Yuhan Corporation (000100.KS) and ST Pharm (237690.KQ) are landing successive supply contracts on the back of active pharmaceutical ingredient (API) plant expansions, raising expectations for order growth and improved earnings. Industry observers say the drugmakers' preemptive capacity expansions are translating into actual orders, positioning the API business as a new growth engine.
According to the Financial Supervisory Service's electronic disclosure system on Wednesday, Yuhan recently signed an API supply contract worth $139.81 million (approximately 210.2 billion won) with U.S.-based Gilead Sciences. The supplied product was not disclosed, citing business confidentiality. The deal came just two weeks after Yuhan signed a roughly 56 billion won contract with U.S.-based BridgeBio Pharma to supply APIs for a cardiomyopathy treatment earlier this month. In total, Yuhan has secured over 260 billion won in API orders this month alone.
Behind the surge in orders is expanded production capacity. Yuhan's API business operates under a structure in which subsidiary Yuhan Chemical handles production while Yuhan oversees global orders and sales. Yuhan Chemical completed the expansion of its HB building at the Hwaseong plant last April, securing production capacity of approximately 995,000 liters. The company is also pushing forward with an additional 292,000-liter expansion of the HC building at the Hwaseong plant. Construction is set to begin this year, with operations targeted for the first half of 2028.
Yuhan posted preliminary first-quarter consolidated revenue of 526.8 billion won and operating profit of 8.8 billion won, up 7.2% and 37.3%, respectively, from a year earlier. Notably, overseas business revenue, led by API contract development and manufacturing organization (CDMO) operations, exceeded 100 billion won, growing 21.4% year-on-year.
"Yuhan's API business is expected to grow as an indirect beneficiary of the global API market's de-China shift," said Jeong Jae-won, an analyst at iM Securities. "The additional expansion underway to meet customer supply requests is expected to begin contributing meaningfully to revenue from mid-2028."
"Structural Growth in Oligo Demand Improves Earnings Visibility"
ST Pharm, a CDMO-focused subsidiary of Dong-A Socio Holdings, is also broadening its order base, leveraging production of oligonucleotides (oligos), a key raw material for ribonucleic acid (RNA) therapeutics. In January, ST Pharm signed a contract worth approximately 82.5 billion won with a U.S.-based global biotech firm to supply APIs for an oligonucleic acid therapeutic. In March, the company added another contract worth approximately 89.7 billion won with a European drugmaker, building up its order backlog.
ST Pharm completed its second oligo building at the Banwol Campus in Ansan in September last year, expanding oligo production capacity from 6.4 moles per year to 14 moles. The current average utilization rate is between 40% and 50%, and the company has set a target of 60% to 80% for this year. With RNA therapeutic development continuing to expand, the company plans to decide on further expansion within the year.
Oligos are also driving ST Pharm's earnings growth alongside order expansion. ST Pharm reported first-quarter revenue of 67 billion won, operating profit of 11.5 billion won, and net profit of 15.2 billion won. Revenue rose 27.7% from a year earlier, while operating profit and net profit surged 1,024.6% and 2,044.8%, respectively. Oligo sales reached 40.4 billion won, up 7.5% year-on-year.
"Oligo demand is structurally increasing as commercialization of RNA therapeutics grows and indications expand from rare diseases to chronic conditions," said Hong Ga-hye, an analyst at Daishin Securities. "ST Pharm is rapidly expanding its order backlog, and earnings visibility has improved, particularly with a rising share of commercial volumes."
As global pharmaceutical companies accelerate new drug development and seek to secure supply chain stability by increasing API outsourcing, Korean drugmakers are expected to see expanded production order opportunities. "API CDMO is a business that simultaneously requires large-scale facility investment and quality reliability," an industry official said. "As the effects of preemptive large-scale expansions are translating into orders from global pharmaceutical companies, APIs will establish themselves as a growth pillar that enhances earnings stability."
