'COVID-19 bad times over' Youngjin Pharmaceuticals' operating profit soars 180% last year...'What's the secret to its rapid growth?

[Korea Financial Times, Kim Nayoung] Youngjin Pharmaceutical is back on a growth trajectory after recovering from the aftermath of COVID-19. For now, the company is focusing on management efficiency, such as sales and custodial business, rather than new drug development, and has returned to the black for the first time in three years.

According to a disclosure by the Financial Supervisory Service on the 20th, Youngjin Pharmaceutical posted separate sales and operating income of KRW 252 billion and KRW 8.7 billion won last year, up 7.3% and 179.8%, respectively, from the previous year. Net profit also returned to the black, reaching KRW 1.2 billion.

“Sales increased in domestic sales, global sales, and custodial business, and net profit turned positive through improved profitability,” Youngjin Pharmaceutical explained.

Youngjin Pharmaceutical has been mired in capital erosion during the COVID-19 pandemic. The company has focused on exporting raw materials and finished pharmaceutical products overseas, which has been hit hard by the pandemic. To add insult to injury, the company's export share fell to 14.72% from 28% when its contract with Japanese pharmaceutical giant 'Sawai' to supply Seppa antibiotics ended in 2021.

In fact, the company's revenue shrank from KRW 225.2 billion in 2019 to KRW 208.5 billion in 2020 and KRW 196.1 billion in 2021. Operating profit also plummeted from KRW 10 billion in 2019 to KRW 400 million in 2020. The following year, 2021, the company lost KRW 13.9 billion.

In 2022, the company's revenue increased to KRW 218.3 billion, but it still incurred an operating loss of KRW 7.3 billion and fell into capital erosion. The company's capital erosion rate at that time was 1.72%.

The following year, 2023, the company posted a capital erosion rate of 1.98%, but both revenue and operating profit grew. The company's revenue for the year was KRW 234.9 billion, up 7.6% from the previous year, and higher than 2019, the year before the pandemic. Operating profit, in particular, turned positive at KRW 3.1 billion.

The company has been able to increase sales and operating income as well as net profit since last year, eliminating capital erosion and entering a full-fledged growth phase.

The steady growth of Youngjin Pharmaceuticals is attributed to its aggressive sales focus on products that are effective in reducing costs. In particular, sales of antibiotics and intravenous and enteral nutrition products, which are core items, increased steadily. Specifically, sales of antibiotics increased to KRW 30.6 billion in 2021, KRW 42.7 billion in 2022, and KRW 46.2 billion in 2023. Intravenous and enteral nutrition products generated sales of KRW 29.8 billion in 2021, KRW 37 billion in 2022, and KRW 42.1 billion in 2023.

The reopening of export routes in time for the end of the pandemic also played a role. In the third quarter of last year, the company's sales in this segment increased by 40.8% year-on-year to KRW 6.4 billion due to an increase in exports of Cepha antibiotics to major Japanese customers.

The company plans to expand its global contract manufacturing organization (CMO) business by increasing its capacity (CAPA). Since September 2022, Youngjin Pharmaceutical has been expanding its antibiotic injection control unit at its Namyang plant. The expansion work was completed on December 27 last year, and the company has an annual antibiotic capa of 20 million vials.

Thanks to this, the company has secured additional sources of income in the global market. In September last year, the company signed a contract with China's Zhongshan Belling Biotechnology to export cefcarfen granular finished drug worth KRW 99.5 billion over the next 10 years. The market expects the product to be licensed by China's National Medical Products Administration (NMPA) around the first half of next year.

An official from Youngjin Pharmaceutical said, “We are expanding our CMO business to strengthen our competitiveness in the domestic pharmaceutical market and explore overseas markets such as Japan and China.” “In the future, we will strive to secure profitability by expanding sales centered on antibiotic injections and raw materials, and discovering new businesses, various items, and new customers.”

Kim Nayoung, Korea Finacial Times (steaming@fntimes.com)