Double Setback Deepens Wrinkles for 'Medytox'

'Botulinum toxin,' commonly known as Botox among the general public, is a terrifying neurotoxin capable of killing millions of people with just 1 gram. However, recently it has been widely used as a treatment for neurological disorders such as facial spasms and cerebral palsy, as well as a cosmetic agent for wrinkle reduction and facial contour improvement. By utilizing the effect of temporarily paralyzing muscles in minute amounts, this deadly toxin has been transformed into a useful product. South Korea is considered an advanced powerhouse in the field of botulinum toxin. It is one of the five countries worldwide that have developed botulinum toxin. Moreover, more than 10 companies in the country have jumped into the 'Botox war' to capture market share. The survival game has led to mixed fortunes among companies. Medytox, which first developed botulinum toxin domestically, and Hugel, which targeted the massive Chinese market as the fourth in the world, are representative domestic companies in this field. This article analyzes the management status of these two companies to predict their future growth potential.

[Asia Economy Reporter Jang Hyowon] Medytox is facing a critical situation after failing in its rights offering. Due to excessive legal expenses from lawsuits with Daewoong Pharmaceutical, the company recorded losses, making external funding urgently needed.

To make matters worse, the main product accounting for half of its sales was suspended from sale by the Ministry of Food and Drug Safety (MFDS). The production facility expansion, which was invested in expecting sales growth, is also in a dilemma as it cannot manufacture the main product even after completion.

◆ Sales Ban and Accumulated Losses... Rights Offering Failure

Medytox is a company that manufactures botulinum toxin-based pharmaceuticals for facial wrinkle reduction. Its flagship product is Meditoxin (export name ‘Neuronox’). Botulinum toxin accounts for 87.1% of total sales. The rest consists of medical device product sales such as injectors and other sales, accounting for 6.7% and 6.2%, respectively.

As of the end of the first half of this year, Medytox recorded cumulative sales of 75.5 billion KRW, a 24% decrease compared to the same period last year. Operating loss and net loss were 14 billion KRW and 12.2 billion KRW, respectively, turning into a deficit.

The cause is partly due to decreased sales but also because of high litigation costs. Medytox is engaged in a botulinum strain dispute with Daewoong Pharmaceutical at the U.S. International Trade Commission (ITC).

As of the end of the first half of this year, Medytox spent 18.4 billion KRW on commission fees as selling and administrative expenses, a 135.9% increase from 7.8 billion KRW last year. These commission fees include legal expenses.

Additionally, Medytox has filed an administrative lawsuit against the MFDS. On the 19th of last month, the Daejeon Regional Food and Drug Administration ordered the recall and disposal of Meditoxin, Coretox, and other products, canceling their product approvals because Medytox sold these products without national batch release approval.

Relatedly, although future legal costs will arise, the immediate impact on sales is significant. The sales of the products subject to the sales suspension order amounted to 104.8 billion KRW last year, accounting for 50.93% of total sales.

Because of this, the rights offering initiated in July was also withdrawn. Medytox planned to raise about 166.6 billion KRW through a shareholder allocation public offering. Initially, the subscription rate among existing shareholders was 104.66%, suggesting a smooth process.

However, three days before the payment date, after receiving a business suspension notice from the MFDS, the stock price fell below the public offering price of 171,400 KRW, leading to the cancellation of the offering. The accompanying bonus issue, which allocated 0.2 shares per share, was also withdrawn.

◆ Pressure to Repay Borrowings... Facility Expansion Halted

With the withdrawal of the rights offering, Medytox urgently needs funds to repay borrowings. As of the end of the first half of this year, Medytox’s consolidated total borrowings stood at 151.5 billion KRW, of which 110.9 billion KRW are short-term borrowings due within one year. Cash and cash equivalents held during the same period were 49.7 billion KRW.

To repay borrowings while recording losses, Medytox must refinance or secure over 60 billion KRW in cash. The company intended to use 67 billion KRW from the rights offering proceeds to repay short-term borrowings. Starting December 21, 22.5 billion KRW of short-term borrowings mature, with maturities continuing until August next year.

Factory expansion has also been delayed. Last May, Medytox announced it would invest a total of 47.6 billion KRW to build the Osong Plant 3 production line, anticipating increased sales of Meditoxin. It also planned to invest 21 billion KRW from the rights offering proceeds here. However, with the failure of the offering, the completion of the facility is uncertain.

Seon Minjung, a researcher at Hana Financial Investment, said, “Due to the Innotox Phase 3 clinical trial, Allergan received a milestone payment of 20 million USD (about 22 billion KRW), and third-quarter net profit is expected to be 7.2 billion KRW. The uncertainty will be resolved with the ITC final ruling on the 7th, and operating profit is expected to turn positive from the fourth quarter.”

A Medytox official stated, “Liquidity has been secured thanks to the milestone payment from Allergan. The Osong Plant 3 production line will proceed depending on the outcome of the main lawsuit regarding the sales suspension of Meditoxin.”

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