Ildong Pharmaceutical Transforms into a New Drug Developer Beyond 'Aronamin Gold'

Joint Development of Oral Therapeutics with Japanese Company
Optimistic Outlook if Convenient Dosage Method Succeeds
Same 5-Day Course but Only Once a Day... '3rd Generation Management System' Accelerates R&D and New Drug Development

Delta and Omicron, along with other COVID-19 variants, are once again threatening daily life. Although vaccination rates continue to rise daily, breakthrough infections are increasing, causing a rapid surge in confirmed cases. In this situation, stock investors' attention has shifted to companies developing oral therapeutics in pill form. Investors' experience of seeing stocks of companies involved in vaccine development, manufacturing, and distribution rise faster than the vaccine rollout speed has influenced this trend. Among domestic companies, Daewoong Pharmaceutical, Ildong Pharmaceutical, Hyundai Bio, Shinpoong Pharmaceutical, and Korea BNC are considered representative. However, the situation changed as oral therapeutics developed by U.S. companies Pfizer (Paxlovid) and Merck (Molnupiravir) received consecutive approvals from the U.S. Food and Drug Administration (FDA). Domestic companies still in clinical stages suddenly became latecomers. Uncertainty about clinical success and unfavorable market conditions as late entrants emerged as risk factors. Amid expectations and concerns about domestic pharmaceutical companies, Asia Economy analyzed the business and financial status of Daewoong Pharmaceutical and Ildong Pharmaceutical, which are progressing rapidly in oral therapeutic clinical trials, to gauge their growth potential.

[Asia Economy Reporter Park Soyeon] Ildong Pharmaceutical, famous for 'Aronamin Gold,' is also developing a COVID-19 therapeutic. It is showing rapid clinical progress and plans to complete clinical trials by the first half of next year and obtain emergency use authorization. The company is jointly developing an oral COVID-19 therapeutic with Japan's Shionogi Pharmaceutical, which is a new drug candidate developed exclusively targeting COVID-19. If Ildong Pharmaceutical succeeds in development and commercialization, the convenience of medication is expected to be a significant advantage. Ildong Pharmaceutical is developing a regimen of once-daily dosing for five days. Pfizer's oral therapeutic Paxlovid requires taking three pills twice daily for five days, totaling 30 pills, while MSD's Lagevrio is known to require 40 pills over five days. If successfully commercialized, expectations are high that it will lead to rapid performance improvement and stock price increases.

Since its corporate split in 2016, Ildong Pharmaceutical has increased its research and development (R&D) investment over five years, positioning new drug development as a future growth engine. It is conducting new drug development projects in various fields, including not only COVID-19 therapeutics but also ophthalmic disease treatments, metabolic diseases, liver diseases, cancer, and gastrointestinal diseases. The company's R&D expenses through the third quarter of this year amounted to 79.6 billion KRW, accounting for 19.1% of total sales. Ildong Pharmaceutical's R&D expenses increased from 48.3 billion KRW (10.5%) in 2017, immediately after the establishment of the new corporation, to 54.7 billion KRW (10.9%) in 2018, 57.4 billion KRW (11.1%) in 2019, and 78.6 billion KRW (14%) in 2020.

Recently, Yoon Woongseop, CEO of Ildong Pharmaceutical, was promoted to vice chairman, marking the full-scale start of third-generation family management. Vice Chairman Yoon has led the company's structural reform over five years since becoming sole CEO when Ildong Pharmaceutical transitioned to a holding company system in 2016. He is especially expanding investments in future growth areas. The company has boldly shifted its management strategy toward new drug development and pursued bold organizational changes. In May 2019, it established a dedicated subsidiary, Idience, for anticancer drug development and incorporated AI and clinical pharmacology consulting company Aims Biosciences as a subsidiary. Subsequently, it launched an in-house venture, iRID BMS, continuously innovating its R&D organization. Currently, it is operating more than 20 new drug projects, striving to discover future growth engines.

There are also attempts to reduce risks through external financing. In January this year, the company raised 100 billion KRW through convertible bonds for new drug development funds. This is interpreted as a strong commitment to developing new drugs by increasing R&D investment while accepting operating losses rather than spending heavily on advertising and promotion. However, due to increased investment exceeding profits, the company has posted losses for four consecutive quarters. Starting with an operating loss of 5.7 billion KRW in Q4 last year, it recorded operating losses of 13.7 billion KRW in Q1, 8.4 billion KRW in Q2, and 14.9 billion KRW in Q3 this year. During the same period, quarterly operating margins fluctuated between minus (-) 4% and -10%.

Annual sales have steadily increased. The company recorded 201.3 billion KRW in 2016, 460.7 billion KRW in 2017, 503.9 billion KRW in 2018, 517.5 billion KRW in 2019, and 561.8 billion KRW in 2020. Return on equity (ROE) was 7.18% in 2017, 4.53% in 2018, -5.08% in 2019, and -5.13%. The cash dividend payout ratio was 42.55% in 2016, 39.56% in 2017, and 67.86% in 2018 but has been near zero since 2019. Interest-bearing debt stood at 166.9 billion KRW as of the end of 2020, with a debt ratio of 137.79%.

The market expects that as Ildong Pharmaceutical shifts its investment focus from prescription and over-the-counter drug performance to new drug development, stock price volatility will increase despite expanding operating losses. Ha Taegi, a researcher at Sangsangin Securities, forecasted, "With increased R&D investment, the number of events is likely to rise next year, and volatility will expand." He added, "However, since the market capitalization is still around 400 billion KRW, the potential for upward movement appears greater."

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