biopharmaceutical march 2015

BIOPHARMACEUTICAL

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INVESTMENTOPPORTUNITIESIN KOREA

BIOPHARMACEUTICAL

INVESTMENTOPPORTUNITIESIN KOREA

KOREA, Where Success Knows No Limits

Contents

04 Industry overview

The pharmaceutical industry

Biotech industry

10 Competitive standing and outlook

Global market outlook

Future development of pharmaceutical and biotech industries

18 Government policies and related regulations

Government policies by industry

22 Cost

24 Success cases

28 Related companies and associations

0501 INDUSTRY OVERVIEW

The pharma-ceutical industryINDUSTRY

OVERVIEW

Korea’s pharmaceutical market stood at KRW 19.291 trillion (USD 17.3 billion)* in 2013, up 0.3% YoY, and posted a five-year CAGR of 2.3% from 2008 to 2013. Given that the market recorded a higher growth rate than the global market until 2010, its growth pace has slowed. However, Korea’s pharmaceutical market continues on a steady growth path despite the global economic crisis. •�In particular, it is notable that Korea’s pharmaceutical production increased by 4.1% YoY,

to KRW 16.2 trillion, in 2013, departing from a stagnant growth trend since 2010. Korea’s pharmaceutical exports posted a 2008 - 2013 CAGR of 13% driven by Korean pharmaceutical companies with a growing presence in the global market.

•�In contrast, Korea’s pharmaceutical imports dropped 10% YoY, to KRW 5.2 trillion in 2013, contributing to a sharp decline in trade deficits.

In a nut shell, Korea’s pharmaceutical industry records modest growth across the board. As Korean pharmaceutical companies have steadily sharpened their competitiveness, the Korean industry has increased exports and production volumes and fast reduced trade deficits. Korea’s pharmaceutical industry employed 78,259 individuals in 2013, up 5.1% YoY, or 3,782 individuals. This marks an upturn in pharmaceutical employment, breaking from a downward trend since 2010, and indicates that business activities have recently gained momentum in Korea’s pharmaceutical industry.

Recent developments in Korea’s pharmaceutical industry (Unit: KRW million)

2008 2009 2010 2011 2012 2013 % YoY A 5-year CAGR

Production 13,893,810 14,788,387 15,569,588 15,440,251 15,560,663 16,191,845 4.1% 3.1%

Export 1,255,891 1,772,242 1,770,059 1,943,493 2,309,534 2,318,522 0.4% 13.0%

Import 4,319,756 4,953,881 5,108,911 5,447,053 5,728,874 5,155,829 -10.0% 3.6%

Trade balance -3,063,865 -3,181,639 -3,338,852 -3,503,560 -3,419,340 -2,837,308 -17.0% -1.5%

Market size 16,957,675 17,970,026 18,908,439 18,943,812 18,980,003 19,029,152 0.3% 2.3%

* Source: Korea Health Industry Development Institute (2014), Analysis of Korea’s Pharmaceutical Industry (2013)

* Currency conversion based on March 10, 2015 rate.

0706 BIOPHARMACEUTICAL 01 INDUSTRY OVERVIEW

Pharmaceutical researchers numbered 5,437, accounting for 6.9% of the total workforce in Korea’s pharmaceutical industry. As much as 70.2% of researchers have master’s or doctoral degrees and the research workforce structure was based mostly on higher-skilled talent.

Number of people employed in Korea’s pharmaceutical industry

82,000

80,000

78,000

76,000

74,000

72,000

70,0002008

75,406

2009

81,204

2010

77,314

2011

74,477

2012

78,259


Research workforce breakdown by educational background (Unit: People)

Others107

B.S. degree holders

1,509

Ph.D. holders637

M.S. degree holders

3,184


The biotech industry uses biotechnologies based on DNA, protein and cells to produce various products, such as biopharmaceuticals, and to create value-added services. The industry includes biopharmaceuticals, bioengineered food, biochemicals and bio-environment, bioelectronics, bio-process and device, bio-energy resources, others such as biological assay (assessment) and bioinformatics services.

Korea’s biotech industry stood at KRW 7.52 trillion in 2013, up 5.3% YoY, in terms of domestic sales and exports, and posted a high CAGR of 8.9% from 2009 to 2013.

In terms of production value, the bioengineered food segment is the largest contributor, with annual production of KRW 3.21 trillion in 2013, accounting for 40% of the biotech industry. The second-largest contributor is biopharmaceuticals, with annual production of KRW 2.78 trillion. Biochemicals and other biotech segments are small in terms of absolute production value but expand at a fast pace, raising expectations that they will represent an increasing share of the biotech industry’s production.

Korean biotech industry production (domestic sales + exports) (Unit: KRW million)

Year Production Total Biopharmaceuticals Biochemicals Bioengineered food Other

2009Domestic sales 2,907,448 1,564,251 260,356 283,954 601,718

Export 2,728,749 1,209,223 69,907 722,474 371,403

2010Domestic sales 3,346,287 1,521,210 230,073 989,797 605,207

Export 2,441,539 852,028 60,352 1,356,334 172,825

2011Domestic sales 3,646,896 1,506,329 355,684 1,065,834 719,049

Export 2,749,356 954,412 74,783 1,531,965 188,195

2012Domestic sales 4,068,644 1,577,572 408,226 1,261,325 821,521

Export 3,060,585 1,139,980 97,173 1,610,631 212,802

2013 Domestic sales 4,357,396 1,636,942 451,091 1,338,933 930,430

Export 3,166,435 1,138,462 111,110 1,682,131 234,731

% YoYDomestic sales 7.10% 3.76% 10.50% 6.15% 13.26%

Export 3.46% -0.13% 14.34% 4.44% 10.30%

CAGR (2009 - 2013)

Domestic sales 10.64% 1.14% 14.73% 47.36% 11.51%

Export 3.79% -1.50% 12.28% 23.53% -10.84%

* Source: Korea Statistical Information Service (www.kosis.kr)

The domestic biotech market stood at KRW 5.87 trillion in 2013, up 6.1% YoY, posting a CAGR of 8.5% from 2009 to 2013. •�By segment, the biochemicals segment posted the fastest growth, at 8.5% YoY. Of other

biotech segments, the bioelectronics and bio-environment segments recorded a high growth rate of 53.8% YoY and 9.6% YoY, respectively, although their domestic sales were relatively low, at KRW 37.3 billion and KRW 30.3 billion.

Biotech industry

0908 BIOPHARMACEUTICAL 01 INDUSTRY OVERVIEW

In terms of domestic sales, biopharmaceuticals are the largest segment, accounting for 50% of the biotech market. However, biopharmaceuticals record a slower growth rate than other segments, while bioengineered food and biochemicals marked higher growth rates. The biotech market is expected to grow beyond biopharmaceuticals to include diverse segments such as biochemical, bioengineered food and other biotech segments. Size of Korea’s biotech market (domestic sales + import)

(Unit: KRW million)

2009 2010 2011 2012 2013 % YoY CGAR(2009 - 2013)

Total 4,236,695 4,751,946 5,208,078 5,643,437 5,866,853 3.96% 8.48%

Biopharmaceuticals 2,536,348 2,620,986 2,736,657 2,819,494 2,961,578 5.04% 3.95%

Biochemicals 372,034 324,505 435,402 476,952 515,177 8.01% 8.48%

Bioengineered food 317,692 999,180 1,098,907 1,320,973 1,385,571 4.89% 44.51%

Other 813,452 807,273 937,112 1,026,018 1,004,527 -2.09% 5.42%

* Source: Korea Statistical Information Service (www.kosis.kr)

The number of companies in Korea’s biotech industry increased by 13, from 958 in 2011 to 971 in 2012, marking an upward trend. •�By segment, the number of biotech companies increased in the biopharmaceuticals,

biochemicals and other segments but slightly declined in the bioengineered food segment.

In 2013, the number of people employed by biotech companies stood at 38,197, marking an increase of 627 individuals from 2012. In other words, the average number of employees per biotech firm stood at 39.3.

The number of researchers amounted to 11,605 individuals, or 30.4% of the employees in Korea’s biotech industry. About 60% of researchers have master’s or doctoral degrees. The workforce is highly skilled in the biotech industry, as seen in the pharmaceutical industry.

Changes in number of biotech companies

1,000

900

800

700

600

500

400

300

200

100

0Total

913

276

188 202247

971

317

203 199252

Biopharmaceuticals Biochemicals Bioengineered food Other

958

305

204 199250

2011 2012 2013

* Source: Biotech Industry Study (2014)

Workforce structure of Korea’s biotech industry

SegmentPeople Doctoral degree Master’s degree Bachelor’s degree Other

Share (%) People People People People

Biopharmaceuticals18,469 1,030 3,519 6,877 7,043

100% 6% 19% 37% 38%

Biochemicals4,936 362 1,355 1,937 1,282

100% 7% 27% 39% 26%

Bioengineered food8,070 345 1,298 3,527 2,900

100% 4% 16% 44% 36%

Other6,722 359 1,239 3,079 2,045

100% 5.34% 18.43% 45.80% 30.42%

Total38,197 2,096 7,411 15,420 1,285

100% 5.49% 19.40% 40.37% 3.36%


1110 BIOPHARMACEUTICAL 02 COMPETITIVE STANDING AND OUTLOOK

The global pharmaceutical and biotech markets have steadily expanded thanks to an aging population and growing awareness of healthy lifestyles worldwide. •�The global pharmaceutical industry expanded 2.4% YoY, to USD 959 billion in 2012, and posted

a high CAGR of 5.3% from 2007 to 2012. The growth rates are relatively low compared to the pre-crisis growth rate of about 8%. However, the global pharmaceutical industry has continued on a steady growth path despite a global economic slowdown, as national healthcare spending and demand for healthcare have increased amid aging populations in Asia. •�The global biotech market amounted to USD 1.18 trillion in 2012. This global industry is one of the

most promising and expected to reach USD 1.57 trillion in 2015, with a 2010 - 2015 CAGR of 9.7%.

Size and growth outlook of the global biotech market

Year Value (USD billion)Growth rate (%)

% YoY CAGR

2010 987.2 9.1% 9.7%

2011 1,079.0 9.3% 9.7%

2012 1,181.5 9.5% 9.7%

2013 1,298.4 9.9% 9.7%

2014 1,434.7 10.5% 9.7%

2015 1,572.4 9.6% 9.7%

* Source: IMS Health (2012)

The future development of the pharmaceutical and biotech industries is expected to be led by technology convergence-driven new industries, such as BIT. •�The “ubiquitous” healthcare industry has emerged thanks to IT-related innovative technologies,

creating new medical device markets such as portable diagnostic devices for remote health monitoring, remote consultation and remote treatment. The personalized healthcare market is estimated to reach USD 63.9 billion in 2015, from USD 33.7 billion in 2010.

Thanks to dramatic technological developments in DNA analysis, key product categories will include chips and diagnosis kits based on DNA sequencing and protein analysis. •�The preventive medicine segment, such as the introduction of biosensors and biomarkers, is

expected to develop thanks to growing demand for products that enable fast diagnosis and early detection, for disease prevention. The development of personalized target therapy and companion biomarkers (companion diagnostics) are expected to emerge as a new business model for the pharmaceutical industry.

COMPETITIVE STANDING

AND OUTLOOK

Global market outlook

Future development of pharma-ceutical and biotech industries


The industry shift from one-size-fits-all products to personalized treatment products should be accelerated. •�Medicinal treatment and management will take into consideration personal genetic

information and physical traits, departing from the practice of applying the same treatment to all patients. In this regard, development of the single-nucleotide mutation search, precision diagnosis and monitoring segments will enable drug response prediction and help establish a system to fend off trial and error and side effects in advance.

Diagnosis of Korea’s competitivenessKorea accounts for 1.8% of the global pharmaceutical market and 1.7% of the biotech market in terms of sales revenue. Korea’s biotech and pharmaceutical markets are small in absolute terms but have overtaken the global market in terms of growth rates. For example, Korea’s bioengineered food segment has posted a five-year CAGR of more than 50%, and the domestic sales and exports of biotech products, such as bio-chemicals and biopharmaceuticals, recorded a CAGR of 20 - 30%. Given the brisk pace of market growth and active business, Korea is expected to enhance its competitiveness in the global market. •�Korea’s biotech industry is expected to maintain strong growth momentum and record KRW

20 trillion in production and KRW 13 trillion in domestic sales in 2017.•�The fast growth of the biotech industry is attributed to socio-demographic and demand and

supply-side factors, among others. On the socio-demographic side, the biopharmaceuticals and bio diagnostic device segments have been expanding quickly thanks to growing demand for health checkups, disease prevention and geriatric treatment amid an aging population and longer life expectancy.

•�On the demand side, the biopharmaceuticals, bio-cosmetics and bioengineered food segments have been rapidly growing due to an increase in disposable income and standard of living and a greater desire for a healthy, younger life.

•�On the supply side, as national spending on social welfare and public health has increased due to an aging population, it is increasingly important to meet social demand in a more cost-effective way. As such, the biotech industry has been a target of active national investments and efforts to develop technology. Developing further on scientific achievements, the biotech industry has been leading national and industrial efforts to generate new growth momentum for industrial development.

Competitiveness of the pharmaceutical industryKorean pharmaceutical companies have mostly developed generic drugs. However, the development of new drugs is more important than ever to meet changes in the pharmaceutical environment. As such, industry players, especially major pharmaceutical companies, have strengthened their commitment to investing in new drug development. •�The need to develop new drugs is gaining momentum due to government policies and

changes in the domestic and foreign pharmaceutical market. Therefore, the commitment and investment of major pharmaceutical companies in new drug development are becoming more important. •�Korean pharmaceutical companies have delivered achievements in biosimiliar and

incrementally modified drugs (IMD), capitalizing on their knowhow and research expertise, and made significant efforts to develop first-in-class drugs. As a result, Korean companies have exported technologies to multinational companies and conducted global clinical trials, earning recognition for their technological prowess. For example, Hanwha Chemical exported its biosimilar version of Pfizer’s blockbuster rheumatoid arthritis drug Enbrel, and Hanmi Pharmaceutical has licensed out its Poziotinib, a targeted anti-cancer treatment.

Korean pharmaceutical companies made research and development (R&D) investments worth KRW 967.2 billion in 2012. The R&D investment posted a high CAGR of 13.7% over the past five years, reflecting a growing commitment to R&D. •�In addition, the average concentration ratio of the pharmaceutical industry increased from

6.24 in 2008 to 7.67 in 2012 in the R&D segment. Such an increase in R&D activities, which are essential to the development of the pharmaceutical industry, raises expectations that Korea will be able to enhance its competitiveness.

Korean pharmaceutical companies have actively sought partnerships with global pharmaceutical companies. For example, Hanwha Chemical concluded an agreement with Merck to produce and globally market the biosimilar of arthritis blockbuster Enbrel. Samsung BioLogics established a biosimilar joint venture with the U.S.-based Biogen Idec, enhancing comprehensive partnerships in areas such as R&D, manufacturing and marketing. As such, cooperation with multinational pharmaceuticals is expected to generate strong synergy effects.


The therapeutic antibodies segment is among the most promising in the pharmaceutical industry. Korea’s therapeutic antibodies market increased from KRW 30 billion in 2006 to KRW 83 billion in 2010. If the domestic development of new therapeutic antibodies speeds up, Korea’s therapeutic antibodies segment will reach KRW 300 billion in 2015. •�ISU ABXIS recorded KRW 3.3 billion in sales with Clotinab, Korea’s first antibody-based

treatment. Celltrion has actively conducted R&D in therapeutic antibodies, winning approvals for its infliximab biosimilar Remsima and completing the phase III clinical trial of the biosimilar Herceptine (breast cancer treatment).

Outlook for the Korean therapeutic antibodies market

(Unit: KRW 100 million)

Market size3,000

2,500

2,000

1,500

1,000

500

0

300

830

3,000

* Source: Ministry of Trade, Industry & Energy, Five-year Plan for Technology Innovation (2013)

Competitiveness of the biotech industryGiven that Korea is one of the countries with the most rapidly aging population, the outlook for demand in the biotech industry is positive. In addition, the biotech industry is expected to continue on a growth path driven by government support and the commitment of large corporations to new business development.

Accordingly, Korean companies increase their R&D investments to secure their competitiveness in the biotech industry. Korea’s biotech R&D investments reached KRW 1.165 trillion in 2013, continuing on a growth path.•�Korea ranks fifth among OECD member countries, following the United States, France, Japan

and Germany in terms of the private sector’s investments in the biotech segment. In addition, the biotech segment accounts for 20% of the Korean government’s investments, the second largest among OECD member countries, following Germany. •�Statistics show that the Korean government has played a key role in establishing the scientific

foundation for biotech research. The public sector’s efforts have facilitated the private sector’s investments and put the biotech industry on the path to growth and development.

Korea’s new drug development

Company New drug Development stage

Celltrion Remsima (anti-rheumatic drugs ) World’s first biosimilar antibody (approved in July 2012 in Korea, June 2013 in EU)

Celltrion Biosimilar Herceptin (breast cancer treatment) Phase III clinical trial (completed in Asia in November 2010)

Dong-A ST Tedizolid phosphate (super bacteria antibiotics) FDA approval (April 2014)

LG Life Sciences Zemiglo (anti-diabetic drug) Phase III clinical trials and sales right agreement (June 2012)

Chong Kun Dang Pharmaceutical CKD-732 (anti-obesity drug) Phase III clinical trials underway (October 2014)

Pharmicell Hearticellgram (myocardial infarction treatment) World’s first stem cell treatment (July 2011)

Medipost CARTISTEM (knee cartilage regeneration treatment) KFDA approval (January 2012)

Antrogen Cupistem injection (Crohn's disease treatment) KFDA approval (January 2012)

Core Stem HYNR-CS injection (ALS treatment) KFDA approval (July 2014)

R&D investments by Korean pharmaceutical companies

(Unit: KRW million)

1,000,000

800,000

600,000

400,000

200,000

02008

578,268

2009

648,362

2010

684,207

2011

813,755

2012

967,239 R&D investments

* Source: Korea Health Industry Statistics System (KHISS)

R&D concentration among Korean pharmaceutical companies (Unit: %)

9,00

8,00

7,00

6,00

5,00

4,00

3,00

2,00

1,00

0,002008

6.24

2009

6.50

2010

6.44

2011

7.41

2012

7.67

R&D concentration rate

* Source: Korea Health Industry Statistics System (KHISS)

1716 BIOPHARMACEUTICAL

Korea’s biotech R&D investments (Unit: KRW 100 million)

R&D investments10,000

8,000

6,000

4,000

2,000

02008

7,293

2010

7,686

2009

8,761

2012

9,988

2011

9,302


By segment, major market players in the biotech industry are as follows.

Segment Major companies

Biopharmaceuticals Celltrion, Isu Abxis, Meditox, RNL Bio, JW-Shinyak, etc.

Biochemicals CJ CheilJedang, Daesang, SK, LG Chem, GS Caltex, Cheil Industries, etc.

Bioengineered food Daesang , CJ CheilJedang, Dongbu Farm Hannong, MOGHU Research Center, etc.

Bioelectronics and analytic device Humasis, Bio Focus, Nano Entek, K-MAC, Seegene, Bioneer

Other AmorePacific, LG Household & HealthCare, Hankook Cosmetics, Pharmicell , Medipost, etc.

The in vitro diagnostic segment is expected to be among the fast-growing markets of the biotech industry. The segment has strong growth potential thanks to new technology development and a rapidly aging population. The market is estimated to reach KRW 420 billion in 2014.

Korea’s in vitro diagnostic medical device (IVDs) market (KRW 100 million)

2009 2010 2011 2012 2013 2014

Bioelectronics 369 489 553 624 724 840

Bioinformatics & biological assay 1,406 1,355 1,531 1,730 1,955 2,209

Bio diagnostics(20% of the diagnostic test market) 600 690 780 881 996 1,125

Total 2,375 2,534 2,864 3,235 3,675 4,174

* Source: Ministry of Trade, Industry & Energy, Five-year Plan for Technology Innovation (2013)

•�In particular, the bio-convergence segment has strong growth potential thanks to Korea’s

technological capabilities in the semiconductor and IT segments, and Korean electronics companies are showing growing interest in the bio-convergence segment. - This segment includes biochips, biosensors, u-healthcare and diagnostic devices. In particular, the biochip and biosensor markets have demonstrated significant growth potential and delivered strong performance.

•�In this regard, the development of bio chips has been led by public research institutes and universities such as the Korea Institute of Science & Technology (KIST), Electronics and Telecommunications Research Institute (ETRI), Korea Electronics Technology Institute (KETI), Korea Advanced Institute of Science and Technology (KAIST), Pohang University of Science and Technology (POSTECH), Seoul National University (SNU) and private research institutes and large corporations such as Samsung Advanced Institute of Technology (SAIT), LG Electronics Tech Center and LG Chem. Recently, an increasing number of biotech startups have been entering the market. •�Of Korea’s IVD market, companies such as HBI, SD, Humasis, Bio Focus, Nano EnTek and K-MAC

are new entrants in the immune segment, and companies such as Seegene and Bioneer have DNA diagnosis products and globally competitive technologies in the molecular diagnosis segment. •�In addition, as the focus of healthcare has shifted from treatment to disease prevention due to

an aging population, the personalized healthcare market is expected to fast expand, enabling routine and customized health care through early diagnosis, a ubiquitous healthcare system and personal health records.

02 COMPETITIVE STANDING AND OUTLOOK


Korea’s pharmaceutical industryThe Korean government announced in July of 2013 the Five-year Comprehensive Plan for the Support and Development of the Pharmaceutical Industry in an effort to promote the pharmaceutical industry. In a fast-changing pharmaceutical industry, the Korean government has launched a five-year initiative to encourage Korean pharmaceutical companies to go global through the development of new drugs and products, departing from growth strategies focused on generic drugs and the domestic market. •�The five-year plan envisions that Korea will join the top 10 in the global pharmaceutical

industry by recording pharmaceutical exports worth KRW 11 trillion and creating four world-class new drugs by 2017 through five core tasks, 13 key strategies and 41 action plans.

In September of 2013, the Ministry of Health and Welfare launched a fund worth KRW 100 billion specializing in the pharmaceutical industry to promote high-risk investments by pharmaceutical companies. The specialized fund is financed by the Ministry of Health and Welfare, Korea Finance Corporation, Korea Development Bank and Korea Securities Finance Corporation. Its objective is to support Korean pharmaceutical companies in their technology partnerships and overseas expansion and to invest in small- to mid-size tech startups with weak financing capacity. The first global pharmaceutical fund started investments in promising Korean pharmaceutical companies such as Genexine, Crystal Genomics, DiNonA and CorenTec in 2014, providing growth momentum for Korea’s pharmaceutical industry.

The Korean government has pursued the PB 300 Project, which provides Korean companies with consulting and advisory services, by recruiting leading experts from overseas as short-term consultants. The objective of the PB 300 Project is to ensure that the government can help Korean companies tackle challenges and enhance their capability by providing consulting services with a talent pool of overseas experts in new drug R&D, planning, clinical trials, manufacturing, approval and technology marketing. With the help of the PB 300 Project, Korean companies that have technologies but lack clinical trial experience overseas will be able to expand to global markets and emerge as globally competitive players by acquiring advanced technologies and know-how, enhancing their competence in developing and marketing their technologies and products.

GOVERNMENT POLICIES AND RELATED REGULATIONS

Government policies by industry

03 GOVERNMENT POLICIES AND RELATED REGULATIONS


To increase awareness of Korea’s pharmaceutical products in the global market, the Korean government has assisted Korean companies in their expansion to new emerging markets, enhancing government-to-government collaboration and sending private-public market development delegations. During Bio Korea 2013 (September 11-13, 2013), Pharm Fair was held on the sidelines to bring together related foreign authorities in the drug approval segment and promote marketing cooperation with overseas drug distribution companies. Pharm Fair created an opportunity for Korean pharmaceutical companies to generate businesses worth KRW 170 billion, including the USD 100 million export deal between BC World Pharm and KOA SHOJI (Japan). Such policy efforts should help Korean companies look beyond the domestic market, reach out to the rest of the world and become globally competitive players.

The Korean government introduced a pilot procedure combining drug approval and price evaluation from October to December of 2013, to shorten the time-to-market for new drugs and the evaluation period of drug list prices and thus establish an efficient infrastructure for new drug development.

The biotech industryThe government has designated the healthcare industry as one of the pillars of and core tasks for Korea’s transition toward a “creative economy.” It has made nation-wide efforts to increase investments, raise private funds, develop a talent pool and enhance infrastructure efficiency. •�For this goal, the government has set out key initiatives to develop Korea as one of the top

ten players in the global pharmaceutical industry and enhance strategic healthcare R&D by increasing R&D competence in personalized healthcare, stem cell & rehabilitation medicine, new drugs & medical devices and conversion between Western and traditional medicines.

In addition, according to the 2nd Basic Development Plan for Bioengineering (2012), the Korean government will increase biotech investments to KRW 9.7 trillion through 2016 and is developing a research talent pool of 73,222 master’s or doctoral degree holders.

Government R&D investments in the biotech segment (Unit: KRW 100 million)

2009 2010 2011 CAGR

Government R&D 123,437 137,014 148,902 9.8%

Biotech R&D 20,112 23,252 25,808 13.3%

Biotech R&D as % of government R&D 16.3% 17.0% 17.3% -

The Korean government announced in July of 2013 the “Government-wide Mid- to Long-term Action Plans to Promote R&D for National Healthcare,” integrating policy plans established by ministries responsible for the biotech and healthcare industries. Moreover, the Korean government seeks to increase public investments and ease investment restrictions in an effort to promote private investments. As part of a private-public initiative to promote the biochemicals sector, a total of KRW 250 billion will be invested for a five-year period from 2013. The Korean government is also making efforts to establish a full-cycle R&D system through collaboration with related companies and to overhaul the system, which requires that public organizations prioritize the purchase of certain products upon procurement. As such, various mid- to long-term initiatives are underway to ensure Korea will be among the top five in the global biochemicals market by 2020. •�The Ministry of Trade, Industry & Energy has launched a five-year biochemicals technology

development project worth KRW 215.5 billion in 2014 with the goal of accelerating the development of technology and production infrastructure.

03 GOVERNMENT POLICIES AND RELATED REGULATIONS


The average annual salary at Korean pharmaceutical companies is USD 27,681, with the top 25% at USD 42,987 and the bottom 25% at USD 15,903. The starting salary at major companies tends to be higher at multinational companies than Korean companies and is distributed as follows.

Starting salary at major pharmaceutical companies (Unit: USD)

Company Starting salary (USD)

GlaxoSmithKline 33,393

Korea Polyol 32,491

AstraZeneca Korea 31,769

Pfizer Korea 31,588

ISU Chemical 30,505

Dong-A Pharm 29,874

Yuhan Corporation 27,076

Dongwoo Fine-Chem 24,368

Average annual income is distributed as follows by academic background.

Average annual income by academic background (Unit: USD)

Average salary40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0Associate degree holder

22,572

Master’s degree holders

32,139

Bachelor’s degree holders

28,384

Ph.D. holders

39,025

COST

04 COST


SUCCESS CASES

05 SUCCESS CASES

1) Celltrion: KRW 350 billion in investments from Temasek, Singapore’s sovereign wealth fund, since 2010•�Celltrion attracted KRW 207.9 billion in investments from Temasek, Singapore’s sovereign wealth

fund, in 2010 thanks to its superb biosimilar technologies and solid contract manufacturing organization (CMO) business. Temasek acquired a 10% stake in Celltrion Healthcare, Celltrion’s affiliate, and made an additional investment of about KRW 150 billion in 2013. •�Investment incentives and outcomes

Celltrion has expanded the global market coverage of Remsima, a biosimilar version of Remicade (rheumatoid arthritis drug), winning regulatory approvals in Korea and Europe. With the completion of a phase 3 clinical trial of the biosimilar Herceptine (breast cancer treatment), the company has made significant achievements in the biosimilar segment. •�It was biosimilar capability that enabled Celltrion to attract foreign investments. Foreign

investments helped Celltrion repay its debts, raise operating capital, enhance its presence in the global capital market and place a greater focus on developing biosimilar and therapeutic antibody technologies.

2) Aprogen: Strategic partnership with Japan’s Nichi-Iko Pharmaceutical (2010) and exclusive sales right worth KRW 30 billion (2014)•�Aprogen, a tech venture in the Daeduk Specialized Zone, attracted an investment of KRW

13.3 billion in the biosimilar business from Japan’s Nichi-Iko Pharmaceutical in 2010. Nichi-Iko Pharmaceutical acquired a 33.4% stake in Aprogen and entered into an agreement to conduct clinical trials, file for regulatory approval and sell Aprogen’s biosimilars in Japan. Afterwards, Aprogen developed the Remicade biosimilar and entered into an exclusive supply contract with Nichi-Iko Pharmaceutical for KRW 30 billion in 2014. •� Investment incentives and outcomes

Aprogen is a subsidiary of Schnell Biopharmaceuticals and the first company in Korea to have promoted the development of new drugs based on protein and antibodies. Aprogen was established in 2000 by two professors from the Korea Research Institute of Bioscience and Biotechnology (KRIBB) and KAIST and has transferred four biosimilar drug technologies to other companies. Currently, the company is developing four kinds of biosimilars and three kinds of protein-based new drugs. In addition, the company transferred its business right to biosimilars of Ramicade (rheumatoid arthritis treatment) and Rituxan (anti-cancer drug) to Schnell Biopharmaceuticals.

Aprogen attracted equity investments from Japan’s Nichi-Iko Pharmaceutical in 2010 to finance its biosimilar production and facilitate its advancement in the global market. The agreement in 2014 includes an investment clause that Nichi-Iko Pharmaceutical will provide capital for Aprogen to build large-scale biosimilar production facilities. As such, Aprogen has secured financing for its production facilities and an exclusive right to supply products.


3) Samsung BioLogics: Joint venture between Samsung and Quintiles Transnational Corp. Samsung BioLogics has created a USD 300 million biosimilar development JV with Biogen Idec. •�Samsung and Quintiles Transnational Corp, a U.S.-based global clinical research service

provider, established Samsung BioLogics, a joint venture with KRW 300 billion in capital. BioLogics teamed up with Biogen Idec to establish a joint venture that develops, manufactures and sells biosimilars. Samsung BioLogics started construction of a biopharmaceutical plant with a cell culture capacity of 30,000 liters in June of 2011, with plans to complete the pilot production of therapeutic antibodies in August of 2014 and start mass production in 2015.

•�Investment incentives and outcomesSamsung BioLogics has secured access to the global biotech industry by attracting foreign investment. In addition, Samsung BioLogics is well-positioned to sharpen its competitiveness in the biopharmaceutical segment, as it can share knowhow with a global company in various areas such as contract manufacturing and preclinical and clinical trials. In addition, the establishment of mass production facilities for biosimilars should allow the company to expand biopharmaceuticals production, extend global market reach and accelerate R&D.

4) Dong-A Pharm: Strategic partnership with GSK •�In May of 2010, Dong-A Pharm forged a strategic partnership with the global pharmaceutical

company Glaxo Smith Kline (GSK). GSK acquired a 9.9% stake in Dong-A Pharm to jointly operate the sales, clinical trials and commercialization of ethical drugs. It is a comprehensive partnership that enables Dong-A Pharm to secure a stable supply of GSK’s key pipeline drugs and GSK to use Dong-A Pharm’s sales networks and marketing force in Korea. GSK and Dong-A Pharm expanded their partnerships in March of 2012 to include over-the-counter (OTC) drugs, generating synergy effects both in the OTC and ethical drug markets.

•�Investment incentives and outcomesThe partnership between GSK and Dong-A Pharm is an unprecedented model of partnership between a global pharmaceutical company and a Korean pharmaceutical company. In particular, GSK has identified Korea as an attractive investment destination, given Korea’s R&D capacity and clinical trial experiences, and thus showed great interest in Dong-A Pharm’s overseas R&D pipeline. Through partnerships, Dong-A Pharm has secured an opportunity to learn global clinical expertise and successfully expand its global business.

5) Genexine: Ajinomoto Genexine, a joint venture with Ajinomoto •�Genexine, a Korean biotech venture, formed a joint venture, Ajinomoto Genexine, with

Ajinomoto in November of 2012 to produce cell culture media for biopharmaceutical production. Ajinomoto has a 75% equity stake in the joint venture, which has KRW 35.7 billion in capital. With the complement of the cell culture media production facilities at the end of May 2014 in Songdo, Incheon, Ajinomoto Genexine can domestically produce Ajinomoto’s patent-protected serum-free medium, which used to be imported, and plans to expand its market presence, especially in Korea and Asia.

6) Investment incentives and outcomes•�Ajinomoto needed to establish a production base in Asia to meet growing demand for

biological research and biopharmaceutical production. As such, Ajinomoto formed a joint venture with Genexine, a Korean biotech company with solid biopharmaceutical infrastructure and promising R&D networks. The joint venture makes it easier for Korean biopharmaceutical companies to domestically procure customized cell culture media, which offer higher quality than imported products. In addition, Ajinomoto Genexine is a good example of where a competitive Korean biotech company has attracted foreign investment with its technological prowess. It will pave the way for competitive biotech companies to further enhance their technological competence and develop financing and marketing capacity by attracting foreign investment and forging partnerships.

05 SUCCESS CASES


Related associations

Name Website

Korea Biodiesel Association blog.naver.com/kbda0711

Korea New & Renewable Energy Association www.knrea.or.kr

Korea Pellet Fuel Association cafe.naver.com/ilovepellet

Korea Bioplastics Association www.kbpa.net

Korea Bio Material Packaging Association www.biopack.or.kr

Korea Association of Geriatric Hospitals www.kagh.co.kr

Korean Hospital Association www.kha.or.kr

Korea Pharmaceutical Association www.kpanet.or.kr

Korea Medical Devices Selling Association www.komedia.or.kr

Korea Medical Association www.kma.org

Korea u-Health Association www.uha.or.kr

Korea Association of Health Promotion www.kahp.or.kr

Korea International Medical Association www.koreahealthtour.co.kr

Korea Global Healthcare Association www.kgha.kr

Korea Biopharmaceuticals Association www.ko-bia.or.kr

Korea Biotechnology Industry Organization www.koreabio.org

Korea Research Institute of Bioscience & Biotechnology www.kbra.or.kr

Korea Biosafety Association www.kobsa.net

Korea Drug Research Association www.kdra.or.kr

Korea Medical Devices Industrial Coop www.medinet.or.kr

Korea Medical Devices Industry Association www.kmdia.or.kr

Korea Pharmaceutical Distribution Association www.kapw.or.kr

Korea Pharmaceutical Traders Association www.kpta.or.kr

Korea Pharmaceutical Manufacturers Association www.kpma.or.kr

Korea Food Industry Association www.kfia.or.kr

Korea Crop Protection Association www.koreacpa.org

Korea Seed Association www.kosaseed.or.kr

Korea Animal Health Product Association www.kahpa.or.kr

Korean Veterinary Medical Association www.kvma.or.kr

Korea Advanced Farmers’ Federation www.kaff.or.kr

Korea Animal Improvement Association www.aiak.or.kr

RELATED COMPANIES AND ASSOCIATIONS

06 RELATED COMPANIES AND ASSOCIATIONS


Related companies

Company Website

Gwangdong Pharmaceutical www.ekdp.com

Kukje Pharm www.kukjepharm.co.kr

Green Pharm ‐

BC World Pharm www.bcwp.co.kr

Kunwha Pharmaceutical www.kunwha.com

GlaxoSmithKline www.gskkorea.co.kr

Green Cross www.greencross.com

Daelim Pharmaceutical ‐

Daewoong Pharmaceutical www.daewoong.co.kr

Daewon Pharm www.daewonpharm.com

JW-Shinyak www.jw-shinyak.co.kr

Dai Han Pharm www.daihan.com

Daehwa Pharmaceutical www.dhpharm.co.kr

Dongkook Pharmaceutical www.dkpharm.co.kr

Huniz www.huniz.kr

Dong-A Pharm www.donga.co.kr

Dong Wha Pharm www.dong-wha.co.kr

Mundi Pharma mundipharma.co.kr

Medica Korea www.medicakorea.com

BiNex www.bi-nex.com

Baxter www.baxter.co.kr

Bolak www.bolak.co.kr

Boryung Pharm www.boryung.co.kr

Sewon Cellontech www.sewoncellontech.com

B. Braun Korea www.bbraun.co.kr

Bukwang Pharm www.bukwang.co.kr

Samnam Pharm www.samnam51.com

Samsung Fine Chemicals www.sfc.samsung.co.kr

Sama Pharm www.samapharm.co.kr

Samyang Biopharmaceuticals www.samyangpharm.co.kr

Sam Yang Chemical www.samyangchem.com

Samil Pharm www.samil-pharm.co.kr

Samjin Pharm www.samjinpharm.co.kr

Sam Chun Dang Pharm www.scd.co.kr

Saehan Pharm www.shpharm.co.kr

Company Website

Seoul Pharma www.seoulpharma.com

Suheung www.suheung.com

Hutecs Pharmaceutical www.hutecs.co.kr

SS Pharm www.susungpharm.com

Ahn Gook Pharm www.ahn-gook.com

RP Corp www.rpskorea.com

Pharmbio Korea www.pharmbio.co.kr

SB Pharmaceutical www.sbp.com

SK Chemicals www.skchemicals.com

Estech Pharma www.estechpharma.com

Dream Pharm www.dreampharma.co.kr

Nensys www.nensys.co.kr

LG Life Sciences www.lgls.co.kr

YD Diagnostics www.yd-diagnostics.com

Yungjin Pharmaceutical www.yungjin.co.kr

Youyoung Pharmaceutical www.yypharm.co.kr

Yuyu Pharma www.yuyu.co.kr

UK Chemi Pharm www.ukchemipharm.co.kr

Bioland www.biolandkorea.com

Yuhanmedica www.yuhanmedica.co.kr

Yuhan Corporation www.yuhan.co.kr

Ildong Pharmaceutical www.ildong.com

Ilsung Pharmaceutical www.ilsung-ph.co.kr

ILYANG Pharmaceutical www.ilyang.co.kr

Ilhwa www.ilhwa.co.kr

JRP www.jrpharm.co.kr

Kyowa Hakko Kirin Korea www.kyowa-kirin-korea.com

Jeil Pharmaceutical www.jeilpharm.co.kr

Choa Pharmaceutical www.choa.co.kr

Chong Kun Dang Pharmaceutical www.ckdpharm.com

JW Pharmaceutical www.cwp.co.kr

Jinyang Pharm www.jinyangpharm.com

Unimed Pharm www.unimed.co.kr

Chunggei Pharm www.chunggei.co.kr

Chodang Pharm www.chodang.com

KMS Pharm www.kmspharm.com



Company Website

Kolon Pharm www.kolonpharm.co.kr

Pharmicell www.pharmicell.com

Tai Guk Pharm www.taiguk.co.kr

Pharma King www.pharmaking.co.kr

Taejoon Pharm www.taejoon.co.kr

Pacific Pharm www.pacificpharm.co.kr

Richwood Pharmaceutical www.richwood.net

Fresenius Kabi Korea www.fresenius-kabi.co.kr

Hana Pharm www.hanaph.co.kr

Hawon Pharm www.hawonpharm.co.kr

Nelson Korea www.nelsonkorea.co.kr

PMG Pharm www.pmgpharm.co.kr

Daiichi Sankyo Korea www.daiichisankyo.co.kr

DPH Korea www.dhpkorea.co.kr

Korea Vaccine www.koreavaccine.com

Modern Cell & Tissue Technologies www.mctt.co.kr

Han Kook Shin Yak www.hsp.co.kr

Genexine www.genexine.com

Korea Arlico Pharm www.arlico.co.kr

Alcone Korea www.alconlabs.co.kr

Newgenpharm www.newgenpharm.com

Janssen Korea www.janssenkorea.com

Eisai Korea www.eisaikorea.com

Otsuka Pharmaceutical www.otsuka.co.kr

C&R Research www.cnrres.co.kr

Korea Atomic Energy Research Institute www.kaeri.re.kr

Korea United Pharm www.kup.co.kr

Union Korea Pharm www.ukp.co.kr

Meid Help Line www.medihelpline.co.kr

CTC Bio www.ctcbio.com

Korea Ginseng Corp. www.kgc.or.kr

Hankook Korus Pharm www.koruspharm.co.kr

Korea Pharma www.koreapharma.co.kr

Pharvis Biotech Korea www.pharvis.co.kr

Ferring Pharmaceuticals www.ferring.co.kr

Korea Prime Pharma www.koreaprime.co.kr

Company Website

Astellas Pharma Korea www.astellas.com/kr

Handok Pharm www.handok.co.kr

Hanmi Pharm www.hanmi.co.kr

Hanbul Pharm www.hanbulpharm.co.kr

Celltrion www.celltrionph.com

Hanall Biopharma www.hanall.co.kr

Hanzhung Pharmaceutical www.hzpharm.co.kr

Hanpoong Pharm www.hanpoong.co.kr

Han Wha Pharma www.hwpharm.com

CMIC CMO cmic-cmo.co.kr

Hyundai Pharm www.hyundaipharm.co.kr

Whanin Pharm www.whanin.com

Huons www.huons.co.kr

CJ Health Care www.cjp.co.kr

Isu Abxis www.abxis.com

GL Pharm Tech www.glpt.co.kr

MG www.medi-green.co.kr

YD Global Life Science www.bioyd.co.kr

Korea Global Pharm www.globalpharm.co.kr

Sungwon Adcock Pharm www.swpharm.com

Mcnulty Pharmaceutical www.mcnultypharm.com

Humedix www.humedix.com

Donwoo Syntech dongwookr.com

Samsung Bio Epis www.samsungbioepis.com

White Global Pharmaceutical Corp. www.whpharma.com

Crystal Genomics www.crystalgenomics.com

Bio Leaders www.bioleaders.co.kr


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