February 15, 2009 (Vol. 29, No. 4)
Robert Yuan, Ph.D.
The Industry in This Country Is Slowly Being Transformed by Wise Use of Public Funding
The development of a biotechnology industry has been a priority of the Korean government for awhile, as outlined in the January 1 issue of GEN. In the process, the emphasis has moved from the chaebols, a South Korean form of business conglomerate, to new start-up companies. According to the Korea Bioventure Association, the domestic biotechnology market is split into biopharmaceuticals (35%), biochemicals (30%), biofoods (20%), and others (15%).
Government action has been the driving force for restructuring the pharmaceutical industry and making biotechnology the basis for new business activities and firms.
Diversification of the Chaebols
Encouraged by the government, the chaebols took an early lead in biotechnology. Some of the largest investments have been made by CJ (formerly Cheil Jedang), LG Life Sciences (LGLS), and SK Pharma. While most of the funds have gone into firms that are part of the conglomerates, some of the money has been used for new start-up firms.
CJ was originally part of the Samsung group, the largest of the chaebols and a leading global electronics firm. It has many of the characteristics of a business in a traditional conglomerate. The company split off from Samsung in 1995, though the firms have remained close.
CJ has two profit centers—food and pharmaceuticals. Its capabilities in fermentation technology have made it a leading producer of food flavorings and animal feeds. In addition to Korea, it has major feed-additive production facilities in China and Indonesia, and is establishing one in Brazil. CJ’s R&D Center for Bioproducts carries out studies on the genomics of microorganisms and develops high-yield strains while pursuing research in process technology and bioengineering.
Research in drug development is carried out at CJ Pharmaceutical Institute. Recently, the company entered into a material transfer and technology evaluation agreement with Forticell Bioscience. As part of the agreement, it will explore the use of Forticell’s fibrin microbead technology for extraction and expansion of mesenchymal stem cells. These cells have the potential for in vivo treatment to regenerate or repair damaged or diseased tissues.
LG Life Sciences became one of the companies of the LG Group in 2002, one of the principal chaebols in electronics and chemicals. LGLS was one of the first Korean companies to apply genetic engineering to the production of a variety of bioproducts. LGLS has been active in establishing agreements worldwide. It has a distribution agreement with Sinovac for its hepatitis B vaccine in China, and a copromotion agreement with Sanofi-Aventis Korea for Stilnox/Ambien.
LGLS is expanding its efforts on nephrology and endocrinology in India and plans to add manufacturing and R&D capacity there. The firm also has a global licensing and research collaboration with Takeda for LGLS’s program on antiobesity drugs.
SK Pharma is part of the SK Group, the third largest chaebol. The Group’s core business is energy production and distribution, though it has made a major drive into biotechnology.
SK has three major R&D centers—Daedeok Science Town, New Jersey, and Shanghai. Its Shanghai Institute of Technology carries out research into new drugs based on traditional chinese medicine. SK uses its strengths in combinatorial chemistry, genomics, and drug target identification to generate candidate compounds for the treatment of neurologic and metabolic diseases, asthma, pain, and inflammation.
Change Comes to the Industry
The Korean pharmaceutical industry consists of some 2,000 companies. About 60 of the 550 companies that manufacture pharmaceutical products are considered to be conventional drug firms, and there are roughly 20 that are venture-funded start-up biotech firms. The output of the industry consists of nutritional supplements, active pharmaceutical intermediates, generics, pharmaceuticals, and biotech drugs.
The industry is undergoing drastic change as it moves away from the lower value products (e.g., generics) toward new drugs and biotech. One exception is novel medicinals based on traditional Oriental formulations.
The transformation of the pharmaceutical industry is illustrated by the following two companies, which have used biotechnology in different ways to reinvent themselves.
Dong-A Pharmaceuticals is a major pharmaceutical company in Seoul. Its growth has been fueled by new biotech products. The company has made gains in generic versions of Plavix and Norvasc and is launching new generic versions of Lipitor, Zocor, and Aricept.
Dong-A is pursuing a multipronged strategy that includes recombinant drugs, generic drugs in major disease categories, and the development of novel formulations based on herbal and plant materials. Many of these products are directed toward the rapidly growing Chinese market.
Korea Green Cross was established in 1970 for the production of plasma products, and its technology was based on processing and fractionation. Green Cross’s first biotech product was a hepatitis B vaccine developed in a joint venture with Rhein Biotech.
The company has three research facilities. The Mokam Life Sciences Research Center is the collaborating center with WHO and is responsible for long-term research, particularly in new materials. The General Research Center is responsible for short/midterm research that entails the scale up of research done at the Mokam Life Sciences Research Center. The work focuses on improving the efficiencies and yields in production as it relates to plasma products and vaccines.
The Mogam Biotechnology Center was established in collaboration with the Minister of Science and Technology as a private research institute. Its focus is on immunology directed toward vaccines against epidemic hemorrhagic fever, chicken pox, typhoid, and breast cancer. Work is also being done on immunotherapeutic agents against osteoporosis and cytotoxic T lymphocytes.
Brave New World of VCs
Government policy has promoted the creation of start-up companies with the intention of expanding research and technological innovation. Aside from drug development, the interest in stem cell research has led to the use of cell technology for novel therapeutic approaches. Genomics and information technology have also been key areas with the potential for new diagnostics and devices.
Macrogen is among the earliest biotechnology companies, having been established in 1997, with a focus on genomics applications.
The company has developed and marketed a series of product lines including the MacArray Express Oligochip for determining the degree of gene expression, and the MacArray Karyo for identifying chromosomal aberrations. It also designs and produces MacProbe products to assay for specific sequences.
In addition to its products, the company provides a variety of services such as sequencing and gene knockout. Macrogen has created a number of research institutes designed to support its services and technological base, such as the Life Science Institute, which has sequenced the Zymomonas mobilis genome (this microbe is one of the most efficient ethanol producers), the Bioinformatics Research Center, and the LentiVector Institute, which develops lentiviral vector systems for gene delivery both in vivo and in vitro.
Hans Biomed was established in 1993. In order to expand its activities, it built the Hans DaeDeok Institute (HDI) in June, 2002, combining both research laboratories and production lines. Hans has invested $1.2 million in two research institutes, HDI and the Hans Institute of Tissue Engineering (HITE), and cooperates with the animal cell engineering lab at KAIST (Korea Advance Institute of Science and Technology).
Hans uses its tissue-engineering technology for products such as human-based skin and bone grafts, soft tissue restoring injectable products, active medical ingredients, and silicone polymer products.
Sewon Cellontech was established in 1971 and applies cellular- and tissue-engineering technologies to medical treatments. Cellontech has three core businesses: chemical production, precision mechanics, and bioengineering. It has expanded its business by seeking partners for its regenerative medical system.
Tego Science specializes in artificially cultured skin and uses its cultured skin technology in three applications: regenerate damaged or diseased skin, test drugs and cosmetics, and bank keratinocytes from an individual for possible future use.
MyGene produces DNA chips that are used for early cancer diagnosis, and for life-style management for those with chronic diseases such as diabetes, hypertension, osteoporosis, hyperlipidemia, obesity, and also life-threatening common cancers.
Korea boasts a powerful industrial infrastructure that includes some of the world’s most important conglomerates. The country has a skilled and educated work force. Government action has been the driving force for restructuring the pharmaceutical industry and making biotechnology the basis for new business activities and firms.
Master Plan
The master plan described in BioVision 2016 (detailed in the January 1 GEN article), is highly ambitious and complex, requiring the creation of a sophisticated research base that leads to new products and processes based on interdisciplinary science. Commercialization is tied to regional development in the form of bioclusters, and flexible financing would be forthcoming with the advent of venture capital funds.
Being able to achieve these goals, however, is largely dependent on the acquisition of the necessary science, the availability of investment capital, and perhaps most significantly, a large pool of entrepreneurial biologists and managers to lead the myriad components of such a complex construct.
The data indicates that most revenues are generated by commodity products such as food additives and early biotechnology products (i.e., vaccines, hormones). Many of the companies combine regular manufacturing with high-tech products (e.g., cell therapy, biochips). While necessary for financial reasons, it is not obvious that there is a Korean company that is a successful business model for biotechnology.
A number of Koreans familiar with the biotech industry have the view that it needs to become more global. Such a strategy would require a move away from the domestic market and the exploitation of the important Chinese and Japanese markets. Manufacturing capabilities, expertise in cell and tissue engineering, and contract services provide opportunities for U.S. companies particularly if used for international markets. Strategic alliances with multinational corporations and foreign biotechnology companies would play an important role in providing needed financing and modern technologies.
Robert Yuan, Ph.D. ([email protected]), is professor emeritus of cell biology and molecular genetics at the University of Maryland in College Park.
