South Korea’s Samsung group announced it would start producing original prescription drugs, heralding its shift into a risky but potentially lucrative business area.

The sprawling conglomerate’s biopharmaceutical affiliate Samsung Bioepis said on Monday that it would join forces with Japan’s Takeda Pharmaceutical to develop drugs in “unmet disease areas”, starting with a treatment for acute pancreatitis.

Launched in 2012, the Samsung affiliate has until now focused on creating biosimilars — discounted near-replicas of prescription medicines produced after the original patents have expired.

The tie-up with Takeda signals the company is proceeding with a long-expected shift into novel biologic drugs. Samsung declined to reveal details of the “risk-sharing partnership”. 

Analysts greeted the move positively but cautioned it was a just first step in risky territory.

“With today’s deal, we can finally see that [Samsung] are moving forward in developing new drugs, which they have neglected until now,” said Um Yeo-jin, an analyst at Shinyoung Securities. “[But] the deal is just the first step — a way for Samsung to show something, that its plans are becoming more specific.”

Given technical, regulatory and legal hurdles, developing new drugs is a fraught and expensive process, with studies suggesting that only one in 10 new medications passes from clinical trials to government approval. 

However, the potential is huge. Research group Evaluate Pharma expects prescription drugs sales globally to grow at 6.5 per cent a year to be worth $1.06tn by 2020.

Similarly, the global market for biologic therapeutic drugs — those genetically engineered from human genes as opposed to chemically synthesised — is expected to reach $386.7bn by the beginning of 2020, according to BCC Research.

Samsung Bioepis said it was “confident” of the market for biologics and biosimilars in the next five years. “Entering this space has been a goal since day one, and at this stage of our company’s development, we believe this is the next logical step,” it said. 

“With novel biologics, we will look to bring medicines to treat unmet diseases by breaking down two major hurdles facing biologics development — cost overruns and time delays.”

The company added it would continue searching for “co-development opportunities with multinational pharmaceutical and biotech companies”.

The initial focus on pancreatitis will suit Takeda, which has highlighted gastrointestinal treatments as one of its key areas of focus along with cancer and neurological therapies.

Takeda is Japan’s largest pharmaceutical company by revenue, but its net profit for the June quarter was a little more than half that of rival Astellas

It has also failed to produce a blockbuster in-house product for almost two decades, with some of its more successful and promising drugs in recent times coming courtesy of acquisitions.

“Samsung Bioepis must have the technology to develop new drugs, so that’s why Takeda would have chosen them,” said Kang Yang-koo, an analyst with HMC Investment Securities.

Mr Kang estimates it will take at least three or four years for the pancreatitis drug to reach the market.

Additional reporting by Kang Buseong

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