[Edaily Reporter KIM SAE-MI ] PharmaResearch(214450)’s growth formula is changing. While the company previously sustained high growth by focusing on its high-margin skin booster “Rejuran,” it has recently been diversifying its growth drivers by focusing on cosmetics and overseas exports.

According to the Financial Supervisory Service’s electronic disclosure system on the 11th, PharmaResearch’s consolidated revenue for the third quarter of this year reached 171.5 billion won, a 26.7% increase compared to the same period last year. Operating profit also rose by 1.2% to 62.6 billion won. The operating profit margin fell by 9.2 percentage points (p), from 45.7% in the third quarter of last year to 36.5% this year.

Domestic Medical Device Sales Stagnate… Growth Diversified Through Cosmetics and Exports

The most notable change is in

domestic medical device sales

. PharmaResearch’s domestic medical device sales for the third quarter of this year totaled 57.1 billion won, a slight decrease from 57.2 billion won in the same period last year. Compared to the previous quarter’s 64.5 billion won, this represents an 11.4% decline.

The year-over-year growth rate of domestic medical device sales has slowed from 59% in the third quarter of last year to 43% in the fourth quarter, 21% in the first quarter of this year, and 6% in the second quarter, and effectively reached 0% in the third quarter. This figure includes products such as “Conjuran,” an intra-articular injection, in addition to Rejuran.

The company attributes this to a slowdown in spending by medical tourists and the maturing of the domestic market. A PharmaResearch official explained, “We believe the slight decline in medical tourism during the third quarter also had an impact,” adding, “As the domestic market has grown to a certain extent, we are focusing more on our overseas business.”

The consensus among securities analysts is that PharmaResearch’s domestic medical device business will struggle to maintain its previous high growth trajectory. Lee Da-bin, an analyst at EUGENE INVESTMENT & SECURITIES, noted, “Domestic medical device sales in the fourth quarter will recover compared to the third quarter, but it will be difficult to expect the same level of high growth as in the past.”

The slowdown in domestic medical device sales was offset by cosmetics and overseas exports. In the third quarter of this year, cosmetics sales reached 62 billion won, a 76% increase year-over-year. Of the total sales increase of 36.1 billion won during the same period, cosmetics accounted for 26.8 billion won, or 74%.

The share of cosmetics in total sales also rose from 26% in the third quarter of last year to 36.1% in the third quarter of this year. Although the share of medical devices fell from 56.7% to 50.8% over the same period, it still accounts for more than half of total sales.

Growth in the cosmetics business was driven by overseas markets. Cosmetics exports in the third quarter reached 42.1 billion won, a 92% increase compared to the same period last year. This was due to expanded sales in existing markets such as Southeast Asia, Japan, and China, combined with the positive impact of securing new distribution channels, including Sephora and Costco in the U.S.

Medical device exports also continued their growth trend. Third-quarter medical device exports totaled 30 billion won, a 53% increase compared to the same period last year. This performance was supported by expanded market penetration in Europe through France’s Vivaci and increased sales in existing Asian markets. Although this figure represents a 6.9% decrease from the previous quarter’s 32.2 billion won, the company attributed this to exchange rate fluctuations.

A PharmaResearch official stated, “The decline in medical device exports compared to the previous quarter was largely due to the strengthening of the Korean won,” adding, “It was not caused by a decrease in shipment volume or inventory adjustments by distributors; on the contrary, we are shipping more units than originally planned.”

Following its expansion into the European market, PharmaResearch is accelerating its entry into the Latin American market. While expanding its sales regions to include Mexico, Argentina, and Chile, the company expects to receive product approval in Brazil sometime next year. A PharmaResearch official emphasized, “We have already signed a distribution agreement in Brazil,” adding, “We have sufficient inventory ready to begin supply immediately upon receiving approval.”

The success of this overseas expansion is also reflected in overall sales. Total exports for the third quarter of this year reached 81.6 billion won, a 61.5% increase compared to the same period last year. The share of exports also rose from 37.3% in the third quarter of last year to 47.6% this year. With overseas sales now accounting for nearly half of the total, the company’s business structure—which was previously focused on the domestic market—is shifting toward a global market-centric model.

Adjusting Profit Margins Amid Expanding Cosmetics Share… Export Growth Is the Answer

Changes are also emerging in the company’s profitability structure due to the expansion of overseas operations and growth in the cosmetics sector. This is because cosmetics have relatively lower margins than medical devices, meaning that as their share of sales increases, the overall operating profit margin may decline.

In the third quarter of this year, PharmaResearch’s gross profit margin stood at 75.8%, down 4.8 percentage points from 80.6% in the same period last year. During the same period, the ratio of selling, general, and administrative expenses to revenue also rose from 34.9% to 39.3%. This is interpreted as profitability being affected by changes in revenue composition due to the expansion of the cosmetics business and an increase in sales and marketing expenses.

The acquisition of CG USA, a U.S. cosmetics manufacturer, also impacted profitability. According to securities analysts, PharmaResearch recorded 2 billion won in one-time expenses in the third quarter—including advisory fees related to the CG USA acquisition—as well as an operating loss of 1.5 billion won resulting from the consolidation of CG USA’s financials. While the one-time acquisition-related expenses are expected to be resolved in the future, CG USA’s operating loss is likely to persist for the time being.

There is a growing sentiment among securities analysts to adjust their expectations regarding PharmaResearch’s profitability. The average operating profit forecast for PharmaResearch’s fourth quarter of this year, as presented by 10 securities firms, stands at 61.6 billion won, falling short of the third quarter’s 62.6 billion won. Of these, nine firms expect fourth-quarter operating profit to fall short of the second quarter’s record high of 66.5 billion won. The prevailing view is that it will be difficult to accelerate profit growth in the short term.

PharmaResearch is currently targeting an operating profit margin in the mid-to-high 30% range. This is interpreted as a strategy to expand overall profit scale through revenue growth in the cosmetics and overseas medical device businesses, rather than focusing on the high operating profit margins in the 40% range seen in the past.

A PharmaResearch official stated, “We are currently meeting our target operating profit margin in the mid-to-high 30% range,” adding, “There is still room for growth in medical device exports, and since the fourth quarter is the peak season for medical devices, we need to keep an eye on future performance.”