OP Comes in Solid
The author is an analyst of NH Investment & Securities. He can be reached at pk.park@nhqv.co. -- Ed.
Yuhan’s consolidated 2Q21 OP came to W23.4bn, exceeding consensus by 17%, with OP excluding licensing fees seeing a turn to profit. Serving as the main momentum driver are clinical trials for a Tagrisso-resistant Lazertinib combination therapy, which may be approved next year if the FDA confers its breakthrough therapy designation.
OP comes in solid even if excluding licensing fees
We maintain a Buy rating and TP of W70,000 on Yuhan. The firm reported consolidated 2Q21 sales of W433.3bn (+4.3% y-y) and OP of W23.4bn (-34.3% y-y), with OP surpassing consensus by 17%. In 2Q21, royalty revenue came to only W16.7bn (-62.1% y-y), but non-consolidated OP topped W28.4bn (-29.7% y-y). Of note, OP excluding licensing fees arrived at W11.7bn, marking a successful turn to profit at the main domestic business.
Although the losses of consolidated subsidiaries such as Yuhan Health & Living are being reflected, the main consolidated business is continuing to improve, with Yuhan Chemical expected to turn to profit this year on the production of Leclaza. Leclaza, which was launched this year, should also contribute significantly to the improvement of non-consolidated earnings.
On a consolidated basis, we estimate Yuhan’s 3Q21 sales at W497.5bn (+15.8% y-y) and OP at W22.1bn (+8.6% y-y). We size 3Q21 royalty income at W13.8bn.
Pipeline check
1) Lazertinib: Yuhan’s phase III monotherapy trial has completed patient recruitment within 3Q21. Janssen’s phase III primary therapeutic combination therapy trial is in progress, and patient recruitment should be completed in 2H22. In addition, a Tagrisso-resistant combination therapy could be designated as a breakthrough therapy by the FDA and even approved next year if encouraging data is disclosed at the European Society for Medical Oncology (ESMO) conference in September.
2) Boehringer Ingelheim, NASH (non-alcoholic Steatohepatitis) treatment: To be launched in 2H21; upon the start of phase I trials, milestone fee inflow of roughly W10bn is expected.
3) Derivation of Gilead’s NASH treatment candidates: Two candidates are anticipated to be sequentially derived next year, helping to bring in related milestone income of about W10bn.