Chugai Earnings: Full-Year Guidance Revised Upward; Fair Value Raised 13% to JPY 5,900

Narrow-moat Chugai's third-quarter earnings exceeded our expectations due to strong overseas sales of immunology drug Actemra and income from disposal of product rights. Not surprisingly, the company raised its full-year revenue guidance to JPY 1.15 trillion from JPY 1.07 trillion. We've increased our fair value estimate to JPY 5,900 per share from JPY 5,200, due to a more optimistic outlook on long-term operating profit margins as well as incremental increases in our assumptions for Chugai’s pipeline assets. Although we hold Chugai’s drug development platform in high regard, the company’s key pipeline assets are not yet derisked.