HONG KONG – South Korea is the third biggest pharmaceutical market in Asia following China and Japan. Even though it accounts for 1.8% of the global pharmaceutical market, the country aims to launch at least two blockbuster drugs by 2030. Backed by massive support from the government, Korea's biopharmaceutical industry is focusing on R&D, production and out-licensing to make high-value new drugs.
President Moon Jae-in announced earlier this year that the government had chosen bio-health care as one of the three strategic sectors, along with non-memory chips and next-generation vehicles. He said the government would help Korea's pharmaceutical and medical device industry to account for 6% of the global market and increase export sales up to $50 billion by 2030. According to the government, it would start supporting R&D for new drugs with an investment of $2 billion over 10 years from 2021.
As of now, 14 Korean drugs have received FDA approval since 2003. The drugs include Celltrion Inc.'s biosimilar, Remsima (infliximab, Janssen Pharmaceutical KK); SK Chemicals Co. Ltd.'s antihemophilic factor recombinant, Afstyla; Daewoong Pharmaceutical Co. Ltd.'s antibiotic, generic meropenem; SK Biopharmaceuticals Co. Ltd.'s excessive sleepiness treatment, Sunosi (solriamfetol); and Samsung Bioepis Co. Ltd.'s biosimilar, Hadlima (adalimumab, Abbvie Inc.), which was given FDA approval on July 23.
Last year, out-licensing deals to foreign companies reached $4.5 billion, and export sales were $14.4 billion, with a 19% increase from 2017.
Industry experts noted that investment in bioventures has risen over the past 10 years as awareness of the industry increases. James Jungkue Lee, CEO of Bridge Biotherapeutics Inc. in Korea, said he recalls that funding for series A rounds normally amounted to SKW2 billion to SKW3 billion (US$1.7 million to US$2.6 million) 10 years ago. Now it has increased up to about SKW10 billion to SKW20 billion, especially for the companies that have potential to enter overseas markets. When he started an NRDO (no research; development only) venture in 2008, there was little recognition of the practice in Korea.
"Investors with a good understanding of the bio sector have increased over the past 10 years. I believe there is a high possibility of developing blockbuster new drugs in Korea because of high-quality R&D, concentration on first-class drugs, and the rapid increase in funding," Lee told BioWorld Asia. "There will be a critical tipping point in two to three years for Korean biopharmaceutical companies, and investment will impact their success."
According to the Korean Venture Capital Association, new investment in biotechnology in 2010 was SKW84 billion, accounting for 7.7% of the total venture capital investment of SKW1091 billion. In 2018, the investment in bio-health care increased to SKW841.7 billion (US$714 million) out of a total SKW3424.9 billion (US$3 billion), accounting for 25%.
Also, outsourcing has been facilitated through partnerships with biotech firms in China. That helps Korean companies learn what big global drugmakers need, and it can lead to active interaction with, and out-licensing to those big companies.
"As there are many global pharmaceutical giants in China, numerous Chinese biotechs know in detail what the global companies want for licensing-in," Lee said. "This encourages Korean firms to prepare better for clinical trials and licensing-out. Besides, there are many CROs in China providing various kinds of clinical studies. Reasonable prices and a similar time zone also accelerate the R&D of Korean biopharmaceutical companies."
In addition, Korea's top five pharmaceutical companies have high R&D spending as a percentage of sales. The top five firms, including Celltrion, Hanmi Pharmaceutical Co. Ltd., Chong Kun Dang Pharmaceutical Corp., Daewoong and Green Cross Corp., spent an average of 16.7% of their sales revenue on R&D in 2018. It was higher than the 15.7% of the five biggest pharmaceutical companies worldwide, including Swiss firms Roche Holding AG and Novartis AG, Pfizer Inc. and Johnson & Johnson Inc. in the U.S., and Bayer AG in Germany. Of course, there is the limitation of the average annual sales of the Korean companies being $92.9 million, while that of the global companies is $55 billion.
While the pharmaceutical industry has rapidly developed in Korea, some experts have pointed out that the government's support is not very effective. Jaecheon Yeo, executive director at Korea Drug Research Association, raised questions about the Korean government's long-term plan and understanding of the sector.
"The government has not got an established framework because they lack both the whole picture and knowledge of the industry. There are many sectors related to new drugs such as pharmacology, biotechnology, health care, and AI, and the sectors must converge to develop innovative drugs. However, the ministries responsible for the sectors function separately," Yeo told BioWorld Asia.
Also, the overly frequent transfer of government employees is noted as a problem for business growth in Korea. While it is intended prevent potentially corrupt links between businesses and the public sector, it also decreases effective communication with professional staff in the government. A similar problem plagues the biopharmaceutical industry as well.
"Because of the frequent rotation of employees, there are not many experienced staff in the bio-related departments," Yeo said. "We need professional staff to accelerate strategic support to selected corporations and pipelines. Huge investment in too many sectors separately does not guarantee the success of new drug development," he added.
Bridge's Lee also said the government's "education effect" is much stronger than the investment effect, which means the public policies can increase venture capital's involvement in the market.
"Once the government announces that the bio sector is important, funding to venture capital companies increases and this creates a viable funding environment in the biopharmaceutical ecosystem," he said. "That effect is bigger and faster than the government's financial grant to R&D. If the market works more effectively, that is the best support for domestic biopharmaceutical firms."