Having risen to the COVID-19 challenge and reaped financial gains, firms could invest in R&D and grow their share in the global biotechnology market.
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January 27, 2020 was a turning point for Seegene, a mid-sized diagnostics firm based in Seoul. CEO Chun Jong-Yoon and other biotech executives were called into an emergency meeting with the government, and charged with producing tests for a coronavirus spreading in Wuhan, China. Seegene’s test kit was approved, and soon after, the virus took hold in Daegu, South Korea. The company went into emergency mode. “We stopped all other activities and just threw everything we had at COVID-19,” says Chun.
It was only a matter of weeks before Seegene was exporting millions of test kits around the world. By the end of the year, its annual sales had grown from about $110 million to $1 billion, with $440 million in net profit. Other South Korean biotech firms saw similar gains. Now the biotech sector is a prominent feature of Korean stock indices, representing five of the 10 most valuable medium-sized companies in the KOSDAQ index, and two of the 10 biggest companies in the KOSPI.
In addition to diagnostics, Korean biotech firms went into COVID-19 vaccine production in a big way. SK Bioscience started producing AstraZeneca’s early this year. After signing a deal with Novavax in February, it raised over $1 billion in an IPO. Samsung Biologics struck a deal with Moderna in May. It launched a major expansion plan in 2020, and is now constructing its fourth and largest facility in Incheon. The company claims this will give it a third of the world’s contract manufacturing capacity for biosimilars, The Economist reports.
Even before enlisting its help to combat COVID-19, the South Korean government sought to promote the biotechnology industry through tax incentives, partnerships and R&D grants. The industry was growing at nearly 7% a year prior to the pandemic. But it was focused mainly on the “me too” end of the market, and has not yet developed its own blockbuster. This might need to change.
According to Lee Seong-Kyou of Korea Biotechnology Industry Organisation (KBIO), South Korean firms account for less than 2% of the global biotech market. Proponents see room to grow, and believe the pandemic has propelled the country’s biotech industry into a new phase of development. Lee says that companies have probably “learned more and accumulated more technology over the past year than in the 10 years before that”.
Biotech firms that have gained a big financial boost in the past year have the opportunity to invest in R&D. Seegene, for example, has aspired to develop diagnostic kits that can test for a wider array of diseases using less complex equipment. Doing so could broaden the firm’s customer base. “We have always had the plan but we never had the cash to work on it,” says Chun. “Now we do.”
A sustained upward trajectory for South Korean biotech is not guaranteed. Share prices in the sector have lost momentum of late. Of course, some decline from the peaks of last summer is to be expected, but companies will need to reverse the current trend – and this will be harder now that they are facing tougher competition, including giants like Switzerland’s Roche.