Growth in Health Industries Such as Pharmaceuticals and Medical Devices Slows Slightly... Will Government Support Serve as a Catalyst?

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[Image source=Yonhap News]

The scale of the health industry, including pharmaceuticals and medical devices, continues to maintain an upward trend, but the rate of increase has slowed due to the endemic phase of COVID-19. The industry expects that the government's commitment to fostering the pharmaceutical and bio industries as global powerhouse sectors will bring momentum to the previously stalled growth.

The Korea Health Industry Development Institute announced the business performance of publicly audited companies in the health industry, including pharmaceuticals and medical devices, for the third quarter of 2022 on the 2nd. The sales growth rate for the third quarter of last year was 3.7%, a decrease in the growth rate compared to the previous quarter (8.3%). By industry, the growth rate for pharmaceuticals decreased slightly from 13.0% to 12.9%, and for medical devices, it dropped significantly from 15.9% to 1.4%. Both large enterprises (6.5%→3.7%) and small and medium enterprises (14.5%→3.9%) saw a contraction in growth rates. Accordingly, the total asset growth rate of publicly audited health industry companies also declined somewhat to 3.2% compared to 4.6% in the same period last year. The pharmaceutical and medical device sectors view this trend as a natural progression following the end of the COVID-19 special demand effect.

Amid this slowdown in growth, President Yoon Suk-yeol emphasized on the 28th of last month that the biohealth industry should be developed into the "second semiconductor industry," raising expectations within the industry that this could serve as a catalyst to expand their scale.

The government announced the "Biohealth New Market Creation Strategy," proposing plans to develop two blockbuster new drugs within five years and to double medical device export volumes. It plans to invest 2.2 trillion won in the national new drug development project by 2030 and establish a mega fund of 1 trillion won for global expansion. Additionally, to increase medical device exports from $8.6 billion (approximately 11.32 trillion won) last year to $16 billion (approximately 21.06 trillion won) by 2027, the government will support technological advancement in key export sectors such as diagnostic imaging and in vitro diagnostics, and promote strategic investments to capture markets in promising fields like digital health. Plans also include creating a Korean version of the Boston cluster and establishing a Korean-style Advanced Research Projects Agency for Health (ARPA-H).

Meanwhile, the debt ratio of publicly audited health industry companies in the third quarter of last year remained steady at 44.3%, the same as the previous quarter. This financial structure is more stable compared to the manufacturing industry average debt ratio of around 70%. The debt ratio for pharmaceuticals rose from 51.6% to 52.5%, while that for medical devices fell from 44.8% to 42.0%.

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