Plans to Apply for Breakthrough Therapy Approval
The author is an analyst of NH Investment & Securities. He can be reached at pk.park@nhqv.co. -- Ed.
Yuhan plans to apply for breakthrough therapy approval for Lazertinib within the year, with the results of its CHRYSALIS-2 clinical trials and entry in the US expected to materialize in 2022. Noting that the company’s consolidated earnings are improving and Lazertinib’s licensing fees are rising sharply, the firm is expected to achieve solid OP.
Lazertinib, a domestic anticancer drug targeting the US via CHRYSALIS-2 trials
We maintain a Buy rating on Yuhan, and raise our TP to W85,000. The value of Lazertinib, which was unveiled at the 2021 European Society of Oncology ESMO, has been hiked from W2.24tn to W2.99tn, reflecting the increased possibility of approval in the US thanks to encouraging results from the CHRYSALIS-2 trials.
Clinical trials were conducted for 76 patients with EGFR-mutated non-small cell lung cancer showing resistance to Tagrisso and chemotherapy (which leaves no other treatment options), and encouraging data (including response rate and clinical benefit rate) have been released. In an effort to launch its anticancer drug in the US, the company will apply for breakthrough therapy approval from the FDA within the year or accelerated approval in 2022. Janssen has also been working on additional clinical trials—MARIPOSA for primary treatment with the drug, and MARIPOSA-2 (phase 3) for the treatment of Tagrisso-resistant patients. It intends to use Lazertinib for early treatments and combination therapies, targeting the EGFR-mutated non-small cell lung cancer market, which is valued at US$10bn (single drug basis).
High growth expected on improved performance of consolidated subsidiary and royalty income
Yuhan’s consolidated 3Q21 earnings are believed to have fallen slightly, with sales of W439.5bn (+2.3% y-y) and OP of W14bn (-31.4% y-y), affected by the summer vacation and Chuseok holidays. However, thanks to expected 4Q21 earnings improvement, annual consolidated sales and OP should reach W1.74tn and W82.9bn, respectively. Consolidated subsidiary Yuhan Chemical is projected to secure 2021 OP of W5bn (TTP) from domestic production of Leclaza, and from 2022 onwards, consolidated OP should exceed the non-consolidated figure thanks to global production of Leclaza.
Moving ahead, Lazertinib licensing fee revenue should also jump significantly y-y. In 2022, the firm is expected to book milestone fees of W75.5bn with respect to phase III trials and US approval. Approval-related milestone fees of W150bn in 2023 and W200bn in 2024 are also anticipated. Also positive, explosive profit growth looks to be on the horizon thanks to sales-related milestone payments and licensing fees.