Hanmi Pharm's Q2 performance surpasses market expectations despite family feud

Despite ongoing management conflicts within the founding family, Hanmi Pharm has achieved outstanding financial results in the second quarter, driven by robust Korean prescription drug sales and international exports, and the significant growth of its Chinese subsidiary, Beijing Hanmi Pharm.

The company forecasts its highest annual revenue this year since its establishment.

Hanmi Pharm announced on Tuesday its consolidated second quarter sales and operating profit of 378.1 billion won ($273.8 million) and 58.1 billion won, up 10.3 percent and 75.3 percent increase compared to the previous year. Net profit also increased by 150.6 percent to 47 billion won.

For the first half of 2024, revenue grew by 11.1 percent to 781.8 billion won, with operating profit rising by 44.8 percent to 134.8 billion won and net profit increasing by 61 percent to 110.2 billion won.

The robust growth was attributed mainly to the solid growth from the Korean prescription drug market. Hanmi maintained its top position in outpatient prescription drug sales for the sixth consecutive year.

Notably, the company reported significant sales from its leading products, Rosuzet, a treatment for dyslipidemia, and the Amosartan lineup, a treatment for hypertension.

Rosuzet's cumulative outpatient prescription sales surpassed 100 billion won in the first half, and its second quarter sales increased to 51.1 billion won, up 16.6 percent from the same period last year. Amosartan Family's sales rose to 36.2 billion won, up 1.4 percent.

The company's export revenue, excluding royalties, also increased to 57.8 billion won in the second quarter, a 5.9 pecent increase, with Japan accounting for 41 percent of sales, followed by Europe and China at 17 percent and 14 percent.

Further bolstering Hanmi's achievements, its subsidiary in Beijing Hanmi Pharm reported unprecedented sales.

The subsidiary reported sales and operating profit of 98.7 billion won and 23.2 billion won, up 9.6 percent and 15 percent from the previous year. Net profit also grew by 12 percent to 23.2 billion won.

"Hanmi's strong R&D capabilities and the excellent product quality of our proprietary drugs have driven sustainable growth. We anticipate the announcement of clinical trial results for key new drug pipelines in the second half of the year." Hanmi Pharm CEO Park Jae-hyun said. "We are accelerating our research on immunotherapies, beyond targeted cancer therapies, to fulfill our role as a leading pharmaceutical company representing Korea."

Storm clouds ahead despite bright performance

However, even as Hanmi Pharm Group anticipates record-breaking performance this year, internal disputes among the founder's family members have resurfaced.

The mother-daughter duo – Chairwoman Song Young-sook and Vice-Chairwoman Lim Ju-hyun -- and Hanyang Precision Chairman Shin Dong-kuk, who is the largest individual shareholder outside of the Hanmi family, requested an extraordinary shareholders' meeting for Hanmi Science. The three

However, the brothers -- Lim Jong-yoon, Director of Hanmi Science, and Lim Jong-hoon, CEO of Hanmi Science -- opposed this move, describing it as a unilateral decision not agreed upon by the siblings.

As of last Friday, the combined shares of the three people total 34.79 percent, making them the largest shareholder group within the company. Including related parties, such as the minority shareholder alliance (2.21 percent) and the National Pension Service (6.04 percent), their friendly stake reaches 56.27 percent.

In contrast, the combined stake of Lim Jong-yun, Lim Jong-hoon, and their related parties was 29.07 percent at the end of last month.

Hanyang Precision Chairman Shin, who initially sided with the founder's sons, has now aligned with Song and her daughter, casting doubt on the second-generation management system centered on the individual leadership of the two sons.

As a result, the mother-daughter duo and Shin have announced plans to establish a professional management system for Hanmi Science and are pushing to restructure the board.

As a result, the agenda for the extraordinary meeting includes increasing the number of Hanmi Science board members to 12 and appointing three new directors -- two internal and one external.

This move is interpreted as a strategy to secure stable voting power for the mother-daughter duo and Shin.

Given the share structure, industry watchers expect that it will be challenging for the two brothers to oppose the changes in the articles of association to increase the company's board members.

Still, the two brothers remain adamant that their system is working.

Hanmi Science CEO Lim Jong-hoon asserted on the company's website on Tuesday that the professional management system advocated by Shin is already operational, and he plans to attract foreign investors while promoting growth strategies for each subsidiary.

Lim stressed that he who has been chosen by shareholders and Hanmi employees as the CEO has been taking direct responsibility, communicating seamlessly with specialized leaders across each division to advance the "New Hanmi" vision.

"This, I believe, is the true Korean-style advanced professional management system," Lim said.

As the family dispute once again is rising to the surface, industry experts emphasize the need for swift stabilization of management to sustain Hanmi Pharm's continuous growth.

"Hanmi Pharm is currently facing numerous issues such as foreign investments, new drug development, and mergers and acquisitions (M&A)," an industry official told Korea Biomedical Review. "The ultimate decisions rest with the company's leadership, and prolonged management disputes could negatively impact operations and eventually lead to a decline in performance."