20080723-Mirae Asset-Dong-A Pharm (000640.KS)

Presence on Increasing Exports
A new export contract for an in-house developed drug
On July 23, Dong-A Pharmaceutical disclosed that the company recently
struck a US$168mn contract to export erectile dysfunction drug Zydena to
Brazil and South East Asian countries. Considering this contract, the
company’s total exports could exceed W500bn p.a. We believe the company’s
move to expand its presence in overseas markets by beefing up exports is a
positive factor. However, given that it will take at least eighteen months to
receive approval for the drug in Brazil and the South East Asian countries, a
substantial increase in sales should not be seen until early 2011. We maintain
our BUY rating and TP of W130,000.
Improvement of earnings structure backed by export growth
We estimate export sales to post W35.0bn this year and estimate 3-year
export CAGR to be approximately 46%. Assuming average export sales of
approximately W70.0bn per annum, OP contribution of the export division
should expand from 3% in 2008 to 10% in 2011.
Zydena should enter clinical phase III in early 4Q08
Currently, the company is forecast to have additional export momentum as it is
expected to explore channels to export products developed in-house.
Meanwhile, Zydena will enter clinical phase III in early 4Q08. Zydena’s
successfully penetration of the U.S. market should be a key variable for in
boosting its EV.