Caregen eyes growth in cosmeceuticals

Caregen is not a typical Korean biotechnology company local investors are most familiar with.

When it comes to biotech shares trading on the stock market, LG Life Sciences or Medy-Tox would generally come to mind. They are big biotech players, with the market cap of LG Life Sciences reaching over 1 trillion won ($858.8 million) on the benchmark KOSPI. Medy-Tox ranks 6th with nearly 3 trillion won in market cap on the tech-heavy KOSDAQ.

Caregen, which calls itself the “cosmeceutical research and development company,” ranks 15th on the KOSDAQ with a market cap of over 1 trillion won. It is as big as its peers, and analysts expect the firm to grow bigger with its hit global, yet niche products such as dermal and hair fillers.

Beating earnings estimates, Caregen posted operating profit of 3.6 billion won in the first quarter of this year, up 26 percent from 2.9 billion won a year ago, according to financial statements. Its sales reached 8.3 billion won, up 27 percent, from about 6.6 billion won in the same period.

Despite being the off-season for cosmeceutical filler products, the company performed above the market consensus of 3.5 billion won in operating profit, and 8.1 billion won in sales, thanks to brisk overseas sales of dermal fillers for skin care such as antiaging and anti-hair loss.

“We expect Caregen will hit our earnings forecast in the second quarter on the back of growing demand for its new hair filler products,” said Kim Ho-jong, an analyst at NH Investment & Securities.

Its joint venture in China is expected to further boost its sales of retail products to reach 7 billion won this year, up from about 4 billion won last year, the analyst noted.

The company has a JV with Shishangmeida, which operates some 150 beauty care centers in China.

The company recently disclosed that it has secured orders worth some 3 billion won to ship its products including “Dr. CYJ” hair fillers and “Dermahill” derma fillers to eight countries including Israel, Hong Kong, Macau and Spain.

As it continues its exports, NH Investment projects the company to hit sales of 17.7 billion won in the second quarter of this year, up about 46 percent from a year ago, and operating profit of 10.5 billion won, up 40 percent.

Caregen develops and uses two main biochemical substances -- growth factors and peptides -- for its skin and hair care products, enabling cell regeneration preventing aging and hair loss.

The company said in an audit filing that it sells and distribute its products through professional clinics as therapy products and retailers as functional therapy and home care cosmetic products.

“As a biotechnology company, Caregen seeks to further apply growth factors and ‘Biomimetic Peptides’ into developing functional foods in the short-term, and pharmaceutical products in the long-term,” the company said.

Caregen’s owner is chief executive and chief technology officer Chung Yong-ji with a 60.7 percent stake. Shanghai Siyanli Industrial has an 8.4 percent stake in the company, according to an audit filing.

By Park Hyong-ki (hkp@heraldcorp.com)