[Click eStock] HK Innoen, Overhang Resolution and Earnings Improvement Expected

DS Investment & Securities announced on the 25th that it is initiating coverage on HK Innoen with a buy rating and a target price of 55,000 KRW. Minjung Kim, a researcher at DS Investment & Securities, noted, "The overhang issue that negatively impacted Innoen's stock price has been resolved, and future earnings improvement is expected to be prominent."

Currently, the U.S. P-CAB market is a competitive landscape between Takeda's Takecap and HK Innoen's K-CAB. Takeda filed an NDA first in 2021, but the FDA has not granted approval due to the discovery of carcinogenic substances. Takecap has addressed this through reformulation and has submitted 3-month and 6-month stability data. The approval decision by the end of the year remains uncertain. If Takecap fails to obtain approval by year-end, the time gap with K-CAB is expected to significantly narrow. While Takecap's timeline is stalled, K-CAB has skipped Phase 2 and entered Phase 3, with dosing expected to be completed within the year. Researcher Kim explained, "Thanks to this situation, the company has gained competitiveness in securing European partnerships," adding, "In the past, the upfront payment in U.S. partnerships was minimal relative to the total contract amount, but this European partnership is expected to have a higher proportion of upfront payments under improved conditions."

Currently, K-CAB tablets are being sold through a co-promotion agreement with Chong Kun Dang. The contract is set to expire at the end of 2023, necessitating renewal or a new agreement. Researcher Kim stated, "The commission paid to Chong Kun Dang has been large, adversely affecting profits, but profitability is expected to improve immediately from next year through contract renewal," and added, "The outline of the renewal is expected to be finalized in October this year."

The overhang issue is also expected to be resolved. At the time of HK Innoen's listing, three private equity firms?Stick Investment, Mirae Asset, and H&Q Korea?held about 22.8% (6,601,500 shares) of the total outstanding shares. Researcher Kim said, "Continuous on-market selling after listing was the biggest factor suppressing the stock price due to this overhang issue, but it is now estimated that less than 1% remains," and forecasted, "Most of the remaining shares will be resolved within September."

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