■ Our Mission

In my 2023 annual letter and at the shareholders' meeting, I believe I made significant efforts to explain what Boryung aims to become. As a result, Boryung is now perceived as a company delving into space investments, leveraging its robust pharmaceutical business in Korea. Especially, due to our concentrated communication on the reasons for venturing into space last year, there have been frequent suggestions that Boryung should be seen as a space company.

I believe that when a company's mission is clearly shared both internally and externally, its value becomes clearer. Boryung's overarching mission is singular: To become "a company essential to human health." Currently, there are various businesses within Boryung,--some interconnected, some not,--akin to the diversity within the pharmaceutical sector. However, the mission that all businesses must adhere to is that each should be indispensable.

Whether it's the businesses we currently conduct or those we plan to invest in the future, Boryung will approach them with the same perspective, aligning with our mission alongside leaders who resonate with it, to shape the company into one essential to human health. This is what Boryung is doing and what it must continue to do.

Occasionally, acquaintances inquire why I hold such thoughts. It stems from a deeply personal experience when, in 2014, shortly after joining Boryung, I had the opportunity to attend a breakfast lecture by a Harvard MBA professor at a hotel. The question posed during that lecture remains vivid in my memory: "If the company you lead would cease to exist tomorrow, how much pain and inconvenience would people experience? The more significant the impact and duration of suffering, the higher the value of that company."

Naturally, I thought of Boryung upon hearing this question. A decade ago, considering our company's situation, I grew concerned. With a limited understanding of the company at that time, I doubted whether many would face significant difficulties if our company was to disappear tomorrow.

Looking back now, I realize that some of my assessments were off, but one thing remains certain: Boryung today is a more indispensable company to many than Boryung Pharmaceuticals was a decade ago. And we will continue to seek and invest in opportunities to provide businesses essential to more people in the future.

■ 2023 Performance of Boryung

Pharmaceutical Business

The table below illustrates Boryung's pharmaceutical business performance over the past 10 years, including the officially projected figures for 2024.

According to IQVIA, a global pharmaceutical market research firm, the Korean pharmaceutical market has been exhibiting annual growth rates in the range of 6-7% from 2017 to 2022 and maintained a similar level of growth in 2023. Boryung's pharmaceutical business recorded sales of 859.6 billion KRW and an operating profit of 68.3 billion KRW, representing an increase of 13% and 21% respectively compared to the previous year. Overall, we witnessed steady growth across all business segments.

As I mentioned last year, demographic shifts due to aging populations remain a significant driver of growth in the pharmaceutical market. Boryung's pharmaceutical business continues to build a portfolio in anticipation of such macro-social structural changes, and we believe it is well-positioned to deliver results that exceed the market's growth levels in the future. Over the span of more than 60 years since its founding, Boryung has endeavored to provide essential medications to patients and has grown accordingly. We will continue to reflect on how we can sustain this growth trajectory, not only in Korea but also as a necessary player in the global pharmaceutical market, grounded in the same spirit that has guided us thus far.

Humans In Space (HIS, formerly known as Care In Space) Program

The HIS business comprises two components: securing the (1) technology and (2) infrastructure to enable sustained human presence in space. Last year, in both my annual letter and at the shareholders' meeting, I elaborated on the essence of the business, and this year, I will share how both aspects of the business are progressing.

In 2023, the HIS business was focused on expanding it scope. We changed the name to Humans In Space (formerly Care In Space) to encompass a broader meaning. The core of the HIS business is to serve as a platform where partners from around the world come together to enable sustained human presence in space. If 2022 was about clarifying what Boryung aims to achieve with CIS, 2023 was about expanding partnerships through the HIS business and understanding their needs. We established significant partnerships with Axiom Space and the Aurelia Institute and are actively developing strategic collaborations with NASA and other major global space companies.

2024 will mark the beginning of a concerted effort with our partners to find solutions for sustained human presence in space. Regardless of whether they are governments, corporations, schools, or research institutions, any entity pondering this issue will find it imperative to collaborate with Boryung.

BRAX Space, our joint venture with Axiom Space, will serve as a conduit within the HIS platform, sending domestic technology and ideas gathered to the International Space Station (ISS) for validation and development. We will also revitalize the South Korean astronaut project, which has been dormant since 2008, allowing Korean technologies to advance through the hands of Korean astronauts in space. Furthermore, we will endeavor to secure a place for South Korea in space to ensure our presence in the cosmos.

■ Opportunities for Boryung

We consider someone who works in a particular field for a long period and consistently achieves above-average results to be an "expert." Warren Buffett of Berkshire Hathaway is the epitome of this definition. Since 1965, Mr. Buffett has shared an annual letter comparing the company's stock performance with the U.S. S&P 500 Index. Over the same period, Berkshire Hathaway has achieved an annual average return of +19.8%, while the S&P 500 Index has shown +10.2% annual average returns. When compounded annually, while the S&P 500 Index has risen by 31,223%, Berkshire Hathaway has surged by over 4,384,748%. One might question whether it's appropriate to use the world's most prominent business leader (many consider him primarily an investor, but I believe it's fair to see him as a business leader) as an example, but conversely, we can say for certain that achieving such results makes him an "unquestionable expert."

I believe the essence of expertise lies in a relentless pursuit of a specific field and the absolute time devoted to that pursuit. Mr. Buffett has spent a lifetime analyzing countless companies, evaluating the competitive advantages of core businesses, and assessing management's ability (long-term vision and capital allocation prowess). Whether examining new companies or evaluating existing businesses, I believe he has always approached them from the same perspective. As the understanding of industries deepens based on ongoing business activities, the likelihood of discovering new opportunities naturally increases. By organizing a team dedicated to understanding the business and engaging in it "for a lifetime," the probability of excelling at the task surpasses that of anyone else, leading to the current valuation of Berkshire Hathaway.

I consider Berkshire Hathaway to be a gathering of experts who deeply understand the world's trends from their unique perspective, centered on Mr. Buffett. It's true that it took a long time for Berkshire to become what it is today. Boryung will also be relentless in evolving into a group of essential experts in human health. It will be challenging and arduous,but together with our members, we will continuously contemplate our long-term dreams and deeply delve into them.

Berkshire was originally a textile company, but after Mr. Buffett's acquisition, the company's expansion began with a focus on insurance businesses. Similarly, while Berkshire defined its textile business as a declining operation and refrained from additional investment, Boryung, leveraging its existing pharmaceutical business, will explore opportunities for national self-sufficiency in essential medicine and expand our perspective on space exploration for humanity.

In the Pharmaceutical Industry

As the aging population increases the demand for pharmaceuticals, issues related to supplying essential drugs become even more critical in the national level. Boryung seeks opportunities here. We lead the domestic production of essential cancer drugs, which are indispensable for cancer patients but heavily reliant on imports. Acquisitions like Gemzar and Alimta from Lilly through the LBA strategy fall into the same context. By acquiring original essential cancer drugs with proven clinical data through long-term prescriptions, preferred by both doctors and patients, we can proudly say that our pharmaceutical business brings indispensable value to the country.

We are also exploring similar opportunities abroad. Even before the Covid-19 pandemic, the world was already immersed in the trend of reshoring supply chains. We believe that the era of globalization that persisted after the collapse of the Soviet Union has come to an end, and countries are now pondering national survival through domestic or allied production and supply chain networks. While the semiconductor industry catches many eyes, the importance of the pharmaceutical industry cannot be overlooked because drugs are directly related to human survival.

Many countries, including South Korea, have long relied on affordable labor in China or India for the production of raw materials and finished pharmaceuticals. We believe there will be a stronger trend in the future to not rely on other countries for essential drugs. We see opportunities here because many countries, including Korea, cannot bring everything back to their own countries.

In the Space Industry

Humanity is heading towards space. The competition has already begun. However, no country can undertake this endeavor alone—at least not yet.Currently, the world is in the process of building the infrastructures necessary for humans to go beyond the Moon and eventually to Mars. Korea is also participating, with the Artemis program serving as one example.. We are exploring routes to the unchartedworld, building ships, ports, and settlements.

In the past year, Axiom has sent eight people to the International Space Station through two missions. China is conducting continuous manned missions to its own Earth-orbit space station, the Tiangong Space Station. India has become the fourth country in the world to land on the moon through the Chandrayaan-3 lunar lander, and Intuitive Machines from the United States became the first private company to land on the moon (the first US moon-lander in 52 years.) Initially, exploring a new world (space) was a national task. However, due to increasing global government debt and enormous costs, most countries cannot accomplish this task alone with their national budgets. We see another opportunity here as a private entity.

At last year's shareholders' meeting, one shareholder asked if Boryung has experts in the direction it is currently headed. I believe it was a question born out of concerns mixed with curiosity about the HIS business. I replied that the members of our company engaged in that work are experts themselves, and I can say with certainty that they have become more essential to the world than they were last year. Pharmaceuticals and space-related businesses are areas that Boryung has decided to focus on to become an essential company for human health. In this continued pursuit for the next 10, 20, or 30 years, members we will gain deeper expertise and the business will grow accordingly.

■ Personal thoughts on Enhancing Corporate Value

These days, there's a great amount of interest in enhancing corporate value across the Korean stock market. This is a very positive and necessary step for the country. A higher valuation of a market means more capital (foreign and domestic), which will lead to more investments to improve the competitiveness of listed companies in the Korean market.

I believe that, fundamentally, the earning-power of a business equals the value of the business over a long period. We can talk about endless factors that can have an impact on the value of a business: favorable government policies, global trends, investor appetites, market cycles--the list goes on. But at the end of the day, the strength of earnings is where investors will put their trust on.

My responsibility is to improve the company’s earnings through allocation of capital over a long horizon. I strongly believe that Boryung is at a moment where we need to heavily focus on improving the fundamental strength of the company. That means it is a time to chase the opportunities and make investments. The management team sees numerous opportunities to strengthen Boryung’s portfolio, which will contribute, in a positive way, to the company’s value over the long run. The management team including myself will invest our capital back to our company when we conclude that investing in Boryung creates the best value for shareholders.

The more critical the needs of its customers, the higher the chance of the business being more successful. Boryung will invest in those critical and essential businesses and grow the company by continuously doing so.

I noticed a minute change in Boryung's shareholder composition since the end of 2022 since the list of shareholders finalizes at the year-end. The number of individual shareholders increased by approximately 15%, from 34,810 at the end of 2022 to 40,119 at the end of 2023. I am grateful for the fact that more people resonate with our long-term vision and thus feel a greater responsibility to deliver the results. With the broader support, I also feel an inherent obligation to contribute to the advancement of my country. This sense of duty has driven the decision to collaborate with the Korea Foundation for the Advancement of Science and Creativity in organizing the HIS YOUTH Space Science Competition this year.

Despite the challenging circumstances, I would like to extend my heartfelt appreciation to all the dedicated members who contributed to the company's growth last year. The journey ahead remains arduous and distant, but by earnestly reflecting on the purpose of our endeavors, I am committed to ensuring that the efforts of every member are not in vain. I humbly request the support of our valued shareholders, and I eagerly anticipate our gathering at the upcoming shareholders' meeting on March 26.

2024.03.19

CEO & Chairman, Jay Kim