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Samsung Group bets big on biosimilar drugs

Samsung Group transformed its electronics unit into the world’s largest smartphone maker by outselling Apple. Now it’s setting its sights on the drug industry.

Korea’s biggest company is investing at least $2 billion in biopharmaceuticals, including the growing segment of biosimilars, which are cheaper versions of brand-name biotechnology drugs that have lost patent protection.

Samsung, with $327 billion in annual revenue, aims to become a major force in biotechnology, an industry expected to generate sales of more than $220 billion in five years. With the electronics market reaching saturation, billionaire Chairman Lee Kun-hee has been investing in new areas that might shore up growth for the family-controlled company.

“We are in an infancy still,” said Christopher Hansung Ko, chief executive officer at the Samsung Bioepis unit. “We are a Samsung company. Our mandate is to become No. 1 in everything we enter into, so our long-term goal is to become a leading pharmaceutical company in the world.”

At the heart of those plans are biosimilars. Samsung plans to sell its first biosimilar version of Amgen’s arthritis therapy Enbrel in 2016 in Europe and a version of Johnson & Johnson’s Remicade treatment for autoimmune diseases in 2017, according to Ko. A separate unit called Samsung Biologics has contracts to manufacture biologic medicines for branded pharmaceutical companies.

As it expands in biosimilars, Samsung faces competitors like Pfizer and Amgen, regulatory hurdles and an undeveloped market. While Europe and Japan have allowed biosimilars, the United States has yet to set specific guidelines or approve any drugs in that class.

U.S. regulators are considering a variety of issues, including what research will be required to permit the cheaper therapies to be substituted for the original drugs. Producing exact copies is harder than making traditional generic pills because factors including temperature can affect the product.

Companies haven’t made much money with biosimilar drugs because most products remain under development and the U.S. market is untapped, said Giles Somers, an analyst at Datamonitor Healthcare.

The industry’s sales may expand to $24 billion in 2019 from $1.2 billion last year, and markets including the United States may grow “exponentially” after regulations are set, consulting firm Frost & Sullivan said in January.

Samsung plans to bring a fresh perspective, be bold and make quick decisions, Ko said. Its two biologics units together employ about 800 people, making the group South Korea’s largest biotechnology company, he said.

Biosimilars are often follow-on versions of expensive drugs for conditions such as cancer or arthritis and are big revenue generators. Amgen’s Enbrel, for instance, treats autoimmune diseases including arthritis and the skin condition psoriasis.

Samsung Biologics, set up with Quintiles Transnational, agreed in October to make proprietary biologic medicines for a unit of Roche Holding AG. It also has a partnership with Bristol-Myers Squibb.

Samsung Bioepis, a venture with Biogen Idec, is developing other biosimilars, including versions of Roche’s Herceptin breast cancer treatment and Sanofi’s Lantus diabetes drug, according to Ko.

Lee Jin Woo, a Seoul-based senior fund manager at KTB Asset Management Co., isn’t convinced the group can succeed in health care because the industry is highly specialized and requires deep scientific knowledge.

“It’s not something you can do easily just by speeding up manufacturing with big cash on hand,” he said.

Samsung has compensated through partnerships, including one with Merck & Co., which brings in manufacturing, regulatory, and marketing clout, said Asthika Goonewardene, a pharmaceutical analyst at Bloomberg Industries.

Samsung said it expects to generate more than 1.8 trillion won ($1.8 billion) a year from biopharmaceuticals by 2020.

“We have an outstanding pedigree of being able to innovate an old process to a new process in order to improve in another sector, so we apply that principle,” Ko said. “I can’t see a reason why we aren’t going to be successful.”

Bloomberg