[E-Daily Reporter Kim Kyung-eun ] Analysts have concluded that while Alteogen Inc.(196170) ’s stock price plummeted 16% in a single day due to stricter U.S. drug price regulations and concerns over patent disputes in Europe, the impact on the company’s actual profitability will be limited. Even if the U.S. government reduces the price of the subcutaneous (SC) injection of the anticancer drug Keytruda by 60%, the decline in annual royalties received by Alteogen Inc. is projected to be limited to around 8%.

In a report released on the 10th, Eom Min-yong, a research analyst at Shinhan Investment Securities, stated, “We believe the impact of the price reduction for the Keytruda SC formulation will be minimal,” adding, “Since this issue has been known to the market since the draft price negotiation proposal was announced last May, any further decline in the stock price would be excessive.”

Shinhan Investment Securities maintained its “Buy” rating on Alteogen Inc. and its status as the top pick in the pharmaceutical and biotech sector. However, it lowered the target price to 430,000 won by adjusting the perpetual growth rate used in its enterprise value assessment.

Alteogen Inc. closed at 168,400 won the previous day, a sharp drop of 16.01% from the previous trading session, amid concerns over stricter U.S. drug pricing regulations and patent disputes.

The direct trigger for the sharp decline was the final rule for 2029 drug price negotiations, which the U.S. Centers for Medicare & Medicaid Services (CMS) finalized on the 5th. The rule allows for drugs to be included in price negotiations even if an existing intravenous (IV) formulation is changed to a subcutaneous (SC) formulation, as they are considered the same drug. Consequently, concerns have spread that Keytruda SC, which incorporates Alteogen Inc.’s technology, could also face pressure to lower its price.

However, Shinhan Investment Securities analyzed that the price reduction is unlikely to have a significant impact on actual sales. This is because the price reduction resulting from the negotiations applies only to sales covered by Medicare, the U.S. public health insurance program. These sales are estimated to account for approximately 24% of Keytruda’s global sales in 2029.

Research Analyst Eom explained, “Even if we conservatively assume a 60% price reduction in 2029, it would account for only 12.6% of global sales,” adding, “If the statutory minimum reduction rate (35%) is applied, the loss ratio would drop to 7.3%.”

The impact on Alteogen Inc.’s royalty revenue is expected to be even more limited. Assuming a Keytruda SC conversion rate of 40% and a royalty rate of 2%, the annual decrease in Alteogen Inc.’s royalty revenue due to the price reduction is estimated at approximately 28.8 billion won. This amounts to about 8% of the 377.2 billion won in Keytruda SC royalty revenue projected by Shinhan Investment Securities for 2029.

The firm also projected that the period during which the price reduction would apply would not be long. This is because Keytruda IV may be excluded from price negotiations once a biosimilar (a generic version of a biopharmaceutical) is launched. Shinhan Investment Securities noted that even if Keytruda is subject to price reductions starting in 2029, it is likely to be excluded from negotiations in 2030 or 2031, depending on the timing of the biosimilar’s launch.

The firm also expects the uncertainty stemming from the European patent dispute to be resolved. Regarding the patent dispute filed by U.S.-based Halozyme—a competitor of Alteogen Inc.—11 out of 14 U.S. patents have been invalidated, and a ruling on the remaining three is expected on the 19th. On the same day, the results of MSD’s appeal hearing regarding the German sales ban are also scheduled to be announced.

Research Analyst Eom predicted that the U.S. patent dispute is likely to be resolved. In particular, he viewed it as a positive sign that Halozyme recently stated in its earnings announcement that it is not currently negotiating with MSD regarding the royalty distribution for Keytruda SC.

He also noted that the pace of the transition to Keytruda SC is faster than expected. The cumulative transition rate for the third quarter of this year was 9.7%, exceeding previous forecasts. Given that MSD has set a goal of raising the transition rate to 30–40% by 2028, analysts suggest that Alteogen Inc.’s royalty base could expand in the future.

Research Fellow Eom added, “Regardless of whether drug prices are reduced, demand from global pharmaceutical companies seeking to improve patient convenience continues,” and noted, “We expect new technology transfer agreements for the switch to SC formulations to continue.”