Yuhan Corporation demonstrates the strength of its core business; Leclaza also expected to deliver

[Financial News] An analysis says Yuhan Corporation is strengthening the earnings power of its core business, but that more time will be needed before Leclaza, its key growth driver, undergoes a reassessment of its value.
Improved profitability in the pharmaceutical business and a rise in active pharmaceutical ingredient (API) orders are supporting results, while R&D achievements, including Leclaza and allergy treatments, are expected to be the next drivers of share-price gains.
On the 11th, iM Securities maintained its Buy rating on Yuhan Corporation but lowered its target price from KRW 140,000 to KRW 120,000. That implies 53.1% upside from the previous day’s closing price of KRW 78,400.
iM Securities analyst Jaewon Jeong cited an adjustment to the pipeline’s value to reflect the pace of growth in Leclaza prescriptions as the reason for the target-price cut. The pipeline’s value was reduced by about 14%, from KRW 7.8 trillion to KRW 6.7 trillion.
However, the core business’s profitability is clearly improving. Yuhan Corporation’s third-quarter revenue and operating profit on a standalone basis grew from a year earlier, and it is expected to meet the business plan set at the start of the year without difficulty. In particular, the share of prescription drug sales accounted for by the company’s own products rose to about 45% in the third quarter. “The larger the share of our own products, the greater the improvement in profitability,” Jeong said.
The overseas business is also building a foundation for growth. The company disclosed a total of four API supply contracts this year, worth about KRW 480 billion. Two of them were signed in the third and fourth quarters.
As South Korea emerges as an alternative production base amid the U.S.-China competition for biotech leadership, existing customers’ production volumes are returning and new customers are coming on board, according to the analysis. Jeong said this “can be interpreted as a situation in which production volumes from existing customers that had entrusted manufacturing to China are returning.”
The key question is how quickly Leclaza prescriptions will expand. Lazertinib royalties in Q3/Q4 were about KRW 7.5 billion, up 97% from a year earlier, but the increase from the previous quarter was only about KRW 500 million in won terms.
Excluding the impact of exchange rates, growth in dollar terms has continued to exceed 20% each quarter. However, expanding prescriptions in the U.S. for the subcutaneous (SC) formulation of Rybrevant requires the completion of individual negotiations with pharmacy benefit managers (PBMs).
Jeong identified overall survival (mOS) data from the MARIPOSA trial as a key factor in expanding Leclaza prescriptions. “Ultimately, the trigger for wider prescribing will be the point at which the MARIPOSA trial’s mOS data are confirmed,” he said.
Leclaza combination therapy currently accounts for about 25% of first-line prescriptions for newly diagnosed patients with EGFR-mutated non-small cell lung cancer. Prescriptions could rise sharply if the final mOS data meet or exceed market expectations, the analysis said.
The next-generation pipeline candidate YH35324, an allergy treatment, was also cited as an asset to watch. Phase 2 trials are under way in five countries, including South Korea and China, and the data are expected as early as the fourth quarter of next year. With global pharmaceutical companies showing growing interest in IgE-targeted treatments, the possibility of a licensing deal remains open, the analysis said.
Jeong said Yuhan Corporation’s core business “has developed a structure that allows it to continue growing profits while spending around 10% of revenue on R&D.” He added, “I believe the core business can provide downside support.” The company’s near-term share-price direction depends on the Leclaza mOS data and the licensing outcome for YH35324, but the earnings strength of its core business should give it time to wait for growth momentum, the analysis said.
[email protected] Kang Jung-mo Reporter