New Drug Pipelines Waiting for Right Moment to Shine
The author is an analyst of NH Investment & Securities. He can be reached at pk.park@nhqv.co. -- Ed.
We raise our TP on Daewoong Pharm to W260,000. On a parent basis, it booked 2Q22 sales of W293.8bn and consensus-topping OP of W33.6bn. We boost our 2022 sales assumption for Nabota to W141.3bn, and we believe that domestic ETC earnings contributions to overall OP will continue to rise in line with a wider manufactured product portion within domestic ETC sales.
Registers earnings surprise: 2Q22 results beat consensus
Reiterating a Buy rating, we raise our TP on Daewoong Pharm by 13% to W260,000, reflecting: 1) a W8.8bn boost in our 2023 OP projection; and 2) a hike in our target multiple (EV/EBITDA) from 11.7x to 14.2x for the firm’s Nabota domain in line with share price increases at peers.
On a parent basis, Daewoong Pharm announced sales of W293.8bn (+7.6% y-y) and OP of W33.6bn (+25.8% y-y), with OP beating our estimate and consensus. We mainly attribute this strong performance to both ongoing sales growth for Nabota in the US and ROW countries and favorable forex market conditions. And, the manufactured product portion within domestic ETC sales is widening.
For 3Q22, we predict sales of W302.9bn (+14.3% y-y) and OP of W34.7bn (+45.2% y-y). Already continually revising up our Nabota sales projections since Mar 2022, we now push up our 2022 annual sales estimate for the toxin product to W141.3bn. With Nabota being sold at 30% lower price tag than that for Botox, the company is in an advantageous position to expand its market share amid a global economic downturn. However, taking a conservative stance, we restrict our 3Q22 and 4Q22 sales projections for Nabota to roughly the 2Q22 level, even though the sales of product are well situated to rise in 2H22.
New drug pipelines waiting for right moment to shine
Daewoong Pharm’s 2Q22 results release shows a widening in its manufactured product portion within domestic ETC sales to 50.9%, with a GPM of 49.7%. This trend is expected to grow stronger towards next year in keeping with the planned launches of Fexuprazan (acid reflux treatment) in Jul 2022 and Enavogliflozin (a new diabetes drug) in 2H23. With both of the two drugs being prepared for overseas market entrances, related results should start to be seen with the slated debut of Fexuprazan in Brazil/Mexico in 2024. In addition, DWN12088, a new drug for idiopathic pulmonary fibrosis, which has recently received fast-track designation by the US FDA, has entered global phase II trials, including in the US.
We view Daewoong Pharm’s shares as being undervalued compared to those of other large domestic pharmaceutical players, believing that its new drug pipeline value is underappreciated. Anticipating further robust earnings performance, we view the time as being ripe to load up on its shares.