[Column] 'Restructuring' in Pharmaceutical and Bio Industries: What Must Not Be Overlooked

COVID-19 was a golden era for the pharmaceutical and bio industries. The unprecedented crisis highlighted the importance of the healthcare sector, and the names of pharmaceutical companies, unfamiliar to many, became widely discussed. Where words gather, money follows. Investments surged, and the technological capabilities of small and medium-sized biotech firms also gained attention.

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However, as the pandemic ended, the good times disappeared. The excessively expanded pipeline (new drug development projects) became a burden for companies, and frozen investments dried up their financial resources. Traditional pharmaceutical companies such as Ildong Pharmaceutical, GC Green Cross, and Yuyu Pharma are also undergoing restructuring.

This situation resembles that of the shipbuilding industry seven years ago. Korean shipbuilding was a cornerstone of the Korean economy. It experienced a great boom in the early 2000s, but when the global financial crisis hit, the low-price orders made under intense competition became a burden, and the rapid growth of competitors like China quickly pushed the industry to the brink of collapse. Tens of thousands of people left their companies, and tens of trillions of won in public funds were injected.

The shipbuilding industry today is different. Seven years later, the industry is experiencing a ‘renaissance’ with consecutive reports of returning to profitability. This is because Korean shipbuilders, who possess outstanding technology in liquefied natural gas (LNG) carriers?whose demand is rapidly increasing due to environmental regulations?are being sought after again. Steady research and development (R&D) has laid the foundation for this recovery.

In pharmaceuticals and bio, R&D determines life or death. Developing a new drug requires at least ten years of long-term investment, yet the success rate is only about 10%. Being ‘high risk, high return,’ the domestic industry has relatively neglected it. Despite investing over 20% of annual sales in R&D, Ildong Pharmaceutical ultimately chose restructuring due to delays in approval of its oral COVID-19 treatment ‘Zocova.’

On the other hand, some companies still find favorable winds in the cold wave through large-scale technology exports. Chong Kun Dang, which has invested more than 12% of its sales in R&D, exported rare disease treatments worth a total of 1.7 trillion won to Novartis, and Orum Therapeutics, which has continued developing new platforms, achieved a technology export deal with big pharma Bristol-Myers Squibb (BMS) with an upfront payment of 130 billion won. The solution is proof that steady R&D is key.

The solution that revived the shipbuilding industry, which was once in crisis, was ultimately technological capability. This is a lesson that the struggling pharmaceutical and bio industries must never miss.

Lee Chun-hee, Bio, SME and Venture Business Department Reporter