Daewoong Pharmaceutical, Concerns Over Prolonged ITC Litigation Uncertainty... Target Price ↓

[Asia Economy Reporter Park Jihwan] Hi Investment & Securities diagnosed that Daewoong Pharmaceutical's third-quarter earnings are expected to improve, but concerns about prolonged litigation uncertainty remain. Accordingly, the investment opinion was maintained as 'Buy,' but the target price was lowered from the previous 120,000 KRW to 110,000 KRW.

On the 19th, Park Jaekyung, a researcher at Hi Investment & Securities, stated, "Daewoong Pharmaceutical's third-quarter performance is expected to improve, but directional uncertainty will persist," adding, "Litigation costs are gradually decreasing, with second-quarter litigation costs at 9.8 billion KRW, followed by 4 billion KRW in the third quarter after the preliminary ITC ruling in July, and about 2 billion KRW in the fourth quarter." He explained that depending on the final ITC ruling in November, additional litigation may proceed, and uncertainty due to potential increases in litigation costs is expected to continue.

Researcher Park said, "In the third quarter, Nabota's domestic sales are expected to surge 377.6% year-on-year to 5.3 billion KRW, while exports are expected to decrease by 15.5% to 6 billion KRW, resulting in a consolidated year-on-year increase of 37.2% to 11.3 billion KRW." It was analyzed that although exports to the United States have not been made due to the impact of the novel coronavirus infection (COVID-19), domestic sales increased due to the ban on competing products, and exports increased through regions outside the U.S., such as Canada and Brazil.

Earlier, on July 8 of this year, the ITC preliminary ruling on the trade secret infringement allegations filed by Medytox against Daewoong Pharmaceutical was announced. The ITC judged that Daewoong Pharmaceutical infringed on Medytox Allergan's trade secrets and recommended a 10-year import ban order.

Daewoong Pharmaceutical announced on August 7 that it had submitted an objection to the ITC preliminary ruling. The result of the objection is scheduled to be announced on the 21st of this month.

Researcher Park expressed hope, saying, "Through this result, it will be possible to partially confirm the possibility of a change in the final ruling."

The final ruling is scheduled for November 6. In the final ruling, a six-member committee will issue the final decision on the preliminary ruling. If the final ruling is a loss, the import ban will be finalized after a 60-day presidential review.

Researcher Park forecasted, "There is also a possibility of an appeal to the federal court after losing the final ruling," adding, "The possibility of prolonged litigation uncertainty also exists."