Samsung Biologics sweats over strike threat

Samsung Biologics’ growth outlook faces uncertainty as a first-ever strike for the firm raises risks to production and client trust.

Samsung Biologics’ labor union has asked for a 14 percent average wage increase, a 30 million won ($20,400) cash payout per worker, and a bonus equivalent to 20 percent of operating profit. The company has reportedly offered a 6.2 percent wage increase.

While the two sides have yet to find solid middle ground, the Incheon District Court on Thursday ruled that a strike could proceed, though partially, after Samsung Biologics had asked for a stoppage of the walkout altogether.

The court restricted the labor union from suspending three processes that are directly related to maintaining the quality of drug products: ultrafiltration and diafiltration, drug substance filling, and buffer preparation and supply. However, it ruled that the workers in cultivation and purification processes could participate in a strike.

According to the union, about 400 of the roughly 4,000 union members work in the three processes barred from the strike. It held its first rally in front of the Samsung Biologics campus in Songdo, Incheon, on the day before the court ruling with approximately 2,200 participants. The union claims about 75 percent of all workers at the company are members.

“Even now, we have not abandoned the chance for dialogue,” said Park Jae-sung, head of the Samsung Biologics’ labor union. “But if management continues to refuse meaningful talks, we will show our determination through the planned strike action.”

Samsung Biologics said it had immediately filed an appeal to stop the parts of the strike allowed by the court, noting that the unique nature of biopharmaceutical production and quality risks should be taken into account. It said that a halt in operations could result in not only delayed production, but also batches being thrown away, the process becoming infected, and problems with quality certification.

The dispute at the leading contract development and manufacturing organization comes as the biopharmaceutical producer aims to continue its growth momentum.

In the first quarter of this year, the firm logged 1.26 trillion won in sales and 580.8 billion won in operating profit, up 26 percent and 35 percent from the same period last year, respectively. The company projects its annual growth guidance to be between 15 percent and 20 percent.

“Although (Samsung Biologics’) first-quarter earnings look excellent, it is the result of orders secured in the past,” said an official working in the biopharmaceuticals industry.

“If the union carries out the strike and dampens the company’s production schedule in May, it will not only trigger penalties for violating contracts, but also deal a critical blow to the credibility of (Samsung Biologics) among global clients.”

Noting Samsung Biologics’ recent acquisition of a biopharmaceuticals manufacturing plant in Rockville, Maryland, from GSK, the official said that if a loss in credibility leads to a failure to win contracts, it could harm the company’s efforts to diversify supply chains and production worldwide, while its competitors will look to woo Samsung Biologics’ clients.

“The strike risk poses a great opportunity for (Samsung Biologics’) competitors in the midst of geopolitical uncertainties led by the United States’ stronger protectionism,” said the official. “If Samsung Biologics, the leader of Korea’s bio industry, gets shaken up, the global level of trust in the country’s bio ecosystem could be derailed.”