Samsung Biologics Files for IPO on Korean Exchange, Aiming to Raise KRW 3 Trillion

According to VCBeat (WeChat ID: vcbeat), Samsung Biologics, a biotechnology contract manufacturing organization (CMO) affiliated with the Seoul-headquartered Samsung Group, plans to file its initial public offering (IPO) application with South Korea’s market regulator today (August 11). Previously, the Korea Exchange (KRX) stated that Samsung Biologics is expected to raise approximately KRW 3 trillion (about USD 2.7 billion), which would make it the first biopharmaceutical contract manufacturer to list on the KRX main board in a decade.

As early as 2011, the Samsung Group established Samsung Biologics, formally entering the biopharmaceutical sector. Subsequently, it formed a joint venture with the U.S. biotechnology company Biogen Idec, named Samsung Bioepis, dedicated to the research and development of biosimilars. By leveraging global contract manufacturing organizations (CMOs) for biopharmaceuticals as an entry point, Samsung rapidly penetrated the biopharmaceutical industry, focusing primarily on biosimilars. Unlike traditional small-molecule drugs, biosimilars are derived from living cells and cannot be replicated with 100% fidelity to the reference product; therefore, demonstrating their efficacy is significantly more challenging than for chemical drugs. Although biosimilars currently offer greater growth prospects and profit margins than traditional small-molecule drugs, regulatory authorities in various countries adopt a more prudent approach toward their approval, resulting in higher regulatory hurdles. However, successful approval yields substantially higher returns.

According to Reuters, Samsung Group holds a 97% stake in Samsung Biologics and won a shareholder battle last year, securing management control—including operational authority over Samsung Biologics—from the family led by patriarch Lee Kun-hee. The IPO is expected to heighten interest among other South Korean companies in this rapidly expanding sector, as Europe and the United States are actively filing for biosimilar approvals. For instance, Celltrion, a biotechnology company headquartered in Incheon, South Korea, is currently collaborating with Pfizer to launch a biosimilar of Remicade in the U.S. market.

Rumors regarding the initial public offering (IPO) of Samsung Biologics have been circulating since early this year, with valuations estimated at $2.6 billion as of April. In November 2015, Samsung announced an investment of KRW 850 billion to construct the world’s largest biopharmaceutical manufacturing facility. On December 21, groundbreaking ceremonies were held for this third plant, located in the Songdo district of South Korea’s Incheon Free Economic Zone. The event was attended by Lee Jae-yong, Vice Chairman of Samsung Electronics; Dr. Tae Han Kim, President and CEO of Samsung Biologics; and more than 500 distinguished guests. With a production capacity of 180,000 liters, the facility is scheduled for completion by the end of 2017 and is expected to commence operations in the fourth quarter of 2018, pending regulatory approvals. Once operational, Samsung Biologics aims to become the world’s largest contract development and manufacturing organization (CDMO) for biologics, with a total capacity of 360,000 liters, surpassing Switzerland-based Lonza and Germany-based Boehringer Ingelheim. The company is committed to serving leading global pharmaceutical companies, including Bristol-Myers Squibb and Roche.

Dr. Tae Han Kim stated, “We are investing in the construction of a third manufacturing facility to ensure a stable product supply for the exponentially growing biopharmaceutical market and to meet the production needs of biopharmaceutical companies worldwide. With the largest production capacity globally, this facility is designed for uninterrupted operation 365 days a year, positioning it to deliver world-class quality and manufacturing capabilities.”

Once the facility is fully operational, Samsung Biologics expects to achieve annual sales of KRW 2 trillion and operating profit of KRW 1 trillion. In addition, the company plans to invest in constructing fourth and fifth plants to continuously expand its contract manufacturing business. Samsung Biologics’ first plant officially received production approval from the U.S. Food and Drug Administration (FDA) in December 2015, and the second plant is scheduled to commence operations in early 2016.