Open Innovation: The Fast-Track To Global Pharma Power For Korea?

South Korea has many novel pipeline drugs and outstanding technology, but most of these assets are in the early stages of development and are usually licensed out to third parties rather than development being completed by originators.

"The reality is frustrating. How can we create blockbusters by going all the way? We only have a few pharma firms that exceed annual sales of KRW1tn [$879.8m]. We don't have capacity to conduct clinical trials or market drugs in global markets by ourselves," Hee-Mok Won, chairman of the Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA, formerly the KPMA), told a recent forum in Seoul.

Many agree that the South Korean pharma industry has outstanding infrastructure in clinical trials, good technology, and a strong workforce. The country is seen as a key location for global clinical trials, and of the 7,000 novel drugs in the pipeline worldwide, 1,000 are from South Korea. However, the country accounted for only 1.8% of the total global pharma market in 2015.

In terms of economies of scale, South Korea is still far behind. While multinational pharmas can invest 20-30% of their revenues in R&D, domestic firms are having a tough time allocating more than 10%. Of the country's 28 novel drugs developed so far, none of them can be viewed as blockbusters.

Policy Support, Role Models

The KPBMA chairman stressed the government's role in growing the pharma and biotech industry.

"[Newly elected] President Moon Jae-in has to declare that the pharma industry is the country's future growth engine industry. We need a ‘bucket of water’ that can become the primer," he said. "This is the right time as we have the infrastructure."

Many global big pharmas are exploring South Korea's novel drug pipelines for licensing-in opportunities, but the country needs to take control of the development and go to the finish line. In order to achieve this, Won proposed that South Korean companies take a two-way, open innovation approach.

In the first stage, domestic firms, academia, researchers, and government should collaborate to develop South Korea-oriented technology. Then, the country must attract foreign companies to jointly research and develop this technology in a global open innovation system.

He cited global blockbuster drug Opdivo (nivolumab) as an example. Development of the PD-1-targeting product involved various collaborations among parties including Japan's Ono Pharmaceutical Co. Ltd., Kyoto University in Japan, and Bristol-Myers Squibb Co.

He also suggested that South Korea should benchmark Belgium, where the government has provided significant tax incentives and simplified administrative processes to attract multinationals.

As a result, 29 of the top 30 global pharma companies are conducting joint research or development in the country rather than just licensing in drug candidates from local partners.

"It will take too much time for South Korean companies to have the capacity to conduct global clinical trials and marketing by themselves. We need to create an environment that can induce global pharmas to come to Korea and work together. Rather than seeking out-licensing, we need a strategy that enables us to reach the stage of global marketing and maintain our rights, while learn know-hows of advanced countries," he proposed.

"Global open innovation. This is the fastest way for South Korea to become a strong pharma nation. We need to become a novel drug development hub in Asia as Belgium is in Europe."

Focusing R&D, Strategy

Samsung BioLogics vice president Hoyeol Yoon noted that South Korea has too many diverse and scattered drug pipelines given the scale of investment.

South Korea's R&D spending accounts for a tiny portion of that of global pharma firms, so the economy of scale is poor. As it is difficult to trim costs for the global development of a novel drug, the country needs to create such portfolios appropriately, but at present they seem to be scattered too much, Yoon told the forum.

The country also lacks synergies in capital, technology, and workforce, and while it talks a lot about open innovation, in reality, processes are still closed.

“Many are still reluctant to share [information and data] on fears of exposure in technology and revelation of disadvantages. Despite these concerns, other countries are actively pursuing this in the belief others can do it better than yourself," he said.

Another key point is that South Korea still has too much of a "supply-oriented mind," and the country needs a different concept, a “demand-based mind,” Yoon suggested.

“Countries are fiercely competing in the race of novel drug development. What we have learned from the CMO [contract manufacturing organization] and biosimilar business is that you will lose if you are late, you can't sell if it is expensive, and there is no market value without a global market entry strategy. If we can't differentiate in this, there will be limitations in growth,” he said.

Stronger Growth Ahead?

For South Korea, the year 2015 was an inflection point for its biotech and pharma industries. It has now entered a preparatory period for substantial growth as suggested by Hanmi Pharmaceutical Co. Ltd.’s massive licensing out deals, and the global advancement in biosimilars by Celltrion Inc. and Samsung Bioepis Co. Ltd.

Depending on how South Korea behaves, it could serve a new leading role in the global pharma industry in the coming years.

“How could Switzerland, Ireland, and Singapore become strong pharma and biotech players despite their small size? They are globalized, poured investment into this sector, and the government led these moves. We can learn from these three messages,” Yoon said.

From the editors of PharmAsia News.