[Click eStock] "Yuhan Yanghaeng, Expecting Core Business Normalization Starting This Year"

Pipeline Development Status Also Positive... Target Price Maintained at 75,000 Won

[Asia Economy Reporter Gong Byung-sun] An analysis has emerged that Yuhan Corporation's prescription drug sector, which was hit by COVID-19 last year, will recover this year. It is expected that the core business will normalize once the pandemic ends with vaccine distribution. Accordingly, Heungkuk Securities maintained a target price of 75,000 KRW and a 'Buy' investment rating for Yuhan Corporation.

According to Heungkuk Securities on the 23rd, Yuhan Corporation was impacted by COVID-19 last year. The sales proportion of its core prescription drug sector decreased from 64.1% in 2019 to 58.2% last year. Conversely, the sales proportion of household goods increased from 7.7% in 2019 to 8.8% last year. Exports also sharply declined. The sales proportion from exports was 13.9% in 2019 but dropped to 8.9% last year. Excluding license revenue, the total sales increase was minimal.

However, with the expansion of vaccine distribution this year, there is an expectation that the pandemic will end and Yuhan Corporation's core business will return to its main track. First, new product launches such as the women's probiotic product in the non-prescription drug sector and normalization of the prescription drug sector are anticipated. Domestically, sales of the non-small cell lung cancer treatment 'Reclaza' are expected. Yuhan Corporation has been conducting research and development on Reclaza since 2015 and received conditional new drug approval as the 31st in Korea last January. Researcher Choi Jong-kyung of Heungkuk Securities stated, “The export sector will also return to pre-COVID-19 levels.”

Yuhan Corporation's pipeline development status is also positive. Reclaza is currently undergoing global phase 3 monotherapy and combination clinical trials with global pharmaceutical company Janssen. If it passes clinical trials, it will have value as a first-line treatment for non-small cell lung cancer. Yuhan is developing a non-alcoholic steatohepatitis (NASH) treatment with U.S. pharmaceutical company Gilead Sciences. Gilead is expected to complete lead compound identification in the second half of this year, and Yuhan is expected to gain technical revenue. Another pharmaceutical company, Boehringer Ingelheim's NASH treatment, is also expected to enter phase 1 clinical trials in the first half of this year.

Reflecting this, Heungkuk Securities maintained the target price at 75,000 KRW. Researcher Choi explained, “The target price was calculated by deducting the value of net borrowings of 193.5 billion KRW and preferred shares worth 70.6 billion KRW from Yuhan Corporation's operating value of 4.1 trillion KRW and investment asset value of 867.6 billion KRW using the net asset value method.”