[Bio Shaking the Market] ② L&C Bio, 30% Annual Rapid Growth with Debt-Free Management

Performance Driver of Autologous Dermal Graft 'MegaDerm'
Preparing Commercialization of Arthritis Treatment and ECM Filler
Successful Entry into China with High Demand from Burn Patients and Plastic Surgery Could Lead to a Jump-Up

[Asia Economy Reporter Lim Jeong-su] KOSDAQ human tissue graft (allogeneic dermis) company L&C Bio is continuing its rapid growth trend. Supported by improved performance, it maintains a debt-free management structure, demonstrating solid financial health. The commercialization of new products such as arthritis treatments and adipose tissue fillers (ECM fillers) is expected to further accelerate growth. The ongoing efforts to enter the Chinese market are also drawing attention.

Since 2015, L&C Bio has shown an average annual sales growth rate of over 30%. Sales, which were only 9 billion KRW in 2005, increased to 29.1 billion KRW last year. During the same period, operating profit rose from 1.1 billion KRW to 9 billion KRW. The average annual profit growth rate exceeds 60%. The operating profit margin reaches 31%, maintaining high profitability.

The strong sales of its flagship product, 'Megaderm,' have driven the performance improvement. Megaderm is a tissue graft developed with L&C Bio’s proprietary technology. The company imported allogeneic dermis from the United States and introduced a product that enhances skin graft success rates and safety through its unique technology. The existing domestic market was dominated by 'Alloderm,' imported from the U.S. biotech company LifeCell. However, recently, L&C Bio’s Megaderm has approached a 50% market share in the domestic market.

Rapid market penetration has improved cash generation capabilities, resulting in a solid financial structure. As of the end of the third quarter last year, borrowings were only 1 billion KRW. Cash and cash equivalents amounted to 14.6 billion KRW, and financial assets totaled 23.6 billion KRW, indicating substantial liquidity. Since 2016, the company has maintained a debt-free policy for four consecutive years, with cash assets exceeding borrowings. The debt ratio is only 10%.

The commercialization prospects of the allogeneic cartilage treatment 'Megacarti' and the allogeneic adipose-derived filler (ECM filler) 'MegaECM' are also attracting market attention.

Megacarti is an arthritis treatment created by physically linking allogeneic cartilage with a hydrogel-type excipient (biopolymer). At the end of last year, it received approval for its clinical trial plan (IND) from the Ministry of Food and Drug Safety. It is expected to be commercialized next year or the year after, once safety is confirmed. According to the Korea Institute of Research & Development, degenerative arthritis patients are estimated to account for 10-15% of the global population, and the domestic treatment market size reaches 1.2 trillion KRW.

MegaECM was developed as a biomaterial for tissue repair by isolating ECM (extracellular matrix) from discarded fat. Previously, fat was classified as waste and recycling was prohibited, but with government-led legal revisions for innovative growth, recycling is expected to be permitted within this year. MegaECM consists of 95% collagen and 5% elastin and proteins, and is evaluated to have higher safety compared to other filler products containing chemical components.

If commercialized, it is widely expected to rapidly replace the existing filler market. The U.S. market research firm Transparency Market Research estimated last year that the domestic filler market size is about 1.7 trillion KRW. Researcher Kim Gyuri of Shinhan Financial Investment forecasted, "If the domestic filler market share is raised to 20%, sales could increase by approximately 60 billion KRW."

Entry into the Chinese market is also generating expectations. L&C Bio is establishing a joint venture (JV) with a leading Chinese partner to build a factory in China. Due to the large number of burn patients in China, there is high demand for tissue grafts, and interest in tissue grafts for cosmetic purposes is also increasing, leading to expectations of significant sales growth. An investment banking (IB) industry official advised, "If collaboration with a Chinese partner with a strong network is realized, the growth trend will become considerably steep. However, it is necessary to consider the uncertainties of the Chinese business."