It was recently revealed that Kyungdong Pharm(011040) chief executive Ryu Gi-seong (vice chairman), who leads a company with 51 years of history, gifted some of the company equity he holds to two children. Some say the third-generation succession process began early amid a share price downturn.
According to the Financial Supervisory Service's electronic disclosure system on the 26th, Ryu's Kyungdong Pharm equity fell 0.98 percentage points from 17.51% to 16.53% on the 7th. That is because he gifted 100,000 and 200,000 shares of Kyungdong Pharm to two children, Ms. A (17) and Ms. B (14), respectively. At the current share price, that is worth about 1.5 billion won. Ms. A's equity rose from 0.2% to 0.52%, and Ms. B's rose from 0.02% to 0.67%. A Kyungdong Pharm official said it was "a routine gifting procedure by the largest shareholder."
Kyungdong Pharm was started in 1975 as Yuil Trading by honorary chairman Ryu Deok-hui. The following year, it changed its name and entered the synthetic drug business. Honorary chairman Ryu Deok-hui's son is chief executive Ryu Gi-seong. Ryu's children were born in 2009 and 2012, respectively.
In business circles, there is a view that Ryu, born in 1982, has begun the equity succession process. The recent decline in Kyungdong Pharm's share price also works to his advantage. That is because gift tax on listed shares is assessed based on the average share price over the four months spanning the time of the gift—two months before and two months after. Kyungdong Pharm's share price fell more than 10%, from 5,560 won on May 7 to 4,995 won on the 7th. It closed at 4,975 won on the 24th.
Won Jong-hoon, head tax accountant at Gaon (former head of KB Kookmin Bank's WM Investment Advisory Department), said, "The key is to make the gift as early as possible when the share price is low," adding, "You can have the equity valued inexpensively and, at the same time, enjoy (valuation gain) effects if the share price rises."
Founder and honorary chairman Ryu Deok-hui directly bought equity in the stock market. On the 13th, Ryu purchased 2,700 shares of Kyungdong Pharm on the open market. Ryu's equity rose 0.01 percentage points, from 1.34% to 1.35%. The equity held by the largest shareholder and related parties, including them, exceeds 45%.
Kyungdong Pharm posted consolidated sales of 47.8 billion won and operating profit of 2.4 billion won in the first quarter of this year. They increased 4% and 58%, respectively, from the same period last year. Pharmaceutical sales, including the hyperlipidemia (dyslipidemia) treatment Duorovan, account for about 97% of the total. Rental revenue, including from the Kyungdong Pharm Building, is 2%. A Kyungdong Pharm official said, "Prescriptions for chronic disease treatments increased, and the share of in-house manufactured products also expanded."
Kyungdong Pharm has entered the development of a Dupixent biosimilar (biosimilar) that is called a "miracle" atopic dermatitis treatment. Dupixent, jointly developed by France's Sanofi and U.S. Regeneron, is a blockbuster drug that recorded 27 trillion won in sales last year. Its patents are expected to start expiring around 2029.
Kyungdong Pharm has signed a contract with contract development corporations Proteome Sciences and is preparing a Dupixent biosimilar. It is in the pre-development stage for initiating a phase 1 clinical trial. Biosimilars have the advantages of fewer side effects than synthetic drugs and higher unit prices.