Things to know about bio-drugs as Samsung unit goes public

Bio-drugs have been at the heart of pharamceutgical innovation in many areas of treatment including for cancer, which will kill 5.5 million women every year by 2030, a near 60-percent increase from 3.5 million in 2012 (AFP Photo/PHILIPPE HUGUEN)

Samsung BioLogics, whose shares made their debut on the Seoul stock market in an IPO Thursday, is the biopharmaceutical manufacturing unit of South Korean giant Samsung.

It aims to become a world leader in the outsourced production of biologic drugs.

What are biologic drugs?

Bio-drugs have been at the heart of innovation in many areas of treatment, notably for cancer, infectious diseases, auto-immunity and cardio-vascular illnesses.

They are created in a biotechnology process from cell cultures combined with gene technology. Unlike synthetic chemical drugs, their building blocks come from live cultures.

They are difficult and costly to make, but their share in the global pharma market is growing. They are projected to reach sales of $278 billion by 2020, 27 percent of the sector's overall sales, compared to $200 billion in 2016, according to EvaluatePharma, a British biotech and pharma analysis firm. They are expected to become cheaper and more widespread in coming years.

Why contract out bio-production?

Many pharmaceutical firms outsource biologics production which requires specialised sites able to respect extremely stringent quality and security norms.

Bio-tech startups typically lack the necessary funds to produce the drugs in-house, while large pharma groups like outsourcing because it allows them to save on fixed costs, a "critical long term goal for Big Pharma", according to Visiongain, a London-based research firm.

Outsourcing active ingredients for bio-drugs is still a limited market -- estimated at three to four billion dollars worldwide in 2015 -- but forecasters predict it will grow by more than eight percent annually over the next five to 10 years.

Who are the main players?

Some 80 firms are present in the market, with a few dominant players, notably Switzerland's Lonza and Germany's Boehringer Ingelheim via its BioXcellence unit. Both have long experience in the sector.

Like Boehringer Ingelheim, other big pharmaceutical companies including Novartis, GSK and Pfizer also have their own outsourcing entities.

Being both a pharmaceutical company and a contract manufacturing organisation is a winning formula as "there is a lot of interaction between the customer and the producer" in the biotechnology world: the customers "don't just say 'make me an API (active pharmaceutical ingredient), here's the recipe'," one industry source told AFP.

Founded in 2011, Samsung BioLogics is currently building its third factory in South Korea with the aim of becoming the world's biggest biopharmaceutical sub-contractor in terms of capacity by the end of 2018.