[E-Daily Reporter NA EUN-KYUNG ] HanmiPharm(128940)reported earnings for the third quarter of this year that were slightly more than half of what the market had expected. While its domestic pharmaceutical business grew, a sharp decline in profits at its Chinese subsidiary, Beijing HanmiPharm, dragged down consolidated profitability.

HanmiPharm announced on the 27th that it posted preliminary third-quarter consolidated revenue of 377.4 billion won, operating profit of 37.8 billion won, and net income of 14.0 billion won. While revenue increased by 4.2% year-over-year, operating profit and net income decreased by 31.3% and 69.1%, respectively.

The third-quarter earnings consensus (average of securities firms’ forecasts) compiled by FnGuide was 408.7 billion won in revenue, 65.8 billion won in operating profit, and 30.8 billion won in net profit. Actual revenue fell short of expectations by 7.7%, while operating profit and net profit came in 42.6% and 54.5% below forecasts, respectively.

The year-over-year decline in profits was notably driven by the poor performance of Beijing HanmiPharm. Beijing HanmiPharm’s revenue fell 15.8% year-over-year to 79.3 billion won, while operating profit dropped 75.1% to 5.9 billion won. The decrease in operating profit amounted to 17.7 billion won, which is nearly equal to HanmiPharm’s consolidated operating profit decline of 17.3 billion won.

Beijing HanmiPharm experienced a sales slowdown as part of its efforts to strengthen management of uncollected accounts receivable. HanmiPharm has been implementing measures to collect receivables and prevent recurrence since last July, and in August, it suspended new shipments to relevant business partners to prevent the accumulation of additional receivables. The company explained that OTC drug sales declined due to these stricter shipment controls. Selling, general, and administrative expenses also rose 27.7% year-over-year to 36.1 billion won, putting pressure on profitability.

However, Beijing HanmiPharm showed signs of recovery compared to the previous quarter. Revenue rose 30.6%, and operating profit increased from 600 million won in the second quarter to 5.9 billion won. The company explained that strategic bidding in response to China’s centralized procurement system and an expansion of supply volumes contributed to the improved performance.

The domestic business continued its growth trend. HanmiPharm’s standalone revenue was 291.5 billion won, and operating profit was 34.9 billion won, up 8.3% and 9.7%, respectively, compared to the same period last year. Third-quarter outpatient prescription sales for “Rosujet,” a dyslipidemia treatment, rose 10.6% to 65.2 billion won. Hanmi Fine Chemicals also recorded revenue of 22.8 billion won, up 32.6%, and returned to profitability with an operating profit of 1.9 billion won.

Compared to the previous quarter, consolidated revenue decreased by 19.2%, while operating profit and net income fell by 71.2% and 83.4%, respectively. This reflects a base effect resulting from the one-time recognition of the technology transfer upfront payment for Sonepeglutide in the second quarter. HanmiPharm’s standalone technology royalty revenue decreased from 112.8 billion won in the second quarter to 1.4 billion won in the third quarter.

The securities industry expects that the upfront payment from the technology export of HM17321, an obesity treatment candidate licensed to Genentech, will be reflected in earnings starting in the fourth quarter of this year. Analysts note that it was not reflected in the third quarter because the administrative procedures related to the contract were finalized in early October.

Consolidated R&D expenses for the third quarter totaled 62.3 billion won, representing 16.5% of revenue, a 1.1% decrease compared to the same period last year.

A HanmiPharm official stated, “We will continue to focus our capabilities on new drug R&D and strive to enhance shareholder value to sustain our growth.”