Company leads way overseasAs a major pharmaceutical company in Korea, Boryung Pharm has shown robust sales and operating profits over the past five years.
Sales increased 20 percent last year compared to 2011, while operating profits jumped a whopping 400 percent. Boryung achieved this in a hostile business environment. The government, for example, implemented a law that lowered prices of medical products in 2012, which would reduce profits of the pharmaceutical company.
At the center of Boryung’s growth is the hypertension drug Kanarb, Many have bore skepticism toward a new drug manufactured by Korean pharmaceutical companies, because many domestic companies failed to turn make their products profitable.
However, Boryung proved that is not the case with Kanarb. In 2011 when it was first released, sales reached more than 10 billion won ($9 million). The sales hit 35 billion won last year. The figure marks a distinguished sales performance compared to most of homegrown new drugs that usually manage to sell about 3 billion won annually.
Kanarb also has been well received abroad. In 2011, Boryung signed an agreement to sell Kanarb to 13 Central and South American countries. The most recent achievement in overseas sales business is a license-out agreement with China’s drug company Harbin Gloria this January. China is one of the fastest-growing markets in the pharmaceutical industry. If Kanarb sells well in the market, it will be a significant boost for sales. Boryung has already performed well in China with its Gelfos product.
Still, not all is well for Boryung. The government’s pricing policy that strictly puts a cap on medical products will exert negative effects when Boryung negotiates the prices of Kanarb abroad.
In fact, the drug company failed to reach agreement with Turkey due to divergent views on the price of Kanarb in Turkey. An industry source said, “As Boryung signs deals with more countries abroad, it will later face troubles on pricing.” Boryung hopes to raise prices in a parallel with competitor drugs, but some countries maintain that the price level should be in line with what it sells in Korea.
The law was intended to give competitive edge to domestic medicines over those manufactured by multinational pharmaceutical companies. It might be a relevant law a few years ago where few companies export their drugs. But now, local companies face disadvantages due to the pricing rule. For future growth, Boryung should come up with shrewd strategy to deal with the problems associated with the domestic law.
BY Kim Hyung-gyun, Principal consultant, IBK Consulting Service Center