This article was published on May 8, 2025, at 2:22 p.m. on the ChosunBiz MoneyMove site.
Myung In Pharm, known for its gum disease treatment 'Egatant,' is challenging for a listing on the stock market approximately 40 years after its establishment. Myung In Pharm has ample funds. The goal of fundraising is not the purpose of the listing. The company said it aims to secure credibility, but there are analyses among market participants suggesting it is not unrelated to succession issues. It is expected that the intention may be to reduce succession expenses by applying a conservative valuation during the initial public offering (IPO).
According to the investment banking industry on the 8th, the mid-sized pharmaceutical company Myung In Pharm aims for a KOSPI listing in the third quarter. The lead underwriter is KB Securities, which submitted a preliminary review application for the KOSPI listing to the Korea Exchange on the 30th of last month. Established in November 1998, Myung In Pharm's largest shareholder is President Lee Haeng-myung, who owns 66.32% of the equity. Last year, the company recorded 269.6 billion won in revenue and 90.1 billion won in operating profit. Myung In Pharm is regarded as a 'solid' company, generating more than 60 billion won in operating profit annually since 2020.
This is Myung In Pharm's third attempt to go public. It previously withdrew twice on its own accord. In 2019, the company selected NH Investment & Securities as its underwriter and aimed for a listing in the second half, but withdrew the plan due to the lack of a concrete business plan for utilizing the funds secured through the IPO. It also previously attempted an IPO in 2008 but canceled it almost immediately.
Myung In Pharm has sufficient capital that it does not necessarily need to knock on the capital market's door. At the end of last year, its cash and cash equivalents (including short-term investments) totaled 254.3 billion won, representing a 40% increase from a year ago.
Market analysis suggests that the purpose of this IPO is not unrelated to succession issues. Myung In Pharm is essentially a family-owned company, with Chairman Lee, born in 1949, and his two daughters, Lee Sun-young and Lee Ja-young, holding 95.3% (10,676,000 shares) of the equity.
Whether listed or unlisted, the inheritance and gift tax rate is the same at a maximum of 60% (apply to major shareholders). Nevertheless, the reason predictions suggest the listing purpose might be succession is that pharmaceutical companies, including Myung In Pharm, are considered unpopular sectors on the stock market.
If the market capitalization is formed at a value lower than the asset value through the IPO, it is possible to utilize price discrepancies to lower the taxable standard. Additionally, listed shares can be immediately liquidated on the market, providing advantages for repaying the gift tax through stock collateral loans and company dividends.
For this reason, securities analysts predict that Myung In Pharm will lower its corporate valuation expectations during the IPO process. The most recent validated corporate value for Myung In Pharm was 50,000 won per share, which was the price applied when Chairman Lee launched the Myung In Multicultural Foundation in June last year. Based on this valuation, the market capitalization is approximately 56 billion won, and if the market capitalization is lower than this, it will be advantageous to succeed through the listing.
Myung In Pharm is actually considering including Whan In Pharm, which has a similar business structure, in its peer group. As of the end of last year, Whan In Pharm's price-to-book ratio (PBR) was only 0.5 times. With a market capitalization of only 217.4 billion won the previous day, there is a high possibility that including Whan In Pharm will lower Myung In Pharm's public offering price.
The fact that there has been a controversy regarding unfairly directing business related to succession is a negative factor for investor sentiment. Myung In Pharm previously paid 20% of its revenue to Medycommunication, an advertising agency fully owned by the chairman's two daughters. Currently, the advertising is handled by Myung In Pharm's 100% subsidiary, Myung AdCom. Myung In Pharm also helped finance while guaranteeing when Medycommunication purchased its headquarters in Seocho District, Seoul in 2016, which led to a tax investigation by the National Tax Service. Medycommunication currently does not receive advertising orders but generates annual revenue in the 6 billion won range due to its leasing business.
A representative from Myung In Pharm remarked, "I do not specifically know about the succession issue, as it is an owner matter," adding, "Since we are unlisted, our recognition is low. This listing is for securing external credibility."