ST Pharm’s new cash cow ‘oligonucleotide’

brings ₩270 billion in 4 years

Expands supply contract with a U.S. biotech company…made 14 supply contracts that amounts to ₩270 billion in total

The company secures a stable cash cow with oligonucleotide… if contract is extended, the benefit may last until 2035

The oligonucleotide API business has become a major business of ST Pharm.

 

The company has signed many deals over the past three years and the expansion and expectations for contract extensions have also greatly contributed to improving the company’s performance.

 

Experts expect the oligonucleotide API business to stay as a cash cow for ST Pharm for a decade to come, with the global surge in demand for oligonucleotide API and the fact that most contracts signed by ST Pharm are long-term contracts.

 

On the 27th, ST Pharm publicly announced that its oligonucleotide API supply contract with a biotech firm A in the U.S.

 

has been expanded.

 

In November 2019, ST Pharm had signed a contract with the company to supply 5 batches (150kg) of raw materials for clinical trials.

 

The contract at the time was signed for ₩13.6 billion.

 

Company A had requested to add 1 batch to its contract.

 

With the request, the ST Pharm will be supplying a total of 6 batches (180kg) of its API to Company A.

 

The contract amount also increased to ₩18.1 billion with the added ₩4.5 billion.

 

With the addition, ST Pharm’s total contract for oligonucleotide has increased to ₩270 billion, which is more than twofold the sales made by the company last year.

 

Since November 2017, the company had made a total of 14 deals to supply oligonucleotide API to companies, with most of the deals made in the past 3 years since 2019.

 

ST Pharm had jumped into the oligonucleotide API business in 2018 after completing its Banwol plant in 2018.

 

With its API business on track, the company’s performance has significantly improved.

 

ST Pharm had recorded an operating loss for 9 consecutive quarters from Q2 2018 to 3Q 2020, then marked a turnaround in Q4 last year.

 

The company e explained that its oligonucleotide API business was the cause of the turnaround.

 

ST Pharm’s turnaround is drawing greater expectations as most of ST Pharm’s oligonucleotide API deals being long-term contracts.

 

Industry experts foresee that its oligonucleotide business will contribute as a stable cash cow for 10 years at the most.

 

The company has completed delivery of ₩80 billion’s worth of APIs from the ₩270 billion contracts.

 

This means that the company still has around ₩190 billion left to be reflected in its performance from 2H this year to 2023.

 

Also, expectations for additional sales being made from contract extensions exist.

 

Most of the company’s contracts are for the supply of raw materials for clinical trials or initial commercialization.

 

Therefore, if the drug succeeds in commercialization and enters full-scale production, this may lead to further requests for more supply of oligonucleotides.