Yuhan’s earnings this year will recover on the strength of licensing and collaboration payments, rather than its main pharmaceutical business, said Hana Financial Investment on Feb. 19, maintaining a “buy” recommendation and a 310,000 won (US$274.97) target price.
The company’s revenue in the fourth quarter last year rose 9.8 percent on-year to 414.2 billion won but its operating profit fell 26.5 percent to 7.7 billion won, below market consensus. Higher raw material prices were the main reason and disappointing results were to be expected to some extent, said analyst Seon Min-jeong.
Expectations should not be placed on its main business this year, she said. Annual exports of active pharmaceutical ingredients will decline 5.7 percent from last year and double-digit growth in prescription drugs is not feasible anymore since it lowered prices of best-sellers Viread and Sovaldi, according to the analyst.
An inflow of license payments, however, will more than offset the increase in R&D costs, and the pharmaceutical company’s earnings will recover. Approximately 23 billion won from the transfer deal with Janssen in November and a US$15 million signing payment from Gilead Sciences will be fully reflected in the first quarter, said Seon.
In the latter half, the company might post an earnings surprise if its NASH collaboration with Gilead results in a milestone achievement, she added.
By Hwang You-mee (firstname.lastname@example.org)