With the smartphone and display sectors showing signs of market saturation the early 2010s, the Samsung Group has chosen the biopharmaceutical sector as one of the growth engines that the group is focusing on for the future.
The biopharmaceutical market in general is expected to grow as large as the one combining the semiconductor, chemical and auto manufacturing markets by 2024, thanks to explosive demand in an aging society.
To benefit from a diverse business portfolio that ranges from biopharmaceutical production to its development, Samsung established Samsung Biologics and Samsung Bioepis in 2012, with the former focusing mainly on contract manufacturing organization (CMO), or the commissioned production of drugs without any direct engagement in drug development, while the latter on developing biosimilar drugs. Biosimilars, cheaper near-replicas of brand-name biologics, are able to deliver similar therapeutic effects.
A 90.3 percent stakes of Samsung Bioepis is held by Samsung Biologics, which is in turn owned by Samsung Electronics and Samsung C&T – with a 46.3 percent and 51.2 percent stake, respectively.
The biosimilar sector, an area Samsung Bioepis focuses on in particular, is burgeoning with an immeasurable market growth potential by providing a cost-saving alternative to the world’s best-selling biologics. Moreover, with the patent protection of such drugs as AbbVie’s Humira for rheumatoid arthritis and Roche’s Herceptin for breast cancer nearing the end, the competition in the market is getting severe.
Biosimilars are more difficult to develop and replicate than simpler, chemically-synthesized drugs. However, unlike chemical synthesis drug, biosimilars are known to be able to deliver more targeted treatments and lesson side effects associated with the existing blunter chemical treatment.
Requirement of highly sophisticated science is part of the commercial appeal. Given that only a few companies from rich countries enjoy the luxury of possessing such science, competition is less severe. Instead of the sharp price fall that typically follows the expiration of patents for chemically-synthesized drugs or small molecule drugs, biologics often maintain their market dominance in the absence of effective rivals. In this sense, biosimilars represent an essential “safety valve” against rising healthcare costs.
Given that the government regulations on sales approvals in Europe and the U.S. constitute the main challenge, the European Commission’s sales approval of Benepali, a biosimilar of Amgen's Enbrel, in January this year and its subsequent launch in Europe mark major milestones for Samsung Bioepis.
In addition to its Enbrel biosimilar, the company enjoys one of the industry’s broadest biosimilar pipelines with multiple biosimilar candidates in Phase III clinical trials. Namely, Samsung Bioepis is close to gaining approval of its biosimilars for Johnson & Johnson's Remicade, Roche’s Herceptin, and AbbVie’s Humira. The company also has a Phase I clinical trial underway for a biosimilar of Avastin.
The six biosimilar drugs above are among the world’s 10 highest-earning drugs, each yielding revenues between 60 billion won (US$51,586,800) and 130 billion won (US$ 111,771,400) annually.
Currently, Bioepis is trying to be listed on the Nasdaq, which offers a better chance than the Seoul bourse to meet the company’s target valuation of at least US$8 billion.
At the group level, by 2020, Samsung has the expectation to raise its sales in the biopharmaceutical sector to 1 trillion won (US$ 859,780,000) and an operating profit of 400 billion won (US$ 343,912,000). Furthermore, the business group envisions 2 trillion won (US$1,719,560,000) of sales and an operating profit of 9.0 trillion won (US$ 7,738,020,000) by 2025.