LG Group is seeking a merger between LG Chem and its biotechnology and pharmaceutical affiliate LG Life Sciences. With Samsung and SK making every effort to foster the bio industry as their new growth engines in the future, LG Group is also planning to focus on the biomedicine business and boost the investment in the sector.
In regard to a rumor about the merger between the two companies, LG Chem and LG Life Sciences officially announced on September 6, “We are considering various measures including the merger.” Accordingly, LG Chem is expected to seek the merger with LG Life Sciences soon. The group is said that it plans to grow its presence quickly with the merger in the biomedicine sector in which Samsung and SK are pouring a large amount of investment to target the global market.
LG has ensured the stability for a long time by entering the biomedicine sector earlier than Samsung and SK. The company has expanded the business in size through continuous investments in R&D. However, it failed to stand out in the group since its business showings haven’t improved in the last decade. This year, however, the company expects to see 500 billion won (US$451.67 million) in sales in the sector due to the recent achievement in new diabetes treatments and vaccines.
LG Group began research in genetic engineering since 1981 and set up the medical business division in 1984. The group established the biotech research center in 1987, took over Anjin Pharmaceutical in 1989 and changed its name to Lucky Pharmaceutical the next year. It became the first company in the world to develop the 4th-generation cephalosporin antibiotic in the 1990s and exported the technology to U.K.-based Glaxo, the current GSK. LG released human growth hormone “Eutropin” in 1993 for the first time in the domestic industry and succeeded in exporting its hepatitis B vaccine “Euvax-B” the same year. LG Life Sciences, which changed its name to LGCI in 2001 and was spun off in 2002, launched its new antibiotic “Factive” in the domestic market and received approval from approval from the United States Food and Drug Administration (USFDA) for the first time in the domestic industry the next year. The company signed a contract with U.S.-based Biogen Idec in 2004 to exclusively sell the psoriasis treatment.
LG Life Sciences posted 450.5 billion won (US$406.96 million) in sales last year, ranked 11th in the domestic pharmaceutical industry. With the performance improvements boosted by new diabetes drug “Zemiglo”, dermal filler “YVOIRE” and large-scale vaccine exports, the company recorded sales of 250.3 billion won (US$226.11 million) and operating profits of 277.1 billion won (US$250.32 million) in the first half of this year. It is the result of investing nearly 20 percent of its sales in R&D every year.
When LG Chem, which has enough cash with sales of 20.21 trillion won (US$18.25 billion) and operating profits of 1.82 trillion won (US$1.65 billion) last year, merges with LG Life Sciences, the company will be able to make more aggressive investments in R&D and production facilities. In that case, the company can use the strategy to grow in speed and size at the same time as well as internal stability.