Pharmaceutical firms expand overseas

Hanmi Pharm posts record sales of 1.32 trillion won

By Park Si-soo

Korean pharmaceutical companies are making their way into overseas markets after being inspired by Hanmi Pharmaceutical’s multi-billion dollar deals with foreign drug makers last year.

Backed by the deals, Korea’s No.1 drug maker by assets on Thursday reported record high sales of 1.32 trillion won ($1.1 billion) last year, up 73 percent from the previous year, while its operating profit also swelled to 212 billion won from 34.5 billion won.

Its two smaller rivals ― Chong Kun Dang and Daewoong Pharmaceutical ― successfully moved into Japan and the United States, respectively, last month, giving their peers hope that they would be able to follow suit as soon as they develop competitive products or technologies.

The government appears to be active in supporting their outward expansion by easing regulations and funding their research and development. Recently, the health ministry and 10 financial companies jointly began the “Global Healthcare Fund” of 150 billion won ($124.6 million) to help pharmaceutical companies, medical device makers and hospitals seeking overseas expansion.

Analysts and market insiders welcomed such supportive action. But they said this campaign will come to fruition only when this is implemented long-term and consistently. Noting that it used to take 10-15 years to develop an innovative drug or pharmaceutical technology, they said that should this supporting campaign be short, all resources put into it will be wasted eventually.

They added that the government will have limited ability to fund R&D in the private sector. Thus, what is more important than direct funding by the government is creating an ecosystem in which pharmaceutical companies feel comfortable to carry out long-term R&D without worries about financial shortfalls.

“Developing a new drug is a long-term race, which used to take at least ten years,” an industry insider said. “A great amount of money as well as visible and invisible resources are put into the work. I wholeheartedly welcome the government’s support. But what’s more important than is putting the policy into practice consistently and for the long-term.”

To that end, he said bureaucrats should drop their typical attitude of favoring projects that bear fruit in the short term.

“This is not the problem of only bureaucrats. Policymakers of major lenders share this attitude,” he said. “When we fail to showcase expected output, I would say, within the short period of time they set, they won’t extend our loans and will stop offering new financial support. Without money, we can do nothing.”

Another insider called on the government to promote the creditability of clinical tests conducted domestically.

“Korean pharmaceutical companies have an extremely meager presence in the global market because they have exported virtually nothing over the past century,” he said. “Due to this poor track record, regulators of major markets don’t trust the results of domestic clinical tests. This makes it difficult for domestic drug companies to enter foreign markets.”

In March 2014, the health ministry reached a “homologation” agreement with its Ecuadorian counterpart, the first accord of this kind, under which Ecuador recognizes results of clinical tests conducted in Korea and vice versa.

Experts say the government should try to strike similar deals with North American and European countries.