Korea rises as production hub for coronavirus treatments; darling of global pharmas

South Korea is emerging as a global production base for coronavirus vaccines and medicine thanks to its comprehensive production facilities alongside domestic biopharmaceutical firms securing substantial contract manufacturing organization (CMO) orders from global industry peers.

This year alone, Korean biopharmaceutical companies are expected to fetch over 2 trillion won ($1.7 billion) in CMO orders for coronavirus vaccines and medicine, according to industry sources on Sept. 15.

In April, Samsung Biologics Co. procured an order worth 439.3 billion won ($372.6 million) from GlaxoSmithKline plc. to produce medicine to treat the coronavirus. Samsung's pharma arm has also inked a hefty deal with another client, although details remain under wraps due to a non-disclosure agreement.

Another Korean company SK Bioscience Co. secured two CMO orders this year for new coronavirus vaccine candidates with UK-based AstraZeneca Plc. and US-based Novavax Inc. SK Bioscience runs a production facility in Andong which can produce up to 150 to 200 million doses per year, and the facility’s capacity is expected to reach its limit thanks to the orders. Currently, the company is expanding its facility to produce up to 500 million doses yearly.

If SK Bioscience produces 100 million doses – half of its maximum capacity – at a distribution price of 10,000 won, then the company would post nearly 1 trillion won in annual revenue.

Korean companies are sought after in the pandemic crisis because they offer extensive production facilities, advanced technology on par with the US and Europe, and a timely production schedule with few delays.

Global pharmaceutical companies that have most of their production facilities in the US and Europe are diversifying their bases into Asia, such as Korea, China, Japan and India, where local companies can receive orders.

A lack of production facilities worldwide is another reason why Korean companies are more attractive to the global market. Cell culture production facilities' capacity is expected to increase from 3.7 million liters in 2017 to 5.6 million liters in 2022, posting 8% yearly average growth, according to KTB Investment & Securities. But demand is forecast to increase 13% on a yearly average from 2.3 million liters to 4.3 million liters during the same period, creating a shortage in production facilities.

Korean companies have invested aggressively in production facilities. SK Bioscience can produce up to 200 million doses at its Andong vaccine facility, referred to as the L-House. Samsung Biologics announced in August that it will build a fourth plant, which will increase its production capacity from 364,000 liters to 620,000 liters. This will further widen the gap between Korean companies and industry competitors such as Boehringer Ingelheim and Swiss-based Lonza, which produce 300,000 liters and 280,000 liters, respectively.

Write to Woo-sub Kim at duter@hankyung.com