The domestic pharmaceutical and bio industries are adjusting their business and investment asset portfolios. The corporations are embarking on rebalancing their asset proportions with the aim of improving their financial structures by reorganizing less profitable businesses and refining their core operations.
On the 7th, LG CHEM announced that it would sell its aesthetic (skin care) division within the Life Sciences Division for 200 billion won. The acquiring firm is the domestic private equity management company VIG Partners.
LG CHEM's business is divided into three main areas: petrochemicals, advanced materials, and life sciences. The Life Sciences Division includes primary care (prescription drugs), specialty care (growth hormone injections, vaccines, osteoarthritis injections, etc.), and the aesthetic division, which is being sold.
LG CHEM first entered the filler business in 2014 with the launch of Evear, which improves elasticity and volume of facial skin. The filler is a product that improves wrinkles by injecting hyaluronic acid, a biocompatible substance that softens joints or skin, beneath the skin. The annual revenue of the aesthetic division is approximately 100 billion won.
LG CHEM previously pushed for restructuring by disposing of non-core assets and focusing its capabilities on eco-friendly and battery materials and innovative medicines. The strategy aims to concentrate on high-growth and high-revenue businesses, making the sale part of this effort.
According to industry sources, LG CHEM initially considered bundling the sale of the filler and vaccine businesses but has reportedly revised its sale strategy due to unfavorable conditions. This sale is expected to strengthen the Life Sciences Division's specialized pharmaceuticals, including anti-cancer drugs.
The company is developing anti-cancer drugs centered around the U.S. firm Aveo Pharmaceuticals, which it acquired two years ago. Cha Dong-seok, Chief Financial Officer (CFO) and president of LG CHEM, also noted during an online conference call that "the Life Sciences Division decided to sell the aesthetic business to strengthen its domestic and Asian operations centered on pharmaceuticals and to focus its core capabilities on developing global anti-cancer new drugs."
CJ CheilJedang has resumed restructuring its bio and healthcare business through subsidiaries CJ Bioscience and health supplement specialized subsidiary CJ Wellcare, after the failed sale of its bio business.
Last month, CJ CheilJedang appointed Yoon Sang-bae, former CEO of Huons, as the new CEO of CJ Bioscience and subsequently appointed him as CEO of CJ Wellcare on the 5th. This is the first time a person has held leadership roles in both bio affiliates within CJ Group.
Industry sources believe that CJ CheilJedang will push for restructuring to increase revenue in the bio and healthcare sector after replacing its leadership in this field.
CJ Bioscience has recorded operating losses for three consecutive years. The company reported losses of 31.4 billion won in 2022, 30.3 billion won in 2023, and a projected 32.3 billion won in 2024. By the end of 2020, the scale of its deficit was at 8.8 billion won, but it ballooned to 119.1 billion won by the end of last year.
Previously, CJ CheilJedang had pursued the sale of its bio business. According to industry sources, the company held discussions with the private equity management firm MBK Partners, which expressed interest in acquiring the assets, but no agreement was reached. The company announced in May that it was withdrawing the sale plan, stating, "We will seek business synergies through strategic alliances with global companies and restructure our portfolio focused on high-revenue specialty items."
There are also corporations that are rebalancing their investment portfolios, such as Theragen Etex and Yuhan Corporation. Generally, large pharmaceutical and bio companies invest in other firms for strategic partnerships or technical acquisition, but the disposal of held stocks indicates a shift in their open innovation and research and development strategies.
Theragen Etex announced last November that it would sell 14.65% (4,931,039 shares) of its equity in the anti-cancer drug developer MedPacto. The company, which is the largest shareholder of MedPacto, stated, "The purpose is to realize long-unrealized profits to increase distributable profits and improve our financial structure."
MedPacto, which was listed on the KOSDAQ through a special technology listing at the end of 2019, will have its grace period for revenue requirements end this year. If it fails to record more than 3 billion won in revenue, it could be designated as a management category. There has yet to be any entities publicly expressing interest in acquiring shares of Theragen Etex.
Yuhan Corporation sold all its shares in Ensol Biosciences in June. Fourteen years after investing in Ensol Biosciences in 2011, it realized a profit of 12.7 billion won. Last year, it fully disposed of its holdings in Warantec and Genexine as well.
An industry insider stated, "Yuhan Corporation invested in equity to secure new drug technology, but it seems to be changing that strategy now," adding that "the corporations exiting are not only aiming to realize profits but also to minimize losses due to risks."