[Click eStock] Daewoong Pharmaceutical: No Impact on US Sales Despite Botox Lawsuit

Hi Investment & Securities Report

[Asia Economy Reporter Minji Lee] Hi Investment & Securities maintained a buy rating on Daewoong Pharmaceutical on the 17th but lowered the target price to 170,000 KRW.

The company announced that its consolidated sales for the fourth quarter reached 372.8 billion KRW, an 8.2% increase compared to the same period last year. Operating profit was 12.6 billion KRW, down 49.4% year-on-year, falling short of the market expectation of 21.2 billion KRW. The decline in profitability was attributed to three factors: increased selling and administrative expenses due to initial marketing costs for Paxculu (launched in July last year), increased research and development expenses from additional clinical trials for Paxculu and Envolo (approved in December), and a slowdown in overseas sales growth of Nabota (Botox).

Researcher Ho-cheol Lee of Hi Investment & Securities said, “Competition in the U.S. market has intensified since Dexapia, a competitor to Nabota, received FDA approval in September last year,” adding, “Expanding to more countries is necessary to sustain growth.”

Over the past week, Daewoong Pharmaceutical’s stock price has fallen more than 20%. This was due to a partial loss in the lawsuit with Medytox over the theft of the Botox strain. In the first trial ruling, the company was ordered to cease manufacturing and sales of products using the strain and to pay 40 billion KRW in damages. The company has filed an appeal and requested a stay of enforcement.

The most positive scenario at this point is that the stay of enforcement is granted, as this would prevent any impact on Nabota sales until the appeal verdict. The worst-case scenario is that the stay of enforcement is not granted, which would inevitably lead to a decline in sales due to the ban on manufacturing and selling Nabota.

However, even in the worst-case scenario, it is highly likely that the U.S. sales volume handled by Evolus will not be affected. This is because, under the 2021 ITC agreement, Evolus was guaranteed the rights to sell and produce Nabota in exchange for a lump sum and royalties paid to Medytox.

Researcher Lee explained, “If Medytox violates the agreement and proceeds with enforcement against U.S. volumes as well, there is a risk of having to pay astronomical damages,” adding, “Even if Medytox proceeds with enforcement, it is highly probable that manufacturing and sales will only be banned in countries other than those handled by Evolus, such as Korea and China.”

Finally, the researcher analyzed, “Considering that U.S. sales, which account for 80% of total sales, would not be affected even in the worst-case scenario, the current adjustment is excessive.”

This content was produced with the assistance of AI translation services.