The Dong-A Solbio Group has reunited Dong-A Pharmaceutical with its holding company for the first time in 13 years. Through this move, stable cash generated from Bacchus and over-the-counter (OTC) drugs can now be utilized to secure future growth drivers for the group, such as new drug development and biopharmaceuticals.
According to pharmaceutical industry sources on the 6th, Dong-A Solbio Holdings completed its absorption merger with its 100% subsidiary, Dong-A Pharmaceutical, on the 1st. The Dong-A Pharmaceutical business, which was separated during the transition to a holding company structure in 2013, has returned to the listed parent entity after 13 years, marking a shift from a pure holding company to an operating holding company that also conducts its own business.
This merger is notable given that Dong-A Pharmaceutical had already been the largest cash source for the holding company. Dividends paid by Dong-A Pharmaceutical to Dong-A Solbio Holdings increased from 35.4 billion won in 2021 to △36 billion won in 2022, △40.2 billion won in 2023, and △41 billion won in 2024, rising to 59 billion won last year. This accounted for 81.8% of the 72.1 billion won in dividends received by Dong-A Solbio Holdings from its affiliates last year.
Dong-A Pharmaceutical’s own performance has also continued a growth trend. Last year’s revenue was 726.3 billion won, a 7.0% increase from 678.7 billion won the previous year, while operating profit rose by 2.0% to 86.9 billion won from 85.2 billion won. Based on its consumer healthcare business, including Bacchus, OTC drugs, health functional foods, and lifestyle health products, it has served as a stable cash generator for the group.
The core of this merger is not simply about securing a new cash source. Emphasis is placed on simplifying the capital management structure by consolidating the cash generated by Dong-A Pharmaceutical’s business and the group investment function previously handled by Dong-A Solbio Holdings into a single entity.
Prior to the merger, for the holding company to utilize cash earned by Dong-A Pharmaceutical, it had to go through inter-company fund transfer procedures such as dividends. After the merger, the integrated entity directly manages the cash generated from Dong-A Pharmaceutical’s business. Although the group’s consolidated results will not increase solely due to the merger since Dong-A Pharmaceutical was already a 100% subsidiary, the cash generation and investment decision-making functions that were divided between separate entities are now combined into one.
A representative of Dong-A Solbio Holdings explained, "Previously, while the holding company and the operating company operated as separate legal entities, cash generated from business operations was transferred to the holding company through procedures such as dividends. However, after the merger, the cash flow generated from Dong-A Pharmaceutical’s business and the investment function of the former holding company are operated within a single entity."
The company believes this will allow it to unify the decision-making system for business and investment, thereby enhancing the efficiency of capital management and investment judgment. The plan is to combine Dong-A Pharmaceutical’s business competitiveness with the existing group management and investment functions of Dong-A Solbio Holdings to more swiftly promote strengthening the competitiveness of existing businesses, expanding global operations, and securing future growth drivers.
Specific uses for the expanded investment capacity have not yet been determined. The scale or timing of investments in specific affiliates such as Dong-A ST, ST Pharm, and ST Gene Bio has not been finalized at this time. However, the policy is to review investment targets centered on opportunities that can strengthen the group’s overall growth foundation and enhance business synergy.
Dong-A ST is conducting new drug research and development (R&D) based on its prescription drug business, while ST Pharm is growing its contract development and manufacturing organization (CDMO) for oligonucleotide therapeutic APIs as a growth business for the group. ST Gene Bio also handles biopharmaceutical CDMO operations. Dong-A Pharmaceutical is pursuing overseas expansion of its consumer healthcare business centered on Bacchus and OTC drugs, while adopting a strategy to strengthen the business foundations previously secured by the group in areas such as new drug development and biopharmaceuticals.
Mergers and acquisitions (M&A) are also one of the options for securing future growth drivers. There are currently no specific acquisition targets or new business investment plans finalized. However, the stance is that M&A can be considered if there are opportunities to enhance the competitiveness of existing businesses or generate synergy with the group’s growth strategy.
A representative of Dong-A Solbio Holdings stated, "In terms of business direction, expanding Dong-A Pharmaceutical’s global consumer healthcare business and strengthening the competitiveness of existing businesses such as new drug development and biopharmaceuticals are important growth directions," adding, "M&A can also be considered as one of these growth opportunities." The representative further noted, "We plan to decide whether to proceed with new businesses by comprehensively reviewing factors such as relevance to existing businesses and market growth potential."
in THEBIO
