Kyowa Kirin (TSE:4151) Valuation in Focus Following Orphan Drug Designation for OTL-200 Gene Therapy

Kyowa Kirin (TSE:4151) recently announced that Japan's Ministry of Health, Labor and Welfare has granted Orphan Regenerative Medicine Product Designation to OTL-200, an investigational gene therapy for early-onset metachromatic leukodystrophy. This regulatory milestone could open doors to future opportunities in rare disease treatments.

See our latest analysis for Kyowa Kirin.

Regulatory momentum around OTL-200 arrives as Kyowa Kirin’s 1-year total shareholder return stands at -5.6%, reflecting mixed sentiment following broader losses that have accumulated over recent years. While the 7-day share price return of nearly 3% suggests renewed investor optimism, the longer-term figures indicate the stock is still seeking steady traction, especially after a -28% total return over three years. Ongoing developments in its rare disease pipeline are attracting fresh attention from investors who are evaluating both risk and future growth potential.

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Yet with Kyowa Kirin still trading at a notable discount to analyst targets and showing early signals of recovery, investors are left wondering if this reflects an undervalued opportunity or if markets are already fully pricing in expected growth.

Price-to-Earnings of 32x: Is it justified?

Kyowa Kirin is currently trading at a Price-to-Earnings (P/E) ratio of 32, which places it at a premium to both its peers and the broader pharmaceuticals sector. With a last close of ¥2,350, this ratio signals that the market is assigning a higher price for each unit of current earnings, perhaps anticipating favorable future developments or pricing in the company’s research pipeline.

The P/E ratio measures how much investors are willing to pay for a yen of earnings, reflecting both current profitability and future growth expectations. For pharmaceutical companies like Kyowa Kirin, elevated P/E ratios are not uncommon if the market anticipates breakthrough therapies or accelerated profit growth. However, high P/E ratios can also indicate that the current stock price is ahead of fundamentals in case growth fails to materialize.

Despite the premium, Kyowa Kirin’s P/E of 32 is notably higher than the JP Pharmaceuticals industry average of 15.3. In addition, compared to the estimated Fair Price-to-Earnings Ratio of 23.4, the stock still appears expensive even when accounting for industry trends and adjusted sector benchmarks. This difference raises questions about whether the market expects significant benefits from the current pipeline or if investors are overpaying for potential.

Story Continues

Explore the SWS fair ratio for Kyowa Kirin

Result: Price-to-Earnings of 32 (OVERVALUED)

However, ongoing revenue pressures and recent multi-year total return declines could challenge the current optimism if operational momentum stalls or if pipeline progress disappoints.

Find out about the key risks to this Kyowa Kirin narrative.

Another View: Discounted Cash Flow Signals Deep Value

Switching gears to our DCF model, the story changes dramatically. By projecting future cash flows, SWS’s DCF places Kyowa Kirin’s fair value at ¥6,068, which is far above its current price of ¥2,350. This suggests the stock could be trading at a steep 61% discount. Is the market missing something, or are these expectations too optimistic?

Look into how the SWS DCF model arrives at its fair value.4151 Discounted Cash Flow as at Oct 2025

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Kyowa Kirin for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Kyowa Kirin Narrative

If these numbers do not quite fit your outlook or you want to research Kyowa Kirin through your own lens, try crafting a new perspective yourself: Do it your way

A great starting point for your Kyowa Kirin research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include 4151.T.

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