[News Inside Companies] Was It Different Because Samsung Did It?.. Everything About 'Samba' Aiming for an Ultra-Gap

The scene at the groundbreaking ceremony of Samba Songdo Plant No. 4. / Photo by Yonhap News

The pharmaceutical and bio sectors are representative industries with high technological entry barriers. When Samsung declared its entry into this business, two perspectives intersected: Samsung would make a difference, and Samsung might not have a sharp solution either. Although Korea's pharmaceutical industry has a history spanning well over 100 years, it is difficult to say it is at an 'advanced country level,' especially in the field of new drug development. Massive investment, low probability of success, and the difficulty of shortening the time to reach a certain level are phrases that describe the pharmaceutical and bio sectors. Nevertheless, Samsung jumped in, and ten years have passed. Following semiconductors, can Samsung realize top-tier, ultra-gap status in bio as well? And where does the protagonist, Samsung Biologics, currently stand?

Leaped to Global No.1 in 6 Years Since Launch... But the Field is 'Contract Manufacturing'

Samsung Biologics (Samba) started with a single remark from the late Lee Kun-hee, former chairman of Samsung Group. At a Samsung executive meeting held in April 2010 at Seungjiwon in Itaewon-dong, Yongsan-gu, Seoul, Lee said, "Samsung's main products such as smartphones and LCDs can be caught up within 10 years. Therefore, we must discover new sources of growth." Accordingly, the then Samsung Future Strategy Office selected the pharmaceutical industry as one of the five next-generation core businesses and began pushing the business with the group's future at stake.

Major Milestones of Samba

The following April, the Samsung Biologics corporation was established, and within just one month, construction began on the first plant in Songdo, Incheon, with a production capacity of 30,000 liters (ℓ). In October 2013, just over two years after its establishment, Samba signed a production partnership with Roche, a global pharmaceutical giant headquartered in Switzerland, gaining growth momentum. In 2015, the second plant with a production capacity of 154,000ℓ was completed, and in November 2017, the third plant (180,000ℓ) began operations. Within just six years since its launch, Samba had grown into the world's number one bio contract manufacturing organization with a total production capacity of 364,000ℓ.

Surpassing Leading CDMO Companies Through Bold Capital Investment

Samba's core business is the Contract Development and Manufacturing Organization (CDMO) model. This business produces raw pharmaceutical materials, test samples, and commercial pharmaceuticals on behalf of clients needed for next-generation drug development. The business that only manufactures finished products from cell lines provided by clients is called Contract Manufacturing Organization (CMO), whereas CDMO, like Samba, cultivates the cell lines themselves and produces finished products.

CDMO was a blue ocean market even before Samsung declared its entry. As the pharmaceutical industry advanced, not only new drug development but also drug production processes became more complex. Global pharmaceutical giants focused on R&D, reducing their capacity to invest in drug manufacturing plants, and CDMO companies filled this gap. According to market research firm Frost & Sullivan, the global bio CDMO market is expected to grow at an average annual rate of over 31% until 2026, reaching $10.1135 billion (approximately 14.5 trillion KRW).

Recognizing the potential of the CDMO market, Swiss Lonza, German Boehringer Ingelheim, and Japanese Fujifilm entered the business early. Samba started its CDMO business in 2011, making it a latecomer compared to these companies. It was inevitably at a disadvantage compared to leading companies that had already established solid partnerships with large manufacturers.

Samba sought to overcome this weakness through aggressive capital investment. In the past, only Swiss Lonza and Boehringer Ingelheim had global CDMO companies with an annual production capacity of 300,000ℓ. Samba reached a competitive scale by securing over 360,000ℓ of production capacity in just six years, enabling direct competition with these companies.

Samba Sales and Operating Profit Trends

Samba's production capacity earned the trust of global pharmaceutical companies. Last year, it signed a production partnership with Moderna, the U.S. company that succeeded in developing the world's second-ever messenger RNA (mRNA) COVID-19 vaccine. In addition, companies such as Biogen, which develops Alzheimer's treatments, and KAHR Medical, which develops immuno-oncology drugs, have partnered with Samba.

Along with increased production capacity, performance also improved rapidly. In 2017, Samba's sales were only 464.6 billion KRW with an operating profit of 66 billion KRW, but just four years later, last year, it achieved sales of 1.568 trillion KRW and an operating profit of 537.3 billion KRW.

Securing 30% of Global Production Capacity with the Operation of the 4th Plant

Meanwhile, from the 1st of this month, Samba's Songdo 4th plant began partial operations. The 4th plant, with a production capacity of 240,000ℓ, is the world's largest single pharmaceutical plant, and combined with the 1st, 2nd, and 3rd plants, the total production capacity reaches 604,000ℓ. This accounts for 30% of global bio contract manufacturing capacity, and Samba is expected to surpass leading companies to hold the world's number one production capacity.

Samsung Biologics (Samba) Incheon Songdo Plant 3 Exterior / Photo by Samsung Biologics Website Capture

The world's largest production capacity is significant as it serves as a stepping stone for Samba to expand its business area beyond contract manufacturing to drug development. In January this year, Samba acquired all shares of Samsung Bioepis, a pharmaceutical R&D company jointly established with Biogen in 2012, and incorporated it as a subsidiary in April.

Samsung Bioepis specializes in the research and development of biosimilars (generic drugs modeled after patented medicines whose patents have expired). Biosimilars have similar quality and efficacy to original drugs but can significantly reduce R&D costs and development time, making them a new growth engine in the pharmaceutical market. Since Samba's major clients, large pharmaceutical companies, mainly focus on new drug development, there is little concern about conflicts arising from Bioepis's generic drug business.

Samba can operate a 'two-track strategy' by maintaining partnerships with global pharmaceutical companies through its massive production capacity while simultaneously producing Bioepis's generic drug products, thereby dominating both the general pharmaceutical contract manufacturing market and the generic drug development and manufacturing business.

When Will It Become a Leading New Drug Developer?

Whether Samba will be recognized domestically and internationally for elevating Korea's pharmaceutical and bio industry level depends ultimately on new drug development. Global leaders such as Pfizer, Moderna, Roche, and AstraZeneca all develop new drugs, file patents, and generate enormous profits based on their exclusivity.

New drugs can monopolize the market until patent expiration, yielding significant profits, but they are 'high-risk, high-reward' businesses requiring massive research funding and time investment. Big Pharma companies worldwide, with thousands of PhD-level researchers and research lab networks in various advanced countries, have the capacity and stamina to open multiple new drug pipelines simultaneously. For example, last year, Pfizer invested 17% of its sales in R&D, Roche spent 23%, and AstraZeneca's R&D expenditure reached over a quarter of its sales at 26%.

More than 2,000 researchers are engaged in new drug development at AstraZeneca (AZ)'s global headquarters in the UK. Last year, AZ invested $9.7 billion (approximately 13.9 trillion KRW), which is 26% of its sales revenue, in new drug research and development. / Photo by AZ website capture

In contrast, Samba's R&D accounted for only 5.9% of sales in 2021, and its scale is still insignificant, making it not yet competitive with so-called Big Pharma companies. This is also a limitation of Samba's business model, where factory and facility investments must be prioritized to increase contract manufacturing orders.

However, since Samba's long-term business goal is also new drug development, it is premature to draw conclusions. Celltrion, which entered the biosimilar business earlier than Samba, is challenging new drug development by conducting joint research with overseas companies experienced in new drug discovery and clinical trials.

Samba is also pursuing a similar strategy to Celltrion. Together with Samsung C&T, it has established a 150 billion KRW 'Life Science Fund (SVIC 54th New Technology Investment Association)' to scout new drug development companies in advanced pharmaceutical countries. In March, it made its first investment in the U.S. gene therapy developer 'JAGUARIN Therapy,' and last month, it invested $15 million (approximately 21.5 billion KRW) in 'Senda,' a bio-tech company applying artificial intelligence (AI) technology to create optimized drug delivery systems.

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