CEO Letter.

  • CEO  ·  ChairmanJay KIM

  • CEO(Pharma Biz)Daniel Chang

I want to describe Boryung's 2022 as a year of the half-moon. One side of the company was visible and shining, whereas the other was unknown.

Thanks to your support and encouragement, you may have noticed that our pharmaceutical business did well this year. But you may have also wondered what we were doing with our Care In Space (CIS) business, which we started in earnest this year. We didn't do a great job telling you about our CIS-related activities and investments, and I apologize. I want to provide you with sufficient information about our venture so that you will feel comfortable looking at Boryung from now on. Also, I will explain in more detail at our annual shareholder's meeting. Please stay tuned.

In last year's letter, I highlighted three points

  1. 1. Boryung Pharmaceutical to Boryung
  2. 2. Pharmaceutical business: past year's review
  3. 3. CIS business: purpose and the CIS Challenge

This year's letter follows a similar outline

  1. 1. Redefining Boryung: what we do and why we do it
  2. 2. Pharmaceutical business: past year's review and plan from now on
  3. 3. CIS business: our vision towards CIS and plan going forward
  4. 4. General business issues

I will discuss each topic in turn.

Boryung will not remain as a company only doing pharma business

Since the investment in Axiom Space, which was disclosed at the end of 2022, became known, the question I get most often, public or private, is, "Why on earth is Boryung investing in Space?" That question comes with many more sub-level questions. For example,

  1. 1. Why is Boryung Pharmaceuticals (many people still don't acknowledge the name change) investing in Space, which has nothing to do with its primary business?
  2. 2. Should Boryung focus on something other than investing in the continued growth of our pharmaceutical business?
  3. 3. Is Boryung capable of handling continued investment toward Space?

I realized how strongly Boryung as a brand was imprinted on many people as a pharmaceutical company. (This also has positive implications for our LBA strategy in the pharmaceutical business) I tried to explain why Boryung Pharmaceuticals became Boryung in last year's annual letter, but I realized that continuous communication was needed, especially on that topic.

Ultimately, shareholders wish to be assured of what kind of company Boryung wants to be and whether we can continue to grow the company (especially profitability). I also needed to define what I do and our company's definition.

As the Chairman and CEO, my job is to grow our company, increase its value for those who invested their assets in us, and leave a better South Korea for my children and their friends' generation through our company.

After the Korean War, I think many entrepreneurs created companies, created jobs, motivated their employees, grew businesses, generated profits, paid taxes, and contributed significantly to causing South Korea today under the mission of "business for the country" or "we will not leave poverty to our next generation." As the country and generations before ours were the basis of Boryung's growth so far, it is the duty of Boryung and mine to contribute to the way forward of the country and its next generation.

This is what made Boryung look toward Space.

We would like to today the second Age of Exploration. But there are two fundamental differences from the first one, which started in Portugal at the end of the 1400s.

  1. 1. The destination is beyond the Earth
  2. 2. The first Age of Exploration started in peripheral countries and made them into great powers, while the great powers themselves led the second one.

South Korea rose to the top 10 economic power in the world based on compressed growth centered on heavy industries, called the Miracle on the Han River, and by riding on the unprecedented globalization that came after the collapse of the Soviet Union. But what will happen to our next generation's future if we fall behind in the new market that Space will create? UAE became the fifth country to send a Mars-orbiting satellite. China began the operation of its Space station in Low Earth Orbit, and two companies, each from Japan and the United States, expect to land on the moon's surface for the first time as private corporations… the list can continue. Many people think Space has to do with the distant future; however, I would like to say that Space is now.

Space will bring about more change than discovering a new continent. The Age of Exploration that began in Portugal at the end of the 1400s provided seeds for Britain's Industrial Revolution in the early 1800s. Because of technological development accumulated through exploration, Europe could dominate our planet until before World War II. In terms of curing diseases, new diseases emerged due to people coming from different continents to Europe. It was no coincidence that drug development progressed first in Europe to solve them.

I fear that if South Korea does not join the current Age of Exploration toward Space with a differentiated strategy, it will face the same fate as the countries that were discovered during the Age of Exploration or, more recently, the countries that did not ride on the change of globalization 30 years ago.

Fortunately, many in our country have deeper concerns than I do and work tirelessly to find solutions. Their achievements are the successful launches of Nuri and Danuri. However, Space is still an unknown world. There are far more problems to solve than those already solved. Thus, Boryung focused on the issues humans will face in an unknown environment like Space. And we will emphasize securing technologies necessary for human survival in Space and infra to research and develop these technologies. A more detailed explanation will be in the CIS section.

As a shareholder of Boryung, I have staked everything on the company and would like to consider that I am in the same boat as every shareholder of Boryung. Instead of short-term gains, long-term trust is embedded in Boryung's shareholders' minds. I sincerely honor everyone's trust and lead Boryung into a company that matters to humanity.

To this end, we changed the company's name from Boryung Pharmaceutical to Boryung at last year's shareholders' meeting. I also mentioned that earning power is paramount because the company needs to build strength to invest continuously for growth.

Indeed, the pharmaceutical business is still the only one that generates revenue and profit, but we will continue looking for opportunities to increase our earning power and future growth. We will prioritize acquiring 100% of assets, but we will also approach investing in part of businesses as if they were 100% acquisitions.

As we get closer to our goal, one step at a time, the value of our company will grow together.

Pharma business

Boryung's pharmaceutical business achieved record-breaking results in 2022, with sales and operating profit increasing by 21% and 37%, respectively, compared to 2021 (sales of KRW 760.5 billion / operating profit of KRW 56.6 billion). As I studied the industry, I noticed many companies achieved significant growth and broke their records last year. Although the South Korean pharmaceutical market expected 8-9% growth in 2022, Boryung's result was remarkable.

In 2022, companies were still experiencing tailwinds from Covid-19, and Boryung was one of them. However, the increase in the absolute number of patients due to the aging population is the driving force for the growth of the pharma industry in South Korea. And Boryung is well-suited to take this more considerable tailwind. We will not achieve 20-30% growth annually, but our business portfolio will help exceed the market growth in the years to come.

Based on this, we acquired Alimta, the third product of our LBA strategy. This is our second original brand anti-cancer drug acquisition following Gemzar, and this acquisition will boost the growth of our anti-cancer drug business.

We are constantly looking for LBA products to help our pharmaceutical business grow, and we will actively pursue acquisitions if opportunities arise. We will also continue to explore opportunities to expand our business globally based on our global-level production know-how and understanding of global pharmaceutical supply chains accumulated through LBA.

There is no 100% in business and human life. For example, even if we set a sales target of KRW 200 billion for the Kanarb family and an operating profit target of KRW 200 billion for the company in 2026, we may or may not accomplish those goals. However, we have a high chance of accomplishing those goals and only consider how to achieve them. I recommend you read Daniel Chang's letter for more details about our pharmaceutical business.

Also, I want to thank everyone in the pharma business for their accomplishments.

Care In Space business

"I've been living on the moon for a long time, and I wonder if Gelfos will help me with my stomach ache."

It is one of the questions to be answered by the CIS business. Humanity already plans to send people to the moon and mars to stay. We will invest in technologies enabling human long-duration activities and infrastructure to research and develop those technologies. Through the CIS Challenge, we explore companies developing technologies and have invested in Axiom for research and development activities in Low Earth Orbit (LEO). We are also building strong partnerships with them.

The inaugural CIS Challenge in 2022 was an opportunity to show Boryung's sincerity toward Space. From the second CIS Challenge in 2023, we will define and find solutions with more diverse and devoted partners. We will share more detailed plans soon as they become formalized, so please look forward to it and cheer for us.

Many people ask me why Boryung is pursuing a journey to Space. I have three simple answers to it.

  1. 1. CIS business will guide us to accomplish our goals of becoming a company that matters to humanity.
  2. 2. Decreasing the cost of accessing Space allows private companies to become creative in approaching Space. Thanks to SpaceX, which offers 1/20 of the cost that NASA used to provide, and many other innovators, who will bring down the price even further
  3. 3. Fortunately, running a pharma business helps us determine what needs to be done in Space regarding human health.

Nicholas Butler, an American philosopher who won the Nobel Peace Prize in 1931, said, "Businesses are the greatest inventions in human history." The entrepreneurial spirit and fast decision-making system representing businesses have given birth to many technologies that have changed human history. SpaceX is a great example. And although a Portuguese prince started the first Age of Exploration, entrepreneurship led to the discovery of a new continent. Eventually, companies like East India Company were established. The Age of Exploration caused businesses to thrive. Businesses joining forces and writing a new history book chapter will also lead to today's second exploration of Space. This new era has already begun, and Boryung will not be left out.

Then people ask me when to expect the financial result of this initiative. People can merely perform anticipated results within the expected period. The financial result will eventually follow if the business behind the investment performs well over time. We will find those businesses that genuinely matter and are run by a remarkable management team and allocate our capital there.

There are two types of investments in the CIS business. One is the motivator investment to the challenge winners from the CIS Challenge, and the other is for companies like Axiom Space.

For the challenge winners, we want to be the bridge to their access to Space and bring their idea into reality and to the commercial stage. Even though these companies have a relatively long road ahead until making their business competitive, Boryung acknowledges the significance of creating an ecosystem for what we do at CIS.

Axiom Space is a company building a private Space station in LEO. The utilization of LEO will increase further because humans can go to the moon and Mars only through the gateway to Space called LEO. The company was founded and is currently being operated by the team who built and managed International Space Station (ISS) at NASA. The chance of replacing the 30-year-old (Space) infrastructure by the team who made the first one seems reasonable, and it is the only private company that can utilize the existing Space station during the process. Demand for manned astronaut projects and research/development in outer space is rapidly increasing, and Axiom Space continues to win national-level contracts. Along with such circumstances, Axiom Space grew over 50% of its 2022 target, resulting in revenue of USD 250 million. None of the competitors currently perform at this financial-performance level, proving the company's competitiveness. Because of the competitors' current status in the private Space station market and their technological gap with Axiom Space, Axiom Space is the most potential candidate to inherit the International Space Station's position after 2030.

Following this trend, Boryung invested USD 60 million in Axiom Space in 2022. If Axiom Space’s executives achieve milestones set going forward, their accomplishment will position the company as one that truly matters to humanity, and its value will adjust accordingly. Based on the Axiom Space investment, we will explore various new opportunities and create the future together. There could be a time when the company's value in the market is lower than the actual, considering an additional investment is proper decision-making for Boryung's value. If we face this point, we will actively communicate with shareholders to make decisions.

Although we explained our CIS business in length and depth, Boryung's priority remains the same. Focusing on strengthening earning power is of utmost importance. We will adhere to the CIS principle as well. We will focus on acquiring companies entirely or partially to grow our earnings.

Like in the pharmaceutical business, the best talents leading the CIS business are already in Boryung. I'm confident that they are writing a page in the history of South Korea. Questioning the CIS business is having doubts about working with these talents, and I will not invest in a company that is unwilling to work with talent with a clear purpose and direction.

Developing new treatments and replacing existing international Space stations are just a few ideas to grow business and positively impact humanity. Boryung will continue to look for those ideas.

General business issues

We thought Boryung's market value was significantly lower than its intrinsic value in the second half of 2022. We could have chosen to buy back our shares and reduce the number of shares outstanding, but we ultimately decided to invest in Alimta and Axiom Space, which would contribute to the long-term growth of our company.

Investing continuously in businesses and assets that can lead to long-term growth is the best policy for our shareholders. The source of funds for our investments will be based on the cash flow generated by our businesses, and after repaying all of our current debt, we plan to minimize borrowing.

I explained Boryung's present and future through this annual letter. However, some parts are insufficient, and I will do my best to answer them at the annual meeting on March 21, 2023.
Below is what I said at a meeting with Space economy pioneers hosted by the president on February 21, 2023. I am sharing it with you for your reference.

"We are now in the Age of Exploration towards Space. The most significant difference between the first Age of Exploration that Portugal started in the late 1400s and now is two-fold: first, our destination is beyond Earth, and second, the countries that led the first Age of Exploration became dominant powers by discovering new continents, now it is the existing dominant powers that are leading the Age of Exploration to Space.

Forty years ago, in February 1983, despite many criticisms, Chairman Lee Byung-chul of Samsung announced his investment in the semiconductor industry, which laid the foundation for South Korea to become an advanced country today. If we don't go into Space with a differentiated strategy from now on, even though the U.S. and China are leading the Space exploration era, I'm sure our descendants' future will not be like today 40 years from now.

That's why Boryung wants to lead the new market of Space healthcare in the U.S. and contribute to business and national development. Since Yuri Gagarin of the Soviet Union went into Space for the first time in human history in 1961, only about 630 people have experienced beyond Earth orbit for 60 years. The most prolonged extended stay was 437 days. But humanity plans to send people to live on the moon and to Mars, which takes at least three years round trip. The ultimate goal of Space development is to expand human life beyond Earth. And technology development for a long-term human stay in Space is still unexplored.

To this end, Boryung will hold the CIS Challenge in America annually to secure technology for human survival in Space. And we have implemented a strategic investment in Axiom Space, a private company that will replace International Space Station as a base for research and development using secured technology. And we are discussing how to secure South Korea's base inside Axiom Space Station."


CEO & Chairman, Jay Kim

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