Chugai Pharmaceutical's Q3 Earnings Surprise to Upside, Guidance Increased; FVE Unchanged

Narrow moat Chugai Pharmaceutical reported third-quarter earnings that surprised to the upside due to higher-than-expected sales of Ronapreve in Japan, the neutralizing antibodies in-licensed from Regeneron for treating mild and moderate COVID-19 cases. Full-year guidance for 2021 revenue was revised upward from JPY 800 billion to JPY 970 billion, and the company also indicated it will achieve growth in 2022. Although we have revised our fiscal 2021 and 2022 estimates to reflect this, we attribute most of this to temporary COVID-19-related sales, and our fair value estimate remains unchanged at JPY 4,860 per share. We think the stock is undervalued and especially think that disclosures on its pipeline will be positive.