ST Pharm's Shift to Deficit in H1: Will H2 Bring a Turnaround?

ST Pharm, which recorded a deficit in the first half of the year, is expected to see a rebound in performance in the second half. On the 26th, the securities industry projected that ST Pharm's lackluster Q2 performance would gradually improve in the latter half of the year, with significant growth anticipated next year.

Huh Hye-min, a researcher at Kiwoom Securities, stated, “ST Pharm’s Q2 consolidated sales and operating profit fell short of the market consensus of 55.2 billion KRW (approximately $42 million) in sales and 2.5 billion KRW (approximately $1.9 million) in operating profit.” She attributed this to a delay of approximately 20 billion KRW (approximately $15 million) in delivery schedules at the request of customers, pushing the sales to the second half of the year.

ST Pharm announced its Q2 results the previous day, revealing a 22.8% year-over-year decrease in sales to 44.6 billion KRW (approximately $33 million) and an operating loss of 3.1 billion KRW (approximately $2.3 million), turning from a profit to a loss. This was due to the postponement of deliveries for oligo (13 billion KRW, approximately $10 million) and low-molecular-weight raw materials (7 billion KRW, approximately $5 million) initially scheduled for Q2. The operating profit in Q1 was only 700 million KRW (approximately $530,000), and with the Q2 loss, the H1 operating profit turned into a deficit. ST Pharm, a raw material pharmaceutical company, produces oligo and low-molecular-weight raw materials, which are primary ingredients for RNA therapeutics.

Huh added, “However, the clinical Phase 1 results for the mRNA vaccine 'STP2104' are scheduled to be announced in Q3, and the Phase 1 results for the anticancer drug 'STP1002' might also be presented at the European Society for Medical Oncology (ESMO) conference. Additionally, the completion of the second oligo plant by the end of the year and the significant increase in siRNA (small interfering RNA) therapeutic 'Leqvio' production next year provide momentum.” Leqvio, for which ST Pharm supplies oligo, is Novartis's treatment for dyslipidemia and is rapidly growing in global sales.

Lee Dal-mi, a researcher at BNK Investment & Securities, stated, “Last year, Q4 oligo sales reached 76.6 billion KRW (approximately $58 million), accounting for 45% of annual oligo sales. Therefore, ST Pharm’s performance typically shows a pattern of 'low in H1, high in H2', and it is expected to turn to profit in Q3.”

Lee Jis-oo, a researcher at Daol Investment & Securities, commented, “The deferred sales are expected to be reflected intensively in Q4, and the sales of Geron's myelodysplastic syndrome (MDS) treatment 'Iometro', which received FDA approval in June, are expected to begin in earnest from the end of the year.” She analyzed, “Accordingly, this year’s sales and operating profit are estimated to increase by 3.4% and 14.5% year-over-year to 293.9 billion KRW (approximately $226 million) and 38.4 billion KRW (approximately $29.5 million), respectively.” ST Pharm has been producing raw materials for Iometro from its early development stages.

Moreover, significant growth is anticipated next year. The commercialization of the CDMO (Contract Development and Manufacturing Organization) pipeline, which has been in clinical stages, is expected to start from the end of the year, and the U.S. de-coupling policy from China also presents a favorable environment for ST Pharm. Researcher Lee noted, “ST Pharm has strengths in producing monomers, oligo, low-molecular-weight raw materials, and mRNA, offering a wide range of services.”