Yuhan Corp. recorded sluggish 2021 earnings, but the performance was rather a success given the base effect from licensing fee profits in 2020, analysts at investment banks said.

On Wednesday, Yuhan posted a public filing as its sales and profit structures changed more than 30 percent. According to the disclosure, Yuhan’s consolidated sales increased 4.2 percent on year to 1.68 trillion won ($1.4 billion) in 2021.

However, operating profit and net profit plunged 42.3 percent and 47.9 percent year-on-year, respectively, to 48.5 billion won and 99.1 billion won.

The sluggish earnings were particularly large in the fourth quarter alone. Yuhan’s fourth-quarter revenue declined 8.1 percent on year to 423.9 billion won. Operating income plummeted 82.5 percent to 4.7 billion won.

Yuhan attributed the sales increase to the expanded revenues of the parent company and subsidiaries. However, operating profit fell because of reduced licensing income and decreased gains from the sale of the factory site in Gunpo, Gyeonggi Province.

“Excluding the base effect from 2020 gains in licensing fees, Yuhan recorded robust earnings in the fourth quarter,” said Hanwha Investment & Securities in a report on Thursday.

The brokerage suggested a six-month target price of Yuhan’s stock at 85,000 won.

Excluding 77.8 billion won revenue from licensing fees, including $65 million royalty received from Janssen in the fourth quarter of 2020, 9.5 percent growth in sales was positive, Hanwha Investment & Securities said.

Also, not only the reduction in profits from licensing fees but an increase in investment, including marketing expenses for strategic products, led to a decline in operating profit, it went on to say.

Yuhan’s anticancer drug Leclaza, the nation’s 31st novel drug, recorded 6.4 billion won revenue in 2021, and it is expected to sell over 30 billion won in 2022, the securities firm said.

The clinical trials of Leclaza are in smooth progress, and other pipelines are making progress in clinical studies, raising anticipation for new drugs, it noted.

The company is expected to show over 100 billion won revenue growth in pet care, incrementally modified drugs, probiotics, and health functional foods, it added.

On the same day, Daishin Securities released a more conservative report on Yuhan. The company’s earnings fell short of expectations due to the decrease in licensing profits and increase in non-production costs.

Daishin lowered the six-month stock price target by 5.3 percent to 90,000 won. However, the securities company paid attention to Yuhan’s diversification of pipelines.

Yuhan’s phase 1 trials of NASH treatment candidate YH25724 and allergic disease drug candidate YH35324 are proceeding smoothly, and degenerative disc treatment candidate YH14618, licensed out to Spine Biopharma, is expected to enter a phase 3 study in the U.S. within this year, Daishin said.

The brokerage predicted that Yuhan would apply for a phase 1 study of YH32367, a 4-1BB/HER2 dual antibody immunotherapy candidate introduced from ABL Bio.

“Anticipations are growing for Yuhan’s release of additional data from lazertinib/amivantamab combo trials at ASCO in June and FDA’s designation of the innovative drug and conditional approval in the second half,” it added.