Pharmaceutical Industry Q3 Earnings Strong, Polarization Between Large and Small-Medium Companies [AK Radio]

Despite concerns over medical service gaps due to strikes in the healthcare sector, the domestic pharmaceutical industry recorded better-than-expected performance in the third quarter. According to data compiled by the pharmaceutical trade publication Hit News, the third-quarter results of 33 top pharmaceutical companies with sales exceeding 50 billion KRW showed a 10% growth compared to the same period last year, with operating profit and net profit increasing by 33% and 41%, respectively, demonstrating solid performance.

Notably, the growth of the top five companies representing the domestic pharmaceutical industry stood out. Industry leader Yuhan Corporation recorded the highest growth rate with a 25% increase in sales compared to the same period last year, driven by the success of the U.S. technology export of its self-developed lung cancer drug 'Reclaza.' Companies ranked second to fifth?Chong Kun Dang, GC Green Cross, Daewoong Pharmaceutical, and Hanmi Pharmaceutical?also showed steady growth rates ranging from 1.7% to 10%, meeting market expectations. The rankings of these five companies have remained stable over recent years, underscoring the solid position of the industry's leading group.

However, even among the top-tier companies, some faced individual challenges. Hanmi Pharmaceutical recorded a 1.7% growth rate despite ongoing family management disputes, but its operating profit and net profit declined compared to the same period last year. Chong Kun Dang experienced a decrease in performance as the co-marketing contract for its key product, the gastroesophageal disease treatment 'K-CAB,' with HK Innoen ended, and sales rights were transferred to Boryung Pharmaceutical. Nevertheless, despite these individual issues, the companies maintained sales growth, indicating the strong fundamentals of large firms.

Despite the overall strong performance of the top 33 companies, small and medium-sized enterprises (SMEs) showed clear signs of poor results. Among the analyzed companies, 16?accounting for half?experienced a decrease in net profit or an expansion of losses, and 14 saw a deterioration in operating profit. In particular, three companies turned operating profits into losses, and one continued to suffer deficits, facing significant difficulties.

Amid this, Ildong Pharmaceutical attracted attention as the only company to successfully turn from a deficit to a surplus. This polarization phenomenon is analyzed to stem from differences in the ability to respond to changes in the medical environment caused by the healthcare sector strikes.

Industry insiders attribute this polarization directly to the impact of the healthcare strikes. With the resignation of resident doctors leading to reduced medical services at tertiary hospitals, patients shifted to small and medium-sized hospitals, necessitating changes in pharmaceutical companies' sales strategies. Large pharmaceutical companies, leveraging abundant sales personnel and organizational strength, were able to quickly shift their sales focus from tertiary hospitals to smaller hospitals, whereas SMEs, limited by restricted sales resources, were unable to adequately respond to these changes.

A noteworthy point is the strong performance of pharmaceutical companies specializing in essential surgical medicines. Hana Pharmaceutical, a specialist in anesthetics, recorded increased sales, and Daehan Pharmaceutical, specializing in infusion solutions, showed growth in both sales and profits. These companies' achievements are interpreted as a result of essential surgeries continuing without interruption and shifting to small and medium-sized hospitals despite the medical service gaps. In particular, the demand for anesthetics, infusion solutions, and hemostatic agents used in emergency surgeries or cesarean sections remained steady. This is seen as an example demonstrating the stability of the essential medicines market, which forms the foundation of medical services.

Pharmaceutical industry investors can check surgery numbers and prescription statuses through statistical data from the Health Insurance Review & Assessment Service or the National Health Insurance Service. Such data serve as important indicators to understand the medical performance and prescription patterns of each medical institution. Additionally, detailed performance information can be obtained through each pharmaceutical company's disclosure materials and financial statements, and analyses from pharmaceutical trade publications can also serve as useful references for investment decisions. However, due to the specialized terminology and complex market structure inherent to the pharmaceutical industry, investors are advised to exercise careful attention.

The industry expects this performance trend to continue into the fourth quarter. However, concerns have been raised that prolonged healthcare strikes could worsen the poor performance of SMEs. Especially for SMEs lacking sales power and financial resources, adapting to the changed medical environment may become more difficult, potentially deepening the industry's polarization.

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