The poor earnings by botulinum toxin makers Medytox and Hugel have something to do with China’s war on smugglers, analysts said Friday.

Net income of Medytox fell 11 percent to 18.2 billion won ($16.1 million) in the second quarter from 20.5 billion won a year earlier, although the revenue rose 15.8 percent to 54.9 billion won. The first-half sales also went up 29.4 percent to 113.7 billion won from 87.9 billion won over the cited period.

Hugel suffered a massive blow in the second quarter earnings, continuing the setback from the first quarter. The company’s sales went down 7.1 percent to 42.8 billion won in the second quarter from 46.1 billion won a year earlier. Its net profit plummeted 22 percent to 15.9 billion won in the second quarter from a year earlier. First-half sales fell 9.9 percent year-on-year to 37.2 billion won.

Medytox and Hugel also suffered setbacks in operating profit.

Medytox’ operating income plunged 44.5 percent to 26.3 billion won in the first half from 47.5 billion won a year earlier. The second-quarter operating profit marked 22.6 billion won, which was only half that of the same period of the previous year.

Hugel’s operating income dropped 26.6 percent to 39 billion won in the first half from 53.1 billion won a year earlier. Its second-quarter operating profit went down 57.2 percent to 16.7 billion won from 39 billion won a year earlier.

The sales and profit declines of the two companies were attributed to reduced shipments.

Declines in exports to China, in particular, hit them the hardest, observers said. In the past, a significant proportion of Botox exports to China came from Chinese smugglers’ purchases.

According to a report by Ku Wan-sung, an analyst at NH Investment & Securities, the customs data with HS Code 3002.90.3090 in July, regarded as botulinum toxin exports, marked $6.82 million.

The figure was a 59.7 percent down from a month ago, and a 1.6 percent decrease from a year earlier. The July data was the lowest since May 2017, Ku said.

Sources said a significant share of Korean pharmaceutical exports was heading China. Among them, botulinum toxin products took up more shares than other drugs such as vaccines. Since Beijing’s crackdown on smuggling, exports to China went down, which led to the declines of operating profits at the two Korean Botox makers, they said.

However, Medytox and Hugel officials said their sales had nothing to do with China’s regular crackdown of smugglers, and their products were still performing well in the local market.

The two suffered drops in operating income because the companies temporarily spent a large amount of money on accrued receivables, marketing expenses, and creation of prototypes to maximize the plant operation.

“We can make up for the decreased sales by winning sales approval in China. The impact from China’s clampdown on smuggling is not so big,” an industry official said. “The domestic market is still active, and we’re officially exporting our products to more countries.”

sjh@docdocdoc.co.kr

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