The owner management of Dong Sung Bio Pharm, famous for its diarrhea treatment 'Jeongro-hwan' and hair dye 'Seven Eight,' seems to be coming to an end. Chairman Lee Yang-gu, a second-generation manager, abruptly transferred his share to the marketing company Brand Refactoring, resulting in a change of the major shareholder. It has been confirmed that this decision was made without prior consultation with the company. The company has fallen into chaos as the personal major shareholder suddenly transferred their equity just under a year after his nephew, Representative Na Won-kyun, took responsibility for the company.
Brand Refactoring is a private company led by Baek Seok-hyun, the representative of the KOSDAQ-listed Celestura. Celestura is a company that sells medical devices for cancer diagnosis; however, it became a target for delisting after receiving a disclaimer from an external auditor during the last audit season. Among shareholders, there are significant doubts regarding the managerial abilities of the new major shareholder.
With nearly 70 years of foundation, Dong Sung Bio Pharm has grown as a small but strong pharmaceutical company by launching various health products, including not only Jeongro-hwan and Seven Eight, but also treatments for atopy and scars. Following the late founder, Chairman Lee Seon-kyun, his youngest son, Chairman Lee Yang-gu, has led the company.
This year, a third-generation management team emerged. Na Won-kyun, the grandson of the late former Chairman Lee Seon-kyun and nephew of Chairman Lee Yang-gu, was appointed as the representative last October.
However, the situation changed drastically when Chairman Lee Yang-gu transferred his equity to an outside party. The company announced on the 23rd that it signed a contract to sell 14% (about 3.68 million shares) of Chairman Lee's equity to Brand Refactoring on the 21st, resulting in a change of the major shareholder. Chairman Lee sold the equity for 12 billion won, transferring it at a price of 3,256 won per share, which is 14.8% lower than the market price of 3,820 won on the same day, without any management premium.
From Chairman Lee's perspective, if he had to sell his equity, doing so through a block deal would have been a better choice. This raises suspicions about the background of the equity sale.
Dong Sung Bio Pharm explained that once an individual designated by Brand Refactoring is appointed as a director at the extraordinary shareholders' meeting, Chairman Lee will hand over the remaining 865,000 shares immediately after the transfer of management rights is completed.
As a third-generation manager took over the company, investors were thrown into confusion when the owner's family suddenly transferred equity to an outside party. Although the company's operating performance and profitability continued to deteriorate, leading to a chronic deficit, they inwardly hoped for performance improvement with the emergence of the third-generation owner, born in 1986.
The company stated, "Brand Refactoring is a company that has no connection with the current representative, Na," adding that "the equity sale was a personal decision by Chairman Lee that was not discussed with the company, and the company is currently confirming the specific details." This implies that the new major shareholder, Brand Refactoring, is unlikely to be a supportive force for Representative Na Won-kyun.
The share of the company held by Representative Na Won-kyun is only 4.1%. Initially, he held 1%, but that increased slightly after purchasing 2.9% of shares from Chairman Lee at 4,600 won per share last February.
Brand Refactoring is a marketing company that is smaller in scale and has no business relevance to Dong Sung Bio Pharm. Although the company is led by Baek Seok-hyun, who also leads the medical device company Celestura, expecting synergy is not easy.
Celestura was formerly known as Clinomics. Established in 2011 as the first venture business of the Ulsan National Institute of Science and Technology (UNIST), Clinomics emphasized its production of pharmaceuticals related to cancer diagnosis and genetic testing to enter the KOSDAQ market through a technology exception in 2020; however, the genome technology has failed to generate substantial revenue.
Baek Seok-hyun is not a founder. The founding figures sold the company to an investment group (Zeno Investment Consortium No. 1) primarily financed by Jeong Joon-ho last year. Baek was appointed as the representative of Celestura according to the will of the investment group. After receiving a diagnosis from external auditors that there was significant uncertainty regarding the company’s ability to continue, Celestura became a target for delisting.