Three local pharmaceutical companies enjoyed robust growth in operating income in the third quarter, on the back of profits from licensing-out royalties, industry data showed. Along with the upfront payment, additional milestone payments raised their profits sharply.
Yuhan Corp., Dong-A ST, and HanAll Biopharma recorded an earnings surprise, as their operating profit surged more than 100 percent on-year in the third quarter, thanks to licensing-out deals.
Yuhan posted 380 billion won ($327.4 million) in sales and 10.2 billion won in operating income in the third quarter. The quarterly sales remained relatively similar, but the operating profit jumped 131.8 percent, compared to 4.4 billion won a year earlier.
The surge in operating profit was attributed to licensing-out deals with multinational drugmakers since last year. Yuhan reflected 4.2 billion won, 1.8 billion won, and 1.6 billion won, respectively, on the third-quarter earnings out of the upfront payments from Boehringer Ingelheim, Janssen, and Gilead. The profits from the deals totaled 7.6 billion won in the third quarter.
Earlier, Yuhan licensed out lazertinib(YH25448), a treatment for non-small cell lung cancer, to Janssen in November, two nonalcoholic steatohepatitis (NASH) treatment candidates to Gilead in January, and NASH treatment candidate YH25724 to Boehringer Ingelheim in July, respectively.
The company received the upfront payment of $50 million from Janssen, $15 million from Gilead, and $40 million from Boehringer Ingelheim. The company does not have to return the down payment in any situation.
As the company plans to file the upfront payment in installments in the earnings, it will continue to see profits from licensing-out deals at least until next year.
Dong-A ST is also enjoying benefits from licensing deals. The company’s sales and operating income rose 14.9 percent to 161.7 billion won and 163.4 percent to 21.5 billion won, respectively, in the third quarter.
Dong-A ST has steadily reflected licensing-out profits on earnings. As its pipeline, licensed out to a foreign firm, progressed for further development with a regulatory permit, the company’s profit from the licensing-out deal surged from 9.1 billion won in the third quarter last year to 15.2 billion won in the second quarter this year.
Dong-A ST’s DA-3880, Aranesp biosimilar, licensed-out to Japan’s Sanwa Kagaku Kenkyusho (SKK) in January 2014, won sales license from the Japanese Ministry of Health, Labor and Welfare in September. The nod gave Dong-A ST a milestone payment.
The company also received about 6 billion won in additional milestone payment as it recently completed applying for approval of diabetes treatment Suganon in Brazil and began selling the drug in South American countries.
HanAll Biopharma’s revenue and operating profit also went up 16.8 percent and 115.3 percent, respectively, to 28 billion won and 4.5 billion won in the third quarter.
The company clinched a licensing-out deal with Switzerland’s Roivant Sciences for new drug candidate HL161, and another deal with China’s Harbour Biomed for HL036, in 2017. Since then, the company has been receiving billions of won in royalties, which drove up the operating margin.
The profits from licensing-out deals totaled 11.9 billion won in the first three quarters, a significant jump from 4.5 billion won in 2017. The operating margin also rose significantly to 17.1 percent from 4.1 percent during the same period.
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