Korean analysts said the new U.S. National Biotechnology and Biomanufacturing Initiative will have a limited impact on the Korean bioindustry.

U.S. President Joe Biden signed an executive order entitled "Advancing Biotechnology and Biomanufacturing Innovation for a Sustainable, Safe, and Secure American Bioeconomy" and launched the "National Biotechnology and Biomanufacturing Initiative" on Sept. 12.

The executive order aims to provide support to strengthen U.S. bio-manufacturing capabilities to secure leadership in the bio industry.

The White House provided additional details about the initiative after a meeting with each department on Sept. 14.

The initiative promised funding such as $1 billion to build bio-manufacturing infrastructure for five years, $270 million for research and development of biofuels and compounds for defense purposes, $200 million to strengthen the security of bio-manufacturing infrastructure, $500 million for bio-fertilizer production, $180 million for biomass, waste-using fuel, and material R&D, and $0.4 billion to expand production of active pharmaceutical ingredient, antibiotics, and production key raw materials needed to produce essential drugs and cope with pandemics.

Some Korean media outlets reported that Korean biotech companies might be on their toes as biopharmaceuticals may become next after chips and batteries fall under the U.S. mandate to be manufactured on U.S. territories for incentives in sales,.

Still, local analysts disagreed. 

"Of the additional details provided by the White House, the five-year support for the establishment of bio-manufacturing infrastructure is judged to have the most significant impact on the Korean biopharmaceutical industry," Hana Securities analyst Park Jae-gyeong wrote in a report. "However, considering that the construction cost of Samsung Biologics' 4th plant is about 1.7 trillion won ($1.2 billion), it is difficult to see that the scale of the funding will have an impact on the overall industry."

Park stressed that the executive order applies to items developed in the U.S., and although it may vary depending on what constitutes an item developed in the U.S., it will affect the contract development and manufacturing organization (CDMO) industry.

"However, judging from the information disclosed so far, I believe the short-term impact will be limited as global pharmaceutical companies are outsourcing production to several global CDMOs to stabilize supply and demand.," Park said. "Stable supply is important and rapid reshoring is not easy due to the nature of the pharmaceutical industry, which requires licenses to change manufacturing sites."

Although the specific support plan has yet to be disclosed, it will likely be difficult for the U.S. government to provide incentives to compensate for the cost increase caused by the operation cost of the manufacturing plant, such as labor and utility costs, with the currently disclosed support amount, Park added.

A Shinhan Investment Corp. analyst agreed and said the initiative will have little impact on the biosimilar industry .

"As the initiative did not separately mention regulations on biologics, including biosimilars, considering the characteristics of the biopharmaceutical market and the U.S. government's intention to introduce more biosimilars, the possibility of a negative impact is low," Shinhan Investment Corp. analyst Lee Dong-gun said.

According to Lee, President Biden declared that Americans are overspending on prescription drugs and medical services compared to other countries through the Executive Order on Promoting Competition in the American Economy, in July 2021.

"Biden stressed that such overspending was due to the limited competition or delay in the introduction of generic drugs and biosimilars," Lee said. "In this regard, the U.S. government has announced that it will improve the licensing criteria for biosimilars to be clear, effective, and predictable, while at the same time increasing the understanding of healthcare providers and patients to expand the prescription of biosimilars."

U.S. health officials also said they plan to expand coverage for biosimilars through Medicare and Medicaid, Lee added.

Lee stressed that as the main purpose of the U.S. government's active introduction of biosimilars is to reduce the burden of high drug and medical service expenditure, it is unlikely that the new initiative will include a policy to reduce biosimilar competition.

A third analyst stressed that some companies that already have a U.S. production base, such as SK Group, would benefit greatly from Biden's initiative.

"SK Group's SK Pharmteco is expected to benefit from Biden's initiative due to already having a production base in the U.S.," Yuanta Securities analyst Choi Nam-kon said. "SK Pharmteco acquired AMPAC, a U.S.-based CDMO for active pharmaceutical ingredients (APIs) in 2018."

SK Group has also become the second largest shareholder of CBM, a U.S. CDMO specializing in cell and gene therapy, by investing $350 million through SK Pharmteco, Choi added.

Choi stressed that CBM aims to expand its production facility for cell gene therapy by 2025.