Should I Invest in New Drug Development?… 'Clinical Outsourcing' ADM Corina to Go Public Next Month

[Asia Economy Reporter Ji Yeon-jin] Amid growing attention on COVID-19 vaccines and new drug development-related stocks, a company specializing in clinical trials, an essential step in new drug development, is preparing for its IPO.

According to the financial investment industry on the 15th, ADM Korea will conduct a demand forecast targeting institutional investors over two days starting from the 17th. The lead underwriter is Hana Financial Investment, and the expected public offering price ranges from 2,900 KRW to 3,300 KRW. The public subscription will take place over two days starting from the 25th of this month, with the listing scheduled for next month.

ADM Korea is a contract research organization (CRO) that performs clinical trial tasks entrusted by client companies and receives fees. Based on last year’s figures, the revenue composition was 82.0% from clinical CRO (Phases 1 to 3), 17.7% from post-marketing surveillance (PMS)/Phase 4 clinical trials, and 0.3% from others.

With the surge in new drug development, the CRO market is expanding due to continuous growth and an increase in clinical trial approvals. New drug development takes an average of 14 years and costs about 2 trillion KRW, with clinical trials alone taking 6 to 8 years. Approximately 77% of the total new drug development cost is spent on clinical trials.

As pharmaceutical and bio companies tend to outsource clinical trials to reduce costs during new drug development, ADM Korea is expected to secure mid- to long-term growth and profitability through high value-added orders.

The company has secured major domestic top 10 pharmaceutical companies as key clients and holds references for various disease groups focused on new drug approval clinical trials. Notably, the high proportion of CRO (Phases 1 to 3, gross profit margin about 60%) is considered a premium factor. Since 2006, it has conducted over 50 global clinical trials and acquired a 35% stake in Vietnam’s top CRO in 2018, incorporating it as an affiliate.

The funds raised through this public offering will be used to establish clinical trial infrastructure contracts in 10 additional regions across Asia. As of the end of last year, the order backlog reached a record high of 30.4 billion KRW, and this year’s sales are expected to grow about 8% from last year to 14.2 billion KRW.

Researcher Kang Kyung-geun of NH Investment & Securities emphasized, "As a domestic CRO company, holding references for various disease groups focused on new drug approval clinical trials and having a high proportion of profitable clinical CRO is a premium factor," adding, "Through high value-added orders, the company can secure stable mid- to long-term growth and profitability."

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