Korean Drugmakers Push New Businesses to Diversify Revenue Amid Price Cuts, Supply Risks

South Korea’s pharmaceutical and biotech industry is accelerating diversification as it faces drug price cuts and global supply-chain uncertainty tied to tensions in the Middle East. Companies are widening their portfolios beyond medicines, from health supplements and animal products to solar power and even car-wash operations.

Industry officials said April 1 that several established drugmakers are adding new business purposes at shareholder meetings, seeking new growth as price cuts make limits in the traditional drug business more apparent.

Yuyu Pharma recently added the manufacturing and sale of “animal quasi-drugs, quasi-drugs and health functional foods” to its articles of incorporation.

Animal pharmaceuticals are seen as a potential steady earner as pet ownership rises and entry barriers are relatively low. The global pet market is projected to grow from $320 billion in 2022 to $493 billion in 2030, according to the industry estimate cited in the report.

Health functional foods are also a key target. Despite intense competition, the market reached 5.9626 trillion won last year. Companies see the segment as a potential high-margin cash generator that is less directly exposed to drug price regulation, and many have already entered with products such as probiotics and collagen.

Expansion into beauty and medical devices is also drawing attention. Anguk Pharm added “development and sales of plastic surgery-related formulations” and “development and sales of biomedical-related products” to its articles, aiming to strengthen its health care portfolio by tapping growing demand for aesthetic dermatology in an aging society. Anguk Pharm, which previously acquired health care company Dmedic Korea, has been broadening beyond prescription drugs into health supplements, beauty and sleep-related businesses.

A frequently cited success story is Dongkook Pharmaceutical’s cosmetics brand Centellian24. The product line built recognition by applying the concept of ingredients from its wound treatment Madecassol to cosmetics, and some forecasts say the company could join the ranks of firms with 1 trillion won in annual sales on the back of health care growth.
 
Some companies are moving into businesses far removed from their core operations. Daewoong Pharmaceutical added a “solar power generation business” to its articles at this year’s shareholder meeting. The move is viewed as part of ESG management, aiming to produce electricity and cut energy costs through rooftop solar facilities at factories. With raw material prices surging amid Middle East instability, the solar business is expected to help reduce costs over the long term.

Dong-A ST listed “car-wash operation” as a new business, saying it plans to use land near factories and logistics centers to generate additional income and diversify cash flow. JW Pharmaceutical added “investment, management advisory and consulting,” a step seen as strengthening investment and management support functions across affiliates.

Still, some warn that new ventures could dilute drugmakers’ core capabilities in pharmaceutical research and development and sales. “The key question is whether new businesses will connect to existing strengths and translate into real profitability, or whether they will reduce room for R&D investment,” an industry official said.