Biopharma Market Fuels South Korean Growth Engine

South Korea is the tenth largest economy in the world with a population of 51.3 million. Alongside fast growth of the region’s technology-driven economy, its pharma industry has been expanding significantly too. 

According to the Korean Ministry of Food and Drug Safety, the domestic pharmaceutical market hit KRW24,310bn ($21.8bn) in 2019, up 5.2% year on year (y-o-y), while exports surged by 11.2%. The total production of pharmaceuticals amounted to KRW22,313bn, showing a 5.7% increase and 7.1% average annual growth rate over the 5 years to 2019.

The production of prescription drugs reached KRW16,618bn, maintaining over 80% share of the total in the last 5 years. The output of quasi-drugs (products that require data submissions and regulatory approvals or notifications, such as certain cosmetics, oral hygiene products and disinfectants) shows the highest growth rate in that period. The number of manufacturers and product items also showed 14% and 9% increases y-o-y, with 382 manufacturers and 2,881 product items in 2019, respectively.

Pharmaceutical exports increased to a record high $5,195m, showing annual average growth of 15.2% in 2019. Japan ($576m) was the largest drug export destination, followed by Germany ($571m) and the US ($529m). Particularly, Switzerland and Belgium experienced high surges.

Pharmaceutical imports reached $6,907m, up 6.2%. In terms of destination, the US ($928m) was top, followed by China ($849m) and Germany ($811.49m).

When ranked by players, Dong-A Pharmaceutical (KRW322.2bn) maintained first place, followed by LG Household & Health Care (KRW258.7bn),  Amorepacific (KRW126.4bn), Yuhan-Kimberly (KRW111.0bn) and Aekyung Industrial (KRW 101.1bn). These companies accounted for 55.5% of the total production.

In terms of profit, Hanmi Pharmaceutical Co., Ltd. took the first place, earning KRW1,013bn, followed by Chong Kun Dang Pharmaceutical Corp. (KRW856.1bn), Daewoong Pharmaceutical Company Ltd. (KRW 739.2bn), Green Cross (KRW682bn) and Celltrion Healthcare Co., Ltd. (KRW592.6bn). In terms of products, Celltrion’s Remsima Inj. 100mg holds the top spot with KRW108.7bn, followed by Handok’s Plavix Tab. 75mg (KRW95.9bn) and Green Cross’s Human Serum Albumin Inj. 20% (KRW86.4bn). Domestically produced new drugs, of which there were 21, yielded KRW235bn, up 26.4%.

In the consumer segment, the top five product items with the highest production performance were toothpaste products (KRW562.8bn), medicines for internal use (KRW 346.6bn), feminine hygiene products (KRW235.6bn), face masks (KRW223.1bn), and bandages, adhesive plasters, and other similar products (KRW132.6bn).

Biopharma Boom

The domestic biopharmaceutical market and export expansion focused on biosimilars has contributed largely to growth of the South Korean market. The biopharmaceutical segment amounted to KRW2,600bn, a 16.6% increase. The recombinant products market surpassed KRW1tn for the first time in 2019, accounting for the biggest share in this market (44%), followed by vaccines (24%). Recombinant products, cellular therapy products and vaccines increased by 47.5%, 26.2% and 7.9%, respectively.    

The export of biopharmaceuticals stood at $1,283m (up 17.7%), of which 55.7% were exported to Europe. Specifically, the export to Asia and Latin America/the Caribbean reached $209.5m (up 35%) and $193.2m (up 49%), respectively. The majority of exported products were biosimilars, yielding $874.5m and taking up 68.2% of the total biopharmaceutical export market. In 2015, only one Korean company was exporting one type of biosimilar. This has expanded to five types from three companies: Celltrion’s Remsima, Truxima, and Herzuma; LG’s Chem’s Eucept; and Chong Kun Dang’s Nesbell.

Celltrion Healthcare has become the world’s leading biologics company entering 110 countries. Celltrion Healthcare signed a contract to supply Herzuma and Truxima to Brazil in late 2020, winning the order in open bidding of Brazil’s federal government. The company expects to expand its share of the Truxima market in Brazil after winning another contract in Sao Paulo, the largest of the nation's provincial bids. In terms of region, east, west, and central African countries have been left on their radar.

"We are building a leading position as a biosimilar developer by winning orders and expanding drug prescriptions in the Latin American and Asian markets. We will do our best to lead the global biopharmaceutical market by launching Remsima SC in more European countries and expanding the global sales of the three key brands," a Celltrion official said.

Several mega corporations, such as Lotte Holdings, Hyundai Department Store Group, KT and Orion have announced their intention to enter the biotechnology sector. Lotte Holdings is considering acquiring the equity stakes of Enzychem LifeSciences, a biopharmaceutical venture listed on the Kosdaq market, and establishing a separate joint venture, according to industry sources.

SK Bioscience’s initial public offering issued in March 2021 easily surpassed the record of SK Biopharmaceuticals by hitting subscription margins of KRW64tn. KT, one of Korea's top 3 telecom companies, has unveiled its intention to enter the business of diagnosing infectious diseases and building a biohealth data platform by signing a business agreement with Mico Biomed, a local in vitro diagnostic company, in October 2020.

Orion Holdings officially signed a joint venture agreement to advance into the bio-business with Shandong Lukang Pharmaceutical, a Chinese Government-owned pharmaceutical company, in October last year.

The LG Group is speeding up new drug development in areas such as diabetes, metabolism and immunotherapy by investing more than KRW200bn into R&D this year to foster the bio business. Hyundai Bioland obtained approval from the Ministry of Drug Safety in March for various compounds, such as fermented achyranthes japonica.

Samil Pharmaceutical of South Korea and Biosplice Therapeutics, Inc., a clinical-stage biotechnology company pioneering therapeutics, announced the execution of a licensing agreement in April 2021 that grants Samil the right to develop and exclusively commercialize lorecivivint (SM04690) for the treatment of knee osteoarthritis  in the Republic of Korea.

The Korea Institute for Technology Advancement revealed the country’s top 50 R&D investors in November 2020, and it included eight pharmaceutical and biotechnology companies. Specifically, they are Celltrion (17th), SK Biopharmaceuticals (27th), Hanmi Pharm (29th), Yuhan (34th), Daewoong Pharmaceutical (36th), GC Pharma (39th), Samsung Bioepis (43rd) and Chong Kun Dang (45th).

The Korea Biotechnology Industry Association held a seminar on Strengthening the Overseas Expansion Capabilities of Bio Companies on 12 May through the association’s YouTube channel ‘BioTV’ for the successful overseas market entry of domestic bio companies. At the seminar, managing director Soo-Jung Lee of G2GBio said: “I was able to gain insights into the FDA approval strategy and drug price policy. I was considering establishing a subsidiary in the US, and through this seminar, I felt the need to enter the US again.” The company plans to expand in the near future by exploring potential usages of their InnoLAMP technology in order to improve the efficacy of drugs for a variety of chronic diseases such as diabetes and cancers.

Also, CEO Ko Jong-Seong of Genosco, a clinical-stage biotechnology firm noted, “It is difficult to make a global new drug without entering the United States, which dominates global standards.”  Ultimately, he says the industry needs to create a wonderful sphere and recommends using mentor-mentee ecosystems such as KABIC (Korean American Bio Industry Council) and KASBP (Korean American Society in Biotech and Pharmaceuticals).

“Compared to advanced countries in pharmaceutical and biotechnology such as the US and European markets, we are far behind. But it does not mean that there is no growth potential,” said Chae Soo-chan, head of the KAIST Bio Healthcare Innovation Policy Center. He implied Korea needs to absorb European talent and benchmark the US. 

The strategy emphasized by the head of the center is to establish a cooperative network with global pharmaceutical and bio companies. He explained, "There are still many areas lacking in technology, manpower and capital for Korean companies to research and develop on their own." He also claimed: “We need to look forward to at least 10 years, not short-term results, researching and working with the world's top players.”

Investments For New Medicines

Government agencies related to new drug development have outlined a "National New Drug Development Research Project," which will invest KRW3.5tn over 10 years from 2021. The new project intends to resolve some issues by establishing an inter-agency support system that assists with basic research to commercialization.

The scope of the project is limited to new drugs and will cover all indications except infectious disease and dementia. The fund will also exclude gene therapy and immune cell therapy products, as they overlap with the government's regenerative medicine projects.

Specifically, the project will be divided into four parts: new drug base expansion research, new drug R&D ecosystem establishment, new drug clinical development, and new drug R&D commercialization support.

Each part will receive between KRW1bn and KRW7bn every two years, and if the preliminary feasibility study passes, a total of KRW3.5tn will be disbursed over the next decade. Under the project, the inter-agency team expects to achieve a 6% global market share, develop two new drugs ranked on the top-200 drug list, license out $10bn worth of technologies and export $16bn worth of drugs by 2030.

 

Written by Mr. Mainbayar and Dr. Maitsetseg