Daewoong Pharmaceutical posted the highest operating profit among major listed drugmakers in the third quarter this year, raising expectations for growth next year. Expanded overseas sales of the botulinum toxin "Nabota" and growth in its digital healthcare business drove the improvement. However, delays in toxin approval in China and the lawsuit with Medytox are cited as uncertainties.
Daewoong Pharmaceutical's cumulative operating profit for the third quarter was 158 billion won, up 29.5% from a year earlier. During the same period, revenue was 1.0351 trillion won, with an operating margin of around 15%.
During the same period, Hanmi Pharmaceutical's cumulative operating profit rose about 20% to 122.3 billion won, and Yuhan Corp. increased 2.7% to 78.4 billion won. GC Biopharma came in at 64.5 billion won, up 52.8%. In contrast, Chong Kun Dang fell 30.9% from a year earlier to 55.5 billion won.
◇ Breadwinner "Nabota"… The toxin + filler bundle strategy expanded the market
The core driver of the turnaround is Nabota. Cumulative revenue for the third quarter was 170.7 billion won, up 23% year over year, accounting for 16% of total revenue.
It helped that U.S. partner Evolus increased its local share. Evolus, by stepping up its push to reach younger consumers through aggressive marketing, lifted its U.S. market share to 14% from 13% last year. A "bundle strategy" with a filler product launched in April is also paying off. In the United States, 37% of patients with hospital appointments are said to receive toxin and filler together.
Lee Dal-mi, an analyst at Sangsangin Investment & Securities, said, "The bundling effect appears to account for about 37% of total revenue."
Growth is continuing in Europe as well. With Evolus recently launching Nabota in the French market, Nabota has entered a total of six countries, starting with the United Kingdom in 2022 and moving into Germany, Austria, Italy and Spain. In the Middle East and North Africa, advance orders are continuing as demand expands.
Market research firm Grand View Research projected that the Middle East and North Africa (MENA) aesthetic market will grow at a compound annual rate of 10.7%, from $2,589.3 million in 2024 to $4,762.6 million in 2030.
Shin Min-su, an analyst at Kiwoom Securities, said, "Third-quarter Nabota revenue is estimated at 8.7 billion won in Korea and 46.9 billion won overseas," adding, "In October, a client, mindful of the U.S. tariff issue, requested inventory build-up in advance, and shipments to Brazil and the Middle East will take place in November–December."
◇ "Operating profit seen topping 200 billion won next year… all-time high"
Digital healthcare is also growing rapidly. The flagship product "ThynC" posted cumulative third-quarter revenue of 36.3 billion won, up 57% from a year earlier. Because revenue is recognized about five months after a contract, its real contribution is expected to begin in earnest next year.
Installed beds are also expected to expand from the current level of 13,000 to 20,000 by year-end. Daewoong Pharmaceutical said in Feb. that it had "set a target of introducing ThynC to 3,000 beds by next year." Analyst Shin Min-su said, "With faster penetration into hospitals, full-year revenue is forecast at 51.3 billion won." Analyst Lee Hee-young at Daishin Securities Co. said, "In particular, as subscription-type revenue expands, an operating profit margin (OPM) of 20%–30% is expected."
Brokerages projected that Daewoong Pharmaceutical's operating profit will surpass 200 billion won next year to reach an all-time high. Analysts Kim Seung-min and Cho Se-eun at Mirae Asset Securities said, "Next year's revenue is expected at 1.5 trillion won, with operating profit of 226.4 billion won," adding, "Among top domestic drugmakers, it has the most attractive valuation."
Analysts said, "Profitability is improving on export growth centered on Nabota and a better product mix in ETC (ethical drugs), and with the expansion of digital healthcare and the new drug pipeline, mid- to long-term growth is possible."
However, delays in toxin approval in China and the lawsuit with Medytox are burdens. Daewoong Pharmaceutical applied for approval in China in 2021, but with the timing of approval uncertain, it reapplied in Jul. this year. The Medytox suit is also in the appeals stage.
Accordingly, securities firms set valuations conservatively to reflect the uncertainties. Mirae Asset Securities and Eugene Securities applied a discount rate of about 20% in setting their target prices in light of the Medytox lawsuit, and Sangsangin Investment & Securities, reflecting delays in Chinese approval as well, revised down this year's earnings per share (EPS) estimate by 17.5%.
In response to questions about the China approval timeline and the Medytox lawsuit, a Daewoong Pharmaceutical official said, "At this stage, there is no position we can disclose."