South Korean heavyweight Daewoong Pharmaceutical saw record sales in 2018, but did see a decrease in its EBITDA figures. To ensure its future profitability, the company has decided to invest heavily in the research of development of new drugs, with a new 100 billion won facility planned.
Daewoong Pharmaceutical’s sales of 943.5 billion won (USD 835.7 million) in 2018 represented an 8.9 percent increase from the 2017 figures. The firm also registered 30.8 billion won (USD 27.2 million) in operating profit and 1.5 billion won (USD 1.3 million) of net profit, thanks to growth in both its prescription and over-the-counter medicine portfolios. However, it did see a decrease of 5.3 percent from 2017 in its earnings before interest, taxes, depreciation and amortization (EBITDA) to 72.4 billion won (USD 63.9 million).
The company puts this slight decline down to the depreciation of its Osong and Hyangnam plants, high personnel costs, as well as “continued investment in subsidiaries such as overseas research institutes,” but adds, “we believe that long-term investment is needed to revitalize the market.”
Indeed, Daewoong is already investing heavily in R&D, in the hope that new drug development will ensure future profitability. R&D costs grew by more than 2.6 times from 43.4 billion won (USD 38.4 million) in 2009 to 114.3 billion won (USD 100.9 million) in 2017; more than 10 percent of the company’s total revenues.
Further investments in R&D are in the offing. Daewoong is planning to invest 70.5 billion won (USD 62.2 million) from May 31, 2019 to July 31, 2023, to build a connected collaboration and development (C&D) centre in Magok in Gayang-dong, Seoul for the R&D of potential drugs. With the 8,800m2 plot for the centre having been purchased for 29.2 billion won (USD 25.8 million), the total cost of the new facility rises to an impressive 100 billion won (USD 88.3 million).
Through this new C&D centre, Daewoong is aiming to continue its research efforts in cutting edge technologies such as stem cells, immuno-vaccines and artificial intelligence.
