20170428-三星证券-R_D_expectations_heightened_after_solid_1Q_12页_456kb

Hanmi Pharmaceutical Summary

Core Content

Hanmi Pharmaceutical, a South Korean biopharmaceutical company, reported its first-quarter results, showing a mix of performance across different segments. Despite a year-over-year decline in consolidated sales, the company managed to achieve a significant increase in operating profit and net profit, beating expectations.

Key Financial Performance

• 1Q17 Sales: KRW233.6b (down 8.9% y-y, up 35.7% q-q)
• 1Q17 Operating Profit: KRW31.4b (up 39.0% y-y)
• 1Q17 Net Profit: KRW24.7b (up 178.8% vs. estimates, up 39.9% y-y)

Product Sales Highlights

• Amosartan: KRW13.5b (up 5.5% y-y)
• Rosuzet: KRW9.2b (up 155.6% y-y)
• Esomezol: KRW5.9b (up 22.9% y-y)
• Amodipin: KRW5.8b (up 31.8% y-y)
• Rovelito: KRW4b (up 21.2% y-y)

Upfront and Milestone Revenue

• Upfront income from out-licensing contracts:
  • HM95573 with Genentech: KRW9.1b
  • Orascovery with Athenex: KRW8.2b

R&D and Clinical Trials

Hanmi Pharmaceutical has a robust R&D pipeline with the following key developments:

Clinical Trials

• Efpeglenatide (Sanofi): Phase I trials to commence in 2H 2017
• JNJ-64565111 (Johnson & Johnson): Phase I trials to commence in 2H 2017
• Rolontis (by Spectrum): Phase III trials ongoing
• Olmutinib (ZaiLab): Phase III trials ongoing
• Poziotinib (Spectrum): Phase II trials ongoing
• HM71224 (Eli Lilly): Phase II trials ongoing
• HM95573 (Genentech): Phase I trials ongoing
• Efpegsomatropin (Sanofi): Phase I trials ongoing

Pre-Clinical Candidates

• 10 drug candidates are expected to enter clinical trials in 2H 2017.

Valuation and Target Price

• Current Price: KRW299,500
• Target Price: KRW410,000 (up 10.8% from previous estimate)
• Market Cap: KRW3.3t / USD2.9b
• Shares (float): 11,163,452
• 52-Week High/Low: KRW670,486 / KRW266,043

Valuation Multiples

• P/E (2016): 143.3
• P/E (2017E): 69.6
• P/E (2018E): 65.6
• P/B (2016): 5.1
• P/B (2017E): 4.7
• P/B (2018E): 4.4
• EV/EBITDA (2016): 52.1
• EV/EBITDA (2017E): 29.8
• EV/EBITDA (2018E): 28.6

Earnings Growth

• 2017E EPS: KRW4,301 (up 80.2% y-y)
• 2018E EPS: KRW4,565 (up 35.9% y-y)

Key Changes

R&D Strategy and Pipeline

Hanmi's R&D strategy focuses on open innovation, with a diverse pipeline that includes:

• Biologics: 5 candidates in global clinical trials, 10 in pre-clinical trials.
• New Chemicals: 8 candidates in various stages of development.
• Incrementally Modified or Fixed-Dose Combinations: 9 candidates in development.

Notable Projects

• Quantum Project: Out-licensed to Sanofi, ongoing clinical trials in nine countries.
• LAPS Insulin Combo (HM14220): Pre-clinical trials ongoing.
• Poziotinib (HM781-36B): Out-licensed to Spectrum Pharmaceuticals and Luye Pharma in China.
• Olmutinib (HM61713): Out-licensed to ZaiLab in China.
• HM71224: Out-licensed to Eli Lilly.
• HM95573: Out-licensed to Genentech.

R&D Milestones

Quantum Project

• LAPS Exendin4 (HM11260C): Late phase II clinical trials in nine countries, including the US, EU, and Korea.
• LAPS Insulin Combo: Pre-clinical trials ongoing.

New Biologics

• LAPS Insulin115 (HM12470A): US clinical trials began.
• LAPS GLP/GCG (HM12525A): Phase I clinical trials ongoing globally.

New Chemicals

• Olmutinib (HM61713): Phase II clinical trials ongoing.
• HM71224: Phase II clinical trials ongoing.
• HM95573: Phase I clinical trials ongoing.

Ownership and Structure

• Beijing Hanmi: 74% stake in Hanmi Pharmaceutical.
• Hanmi Fine Chemical: 63% stake in Hanmi Pharmaceutical.
• Ownership Structure: Provided by company data and Samsung Securities.

Summary of Key Events and Valuation

• Out-Licensing Deals: Multiple deals have been signed with major pharmaceutical companies, including Sanofi, Janssen, Eli Lilly, and Genentech.
• Milestone Income: Expected from pipeline drugs progressing through trials.
• R&D Investment: 18.2% of total sales allocated to R&D in 2017.
• Valuation Approach: Sum-of-the-parts valuation with a fair equity value of KRW5,244.8b.
• Target Price: Based on improved earnings and R&D progress, the target price was raised to KRW410,000.

Market Performance

• One-Year Performance:

  • Hanmi Pharmaceutical: -47.8% (12M), -21.7% (6M), -0.7% (1M)
  • Kospi Index: -52.4% (12M), -28.3% (6M), -3.1% (1M)

• Forward P/E and P/B Bands: Provided by QuantiWise and Samsung Securities estimates, indicating potential for growth and value.

Conclusion

Hanmi Pharmaceutical demonstrated strong performance in its 1Q results, driven by supergeneric sales growth, product mix improvements, and cost savings. The company is actively advancing its R&D pipeline with multiple projects in clinical trials and pre-clinical stages, and has secured several out-licensing deals. The target price has been raised to KRW410,000, reflecting the firm's solid earnings and promising R&D prospects. The valuation suggests a potential upside, with a fair equity value of KRW5,244.8b.