Chong Kun Dang Pharmaceutical, a leading biotechnological and pharmaceutical company in South Korea, is poised to achieve a nearly sevenfold increase in operating profit in the fourth quarter of last year compared to the same period the previous year. This remarkable growth is attributed to the technology export agreement with Novartis, concluded in November.
According to financial information firm FnGuide on Jan. 10, Chong Kun Dang’s performance outlook for the fourth quarter of 2023 is projected to be a revenue of 492.5 billion won (US$372.82 million) and an operating profit of 126.8 billion won. With a whopping 24.0 percent increase in revenue compared to the same period the previous year, the operating profit has surged by an impressive 6.8 times.
The explosive increase in operating profit for Chong Kun Dang can be attributed to a large technology export contract with Novartis concluded at the end of last year. In November, Chong Kun Dang transferred the global development and commercialization rights of “CKD-510,” a treatment for Charcot-Marie-Tooth disease (CMT) that was under development, excluding South Korea. The substantial contract, totaling 1.7 trillion won, including an upfront payment of US$80 million, has significantly boosted the financial performance. The upfront payment was fully reflected in the fourth-quarter results.
As a result, the annual performance outlook has experienced a significant leap. Until just October of last year, Chong Kun Dang’s annual operating profit outlook was at the level of 150 billion won. However, with the reflection of the upfront payment, the outlook has been revised upward to around 230 billion won. Similarly, the revenue has also increased, rising from the previous 1.5 trillion won range to 1.64 trillion won.
As the reflection of the upfront payment resulting from technology export is deemed temporary, the likelihood of sustained performance contribution is low. In fact, Chong Kun Dang’s performance outlook for this year anticipates a slight decrease, with revenue expected to be 1.59 trillion won and operating profit at 116 billion won. However, the significance of this technology export for Chong Kun Dang is assessed to be beyond the mere financial impact.
Chong Kun Dang is considered to be a domestic traditional pharmaceutical company that consistently executes high research and development (R&D) investment relative to their revenue. In the recent decade, the company has allocated more than 10 percent of its revenue to R&D costs, and until 2022 it has obtained approval for the highest number of domestic clinical trials for five consecutive years.