Shin Poong Pharm, which is developing a new stroke drug, is speeding up patient enrollment for its phase 3 trial. With its finances partly restored after returning to profit last year, the company appears to be putting the drive back into commercializing its new drug pipeline.
However, the government has signaled it will implement a generic drug price cut policy in Jul., making a short-term deterioration in profitability inevitable. Some also say financial burdens could grow as facility investments overlap.
Based on the closing price of 11,000 won on the 20th, Shin Poong Pharm's market capitalization is about 582.8 billion won.
◇ Completing phase 3 of the stroke drug without interim analysis…a test to make up for the "Pyramax failure"
According to Shin Poong Pharm, the company began enrolling the first patient in Apr. last year for the phase 3 trial of its stroke treatment candidate "SP-8203 (otaplimastat)."
The Ministery of Food and Drug Safety approved in Oct. 2024 a phase 3 trial plan to follow 852 patients with moderate and severe cerebral infarction for 90 days. Patient enrollment began about six months after approval.
A company official said, "As institutional review board (IRB) approvals have followed one after another at each site, patient enrollment is proceeding smoothly," adding, "As of the end of last year, there were 32 participating institutions."
Research and development (R&D) investment is also expected to increase as the trial progresses. A company official said, "We are drawing up an investment execution plan in view of the possibility of meeting our target number of patients within the year," and added, "It is difficult to disclose the specific size of the investment."
Shin Poong Pharm plans to carry the trial through to final results without interim analysis. This is seen as a decision to reduce the time and expense involved in interim analysis and move up the timing of final results. The phase 3 completion is expected in Jul. 2027.
It is also expanding its base for new drug development partnerships. On the 27th of last month, Shin Poong Pharm acquired 2,307,929 shares of Hyundai Pharm for about 29.6 billion won, securing a 7.2% equity stake. On the same day, Hyundai Pharm also acquired 2,437,310 shares of Shin Poong Pharm (a 4.6% stake).
A company official said, "Hyundai Pharm has extensive research and development (R&D) experience centered on prescription drugs (ETC)," adding, "There is significant potential for collaboration, including know-how sharing."
Uncertainty remains, however. The company previously failed to demonstrate efficacy in a phase 3 trial of the antimalarial "Pyramax," for which it had sought to expand the indication as a COVID-19 treatment.
◇ Generic dependence over 90%…profitability warning light with July price cuts
Shin Poong Pharm posted consolidated revenue of 234.7 billion won last year, up about 6% from a year earlier. Operating profit was 14.2 billion won, turning around from an operating loss of 20.5 billion won the previous year. Net profit also returned to the black at 8.4 billion won, from a net loss of 15.4 billion won a year earlier.
The company cited improved cost ratio and reduced R&D expense as reasons for the turnaround. Shin Poong Pharm's R&D expense fell from 55.5 billion won in 2022 to 54.4 billion won in 2023 and 30.7 billion won in 2024. Through the third quarter of last year, it stood at 15.8 billion won. R&D as a share of revenue also fell from 26.54% in 2022 and 27.19% in 2023 to 13.92% in 2024, and dropped to 8.94% in the third quarter of last year.
The end of the global phase 3 trial of Pyramax had a big impact. The trial concluded in 2023. A company official said, "Global trials do not incur expenses all at once but are carried out annually at a certain scale," adding, "With the end of the Pyramax trial, expenses have fallen sharply over the past two years."
Still, concerns are rising about a renewed deterioration in profitability as the government has signaled it will implement a generic drug price cut policy in Jul. Shin Poong Pharm is highly dependent on generics. Of roughly 300 marketed products, most are generics except for some improved drugs.
◇ Pushing animal health products amid variables for new product uptake…concerns about financial burdens
The company plans to offset sales gaps first by launching new products. The product currently drawing high expectations is "Denobon Prefilled Syringe," a biosimilar to the osteoporosis drug "Prolia (denosumab)." It is awaiting item approval from the Ministery of Food and Drug Safety.
Competition, however, is fierce. The domestic denosumab market is estimated at about 200 billion won. Amgen, which has the original drug, is co-promoting it with Chong Kun Dang pharmaceutical, while Celltrion and Samsung Bioepis are each selling biosimilars in partnership with Daewoong Pharmaceutical and Hanmi Pharmaceutical.
Shin Poong Pharm launched the combination therapy for benign prostatic hyperplasia "Avocial" in Dec. last year and rolled out the osteoarthritis treatment "Hyalflex" early this year. However, some say both products will need time to gain a foothold in the market.
In the case of Hyalflex, LG Chem's "Synovian" leads the domestic hyaluronic acid osteoarthritis treatment market. Avocial is not covered by national health insurance benefits, making initial sales expansion difficult, according to some analyses.
Over the mid to long term, the company plans to expand revenue sources through new businesses. At the regular shareholders meeting on the 30th, the company plans to propose an amendment to its articles of incorporation to add "research, manufacturing, and sales of animal drugs and animal medical devices" to its business purposes.
A company official said, "Specific indications or commercialization plans have not yet been decided," adding, "We are reviewing various possibilities, including not only in-house development but also external in-licensing."
However, business expansion could lead to financial burdens. Shin Poong Pharm has already announced a plan to invest a total of 62.4 billion won over three years, in stages, to build new production facilities at its Osong plant and refurbish facilities at its Ansan plant.
As of the end of last year, Shin Poong Pharm's cash and cash equivalents (including short-term financial instruments) stood at 71.4 billion won. Short-term borrowings to be repaid within a year were 41.2 billion won. Some say financial burdens could grow if facility investment, new business investment, and repayment of short-term borrowings proceed simultaneously using available funds.
An industry official said, "The company does not have ample funding capacity," and added, "I understand that additional fundraising is also under review." Shin Poong Pharm earlier raised 11.5 billion won through exchangeable bonds (EB) backed by treasury shares and said it would invest the funds in facilities.