Yuhan Corp
The author is an analyst for NH Investment & Securities. He can be reached at pk.park@nhqv.com -- Ed.
Yuhan posted 2Q23 consolidated OP of W27.1bn, significantly beating consensus. Earnings should continue to improve on: 1) the likely listing of Lazertinib as a first-line treatment for NSCLC in Korea; 2) growing milestone fee income from Janssen; and 3) capacity expansion at Yuhan Chemical. Against this backdrop, we raise our TP to W110,000.
Consolidated earnings continue to beat consensus; raise TP further
We maintain a Buy rating on Yuhan and raise our TP by 10% to W110,000, as we upwardly revise our earnings estimates. Yuhan delivered consolidated 2Q23 sales of W495.7bn (+3% y-y) and OP of W27.1bn (+60% y-y), significantly beating consensus. Sales of high-margin products rose, and the household goods business showed growth for the first time in five quarters. As a result, cost-to-sales ratio and SG&A-to-sales ratio excluding milestone fees and research expenses improved.
Consolidated subsidiaries have been reporting meaningful OP growth since 1Q23. Although Yuhan Chemical is still in the red, it should generate full-fledged consolidated profits after the expansion of its Hwaseong plant in 4Q23.Yuhan’s 2023 consolidated OP is estimated at W98bn (+172% y-y).
Growth drivers: 1) domestic sales of Lazertinbi; 2) Janssen’s phase 3 results; and 3) next licensing-out deal
1) We keep our prediction for 2028 Lazertinib GP on domestic primary treatment sales unchanged at W162bn (GPM 75%). The treatment’s price is predicted to be 50% lower than the current price, and its GP is estimated at 60% of GP on Janssen’s global Lazertinib royalty. The possibility of primary treatment listing for Tagrisso on the Korean national health plan within the year is also positive for Yuhan.
2) On Aug 16, the phase 3 study abstract for Tagrisso FLAURA2 (Tagrisso + chemotherapy combination as a first-line treatment) will be released at WCLC. FLAURA2 boasts advantages over MARIPOSA phase 3 in terms of: 1) quality of life; and 2) efficacy of chemotherapy after first-line treatment.
3) Allergy treatment YH35324 phase 1a (single dose) data was released at the European Society of Allergy and Immunology. The data shows superiority to omalizumab 300mg in terms of: 1) degree and duration of suppression of serum free IgE; and 2) treatment-related adverse reaction index. We recommend paying attention to ongoing phase 1b repeat-dose data.