Download Hanmi Pharmaceutical Buy

Hanmi Pharm.
Hanmi Pharmaceutical
Buy
(0893 KS, Won19,700)
Category: Korea, Pharmaceutical
Yr to Dec
Sales
(Wbn)
1999A
2000A
2001E
2002E
2003E
114.9
149.1
184.7
237.3
265.8
EBITDA
(Wbn)
17.2
26.1
39.5
50.2
59.0
NP
(Wbn)
EPS
(Won)
+/- EPS
(%)
5.4
11.4
19.1
25.3
29.4
985
1,919
2,900
3,747
4,356
-39.9%
94.8%
51.1%
29.2%
16.3%
P/E P/FCF
EV/
(X)
(X) EBITDA
15.8
5.4
3.4
5.3
4.5
(5.3)
n.a.
(45.5)
(26.1)
27.8
9.0
5.1
3.4
4.2
3.5
EV/
Sales
1.3
0.9
0.7
0.9
0.8
ROE
(%)
7.2%
13.2%
19.5%
21.2%
20.2%
Net D/E Div. Yld.
(%)
(%)
81.7%
80.0%
67.0%
58.4%
45.0%
0.8%
1.3%
1.3%
0.6%
0.6%
Dongwon Securities
Dongwon Securities
Notes: Historic figures are based on non-diluted common share earnings, not adjusted for capital increases, and yearly average share prices.
Price (March 11, 2002)
W19,700
Target price
W24,000
Kospi
827.02
52-week range
W19,850-W7,220
Daily trading value
USD1.9mn
Shares issued (common)
6.7 mn
Free float
54.5%
Foreign ownership
17.3%
Market cap.
USD103.8mn
3-yr fwd EPS growth
31.4%
Earnings yield
19.0%
Dividend payout ratio
3.3%
Price / Book NAV
1.0
Credit rating
BBB
Abs. price chg. (1/6/12m) 17.5%, 93.1%, 127.0%
Rel. to Kospi (1/6/12m)
5.3%, 26.5%, 55.6%
000 'S
20
HA N M I P HA R M .I N D .
FRO M 8 / 3 /0 1 T O 8/ 3/02 D AIL Y
18
16
First Generics!
Hanmi recently grew to become the sixth largest
pharmaceutical company in Korea, while its ‘first
generics’ strategy looks to succeed. We maintain
our BUY recommendation on Hanmi
Pharmaceutical with a six-month target price of
W24,000. Hanmi’s growth will be supported by:
!" First Generics drug marketing strategy
!" Sales increases since the national medical
reform in 2000
!" New products in the pipeline, at higher margins
!" Improved OP margins following the spin-off of
its unprofitable health food division
!" Product diversification out of low-margin
antibiotics
!" Improving cash flow as a result of shorter
accounts receivable days, low interest rates and
increased sales
!" Lower financial burden with improved
profitability at subsidiaries
14
Analysts
12
JIHYUN KIM
[email protected]
822 768 5822
10
8
6
MA RA PRMA YJUNJU LA U GSEPO CTN O VD E CJAN FE B
MA R
PRICEHIG H 19 500 8/3/02 , L O W 7400 4/4/0 1, L A ST 19 50 0
PRICE REL . TO KO REA SE COMPO SITE (K OSPI)
Sou rce: DA T A STREA M
March 12, 2002
JAYCEE KIM
[email protected]
822 768 6592
1
12 March 2002
Stock data
Dongwon Securities
Hanmi Pharm.
Hanmi Pharmaceutical
Hanmi Pharmaceutical
Ratios (%, X)
Year to DEC
Profit & Loss (W bn)
2001E
2002E
2003E
Y ear to DEC
1999A
2000A
2001E
2002E
Growth (+/-% YoY)
Sales Revenues
23.9% 28.5% 12.0%
OP (EBIT)
59.5% 28.1% 17.3%
EBITDA
51.5% 27.3% 17.4%
EPS
51.1% 29.2% 16.3%
3-Yr. CAGR (+/-% YoY)
Sales Revenues
15.9% 27.4% 21.2%
OP (EBIT)
18.1% 45.9% 33.8%
EBITDA
15.5% 42.9% 31.3%
EPS
21.0% 56.1% 31.4%
Margin on Sales
OP (EBIT)
19.0% 19.0% 19.9%
EBITDA
21.4% 21.2% 22.2%
RP
13.8% 14.6% 15.4%
NP
10.3% 10.6% 11.1%
Costs % of Sales
Labor
1.5%
1.3%
1.3%
Raw material
6.8%
6.3%
6.3%
Depreciation
2.3%
2.2%
2.3%
Capex
9.2%
7.6%
7.2%
SG&A Exp.
30.6% 32.3% 32.0%
Interest Exp.
5.1%
3.6%
3.5%
Profitability
Asset Turnover
0.77
0.88
0.86
ROA
7.9%
9.4%
9.5%
ROE
19.5% 21.2% 20.2%
Financial Status
Debt-to-equity
132.0% 119.4% 105.7%
Net debt-to-equity
67.0% 58.4% 45.0%
Interest Cover
3.75
5.31
5.66
Total S ales
GP
EBIT
EBITDA
RP
NP
+/- YoY
114.9
45.5
14.5
17.2
6.1
5.4
33.7%
149.1
69.6
22.0
26.1
13.5
11.4
111.9%
184.7
91.6
35.1
39.5
25.5
19.1
67.2%
237.3
121.6
45.0
50.2
34.8
25.3
32.2%
Y ear to DEC
1999A
2000A
2001E
2002E
2003E
Current Assets
Fixed Assets
Total Assets
Current Liab.
Fixed Liab.
Total Liab.
Paid-in Capital
Capital Surplus
Retained Earn.
Capital Adjust.
S /H's Equity
119.4
92.7
212.1
67.4
59.7
127.1
13.7
24.5
28.2
18.6
85.0
140.4
93.4
233.8
84.9
60.3
145.1
16.1
30.5
38.0
4.0
88.7
136.2
111.9
248.1
79.6
61.6
141.1
16.9
30.5
56.3
3.2
106.9
156.9
131.3
288.2
88.6
68.2
156.8
16.9
30.5
80.7
3.2
131.3
177.4
151.6
329.0
93.1
75.9
169.0
16.9
30.5
109.3
3.2
159.9
Y ear to DEC
1999A
2000A
2001E
2002E
2003E
Operating Profit
Depr. / Amort.
Changes in W/C
Others (OP)
OP Cash Flow
Net interest
Taxes
Dividends
Cash Earnings
Capex (net)
Investments (net)
Others
Free Cash Flow
Equity Issues
Chg. in Net Debt
Net D/E (%)
14.5
2.7
-3.8
-0.3
13.1
-8.5
-0.7
-0.7
3.3
-7.2
-5.0
-7.3
-16.2
0.3
15.9
81.7%
22.0
4.0
-8.8
6.8
24.1
-8.9
-2.1
-0.8
12.2
-15.9
-7.3
0.6
-10.5
8.9
1.5
80.0%
35.1
4.3
-2.3
0.0
37.1
-8.6
-6.4
-0.8
21.4
-17.0
0.0
-5.8
-1.4
0.8
0.6
67.0%
45.0
5.2
-12.6
0.0
37.6
-7.9
-9.5
-0.8
19.3
-18.0
0.0
-6.4
-5.1
0.0
5.1
58.4%
1999A
2000A
2001E
2002E
5.5
5.5
0.0
15,563
85.2
69.5
154.7
6.4
6.4
0.0
10,289
61.3
71.0
132.3
6.7
6.7
0.0
9,557
64.4
71.6
136.0
6.7
6.7
0.0
19,700
132.8
76.7
209.5
HistoricTrading Ranges (X)
Year to DEC
PER-High
PER-Low
EV/EBITDA-High
EV/EBITDA-Low
ROE (%)
+/- EBITDA Chg.
1999A
2000A
2001E
27.11
11.07
12.53
7.51
7.2%
-32.8%
9.93
3.35
7.08
4.19
13.2%
51.4%
4.91
2.48
4.19
3.01
19.5%
51.5%
V aluation Relatives (X , %)
Y ear to DEC
P / Book NAV
EV / Sales
2001E
2002E
2003E
0.60
0.74
1.01
0.88
0.83
0.77
P/E
3.37
Rel. to KOSPI
-76.1%
Rel. to Pharm. sector -61.2%
5.26
4.52
-43.5% -32.5%
-31.7% -30.4%
EV / EBITDA
3.45
Rel. to KOSPI
-45.3%
Rel. to Pharm. sector -28.2%
4.17
3.47
-14.9% -21.1%
-3.0%
-6.1%
Source: Dongwon Securities estimates
March 12, 2002
2003E
265.8
137.9
52.8
59.0
41.0
29.4
16.3%
Balanc e Sheet (W bn)
Cash Flow s (W bn)
52.8
6.2
-6.0
0.0
53.0
-8.8
-11.6
-0.8
31.7
-19.2
0.0
-7.7
4.8
0.0
-4.7
45.0%
V alue ( W bn, Shrs mn, W on, X )
Y ear to DEC
No. of Shares (bal.)
Common
Preferred
Share Price
M arket Cap.
Net Debt
Enterprise Value
2003E
6.7
6.7
0.0
19,700
132.8
72.0
204.8
Source: Dongwon Securities
2
Dongwon Securities
Hanmi Pharm.
Sales breakdown at Hanmi (2000)
Costs breakdown at Hanmi (2000)
Labor
6%
Others
9%
Exports
19%
Overhead
17%
Others
39%
Foods
10%
Drugs
62%
Source: Company Data
Source: Company Data
Quarterly sales and OP margin
(Wbn)
50
Raw
material
38%
(%)
(Unit: Wbn)
400
30
350
45
25
300
40
20
35
15
150
30
10
100
25
5
OP margin(R)
New product sales at Hanmi
Others
Exports
Food & beverage
Domestic sales (New)
Domestic sales (existing)
250
200
Sales(L)
01.4QE
01.3Q
01.2Q
01.1Q
00.4Q
00.3Q
00.2Q
00.1Q
0
99.12
Ranking
40
35
30
25
20
Antibiotic proportion to
domestic sales
15
10
97.12
98.12
99.12
00.12
00.12
01.12E
02.12E
03.12E
Industry ranking (by size)
Antibiotic sales at Hanmi
(Unit: %)
50
01.12E 02.12E 03.12E
1
2
3
4
5
6
7
8
11
12
1996
1998
2000
DongA
DongA
DongA
Yuhan Chong Kun Dang Chong Kun Dang
Chong Kun Dang
Yuhan
Yuhan
Dongwha
Choong Wae
Choong Wae
Il Yang
Dongwha
Daewoong
Hanmi
Daewoong
Daewoong
Hanmi
Choong Wae
Handok
Il Dong
Handok
Dongwha
Boryung
Boryung
Boryung
Hanmi
Il Dong
Kwang-Dong
Source: Dongwon Securities
Hanmi Pharmaceutical
Major Investments & Subsidiaries
Name
Hanmi Chemical Precision
Hanmi Pharm. (China)
Young-Nam Cable TV
stake
63.0%
82.4%
50.0%
(%, W bn)
Cost
3.8
3.0
5.2
Type
Invest.
Invest.
Invest.
Hanmi Pharmaceutical
Recent Capital Changes
16-Mar-01
10-Mar-00
27-Jan-00
19-Apr-99
2% stock dividends W4.9bn
3% stock dividends @ W2.500
14% rights offering @ W2,500
2-for-1 stock split
Major Shareholders
Sung-Ki Lim
Treasury stock
Foreigners
Free float
March 12, 2002
19.7%
3.0%
16.7%
55.1%
Dilutive Securities
issued at
CBs
BWs
ex. Date
conv. @
no. shr
None
None
3
Dongwon Securities
Hanmi Pharm.
Hanmi Pharmaceutical
First generation generic drugs at Hanmi
Launched year
Products
Efficacy
Brand name drugs
Licensor
Patent dispute
84
87
90
92
93
94
95
96
98
01
CEFOTAXIME inj.
TRIAXONE inj.
RAMEZOLE cap.
IMPLANTA cap.
FONTIAME inj.
TAZIDIME inj.
NEOPLANTA cap.
CEFIX cap.
CLARI tab.
ITRA tab.
3rd Cephem. Anti.
3rd Cephem. Anti.
Antiulcerant
Immunosuppressant
2rd Cephem. Anti.
3rd Cephem. Anti.
Immunosuppressant
3rd Cephem. Anti.
Macroride. Anti.
Antifungal agent
Aventis/Craporan
Roche/Rosepine
Astra/Rosec Cap.
Novatis/Sandimoon Cap.
Dakeda/Seradora
Graxo/Fotem
Novatis/Sandimoon new Ooral Cap.
Fujisawa/Suprax Cap.
Avot/Claryseed
Janssen/Sporanox Cap.
Dakeda
Roche
Astra
Novartis
Novartis
Abbort
Win
Win
Win
Tech. Transfer
Tech. Transfer
Win
Source: IMS Korea data for 1Q00
Hanmi Pharmaceutical
Market release of new products
Market release in 2001(OTC: 7, Prescription: 7 )
Products
Efficacy
Univask
Carnital
Funazole
Etra
Metazole
Assec
CECE-pw
Lismon TG
Exferene
Tiramide
Others (4 drugs)
high blood pressure
dementia
athlete's foot
antibiotic
painkiller
vitamine
glaucoma
Skeletel muscle relaxants
Market release in 2002(OTC: 5, Prescription: 13)
License in
Own
Own
Own
Own
Own
Own
License in
Own
Own
Own
Products
Efficacy
Syltazole
Sylimin
Cavenine
Celltra
Ondancetrone
Cancer diagnosis reagent
Sefetile
Amocline
Others (10 drugs)
blood platelet
liver disease
antibiotic
melancholia
antiemetic
diagnosis kit
antibiotic
antibiotic
-
Own
Own
License in
Own
Own
Own
Own
Own
Own
Source: Company data
Hanmi Pharmaceutical
Research Project
Field
Detail
Plan
New drugs
(Long-term project)
Oraxole
Bleeding treatment
ARS antibiotic
HM-10411 white corpuscle
Cancer diagnosis kit
Gene transformed goat
Gene transformed poultry
Hormone
Inteferone
Antibiotic (HM-4001P)
High blood pressure(HM-30020C)
Antimycosis
Antibiotiec
Cold medicine
Frazole
Antibiotic (Seproxil)
Stopping of bleeding
Enlargement of prostate gland
Dec.2002 : End of Pre-clinical test
Dec.2002: Candidate material
Dec.2003: Candidate material
Dec.2002: End of Pre-clinical test
Sep.2002: File government approval
June 2002: Completion of test
Bio
(Long-term project)
Improved new drugs
(Mid-term project)
Basic material
(Short-term project)
Raw material
(Short-term project)
Dec. 2002 : Market release
June 2002: Completion of PEG testing
Dec.2002 : Completion of pre-clinical test
Dec. 2002 : Completion of pre-clinical test
Dec. 2002 : Market release
Jan. 2002 : Market release
May 2002: Market release
April 2002: Market release
Dec.2002: Market release
Dec.2002: Market release
Sep.2002: Completion of development
Source: Company data
March 12, 2002
4
Dongwon Securities
Hanmi Pharm.
Valuation
Company Profile
Although strong results caused the stock price to
soar 93.1% over the last six months, rapidly
improving profits and a higher market position
should leave still further upside. We maintain
BUY on Hanmi, with a six-month target price of
W24,000. Hanmi’s growth will be supported by:
The best synthesis technology in the industry,
strength in developing generic drugs first—Over
80% of sales are contributed by generic products
developed in-house at Hanmi. Hanmi has the best
synthesis technology for Cephalosporine-class
antibiotics, and it is good at being the first company
to developing new generic drugs.
!"First Generics—Hanmi generates sales
growth from its ‘first generics’ drug
marketing strategy to be the first maker of
generic drugs after their original patents
expire. This low-risk, high-impact marketing
strategy looks to work well in Korea.
!"Sales increase following national medical
reform—Like other large pharmaceuticals,
Hanmi has experienced increased demand for
its products since 2000.
!"New products in the pipeline, higher
margins—Hanmi operates one of the largest
in-house R&D labs in the local market.
!"Improved OP margins following the spin-off
of its unprofitable health food division
!"Product diversification out of low-margin
antibiotics—Hanmi is moving towards
products with market potential and high
value-added, such as anti-fungal agents, high
blood pressure medicine and antidepressants.
!"Cash flow is improving as a result of national
medical reform, leading to shorter accounts
receivable days, low interest rates and
increased sales.
!"Hanmi’s financial burden is decreasing with
improved profitability at subsidiaries—
namely, Hanmi Corp., Hanmi Chemical
Precision, and Beijing Hanmi.
March 12, 2002
!"Hanmi has succeeded in localizing the
production of ten medicines originally
developed overseas. In the process, it has won
many patent infringement lawsuits against
major multinationals, including Aventis, Roche
and Astra-Geneca, over six of the products.
!"In general, domestic pharmaceutical companies
rely on foreign products and must make large
royalty payments. However, because generic
products contribute over 80% to Hanmi’s
medicine sales, it makes almost no royalty
payments to foreign pharmaceutical companies.
Rapid growth—Five years ago, Hanmi was just
the tenth largest pharmaceutical company in terms
of sales. However, it quickly rose to sixth in 2000
and should enter the top five soon. Last year,
Hanmi increased its sales force by over 25%, and
strengthened direct sales to pharmacies. Hanmi also
plans to launch over ten new products annually
starting last year.
First Generics Strategy—a Strength
The first company to develop generics has lower
costs and an advantageous market position—
Hanmi’s strategy of being the first producer of new
generic drugs has three major strong points.
!"Lower marketing costs: Hanmi can save
marketing costs (clinical tests, seminars, R&D
support, etc) that would be needed when a
product is first introduced. This is because the
information about markets for established
drugs already exists. [0]
5
Dongwon Securities
!"Much lower development costs mean low
risk of failure: Generic drug companies avoid
the enormous time and costs of developing
their own drugs. They only need to develop
new manufacturing and formulation methods
for existing materials, which are already
secured.
!"Early bird gets the worm: In the United
States, the first company to sell a drug
generically after the patent expires usually
claims over 30% of its market share.
Generic sales overtake brand name sales from
2000—Since 2000, several of Hanmi’s generic
drugs have seen their sales exceed those of the
original brand name drugs.
!"Triaxone, which is a third-generation
Cephalosporine-class antibiotic that Hanmi
developed in 1987, brought in W7bn in sales
in 2000, three times more than a similar
product called Rocephin made by Roche.
!"Fontiam, a third-gen. Cephalosporine-class
antibiotic that Hanmi developed in 1993, has
double the sales of the original brand name
drug, Ceradoran, made by Takeda.
!"Itra-tap, an anti-fungal agent that Hanmi
launched in 1H01, recorded W8bn in sales
during its first six months on the market.
With a sales target of W20bn this year, it is
close on the heels of Sporanox, a brand name
product.
Exporting technology to multinationals—
Hanmi has exported its generic drug
manufacturing technology to multinational
companies several times. In 1989 it sold
manufacturing technology for Triaxone, a third
generation Cephalosporine-class antibiotic, to
Roche, which is the original producer of
Triaxone. In 1997 it sold manufacturing patent
and distribution rights to Novartis for the
manufacturing technology of an anti-rejection
drug used in transplants.
March 12, 2002
Hanmi Pharm.
Earnings Forecast
Quarterly sales continue rising— While most
listed pharmaceutical companies saw 3Q01 sales
either stagnate or shrink, Hanmi’s sales rose
continuously last year.
!"Sales in 4Q01 rose 34.9% YoY, surpassing the
sector average. The sales of new products and
main products led to a 37.7% increase in
domestic sales, while exports increased by
36.4% due to increased demand from China
and Europe.
!"Operating profit rose only 17.6% in 4Q01.
Despite W7bn in royalties from an antirejection drug, expenses from bad debt
amortization, employee incentives and other
miscellaneous expenses were concentrated in
4Q01.
Liquidation of money-losing food division causes
cost structure to improve greatly—OP should
rise 33.8% annually during the next three years at
Hanmi. This is because the loss-making food
division was liquidated at end-2000, greatly
improving the cost structure, while new high valueadded products should continue to push down the
COGS ratio.
!"COGS—Following the liquidation of the food
division, the COGS ratio fell from 53.3% in
2000 to 50.4% in 2001. It should fall to 48.7%
in 2002 and 48.1% in 2003.
!"OP—The operating margin rose to 19% in
2001E (by 4.2%P) on the back of improving
sales and the liquidation of the food division.
The operating margin should stay at 19% level
this year despite improving sales. This is
because R&D expenses will rise from W9.5bn
last year to W14bn this year.
!"RP—Recurring profit should rise 45.2%
annually until 2003 because of decreases in
debt and low interest rates.
!"Improving profitability has pushed ROE from
13.2% in 2000 to 19.7% in 2001E. We believe
that ROE should rise to 21.7% this year before
flattening out.
6
Dongwon Securities
Growth through new products—Sales should
rise 21.2% annually for the next three years.
Hanmi’s expected annual growth is higher than at
most of its competitors. Despite the liquidation of
its food division (sales of W15bn) at end-2000,
sales should be boosted by Hanmi’s plans to
introduce over ten new generic drugs annually
(leading to a 31% annual increase in domestic
sales during the next three years).
!"Hanmi launched 14 new products last year
for the domestic market and plans to launch
18 products this year (including imported
drugs).
!"New products constituted 15.4% of sales last
year. New products from 2001 and 2002
should contribute 29.3% to sales this year.
Converting its product structure to meet
market potential—Hanmi is moving away from
an antibiotic-centered product mix, which faces
intense competition, to products with market
potential and high value-added, such as antifungal agents, high blood pressure medicine and
anti-depressants.
!"In particular, there is a good chance that Itratap, an anti-fungal agent that was launched in
April 2001, could become a major selling
item in a short period of time. Itra-tap is a
generic version of Korea Jansen’s brand
name Sporanox, with similar ingredients and
a different synthesis process. Obviously, the
generic product has better cost
competitiveness than the brand-name
product.
!"Korea Jansen’s brand name Sporanox is
number one in the athlete’s foot market
domestically and overseas, recording W30bn
in domestic sales last year.
Hanmi Pharm.
Finance & Investments
Improving cash flow due to collection-oriented
sales promotion and a policy of ending
relationships with ailing customers—The large
amount of accounts receivable and payment
guarantees to affiliates, which until now have been
the main reason for the company’s lower valuation,
have been decreasing from last year.
!"For the past 5-6 years, Hanmi concentrated on
expanding sales. It allowed the average number
of days it took to settle accounts receivable to
rise to over 200. Hanmi is now focusing on
profitability rather than sales, which should cut
the number of days it takes to settle accounts
receivable to 149 this year.
!"A side effect of the company’s strategy to
expand sales was that its accounts receivable
collection period grew to as long 221 days in
1999. However, Hanmi has been able to reduce
its accounts receivable days since the
government medical reform in 2000, as Hanmi
now sells to pharmacies, which have a shorter
payment period. This has reduced the accounts
receivable collection period to 191 days in
2000 and 170 days in 2001.
!"Thanks to Hanmi’s collection oriented strategy,
the number of days to settle accounts
receivable should fall to 149 days this year. In
2Q01, Hanmi stopped doing business with
companies who took more than 150 days to
pay. This policy will be reflected this year.
!"Because of rising profits and the fall in
accounts receivable days, cash flow has
improved and the net debt/equity ratio should
fall to about 58.4% at end-2003, from 80.0% at
end-2000.
!"Hanmi is set to launch 18 new products this
year including Siltazol, Carbenin and Seltra.
It also plans to jointly enter the vaccine
business with Dongshin Pharmaceutical, a
subsidiary of Hanmi.
March 12, 2002
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Dongwon Securities
Hanmi Pharm.
Increasing profits at subsidiaries, decreasing
payment guarantees—Payment guarantees to
subsidiaries were W40.1bn at end-2000, but have
begun falling (because of expanding profits at
subsidiaries) and should decrease to W30bn at
end-2002.
R&D Expenditure
!"Hanmi Fine Chemical: Its main
pharmaceutical ingredient sales are
increasing, pushing up NP by 2.7 times last
year. The company’s financial structure has
improved to the point that it is able to get
funding on its own credit. This year, sales
and profits should continue as exports to
Europe increase now that the company has
been awarded a COS (Certificate of Stability)
and it is filling extra demand from China for
Cefotaxime, a Cephalosporine-class
antibiotic.
!"Last year the company spent W9.5bn on R&D,
and it plans to spend W14bn this year, a 47.4%
increase. This reflects the fact that there are
more items to commercialize this year and that
given the nature of the company’s ‘first
generics’ strategy, R&D investment is vital.
Hanmi’s R&D expenses should account for
5.9% of sales (from 5.1% last year) this year,
making it the highest in the sector.
!"Hanmi Corporation: After suffering losses
during 1994-99 leading to capital erosion
(W11.5bn deficit at end-2000), Hanmi Co.
turned a surplus in 2000 and recorded a net
profit in 2001 that was 3.5 times higher YoY.
This is because 1) in 2H00, the company got
a talented new CEO from Haitai Beverage,
and 2) following the national medical reform
in 2000, demand from pharmacies for food
supplements (which is Hanmi Corp.’s
strength) increased, replacing drug
preparations as pharmacies’ main source of
profits.
!"Beijing Hanmi Pharmaceutical: Last year, a
children’s digestive medicine called Medilac
Vita helped turn a small profit at Beijing
Hanmi. This year, profits at the subsidiary
should expand greatly now that the company
has completed its factory and received
manufacturing permission from China for
Cefotaxime, Ceftriaxone, Implanta and other
drugs. In particular China’s entry into the
WTO late last year should be good for
Beijing Hanmi.
March 12, 2002
2002 R&D budget is 5.9% of sales, the highest
ratio in the sector—Over the past three years,
Hanmi’s R&D spending has been over 5% of sales.
This displays the company’s strong desire to push
R&D.
Impending commercialization of cancer
diagnosis reagent, cold medicine and new antifungal agent—There are five main research areas
at Hanmi; 1) new medicine development, 2)
bioengineering, 3) new concept medicines, 4) raw
material development, and 5) formulation
development.
!"Currently, new drugs under development (part
of 3-5 year projects) include an anti-cancer
suppository (Oraxol), an aneurysm treatment,
an ARS series antibiotic for fighting resistant
bacteria and a white blood cell growth factor.
!"The anti-cancer drug Paclitaxel has an
estimated world market of USD1.5bn. Hanmi
is attempting to replace it with its own Oraxol,
a suppository, which is being developed with
micro-emulsion technology. Hanmi plans to
finish its clinical trials for the drug by end2002.
!"Bioengineering projects include a cancer
diagnosis kit, transgenic [0]black goat and
poultry, human growth hormone and interferon
alpha.
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Dongwon Securities
Hanmi Pharm.
!"The cancer diagnostic kit can diagnose seven
common cancers and is praised as more
accurate than existing kits. The company has
applied for approval with Korea’s Food and
Drug Administration, but since there are no
existing products domestically, the process of
getting approval remains pending. Korea’s
FDA has requested several additional
measures and Hanmi plans to reapply in
September 2002.
!"The formulation development [0]and raw
material development projects at Hanmi are
relatively short-term project, which take 1 or
2 years before commercialization. An antifungal agent (absorption-enhancing
material), a suppository antibiotic
(Cefuroxime Axetil), cold medicine, and an
antihyperlipidaemic agent (Simvastatine)
should be released at end-2001 or early 2002.
March 12, 2002
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Dongwon Securities
Hanmi Pharm.
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The source of all the estimates in this report is Dongwon Securities unless otherwise specified.
This report has been prepared by Dongwon Securities and is provided for information purposes only. Under no circumstances is it to be used or
considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information
contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should
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March 12, 2002
10
Dongwon Securities
Hanmi Pharm.
2002. All rights reserved. No part of this report may be reproduced or distributed in any manner without permission of Dongwon Securities.
March 12, 2002
11