October 15, 2018

Korea Morning Focus

Company News & Analysis Major Indices Close Chg Chg (%) Hanmi Pharmaceutical (128940/Buy/TP: W680,000) KOSPI 2,161.85 32.18 1.51 Expectations on poziotinib remain intact KOSPI 200 279.37 4.22 1.53 KOSDAQ 731.50 24.12 3.41

Turnover ('000 shares, Wbn) Volume Value KOSPI 288,607 5,966 KOSPI 200 99,986 4,837 KOSDAQ 547,614 3,735

Market Cap (Wbn) Value KOSPI 1,447,955 KOSDAQ 243,729

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,885 1,815 70 Institutional 1,464 1,470 -6 Retail 2,570 2,667 -97

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 439 421 18 Institutional 320 204 116 Retail 2,976 3,101 -125

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 1,669 1,655 13 KOSDAQ 210 231 -21

Advances & Declines Advances Declines Unchanged KOSPI 654 196 50 KOSDAQ 1,037 172 47

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Electronics 44,000 900 544 KODEX KOSDAQ150 14,575 1,070 449 LEVERAGE Hynix 72,400 3,400 345 KODEX LEVERAGE 12,810 260 320 KODEX 200 27,990 270 311

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value SillaJen 89,700 10,100 377 HLB 102,000 17,800 292 INCON 2,260 15 78 LB SEMICON 4,515 465 75 Celltrion Healthcare 82,100 1,600 72 Note: As of October 12, 2018 Mirae Asset Daewoo Research This document is a summary of a report prepared by Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) and published on our website. Please review the compliance notices contained in the original report. Information and opinions contained herein have been compiled in good faith from sources deemed to be reliable. However, the information has not been independently verified. Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy or completeness of the information and opinions contained in this document. Mirae Asset Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. This document is for informational purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments. This document may not be reproduced, further distributed or published in whole or in part for any purpose.

Hanmi Pharmaceutical (128940 KS ) Expectations on poziotinib remain intact

Healthcare Expectations on poziotinib remain intact: Favorable ORR of 43% Company Update At the recent World Conference on Lung Cancer (WCLC), Spectrum Pharmaceuticals October 15, 2018 announced that poziotinib showed an objective response rate (ORR) of 43%. This sparked worries about the drug’s efficacy, as an abstract released before the WCLC had reported an ORR of 58%. On the day of the announcement, Spectrum Pharmaceuticals’ shares tumbled 22.1%. (Maintain) Buy However, we note that the ORR in the abstract reflected both confirmed ORR and unconfirmed ORR (including pending confirmation ORR). The ORR announced at the Target Price (12M, W) 680,000 WCLC was the confirmed ORR, which is based on a different set of criteria. The confirmed ORR previously shown in the abstract was 45%, largely in line with the latest Share Price (10/12/18, W) 433,500 result. Another evaluation parameter, progression-free survival (PFS), was reported to be 5.5 months at the WCLC, similar to the 5.6 months revealed in the abstract. Expected Return 57% Even if the confirmed ORR is 43%, it would be much higher than those of existing drugs like Giotrif, Iressa, and Tarceva, which have an ORR of 8%. Taxotere’s ORR is 9-13% , while recently released PD-1/PD-L1 inhibitors (immuno-oncology treatments) have an OP (18F, Wbn) 85 ORR of around 3.6-19%. It is also worth noting that Dr. John Heymach of the MD Consensus OP (18F, Wbn) 84 Anderson Cancer Center, who is in charge of the poziotinib trials, had said before the EPS Growth (18F, %) -7.8 trials that he expected an ORR of 20-30%. Thus, we believe an ORR of 43% represents a Market EPS Growth (18F, %) 13.6 favorable level. P/E (18F, x) 88.6 3Q18 preview: Revenue to be in line with consensus, but OP to slightly miss Market P/E (18F, x) 8.3 KOSPI 2,161.85 For 3Q18, we forecast Hanmi Pha rmaceutical to post consolidated revenue of W243.4bn (+7.0% YoY), in line with the consensus, and operating profit of W19.6bn Market Cap (Wbn) 4,936 (-29.4% YoY), slightly below the consensus. Despite fewer business days due to Shares Outstanding (mn) 11 Chuseok, we estimate domestic revenue expanded roughly 10% YoY. We believe Free Float (%) 58.0 Beijing Hanmi also continued robust growth. The only upfront/milestone income Foreign Ownership (%) 13.2 recognized in the quarter was likely an upfront payment (W9.1bn) for the RAF inhibitor Beta (12M) 1.13 (which is being spread out across quarters). We expect a marked dec line in operating 52-Week Low 400,000 profit, mainly due to: 1) a tough comparison caused by the receipt of the W5.8bn 52-Week High 620,000 milestone for the RAF inhibitor’s phase 1b trial initiation in 3Q17, and 2) expenses related to efpeglenatide’s global phase 3 trials. (%) 1M 6M 12M Absolute -11.7 -19.9 -9.0 Reiterate Buy; Our top pick in pharmaceuticals Relative -6.8 -9.5 4.2 We reiterate our Buy rating and target price of W680,000 on Hanmi Pharmaceutical and continue to recommend the stock as our top pick in pharmaceuticals. We highlight 160 Hanmi Pharmaceutical KOSPI three investment points. 1) We expect a biologics license appl ication (BLA) for Rolontis 140 and a breakthrough therapy designation application for poziotinib to be filed by the 120 end of the year. 2) Three of the five phase 3 trials planned for efpeglenatide (licensed to Sanofi) have kicked off, as planned. 3) HM15211, a triple agonist currently in a phase 100 1 study, could potentially be developed as a treatment for a number of indications— 80 including non-alcoholic steatohepatitis (NASH), Parkinson’s, Alzheimer’s, and 9.17 1.18 5.18 9.18 diabetes—and could also attract licensing deals.

Mirae Asset Daewoo Co., Ltd.

[ Pharmaceutical/ Biotech ] FY (Dec.) 12/15 12/16 12/17 12/18F 12/19F 12/20F Revenue (Wbn) 1,318 883 917 980 1,153 1,291 Taehee Kim +822 -3774 -6813 OP (Wbn) 212 27 82 85 167 183 [email protected] OP margin (%) 16.1 3.1 8.9 8.7 14.5 14.2

Seunglok Huh NP (Wbn) 154 23 60 56 119 129 +822 -3774 -1374 EPS (W) 13,565 2,049 5,308 4,892 10,470 11,321 [email protected] ROE (%) 25.7 3.5 8.8 7.6 14.6 13.8

P/E (x) 49.2 136.8 110.0 88.6 41.4 38.3 P/B (x) 11.2 4.8 9.1 6.3 5.5 4.9 Dividend yield (%) 0.3 0.0 0.1 0.1 0.1 0.1 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, Mirae Asset Daewoo Research estimates

October 15, 2018 Hanmi Pharmaceutical

Table 1. Poziotinib ORR is much higher than those of existing cancer drug treatments Treatments ORR Giotrif, Iressa, Tarceva, etc. (targeted therapies) 8% Taxotere 9-13% Immunotherapy (PD-1/PD-L1 inhibitors) 3.6-19% Poziotinib 43% Source: Spectrum, Mirae Asset Daewoo Research

Table 2. Three phase 3 studies of efpeglenatide Details

Candidate Efpeglenatide (SAR439977) Sponsor Sanofi Indication Type 2 diabetes Phase 3 Trial design vs. placebo vs. placebo vs. dulaglutide Primary endpoint HbA1c reduction MACE risk HbA1c reduction Patient profile 400 adults 18 years or older 4,000 adults 18 years or older 900 adults 18 years or older Duration Dec. 2017 – Aug. 2020 Apr. 2018 – Apr. 2021 Sep. 2018 – Dec. 2020 Source: Clinicaltrials.gov, Mirae Asset Daewoo Research

Figure 1. Preclinical trial results for efpeglenatide: Effective Figure 2. Preclinical trial results for efpeglenatide: Effective in blood glucose reduction in weight loss

Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research October 15, 2018 Hanmi Pharmaceutical

Figure 3. Preclinical trial results for triple agonist: Effective in Figure 4. Preclinical trial results for triple agonist: Effective in treating NASH treating liver fibrosis

Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

Table 3. 3Q18 preview (Wbn, %) 3Q17 2Q18 3Q18F YoY QoQ Consensus Revenue 227.6 241.3 243.4 7.0 0.9 248.1 Operating profit 27.8 19.9 19.6 -29.4 -1.5 21.6 OP margin (%) 12.2 8.3 8.1 8.7 Net profit attributable to 20.6 13.4 15.4 -25.2 15.1 15.2 controlling interests Source: Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Key Universe Valuations October 15, 2018

※All data as of close October 11, 2018, unless otherwise noted.

18F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 18F 19F 18F 19F 18F 19F 18F 19F 18F 19F 005930 282,450 44,000 3.2 20.3 0.1 27.2 7.5 6.4 5.9 1.3 1.1 22.2 20.0 000660 SK Hynix 52,707 72,400 1.4 62.2 2.4 59.2 4.1 3.1 3.0 1.0 0.8 40.5 30.2 068270 Celltrion 34,421 274,500 - - - - 0.0 0.0 207940 31,395 474,500 4.5 277.0 - 375.1 606.3 127.6 7.8 7.3 1.3 5.9 005490 POSCO 23,105 265,000 3.0 19.3 3.5 21.5 10.4 6.8 6.2 0.5 0.5 7.6 7.9 051910 LG Chem 22,272 315,500 1.9 -17.7 17.4 -10.5 21.2 14.2 11.7 1.4 1.3 10.5 11.7 028260 Samsung C&T Corporation 22,194 117,000 1.7 26.8 7.7 96.0 2.2 17.8 17.5 0.9 0.8 5.4 5.2 105560 KB Financial Group 21,909 52,400 22.1 5.0 8.1 3.7 6.0 5.8 0.6 0.6 10.3 10.0 017670 SK Telecom 21,801 270,000 3.7 -13.2 5.1 29.7 4.8 6.5 6.2 0.9 0.8 17.0 15.2 055550 20,509 43,250 23.2 2.2 16.6 2.6 6.0 5.9 0.6 0.5 9.9 9.4 096770 SK Innovation 19,556 211,500 3.8 -8.0 -6.3 -3.8 -2.0 9.8 10.0 1.0 1.0 11.1 10.4 034730 SK Holdings 19,032 270,500 1.5 4.6 7.0 26.5 6.1 9.0 8.5 1.2 1.0 14.5 13.6 032830 Samsung Life 18,060 90,300 - - - - 0.0 0.0 006400 Samsung SDI 16,779 244,000 0.4 498.4 44.8 15.7 47.3 22.6 15.3 1.4 1.3 6.5 9.0 018260 Samsung SDS 15,940 206,000 1.2 24.5 13.4 31.7 12.1 22.8 20.4 2.6 2.4 12.0 12.3 015760 KEPCO 15,889 24,750 - - - - - 19.2 0.2 0.2 - 1.2 010950 S-Oil 14,579 129,500 3.6 10.1 29.0 -23.3 55.1 15.8 10.2 2.3 2.0 14.2 21.0 033780 KT&G 13,221 96,300 4.4 -15.7 21.0 -16.8 13.7 13.7 12.0 1.6 1.5 12.5 13.8 000810 Samsung F&M 12,886 272,000 - - - - 0.0 0.0 086790 12,790 42,600 24.8 9.6 18.1 9.7 5.2 4.8 0.5 0.4 9.7 9.7 091990 Celltrion Healthcare 11,537 82,100 45.8 63.6 39.9 27.0 46.8 36.8 5.9 5.3 13.5 15.1 003550 LG Corp. 11,095 64,300 2.0 0.5 8.3 -23.0 10.4 6.1 5.6 0.6 0.6 10.9 10.8 066570 LG Electronics 10,539 64,400 1.1 29.4 15.2 -9.5 36.7 7.5 5.5 0.8 0.7 11.2 13.6 009150 Samsung Electro-Mechanics 9,860 132,000 0.6 258.4 27.8 332.2 26.8 14.7 11.6 2.0 1.8 15.4 16.8 011170 Lotte Chemical 9,220 269,000 3.9 -19.6 -0.8 -14.0 4.5 4.8 4.6 0.7 0.6 15.7 14.6 024110 8,092 14,450 24.2 6.2 20.5 6.0 5.3 5.0 0.4 0.4 8.9 8.8 030200 KT 7,520 28,800 3.5 4.0 -1.1 37.6 14.9 11.5 10.0 0.6 0.5 5.4 5.8 010130 Korea Zinc 7,435 394,000 2.5 -8.6 2.9 -1.2 9.5 12.0 10.9 1.2 1.1 10.1 10.3 032640 LG Uplus 7,335 16,800 3.3 0.5 13.8 -3.5 14.9 13.9 12.1 1.1 1.0 8.8 8.8 004020 6,699 50,200 1.5 1.1 2.5 8.3 7.0 8.6 8.1 0.4 0.4 4.6 4.7 034220 LG Display 6,530 18,250 2.7 ------0.5 0.5 - - 000720 Hyundai E&C 6,203 55,700 0.9 1.0 13.9 159.8 9.8 11.8 10.8 0.9 0.9 8.0 8.4 023530 Lotte Shopping 5,700 201,500 2.6 18.2 36.1 - - - 11.1 0.5 0.4 - 4.1 139480 Emart 5,673 203,500 0.9 -5.8 18.1 -28.5 7.9 12.9 11.9 0.7 0.6 5.3 5.6 036460 KOGAS 5,299 57,400 1.7 25.0 10.6 - 8.1 7.6 7.0 0.6 0.6 8.6 8.6 005830 DB Insurance 4,984 70,400 - - - - 0.0 0.0 128940 Hanmi Pharmaceutical 4,936 433,500 0.1 3.0 97.1 -7.8 114.0 88.6 41.4 6.3 5.5 7.6 14.6 078930 GS Holdings 4,804 51,700 3.5 -8.0 4.8 -2.6 5.3 5.1 4.8 0.6 0.5 11.8 11.3 097950 CJ CheilJedang 4,780 317,500 0.9 7.9 9.9 134.6 -65.1 5.3 15.2 1.0 1.0 23.1 6.7 086280 4,163 111,000 2.7 -5.0 8.0 -39.9 40.2 10.2 7.3 1.0 0.9 10.0 13.1 088350 Hanwha Life 4,121 4,745 - - - - 0.0 0.0 271560 Orion 4,092 103,500 0.7 137.1 7.7 34.4 9.7 23.6 21.5 2.8 2.5 12.5 12.3 003670 POSCO Chemtech 3,970 67,200 0.5 -10.4 17.2 26.9 11.2 30.2 27.1 5.4 4.6 19.0 18.3 006360 GS E&C 3,965 50,700 0.6 230.0 -3.9 - 12.3 5.7 5.1 1.1 0.9 19.8 19.7 029780 Samsung Card 3,951 34,100 -33.2 -16.8 -8.9 3.9 11.2 10.8 0.6 0.5 1.5 1.5 028050 3,655 18,650 211.4 69.6 - 50.4 36.9 24.5 3.3 2.9 9.3 12.7 071050 Korea Investment Holdings 3,533 63,400 - - - - 0.0 0.0 001450 Hyundai M&F 3,487 39,000 - - - - 0.0 0.0 005940 NH Investment & Securities 3,475 12,350 - - - - 0.0 0.0 282330 BGF Retail 3,422 198,000 0.5 653.0 16.3 -8.3 14.5 22.3 19.5 6.5 5.0 33.7 29.2 Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Market Data October 15, 2018

※All data as of close October 12, 2018, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 442.67 -24.60 -5.27 -20.12 USD/KRW 1,142.50 1,132.50 1,126.80 1,135.20 KOSPI 2,161.85 32.18 1.51 -12.82 JPY100/KRW 1,018.91 1,008.86 1,009.54 1,009.11 KOSDAQ 731.50 24.12 3.41 -9.96 EUR/KRW 1,324.39 1,306.17 1,307.43 1,346.57 Dow Jones* 25,052.83 -545.91 -2.13 0.92 3Y Treasury 2.05 2.01 1.89 1.90 S&P 500* 2,728.37 -57.31 -2.06 1.21 3Y Corporate 2.49 2.46 2.34 2.44 NASDAQ* 7,329.06 -92.99 -1.25 4.60 DDR2 1Gb* 1.26 1.28 1.30 1.23 Philadelphia Semicon* 1,229.36 -12.74 -1.03 -4.53 NAND 16Gb* 2.81 2.81 2.82 2.96 FTSE 100* 7,006.93 -138.81 -1.94 -8.38 Oil (Dubai)* 80.66 83.04 76.22 54.78 Nikkei 225 22,694.66 103.80 0.46 -3.45 Gold* 1,223.50 1,189.30 1,196.80 1,285.80 Hang Seng* 25,266.37 -926.70 -3.54 -17.20 Customer deposits (Wbn)* 24,375 24,808 26,026 23,980 Taiwan (Weighted) 10,045.81 239.70 2.44 -6.21 Equity type BC (Wbn)(Oct. 10) 81,890 82,021 81,794 72,019 Note: * as of October 11, 2018 Source: KSDA, Wisefn, DRAMeXchange, MSCI

KOSPI Top 10 Foreign Net Buy / Net Sell (Wbn) KOSPI Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell Hynix 77.44 SEMCO 36.21 SEMCO 48.67 KODEX 200 60.55 KODEX 200 64.96 KT&G 34.72 Samsung SDI 24.69 Samsung Electronics 26.10 Samsung Electronics 60.61 Celltrion 17.47 KODEX KOSDAQ150 LEVERAGE 15.43 KODEX LEVERAGE 21.06 NHN 20.79 SAMSUNG BIOLOGICS 16.14 Celltrion 13.45 NHN 19.37 TIGER200 11.67 Hyundai Eng. & Cosnt. 7.56 KT&G 11.92 KB Financial Group 15.63 KODEX KOSDAQ150 11.26 Shinhan Financial Group 5.62 KODEX 200 Futures Inverse 2X 11.01 SK Telecom 11.06 LEVERAGE LG Electronics 10.28 LG Chem 5.20 POSCO 11.01 TIGER200 10.44 LG Display 8.07 Hana Financial Group 5.14 9.38 Hynix 9.22 Samsung SDI 7.54 HANJINKAL 4.72 KODEX INVERSE 9.13 NCsoft 8.70 NCsoft 6.58 4.61 SK Energy 8.68 8.43 Source: KSDA, Wisefn

KOSDAQ Top 10 Foreign Net Buy / Net Sell (Wbn) KOSDAQ Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell SillaJen 4.25 HLB 16.84 SillaJen 14.34 OliX 2.26 Nowcom 2.58 Celltrion Healthcare 16.83 Celltrion Healthcare 14.30 Amotech 2.15 Posco Chemtech 2.13 CJ O Shopping 4.66 Posco Chemtech 7.31 BLUECOM 1.84 Techno Semichem 1.91 Koh Young 3.98 CJ O Shopping 6.82 SEEGENE 1.77 ECOPRO 1.74 Hugel 3.18 ViroMed 4.76 ST Pharm 1.62 NEPES 1.73 SM 3.10 Jenexine 4.47 Mezzion Pharma 1.61 Amotech 1.68 2.91 Emerson Pacific 4.11 Minwise 1.33 Cafe24 Corp. 1.66 IDIS 2.78 Com2us 3.38 GS Home Shopping 1.05 auction 1.61 Samjung Packing & Aluminum 2.21 Medy-tox 2.93 megastudyEdu 0.95 Tes 1.51 Wonik Quartz 2.16 Celltrion 2.91 ENF Technology 0.95 Source: KSDA, Wisefn

KOSPI Top 10 by Market Cap (Wbn) KOSDAQ Top 10 by Market Cap (Wbn) Close (W) Chg (W) Mkt Cap Close (W) Chg (W) Mkt Cap Samsung Electronics 44,000 900 282,450 Celltrion Healthcare 82,100 1,600 11,537 Hynix 72,400 3,400 52,707 SillaJen 89,700 10,100 6,263 Celltrion 274,500 3,000 34,421 CJ O Shopping 241,500 3,500 5,295 Samsung Electronics (P) 35,800 1,150 32,350 HLB 102,000 17,800 3,983 SAMSUNG BIOLOGICS 474,500 7,500 31,395 Posco Chemtech 67,200 5,300 3,970 Hyundai Motor 115,500 -500 24,679 NANOS 7,400 0 3,632 NHN 142,000 1,000 23,404 ViroMed 222,200 11,100 3,545 POSCO 265,000 8,000 23,105 Medy-tox 532,000 14,200 3,009 LG Chem 315,500 8,500 22,272 Studio Dragon 100,400 1,700 2,815 SAMSUNG C&T 117,000 2,000 22,194 PearlAbyss 206,700 9,300 2,662 Source: