Challenge of the Domestic Pharmaceutical Industry in the Global CDMO Business [AK Radio]

The domestic pharmaceutical and biotech industry is accelerating its efforts to target the Contract Development and Manufacturing Organization (CDMO) market. With not only large corporations but also traditional pharmaceutical companies joining in, movements toward global market entry are gaining momentum. Especially with the rapid growth of the biopharmaceutical market and the increasing importance of CDMO, attention is focused on the market entry strategies of domestic companies.

CDMO refers to a service that undertakes the development and manufacturing processes of pharmaceuticals on behalf of pharmaceutical companies. Unlike conventional chemically synthesized drugs, biopharmaceuticals have very complex production processes and require stringent cleanroom management, increasing the necessity for contract manufacturing. In particular, clean facilities comparable to semiconductor factories are required, and it is challenging to produce 100% identical products during the manufacturing process. In fact, about 50% of the global production volume of cell therapies and gene therapies is produced through CDMOs, and approximately 20% of all biopharmaceuticals are manufactured via the CDMO model.

Samsung Biologics, the leader in the domestic CDMO market, is showing remarkable achievements in the global market. It currently has an annual production capacity of 600,000 liters and plans to expand this capacity to 780,000 liters by 2025 and 1.32 million liters by 2032. This will be the world's largest production facility, and recently, it signed a contract worth 1.7 trillion KRW for contract manufacturing, proving its competitiveness in the global market. Samsung Biologics is particularly targeting large-scale biopharmaceutical contract manufacturing for global big pharma companies and is continuously investing in facility expansion to achieve this.

Lotte Group is also accelerating its entry into the CDMO market, positioning its bio business as a future growth engine. Lotte Biologics is constructing a 120,000-liter factory in Songdo, Incheon, aiming for operation by 2027. Additionally, it operates a local CDMO business by acquiring the production facility of multinational pharmaceutical company BMS in Syracuse, New York. This serves as a strategic foothold for global market entry and is expected to become a key base for expanding into the U.S. market in the future.

Traditional pharmaceutical companies are also actively entering the CDMO market. Celltrion plans to establish a dedicated CDMO subsidiary within this year and build a production facility with a capacity of 180,000 liters. This is 50% larger than Lotte Biologics' Songdo plant, demonstrating Celltrion's strong commitment to the CDMO business. Daewoong Bio, a subsidiary of Daewoong Pharmaceutical, has completed a bio factory in the pharmaceutical cluster of Hyangnam District, Hwaseong City, Gyeonggi Province, and entered the CDMO business, while Dong-A Pharmaceutical's ST Pharm has already started CDMO operations. Hanmi Pharmaceutical has also declared the CDMO business as its next-generation growth engine and is preparing to enter the market.

These traditional pharmaceutical companies are approaching the market with strategies differentiated from large corporations. Hanmi Pharmaceutical, Daewoong Pharmaceutical, and Dong-A Pharmaceutical all have the advantage of producing active pharmaceutical ingredients (APIs) in-house, and are expected to target the niche market of contract development and manufacturing of APIs. This approach differs from large corporations that focus on mass production of finished drugs, representing a strategy that leverages each company's expertise.

The global CDMO market is a promising sector expected to grow at an average annual rate of over 14% from 2023 to 2029. Currently, the market is led by companies such as Lonza from Switzerland, Catalent from the U.S., Thermo Fisher from the Netherlands, WuXi Biologics from China, and Daiichi Sankyo from Japan. Lonza, in particular, operates in over 100 countries and leads the market, making it a benchmark for domestic companies.

The biggest challenge in entering the CDMO market is the unique practices of the pharmaceutical industry. Companies that produce finished drugs tend to avoid CDMO businesses due to concerns about technology leakage. This is similar to how Apple does not outsource smartphone production to Samsung Electronics. To address this issue, Samsung adopted a strategy of separating Biologics and Bioepis operations. Bioepis develops biosimilars, and Biologics undertakes contract manufacturing, thereby dividing the business.

Currently, most domestic companies' CDMO businesses are focused on CMO (contract manufacturing) services, but there is a growing movement to expand into contract services during the drug development stage. This signifies a leap beyond simple manufacturing to becoming a partner with technological capabilities. It is a time when strategic approaches that leverage each company's strengths while considering the pharmaceutical industry's practices and characteristics are necessary.

The CDMO industry is establishing itself as a new growth engine for the pharmaceutical and biotech sectors. As domestic companies approach the market with differentiated strategies that utilize their unique characteristics and strengths, future achievements in the global market are anticipated. For successful market establishment, clear business area distinctions, continuous technological advancement, and the building of global networks are expected to be essential. Especially as the biopharmaceutical market continues to grow, the expansion of domestic companies' CDMO businesses is expected to lead to strengthened global competitiveness.

Editor's Note

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