[Post-IPO]⑦ InnoTherapy, Delayed Product Launches Also Weigh on Performance

[Asia Economy Reporter Yoo Hyun-seok] The performance slump of InnoTherapy, a medical material development company in its second year since listing, continues. Delays in new product launches are the main cause. The company’s expected sales of 18.9 billion KRW this year also appear difficult to achieve.

InnoTherapy was established in 2010. It develops and sells surgical hemostatic agents to prevent excessive bleeding. Its main product is the topical hemostatic dressing (pad) 'InnoSeal.' The company entered the KOSDAQ market in February last year.

At the time of its 2019 listing, InnoTherapy’s initial public offering (IPO) price band was 20,200 to 25,200 KRW, but the final IPO price was set at 18,000 KRW, below the expected range. This was likely influenced by the fact that it is a medical device company rather than a new drug developer. Medical devices are generally valued lower than new drugs. However, the IPO saw a strong subscription rate of 463.4 to 1 from general investors. The lowered IPO price helped attract strong demand from retail investors.

At that time, the lead underwriter, Daishin Securities, applied an estimated net profit of 16.7 billion KRW for 2021 when pricing InnoTherapy’s IPO. This was because sales of the absorbable internal hemostatic agent 'InnoSeal Plus' and the gastrointestinal bleeding-specialized hemostatic agent 'EndoSeal' began in 2019 and were expected to peak in 2021. Daishin Securities explained, "Applying a price-to-earnings ratio (PER) to the estimated net profit at the point when InnoTherapy’s products 'InnoSeal Plus' and 'EndoSeal' receive market approval and sales expand significantly, along with the continued growth of InnoSeal, is reasonable for appropriately valuing a company like InnoTherapy."

Daishin Securities expected InnoTherapy to record sales of 2.7 billion KRW and an operating loss of 1 billion KRW in 2019, followed by sales of 18.9 billion KRW and operating profit of 11.1 billion KRW in 2020. Furthermore, it anticipated sales of 30.4 billion KRW and operating profit of 17.4 billion KRW in 2021, with profit margins exceeding 50%. At the time of listing, InnoTherapy also stated that new products like InnoSeal Plus and EndoSeal would compete with fibrin-based products in the 7 trillion KRW global hemostatic agent market.

However, these projections were dashed due to delays in product approval and launch. On a consolidated basis in 2019, InnoTherapy recorded sales of 700 million KRW and an operating loss of 3.9 billion KRW. Although sales increased by 32.25% compared to the previous year, the deficit widened. By product, there were no sales from InnoSeal Plus and EndoSeal. Additionally, sales of the main product InnoSeal were expected to reach 2 billion KRW but actually amounted to only 600 million KRW.

As product launch plans faltered, the company used less of the IPO funds than planned. InnoTherapy planned to use 8.5 billion KRW out of the 9 billion KRW raised through the IPO, excluding issuance costs, over 2019 and 2020. Specifically, in 2019, it intended to spend 350 million KRW on machinery, 1.75 billion KRW on research and development (R&D), and 1.05 billion KRW on operating funds. However, actual investments were 280 million KRW on machinery, 958 million KRW on R&D, and 1.05 billion KRW on operating funds. The company explained that clinical trial delays prevented R&D expenses from being used as planned.

This year’s performance also seems unlikely to meet projections. In the first quarter, InnoTherapy recorded sales of 100 million KRW and an operating loss of 900 million KRW. Sales decreased by 15.23% compared to the same period last year. Existing product sales are declining, and new products have not been launched. In the first quarter of this year, InnoSeal accounted for 100% of InnoTherapy’s sales.

Due to continued losses, InnoTherapy’s cash assets decreased from 15.5 billion KRW in the first quarter of last year to 5.7 billion KRW in the first quarter of this year. Deficit also increased from 15.2 billion KRW to 18.9 billion KRW. However, the debt ratio remains at a healthy level of about 15.9%.

InnoTherapy has stated that the performance slump was influenced by delays in product launches and expects sales to increase once product launches accelerate. A company official explained, "We expected to receive product approval in the second half of last year, but approval was granted in December. Since we are also undergoing insurance reimbursement review, sales generation was delayed." He added, "Once insurance reimbursement is decided, we expect new product sales to begin in the second half of this year or early next year."

This content was produced with the assistance of AI translation services.