‘Boryung posts record-breaking annual earnings but risks remain’

Boryung posted all-time-high sales and operating profit in 2022 but it is expected to face risks over the domestic supply of Eli Lilly's diabetes treatment, rising marketing expenses, and investment in space business, an analyst said.

According to provisional disclosure based on separate financial statements, the cumulative sales and operating profit performance last year was 722.1 billion and 60.3 billion won, a 21 and 20 percent increase compared to the previous year.

Notably, the company posted record-high sales every quarter last year from 170.6 billion won in the first quarter, 172.2 billion won in the second quarter, 187.7 billion won in the third quarter, and 191.6 billion won in the fourth quarter.

Boryung analyzed that the “exceptional business performance” was attributed to the even growth in all sectors due to the establishment of a stable profit structure according to the portfolio of prescription drugs for chronic diseases.

The company's flagship antihypertensive drug Kanarb lineup, a total of six products, recorded sales of 130.2 billion won last year, a 19 percent increase compared to the previous year.

The company expects that with the addition of the three-combo hypertension drug Dukarb Plus (ingredient: fimasartan, amlodipine, hydrochlorothiazides), sales will further grow this year.

The company's anti-cancer drug lineup also recorded 160.6 billion won in sales, up 61 percent from the previous year.

Boryung stressed that it has solidified its position as a pharmaceutical company specializing in anti-cancer drugs by expanding its portfolio by building various items ranging from synthetic drugs to biosimilars and adjuvant anti-cancer drugs.

Neutropenia treatment Grasin (ingredient: filgrastim) and Neulasta (ingredient: pegfilgrastim), which the company began joint sales with Kyowa Kirin Korea last year, recorded sales of 17.6 billion won and 34.6 billion won, respectively.

The company also saw strong growth for its biosimilar lineup. Boryung has been exclusively marketing Samsung Bioepis' breast cancer biosimilars Samfenet (ingredient: Trastuzumab) and Onbevzi (ingredient: bevacizumab) since 2021.

In 2022, Samfenet and Onbevzi recorded sales of 7.2 billion and 19.3 billion won, up 157 and 421 percent compared to the previous year.

Boryung's CNS (Central Nervous System) business also recorded sales of 26.6 billion won last year, centered on Zyprexa (ingredient: olanzapine), up 127 percent compared to the previous year.

Also, Boryung's dialysis and consignment business unit recorded sales of 55.2 billion and 59.9 billion won, up 7.8 and 52 percent compared to the previous year.

Regarding over-the-counter drugs, Boryung recorded sales of 29.8 billion in 2022 based on the growth of the Yonggaksan brand.

"By establishing a business structure with the highest level of profitability in the industry, we will achieve 1 trillion won in sales and 200 billion won in operating profit by 2026," Boryung CEO Chang Doo-hyun said.

What are the risks?

However, a local analyst said some concerns remain.

According to Kang Ha-na, an eBest Investment & Securities analyst, such concerns include the shortage of Trulicity, Eli Lilly's diabetes treatment marketed by Boryung in Korea, in the U.S., which will delay domestic supply, the reflection of the depreciation of three of its LBA items of 15 to 20 billion won, and continued marketing expense in the anti-cancer/brain disease business. 

Also, the large-scale investment in Axiom Space is leading to a decrease in cash and increased investor concerns, while Boryung also faces clinical trial delays, she added.

Regarding Boryung's recent investment in Axiom Space, Kang explained that the amount invested in Axiom Space is for the purpose of open innovation, and it is possible for the company to exit from the investment since it was a Series C investment.

"Therefore, the risk is less compared to other companies engaged in space-related businesses," Kang said.

Continued sales growth in 2023?

Kang expected continued sales growth in 2023.

Following solid earnings in 2022, the company will continue to achieve a 10-15 percent revenue expansion in 2023, and the patent expiration of Kanarb in 2023 will be offset by growth in combination drugs in the Kanarb lineup, she said.

"While the sales proportion of Kanarb in the lineup stood at 36 percent as of the third quarter last year, the proportion of complex drugs is increasing every year,” Kang noted. 

The company's goal of reaching 1 trillion won in sales with an operating profit margin of 20 percent by 2026 also seems achievable, and profitability enhancement of in-house products through legacy brands acquisition (LBA) strategy is working, Kang added.

Kang stressed that additional LBA drugs would likely be secured, and the company will see good results in marketing for biosimilars and brain diseases from 2023.

Taken together, Kang said her brokerage maintained a "buy" opinion on Boryung's shares but lowered the target price to 14,000 won.

As of 2:00 p.m. Tuesday, Boryung's shares stood at 9,620 won, up 0.21 percent from the previous trading day.