As South Korean pharmaceutical companies struggle to raise funds and export their technology on their own, they are increasingly partnering with former competitors to share the burden of drug development and improve profitability.
While jointly marketing or producing existing products has been common in the pharmaceutical industry, there has been a noticeable increase in collaboration, especially for drug development.
In Apr. Ildong Pharmaceutical attracted Dong-A ST as a strategic investor (SI) for its new drug development subsidiary, Ildong Bioscience. On May 29, Ildong Pharmaceutical also signed an agreement with Daewon Pharmaceutical to jointly develop a next-generation gastroesophageal reflux disease treatment.
Dong-A ST, a specialty pharmaceuticals company, under the Dong-A Socio Group, will invest 25 billion KRW in Idience by the end of this year, becoming the second-largest shareholder. With this, Idience became a joint venture (JV) between Ildong Pharmaceutical and Dong-A Socio Group. This is the first time that domestic pharmaceutical companies have pursued a JV model for new drug development. The two companies will jointly develop ‘Venadaparib,’ a targeted anticancer drug candidate discovered by Ildong Pharmaceutical.
Daewon Pharmaceutical has agreed to jointly develop a new drug candidate in the ‘potassium-competitive acid blocker (P-CAB)’ method with Yunovia, a subsidiary of Ildong Pharmaceutical. In return, Daewon Pharmaceutical will cover the clinical trial costs along with a contract fee. Although the specific amount to be paid by Daewon Pharmaceutical to Yunovia has not been disclosed, industry insiders believe Yunovia has significantly reduced its burden. This joint development agreement is the first revenue-generating case since Yunovia was spun off from Ildong Pharmaceutical.
The collaboration with the Dong-A Socio Group was directly promoted by Yoon Woong-seop, Vice Chairman of Ildong Pharmaceutical. Yoon, who was appointed as the chairman of the Korea Pharmaceutical and Bio-Pharma Manufacturers Association this year, is also actively promoting exchanges between domestic pharmaceutical companies.
ST Pharm, a subsidiary of Dong-A Socio Group that manufactures active pharmaceutical ingredients, has begun developing messenger RNA (mRNA) drugs in collaboration with CHA Vaccine Institute.
This is the first time ST Pharm has collaborated with a domestic company for new drug development. The two companies aim to discover mRNA-based new drug candidates by 2025 and enter clinical trials by 2026. ST Pharm will identify mRNA new drug candidates using its technology, while CHA Vaccine Institute will handle the development process, including clinical trials. CHA Vaccine Institute possesses an immune-enhancing platform.
While S. Korean pharmaceutical companies have often collaborated in production and distribution domestically, there have been few instances of collaboration in new drug development. Recently, companies have begun investing in or acquiring stakes in small domestic biotech ventures or transferring rights to new drug candidates, as seen with Yuhan Corporation.
Domestic pharmaceutical companies are partnering to share the burden of new drug development and improve profitability. Since the COVID-19 pandemic, it has become challenging for these companies to finance new drug development on their own. For instance, Ildong Pharmaceutical encountered financial difficulties after its COVID-19 treatment, which was developed in collaboration with Japan’s Shionogi Pharmaceutical, and failed to obtain domestic approval.
The reason why S. Korean pharmaceutical companies cooperating is that earning revenue through technology export to multinational pharmaceutical companies is also challenging. Instances like Hanmi Pharmaceutical, which secured large contract fees for exporting new drug candidates but later had to return the funds, resulting in significant losses, are commonly seen in the industry.
A pharmaceutical industry insider stated, “It is difficult to secure funding in the capital market, and collaborating with multinational pharmaceutical companies requires significant time and effort with low success rates. With their established trust relationships from long-term sales and manufacturing cooperation, S. Korean pharmaceutical companies can be much better partners if the rights contracts are well-organized.”
There is also an analysis suggesting that domestic pharmaceutical companies are collaborating because they have recognized the importance of collaboration, given their expertise in new drug development. Securing effective drug candidates is crucial, but completing clinical trials and obtaining quick approval to bring the product to market is key.
Another industry insider mentioned, “Considering the conditions of the domestic pharmaceutical industry, achieving profitability while investing in new drug development is extremely difficult. It is necessary to simultaneously pursue funding, attract investments, introduce technology, and export technology.”
