[Click eStock] "Chong Kun Dang Increases R&D Expenses for Future Investment"

Hana Financial Investment "Target Price Lowered from 250,000 KRW to 220,000 KRW"
Chong Kun Dang, R&D Expenses Increased by 47.7% Year-on-Year Last Year

[Asia Economy Reporter Gong Byung-sun] Expectations for Chong Kun Dang's pipeline have diminished following the failure to announce results for CKD-506, a rheumatoid arthritis treatment. However, as the company continues to increase its annual R&D expenditure, evaluations suggest that Chong Kun Dang's corporate valuation remains attractive.

On the 15th, Hana Financial Investment lowered Chong Kun Dang's target stock price from 250,000 KRW to 220,000 KRW, while maintaining a "Buy" investment rating.

Chong Kun Dang had anticipated announcing the Phase 2a clinical trial results for CKD-506 last year, but this did not materialize. Consequently, expectations for the company's pipeline significantly declined. On March 17, expert opinions deemed the conditional approval of the COVID-19 treatment Napabeltan inappropriate, making early release based solely on Phase 2 clinical results difficult. Although expectations for Napabeltan were reflected in the stock price until the end of last year, the related bubble began to deflate thereafter.

Nonetheless, with R&D expenses increasing at double-digit rates annually, it is expected that Chong Kun Dang's pipeline will be assigned sufficient value in the future. Sun Min-jung, a researcher at Hana Financial Investment, stated, "Last year, Chong Kun Dang increased its R&D expenses by a remarkable 47.7% compared to the previous year, with the ratio of ordinary R&D expenses to sales reaching 11.1%. The estimated ordinary R&D expenses for the first quarter of this year rose 43% year-on-year to 35.1 billion KRW. Although expectations are currently low, Chong Kun Dang's value is expected to emerge in 2 to 3 years."

Chong Kun Dang's first-quarter performance this year achieved double-digit growth despite a high base last year. Operating profit in the first quarter of last year increased by 56.1% compared to the same period the previous year, and it rose by 22.2% in the first quarter of this year. Even Jinuvia, a major product that recorded annual sales of 147.1 billion KRW last year, achieved double-digit growth. However, the pneumococcal vaccine Prevnar returned to sales levels typical of previous years this winter due to a significant reduction in flu cases.

K-CAB and Prolia, which show increased profit margins as sales volume grows compared to other imported products, continued high growth and contributed to improving Chong Kun Dang's margin rate. K-CAB, the 30th domestic new drug developed by HK Inno.N, is expected to grow over 40% this year and achieve annual sales exceeding 100 billion KRW.