Strong Sales Expected
With obtaining the KGMP certification for its new Nabota plant in Hyangnam expected to happen in mid-2017, Daewoong Pharm is set to expand its domestic sales and exports to Southeast Asia of its botulinum toxin biosimilar “Nabota.”
In addition, Daewoong Pharm aims to apply for FDA approval for Nabota in the first quarter of 2017 and launch the product in the US in the first half of 2018 at the earliest. As Nabota’s launch depends on whether the new Nabota plant passes the FDA’s due diligence evaluation slated for the second half of 2017, we advise paying a close attention to the results of the evaluation.
After the completion of the new Nabota plant in Hyangnam in the first half of this year, Daewoong Pharm’s production capacity of Nabota surged from 10 billion won (US$9 million) to 300 billion won (US$270 million), raising the prospects of greater global and domestic sales. In particular, should Daewoong Pharm obtain KGMP certification in mid-2017, ahead of cGMP certification, for the new plant, the company would likely book Nabota-led sales growth at home and abroad in the second half of 2017. We expect Nabota’s domestic sales to jump from 6.8 billion won (US$6.1 million) in 2016 to 15.3 billion won (US$13.7 million) in 2017 (up 125% yoy). Including exports to Southeast Asia, Nabota sales are likely to reach 20 billion won (US$18 million) in 2017.
The US represents 52.5% of the global botulinum toxin market. Daewoong Pharm has signed a supply contract for Nabota with EVOLUS, a US bio company in which Strathspey Crown, a private equity fund owned by plastic surgeons, dermatologists and ophthalmologists, is the majority shareholder. Once Nabota receives the green light from the FDA, Daewoong Pharm will supply the product for EVOLUS to let its distribution company Alphaeon sell the drug to hospitals connected to Strathspey Crown investors. As such, believing that Daewoong Pharm has already secured a captive client for Nabota via its supply contract with EVOLUS, we expect Nabota to generate a stable US sales once it is approved by FDA. Assuming that everything progresses as planned, we predict that Nabota will be launched in the US in the first half of 2018 at the earliest. However, the timing of the actual launch will likely hinge on whether the firm passes the FDA’s due diligence evaluation for the new manufacturing facility.
Based on a SOTP valuation method, we have calculated Daewoong Pharm’s EV at 1.0765 trillion won (US$968.8 million). The figure is the sum of: Daewoong Pharm’s non-consolidated operating value (798.9 billion won or US$719 million) reflects the strong growth potential of its global businesses with the net profit of 42.1 billion won (US$37.9 billion) in the fiscal year of 2017 multiplied by 19 (average P/E multiple of top-tier pharmas); the 151.1 billion (US$136 million) worth value of Nabota in the US; and the 126.4 billion (US$113 million) worth value of its stake in Hanall BioPharma. We have initiated coverage on Daewoong Pharm with a Buy rating and target price of 90,000 won (US$81).
By William Ku, Analyst at Nonghyup Securities