Change Comes to the Industry
The Korean pharmaceutical industry consists of some 2,000 companies. About 60 of the 550 companies that manufacture pharmaceutical products are considered to be conventional drug firms, and there are roughly 20 that are venture-funded start-up biotech firms. The output of the industry consists of nutritional supplements, active pharmaceutical intermediates, generics, pharmaceuticals, and biotech drugs.
The industry is undergoing drastic change as it moves away from the lower value products (e.g., generics) toward new drugs and biotech. One exception is novel medicinals based on traditional Oriental formulations.
The transformation of the pharmaceutical industry is illustrated by the following two companies, which have used biotechnology in different ways to reinvent themselves.
Dong-A Pharmaceuticals is a major pharmaceutical company in Seoul. Its growth has been fueled by new biotech products. The company has made gains in generic versions of Plavix and Norvasc and is launching new generic versions of Lipitor, Zocor, and Aricept.
Dong-A is pursuing a multipronged strategy that includes recombinant drugs, generic drugs in major disease categories, and the development of novel formulations based on herbal and plant materials. Many of these products are directed toward the rapidly growing Chinese market.
Korea Green Cross was established in 1970 for the production of plasma products, and its technology was based on processing and fractionation. Green Cross’s first biotech product was a hepatitis B vaccine developed in a joint venture with Rhein Biotech.
The company has three research facilities. The Mokam Life Sciences Research Center is the collaborating center with WHO and is responsible for long-term research, particularly in new materials. The General Research Center is responsible for short/midterm research that entails the scale up of research done at the Mokam Life Sciences Research Center. The work focuses on improving the efficiencies and yields in production as it relates to plasma products and vaccines.
The Mogam Biotechnology Center was established in collaboration with the Minister of Science and Technology as a private research institute. Its focus is on immunology directed toward vaccines against epidemic hemorrhagic fever, chicken pox, typhoid, and breast cancer. Work is also being done on immunotherapeutic agents against osteoporosis and cytotoxic T lymphocytes.
Brave New World of VCs
Government policy has promoted the creation of start-up companies with the intention of expanding research and technological innovation. Aside from drug development, the interest in stem cell research has led to the use of cell technology for novel therapeutic approaches. Genomics and information technology have also been key areas with the potential for new diagnostics and devices.
Macrogen is among the earliest biotechnology companies, having been established in 1997, with a focus on genomics applications.
The company has developed and marketed a series of product lines including the MacArray Express Oligochip for determining the degree of gene expression, and the MacArray Karyo for identifying chromosomal aberrations. It also designs and produces MacProbe products to assay for specific sequences.
In addition to its products, the company provides a variety of services such as sequencing and gene knockout. Macrogen has created a number of research institutes designed to support its services and technological base, such as the Life Science Institute, which has sequenced the Zymomonas mobilis genome (this microbe is one of the most efficient ethanol producers), the Bioinformatics Research Center, and the LentiVector Institute, which develops lentiviral vector systems for gene delivery both in vivo and in vitro.
Hans Biomed was established in 1993. In order to expand its activities, it built the Hans DaeDeok Institute (HDI) in June, 2002, combining both research laboratories and production lines. Hans has invested $1.2 million in two research institutes, HDI and the Hans Institute of Tissue Engineering (HITE), and cooperates with the animal cell engineering lab at KAIST (Korea Advance Institute of Science and Technology).
Hans uses its tissue-engineering technology for products such as human-based skin and bone grafts, soft tissue restoring injectable products, active medical ingredients, and silicone polymer products.
Sewon Cellontech was established in 1971 and applies cellular- and tissue-engineering technologies to medical treatments. Cellontech has three core businesses: chemical production, precision mechanics, and bioengineering. It has expanded its business by seeking partners for its regenerative medical system.
Tego Science specializes in artificially cultured skin and uses its cultured skin technology in three applications: regenerate damaged or diseased skin, test drugs and cosmetics, and bank keratinocytes from an individual for possible future use.
MyGene produces DNA chips that are used for early cancer diagnosis, and for life-style management for those with chronic diseases such as diabetes, hypertension, osteoporosis, hyperlipidemia, obesity, and also life-threatening common cancers.
Korea boasts a powerful industrial infrastructure that includes some of the world’s most important conglomerates. The country has a skilled and educated work force. Government action has been the driving force for restructuring the pharmaceutical industry and making biotechnology the basis for new business activities and firms.
The master plan described in BioVision 2016 (detailed in the January 1 GEN article), is highly ambitious and complex, requiring the creation of a sophisticated research base that leads to new products and processes based on interdisciplinary science. Commercialization is tied to regional development in the form of bioclusters, and flexible financing would be forthcoming with the advent of venture capital funds.
Being able to achieve these goals, however, is largely dependent on the acquisition of the necessary science, the availability of investment capital, and perhaps most significantly, a large pool of entrepreneurial biologists and managers to lead the myriad components of such a complex construct.
The data indicates that most revenues are generated by commodity products such as food additives and early biotechnology products (i.e., vaccines, hormones). Many of the companies combine regular manufacturing with high-tech products (e.g., cell therapy, biochips). While necessary for financial reasons, it is not obvious that there is a Korean company that is a successful business model for biotechnology.
A number of Koreans familiar with the biotech industry have the view that it needs to become more global. Such a strategy would require a move away from the domestic market and the exploitation of the important Chinese and Japanese markets. Manufacturing capabilities, expertise in cell and tissue engineering, and contract services provide opportunities for U.S. companies particularly if used for international markets. Strategic alliances with multinational corporations and foreign biotechnology companies would play an important role in providing needed financing and modern technologies.