**Increased Revenue from Royalties and Sales in the U.S.**
**Projected Sales Growth with Upcoming Launches in Europe and Japan**
**R&D Costs Up by 67%, but Operating Profit Down**
Yuhan Corporation has become the first traditional Korean pharmaceutical company to surpass annual sales of 2 trillion won. This milestone was significantly driven by the FDA approval of its lung cancer drug, “Lecraza,” marking a decade after surpassing 1 trillion won in 2014.
Yuhan Corp announced on the 12th that its consolidated sales for 2024 were provisionally tallied at 2.0677 trillion won, up by 208.8 billion won (11.2%) from 1.8589 trillion won in 2023. Despite challenges such as ongoing medical disputes and high exchange rate fluctuations, the company’s sales have achieved double-digit growth.
The sales increase was primarily fueled by milestones (technology fees) from the ramped-up U.S. sales of Lecraza, along with a rise in royalty revenues. Lecraza, a treatment for advanced or metastatic non-small cell lung cancer, was licensed out to Janssen, now known as Innovative Medicine, a subsidiary of Johnson & Johnson, for global development and sales rights in 2018 for a total of 1.4 trillion won. As the first domestically-developed cancer drug to pass FDA approval last August, the commercialization of the Lecraza-Librivant combination therapy has generated steady milestone revenue.
In the last quarter, Yuhan received a milestone payment of $60 million (approximately 87 billion won), and the total milestone revenue for last year reached 105.237 billion won, a more than nine-fold increase from 11.235 billion won the previous year. With Lecraza now covered under health insurance as a first-line therapy for non-small cell lung cancer in Korea, domestic prescription sales rose to 47.8 billion won, a 53% (22.8 billion won) increase from the previous year.
Revenue from prescription medicines increased by 0.3% to 1.1419 trillion won, and revenue from non-prescription medicines grew by 0.2% to 210.885 billion won, compared to the previous year. Analysis suggests that licensing revenue from Lecraza had a more significant impact on growth than actual pharmaceutical sales. Yuhan Corp stated, “The increase in sales was due to higher sales of the parent company and subsidiaries, as well as increased licensing revenue.” Additional royalty revenue is expected for this year as well.
Further sales increases are anticipated with the launch of Lecraza in Europe and Japan, expected to bring in approximately $30 million (around 44 billion won) in the first half of the year, depending on the launch conditions in each European country. The launch in Japan is also expected to bring in about $15 million (around 21 billion won) in the first half of the year.
Revenue from Lecraza royalties is projected to account for 10-15% of Yuhan’s total sales, securing at least 200 billion won annually. When considering that both technology fees and royalties are settled in dollars, the company could benefit from the high exchange rates.
Yuhan’s operating profit last year was 47.679 billion won, down 16.4% from the previous year, affected by the significant increase in R&D expenses, which rose by 67% to 277.1 billion won compared to 165.5 billion won the previous year. Yuhan continues to reinvest 10% of its sales into R&D annually to maintain a virtuous cycle. The company explained, “The increase in R&D expenditure by 111.6 billion won and the decline in the operating profits of subsidiaries led to an overall reduction in operating profits.”
Net income for the year was 47.962 billion won, a 64.3% decrease from the previous year. A Yuhan official attributed this decline to a 36.4 billion won decrease in gains from the disposal of equity investments, a 33.4 billion won increase in impairment losses on tangible and intangible assets, and a 14.3 billion won increase in equity investment valuation losses.
Meanwhile, Yuhan is focusing on R&D with the goal of achieving one technology export outcome each year until 2027. A promising candidate for the “next Lecraza” is the new allergy drug candidate “YH35324.” Yuhan plans to unveil the results of the Phase 1b study of YH35324 for the first time at the American Academy of Allergy, Asthma & Immunology (AAAAI). The Phase 1b Part 2 study of YH35324, involving patients with chronic spontaneous urticaria (CSU), was completed in the second half of last year. The potential for technology export of YH35324 will be evaluated following the Phase 1b Part 2 results expected at the end of February at the AAAAI meeting.