Searching for new, promising businesses to propel their continued growth in the future, South Korea’s leading conglomerates have arrived at a common destination -- biotechnology.

Korea’s top tech giants Samsung Group and LG Group, alongside telecom-focused SK Group, have all set sights on biotechnology as a promising business of the future and are swiftly moving to drive up their presence in the field with hefty investments.

Biotechnology, which has applications across multiple industries, refers to the use of genetic engineering and molecular biology to modify living cells to produce novel substances that perform new functions.

The three conglomerates have focused on a specific sub-field of biotechnology known as “red biotechnology,” which harnesses the science of genetics to develop and produce various forms of cell-based biologic drugs and substances.

Samsung 

At the forefront of the “red biotechnology” push is cash-loaded Samsung, which has so far invested some 3 trillion won ($2.7 billion) into nurturing its biopharmaceuticals business led by two young units -- Samsung BioLogics and Samsung Bioepis.

The former, founded in 2011, is a contract manufacturer of biologic drugs developed by global pharma companies while the latter, established in 2012, focuses on developing biosimilars -- near-replicas of complex biologic drugs that have lost patent protection.

By mass-producing drugs on behalf of global drug companies, Samsung BioLogics CEO Kim Tae-han said it is looking to “shift the industry’s current business paradigm from self-production to outsourcing, as Samsung Electronics did with semiconductors back in the 1970s.”

Samsung BioLogics currently operates two high-tech biologics manufacturing plants boasting a combined production capacity of 180,000 liters, third most in the world. The first plant is already operational, producing biologics for clients Roche and Bristol-Myers Squibb.

After its third plant is completed in 2018, Samsung Biologics said its net capacity would reach 360,000 liters, the largest in the global biopharma contract manufacturing business.

Samsung Bioepis, a joint venture between Samsung BioLogics and US-based Biogen, meanwhile has been tackling the biologics market from another entry point -- biosimilars, a field in which Korea’s Celltrion and Novartis-owned Sandoz have secured early starts.

By launching cheaper alternatives to the expensive blockbuster biologic drugs, Samsung is aiming to steal away a share of the high profits exclusively enjoyed by a handful of global pharma companies.

Samsung Bioepis has six products in development, two of which have begun sales in some countries in the region through Biogen. It is now awaiting regulatory approval to sell its Humira biosimilar in Europe and its Remicade biosimilar in the US.

Samsung BioLogics is currently preparing for an initial public offering on Korea’s main stock market Kospi, with plans to complete the IPO by year’s end. The funds generated via the IPO will be channeled into adding more plants and investing in its subsidiary Samsung Bioepis.


LG 

Meanwhile, LG Group has been stepping up its efforts to expand and diversify its biotechnology business, led by its chemicals arm LG Chem.

Last week, LG Chem announced that it would merge with its biopharma unit LG Life Sciences, calling the merger reflective of “LG Group’s aims to nurture and diversify its biotechnology business.”

The proposed merger foremost lends a much-needed financial boost to the group‘s biotechnology business, which despite its business capacity and competitiveness, has not grown to its full potential due to limited investments and support from within the group, LG Chem said.

For one, LG Life Sciences’ antibiotic drug Factive was the first-ever new treatment developed in Korea to score approval from the US Food and Drug Administration.

Its self-developed diabetes drugs Zemiglo and Zemimet together generated 24.8 billion won in sales last year. The firm, in partnership with France-based pharma giant Sanofi and Mexico’s Stendhal, is in the process of exporting the drug to 104 countries.

The merger also allows LG Chem to set its foot in the “red biotechnology” sector. The firm had already ventured into “green biotechnology,” biotech applied to agriculture and food, by acquiring agrochemical technology firm Farm Hannong in April this year.

Looking ahead, LG Chem plans to inject around 300 billion won to 500 billion won every year into biotech research and development to spur the segment’s expansion. With such efforts, the firm expects its biotech business to generate 5 trillion won by 2025, it said. 


SK 

At the same time, SK Group has set biopharmaceuticals as one of five key businesses to lead its future growth. At the heart of the push are its new drug developing unit SK Biopharmaceuticals and SK Biotek, a contract manufacturer of active pharmaceutical ingredients used to produce chemical drugs.

The two units are currently controlled by SK Corp., which stands at the apex of the group’s governance structure and steers the direction of its core businesses.

On the biopharma front, SK is pinning high hopes on its self-developed epilepsy treatment YKP3089, which scored rare permission from the US FDA to skip the efficacy testing stage in its forthcoming phase III clinical trials in the US, cutting down on related costs and the testing period.

The company said it will submit its drug to the FDA for sales approval next year, with aims to commercialize the drug in the US in 2018. It plans to pursue an IPO after the drug launches, a company spokesperson said.

SK Biotek, which manufactures active pharmaceutical ingredients used to produce drugs made by global pharma companies including Novartis, Pfizer and Astrazeneca, is currently building a new plant in Sejong City. Upon its completion in 2020, the plant will drive up the firm’s net production capacity from 160,000 liters to 640,000 liters.

Looking ahead, SK Holdings is looking to expand SK Biotek’s business to go beyond manufacturing active pharmaceutical ingredients to producing finished drugs, through strategic mergers and acquisitions, a company spokesperson said.

By Sohn Ji-young (jys@heraldcorp.com)