HK inno.N (195940.KS) is expected to report third-quarter results below market expectations, hurt by domestic shipment adjustments for its gastroesophageal reflux disease treatment K-CAB and lower royalties from China. Still, domestic prescriptions keep growing, and expectations remain intact for U.S. marketing approval early next year and a licensing deal in Europe.
Daol Investment & Securities maintained its "buy" rating and 67,000-won target price on HK inno.N in a report on the 13th. It estimated third-quarter revenue at 267.6 billion won, up 2.6% from a year earlier, and operating profit at 25.6 billion won, down 1.0%. The operating profit estimate is 17.1% below the market consensus of 30.9 billion won.
K-CAB is expected to show a gap between prescription growth and reported revenue. Domestic revenue, reflecting deductions tied to drug price rebates and adjustments to shipments through distribution channels, is forecast at 44 billion won, up just 0.5% from a year earlier. Actual prescriptions, by contrast, were estimated at 65.4 billion won, a 16.5% increase. "Actual prescription values are maintaining solid growth," said Lee Ji-soo, an analyst at Daol Investment & Securities.
K-CAB royalties from China are expected to decline from the previous quarter as pharmaceutical sales and prescribing activity weakened in that market. In the health and beauty segment, the report cited a shrinking market and additional advertising spending as reasons for continued losses, despite an improved market share for the hangover remedy Condition. Earnings could improve, however, as advertising costs ease and the beauty business is scaled back.
In the fourth quarter, about 16 billion won in sales of the COVID-19 vaccine Comirnaty are expected to be booked, with domestic K-CAB revenue also recovering. Intravenous solutions and anticancer drugs are projected to maintain stable sales. Daol Investment & Securities estimated full-year revenue at 1.0877 trillion won and operating profit at 127.6 billion won, up 2.3% and 15.1%, respectively, from a year earlier.
K-CAB's overseas expansion is the key variable for the company's medium- to long-term valuation. In a U.S. Phase 3 trial for non-erosive gastroesophageal reflux disease, K-CAB showed improvement in heartburn compared with placebo, and the effect was sustained through 24 weeks in extended dosing. Detailed data will be presented at the American College of Gastroenterology meeting.
"U.S. marketing approval for K-CAB is expected in January 2027, and negotiations for a European licensing deal are progressing well," Lee said. "If a contract is signed this year, we expect a re-rating of the company's value."
