Samsung group diversified into the pharmaceutical sector in 2011. Now, it’s mobilising its expertise in semiconductor making.
The Samsung brand is best known for its smartphones and wide-screen TVs. Yet behind the scenes, the conglomerate is also making a name as a contract manufacturer of complex medicines to treat diseases like cancer. On a piece of reclaimed land along the western coast of South Korea, Samsung BioLogics is building a $740 million factory that will give it the capacity to become the No. 1 producer by volume of a class of drugs called biologics, many of which are derived from mammal cells. The Samsung group diversified into the pharmaceutical sector in 2011. Now, it’s mobilising its expertise in semiconductor making and engineering know-how to make the way biologics are produced on behalf of Big Pharma more efficient. The market for biologic medicines, which are used for everything from cancer to arthritis, is projected to exceed $223.7 billion by 2021, according to a Bloomberg Intelligence analysis.
Being a force in biologics is crucial to Samsung — and South Korea. Galaxy smartphones and other consumer electronics face intense competition from Apple and Chinese brands such as Huawei Technologies, and the chaebol is grappling with the arrest of de facto leader Jay Y. Lee in a scandal that brought down the country’s former president. Meanwhile, the broader economy needs new industries as shipbuilding and heavy manufacturing slow. If the past 40 years of global economic growth were fueled by technology, said Kim Tae-han, chief executive officer of Samsung BioLogics, the next will be fueled by where that converges with health care.
In an interview at company headquarters in Incheon, Kim said he is preparing to ramp up production and is in negotiations for more than 15 new contracts. The Samsung board gave him the green light and $2 billion to start the business about six years ago. Yet, on the strength of demand and business performance, “I’ve already spent $3 billion!” Kim said. Sales totalled 107.6 billion won ($96 million) in the first quarter, a 2.1% increase from a year earlier, though the unit still posted a net loss.
More than 2,000 construction workers — most with experience building semiconductor facilities — are buzzing around the factory site about an hour’s drive from Seoul. It is called Edison and is the company’s third drug facility. Its five floors encompass 112 feet, making way for custom-made vats that are so big some shoot through several floors. Biologic drugs are grown from cells. That necessitates a more complex manufacturing process than typical pills — a mixture of chemicals — but makes biologics more effective and capable of being targeted toward certain diseases.
Building a biologic plant is similar to one for semiconductors. There are clean rooms that cannot tolerate dust or other contamination, so Edison is being built without nuts or bolts to prevent any drilling. As such, everything is welded and tilted to fit together. One day, Kim said, “contract manufacturing” could extend to helping clients build the factories. “We know how to optimise that process,” Kim said, citing the experience in semiconductors. “We could be competitive in quality, speed and cost.”
Samsung already is a contract manufacturer for some blockbuster drugs, including for Switzerland’s Roche Holding and the US’s Bristol-Myers Squibb. It will take three years for the plant to ramp up to full capacity after being completed this year and opening at the end of 2018, Kim said.