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Daehan New Pharm Co., Ltd., Despite Decreased Sales and Profit, Strengthens Internal Stability Daehan New Pharm Co., Ltd. reported a first-quarter sales revenue of 10,777 million KRW, a 15.9% decrease compared to the same period last year, and an operating profit of 1,075 million KRW (operating profit margin of 10.0%), down 28.1%. The main reason for the reduced performance compared to last year’s quarter was the absence of special demand for disinfectants worth 2,153 million KRW due to foot-and-mouth disease starting at the end of 2010, which had boosted results in the first quarter of 2011. Excluding this special demand factor, sales and operating profit remained at similar levels. Since the second half of 2011, Daehan New Pharm has been promoting the "Start-up Daehan New Pharm Project," focusing on strengthening business competitiveness and profitability and restructuring products and distribution channels, improving the quality aspect of sales. In preparation for the drug price reduction and FTA enforcement starting from April 2012, Daehan New Pharm is strengthening its focus and specialization on core competencies and areas where multinational corporations or large pharmaceutical companies do not participate, such as obesity solutions. The company plans to continuously enhance its unique product structure and increase customer assets through direct transactions and distribution efficiency strategies. Through this business portfolio structure, the company aims to absorb the impact of drug price reductions while promoting differentiated strategies to become a small but strong enterprise.

A clinical trial conducted by the Institute of Veterinary Medicine at Gyeongsang National University on broiler farms in the Gyeongnam region, where coccidiosis outbreaks are common, found that administration of “Coccimyeol-S” significantly reduced mortality rates compared to the control group. The study also observed reductions in fecal diarrhea scores and intestinal lesion severity upon necropsy. Coccidiosis affects all poultry species but occurs most severely in chickens and turkeys, causing major economic losses in the poultry industry. The protozoan parasites inhabit the intestinal tract, leading to diarrhea and enteritis, and in broiler farms, resulting in watery, loose, or bloody feces, reduced weight gain, and delayed shipping dates. Through this clinical study, Daehan New Pharm confirmed that the group treated with “Coccimyeol-S” exhibited relatively higher weight gain compared to the untreated group (using 22-day-old broilers infected with Eimeria spp., tested by the Institute of Veterinary Medicine, Gyeongsang National University). “Coccimyeol-S” offers a shorter treatment period of just two days and an economical treatment cost of approximately 4–8 KRW per bird, compared to existing coccidiosis treatments. The withdrawal period is also short at only five days, allowing safe use even in cases of short shipping cycles. Moreover, the product shows minimal drug resistance and does not cause the side effects associated with traditional coccidiosis treatments, such as decreased water intake or weight gain. Daehan New Pharm has also newly launched “Lactoplanta,” an antibiotic alternative derived from fermented fish sauce. [Published in Poultry Research, March 2012.]

Lactoplanta (Lactic Acid Bacteria Derived from Fermented Fish Sauce) Launched

Health Digest Lecithin Therapy

Daehan New Pharm Co., Ltd.’s sales for the January to September period reached 34.1 billion KRW, maintaining a similar level to the previous year. Operating profit increased by 9.8% year-on-year to 4.3 billion KRW (operating profit margin 12.6%) due to results from restructuring and operational efficiency improvements. However, net income decreased by 1.3 billion KRW to 560 million KRW (net profit margin 1.6%), mainly due to litigation costs of 1.94 billion KRW incurred in early July, which were accounted for in the first half of the year. The company is currently appealing and the lawsuit is ongoing. Daehan New Pharm is proactively responding to the challenging business environment in the pharmaceutical industry, including drug price reductions, through management innovation initiatives under the mindset of "START-UP Daehan New Pharm Project." Along with strategic innovation to become the top specialist company in the Med Health (Welling) field, Daehan New Pharm is accelerating efforts to secure core competencies and modernize systems by restructuring product portfolios, strengthening distribution competitiveness, establishing a cash flow and profit-centered operating system, and fostering key talent with performance-based human resource management. The company expects that the first phase of innovation activities this year will be a strategic turning point yielding breakthrough results, and it is committed to continuously driving innovation to make this crisis a launching pad for its second leap forward.

Final Results of the Reassessment of Five Existing Drug Categories1. We hereby inform you of the final results and the effective dates of the revised drug prices for the five therapeutic categories that have been undergoing reassessment since the second half of last year. Please refer to the details below for your business operations. 2. Please note that the effective date of implementation differs by product. << Details >> (1) Price Changes Product Name Current Price 2011.7.1 2012.7.1 Tiparon Tab. (Tiropramide HCl) 195 156 Metazin Tab. 122 113 109 Mucoran Tab. (Rebamipide) 151 150 Asitoba Cap. 300 mg 195 181 173 Levoran Tab. (Levosulpiride) 194 180 177 Silotal Tab. (Cilostazol) 419 390 365 (2) Drug Price DeletionsEffective period: from July 1, 2011 to August 31, 2011 (insurance reimbursement applies during this period) Product Name Current Price Diphedin Inj. 2 mL 670 Mezotopy Inj. (Nicotinic Acid Ethofylline) 2,404 Ribendol Tab. (Alibendol) 104 Diazhe Tab. (Dimecrotinic Acid Magnesium) 97 End.

Daehan New Pharm Co., Ltd. achieved a profit turnaround with a 23% increase in sales to 12,736 million KRW and an 82% significant growth in operating profit to 1,459 million KRW (operating profit margin 11.5%). Although net income was in deficit in Q4 2010, it turned positive to 418 million KRW in Q1 2011. This remarkable improvement in Daehan New Pharm's performance is attributed to the successful implementation of key strategic tasks, including product structure enhancement, distribution structure improvement, sales force strengthening, organizational revitalization, and rigorous profitability-focused responsible management activities. The company has been enhancing its product portfolio by focusing and specializing on core products such as obesity and vitamin treatments, and shifting distribution strategy to direct transactions, which continuously improves its competitiveness.

In 2010, Daehan New Pharm Co., Ltd. reorganized its disrupted sales network and achieved a 22% sales growth, laying the foundation for a renewed leap forward while resolving past obstacles to growth, creating an opportunity for further development. In the fourth quarter of 2010, the company disposed of approximately 6 billion KRW of doubtful accounts receivable from before 2008 through sales of accounts receivable. This was rigorously evaluated through an audit by an accounting firm between November 17 and November 29, 2010, and sold to a specialized acquiring company. As a result, operating profit amounted to 5.8 billion KRW, up 7% year-over-year, but a loss on accounts receivable sales (-6 billion KRW), an extraordinary expense, caused a net loss of 2.7 billion KRW. While the net loss occurred temporarily due to the loss on accounts receivable sales, operating profit increased compared to the previous year. Through this disposal of doubtful accounts receivable, the company improved asset soundness and financial structure while also achieving tax reduction and securing cash liquidity. Going forward, the company will strive for a united effort by all executives and employees to achieve sales of 100 billion KRW within the next two to three years.

On December 1, 2010, Roksy Corporation announced through a public disclosure that they had obtained approval from Kazakhstan's antitrust law authorities to transfer a 40% stake in the Galaz Block to LG Corporation, completing the transaction. The Galaz Block is an investment area in which Daehan New Pharm holds equity. It has already been recognized for its economic viability by a third party and is currently awaiting final government approval from Kazakhstan for pilot production. With this, the Galaz Block will be primarily developed under the leadership of LG Corporation, a major domestic conglomerate. The plan is to not only continue initial production but to actively explore and develop additional production wells throughout 2021, gradually increasing productive capacity. The project will also benefit from smooth financing, which will accelerate exploration and development activities. Through this transaction, Galaz Corporation will receive 15.6 million USD as transaction proceeds and is expected to receive an additional 17.5 million USD designated for exploration and development expenses.