The 85-year-old drugmaker Ildong Pharmaceutical is controlled by the personal company of third-generation leader Chair Yoon Woong-seop. Yoon is the grandson of the late founder Chair Yoon Yong-gu and the eldest son of Yoon Won-young, chair of Ildong Holdoings. Yoon worked at Ildong Pharmaceutical for more than 20 years, serving as Deputy Minister for Planning and Coordination, president, and vice chair before taking office as chair this year.
Ildong Pharmaceutical is known for products such as the vitamin "Aronamin" and the probiotic "Biovita," but it has recently been strengthening research and development on oral obesity drugs and third-generation gastrointestinal drugs. Some, however, say that with the government moving to cut prices for generics, the revenue base could weaken and research and development investment could be dampened.
◇ Yoon controls Ildong Pharmaceutical through a personal company… a layered-over-layers governance structure
Chair Yoon Woong-seop graduated from Yonsei University with a degree in applied statistics and earned a master's in accounting from the University of Georgia in the United States. He worked as an accountant at the global accounting firm KPMG before joining Ildong Pharmaceutical in 2005 in his late 30s as an executive director on the PI (process innovation) team. He then served as Deputy Minister for Planning and Coordination, became executive vice president in 2011, president in 2014, vice chair in 2021, and chair early this year, establishing third-generation leadership.
Ildong Pharmaceutical's governance runs from Chair Yoon Woong-seop → CMJC → Ildong Holdoings → Ildong Pharmaceutical. As of the end of last year, CMJC is a personal company wholly owned by Yoon. CMJC holds 17.02% equity in the holding company Ildong Holdoings. Ildong Holdoings is the largest shareholder of Ildong Pharmaceutical with 30.52% equity. The business community says this amounts to a layered-over-layers (屋上屋) structure in which Yoon's personal company controls the entire group.
Second- and third-generation members of the founding family also hold company equity. Second-generation founder Chair Yoon Won-young holds 14.83% equity in Ildong Holdoings and 0.44% in Ildong Pharmaceutical. Yoon Won-young's spouse, Lim Kyung-ja, also holds equity in Ildong Holdoings (6.17%) and Ildong Pharmaceutical (0.18%). Chair Yoon Woong-seop holds equity in Ildong Holdoings (1.12%) and Ildong Pharmaceutical (1.22%). Including relatives and executives, the largest shareholders and specially related parties together hold 46.57% of Ildong Holdoings and 34.46% of Ildong Pharmaceutical.
◇ Needs to strengthen research and development… pricing cuts are a variable
Ildong Pharmaceutical has been strengthening research and development under Yoon's leadership. The company's research and development expenses last year were 36.6 billion won, up 289% from the previous year. The share of research and development in total sales rose from 1.54% to 6.54% over the same period. On 2023, it also established a subsidiary, Unovia, dedicated to research and development.
Recent focus areas include developing candidates for an oral obesity drug and a third-generation gastrointestinal drug (P-CAB). The oral obesity drug candidate works similarly to the glucagon-like peptide (GLP)-1 hormone secreted by the small intestine after meals. Having completed phase 1 trials, the company is pursuing a license-out (technology transfer). A company official said, "While we prioritize license-out, we are not ruling out the possibility of entering phase 2." The third-generation gastrointestinal drug candidate has a rapid onset and does not require concern about nighttime heartburn. It is in phase 3 trials and being readied for commercialization.
Typically, the probability that a new drug candidate will complete trials and ultimately succeed in commercialization is around 10%. Obesity drugs are being developed not only by Ildong Pharmaceutical but also by Hanmi Pharmaceutical, Celltrion, and Daewoong Pharmaceutical, suggesting fierce competition. In the market for third-generation gastrointestinal drugs, HK inno.N's K-CAB, Daewoong Pharmaceutical's Fexuclue, and JEIL PHARMACEUTICAL's Ja Q Bo have already established positions. Ildong Pharmaceutical is strengthening research and development to build basic capacity to survive such competition.
However, the government's drug price cuts are a variable. According to Ildong Pharmaceutical's business report, of the 40 medicines that completed development and were launched, 12 are generics. With generics accounting for a not-insignificant share, if price cuts hurt profitability, the capacity to invest in research and development will shrink accordingly.
Ildong Pharmaceutical posted 566.9 billion won in consolidated sales and 19.5 billion won in operating profit last year. Sales fell 8% from a year earlier, while operating profit rose 48%. An industry official said, "If they cannot find new revenue sources, they will likely have no choice but to cut costs, such as reducing research and development expenses or trimming payroll."