Huons reports 6.3% revenue growth in Q3, focuses on diabetes devices, biopharma expansion

Huons said on Tuesday that its third-quarter sales increased 6.3 percent year-on-year to mark 146.9 billion won ($104.8 million), thanks mainly to growth in domestic prescription drug sales and diabetes medical device businesses. Operating profit declined 41.9 percent, and net profit shed 38.4 percent.

For the third quarter, Huons' prescription drug sales reached 66.6 billion won. Exports of injections, including exports of anesthetics to the U.S., fell year-on-year, but overall domestic prescription medicines such as circulatory, metabolic, and antibiotics achieved solid performance as sales increased.

The beauty∙well-being business increased 8.3 percent year-on-year to 48.7 billion won in sales. Sales of health-functional foods recently decreased due to cost management for profitability, but sales of medical devices surged 170 percent year-on-year as the continuous glucose monitor Dexcom G7 expanded its market share.

The CMO business sales declined 8.7 percent to 15.6 billion won in the third quarter. In the first half of the year, the company saw significant growth thanks to the new operation of the eye drops line at Plant 2, but the utilization rate slowed down in the third quarter, affecting the sales of eye drops. 

The company is currently seeking a permit to shift the production of major eye drops from Plant 1 to Plant 2. Huons plans to increase the operation rate of Plant 2 again to resolve the overload of Plant 1.

The company attributed the operating profit margin decline to the costs associated with Plant 2, which began operations in the second half of 2023, and a higher proportion of sales in products with relatively higher production costs, leading to an increase in the cost of goods sold. 

Huons' subsidiaries also showed improved performance compared to the previous quarter. 

Huons Foodience, a health-functional food company, successfully returned to profit. Huons Life Science, newly acquired this year, continued to post losses, although the size of the losses has decreased. The company aims to turn to profit next year through company-wide initiatives.

Alongside its Q3 earnings announcement, Huons revised its full-year business outlook. Initially, the company had forecasted annual revenue of 635.3 billion won (a 15 percent increase year-on-year), but after assessing performance through Q3, it has revised the estimate to 598.9 billion won (a 8.5 percent increase year-on-year). Although the original target may not be met, Huons remains optimistic about improving performance next year.

Although it may be difficult to achieve the initial revenue guidance, Huons expects to improve next year's performance. Huons recently applied for U.S. FDA approval for its flagship dental anesthetic. It is also seeking to register new multi-dose anesthetic products other than single-dose anesthetic which are currently exported to the U.S. It plans to seek FDA ANDA approval for three new products in the second half of next year. 

Huons expects that exports of injections to the U.S. will increase again by diversifying its product portfolio.

Huons is aiming to increase revenue next year by ramping up operations at its second plant. In addition to the current single-dose eye drops production line, a multi-dose eye drops line will also begin operations. Furthermore, new injectable lines are set to commence in the second half of next year.

The company has recently made a strategic investment in PanGen Biotech, a biopharmaceutical specialist, and is preparing to integrate it as a new subsidiary. According to a disclosure on Nov. 5, Huons will complete the stock acquisition by Dec. 13, securing management control. 

Starting next year, PanGen will be included in Huons' consolidated financial results. PanGen has seen improved performance, particularly driven by growing global exports of erythropoietin (EPO). Huons plans to expand its biopharmaceutical business in partnership with PanGen.

“Our top priority is to restore profitability by strengthening internal management even as we continue to expand externally,” said Song Soo-young, CEO of Huons. “We will also focus on securing mid- to long-term growth engines by launching a new line at Plant 2 next year and moving into Huons’ Dong-Am Research Center this month.”