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Second-quarter earnings for South Korea's top five pharmaceutical companies are expected to diverge by firm. While revenue grew for most, operating profit is analyzed to show differences depending on the products that drove growth. Companies that led growth centered on new drugs and overseas operations are expected to see relatively solid profitability, with these factors cited as key variables that will drive earnings differentiation in the second half of the year as well.

According to financial information provider FnGuide on July 26, Yuhan Corporation, Hanmi Pharm, and Daewoong Pharmaceutical are projected to see both revenue and operating profit increase year-on-year in the second quarter of this year. In particular, operating profits for Yuhan Corporation and Hanmi Pharm are expected to reach 58.2 billion won and 110.7 billion won, respectively, showing double-digit growth (16.8% and 83.2%) compared to last year. Both companies are expected to post earnings that exceed original market expectations.

The common factor driving strong performance for both companies is achievements in new drug technology exports. In May, Yuhan Corporation received a milestone payment of 45 billion won from Johnson & Johnson (J&J) in the U.S. for the European launch of its lung cancer drug Leclaza. In June, Hanmi Pharm signed a licensing agreement with Eli Lilly for its short bowel syndrome drug candidate sonepegglutide, receiving an upfront payment of 112.9 billion won.

Daewoong Pharmaceutical's second-quarter operating profit is projected to grow 9% to 63.1 billion won. The product driving performance is the botulinum toxin Nabota. According to securities industry analysis, second-quarter Nabota revenue is expected to reach 102.5 billion won, accounting for more than a quarter of total revenue. Observations indicate that operating profit for the second and third quarters will increase significantly as partner Evolus preemptively secured inventory in response to U.S. tariff hikes.

In contrast, profitability for GC Biopharma and Chong Kun Dang is projected to deteriorate in the second quarter. GC Biopharma is expected to see revenue and operating profit fall 12.6% and 67.9%, respectively, as the timing of production, order placement, and revenue recognition for major products such as flu vaccines, Hunterase, and Alyglo is concentrated in the second half of the year. Chong Kun Dang is projected to post an 8.4% increase in revenue due to rising sales of in-licensed products including Wegovy, Godex, and Fexuclue. However, as the ratio of cost of goods sold increases along with the rise in in-licensed products, operating profit is expected to decline 14.8%.

In the industry, views indicate that starting from the second half, the continuity of new drug development achievements and overseas business rather than one-off factors will determine earnings. For Yuhan Corporation, expanding U.S. prescriptions for Leclaza serves as a key variable to sustain growth, while for Daewoong Pharmaceutical, it is expanding Nabota's market share in the U.S. For Hanmi Pharm, commercialization of the obesity treatment efpeglenatide and additional technology exports of new drug candidates are cited as key observation points.

GC Biopharma is expected to see earnings rebound in the second half as first-half revenue was deferred. However, with increased R&D expenses analyzed to have also affected the second-quarter operating profit decline, long-term profitability management capabilities remain to be seen. Chong Kun Dang faces the challenge of securing long-term growth drivers while managing the cost burden from expanding in-licensed products. Analyses point out that the company needs to move away from growth centered on in-licensed products and secure growth engines by developing proprietary new drugs and expanding overseas business.

An industry official said that in the second half, expanding overseas operations and competitiveness in proprietary new drugs are more likely to determine performance by company than one-off technology export revenue, adding that under growing pressure for domestic drug price cuts, the competitiveness of companies equipped with new drug and global business foundations will become even more prominent.

                                                                                                             Bae Da-hyun