[Click eStock] "Yuhan Yanghang, Expected Record High Performance Due to Large-Scale Milestone Receipts Last Year"

Hana Financial Investment Report
Entering the Core Business Growth Phase

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating on Yuhan Corporation on the 13th, expecting record-high performance last year due to the receipt of a large-scale milestone payment, and raised the target price by 0.5% from the previous level to 100,000 KRW.

Yuhan Corporation's sales in the fourth quarter of last year are estimated at 469.2 billion KRW, a 19.2% increase compared to the previous year. Operating profit is expected to increase by 429% to 45 billion KRW. The significant increase in operating profit is due to about 80% of the $65 million milestone payment (approximately 72.3 billion KRW) received from Janssen upon entering Phase 3 clinical trials for the combination therapy of Lazertinib and Amivantamab on November 23 last year being recognized in the fourth quarter.

Accordingly, the annual sales for last year are expected to reach 1.6277 trillion KRW, a 10% increase from the previous year, and operating profit is projected to reach 102.1 billion KRW, a 715% increase, marking a record high performance.

Yuhan Corporation appears to have entered a growth phase in its core business as well. Minjung Sun, a researcher at Hana Financial Investment, said, “The prescription drug segment, which had been shrinking for five consecutive quarters from the first quarter of 2019 to the first quarter of last year, began to show positive growth from the second quarter. Due to the base effect and the impact of newly introduced drugs, the growth rate of the prescription drug segment is expected to be about 14% this year.” Regarding the overseas active pharmaceutical ingredients (API) segment, although a significant rebound is unlikely due to the absence of newly commercialized drug ingredients, the continuous decline that lasted for three years since 2018 is expected to end.

Yuhan Corporation is also expected to maintain high growth in the over-the-counter (OTC) and lifestyle health business this year. Accordingly, sales for this year are estimated to exceed 1.8 trillion KRW, an 11.2% increase from the previous year, while operating profit is estimated at 80 billion KRW, a 21% decrease due to the negative base effect from last year.

Although Yuhan Corporation showed remarkable growth in the R&D (Research & Development) sector last year, it is expected to be difficult to announce clinical results as significant as last year’s immediately this year. However, if the conditional approval application for Lazertinib monotherapy submitted to the Korean Ministry of Food and Drug Safety in the third quarter of last year is approved in the first quarter of this year, sales of Lazertinib are expected to occur domestically.

Researcher Minjung Sun explained, “YH25724, which was transferred to Boehringer Ingelheim after completing preclinical trials last April, is expected to enter Phase 1 clinical trials in Europe in the first quarter of this year, and at least $10 million in milestone payments can be received in the second quarter.” She added, “Considering Yuhan Corporation’s mid- to long-term R&D achievements, its investment attractiveness remains high.”