[Click eStock] "Daewoong Pharmaceutical, Excessive Undervaluation... Buy Investment Opinion"

On the 30th, Kiwoom Securities maintained a "buy" rating and a target price of 170,000 KRW for Daewoong Pharmaceutical, stating that it is "excessively undervalued compared to competitors' market capitalization."

On the same day, Kiwoom Securities analyst Heo Hyemin said, "Daewoong Pharmaceutical's first-quarter sales were 296.6 billion KRW, and operating profit was 31.2 billion KRW, increasing by 1.5% and 1% respectively compared to the same period last year, meeting market expectations."

Sales of the SGLT-2 inhibitor class diabetes drug Forxiga, which used to generate about 24 billion KRW in sales each quarter, were suspended, resulting in first-quarter sales of Forxiga dropping 76% year-on-year to 5.9 billion KRW. Since it was not a high-margin product, the impact on profits was limited. On the other hand, sales of the company’s own diabetes drug Envlo reached 2.7 billion KRW in the first quarter, achieving more than half of last year's annual sales of 4.6 billion KRW.

Analyst Heo explained, "The product composition of prescription drug (ETC) sales improved from 53.1% last year to 58.5% in the first quarter, and the cost of goods sold ratio increased to 49.9%. Besides operating expenses, a one-time impairment loss of intangible assets related to maintenance therapy for erosive gastroesophageal reflux disease with Pexuclu (about 12 billion KRW) was recorded."

The stock price has not recovered to 150,000 KRW, the level before the first trial ruling in the domestic civil lawsuit with Medytox reported on February 13 last year. Analyst Heo said, "The ruling required Daewoong Pharmaceutical to deliver the botulinum strain to Medytox, pay 40 billion KRW in damages, and discard the finished products. The first hearing of the appeal trial will be held on the 2nd of next month, and prolonged litigation issues are expected to continue." However, he added, "Daewoong Pharmaceutical’s corporate value already reflects a scenario of losing the civil lawsuit. We believe the downside risk to the stock price due to the lawsuit is limited."

He also said, "The International Trade Commission (ITC) lawsuit has been resolved. Despite Nabota already being sold in the U.S., the market capitalization is only about half that of Hugel." He added, "While the impact of competitor Hugel’s entry into the U.S. market needs to be monitored, the short-term effect is expected to be limited. Rather, it is known that 62% of GLP-1 obesity treatment users who experienced rapid weight loss tend to seek facial cosmetic procedures like Botox for wrinkle improvement, so we expect market expansion."