April 25, 2024

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[THE INVESTOR] Hanmi Pharmaceutical on Feb. 7 reported nearly 90 percent drop in annual operating profit, underscoring how shaky export contracts of new treatments have taken a toll on South Korea’s leading drug maker.

Hanmi’s profit decline comes after the company logged record high revenue and operating profit in 2015 with massive royalty income from licensing deals for the development of its investigational diabetes medicines with Sanofi and Janssen. This enabled the company to instantly become the country’s largest pharma firm. 

The drug maker endured a tough 2016 as it had to return payments to some global partners, including Boehringer Ingelheim and Sanofi, as they terminated or altered their terms of agreements because of patient deaths in clinical trials and manufacturing issues.

“Sales and operating profit declined in the fourth quarter due to lower royalty income and revision of technology contracts,” an official at the pharma firm said.

Losing global partnerships also means that Hanmi has to undertake costly clinical trials alone.

The company said its 2016 operating profit on a consolidated basis fell 87 percent on-year to 26.8 billion won (US$23.39 million), the lowest in five years, while revenue dropped 33 percent to 882.7 billion won. Net profit also nosedived 81 percent to 30.3 billion won.

Hanmi, however, flagged a more stable year ahead as it expects “better domestic sales of new drugs and increase in exports of finished products.

The payment, estimated at around 30.6 billion won from a deal it inked with Genentech for exclusive worldwide licensing rights of its cancer candidate, will be reflected in this year’s financial statements, it added.

Analysts here said it will take some time to resolve uncertainties surrounding Hanmi’s tech export setbacks.

“Risks still exist until Janssen and Sanofi announce the resumption of their delayed clinical studies on Hanmi’s diabetes treatments,” said Seo Keun-hee, an analyst at Daishin Securities.

Hanmi shares were trading at 302,000 won, or 0.99 percent down, in the morning session on Feb. 8.

By Park Han-na (hnpark@heraldcorp.com)