Lotte Acquires US BMS Factory... Accelerating Bio Business

Future Growth Engine Emphasized by Chairman Shin Dong-bin, Bio Industry Development Becomes Visible

Shin Dong-bin, Chairman of Lotte.

Lotte Group is acquiring the U.S. biopharmaceutical factory of global pharmaceutical company Bristol-Myers Squibb (BMS). Through this, Lotte Chairman Shin Dong-bin plans to fully launch the bio business, a new industry he has emphasized.

According to industry sources on the 13th, Lotte is scheduled to hold a board meeting on the same day to approve the acquisition of the BMS factory located in the Syracuse area of eastern New York, USA. This is the first merger and acquisition (M&A) since the declaration of entry into the bio new business. The acquisition includes not only the factory but also equipment, personnel such as experts, and full operational rights. The acquisition amount is approximately 200 billion KRW. Both parties aim to close the deal within the year.

The acquisition will be made by Lotte Biologics, a subsidiary that Lotte plans to establish soon. After establishing the corporation, it will acquire the factory through capital increase. Through this acquisition, Lotte plans to fully launch the biopharmaceutical contract development and manufacturing organization (CDMO) business. CDMO is a business that jointly develops new drugs and manufactures them upon requests from bio companies and research institutes. After the acquisition, Lotte plans to invest an additional 100 billion KRW to convert the factory into a CDMO facility. Based on this, it is expected to expand new businesses such as new drug development in the future.

Established in 1943, this factory is located about a four-hour drive from the Boston Cluster, the largest bio cluster in the U.S. with an annual economic scale of around 2 trillion dollars. Until the mid-2000s, it was responsible for 70% of the world's penicillin production, and after undergoing renovation in 2010, it transformed into a facility producing biopharmaceuticals. The factory's biopharmaceutical production capacity is about 35,000 liters annually. The industry expects that by acquiring a factory currently producing pharmaceuticals, Lotte will be able to simplify approval procedures and more.

Chairman Shin, in the first half of this year at the VCM (formerly the Presidents' Meeting), said, "We must focus investments on creating new customers and new markets through future-oriented management by reading the changes of the times," urging active nurturing of new businesses including bio and healthcare. Earlier, in August last year, Lotte established the New Growth Team 2 (Bio) and New Growth Team 3 (Healthcare) under the ESG (Environment, Social, Governance) Management Innovation Office to specialize in the bio and healthcare sectors, recruiting external experts as team leaders to strengthen preparations for new businesses. The bio business division, New Growth Team 2, is led by Executive Director Lee Won-jik, formerly of Samsung Biologics, who has been reviewing ways to create synergy with external capabilities.

Lotte recently registered "Lotte Biologics" as a trademark, signaling that the business launch is imminent. Under this name, it plans to participate in "BIO USA," the world's largest bio event held in the U.S. next month. Lotte Biologics disclosed its participation in BIO USA and listed its industry as biopharmaceutical contract manufacturing organization (CMO).