South Korea is the capital of K-pop - and plastic surgery. One in three women between the ages of 19 and 29 have had a vanity operation, according to Gallup Korea, although some Koreans say the figure is higher. Advertisements for plastic-surgery clinics are omnipresent, and real estate funds have been devoted to owning that clinic space.
There is a clutch of nine companies that have started manufacturing or selling botox in Korea. Some have set up manufacturing operations without yet having the permissions to sell within Korea itself, because the export market is their main target.
They're actually selling a potentially lethal poison - botulinum toxin, to be precise. So you figure getting the right kind of permitting straight is pretty important.
But countries such as Japan, Iraq and most nations in Latin America have pretty lax regulations about botox distribution. Those are normally the first destinations for the Korean producers. So they're interesting for international investors to watch as the Korean producers spread their toxin strains.
The big markets to crack, naturally, are China and the United States, both of which are pretty stringent about botox imports. Korean companies can normally carry over a lot of the clinical trial information that they develop to get their product cleared for Korea into those major markets, or at least apply the same process to trials there.
The nine Korean producers compete with international companies such as the Irish manufacturer Allergan, with a U.S. listing (AGN) . Its public pronouncements about growth prospects are that Asia leads the world for growth, thanks largely to China.
Allergan's China sales grew 64% in its most recent quarter, compared with the year-ago period, putting China on pace to become the company's largest international market. It has invested heavily in its field force both in China and Brazil.
The Korean producers should chart a similar course.
In Korea, Pharma Research Bio KR:217950 is the latest new entrant to the market. It has completed construction of its manufacturing facility, although it's not cleared to sell domestically.
The brokerage Nomura spoke with Pharma Research Bio management, who said the company began Phase 1 clinical trials in January, and expect Phase 3 clinical trials to begin around the end of this year. When it applies for the Phase 3 trials in Korea, it intends to file to do the same in China and the United States.
Korean sales should start in 2021, Nomura estimates, if all goes well. From no sales whatsoever in 2018, it should be on track for revenue of 5 billion to 10 billion Korean won (US$4.2 million-US$8.4 million) in 2019, coming from the lax markets, Nomura predicts. The company also aims to enter the China market in 2021.
Two other new entrants with up-and-running production but pending Korean clearance should be on a similar timeline. They'll likely sell into little regulated markets, then see business boom if Korean, Chinese and U.S. approvals come.
Eu Biologics KR:206650 is basically two months behind Pharma Research Bio, having started Phase 1 trials in Korea this March. Phase 3 would follow.
Another new entrant, the unlisted Pro-Tox, aims to begin Phase 1 trials before year-end. Nomura estimates both EU Biologics and Pro-Tox should be ready for sales within Korea by 2021, like Pharma Research Bio.
There are four companies that are already cleared for sales within Korea by the Korean Ministry of Food and Drug Safety.
Huons KR:243070 is the latest to win its clearance, which only came in April. It expects to launch domestic sales in Korea in the second half of the year.
The "oldest" of the players in this young-player, youthful-looking game is Medy-Tox KR:086900. It has been cleared to sell within Korea since March 2006, and has the biggest production facilities, with a capacity of 10 million vials per year. Huons is the second-biggest producer, at around 6 million vials each year.
It's instructive that Medy-Tox got 68% of sales last year from exports, for 10 billion won in overseas sales (US$8.4 million). Korea is a handy base for production and sales that will keep the lights on. But international markets are what light up the eyes.
Medy-Tox expects to win approval from the China Food and Drug Administration in June. But Chinese regulators march to their own beat. So a delay of a couple of months is entirely possible.
Hugel KR:145020 won approval for Korean sales in march 2009. Like Medy-Tox, it is awaiting approval from Chinese regulators to sell in China, where it has partnered with Sihuan Pharmacy. Likewise, it's awaiting approval from U.S. authorities for U.S. sales.
Daewoong Pharmaceutical KR:069620 is the fourth operator that's already selling domestically. It got clearance from the KFDA in November 2013. It is also the only botox operator among the nine Korean producers that is already cleared to sell into the United States. Its China application is now in Phase 3 trials.
Two further privately held companies, Kan Zen and Jetema, are developing their product. Kan Zen has registered its strain of botulinum toxin with the Korea Centre for Disease Control, while Jetema is still developing toxin strains Type A, B and E before applying for CDC approval.
Until the Korean companies win firm approval for direct sales into China, their products are still available through the "gray market." Unlicensed importers will ship the Korean-made botox into China and resell it.
The nine Korean producers will be in big business once they get their botox officially into Chinese and American clinics. The shares are worth putting on a watch list pending those approvals.