Korea Biomedical Review is publishing a series of articles to analyze the top 10 Korean pharmaceutical and biopharma companies with the largest market capitalizations listed on the main bourse, Kospi, and the tech-heavy Kosdaq. The series aims to reflect key industrial issues and the flow of the capital market in the Korean pharmaceutical and biopharma industry. This is the fourth installment. -- Ed.

SK Bioscience, the first Korean company to develop a home-grown Covid-19 vaccine, posted sluggish earnings last year, with sales and operating profit reduced by more than half compared to 2021.

According to the company's public filing, the company recorded sales and operating profit of 456.7 billion won and 115 billion won ($362.3 million and $91.2 million) last year, down 50.8 and 75.5 percent, respectively, compared to 2021.

In the fourth quarter of last year, the company sales were 140.3 billion won, down 68.9 percent from the same period last year, and operating profit was 8.7 billion won, down 96.6 percent.

The poor earnings were mostly due to the decrease in sales of Covid-19 vaccine contract manufacturing organization (CMO) deals with AstraZeneca and Novavax due to the endemic transition.

In 2021, when the Covid-19 crisis turned into a pandemic, SK Bioscience put all of its focus on the CMO deal with AstraZeneca and Novavax.

The decision at the time resulted in the highest sales and profit since its establishment, with the company posting 929 billion won and an operating profit of 474.2 billion won in 2021.

However, the company started to face hardship in the second half of 2022 as countries around the world switched to a live-with-Covid policy and eased quarantine rules which resulted in a weaker demand for Covid-19 vaccines.

As a result, SK Bioscience's CMO deals were either canceled, postponed, or minimized.

Also, the company's high expectations from SKYCovione, the first locally-developed Covid-19 vaccine, failed to have a significant impact on sales due to the waning of the pandemic, the spread of Covid-19 variants, and multinational pharmaceutical companies launching bivalent vaccines to target such variants.

The poor performance of SKYCovione led to the company suspending the production of the vaccine in November 2022.

Industry watchers expect that the losses arising from the previously manufactured SKYCovione inventory will hold back performance this year.

Such poor performance hurt the company's earnings even more as the company had stopped producing its flu vaccines, which was its main source of revenue, to concentrate on its Covid-19 business.

Before the Covid-19 outbreak, SK Bioscience had the highest market share for Korea's flu vaccine market, with SKYCellflu, its flu vaccine, accounting for 29 percent market share.

While SK Bioscience stressed that it plans to re-enter the flu vaccine market, market watchers expect that such plans will not be easy as GC, SK Bioscience's competitor in the flu vaccine market, has solidified its position while SK Bioscience was concentrating on its Covid-19 business.

Notably, GC has acquired most of the flu vaccines ordered by the government, which SK Bioscience used to almost monopolized.

According to industry estimates, GC supplied over 60 percent of the 2.8 million doses of flu vaccines ordered by the government in 2022.

While SK Bioscience expressed its confidence that it will be able to recapture its flu vaccine market share quickly, it will be difficult for the company to regain the market that it had lost, observers said.

Aside from the flu vaccine, SK Bioscience plans to increase its earnings by speeding up the global advancement of self-produced vaccines.

SK Bioscience is currently in the process of obtaining global approval for SKYCovione and has applied for permission to the World Health Organization (WHO), U.K.'s Medicines and Healthcare products Regulatory Agency, and the European Medicines Agency.

Also, the company has obtained product approval for SKYCellflu in 11 countries and is currently undergoing approval procedures in four countries.

Skyzoster, its shingles vaccine, obtained product approval in two countries, and plans to obtain approval from an additional two countries.

Skyvaricella, its chickenpox vaccine, product approval was obtained from four countries, and approval review is in progress in an additional six countries.

Based on such approvals, the company plans to actively enter the global bidding market with plans to expand the supply of its flu vaccine, chickenpox vaccine, and typhoid vaccine through PAHO (Pan American Health Organization) and UNICEF.

Gloomy outlook for SK Bioscience in 2023: brokerages

However, SK Bioscience's outlook for 2023 continues to be bleak as securities companies are lowering their forecasts for SK Bioscience's earnings.

Daol Investment & Securities predicted that SK Bioscience's sales and operating profit will drop 58.2 and 66.2 percent this year.

Accordingly, Daol lowered its target price for SK Bioscience from 82,000 won to 70,000 won.

Securities firms such as Samsung Securities and NH Investment & Securities also lowered their target price for SK Bioscience.

Notably, Meritz Securities lowered its target price for SK Bioscience from 94,000 won to 80,000 won and lowered its investment opinion from “Buy” to “Neutral.”

"There is no clear strategy after the Covid-19 vaccine," said Park Song-yi, a Meritz Securities analyst. "Currently, the company has cash holdings of 1.5 trillion won, so there is room to secure new platform technologies."

Park stressed that SK Bioscience plans to expand its portfolio through global cooperation in the future, and its corporate value can be re-evaluated accordingly.

"However, we currently downgraded our rating and target price given the absence of a pipeline that will contribute to sales in the short term," Park said.