Practically every pharmaceutical company CEO outlines his or her aspirations for the New Year with phrases like “innovative new drug” and “global pharmaceutical company.” And some deliver on this promise to develop new drugs and sign technology export contracts.
Does that mean Korean pharmaceutical companies are on track to become global players?
At least one expert does not seem to think so.
Lee Sang-ho, program director of biomedicine at the Korea Evaluation Institute of Industrial Technology (KEIT), believes that for the Korean pharmaceutical industry to go global, it must create a virtuous cycle and support everything, from drug development to technological industrialization.
Lee emphasizes the need for executives to pursue M&A of bio-ventures with superior technology boldly. Through its affiliation with the Ministry of Trade, Industry, and Energy (MOTIE), KEIT specializes in the planning, evaluation, and management of research and development projects.
After serving as a researcher for Yuhan Corp., Lee worked as the head of Daewoong Pharmaceutical’s new drug center. He has been responsible for planning and managing R&D assignments at KEIT’s bio-department jointly with MOTIE since July 2016, handling about 130 projects currently.
The Korea Bio Medical Business Review recently met Lee to hear about his broad perspective on both the government and private sector, and share his acumen about the strengths and weaknesses of Korea’s biotech industry.
|Lee Sang-ho, program director of Bio Medicine at the Korea Evaluation Institute of Industrial Technology (KEIT), talks about the industry's problems at his office in a recent interview with The Korea Biomedical Review.|
Question: What does a biopharmaceutical project manager do?
Answer: KEIT supports 19 strategic sectors, which are part of projects funded by MOTIE’s 1.5 trillion won ($1.3 billion) R&D budget. In addition to appointing experts, the program director’s job is to plan, evaluate and manage budget tasks and programs.
Q: What is MOTIE’s perspective on the biotech industry?
A: Almost every government department is talking about the fourth industrial revolution, and biotech is at the core of that conversation. MOTIE, of course, is championing biotech and recognizes the importance of fostering it industrially. Mainly, we’re dealing with R&D programs and policies that support industrial growth.
Korea’s biotech market accounts for only 2 percent of global markets. We are not struggling to promote the domestic industry just to maintain this 2-percent share. Ultimately, we need to expand the market itself. Promoting biotech for the sake of social well-being has its limitation. We need to cultivate biotechnology as an industry of its own.
Q: Lately, Korea has been doing well regarding new drug development and technology exports. What should the nation do for improving the situation further?
A: Korea has Samsung for semiconductors and Hyundai for automobiles, but the nation still has no market leaders in the biotech industry. The reason for this partly has to do with policy, but mostly it’s because pharmaceutical companies remain just content with producing generic drugs. It takes a long time to develop new medicines, and it’s difficult to guarantee success, so the generic industry is very alluring.
There’s a big difference between market leaders and followers. Of course, Hanmi Pharm and Celltrion have done well, but we can’t call them star companies just yet. Leading the market through innovation is necessary. It’s only through innovation that we will expand our market share from 2 percent to 10 percent.
Q: How do you define a star enterprise in the bio industry?
A: There are no pharmaceutical companies in Korea that generate 1 trillion won ($884 million) in sales. Although Yuhan Corp., Hanmi Pharm, and Green Cross say they have reached the sales landmark, they attained this volume through “commodities” (selling new drugs via partnerships with multinational pharmaceutical companies) “not products.” No one is genuinely generating the annual sale of 1 trillion won. A star enterprise should make at least 10 trillion in sales.
Additionally, a market leader must have its exclusive signature item. AstraZeneca hadn’t been a world-renowned pharmaceutical company until it developed the gastric ulcer treatment Nexium (Esomeprazole Magnesium) and leaped to one of the top-10 companies worldwide. Similarly, Gilead Sciences is a global player, even though it has only four new drugs. Ultimately, you need to have a signature item of your own.
Q: What do we need to do to create a star company?
A: We should pursue M&A more vigorously. Korean pharmaceutical companies rarely do M&A’s. Even the U.S. pharmaceutical giants are doing them now, outsourcing and importing technology to boost productivity in developing new drugs since the late 1990s. M&A doesn’t mean just buying out a company but purchasing the platform technology.
Currently, more and more Korean bio ventures have good platform technology. Therefore, domestic companies need to pursue M&A boldly.
However, they are still stopping at making equity investments. But this will not get us very far. If you don’t like the investment, you can dispose of it. But if you commit yourself to M&A, you might see different results. The emphasis on innovative new drugs or R&D comes from within a pharmaceutical company through its CEO’s strategic vision or motto. When we look at outcomes, however, how much innovation takes place? They don’t take risks because they’ve yet to experience the benefits of doing so.
Q: How can we invigorate M&A?
A: Ultimately, it’s up to executives. The biggest problem is that decision-makers don’t take risks, which is a leadership problem at the top. There aren’t many managers who embrace failure and support a risk-taking culture. That said you can’t get ahead if you don’t lead the industry.
Q: Is there anything the government can do to help with M&A’s?
A: The government should leave M&A’s the market. It should focus on bringing good technology to the market, and help raise prices for sellable technology.
Q: What R&D programs is KEIT conducting to promote the virtuous cycle of an ecosystem?
A: By nature, biotechnology is a long-term area, so the cyclic processes of start-up to technology transfer and industrialization is having trouble picking up speed on its own. To improve this situation, we are carrying out the Promising Biotech IP (Intellectual Property) Industrial Promotion Project, which will establish an open innovation ecosystem where companies can develop their IP products.
That is the second half of our solution to support the development of new drugs. Before that, the Early Biotechnology Cultivation Fund provided 38.5 billion won ($34 million) to help companies suffering from financial difficulties during the start-up phase.
Also, we created a new program to support start-up companies. This program makes Series-A funding available to innovative technology (the first step in getting investments from venture capital firms). It usually takes about two years to receive this funding. Even when biotech investment is booming, things aren’t easy.
To compensate for that, we are preparing another program for any firm less than 3-years old that hasn’t received Series-A funding. It will support R&D spending necessary to receive Series-A funding without equity participation. This way, MOTIE's bio R&D program will help the entire new drug development cycle.
Q: Starting this year, MOTIE decided to discontinue its annual evaluation of R&D support companies.
A: This is the most dramatic change to take place during the recent restructuring of the R&D system. To put it simply, if there is a five-year, 5 billion-won project, it will become a contract of five years without an annual evaluation. It’s our intention to reduce administrative and non-administrative burdens as there is no need to write a contract every year and receive annual assessments. Instead, we will select candidates for support based on more stringent criteria, of course, and grasp research progress more thoroughly through workshops. The reorganization also includes an effort to prevent the selection of candidates who are just glib promoters of their plans and focus on those with real research skills.
Q: What do you recommend for businesses that hope to be selected for MOTIE’s research projects?
A: You need to know what the request for proposals (RFP) in the research project announcement means exactly. The RFP lists the minimum requirements that you must satisfy. You can’t interpret the RFP as you wish. As obvious as it may sound, quite a few people interpret it however they want and fail to make the cut. It’s also important to have a team that supports the task. You need clearly delineated roles and teamwork to enhance the group’s overall research ability.
Q: What was it like to leave the pharmaceutical industry for a government agency?
A: I came to KEIT because it allowed me to do better evaluation work than I could do in the private sector. When I was in the private sector, I got involved in various fields of research, development, and production. I found it happy to get involved and help bring unfinished work to completion. But that’s what a program director does exactly. We provide project planning and advice. You also learn a lot. I feel like I have a wider perspective on biotechnology as a program director. It’s also rewarding to have a platform from which to promote the biotech industry.
Lastly, it’s good to hear stories about how things are going.
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