Hanmi Pharmaceutical's KRW 3.2 Trillion Technology Export Boosts Financial Flexibility, but Credit Rating Still 'Not Yet' [fn Market Watch]

[Financial News] Hanmi Pharmaceutical will transfer rights to a new obesity drug candidate worth about KRW 3.2 trillion to Genentech, a subsidiary of Roche. Despite the large-scale technology export, the impact on its credit profile is expected to remain limited for now, as milestone payments and royalties will take considerable time to materialize. However, the upfront payment, which does not need to be repaid, is expected to further strengthen the company's financial flexibility.
On the 26th, NICE Investors Service said that Hanmi Pharmaceutical's technology transfer agreement for its obesity drug candidate HM17321 with Genentech is expected to maintain strong financial stability and have only a limited effect on creditworthiness. Hanmi Pharmaceutical's long-term credit rating is AA-, with a Stable outlook.
Hanmi Pharmaceutical signed the HM17321 technology transfer agreement with Genentech on the 24th. HM17321 is a biopharmaceutical candidate being developed as an obesity treatment, and it is currently in Phase 1 clinical trials in the United States. Genentech will take over development from Phase 2 onward.
The total deal value is about USD 2.3 billion, or KRW 3.1892 trillion. Of that, the upfront payment is about USD 190 million, or KRW 262.9 billion, while the remaining roughly USD 2.1 billion, or KRW 2.9263 trillion, will be paid as milestones tied to clinical development, regulatory approval, and commercialization. After the drug is launched, Hanmi will also receive royalties based on annual net sales. The upfront payment and milestone payments are non-refundable.
However, a deal worth more than KRW 3 trillion will not translate into immediate cash inflows. HM17321 is still in Phase 1, so it will take a considerable amount of time to complete Phase 2 and 3 trials, secure approval, and reach commercialization. The actual milestone inflows may also vary depending on development progress.
Kim Yu-bin, a researcher at NICE Investors Service, said, "Given the time required for Phase 2 and 3 trials, milestone and royalty inflows are expected to take a long time, and there is uncertainty over the size of those inflows."
By contrast, the non-refundable upfront payment is a positive factor for financial flexibility. In May, Hanmi Pharmaceutical also licensed out its biopharmaceutical candidate sonefpeglutide to Eli Lilly and Company, securing an upfront payment of KRW 112.9 billion. Including the Genentech deal, the company has secured KRW 375.8 billion in upfront payments from two technology transfer agreements this year.
Its financial structure is also improving. On a consolidated basis, net debt fell to KRW 28 billion at the end of June this year from KRW 494.3 billion at the end of 2021. Over the same period, the debt ratio declined from 108.6% to 46.9%, and the dependence on borrowings fell from 36.3% to 17.9%. Total debt-to-EBITDA also improved from 3.3 times to 0.9 times.
Kim said, "The inflow of non-refundable upfront payments will improve financial flexibility," adding, "The company is expected to maintain strong financial stability while meeting funding needs for R&D and the construction of the Beijing Hanmi Pharmaceutical integrated base."
NICE Investors Service plans to monitor the future size of milestone payments and the extent to which they are used to repay debt, and reflect that in its credit assessment.


[email protected] Kim Hyun-jung Reporter