Huons is folding biotech affiliate Huonslab into the listed company after telling regulators its generic drug business faces a structural squeeze from Korea’s coming drug price cuts and a shortage of new drug pipelines.
The merger, approved by Huons’ board on Monday, will bring Huonslab’s biologics pipeline, R&D staff and patents into the listed company.
Huons has said it plans to pursue certification as an innovative pharmaceutical company, a designation that could give it better pricing terms under the government’s drug pricing overhaul.
But Huons has not disclosed how much of its revenue is exposed to the coming generic price cuts, how much the reform could hurt profit, or when it expects to qualify for the certification.
In written responses to Korea Biomedical Review (KBR), Huons pointed instead to rising R&D spending and said the merger would help it compete under the new pricing system.
“Through the absorption merger of Huonslab, we expect to strengthen our R&D capabilities and secure competitiveness under the drug pricing reform,” a company spokesperson said. “We also expect R&D spending and the ratio of R&D to sales to rise steadily."
Huons Group headquarters in Seongnam, Gyeonggi Province. (Credit: Huons Group)
On a consolidated basis, the company spent 41.9 billion won ($28 million) on R&D last year, up 20.1 percent from a year earlier. That amounted to 6.7 percent of annual revenue.
The ratio has continued to climb. In the first quarter, R&D spending rose 18 percent year on year to 11.7 billion won, pushing R&D to 8.2 percent of sales.
The company did not say whether those figures are enough to meet the requirements for innovative pharmaceutical company certification.
The deal comes months before Korea begins adjusting prices for already-listed drugs. In March, the Ministry of Health and Welfare (MOHW) approved a plan to cut the base price of existing generics from 53.55 percent of the original drug price to 45 percent.
Companies certified as innovative pharmaceutical companies would receive 49 percent of the original drug price for existing generics for up to four years. For newly listed generics, innovative companies could receive up to 60 percent, while quasi-innovative companies could receive 50 percent.
In the filing, Huons cast the merger as an answer to a business model under strain, citing both a shortage of new-drug pipelines and “deepening downward pressure on sales and profitability” from the government’s drug pricing reform.
Huons will remain the surviving listed company. Huonslab, a subsidiary of Huons Global, the group’s holding company, will be absorbed. The merger ratio is 1 Huons share for every 0.4256893 Huonslab shares.
Huons told KBR that no further group restructuring has been decided after the merger.
A shareholder meeting is scheduled for July, with the merger set for Aug. 18.
Huons will issue 3,825,327 new shares to Huonslab shareholders, equivalent to 24.20 percent. The company said there would be no change in management control apart from the shareholding shift.
The main asset moving into Huons is HyDIFFUZE, Huonslab’s recombinant human hyaluronidase platform, which is designed to help drugs spread through tissue and support subcutaneous (SC) delivery.
Huonslab applied in December for Korean approval to commercialize a product using the technology.
“If the drug-diffusion platform technology is commercialized, we expect sales growth and cost reductions through synergies with Huons’ infrastructure and sales organization,” Huons told KBR.
Huons said the merger would add Huonslab’s new drug and biosimilar pipeline to its existing generic drug-centered business and allow the company to internalize R&D talent and core patents.
It also said R&D costs would rise in the short term, though it expects the deal to reduce duplicate investment and external costs over time.
Kim Ji-hye
댓글
0