Future Cash Cow
As pharmaceutical and biotechnology sector is emerging as the key business of major domestic conglomerates, owners are directly heading the business. In particular, pharmaceutical and biotechnology arms are becoming a future cash cow at the conglomerates, taking roots as the key affiliates of holding companies that manage the conglomerates.
With conglomerates turning pharmaceutical and biotechnology companies, which are considered a new growth engine, into their own subsidiaries, they are believed to improve their presence in the market and raise the value of shares owned by owners’ families. Group owners heads their pharmaceutical and biotechnology business, giving full support of groups.
According to business industry sources on March 1, the recent movement of SK Holdings Co., the holding company of SK Group whose largest shareholder is chairman Chey Tae-Won with a 23.4 percent stake, is similar to Samsung C&T Corp., the holding company of Samsung Group.
SK Holdings has decided to acquire a 100 percent stake in its subsidiary SK Biotech, a contract manufacturing organization (CMO) of raw materials for medicines, at the board meeting on Feb. 25. SK also wholly owns its subsidiary SK Biopharmaceuticals Co., which is in charge of the new drug development. It is a similar movement with Samsung C&T which also owns a company that develops new medicines.
Samsung established Samsung BioLogics, its CMO subsidiary under Samsung C&T, in 2011 and Samsung Bioepis, which develops new biopharmaceutical products, in 2012. Samsung C&T owns a 52.1 percent stake in Samsung BioLogics, while Samsung BioLogics owns a 90.3 percent stakes in Samsung Bioepis.
It means Samsung C&T, whose largest shareholder is Samsung Electronics vice chairman Lee Jae-yong with a 17.23 percent stake, owns Samsung BioLogics as its subsidiary and Samsung BioLogics as its granddaughter company.
Other major groups, such as LG Group, Kolon Group, Iljin Group and Samyang Corp., also own pharmaceutical and biotechnology companies under their holding companies.
LG Corp. is the largest shareholder of LG Life Sciences with a 30.43 stake and Kolon Corp. is also the largest shareholder of Kolon Life Science with a 20.5 percent stake. In particular, Kolon Group chairman Lee Woong-ryul has a 15.4 percent stake in Kolon Life Science.
Iljin Holdings, the holding company of Iljin Group, owns a 97.6 percent stake in Alpinion Medical Systems, which has recently entered the early dementia diagnosis market with its innovative ultrasound diagnostic equipment. Samyang Holdings also wholly owns Samyang Biopharm, which is engaged in research and development, production and provision of medicines.
As the groups have pharmaceutical and biotechnology companies as their subsidiaries, owner families have high interests in relevant business.
Samsung Bioepis and Samsung BioLogics are subsidiaries that vice chairman Lee Jae-yong are directly reported the current situation of their business and involveing in management. Samsung Group are providing full support and making large-scale investments in the companies, and the group is also preparing for their initial public offering for financing.
SK has started developing new drugs since 1993 with its chairman Chey Tae-Won’s decision, and it recently selected the pharmaceutical and biotechnology sector as one of five key growth engines. Since Chey has returned to the group as a registered director last month, the group is expected to expand its biotechnology business.
LG named vice chairman Koo Bon-joon as the head of new business development team at the end of last year and recently selected him as a registered director of LG Chem, the parent company of LG Life Sciences. It is believed that the group is showing the will to promote its new growth engines early through owner’s responsible management.