[Edaily Reporters KIM SAE-MI, SONG YOUNG-DOO, Lim Jeong-yeo ] #ROKIT HEALTHCARE Inc. has reported an order backlog totaling 1.898 trillion won from contracts for its long-term regeneration platform. However, it has been confirmed that these contracts are non-binding. With only 0.8% of these contracts having actually converted into revenue, questions are being raised about the practical significance of the order backlog.

1.9 Trillion Won in Orders for Tissue Regeneration Platform: “Non-Binding Contracts”

According to an investigation by Pharm E-Daily—E-Daily’s premium pharmaceutical and biotech content service—on the 4th, it was confirmed that most of ROKIT HEALTHCARE Inc.’s global supply contracts for its skin regeneration platform

are non-binding

.

A ROKIT HEALTHCARE Inc. official who met with Pharm E-Daily on the 28th of last month stated, “Although we have set a minimum order quantity (MOQ), if the contracts were legally binding, they would be subject to disclosure—but that is not the case,” adding, “The fact that the contract is not strictly enforced does not result in any disadvantage for the counterparty.” The company has effectively acknowledged that the contract structure imposes no penalties even if the counterparty fails to fulfill its purchase obligations.

The method for calculating the contract deposit is also controversial. ROKIT HEALTHCARE Inc. official explained, “The contract deposit should be understood in terms of market size,” adding, “It was roughly estimated based on demand projections derived from the population of the respective country.” The official continued, “There may have been some misunderstandings during the initial contract negotiations due to a lack of mutual understanding.”

Ultimately, this suggests that the 1.898 trillion won in order backlog is not based on contracts with firm purchase obligations but rather on loose agreements grounded in potential demand.

Revenue Conversion Rate at ‘0.8%’; Some Contracts Have Already Expired

The actual revenue

conversion

rate for these orders is also extremely low. Analysts suggest that the lack of legal enforceability in some parts of the contracts has contributed to this. According to ROKIT HEALTHCARE Inc.’s business report, the order backlog for exclusive supply contracts for its skin regeneration platform stood at $1,253.3 million as of the end of last year. Applying an exchange rate of 1,500 won to the dollar, this amounts to approximately 1.898 trillion won.

However, based on ROKIT HEALTHCARE Inc.’s consolidated revenue for last year (26.2 billion won)—excluding the 15.6 billion won in revenue from its subsidiary Rokit America, which sells health functional foods—the revenue conversion rate relative to the order backlog is a mere 0.8%. Considering that the majority of the order backlog stems from overseas contracts, this ratio drops to 0.6% when calculated based on overseas revenue.

The problem is that the company does not separately disclose revenue from its organ regeneration platform in its business report, making it difficult to determine the exact revenue conversion rate. While the company positions its AI-powered, hyper-personalized organ regeneration platform as its core business, it does not disclose the revenue generated by that platform.

It is also understood that a significant number of contracts have expired or are about to expire. The contract signed with Turkey’s IntraMedical in the second half of 2021 (with an upfront payment of 7.5 billion won) was a three-year agreement that already expired in the second half of last year. Contracts totaling 514 billion won—including those with SRS Life Science (380 billion won), 1000Medic (100 billion won), and Lamone (34 billion won)—are also set to expire in the second half of this year.

Considering that ROKIT HEALTHCARE Inc.’s revenue over the past three years has been around 10 billion won, it remains uncertain whether the company will actually receive the hundreds of billions of won in contract deposits from these agreements. This is because, under the contract structure—which lacks legal enforceability—there are no penalties if the other party fails to fulfill its purchase obligations.

A source in the medical device industry pointed out, “If ROKIT HEALTHCARE Inc.’s business model relies on supplying 3D printers at low prices and generating additional revenue through kits, the contracts may exist but generate almost no revenue if hospitals do not continue to use the products.”

PharmDaily had already highlighted this same issue in 2022, prior to ROKIT HEALTHCARE Inc.’s IPO, in an article titled “ROKIT HEALTHCARE Inc.: Sales in the Billions of Won Despite a 1.5 Trillion Won Distribution Contract?” Three years have passed, but the structure has not changed; only the size of the order backlog has grown.

ROKIT HEALTHCARE Inc. disclosed its order status in relatively detail in its initial public offering (IPO) prospectus. However, in its periodic reports following the listing, it has limited itself to briefly stating only the total contract value and the backlog of orders. The breakdown by platform—such as skin regeneration and cartilage regeneration—has disappeared, and since contract periods are not specified, it is impossible to verify delivery dates.

Samsung BioLogics 150%, Noul Co., Ltd. 18%… Rokit 0.8%

The gap compared to other domestic companies is stark. SAMSUNG BIOLOGICS, a leading order-based company in the biotech industry, has a revenue conversion rate relative to its order backlog of 150%. Even Noul Co., Ltd., another small-to-medium-sized medical device company, has completed deliveries worth 4.9 billion won, which is 18.3% of its total order value (26.8 billion won).

Simple comparisons may have limitations depending on each company’s business structure and contract types. Nevertheless, the level of revenue conversion relative to the order backlog is considered a key indicator for gauging the actual degree of contract fulfillment. The medical device industry points out that ROKIT HEALTHCARE Inc.’s ratio of deliveries to total orders—0.8%—is a figure that requires explanation even by this standard.

An official from the medical device industry stated, “Due to the nature of medical devices, products must be registered with hospitals after delivery and actually used by medical staff before they translate into revenue, so it generally takes some time for revenue to materialize,” but added, “It’s difficult to make a definitive statement because how revenue is generated can vary depending on the contract structure.”