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Despite earnings shock in Q2, Yuhan to rebound in H2: analysts

Lazertinib development expected to put Yuhan back on track in second half

Despite Yuhan Corp.’s second-quarter earnings shock, analysts on Thursday predicted the company would make a turnaround in the second half of the year.

Yuhan’s second-quarter report showed Wednesday that the company marked 355.7 billion won ($299 million) in quarterly revenue, a 7 percent fall from a year earlier. Operating profit dropped more than 98 percent to 444 million won, while net profit fell nearly 75 percent to 4.7 billion won.

Analyst Sun Min-jung from Hana Financial Investment said in a research note, “Milestone payments from Janssen, Gilead and Boeringer Ingelheim will be recognized in the third quarter report, creating some 10 billion won revenue for Yuhan.”


Hana Financial Investment maintained the target stock price for Yuhan at 330,000 won.

Analyst Hong Ka-hye of Daishin Securities revised Yuhan’s target stock price downward from her previous projection of 300,000 won to 280,000 won, but predicted the company would fare better in the third quarter.

Hong said in her report that she based the revised stock price on her analysis of Yuhan’s operating value at 1.5 trillion won, the potential value of Lazertinib at 874 billion won and subsidiary firm Yuhan Kimberly’s value at 717 billion won.

“Research and development costs will continue to increase in the second half due to Lazertinib’s progressing clinical trials, but the overall company performance will improve as prescription drug sales recover and additional product lines are added in 2020,” Hong said in her report.

Both Sun and Hong said Yuhan’s second-quarter performance was affected by the fall in revenue due to lowered drug costs in Korea as well as an increase in the company’s R&D costs and the fiscal time difference in reflecting license-out payments Yuhan received.

Only license-out profit of 1.9 billion won was recognized in Yuhan’s second-quarter report, while a bigger portion of the deals, 9.4 billion won, was reflected in the first-quarter report.

Lazertinib -- a highly mutant-selective, irreversible third-generation epidermal growth factor receptor tyrosine kinase inhibitor -- will enter phase 3 clinical trial in Korea in the last quarter of this year and globally in the first quarter next year.

A variant treatment that combines Lazertinib with dual antibody JNJ-372 is expected to complete phase 1b clinical trial in 2019.

Yuhan shares closed at 216,500 won Wednesday, down 0.5 percent from the previous day, but rose 4 percent to 225,000 won as of 2:30 p.m. Thursday.

By Lim Jeong-yeo (