Korea Syntex Pharmaceutical, which received an administrative penalty over a quality control controversy, has begun looking for a new owner after entering a rehabilitation process. Industry watchers say it will be hard to find a buyer due to a downturn in the sector and weakened investment in biotech.
According to mid-sized business and pharmaceutical industry sources on the 22nd, Korea Syntex Pharmaceutical has selected Sunil Accounting Corporation as the sell-side advisor and is pursuing a merger and acquisition (M&A) through a stalking-horse process. A stalking horse is a sale method in which a preferred bidder with the right of first refusal is set and then an open competitive auction is held. Letters of intent (LOIs) were accepted through last week. The company plans to select a preferred negotiating partner this month.
Founded in 2012, Korea Syntex Pharmaceutical is a domestic drugmaker that manufactures and sells prescription and over-the-counter medicines. It produces anti-inflammatory analgesics and drugs for the circulatory and gastrointestinal systems. Its flagship products include "Ifpen Tab" and "Ifpen W Tab."
However, it recently faced a crisis after receiving an administrative penalty over quality control issues. The Ministery of Food and Drug Safety imposed a three-month suspension of sales operations on "Ifpen Tab" and "Ifpen W Tab" this year, saying the container labeling differed from what had been approved or reported.
Last year it violated GMP (good manufacturing practice). Failures included not conducting raw material quality tests, not conducting cleaning validation, and not conducting stability tests. At the time, 58 items, including the cold medicine Neocol Capsule, the herbal preparation Syntex Ssanghwatang Liquid, and Flurak Liquid (Galgeuntang Liquid), were given three- to four-month suspensions of manufacturing operations.
Performance volatility had been high even before the administrative penalties. In 2023, sales rose to 13.3 billion won from 8.5 billion won the previous year, but operating profit fell 58% year over year to 942.47 million won. The penalties then disrupted operations, and liquidity pressure led the company to enter rehabilitation at the end of April last year.
Industry sources point to production disruptions and deteriorating profitability from the administrative penalties as Korea Syntex Pharmaceutical's risk factors. Lee Jae-guk, vice chair at the Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA), said, "It is true that, especially for small and mid-sized drugmakers, price cuts and various regulations have reduced management leeway compared with the past."
He added, "The 'one-strike-out' system that cancels authorization for GMP violations has also been partially eased as industry opinions were reflected," and "With drug price cuts, high interest rates, and geopolitical instability recently heightening uncertainty across the industry, companies are responding with restructuring and M&A, but because medicines are directly tied to public health and safety, there can be no compromise on quality and safety."
With weakened sentiment for biotech investment and a rise in M&A assets on the market, securing a buyer is unlikely to be easy. Gencurix(229000), which developed Asia's first breast cancer diagnostic solution, is also pushing to sell its management control but is reportedly struggling to secure a buyer. Samjong KPMG led the sale, but the process was halted after no buyer was found, and the company is now said to be contacting investors without a separate advisor.
An industry official noted, "Investors have recently been taking a conservative approach to pharma and biotech assets." The official added, "Korea Syntex Pharmaceutical has the advantage of being able to improve its financial structure through rehabilitation," and explained, "Its record of administrative penalties, the likelihood of normalizing production, and the burden of additional investment going forward will be variables that determine whether it is acquired."