Company Report May 21, 2015
Pharma/bio
BUY (M)
TP: W500,000 (U)
Share price (won, May 15) 382,400
Paid-in capital (Wbn) 3
Market cap (Wbn) 2,163
BPS (won) 27,364
Net debt to equity (%) -85.3
Shares outstanding 5,656,535
Avg daily T/O (2M, Wbn) 18
Avg daily vol (2M, shrs) 50,497
52-week high (won) 404,900
52-week low (won) 118,900
Foreign ownership (%) 33.7
Major shareholders (%)
Hyeon-Ho Jung & others 21.8
Stock performance (%)
1M 3M 12M
Absolute 7.2 1.3 159.1
Relative 5.5 (12.7) 106.3
Abs (US$) 8.3 2.3 144.7
0
50
100
150
200
250
300
350
400
050,000
100,000150,000200,000250,000300,000350,000400,000450,000
May-13 May-14 May-15
Medy-Tox Inc.(LHS)
Rel. to KOSDAQ(RHS)
(won) (%)
Medy-Tox (086900 KS)
Popularity of Korean fillers
Forecasts and valuations (K-IFRS, consolidated) (Wbn)
FY ends Dec 2013A 2014A 2015E 2016E
Sales 39 76 103 124
Operating profit 17 50 71 86
Net profit, CI 14 44 56 70
% YoY -7.3 205.0 29.3 23.6
P/E (x) 48.8 24.2 38.3 31.0
P/B (x) 11.0 12.2 15.7 10.7
EV/EBITDA (x) 36.9 18.5 27.3 21.8
ROE (%) 24.7 61.3 53.4 43.6
Note: Operating profit = gross profit – SG&A expense, CI = controlling interest
Source: Yuanta Securities
Quarterly earnings
(Wbn) 1Q15E % YoY % QoQ Consens vs consens (%)
Sales 19 41.6 31.2 16 20.6
Operating profit 11 48.3 69.5 9 27.0
Pre-tax profit 11 36.4 34.4 9 16.4
Net profit 9 29.6 29.1 7 16.6
Op margin (%) 59.0 +2.6 %pt +13.3 %pt 56.0 +3.0 %pt
Net margin (%) 45.2 -4.2 %pt -0.7 %pt 46.7 -1.5 %pt
Note: TTB = turn to black, TTR = turn to red, RR = remain in red
Source: Yuanta Securities
Earnings surprise led by strong filler sales
Medy-Tox’s 1Q15 K-IFRS consolidated sales came to W18.8bn (+41.2% YoY, 30.8% QoQ)
and operating profit W11.1bn (+48.1% YoY, +69.4% QoQ, OPM 59.1%), beating consensus by
a significant margin.
Sales jumped as much as 68% (excluding upfront fees from Allergan)
Medy-Tox received W68.9bn in upfront payment from Allergan in 1Q14 and recognized
W3.9bn each quarter until 4Q14, where it reflected just W0.2bn, as it decided to recognize
W11.8bn annually. From 1Q15, it began to recognize W3.0bn each quarter. Excluding
Allergan’s upfront payment, sales came to W15.8bn (+67.9% YoY, +11.5% QoQ) and operating
profit W8.1bn (+124.7% YoY, +27.5% QoQ, OPM 51.3%). Despite that, COGS to sales climbed
0.9%p due to higher filler sales, while SG&A dropped 13.9% thanks to a sharp increase in
sales. Non-operating loss worsened due to W0.9bn in valuation and disposal losses on
financial assets designated at fair value.
Domestic sales up 35% while exports jumping a whopping 111%
In 1Q15, domestic sales grew 35.3% to W6.8bn. From 3Q13, it started selling HA filler, but
after it released a filler containing lidocaine at end-2014, filler sales (both domestic and
overseas) began to sky-rocket. In 1Q15 alone, overseas filler sales jumped 111.0% to W8.9bn,
with especially high demand in Japan, China, and Taiwan. Filler demand in the Asia Pacific
region is relatively strong and Korean fillers are the most popular. Medy-Tox fillers have been
well received in the region thanks to their decent quality and brand power.
Revise up target price to reflect solid sales and expectations for JV in China
In Mar 2015, Actavis completed its merger with Allergan and plans to change its name to
Allegan after gaining the approval of shareholders. Medy-Tox’s next-generation botulinum toxin
(liquid type) will enter phase-IV clinical trials in the US in 4Q15 upon which Allergan is due to
make an additional milestone payment (assumed to be $25mn). The Chinese botulinum toxin
market is valued at W100.0~W150.0bn, but Medy-Tox has yet to secure approval for its
botulinum toxin there. To facilitate its Chinese operations, it is expected to set up a joint venture
with a local company. We upgrade our earnings estimates to reflect 1Q’s earnings surprise and
revise up our target price to W500,000 (target P/E 45x and 2015-16 average EPS) on
expectations for overseas expansion.
2
Medy-Tox (086900 KS)
Medy-Tox: earnings estimates (K-IFRS, consolidated) (Wbn)
1Q14 2Q14 3Q14 4Q14 1Q15 % YoY % QoQ1Q15E
(consensus) 2014
2015E
(consensus)
Sales 13.3 16.1 32.1 14.4 18.8 41.2 30.8 15.6 75.9 84.1
COGS 1.5 1.8 1.8 1.8 2.7 78.5 48.6 6.9 0
COGS-to-sales (%) 11.2 11.2 5.5 12.5 14.1 9.0
Gross profit 11.8 14.3 30.4 12.6 16.1 36.7 28.3 69.1 0
SG&A 4.3 4.8 3.9 6 5 16.7 -16.4 19.1 0
SG&A-to-sales (%) 32.4 29.9 12.3 41.9 26.8 25.1
Op profit 7.5 9.5 26.4 6.6 11.1 48.1 69.4 8.8 50 53.2
Op margin (%) 56.3 58.9 82.2 45.7 59.1 56.4 65.9 63.3
Non-op profit/loss 0.3 1.3 0.9 1.4 -0.5 -235.3 -133.1 0.4 3.9 3.1
Net prof before income tax 7.8 10.8 27.3 8 10.7 35.8 34.0 9.2 53.9 56.3
Income tax 1.3 2.2 5.5 1.4 2.1 66.1 55.1 1.9 10.3 10.9
Tax rate (%) 16.2 20.4 20.0 17.1 19.8 20.7 19.1 19.4
Net profit 6.6 8.6 21.8 6.6 8.5 30.0 29.6 7.3 43.6 45.4
Net margin (%) 49.4 53.5 67.9 45.9 45.4 46.8 57.4 54.0
Source: Yuanta Securities
Medy-Tox: earnings estimates (K-IFRS, consolidated, excluding payments from Allergan) (Wbn)
1Q14 2Q14 3Q14 4Q14 1Q15 % YoY % QoQ 1Q15E
(consensus) 2014
2015E
(consensus)
Sales 9.4 12.2 12.8 14.2 15.8 67.9 11.5
COGS 1.5 1.8 1.8 1.8 2.7 77.3 48.6
COGS-to-sales (%) 15.9 14.8 13.8 12.6 16.8
Gross profit 7.9 10.4 11.1 12.4 13.1 66.1 6.1
SG&A 4.3 4.8 3.9 6 5 17.0 -16.4
SG&A-to-sales (%) 45.7 39.4 30.7 42.5 31.8
Op profit 3.6 5.6 7.1 6.4 8.1 124.7 27.5
Op margin (%) 38.4 45.8 55.5 44.9 51.3
Non-op profit/loss -0.3 -1.3 0.9 1.4 -0.5 53.3 -133.1
Net prof before income tax 3.3 4.3 8 7.8 7.7 131.1 -1.3
Income tax 0.3 1.3 0.8 1.3 1.4 324.3 5.5
Tax rate (%) 9.9 29.4 9.9 16.9 18.1
Net profit 3 3 7.2 6.4 6.3 110.0 -2.7
Net margin (%) 31.7 24.8 56.0 45.4 39.7
Source: Yuanta Securities
3
Company Report
Medy-Tox: sales breakdown (Wbn)
1Q14 2Q14 3Q14 4Q14 1Q15 % YoY % QoQ 2013 2014 2015E
Sales 13.3 16.1 32.1 14.3 18.8 41.2 31.8 39.1 75.9 103
% YoY 51.1 45.0 219.0 55.0 41.2 7.8 94.1 35.7
1) Domestic 5.1 6.7 5.6 7 6.8 35.2 -2.7 20.8 24.4 29.3
% YoY 2.9 18.8 5.7 43.2 35.2 18.3 17.4 20.0
Meditoxin + INNOTOX (botulinum toxins) 4.4 NA NA NA 5.8 32.5 NA 22.8 0
% YoY 32.5
Neuramis (HA fillers) + others 0.7 NA NA NA 1 52.5 NA 1.6 0
% YoY 52.5
2) Exports 4.2 5.4 7.2 7.2 8.9 111.0 24.1 18.3 24.1 36.5
% YoY 8.6 0.2 51.6 67.4 111.0 -2.0 31.5 51.7
% of sales 31.8 33.9 22.4 50.5 47.5 46.9 31.7 35.5
* By product
Neuronox (botulinum toxin) 4 NA NA NA 4.9 21.8 NA 18.3 0
% YoY 21.8
Neuramis (HA fillers) 4 NA NA NA 4.9 2031.9 NA 5.8 0
% YoY 2031.9
* By region
Asia 2.5 3.6 4.5 5.9 7 181.3 19.2 11.5 16.5 28.0
% YoY 20.7 0.3 42.8 117.8 181.3 -13.7 43.3 70.0
East Europe 0.5 0.4 0.4 0.6 0.3 -43.1 -49.6 1.8 1.9 1.9
% YoY 75.7 -19.8 3.5 -6.0 -43.1 53.0 5.6 4.0
Latin American and others 1.2 1.5 2.3 0.8 1.6 32.1 118.1 5.1 5.8 6.6
% YoY -16.1 6.8 90.6 -24.7 32.1 153.6 42.9 6.8
3) Revenues relevant to Allergan 4 3.9 19.3 0.2 3 -24.5 1798.1 27.4 37.2
% YoY -24.5 35.7
* Peer group botulinum toxin sales
CKD Botulax sales 1.5 1.9 1.9 2.1 2.1 36.6 2.7 3.1 7.4
% YoY 1077.9 222.2 99.7 45.5 36.6 140.1
Daewoong Nabota sales 0.4 1.3 1.9 1.4 1.2 200.0 -14.3 5.0
% YoY NA NA NA NA 200.0
Estimated sales from Allergan related to technology transfer (Wbn)
2014 2015E 2016E 2017E 2018E 2019E
Milestone payments 27.0 37.2 47.3 67.6 11.8 9.9
Upfront payment 11.8 11.8 11.8 11.8 11.8 9.9
Milestone payments 15.2 25.4 35.5 55.8
Allergan sales 106.0 212.0 318.0
Sales milestone 5.3 10.6 15.9
Supply to Allergan 26.5 53.0 79.5
Royalty 7.4 14.8 22.3
Total sales related to Allergan alliance 27.0 37.2 47.3 106.8 90.2 127.6
Source: Yuanta Securities
4
Medy-Tox (086900 KS)
Medy-Tox earnings estimates (K-IFRS, consolidated) (Wbn)
New Old Change %
2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E
Sales 103.0 124.0 192.7 93.9 110.7 176.9 9.7 12.0 8.9
Operating profit 71.2 86.4 144.5 61.9 74.0 130.4 15.0 16.8 10.8
OPM (%) 69 70 75 66 67 74
Pre-tax profit, continuing ops 72.0 88.3 148.8 64.6 77.4 135.7 11.5 14.1 9.7
NPCI 56.9 69.7 114.6 52.3 62.7 109.9 8.8 11.2 4.3
EPS (won) 10,061 12,327 20,262 9,253 11,080 19,437 8.7 11.3 4.2
Current price (won) 382,400 382,400 382,400
Implied P/E (x) 38.0 31.0 18.9
2015-16 avg. EPS (won) 11,194
Target P/E (x) 45.0
Target price (won) 503,730
Source: Yuanta Securities
Medy-Tox’s technology transfer agreement with Allergan
Other party Allergan
Technology to introduce/transfer Next-generation botulinum toxin (Korean product name Innotox)
Method of introduction/transfer Transfer of license, transfer of data for permission and approval
Key contract detail Medy-Tox makes product and Allergan has exclusive rights to distribute it globally
Allergan, Inc exclusively develops and sells product globally, excluding Korea and Japan
Medy-Tox has sales rights in Korea; joint sales in Japan
Beginning/expiry of contract Sep 25, 2013 / none
Total amount $362mn (W389.8bn)
Upfront payment
$65mn (W68.9bn); received total amount in 1Q14 and recognized W3.9bn each quarter. From
4Q14, decided to book W11.8bn annually, so booked just W0.2bn in 4Q14. Reflected W3bn
per quarter from 1Q15
Milestone payment on Biologic License Application (BLA) in US Up to $116.5mn (W125.4bn), 3Q14 $15mn (W15.2bn); received and booked entire amount
Milestone payment on commercialization Up to $180.5mn (W194.4bn)
Base currency USD (basic rate on Sep 26, 2013 of W1,076.80/$)
Other Sales royalties for future sales not included in the amount
Source: Yuanta Securities
Characteristics of next-generation botulinum toxin
Meditoxin (identical to Botox) Nex-gen Meditoxin (different from Botox)
Fermentation process Animal-derived drug ingredients used Safer; animal-derived drug ingredients not used
Stabilizer Human serum albumin Safer; human serum Albumin not used
Dosage form Freeze-dried Liquid
Storage temperature Refrigerated (4℃) Room-temperature storage
Key markets Korea and developing world Developed markets (US, Europe, etc)
Source: Yuanta Securities
5
Company Report
Global cosmeceuticals market
“Cosmeceuticals” (cosmetics + pharmaceuticals) are cosmetic products with biologically active
ingredients proven to have medical benefits and in which doctors and pharmacists participated in
R&D. Most cosmeceutical brands highlight the brand value of the participating doctors and partner
pharmaceutical companies. The cosmeceutical label applies mostly to functional cosmetics
products such as whitening and anti-wrinkle products.
The global cosmeceuticals market was valued at $35bn as of 2012, and is likely to post a CAGR
of 5.4% to reach $45.6bn in 2017. In particular, the injectable cosmeceuticals (botulinum toxin,
facial filler, etc) market was valued at $1.6bn in 2012, and is likely to grow to $2.8bn in 2017,
posting a CAGR of 11.8%. The global botulinum toxin market was valued at $2.3bn in 2012, but
only 48% ($1.1bn) came from injectable cosmeceuticals. The domestic cosmeceuticals market is
currently valued at about W400.0bn with an annual growth rate of 15%.
Cosmeceuticals brand zone in Hong Kong drug store Mannings
Global cosmeceuticals market value and forecast Injectable cosmeceuticals market (2012)
33.4
42.8
1.6
2.8
0
10
20
30
40
50
2012 2017F
Topical Cosmeceuticals Injectable Cosmeceuticals($bn)
Botulinum Toxin69%
Facial Fillers31%
Source: Yuanta Securities Source: Yuanta Securities
6
Medy-Tox (086900 KS)
What are facial injectables or injectable cosmeceuticals?
Minimally-invasive and non-invasive procedures have become mainstream, across most medical
fields, and especially in cosmetic surgery. Minimally invasive and non-invasive procedures using
injectables such as botulinum toxin and dermal filler are now referred to as “petit surgery,” and are
used for diverse purposes including wrinkle elimination and facial contouring surgery.
Some 20 years ago, face-lifts were the only way to get rid of facial wrinkles. However, the
popularity of facial injectables has grown considerably since their launch thanks to their
convenience and relatively low cost, and they are now the primary way to eliminate wrinkles. In the
US, over 50% of plastic surgeons’ income is estimated to come from facial injectables.
Face-lifts vs facial injectables
Strength Weakness
Face-lift Long duration High cost ($6,000~15,000)
Weeks of recovery
Facial injectable
Relatively low costs ($400~1,000)
Fast recovery period (procedures can be
done over a lunch break)
Relatively short duration
Note: Based on US prices Source: Yuanta Securities
As shown in the table below, facial injectables are divided into four types. The global facial
injectable market was estimated at $2.2bn in 2010 and should expand at a CAGR of 9% to reach
$4.0bn in 2017. The US is the world’s largest market, estimated at $1.4bn, or 39% of the global
facial injectable market. Among facial injectables, the botulinum toxin market is the largest,
estimated at $1.4bn in 2010. It is also growing most rapidly, along with HA filler. Botulinum toxin is
mostly used for eliminating wrinkles on the upper part of a face, such as the forehead or around
the eyes, while HA filler is mostly used for eliminating wrinkles on the lower part of the face.
Types of facial injectables
Strength Weakness
Botulinum toxin
Short procedure (5~10 mins); immediate results Can be applied to diverse areas such as forehead, eye area, lips, neck Needs repeated injections; doctors have incentive to recommend it
Relatively frequent side effects Lasts up to just 6 months
HA filler (hyaluronic acid-based dermal filler)
Similar to material in living body; thus, has few side effects Needs repeated injections, and thus, doctors have strong incentive to recommend botulinum toxin
Lasts for 6~12 months
Particle and polymer filler Lasts for up to 2 years Relatively frequent side effects Doctors have less incentive to recommend due to long duration
Collagen filler Lasts for 2~3 years Patients could be allergic to animal protein Doctors have less incentive to recommend due to long duration
Source: Yuanta Securities
7
Company Report
Facial injectable applications
Source: Yuanta Securities
8
Medy-Tox (086900 KS)
Dermatologist treatment preferred to expensive cosmetics
Trend-savvy young women tend to prefer treatment by dermatologists, whose prices have recently
declined, over high-priced premium cosmetics with little discernible effect, and then use
cosmeceutical products after receiving treatment.
As consumers can compare products through the Internet, they can decide which brand to use
from among a range of diverse botulinum toxin and facial filler products. Currently, most
dermatologist clinics disclose treatment prices for facial injectables (Botox, Meditoxin, etc). The
domestic price of Medy-Tox’s Meditoxin is 40% lower than Botox and its export price is 30% lower.
UK dermatologist’s Botox treatment advert
Source: Premier Laser Clinic, Yuanta Securities
9
Company Report
Botulinum toxin market
▶ Uses of botulinum toxin
Botulinum toxin blocks the secretion of acetylcholine, which causes muscles to contract. Thus, it
can be used to treat all ailments caused by excessive secretion of acetylcholine.
Botulinum toxin blocks the secretion of acetylcholine in the target body part for a certain period of
time, affecting the action of nerve cells without destroying them. Thereafter, the secretion of
acetylcholine in the target area is restored. It can be used to treat a variety of complaints, including
neuromuscular diseases.
Botulinum toxin applications
Area Indications
Ophthalmology Squints, facial tics, hemifacial spasms
Dentistry Square jaw, teeth grinding
Rehabilitation medicine Cerebral palsy, post-stroke muscle stiffness
Gastroenterology Esophageal muscle spasms, and others
Dermatology/plastic surgery Wrinkle elimination, square jaw, calf muscle slimming, hyperidrosis
Neurology Migraine, back pains
Urology Prostate hypertrophy, overactive bladder
Gynecology Incontinence
Other Vocal cord nodule, hemorrhoids
Source: Yuanta Securities
Botox: therapeutic vs cosmetic sales
57% 56%52% 50% 50% 52% 51% 51% 52% 54%
0%
25%
50%
75%
100%
0
500
1,000
1,500
2,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
($mn) Cosmetic sales (L)
Therapeutic sales (L)
Therapeutic sales share (R)
Source: Yuanta Securities
Therapeutic sales represent
only 10% of Botulinum Toxin
sales in emerging countries
10
Medy-Tox (086900 KS)
▶ Botox, the breakthrough botulinum toxin product
Allergan’s Botox was the world’s first botulinum toxin product. It was approved by the FDA in 1989
and went on sale in 1991. In 1991, French drugmaker Beaufour Ipsen obtained approval in Europe
for and began selling its botulinum toxin product “Dysport.” However, until 2000, only Botox had
been approved by the FDA. Since going on sale in 1991, Botox’s cumulative sales had reached
just $240mn by 2000. However, with approval from the FDA in 2000 for the treatment of platysma
muscle spasms, and in 2002 for the treatment of wrinkles, Botox sales posted a CAGR of 15% to
reach $2.0bnin 2013.
Global botulinum toxin product market vs Botox sales
125 176 240 310 440 564 705 831 982 1,212 1,311 1,310 1,419 1,595 1,766 1,982 966 1,156 1,426 1,579 1,597 1,797 2,045 2,294
2,608
86% 85% 85% 83% 82% 79% 78% 77% 76%
0%
25%
50%
75%
100%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Botox sales (L)
Global botulinum toxin market (L)
Botox market share (R)
($mn)
Botox approved for cosmetic use by FDA
2005~2013 global market CAGR 13.2%2005~2013 botox sales CAGR 11.5%
Source: Allergan, Yuanta Securities
Botulinum toxin product market share, by region (2013) Botulinum toxin product market share, by product (2013)
Source: Yuanta Securities Source: Company data, Yuanta Securities
US, 50%
EU, 26%
Others, 24%
Botox (US), 74.5%
Dysport (France),
15.8%
Xeomin (Germany),
6.0%
BTXA (China), 1.2%
Meditoxin (Korea), 2.5%
11
Company Report
▶ Korea’s botulinum toxin market
In Korea, clinical use of botulinum toxin began in 1996 when Allergan’s Botox imports were
approved. Imports of Dysport began in 1999 and BTXA from China in 2002. In 2006, Medy-Tox’s
“Medytoxin” was the first domestically manufactured botulinum toxin product to be approved by
Korea’s FDA. After the release of “Botulax” and “Nabota,” Korea had the highest number of
competing botulinum toxin products. Korea’s botulinum toxin market was estimated at W71.0bn for
2014, and Medy-Tox’s Meditoxin has the largest market share (30% in sales value, 38% in sales
volume).
Domestic botulinum toxin market value Botulinum toxin product market share, by product (2013)
Source: Yuanta Securities Source: Yuanta Securities
Comparison of botulinum toxin products sold in Korea
Botox Dysport BTXA Meditoxin Myobloc Xeomin Botulax Nabota
Toxin type A A A A B A A A
Manufacturer
Allergan (US) Ipsen (France) Lanzhou Institute
(China)
Medy-Tox
(Korea)
Solstice
Neuroscience
(US)
Merz (Germany) Hugel Pharma
(Korea)
Daewoong
Pharm (Korea)
Distributor Allergan Korea Ipsen Korea Hanol Pharm Medy-Tox,
Pacific Pharm Dream Pharma Hanwha Pharm Hugel Pharma,
CKD
Daewoong
Pharm (Korea)
Major markets US, UK, etc US, UK, etc China, Korea
Korea, Japan,
etc US, Europe
Europe, South
Am
Korea, Japan,
etc Korea
Approval Oct 2, 1996 Jul 13, 1999 May 29, 2002 Mar 16, 2006 Apr 8, 2008 Jun 2, 2009 Mar 17, 2010 Nov 29, 2013
Ingredients
A-type 100U
Human serum
albumin 0.5mg
NaCl 0.9mg
A-type 500U
Human serum
albumin 125ug
Lactose 2.5mg
A-type 100U
gelatin 5mg
dextran 25mg
sucrose 25mg
A-type 100U
Human serum
albumin 0.5mg
NaCl 0.9mg
B-type 5000U/ml
Human serum
albumin 0.05%
Succinate 0.01 M
A-type 100 LD50
U
Human serum
albumin 1mg
Saccharose
4.7mg
A-type 100U
Human serum
albumin 0.5mg
NaCl 0.9mg
A-type 100U
Human serum
albumin 0.5mg,
NaCl 0.9mg
Product image
Source: Yuanta Securities
Meditoxin, 29.6%
Botox, 21.3%
Botulax, 21.3%
Dysport, 12.8%
Others, 14.9%
26 32
41 46
56 61 63
66 70
74
0
10
20
30
40
50
60
70
80
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F
CAGR 12.5%
(Wbn)
12
Medy-Tox (086900 KS)
Dermal filler market
Soft tissue augmentation for wrinkles, scars, and lips, has long been used in cosmetic surgery.
In the early 1900s, liquid paraffin was used for soft tissue augmentation, and in the 1940s, liquid
silicone, but they were subsequently banned due to side effects. In the late 1970s, with the
introduction of liposuction, autologous fat began to be widely used for soft tissue augmentation. In
1981, bovine collagen was approved by the US FDA as a dermal implant, and, in the late 1980s,
autologous collagen was successfully separated from autologous fat for use in soft tissue
augmentation.
These days, hyaluronic acid derivatives (HA filler), autologous dermal implants, allogenic dermal
implants, recombinant human collagen, and synthetics, are used in soft tissue augmentation. With
the introduction of HA filler, now the most popular type of dermal filler, collagen is less frequently
used. The table below shows the various types of dermal filler.
Hyaluronic acid (HA) was first extracted from vitreous humor by Meyer and Palmer in 1934. It is a
polyanionic mucopolysaccaride, a bio-macromolecule commonly found in living organisms. It is
found in muscle, the skeleton, blood, lymph, the placenta, eyes, cartilage, and synovia, but most
commonly in the skin. HA is widely used to replace and restore human tissue, and is commonly
used in cosmetic surgery.
HA filler classification, by originating material
Classification Note
Heterografts Bovine collagen and derivatives, pig collagen, and hyaluronic acid
Allografts Less chance of allergic reactions to bovine/pig collagen and derivatives
Autografts Autologous fat, autologous collagen, etc
Synthetics Gore-tex, silicone, bio polymer, bio plastics, etc
Source: Yuanta Securities
HA filler classification, by action
Classification Note Ingredients
Volumizer Remains in bulk form Collagen, hyaluronic acid, silicone, PAAG, etc
Stimulator Stimulates creation of new collagen and tissue PMMA, PLA, Dextran, CaHA, HEMA, etc
Source: Yuanta Securities
13
Company Report
▶ HA filler (hyaluronic acid based dermal filler) market
Hyaluronic acid-based dermal filler is most widely used, since HA has few side effects compared
with artificial material-based fillers. Some of the latest HA products now come with local anesthetic
“Lidocaine,” which can minimize pain.
Sweden-based Q-Med’s “Restylane” was the first HA filler approved by the FDA (2003). In 2010,
Q-Med was bought by Swiss firm Galderma, a joint venture between Nestle and L’Oreal.
Galderma sells both Restylane and “Azzalure” (Ipsen), a botulinum toxin; and Allergan sells Botox
and HA filler “Juvederm” (approved by the FDA in 2006), which has now become the most popular
HA filler, overtaking Restylane. In this way, when a company offers both botulinum toxin and HA
filler, it can maximize synergies by selling package deals (= product bundling).
Global Juvederm sales Vs facial filler market Global facial filler market breakdown (4Q13)
14%
28% 31% 33% 35% 37% 36% 38%
0%
20%
40%
60%
80%
100%
0
500
1,000
1,500
2,000
2006 2007 2008 2009 2010 2011 2012 2013
Juvederm sales (L)
Global facial filler market (L)
Juvederm M/S (R)
($mn)
2006~2013 global market CAGR 14.0%
2006~2013 Juvederm sales CAGR 37.2%
Source: Yuanta Securities Source: Yuanta Securities
Domestic facial filler market Domestic facial filler market breakdown (2013)
Source: Yuanta Securities Source: Yuanta Securities
Juvederm (Allergan),
44%
Restylane (Galderma),
25%
Others, 31%
Restylane (Galderma),
32.9%
Yvoire (LGLS), 15.7%
Juvederm (Allergan),
14.3%
Elravie (Huons), 11.4%
Ellanse (JW Pharma),
10.0%
Others, 15.7%
43
55
70
100
0
20
40
60
80
100
120
2011 2012 2013 2014F
CAGR 32.5%
(Wbn)
14
Medy-Tox (086900 KS)
Allergan the leader in facial injectable market
Founded in 1948, Allergan is a global specialty pharma specializing in ophthalmic, dermatological,
and neurological products. It is best known for “Restasis” (prescription eye drop), “Botox”
(botulinum toxin), “Juvederm” (HA filler), and “Natrelle” (breast implant). Through the acquisition in
1991 of Oculinum, it obtained the sales license for Botox, which received FDA approval in 2002 for
the treatment of wrinkles. In 2006, it bought US company Inamed for $3.3bn (12-month-forward
P/E 31x), adding Natrelle, Juvederm, and “Lap-Band” (adjustable gastric banding system) to its
product line-up.
Allergan announced a plan in Nov 2014 to merge with Irish generic pharma, Actavis, for $66bn
($215/share). In Mar 2015, Actavis completed its merger with Allergan and it plans to change its
name to Allegan after shareholders’ approval.
Allergan: sales breakdown, by product Allergan: sales breakdown, by region
1,531 1,777 2,009 2,101 2,262 2,520 2,692 2,890 982
1,212 1,311 1,310 1,419
1,595 1,766
1,982
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2006 2007 2008 2009 2010 2011 2012 2013
($mn) Eye care pharmaceuticalsBotox/neuromodulatorSkin careUrologicsMedical devicesOther revenues
2,024 2,542 2,793 2,906 3,017 3,222 3,379 3,839
549 762
882 858 932 1,087 1,096
1,238
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2006 2007 2008 2009 2010 2011 2012 2013
($mn) United States Europe Asia Pacific Latin America Other regions
Source: Yuanta Securities Source: Yuanta Securities
Allergan: operating margin change depending on Botox’s sales portion
10%12%
15%
18%
32% 32%34% 36%
32% 31% 30% 29% 29% 29%31% 31%
17% 17% 18%18%
22%
-1%
26% 27%
1%
19%19% 21%
5%
25%29% 29%
-10%
0%
10%
20%
30%
40%
0
500
1,000
1,500
2,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Botox sales (L)Botox sales share (L)OPM (R)
($mn)
Source: Yuanta Securities
15
Company Report
Medy-Tox (086900 KS) pro forma financial statements (K-IFRS, consolidated)
Statement of comprehensive income Statement of financial position
FY ends Dec (Wbn) 2013A 2014A 2015E 2016E 2017E FY ends Dec (Wbn) 2013A 2014A 2015E 2016E 2017E
Sales 39 76 103 124 193 Current assets 31 103 141 192 298
Cost of sales 5 7 11 13 15 Cash & cash equiv 4 5 40 87 182
Gross profit 34 69 92 111 177 Accts rec & other 10 14 18 20 29
SG&A 18 19 21 25 33 Inventory 2 4 3 4 6
Operating profit 17 50 71 86 145 Non-current assets 48 65 76 86 84
EBITDA 19 53 75 92 151 Tangible assets 36 51 59 66 63
Non-op profit/loss 0 4 1 2 4 Investment in affiliate 0 0 0 0 0
Forex gain/loss 0 0 0 0 0 Other non-current 0 0 0 0 0
Net interest inc 0 2 2 3 6 Total assets 79 169 217 278 383
Equity-meth gain/loss 0 0 0 0 0 Current liabilities 14 35 36 36 36
Other 0 2 -2 -2 -1 Accts payable & other 4 6 7 7 7
Net prof before income tax 17 54 71 88 149 ST financial liabilities 8 8 8 8 8
Income tax 2 10 15 19 34 Liquid LT liabilities 0 0 0 0 0
Net profit from cont op 14 44 56 70 115 Non-current liabilities 4 52 52 52 52
Net profit from discont op 0 0 0 0 0 LT financial liabilities 0 0 0 0 0
Net profit 14 44 56 70 115 Debentures 0 0 0 0 0
NP for controlling int 14 44 56 70 115 Total liabilities 19 87 87 88 88
Total comprehensive inc 14 43 56 70 114 Equity, controlling int 61 82 130 190 295
TCI for controlling int 14 43 56 70 114 Paid-in capital 3 3 3 3 3
Note: Operating profit calculation same as K-GAAP (sales - COGS - SG&A). Capital surplus 14 14 14 14 14
Retained earnings 55 90 138 199 304
Equity, non-control int 0 0 0 0 0
Total equity 61 82 130 190 295
Net debt -10 -76 -111 -158 -253
Total debt 8 8 8 8 8
Cash flow statement Valuation FY ends Dec (Wbn) 2013A 2014A 2015E 2016E 2017E FY ends Dec 2013A 2014A 2015E 2016E 2017E
Operating cash flow 17 105 57 71 109 EPS (won) 2,529 7,713 9,975 12,325 20,274
Net profit 14 44 56 70 115 BPS (won) 11,186 15,276 24,327 35,655 55,211
Depreciation & amort 1 1 3 4 4 EBITDA/shr (won) 3,293 9,337 13,284 16,233 26,690
Forex gain/loss 0 0 0 0 0 SPS (won) 6,920 13,417 18,209 21,922 34,067
Affiliate invest gain/loss 0 0 0 0 0 DPS (won) 1,000 1,500 1,700 1,900 2,500
Inc(dec) net working cap 1 55 -3 -3 -11 P/E (x) 48.8 24.2 38.3 31.0 18.9
Other 0 6 0 1 1 P/B (x) 11.0 12.2 15.7 10.7 6.9
Investing cash flow -6 -84 -15 -15 -5 EV/EBITDA (x) 36.9 18.5 27.3 21.8 12.7
Investment 1 0 0 0 0 PSR (x) 17.8 13.9 21.0 17.4 11.2
Inc in tangible assets -17 -17 -11 -11 -1
Dec in tangible assets 0 0 0 0 0 Key financial dataOther 10 -67 -4 -4 -4 FY ends Dec 2013A 2014A 2015E 2016E 2017E
Financing cash flow -7 -21 -7 -8 -9 Sales (% YoY) 7.9 93.9 35.7 20.4 55.4
Inc(dec) in ST fin liab 4 0 0 0 0 Operating profit (%YoY) -1.6 198.1 41.3 22.4 67.4
Inc(dec) in LT fin liab -2 0 0 0 0 NP, CI (%YoY) -7.3 205.0 29.3 23.6 64.5
Inc(dec) in equity 0 0 0 0 0 Gross margin (%) 87.6 91.0 89.1 89.7 92.1
Cash dividend -3 -8 -8 -9 -10 Operating margin (%) 42.8 65.8 68.5 69.7 75.0
Other -6 -13 1 1 1 NP, CI margin (%) 36.5 57.5 54.8 56.2 59.5
Other cash flow 0 0 -1 -1 -1 EBITDA margin (%) 47.6 69.6 73.0 74.1 78.3
Inc (dec) in cash & eq 4 1 34 47 95 ROIC (%) 32.9 78.4 93.3 93.4 132.0
Beginning cash & equiv 1 4 5 40 87 ROA (%) 19.1 35.2 29.3 28.2 34.7
Ending cash & equiv 4 5 40 87 182 ROE (%) 24.7 61.3 53.4 43.6 47.3
NOPLAT 17 50 71 86 145 Debt-to-equity (%) 30.9 106.5 67.4 46.1 29.9
FCF 0 82 46 59 106 Net debt-to-equity (%) -16.8 -93.4 -85.3 -83.2 -85.9
OP/financing cost (x) 100.9 472.3 667.4 816.8 1,367.0
Note: EPS, BPS, P/E and P/B are based on controlling interest
For valuation metrics such as P/E, historical figures are based on annual averages, estimates on current price
For ROA or ROE, assets and equity are averages of end-of-year figures for given year and year prior
Data to 2010 based on K-GAAP and from 2011, K-IFRS
Source: Yuanta Securities
16
Medy-Tox (086900 KS)
P/E band chart P/B band chart
Medy-Tox (086900 KS) ratings and target price history
Date Rating TP (won)
2015-05-18 BUY 500,000
2015-05-06 BUY 400,000
2015-03-30 BUY 400,000
2015-03-02 BUY 450,000
2015-02-10 BUY 450,000
2015-01-28 BUY 400,000
2015-01-14 BUY 400,000
2014-12-22 BUY 290,000
2014-12-01 BUY 290,000
2014-11-28 BUY 290,000
Source: Yuanta Securities
Disclosures & disclaimers This research report has been prepared for informational purposes only; it does not constitute an offer or a solicitation of an offer to buy or sell any securities or other financial instruments. The information and data contained in this report have been obtained from sources we consider reliable; however, we make no representation that the information provided in this report is accurate or complete, and it should not be relied on as such. The recipient of this report should use his/her independent judgment regarding the sale or purchase of any securities or financial instruments mentioned herein. We disclaim any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. This report is for our clients only. It is copyrighted material and may not be reproduced, transmitted, quoted, or distributed in any manner without the prior written consent of Yuanta Securities Korea Co., Ltd.
As of the publication date of this report, Yuanta Securities Korea Co., Ltd. does not own a stake in excess of 1%, nor does it have any interest whatsoever, in the subject company (ies). The material contained herein was not disclosed by Yuanta Securities Korea Co., Ltd. to any institutional investors or third parties prior to its publication. The analyst (s) of this report or the analyst (s)’ spouse does not have any financial interest in the securities of the subject company (ies) mentioned herein, nor financial interest of any nature related to the subject company (ies) (including without limitation, whether it consists of any option, right, warrant, future, long or short position), as of the publication date of this report.
Analyst certification I/We, as the research analyst/analysts who prepared this research report, do hereby certify that the views expressed in this report accurately reflect my/our personal views about the subject securities discussed in this report.
Stock and sector ratings Stock ratings include an Investment Rating (Strong Buy, Buy, Hold, Sell) based on the expected absolute return of a stock over
the next 6 -12 months. - Strong Buy: Expected to return 30% or more - Buy: Expected to return between 10% and 30% - Hold: Expected to return between -10 and +10%
- Sell: Expected to return -10% or less
Sector ratings suggest 6 to 12 - month forward investment weighting of a given sector compared to its market capitalization weighting.
- Overweight: Investment weighting is higher than the market capitalization weighting - Neutral: Investment weighting is equal to the market capitalization weighting - Underweight: Investment weighting is lower than the market capitalization weighting
0
100,000
200,000
300,000
400,000
500,000
600,000
May-13 Nov-13 May-14 Nov-14 May-15
Current PriceTarget Price
(won)
0
100
200
300
400
500
600
700
800
900
1,000
Jan-08 Jan-11 Jan-14 Jan-17
Price (adj)8.1 x15.2 x22.3 x29.3 x36.4 x
(W'000)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Jan-08 Jan-11 Jan-14 Jan-17
Price (adj)2.6 x7.7 x12.9 x18.0 x23.1 x
(W'000)
17
Company Report
Yuanta Securities (Korea) International Network
Research Center
Yuanta Securities Building
Euljiro 76 Jung-gu
Seoul, Korea 100-845
Tel: +822 3770 3454
Seoul
Head Office
Yuanta Securities Building
Euljiro 76 Jung-gu
Seoul, Korea 100-845
Tel: +822 3770 3454
Hong Kong
TONGYANG Securities Hong Kong Limited
#2107, 21F, Hutchison House, 10 Harcourt Road,
Central, Hong Kong
Tel: +852 3980 6000
Manila
TONGYANG Savings Bank
Ground Floor Chatham House 116 Valero cor. V.A.
Rufino streets, Salcedo Village, Makati City Metro
Manila, Philippines
Tel: +63 2 845 3838
Phnom Penh
TONGYANG Securities (Cambodia) Plc.
#138, 2nd Floor, Paragon Bldg, Norodom Blvd,
Phnom Penh, Cambodia
Tel: +855 23 224 125