base effects from the previous-month spikes). Thus, market growth in June was negative due to the strong rises in May.
In June, monthly prescription growth for third-generation epilepsy drugs clocked at +10% (y-y) and -3% (m-m), following May growth of +22% (y-y) and +8% (m-m). With its market share widening to 9.1%, XCopri kept the highest pace of expansion in the category, displaying y-y growth of +38% and m-m growth of -1%. New prescriptions remained stable at the May level. Given this backdrop, SK Biopharm should enjoy 2025 OP of W207.7bn, exceeding consensus even after reflecting W40bn in SG&A expenses for Proteovant.