Daiichi Sankyo Pharmaceutical (4568): Story Still in Place and Not (Yet?) Fully Valued
In our Feb 26 2015 Daiichi Sankyo (DSK) report, Value Trap or Opportunity?, we suggested that the market was massively undervaluing DSK’s potential. Fifteen months on, the stock is now 40% higher, and if we stick with the ¥90bil FY17 OP forecast we had in that report (¥90bil), the shares are trading on an uninspiring 14.5x EV/OP. In this new report, we assess whether to call in the bet on DSK, or to continue to run with it.
Key Points
- While DSK has a patent cliff problem, it is not an Otsuka / Takeda-style, Beachy Head-sized cliff, but instead, more of a pothole.
- DSK’s domestic business has caught the market out over the past four years, and it definitely has the potential to repeat that trick over the next four years.
- Overseas potential from the much-maligned Savaysa / Effient combination is yet to be appreciated by the market. The combined domestic sales of these drugs could reach ¥85bil in FY18, from zero in FY14…
- …while any royalties on the international side go straight to the bottom line.
- Not only does DSK have tivantinib, quizartinib and vemurafenib in its Phase III global pipeline, but it has the Japanese rights to another borderline oncology drug, nimotuzumab.
- There is also huge potential from mirogabalin, which could see peak sales of US$5bil.
- The oncology pipeline remains a “call option”.
- Long-term valuations remain attractive (8.7x FY20 EV/OP), while not quite as compelling as they were before the rally in the share price.
Daiichi Sankyo is engaged in the research and development, manufacture, sales, and marketing of pharmaceutical products. Co. operates its operation in Japan, the Americas, Europe, China and Asia. Co. provides ethical pharmaceutical and proprietary drugs. Co.'s principal products include antihypertensive agent "Olmetec" ("Olmesartan" in overseas), ulcer treatment drug "NEXIUM," Alzheimer's disease treatment "Memary," anti-influenza treatment "Inavir," antiplatelet agent "Prasugrel," anticoagulant "Edoxaban," anti-inflammatory analgesic "Loxonin" Tape, synthetic antibacterial agent "Cravit," treatment for bone complications "RANMARK," and anticoagulant "LIXIANA."
Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods.
PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries.
The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.