Korean Drugmakers Pivot to Digital Healthcare as Generic Price Cuts Squeeze Profitability
核心洞察
South Korean pharmaceutical companies are investing heavily in digital healthcare as a new growth engine amid mounting profitability pressure from generic drug price cuts.
Daewoong Pharmaceutical (搜索)'s digital healthcare revenue more than tripled from 4.8 billion won in Q1 2024 to 17 billion won in Q1 2025, with annual revenue forecast to approach 100 billion won.
Dong-A ST (搜索)'s digital health revenue rose 220.4% year-over-year to 5 billion won in the first half, while Daewon Pharmaceutical (搜索) plans to launch a corporate venture capital arm this year.
South Korean pharmaceutical companies are increasingly turning to digital healthcare as a new axis of growth, as profitability pressure from generic drug price cuts and other factors mounts on their existing pharmaceutical operations. Moving beyond simple equity investments to licensing deals and cooperation in sales and marketing, cases that translate into actual revenue are also increasing, according to industry reports.
A Strategic Shift Driven by Pricing Pressure
The pivot is being driven by a deteriorating pricing environment for traditional generics. Starting this month, a new drug pricing system took effect in South Korea, lowering the price calculation rate for generics and off-patent drugs from the previous 53.55% to around 45%. The impact is already visible in financial results: Daewon Pharmaceutical (搜索) reported revenue of 605.4 billion won last year, up 1.2% from the previous year, but its operating profit fell 87.7% to 3.5 billion won.
An industry official explained the appeal of digital health for drugmakers: "Unlike new drugs, digital health can speed up market entry by combining a promising company's technology with a drugmaker's distribution and sales capabilities."
Daewoong Pharmaceutical Leads the Charge
Daewoong Pharmaceutical (搜索) (069620.KS) has emerged as a frontrunner in the space, investing a cumulative 33 billion won in the digital healthcare field from 2020 through the end of June this year. In the first half of this year alone, it put 7.4 billion won into six companies, including Inmed Data, TR, Promedius and iKooB. The company is expanding its investment and collaboration areas from diagnosis to post-discharge management, encompassing AI endoscopy diagnosis with Waycen, smart wards with Seers and TR, AI medical records with Puzzle AI, and home care with Arc.
Daewoong is also moving into digital therapeutics for dementia (搜索). The company plans to complete a pre-IPO investment this month in Emocog (搜索), a company developing digital therapeutics for dementia, and is reportedly pursuing a plan to use Daewoong's hospital and clinic network for the sales and distribution of products such as CogTherapy, a digital therapeutic being developed by Emocog for patients with mild cognitive impairment (搜索) (MCI). GC Green Cross (搜索) (006280.KS) had earlier participated as an early investor in Emocog, with Green Cross Holdings (搜索) (005250.KS) investing 3 billion won in Emocog's Series A in 2021 and holding a 2.8% stake as of the end of June this year.
The revenue trajectory has been steep. Daewoong Pharmaceutical (搜索)'s digital healthcare revenue rose from 4.8 billion won in the first quarter of 2024 to 17 billion won in the first quarter of this year, more than tripling in two years. In the second quarter, it recorded 15.7 billion won, up 26.6% from 12.4 billion won a year earlier. The securities industry forecasts that annual revenue will approach 100 billion won this year, up from 50.9 billion won last year.
Shin Min-soo, an analyst at Kiwoom Securities, said, "The digital healthcare business should be able to offset the slowing growth of the core business," adding, "With bold investment and sales that combine hospital and clinic sales networks, the growth is likely to continue for the time being."
Dong-A ST and Yuhan Expand Their Footprints
Dong-A ST (搜索) is also expanding its investments and business cooperation. After investing 3 billion won in remote patient monitoring company Mezoo (搜索) in 2021, it invested 2 billion won each in March this year in Mediwhale (搜索), an AI cardiovascular disease prediction company, and People and Technology, a smart ward platform company. As of the end of June this year, the book value of its 3.75% stake in Mezoo stood at about 5.3 billion won, more than double the initial investment of 2.5 billion won. The company has maintained its stake even after Mezoo's listing and supplies the remote patient monitoring platform HiCardi through Dong-A ST's sales network.
Dong-A ST (搜索)'s digital health revenue in the first half of this year was 5 billion won, up 220.4% from a year earlier. In the second quarter alone, it recorded 3.2 billion won, approaching last year's full-year revenue. In the second half, it plans to launch the HiCardi M350, which adds oxygen saturation and blood pressure measurement to its existing heart rate, respiration and body temperature functions, to sustain the growth.
Yuhan (000100.KS) has also invested a cumulative 9 billion won in companies such as Huinno. After securing the domestic sales rights for the wearable electrocardiogram device MEMO Patch in 2022, it commercialized the AI remote monitoring system MEMO Q last year, expanding its business into a patient monitoring platform.
Daewon Pharmaceutical Prepares a CVC Launch
Daewon Pharmaceutical (搜索) is pushing to expand its digital healthcare business through investments via a corporate venture capital (CVC) arm. The company is discussing plans to establish a CVC within the year to invest in digital healthcare companies, with the goal of investing in promising venture firms and then extending the relationship into business cooperation, such as adopting medical devices. The company is also considering creating a fund using its own capital combined with contributions from the government's fund of funds.
"If we establish a CVC and invest through it, expert personnel handle the investment review, enabling systematic decision-making and risk management," a company official said.
A Growing Market Opportunity
Digital healthcare is an industry that uses information technology (IT) to prevent, diagnose, and treat diseases, encompassing digital medical devices and health management platforms. Pharmaceutical companies can supply digital medical devices using their existing drug sales networks, while digital healthcare firms can speed up market entry through the pharmaceutical companies' sales networks, creating strong demand for cooperation on both sides.
According to the Korea Information Society Development Institute, the global digital healthcare market is projected to grow at an average annual rate of 8.5%, from $171.9 billion (about 246 trillion won) in 2024 to $258 billion (about 369 trillion won) in 2029.