On Friday, Citi updated its outlook on Santen Pharmaceutical Co (OTC:SNPHY)., Ltd (4536:JP) (OTC: SNPHF) shares, increasing the price target to ¥2,400 from the previous ¥2,000, while maintaining a Buy rating on the stock. This adjustment comes in the wake of the company's full-year results and the anticipation of new drug releases.
The company's financial estimates for the fiscal year ending March 2025 have been adjusted to account for domestic drug price revisions and the impact of an increase in co-pays for long-listed drugs starting in October. Despite these changes, the guidance provided by Santen Pharmaceutical is considered by the analyst to be on the conservative side.
Citi has revised its forecasts following the successful development of two treatments: the myopia treatment DER-127 and the blepharoptosis treatment STN138. Both are expected to launch in 2025, with peak annual sales projections increased to ¥30 billion each, up from the previous estimate of ¥20 billion.
The upward revision in the price target is attributed to the roll forward of the base year and an increase in medium-term forecasts, stemming from higher sales estimates for these new drugs.
The analyst notes that both treatments will be sold in Japan outside the insurance system, at patients' own expense. This market, which is not bound by insurance limitations, is seen as a potential area for domestic growth for Santen Pharmaceutical.
The company's strategy to tap into the own-expense market is significant as it allows for revenue streams that are not restricted by insurance requirements, providing a potential boost to the company's growth prospects in Japan.
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