Samsung's Bio Trio Enters Global Big Pharma Arena After 15 Years of Steady Investment

Samsung has restructured its bio business into a "triangular formation" this year by spinning off Samsung Biologics (207940.KS) and Samsung Epis Holdings (0126Z0.KQ), reorganizing operations into contract development and manufacturing organization (CDMO), biosimilars, and new drug development. The move represents a structural shift to nurture the bio sector as a future growth engine on par with semiconductors.

The conglomerate has established a stable revenue base through CDMO leveraging its manufacturing strengths, expanded its network and experience through global biosimilar market penetration, and is now entering full-scale competition in new drug development. The market expects Samsung's bio business to deliver meaningful results going forward, having built the structural foundation to compete with global big pharma after 15 years.

According to pharmaceutical and bio industry sources on December 16, Samsung's bio-related listed companies surpassing 100 trillion won in combined market capitalization signals the company has joined the ranks of global big pharma and entered full-fledged competition. Major global big pharma companies including Takeda Pharmaceutical, Gilead Sciences, Pfizer, and Merck have market capitalizations ranging from 100 trillion to 300 trillion won.

"Surpassing 100 trillion won in market cap for the bio business can be seen as reaching the starting line to become a major global pharmaceutical and bio player," an industry official said. "The key going forward will be delivering performance and future growth potential that matches market expectations."

Samsung continued investing in the bio industry despite enduring losses for roughly half of the past 15 years. Samsung Biologics weathered approximately seven years of losses after its launch while focusing on capacity expansion, finally achieving profitability in 2018. By 2022, the company secured the world's largest production capacity in the CDMO sector. Profitability improved rapidly thereafter, with the company recording a 50.4 percent operating margin on a standalone basis in the third quarter of this year.

Samsung Bioepis also overcame concerns about being a latecomer in the biosimilar business by strengthening R&D investment, turning profitable in 2019. The company has now commercialized more than 10 products in the European market, establishing itself as the industry leader with the largest product portfolio.

"While the bio industry's share of Samsung's total revenue is not yet large, its overwhelmingly high operating margin means it is rapidly growing as a core pillar supporting Samsung's profit structure," an industry official said. "The results of designating bio as a future industry and continuing large-scale investment despite uncertain external business conditions are now showing in production, generics, and new drugs as the company leaps toward becoming a big pharma."

These achievements against powerful global competitors like Roche and WuXi are attributed to persistent investment. If Samsung Electronics' semiconductor business was the work of the late Chairman Lee Kun-hee, the bio business has been directly cultivated by Chairman Jay Y. Lee. In 2018, Samsung designated artificial intelligence, 5G, bio, and automotive components as its "four future growth businesses." Bio is the only non-electronics business among them.

At a business leaders' meeting hosted by President Lee Jae-myung earlier this year, Chairman Lee stated, "We are expanding investment in AI, semiconductors, and bio to prepare for 20 to 30 years ahead." He has shown particular interest in the sector, personally visiting the Songdo bio facility in Incheon ahead of the spin-off to inspect operations.

The key challenge ahead is securing future competitiveness. Samsung Biologics must strengthen its CDMO capabilities to handle various modalities beyond antibodies while expanding production capacity. Samsung Epis Holdings must also prove its next-generation new drug capabilities on top of its stable revenue base from biosimilars. As global big pharma companies are evaluated primarily on new drug performance, Samsung's next-generation drug results are expected to be the critical factor determining future corporate value.

"Samsung's success has prompted major Korean conglomerates including Lotte, HD Hyundai, GS, and Orion to enter the bio industry in earnest," an industry official said. "As this has laid the foundation for creating a virtuous cycle bio industry ecosystem encompassing production, research, and components, as well as cultivating high-quality talent, the choices made going forward will determine the next 10 to 20 years of Samsung's bio business."