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Medytox’s earnings plummet amid lawsuit against Daewoong
  • By Jeong Sae-im
  • Published 2020.05.18 11:33
  • Updated 2020.05.18 11:33
  • comments 0

Medytox, the nation’s largest botulinum toxin maker by market share, suffered a nosediving operating margin last year, amid an ongoing lawsuit against Daewoong Pharmaceutical over the ownership of a BTX strain.

Medytox’s operating profit turned to an operating loss in the fourth quarter last year, and the operating loss even grew larger in the first quarter. Analysts expect the company’s earnings to worsen, as the suspension of the sale of the BTX, Meditoxin, will be reflected in the financial statement of the second quarter.

According to the company’s quarterly earnings report on Friday, Medytox reported 33.9 billion won ($27.5 million) in consolidated sales in the first quarter, 9.9 billion-won operating loss, and 6.1 billion-won net loss. The quarterly revenue recorded a 23.4 percent decline year-on-year. Operating profit and net profit all turned losses during the same period.

Medytox posted 4.6 billion won operating loss in the fourth quarter last year. It was the first time that the company recorded a quarterly operating loss since the listing on Kosdaq in 2009. Coming into the year 2020, the loss widened to 9.9 billion won in the first quarter.

Medytox’s operating margin, a measure of profitability, had stayed higher than 40 percent. Its operating margin recorded 48 percent and 42 percent in 2017 and 2018, respectively.

However, the figure plunged by 30 percentage points to 12 percent in 2019.

The company managed to keep its sales from falling significantly. Still, it could not handle ever-growing selling, general and administrative expenses (SG&A).

During the fourth quarter last year and the first quarter this year, the operating margin marked minus 8 percent and minus 29 percent, respectively.

The rapid decline in Medytox’s earnings coincided with the massive expenses for the legal battle against Daewoong. Since Medytox filed a complaint with the U.S. International Trade Commission last year, the company has spent up to 10 billion won per quarter on the lawsuit. Specifically, Medytox’s costs for the trial recorded 17.8 billion won in the second half of 2019, and about 10 billion won in the first quarter of 2020.

To make matters worse, the Covid-19 outbreak this year aggravated the company’s sales, further pulling down the operating margin in the first quarter.

Analysts had expected that the company’s earnings would improve in the second quarter with the lawsuit closing.

However, the company suffered another issue – the suspension of Meditoxin sales due to alleged violation of the Pharmaceutical Affairs Act.

The company’s flagship BTX product Meditoxin generated 41.6 billion won sales in Korea last year. Including exported items, Meditoxin sales reached 86.7 billion won, accounting for 42 percent of the total sales in 2019.

Medytox is striving to sell other BTX products, including Meditoxin 200 unit. Still, the prosecution’s charging it of “using unauthorized ingredients” in Meditoxin manufacturing tarnished the brand name and reputation.

The Ministry of Food and Drug Safety plans to go ahead with its decision to nullify the license of Meditoxin.

The prosecution recently indicted Medytox CEO Jung Hyun-ho and the head of the company’s factory.

“Even if the company does not spend any more for the lawsuit from the second quarter, a revocation of the Meditoxin license would lead to a plunge of sales worth scores of billions of won. In such a scenario, the company will find it difficult to recover its operating margin,” a pharmaceutical industry official said.

same@docdocdoc.co.kr

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