[New Wave] Korea-style Open Innovation-based Global New Drug Development

The world’s top 50 pharmaceutical and biotechnology companies dominate and lead the global pharmaceutical market based on innovative technologies. To reach this level, sales must exceed 3 trillion won. Blockbuster new drugs generating sales of over 1 trillion won are essential. This is why Korean companies also need a successful model of possessing blockbuster drugs through global new drug development.

New drug development has a ‘high risk-high return’ structure. In this context, an important strategy in the pharmaceutical and biotechnology sector is open innovation. This corporate innovation strategy involves opening up the entire innovation process?from research and development to commercialization?to utilize external resources, thereby reducing innovation costs, increasing the likelihood of success, and maximizing value creation.

A representative form of open innovation is technology transfer. According to statistics on new drugs approved by the U.S. Food and Drug Administration (FDA), 74% of cases involve different patent holders and approval holders. In other words, more than 70% of new drugs change hands during the development process, and approvals at the final stage are based on open innovation. It is practically difficult for a single company to bear the long time and enormous costs involved in new drug development.

Korean companies are also keeping pace with this global trend of open innovation, breaking records in overseas technology export amounts every year. Last year, exports exceeded 10 trillion won, and this year, just in the first half, exports surpassed 6 trillion won, predicting that technology exports will exceed last year’s figures. Although there are frequent cases of discontinuation or withdrawal during the development process due to the nature of new drug development, the accumulated exported technologies increase the probability of possessing blockbuster new drugs.

So, what is the Korean-style open innovation model? The successful technology export by Yuhan Corporation and Bridge Biotherapeutics is a representative success case based on the three-party division of labor model. The three-party division of labor model forms a cooperative and division of labor structure among universities, government research institutes, venture companies, and pharmaceutical companies, with technology transfer to foreign pharmaceutical companies occurring after the mid-stage clinical trials.

To activate this Korean-style open innovation three-party division of labor model, not only the efforts of companies but also the government’s role is important. Expanded specialized research and development support is needed for new drug candidates transferred from domestic universities or bio ventures to domestic companies. Specialized government research and development program policy support is required to assist clinical trials and other activities for new drug candidates with technology transfer contracts between technology providers and adopters.

Tax support for overseas technology exports as well as domestic ones is also necessary to back the open innovation strategy in new drug development. Examples include tax reductions on rental income from patents for small and medium-sized enterprises under the current Restriction of Special Taxation Act. Although this system was scheduled to expire at the end of this year, fortunately, the government expanded the target from small and medium-sized enterprises to medium-sized enterprises and extended the system until the end of 2023 through tax reform on the 3rd of this month.

We need a successful model of being among the world’s top 50 pharmaceutical and biotechnology companies. To this end, it is necessary to broaden the support targets to include innovative pharmaceutical companies under the Pharmaceutical Industry Promotion Act and for the government to consider supporting pharmaceutical research and development and the commercialization of unused technologies, including overseas technology exports.

Jung Yuntaek, President of the Pharmaceutical Industry Strategy Institute

This content was produced with the assistance of AI translation services.