[Edaily Reporter KIM SAE-MI ] Tego Science, Inc.(191420)reported that despite revenue growth in the first half of this year, its operating loss widened due to increased research and development expenses.

Tego Science, Inc. announced on the 14th that its consolidated revenue for the first half of this year reached 3.2 billion won, an 8.2% increase compared to the same period last year. During the same period, the operating loss rose 123.5% to 3.0 billion won, and the net loss surged 592.5% to 6.9 billion won.

Second-quarter revenue was 2 billion won, up 21.9% year-over-year, while the operating loss rose 148.9% to 1.2 billion won. The net loss soared 1,345.1% to 4.9 billion won from 300 million won in the same period last year.

The consolidated results for the first half of this year partially reflect the performance of a new subsidiary. P&P Pharm’s first-half revenue totaled 400 million won, with net income of 90 million won.

Previously, in May, Tego Science, Inc. acquired a 95.77% stake in P&P Pharm, a pharmaceutical wholesaler and retailer, for approximately 3.8 billion won, making it a consolidated subsidiary. P&P Pharm is a company that distributes and markets pharmaceuticals to medical institutions such as hospitals. Tego Science, Inc. plans to leverage P&P Pharm’s sales network to expand domestic sales of “Caloderm,” an autologous cell therapy product.

The widening operating loss was influenced by an increase in research and development (R&D) expenses. Ordinary R&D expenses for the first half of the year totaled 3.1 billion won, an 84% increase compared to the same period last year. Consequently, selling, general, and administrative (SG&A) expenses also rose by 50.5% to 5.1 billion won. The company attributed this primarily to increased costs associated with ongoing domestic and international clinical trials, including the U.S. Phase 2 clinical trial for “TPX-115,” an allogeneic cell therapy for rotator cuff tears.

Derivative valuation losses related to convertible bonds (CBs) played a major role in the widening net loss. Tego Science, Inc.’s financial expenses for the first half totaled 5.7 billion won, a sharp increase from the 200 million won range recorded in the same period last year. Of this amount, derivative valuation losses accounted for 4.5 billion won, while interest expenses amounted to 1.1 billion won.

Derivative valuation losses are accounting losses that do not involve actual cash outflows. Changes in the fair value of conversion rights and other features attached to the 27 billion won worth of convertible bonds (CBs) issued by Tego Science, Inc. in May of last year were reflected in the company’s income statement. Depending on future changes in fair value—such as those driven by stock prices—valuation gains or additional valuation losses may occur.

Tego Science, Inc. plans to expand domestic sales of Caloderm and enter overseas markets in the second half of this year by leveraging P&P Pharm’s sales network. A Tego Science, Inc. official stated, “In the second half, we plan to expand domestic sales of Caloderm through our subsidiary’s sales capabilities while also accelerating our overseas expansion,” adding, “In tandem with the increase in our subsidiary’s sales, we expect second-half earnings to improve significantly compared to the first half.”