Korea United Pharm’s entry into Chinese market with IMDs hits a snag

Korea United Pharm is experiencing difficulties turning its plan to enter the Chinese market with incrementally modified drugs (IMDs) into a reality.

In a public disclosure Monday, Korea United Pharm announced that the company has terminated its contract with Jiangxi JiminKexin Group (JJK) to supply Clanza CR Tab to China.

In June 2013, Korea United and JJK signed a contract to supply two of its IMDs -- Clanza CR Tab (aceclofenac) and Cilostan CR Tab. (cilostazol) -- to China for 15 years until June 2028.

The contract value amounted to a maximum of $69 million (about 79 billion won at the exchange rate at the time), 58.9 percent of Kores United’s sales in the previous year, attracting the industry’s attention. In addition, JJK agreed to conduct a local clinical trial to acquire an item permit and supply finished products to China after winning the permit.

However, their partnership did not last long.

Korea United nullified the contract for the supply of Cilostan CR Tab in 2016 and ended one for Clanza CR Tab lately. With the recent termination of the contract, the two companies have called the whole thing off.

“The progress of the contract with JJK has been delayed by more than 12 months than scheduled. We have requested JJK to give us feedback to confirm the progress,” Korea United said in the public filing. “However, there was no feedback from JJK, forcing us to terminate the contract for reasons attributable to JJK under the terms of the termination of the contract.”

When the two companies concluded the contract for commercializing and supplying the drugs, Korea United attached a condition that gives the Korean company the right to cancel the contract if JJK fails to place orders of less than 60 percent of the expected purchase amount under the contract for three years in a row.

“We suffered no financial damages due to the termination of the contract,” the Korean company added.

However, considering that a local partner is a prerequisite to doing business in China, Korea United’s plan to enter the Chinese market will inevitably experience a setback until it finds a new partner.

Local analysts pay attention to how Korea United will respond to the problems and enter the Chinese market as planned, armed with IMDs, the company’s flagship items.