Drugs could be South Korea's next growth sector

SEOUL - A pair of South Korean drug companies are leveraging their R&D prowess to climb to the top of the industry, rushing past less-nimble members of large conglomerates and lining the sector up as the nation's next driver of growth.

Novel-drug developer Hanmi Science and biosimilars producer Celltrion each have a market capitalisation of nearly 10 trillion won (US$8.8 billion) -- on a par with LG Electronics. The duo could serve as a new model for growth in a market that finds itself lagging in innovation.

Risk and reward

Celltrion submitted Nov. 10 a generic version of global bestselling cancer drug rituximab to the European Medicines Agency for approval. The treatment was originally developed by Idec Pharmaceuticals, since absorbed by Biogen, and generates some US$9 billion in annual sales. But it went off-patent in Europe in December 2013 and will lose US patent protection in September 2016.

Celltrion's version is a biosimilar -- an imitation produced using genetically modified cells. Such compounds cannot be made precisely identical to the drugs they aim to mimic, necessitating additional clinical trials for approval. Biosimilars are also much harder to develop than generic drugs based on simpler molecules. Teva Pharmaceutical Industries of Israel and Boehringer Ingelheim of Germany, for example, quit the race to create a biosimilar rituximab in the clinical-trial phase. But success in the lengthy development process can pay off handsomely.

Industry outsiders

Celltrion is a powerhouse of improbable origin. It was founded in 2002 by executives from the corporate planning division of the now-defunct Daewoo Motor, acquired by US automaker General Motors following a bankruptcy. Celltrion chief Kim Hyoung-ki was one of those pioneers.

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