CKD (Chong Kun Dang) is under pressure as analysts cut ratings and targets, citing lower margins from more low-profit products and higher R&D spending.

Yuanta Securities, Daol Investment & Securities, and Kiwoom Securities all recently released reports highlighting short-term profitability concerns but signaled longer-term optimism tied to CKD’s pipeline, especially the investigational drug CKD-510. 

Yuanta Securities fixed its price target at 110,000 won ($80), down 22.5 percent from the previous 142,000 won, while maintaining a “buy” rating.

Ha Hyun-soo, an analyst at Yuanta, estimated second-quarter standalone sales at 411.8 billion won and operating profit at 21 billion won, down 26 percent year-on-year and below market consensus.

“The rising share of new co-promotion products like Celltrion Pharm’s Godex, a liver disease treatment for improving liver function, and Daewoong’s Fexuclue, a new potassium-competitive acid blocker (P-CAB) for gastroesophageal reflux disease (GERD), is pushing the cost ratio to around 68.4 percent,” Ha said.

Ha also pointed to weakened profitability following the 2023 expiration of Januvia’s patent, a DPP-4 inhibitor for type 2 diabetes developed by MSD, and the end of the K-CAB co-marketing deal, an HK inno.N-developed P-CAB for GERD, alongside a 20 percent price cut on Prolia, Amgen’s osteoporosis treatment, after biosimilars entered the market in April.

Daol lowered CKD's price target from 130,000 won to 120,000 won, while also maintaining a “buy” recommendation.

Daol analyis Lee Ji-soo expected that first-quarter consolidated sales at 402.2 billion won would go up 13.8 percent on-year. However, operating profit will be down 57.3 percent at just 11.4 billion won, she said.

“While sales are expanding on the back of new and existing products, low-margin in-licensed drugs and higher R&D costs are weighing on earnings,” Lee said, forecasting an annual operating profit decline despite top-line growth.

Kiwoom Securities took a more cautious turn, downgrading its rating from “buy” to “outperform,” which is a grade lower, while keeping the price target at 100,000 won.

“Although CKD is expected to meet second-quarter market estimates thanks to milestone payments from Novartis for CKD-510, delays in launching new drugs like the gastritis herbal medicine G-Tec and the impact of increased R&D spending will make profitability improvement difficult this year,” Kiwoom analyst Heo Hye-min said.

Heo projected second-quarter standalone sales at 425.4 billion won, up 11 percent from a year ago, but operating profit at 21.3 billion won, down 25 percent.

“It’s disappointing that profitability improvements are unlikely this year due to investment expansion, but if CKD discloses CKD-510’s indications and delivers positive clinical data, it could lead to a revaluation of the company’s worth,” Heo said.

While analysts highlighted concerns over rising costs and weaker profitability this year, they also pointed to potential catalysts ahead. Yuanta's Ha stressed that he expects the value of CKD-510, currently preparing for clinical trials in the U.S., to gradually reflect in CKD’s valuation.

Daol’s Lee also stressed that he believes that despite short-term margin pressures, CKD’s long-term growth will be supported by expanding sales of in-licensed drugs, and Kiwoom’s emphasized that if CKD discloses specific indications for CKD-510 and releases positive clinical data, it could prompt a meaningful revaluation of the company’s worth.

Amid analyst downgrades and broader market jitters, CKD shares have trended downward this week. The stock opened at 86,300 won on Monday and fell steadily before rising 500 won on Thursday to close at 84,900 won.