Creative economy in action

Hanmi Pharmaceutical opened a new chapter in the Korean pharmaceutical industry by inking a landmark multibillion-dollar deal with a French drug maker for the commercialization of its longer-acting diabetes treatments. Including an immediate payment of 400 million euros ($430 million), French company Sanofi pledged to give Hanmi up to 3.5 billion euros for a global license to develop and commercialize three investigative diabetes solutions, dubbed the “Quantum Project.”

The company is eligible for a double-digit percentage of the royalties on global sales after the product is released. The deal is the third blockbuster out-licensing deal for Hanmi this year after a contract with Boehringer Ingelheim for its lung cancer treatment in July and another deal with Eli Lilly in March on a drug to treat an array of autoimmune diseases. The feats were the fruits of decades of dedicated entrepreneurship and bold, uninterrupted research and development.

New drug development is a risky investment with both high stakes and high returns. A company can earn huge profits from proprietary licenses, but it can also see investments of an average 15 years go down the drain if something goes wrong. Hanmi incurred its first deficit in 2010 after pouring 900 billion won ($777 million) into R&D for the previous 15 years. But its founder and chairman, Lim Sung-gi, stuck stubbornly to his belief and did not stop his investments.

Hanmi is a rarity in the local industry. R&D spending usually takes up about 3.47 percent of the revenue of local pharmaceutical companies, compared with 27.3 percent in the United States, 18.8 percent in Japan and 12.8 percent in Germany. There are 500 pharmaceutical companies in Korea, but none are ranked in the world’s top 100. Most are busy emulating drugs that have been tested and succeeded overseas, or are generating profits from local consumers by selling health drinks.

Hanmi changed its policy towards new drug development due to various regulations at home. It turned its eyes towards the bigger world with fewer constraints. It prioritized its limited human and capital resources to core fields. Many should follow Hanmi and look beyond the immediate and domestic market.

Authorities also must change their perspective. The government must give more freedom to the pharmaceutical industry. It must not interfere with funded R&D projects and regulate drug prices to lessen national health insurance coverage costs. The global pharmaceutical market is triple the size of the semiconductor market. Authorities must lift barriers so that more like Hanmi can venture into new fields and bigger markets. JoongAng Ilbo, Nov. 9, Page 34