Biopharma M&As: Next big thing for South Korean manufacturers

When Orion Corp., known for its signature snack cake Choco-Pie, announced a $415 million deal to acquire biotech startup LegoChem Biosciences Inc. last week, it meant the time of reckoning for many business leaders in South Korea’s manufacturing sector.

The same week, OCI Holdings Co., a chemicals firm, nailed it when its Chairman Lee Woo-hyun said the company was acquiring Hanmi Pharmaceutical Co.'s parent Hanmi Science Co. in a half-a-billion-dollar deal with a vow to become Korea’s Bayer.

Korean conglomerates, big and small, are joining the merger and acquisition market in the biotechnology and biopharmaceutical sector – widely viewed as the next big thing for growth.

According to industry sources on Monday, conglomerates with biotech affiliates, including Samsung, LG, Lotte and CJ, as well as smaller manufacturers such as Hanwha, GS, HD Hyundai, Kakao and Harim are seeking or considering bio and healthcare M&As.

“It is almost impossible to discuss high-tech industries without bio. The biopharma industry is showing infinite scalability by converging with AI, big data, materials, environment and energy,” said Lee Seung-kyu, vice chairman of the Korea Biotechnology Industry Organization. “It is the sector that is most widely talked about for investments.”

SAMSUNG EYES US BIOSIMILAR FIRM BIOGEN

Samsung Bioepis Co., a biopharmaceutical unit of Korea’s top conglomerate Samsung, is looking to acquire the biosimilar business of Biogen Inc. The Nasdaq-listed US biotech firm is preparing to launch Alzheimer’s disease treatment Leqembi.

The Massachusetts-based biotech and Samsung Biologics Co., Samsung Group’s biosimilar production unit, jointly established Samsung Bioepis in 2012. Biogen sold off its stake in Samsung Bioepis in 2022, resulting in Samsung Biologics wholly owning the biosimilar developer.

Industry officials said Samsung’s Life Science Fund, jointly launched by Samsung Biologics, Samsung Bioepis and Samsung C&T Corp., is actively seeking to acquire another overseas biotech firm.

LG Chem Ltd., the parent of Korea’s top battery maker LG Energy Solution Ltd., in October announced a $566 million deal to acquire Nasdaq-listed cancer drug maker AVEO Pharmaceuticals Inc.

LG is looking at another foreign biotech company as its next M&A target, sources said.

Lotte Group said it is investing 3.2 trillion won ($2.4 billion) at its plant in Songdo, Korea’s bioscience park in Incheon, west of Seoul, to become one of the world’s top 10 contract drugmakers, known as contract development and manufacturing organizations (CDMOs), by 2030.

The conglomerate plans to spend at least 1.5 trillion won on novel drug development over the next five years.

Hanwha Group recently reentered the bio business after a seven-year hiatus with an investment in bio reagent production facilities.

Kakao Corp., the operator of Korea’s top messenger app KakaoTalk, is preparing to expand its business into the medical artificial intelligence segment. Kakao Healthcare Corp. plans to launch Pasta, an AI-powered blood sugar level management app, next month.

HIGHER PROFIT MARGINS

The biotech industry boasts a significantly higher operating profit margin of 20-50% than the conventional manufacturing sector’s 6%, industry officials said.

According to market research firm IQVIA, the global pharmaceutical market, which stood at 214.9 trillion won as of 2023, three times that of the semiconductor market, is expected to rise 39% to 299.3 trillion won by 2028.

The biopharma and biotech-related M&As in the US are forecast to grow to 356 trillion won this year, up 23% from last year, according to global accounting and consulting firm PwC.

SK Biopharmaceuticals Co. is looking to buy biopharmaceutical products in the pipeline, or those under development, instead of seeking M&As.

CJ Group is also out in the M&A market again after acquiring a Dutch cell and gene therapy (CGT) CDMO firm in partnership with a Korean microbiome bio startup in 2021.

Chung Ki-sun, vice chairman of HD Hyundai Co., Korea’s largest shipbuilding group, has also shown deep interest in the biotech business for synergy with Asan Medical Center.

HD Hyundai has established AMC Bio for novel drug development and launched Medi Plus Solution Co., a digital healthcare affiliate, to collaborate with Samsung Electronics Co. to develop a wearable patient healthcare system.

Active biotech M&As and partnerships are a global phenomenon.

Nvidia Corp., the world’s largest chip design firm, has partnered with multinational biopharmaceutical company Amgen Inc. to unveil an AI-powered supercomputer for novel drug development.

Isomorphic Labs, founded by Google, has signed a 4 trillion won deal with Eli Lilly & Co. and Switzerland-based Novartis for drug development.

Industry officials said the bio industry’s high entry barrier guarantees high profitability for successful biotech firms.

Novo Nordisk A/S, a Danish multinational pharmaceutical company known for anti-obesity drugs, posted 2023 sales revenue of 41 trillion won, a sixth of Samsung Electronics’ 261 trillion won. However, the Danish firm’s operating profit is 17.8 trillion won – 2.4 times higher than that of Samsung.

Write to Jeong-Min Nam, Woo-Sub Kim and Dae-Kyu Ahn at peux@hankyung.com

In-Soo Nam edited this article.