By Elizabeth Koh
SONGDO, South Korea-- Samsung's drug-manufacturing arm is
betting that the already-booming market for biologic drug
ingredients will only get hotter, thanks to industry shifts sparked
by the coronavirus pandemic.
Key to that bet is a nearly $2 billion drugmaking plant that,
when completed in 2022, will be the largest of its kind in the
world. Dubbed the "Super Plant," Samsung Biologics Co.'s fourth
factory will have around 230,000 square meters of floor space,
making it bigger than the company's three existing plants combined
and slightly larger than the Louvre.
Samsung's goal is to capture what the company has said is an
unprecedented increase in demand spurred by the pandemic, and to
take advantage of the simultaneous reckoning it is creating for
global drug production.
Demand for new and increasingly complex medicines has
skyrocketed since the pandemic began. The situation has exposed how
reliant conventional drug production has become on China and India,
potentially threatening supply chains. That uptick in demand has
been beneficial to Samsung Biologics, which is based here and
specializes in the production of complex medicines for rare
diseases. This year, the business has expanded into potential
Covid-19 antibody treatments.
The firm makes biologic drugs for some of the world's largest
pharmaceutical companies, including Bristol-Myers Squibb Co. and
Roche Holding Ltd.
The company's CEO, Kim Tae-han, told The Wall Street Journal the
new plant was originally planned to be far smaller. But he pushed
for a bolder expansion this year after seeing how the pandemic
created a new product category, Covid-19 treatments, and prompted
drug developers and national governments alike to find new
manufacturing sources.
"Covid-19 is giving us more opportunity than crisis," said Mr.
Kim, who has led Samsung Biologics since 2011 after helping pitch
the venture to Samsung's top leaders.
Samsung Biologics has seen manufacturing orders nearly triple to
$1.5 billion in its most recent quarter from the prior year. A
recent deal with GlaxoSmithKline PLC accounts for $370 million over
the next two years, or about 60% of last year's sales. Mr. Kim said
the company is nearing maximum use of its three plants more quickly
than expected, and the new facility will help it meet demand.
Samsung Biologics executives say they are in conversations with
other biopharmaceutical firms to manufacture Covid-19 antibodies
but declined to name the firms.
Before the pandemic hit, drugmakers were already tapping
contract manufacturers like Samsung Biologics to produce complex
treatments, especially as biopharmaceuticals become a larger
fraction of drug sales world-wide.
After a drug is first developed, contract manufacturers step in
to make biologic compounds, which are complex medicines derived
from living cells. This work can entail research and development,
clinical trials or commercial rollouts.
Biotechnology currently make up 30% of global sales of
prescription and over-the-counter medication, and are expected to
expand by another 5 percentage points by 2026, according to
research firm EvaluatePharma. Five years ago, the sector
represented less than a quarter of total sales.
Drug developers, racing to develop antibodies and vaccines to
treat the coronavirus, have also been nudged to reconsider where
and how they manufacture their treatments. The U.S. government has
pushed to produce more drugs domestically and lessen dependence on
foreign production, even planning to loan Eastman Kodak Co. $765
million before the deal fell through last month.
More demand has also come from pharmaceutical companies alarmed
by supply-chain disruptions abroad in the past year. Firms once
inclined to consolidate manufacturing deals to save money are now
willing to pay higher costs to ensure they have multiple sources
for the compounds they need.
"Essentially what's happening is everyone is scrambling for
space" at contract manufacturing sites because of new coronavirus
orders, said Eric Langer, president of Rockville, Md.-based BioPlan
Associates, a research and marketing firm. "A lot of the companies,
even pre-pandemic, were just fully booked."
Samsung Biologics is one of several dozen affiliates in South
Korea's largest conglomerate, best known for smartphones and
consumer electronics. Samsung's business empire also includes theme
parks and life insurance, but its push into biopharmaceuticals is
relatively recent.
Founded in 2011, Samsung Biologics went public five years later
and first turned a profit in 2015.
The company remains entangled in a long-running accounting
scandal, in part related to that first year's profit, that
prosecutors allege involves the conglomerate's de facto leader Lee
Jae-yong. On Tuesday, Mr. Kim was among 11 former and current
Samsung executives, including Mr. Lee, indicted on various counts
involving accounting fraud and violations of Korea's
capital-markets laws. Samsung Biologics, which has denied
wrongdoing, declined to comment on the case.
Samsung Biologics is already one of the world's largest
contract-drug makers based on capacity, and its Songdo complex is
the largest single biologic drugmaking facility in the world,
according to market tracker BioPlan Associates. The company's
Europe-based rivals, Lonza Group AG and Boehringer-Ingelheim GmbH,
also plan to expand operations.
Samsung Biologics plans to expand substantially over the next
decade. It is pursuing a deal for a second campus near its current
complex in Songdo, a western suburb of Seoul, which could house up
to four more plants.
Mr. Kim said the company's reasons for keeping production out of
China remain economic, not political, pointing to China's
relatively uncertain conditions for foreign businesses. More than
70% of global contract manufacturing demand for biopharmaceuticals
come from the U.S. and Western Europe, he said.
Mr. Kim sees Samsung Biologics' growth as part of the growing
shift in biopharmaceutical production and innovation toward Asia,
mirroring other industries such as shipbuilding and chemicals. Most
of the biopharmaceutical business is in the West, he added.
"Maybe 10 years later, 20 years later, it can be 50/50," Mr. Kim
said.
Write to Elizabeth Koh at Elizabeth.Koh@wsj.com
(END) Dow Jones Newswires
September 03, 2020 05:49 ET (09:49 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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