Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>Hugel is a solid turnaround story. The recent resumption of its Botulax product sales in China is likely to boost the company's sales and profits in 2023 and 2024.</li>
<li>Despite this important catalyst, Hugel continues to face potential legal battle with Medytox over the botulinum toxin-related patent in the United States.</li>
<li>The overall valuation on Hugel remains attractive and it is trading at EV/EBITDA of 7.1x and P/E of 18.2x in 2023.</li>
</ul>


Hugel is a solid turnaround story. The recent resumption of its Botulax product sales in China is likely to boost the company's sales and profits in 2023 and 2024.
Despite this important catalyst, Hugel continues to face potential legal battle with Medytox over the botulinum toxin-related patent in the United States.
The overall valuation on Hugel remains attractive and it is trading at EV/EBITDA of 7.1x and P/E of 18.2x in 2023.


Hugel: A Solid Turnaround Story With Resumption of Botulax Sales in China

Global Healthcare Analyst

Tina Banerjee

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hugel-inc" target="_blank" data-smartkarma-citation="entities:22860:1" rel="noopener">Hugel Inc (145020 KS)</a> is expected to start shipment of Botulax to China this month. Moreover, the company will launch its HA filler in China by middle of 2023.</li>
<li>Hugel plans to focus on expanding into the global market in 2H23. The company began full-scale sales of Botulax in Australia in April and plans to enter Canada this year.</li>
<li>Preliminary ruling regarding legal dispute in US is expected in November, while final ruling will come in March 2024. Hugel pushed back its US entry to 2025.  </li>
</ul>



Hugel Inc (145020 KS) is expected to start shipment of Botulax to China this month. Moreover, the company will launch its HA filler in China by middle of 2023.
Hugel plans to focus on expanding into the global market in 2H23. The company began full-scale sales of Botulax in Australia in April and plans to enter Canada this year.
Preliminary ruling regarding legal dispute in US is expected in November, while final ruling will come in March 2024. Hugel pushed back its US entry to 2025.  


Hugel Inc (145020 KS): Expanding Global Presence Provides Solace Amid Patent Tussle with Competitor

<ul>
<li>During 2022, <a href="https://www.smartkarma.com/entities/bnc-korea-co-ltd" target="_blank" data-smartkarma-citation="entities:34785:1" rel="noopener">BNC Korea (256840 KS)</a> reported gross profit margin of 48.3%, lower than 51.9% reported in 2021, as increasing competition is leading to price erosion of botulinum toxin products.</li>
<li>In March 2023, prosecutors have indicted BNC Korea for allegedly selling botulinum toxin injections to exporters without the approval of the MFDS from December 2015 to December 2021.</li>
<li>With the pandemic on a downward trend for more than a year now, we are skeptical about BNC Korea’s in-licensed COVID-19 drug candidate for a milestone payment of $15M.</li>
</ul>


During 2022, BNC Korea (256840 KS) reported gross profit margin of 48.3%, lower than 51.9% reported in 2021, as increasing competition is leading to price erosion of botulinum toxin products.
In March 2023, prosecutors have indicted BNC Korea for allegedly selling botulinum toxin injections to exporters without the approval of the MFDS from December 2015 to December 2021.
With the pandemic on a downward trend for more than a year now, we are skeptical about BNC Korea’s in-licensed COVID-19 drug candidate for a milestone payment of $15M.


BNC Korea (256840 KS): Margin Pressure; Base Business Faces Regulatory Risk; COVID Drug in Doldrum

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bnc-korea-co-ltd" target="_blank" data-smartkarma-citation="entities:34785:1" rel="noopener">BNC Korea (256840 KS)</a> has been found guilty for the violation of the Pharmaceutical Affairs Act. Consequently, production of its Bienox injection has temporarily been halted till May 30, 2023.</li>
<li>The company’s in-licensed COVID-19 drug candidate could not secure emergency use approval from the FDA, which has asked for further clinical trial demonstrating efficacy and safety.</li>
<li>BNC Korea is not a bottom fishing idea, due to lack of any strong growth engine in near-term. Despite attractive valuation, we still like to avoid the stock.     </li>
</ul>



BNC Korea (256840 KS) has been found guilty for the violation of the Pharmaceutical Affairs Act. Consequently, production of its Bienox injection has temporarily been halted till May 30, 2023.
The company’s in-licensed COVID-19 drug candidate could not secure emergency use approval from the FDA, which has asked for further clinical trial demonstrating efficacy and safety.
BNC Korea is not a bottom fishing idea, due to lack of any strong growth engine in near-term. Despite attractive valuation, we still like to avoid the stock.     


BNC Korea (256840 KS): Base Business Faces Regulatory Headwind; Delay in COVID Drugs Approval

<ul>
<li>The U.S. International Trade Commission is starting an official investigation based on <a href="https://www.smartkarma.com/entities/medy-tox-inc" target="_blank" data-smartkarma-citation="entities:11403:1" rel="noopener">Medy Tox Inc (086900 KS)</a>’s complaint against Hugel for the alleged theft of its botulinum toxin strain.  </li>
<li>The verdict is expected in H12023. Hugel is expected to receive FDA approval for botulinum toxin by the end of 2022, while Medytox plans to file to FDA in H12023.  </li>
<li>Medytox’s export revenue has still not recovered. However, Q1 sales jumped 25%, on the back of 89% increase in domestic revenue. Medytox shares has declined 20% YTD.</li>
</ul>


The U.S. International Trade Commission is starting an official investigation based on Medy Tox Inc (086900 KS)’s complaint against Hugel for the alleged theft of its botulinum toxin strain.  
The verdict is expected in H12023. Hugel is expected to receive FDA approval for botulinum toxin by the end of 2022, while Medytox plans to file to FDA in H12023.  
Medytox’s export revenue has still not recovered. However, Q1 sales jumped 25%, on the back of 89% increase in domestic revenue. Medytox shares has declined 20% YTD.


Medy Tox Inc (086900 KS): Legal Battle Continues; Muted Recovery in Export Revenue

South Korea

Medy-Tox Inc. is a biopharmaceutical company.  The Company researches, develops and manufactures biopharmaceutical products using clostridium botulinum which is a microorganism toxin.

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Medy Tox Inc (086900 KS)

Hugel: A Solid Turnaround Story With Resumption of Botulax Sales in China

Hugel is a solid turnaround story. The recent resumption of its Botulax product sales in China is likely to boost the company's sales and profits...

Douglas Kim

Hugel Inc (145020 KS): Expanding Global Presence Provides Solace Amid Patent Tussle with Competitor

Hugel is expected to resume shipment of Botulax to China this month and will enter Canada and some European markets this year. The company is in...

Tina Banerjee

BNC Korea (256840 KS): Margin Pressure; Base Business Faces Regulatory Risk; COVID Drug in Doldrum

We remain bearish on BNC Korea due to regulatory overhang on its base business, competitive pressure in BTX industry, and exposure to Russia & CIS...

Tina Banerjee

BNC Korea (256840 KS): Base Business Faces Regulatory Headwind; Delay in COVID Drugs Approval

BNC Korea is barred from producing and exporting botulinum toxin for 6 months. Its in-licensed oral COVID drug could not secure FDA approval....

Tina Banerjee

Medy Tox Inc (086900 KS): Legal Battle Continues; Muted Recovery in Export Revenue

The commencement of an U.S. investigation against Hugel based on Medytox’s complaints make the U.S. entry uncertain for both the companies. The...

Tina Banerjee

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