Domestic small and medium-sized pharmaceutical and bio corporations have generally struggled due to deteriorating profitability, but among them, a few have succeeded in turning profitable this year by reducing expenses and focusing on high-revenue products.
As of the 16th, among the listed small and medium-sized pharmaceutical and bio corporations with annual sales of less than 300 billion won that announced their performance for the first quarter of this year, five companies have turned profitable in operating profit compared to the previous year: Bukwang Pharmaceutical, Medytox, KyungDong Pharm, KOREA ARLICO PHARM, and JEIL PHARMACEUTICAL.
The representative corporation that successfully rebounded in performance during the first quarter is Bukwang Pharmaceutical. It recorded an operating profit of 3 billion won on a consolidated basis, successfully turning profitable. Revenue increased by 39% compared to the same period last year, reaching 47.8 billion won.
Bukwang Pharmaceutical has undergone restructuring over three years since being acquired by OCI Holdings in 2022. It reduced low-revenue products and halved the number of trading wholesalers to lower expenses and enhance distribution efficiency. However, it also recorded an operating loss of 37.5 billion won and a net loss of 34.4 billion won in 2023.
The flow of performance began to change last year. Following a transition to profitability in the third quarter of last year, it has achieved consecutive profits until the first quarter of this year. Analysts suggest that the strategy of choosing and concentrating on reducing the number of pharmaceutical products has been effective. Lee Jae-young, the representative of Bukwang Pharmaceutical, stated during the first quarter performance announcement that treatments for diabetic neuropathy, 'Dexid' and 'Chioktasid', and the antipsychotic drug 'Latuda' have driven revenue growth.
Bukwang Pharmaceutical has recently carried out an organizational restructuring. It has centralized marketing, sales, management strategy, and production parts that were dispersed across different institutional sectors under a business management unit, and Kim Sung-soo has taken charge as the head of the business management unit. Kim, who joined the company last year after serving as a partner at EY HanYoung’s audit division, is known to have led this organizational restructuring.
Medytox has also improved its performance through revenue growth from its key products in the first quarter of this year. Medytox's first quarter revenue rose by 17.2% from last year, reaching 64 billion won, marking the highest first quarter revenue ever. As a result, it achieved an operating profit of 5.5 billion won and a net profit of 3.3 billion won, successfully turning profitable.
Medytox's key product is botulinum toxin. Extracted from the food poisoning bacterium Clostridium botulinum, it causes muscle paralysis, reduces muscle size, and smooths wrinkles. A company representative explained that "the revenue of botulinum toxin products, which are wrinkle treatments, has increased in both domestic and international markets, contributing to the growth in performance."
Botulinum toxin has propelled Medytox's growth but is also a risk factor. The company is engaged in several lawsuits with various firms over the alleged theft of toxin strains. There are currently four domestic lawsuits against Medytox, along with two international lawsuits.
Shin Min-soo, a research fellow at Kiwoom Securities, noted that "Medytox has strong revenue growth, but the burden of legal expenses from multiple lawsuits affects its profit margins," and advised that it will be necessary to watch whether profit improvements can be achieved despite legal expense expenditures in the second quarter.
KyungDong Pharm recorded an operating profit of 1.8 billion won in the first quarter, successfully turning profitable. It has continued to achieve profitable operating profits since the second quarter of last year. A company representative explained that "efforts have been made to expand revenues from specialized drugs for chronic diseases such as diabetes and hypertension while reducing production costs and selling and administrative expenses, leading to continuous improvement in profitability."
KOREA ARLICO PHARM posted a first quarter operating profit of 1 billion won, up 165.5% year-on-year, turning profitable compared to the same period last year. Revenue increased by 13.6%, reaching 50.4 billion won. The company stated that sales growth was driven by treatments for cerebrovascular diseases, hypertension, and respiratory conditions. Last year, the company faced a raw material supply crisis that negatively impacted profitability. They indicated that they are focused on diversifying the raw material supply chain and restoring production automation systems to stabilize supply.
JEIL PHARMACEUTICAL saw its first quarter revenue decline by 4.3% compared to the same period last year, but managed to turn profitable due to cost savings. The first quarter revenue reached 163 billion won, with operating profit and net profit recorded at 5.7 billion won and 3.6 billion won, respectively. Although the company’s key product sales decreased in the first quarter, it improved profitability by reducing the cost of goods sold by 13.5% compared to the previous year.
KOLON Life Science also turned profitable in the first quarter, recording revenues of 44.8 billion won and operating profits of 74 million won. This was a result of reducing overall expenses, including materials and supplies costs, outsourcing costs, selling and administrative expenses, and research and development expenses, compared to the previous year. The company recorded operating losses of 24.1 billion won and 22.1 billion won in 2023 and the previous year, respectively.
The business of KOLON Life Science is primarily divided into chemical (synthesis drugs, antibiotics, etc.) and bio (biopharmaceutical contract development and manufacturing) sectors, showing signs of performance improvement centered on the chemical business. It remains to be seen if this performance recovery can continue into the second to fourth quarters.