April 25, 2024

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[THE INVESTOR] Yungjin Pharm shares climbed Dec. 13 after the board of directors approved a proposed merger with its affiliate KT&G Life Sciences, aiming to strengthen its pipeline of new drugs. 

The tie-up is expected to increase operational efficiency of the two drug-making units of KT&G, South Korea’s largest tobacco and ginseng product manufacturer, which jumped into the pharmaceutical business in early 2000s.

“We plan to boost competitiveness by reinforcing infrastructure of research and development and securing innovative new drug pipelines via the merger,” Yungjin Pharm said in a regulatory filing.

KT&G Life Sciences will be dissolved after the merger, according to the firm.

The merger ratio has been set at 1: 0.4957375 between Yungjin Pharm Industry and KT&G Life Sciences with a effective date of Jan 13.

On the announcement, Yungjin Pharm shares jumped 17.79 percent to trade at 9,070 won (US$7.78) as of 10:45 a.m. while KT&G gained 1.49 percent to 102,000 won.

The move comes as KT&G Life Sciences has been showing sluggish growth since it was established in 2012 with KT&G’s ambitious plan to spearhead the business. It posted an operating loss of 4.1 billion won in 2015.

Currently, Yungjin is working on developing drugs for chronic obstructive pulmonary disease, which are undergoing phase 2 clinical trials, and rheumatoid arthritis treatment.

KT&G Life Sciences is developing drugs for cancer and osteoporosis, and for atopic diseases, as well as new medicines for diabetes and obesity, but none of them have started clinical studies yet.

By Park Han-na (hnpark@heraldcorp.com)