Chong Kun Dang (CKD) Bio plans to reduce its workforce through an early retirement program (ERP) due to the deterioration of its performance caused by the Covid-19 outbreak, its CEO said on Monday.

CKD Bio CEO Lee Jung-jin notified employees that the company's business situation was more difficult than ever due to inflation caused by the Covid-19 pandemic and the sharp increase in raw material prices due to the Russian-Ukrainian war.

"The business environment has led us to conclude that there is no other way but to reduce the workforce through restructuring," Lee said in a statement sent to employees on Monday. "The company will sincerely consult with the labor-management council on the ERP process, and will do its best to resolve this restructuring issue through ERP rather than forced restructuring."

However, if the appropriate number of employees judged by the company is not reduced during the ERP process, the company may be forced to carry out management layoffs under Article 24 of the Labor Standards Act, Lee added.

CKD Bio was unavailable for immediate comments regarding the possibility of layoffs.

CKD Bio once enjoyed hefty profits by providing ingredients for its affiliate Chongkundang Healthcare to make LactoFit, a probiotic health supplement.

However, its profitability deteriorated as probiotic sales declined in the wake of the Covid-19 pandemic.

While CKD Bio's sales have grown over the past three years, its profitability has declined.

According to the company's public filings, the company's sales have steadily increased from 124.6 billion won ($98.5 million) in 2020 to 142.2 billion won in 2021, and 156 billion won in 2022.

However, the company turned red from an operating profit of 7.6 billion won to an operating loss of 11.4 billion won in 2021, and widened to 14.8 billion won last year.

CKD Bio is trying to offset the decline in probiotics sales with revenues from its microbiome contract development and manufacturing organization (CDMO) and botulinum toxin business.

Since the end of last year, CKD Bio has signed CDMO contracts for new drug candidates with Bifido and AtoGEN.

In addition, CKD Bio received approval from the Ministry of Food and Drug Safety for a domestic phase 3 clinical trial investigational new drug application for CKDB-501A, its botulinum toxin, in March.

The trial, which will be conducted on 300 adult men and women, is expected to end in June 2024.