Bukwang's Performance Declines Over 2.5 Years Under OCI: Will Q3 Bring a Turnaround?

It's been two and a half years since OCI became the largest shareholder of Bukwang Pharmaceutical, yet instead of generating synergy, Bukwang's financial performance has continued to falter. On the 21st, the pharmaceutical industry reported that Bukwang will hold an investor relations (IR) meeting on the 22nd to present its third-quarter performance and R&D status. However, shareholders seem to have lowered expectations, with comments like, “They’ve halted their entire pipeline, so what’s left to announce?” and “There’s a 99% chance of continued losses.”

OCI Group acquired approximately 11% of Bukwang's shares in February 2022, becoming its largest shareholder. At the time, OCI stated that the investment was made to strengthen its technical capabilities in the pharmaceutical and biotech fields, planning to leverage OCI's global business and cash generation capabilities alongside Bukwang's R&D.

However, more than two years later, there has been little to no visible synergy. Bukwang’s performance has worsened since 2022. While its consolidated sales rose slightly from 182.4 billion KRW at the end of 2021 to 190.9 billion KRW in 2022, they plummeted to 125.9 billion KRW last year. The company turned a loss of 2 billion KRW in 2022, and this expanded to a 37.5 billion KRW loss last year. OCI’s global capabilities have not materialized either, as Bukwang’s export revenue dropped from 200 million KRW in 2022 to 150 million KRW last year, with no exports in the first half of this year.

Bukwang’s financial stability has also deteriorated. The debt ratio, which was in the 40% range until 2022, surged to 83% last year. The current ratio, which measures short-term debt repayment ability, fell from 594% in 2021 and 490% in 2022 to 260% last year. Lower debt ratios and higher current ratios are generally considered indicators of financial stability.

On top of this, Bukwang’s main pipelines have collapsed. Back in February 2022, Bukwang’s pipeline included treatments for schizophrenia (Lurasidone), diabetes (MLR-1023), Parkinson’s dyskinesia (JM-010), and prostate cancer (SOL-804). However, two of these projects ended in failure.

Last year, Bukwang returned the Asian rights and manufacturing patents for MLR-1023 to its partner Melior, citing unsatisfactory clinical results after a decade of development. The company also decided to halt clinical trials for its highly anticipated Parkinson’s treatment JM-010 this past May after Phase 2 trials failed to show statistically significant results compared to the placebo group.

Bukwang’s remaining pipeline includes the prostate cancer treatment SOL-804, which has completed Phase 1 clinical trials in Korea, CP-012 for Parkinson’s morning akinesia (currently in Phase 1 trials in Europe), a dementia treatment in the discovery phase, and a solid tumor treatment in the preclinical stage. Since these are all in the early stages of clinical development, commercialization is expected to take some time. The one bright spot is the schizophrenia treatment Lurasidone, which was approved in November last year and recently launched under the brand name Latuda, potentially contributing to sales growth.

A Bukwang representative stated, “While performance has been poor in recent years, we are seeing signs of recovery, and we expect positive results in the third quarter. At the corporate briefing on the 22nd, we plan to provide updates on the clinical trials being conducted by our overseas subsidiaries and outline our strategic direction.”