Ono Pharmaceutical Needs To Reinvest Its Windfall

Ono Pharmaceutical (OTCPK:OPHLY) (4528.T) has a rare chance to reinvest in a bigger, brighter future, and management needs to execute, as the windfall from Opdivo won’t last forever. While this company has a strong history in manufacturing prostaglandin compounds, Ono has struggled to drive meaningful innovation from its own R&D, and although this Japanese pharmaceutical company can trace its history back roughly 300 years, it’s a small player in the overall Japanese (let alone global) pharmaceutical industry.

Ono currently looks slightly undervalued, but that is giving no credit to value-creation from the company’s cash hoard. While Ono has not historically done M&A, management has sounded more interested in pursuing deals as a way of gaining a foothold in the U.S. and reinvigorating its pipeline. Even so, investors need to consider the risk that growing competition in PD-1/PD-L1 antibodies and potential changes to Japanese drug pricing policy will hit the company’s overwhelmingly large driver of value.

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Ono Pharmaceutical Needs To Reinvest Its Windfall