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Korean Biotech Industry in 2004
- Past, Now, & Future March 2004
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Korean Biotech Industry in 2004
Byong Seung Cho
Notice
These slides are only for the presentation at the 8th Nomura Bio Conference Asia Pacific 2004, written by
Byong Seung Cho, an investment associate at Korea Technology Investment Corp.
All the information in this material is subject to change without any notice. Anybody should check the reality
and take his(or her) own responsibility for it.
For more information, please contact the following.
Byong Seung Cho: e-mail: [email protected]
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Korean Biotech Industry in 2004
Byong Seung Cho
I. Presenter’s Background
 Business consultant/developer
 Clients: Medy-Tox, LabGenomics, Elpis-Biotech, Neurogenex, and others
 Work experience
 Investment associate(Biotechnology), Korea Technology Investment Corp.(KTIC)
 System programmer, Zeeon Info Corp.
 Education
 Techno-MBA(Venture Management Track), 2000-2002, Korea Advanced Institute of Science &
Technology(KAIST)
 MS/BS(Molecular Biology), 1991-1997, Seoul National University
Korea Technology Investment Corp.(KTIC)
Established in 1986
2nd largest VC in Korea
Total asset under management: USD 350 millions
Biotech portfolio: 9% in dollar value, 20 companies
4 Biotech IPOs: Macrogen, Isotechnika, Cell Biotech, Eco Solution (Total 59 IPOs)
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II. Biotech Ventures in Korea
 About 600 biotech ventures have been established.
 Steady status in terms of the number of companies since 2002.
<Number of Korean Bio-ventures>
700
600
500
400
300
200
100
0
1998
1999
2000
2001
2002
2003
Source: Korea Bioventure Association, Presenter’s estimates
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Korean Biotech Industry in 2004
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III-1. Money Flow into R&D
 Since 1999, R&D investment has increased rapidly.
 Government has provided about 65% of funds.
 9% of the total R&D support from the Korean government
<R&D investment>
900
800
700
600
500
400
300
200
100
-
(Unit: KRW Billions)
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
Non-Government
Government
Non-Government includes pharmaceutical, food, and medical industries.
Source: Korean Biotech Industry 2003, Ministry of Science & Technology, Presenter’s estimates
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III-2. Money Flow From Venture Capital
 VC has funded around USD 200 millions during the last 4 years.
 However, the current investment activity is very low.
 The major money source for early stage biotech is the “government”.
 Some traditional & food companies contributed about USD 200 millions.
<VC Bio Funds>
(Unit: KRW Billions)
VC
Year
Size
MuHan Investment
2000
11
HanmiYeolin Tech
2000
5
UTC Venture
2000
17
HVIC
2000
15
Woori Tech
2000
10
SK Corp
2000
50
KBIC
2000
30
GreenCross
2001
10
MuHan Investment
2001
10
KTIC
2001
21
Ministry of Agriculture
2002
20
Nexus
2003
10
Source: KTB,
Presenter’s estimates
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IV-1. Major Listed Biotech Companies
 15+ biotech companies have been listed on the KOSDAQ market.
 The “First Biotech Boom” burst in 2002.
<Major Listed Biotech Companies>
(As of 2004/02/26)
Company
Business
Market Cap(USD millions)
Standard Diagnostics
Diagnostic kits
50
Macrogen
Genomics
42
Cell Biotech
Functional food, Fermentation
19
Estech Pharma
Pharmaceutical ingredients
28(expected)
Rexgene Biotech
Functional food
22
Enbiotechnology
Functional food
34
Bioland
Cosmeceuticals
16
Ventree
Pharmaceuticals
15
JoongAng Vaccine
Animal vaccine
13
Inbionet
Animal feed
8
JoongAng Biotech
Animal nutrition & antibiotics
5
Korea Microbiology Lab
Animal vaccine, Food addtive
24
Easy Bio System
Animal feed additive
10
KoBio Tech
Bioreactor
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Korean Biotech Industry in 2004
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IV-2. Major Unlisted Biotech Companies(1)
 Bio-ventures with strong biz model are growing steadily and catching investors’ eyes.
Company
Business
Description
Medipost
Cord Blood & Stem Cell
*2003 revenue/profit: USD 25/6 millions
*To be listed in 2004
*Expected market cap: USD 150 millions
Celltrion
Contract Manufacturing
*JV of Vaxgen and Korean investors including KT&G
*2nd largest capacity planned(50,000 L * 3)
Medy-Tox
Biogeneric &
Cosmeceuticals
*Botulinum neurotoxin products (“Botox” bioequivalents)
*The 1st Korean bio-venture which launches protein drugs
*The biggest market cap on KOSDAQ expected in 3 years
Oscotec
Bone material &
pharmaceuticals
*Specialized in bone and its related area
*Hybrid biz model of research reagent, functional food, and new drug
*USD 4 millions financing in 2003
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IV-2. Major Unlisted Biotech Companies(2)
Company
Business
Viromed
Gene Therapy
Neurogenex
Drug discovery &
contract research
Toolgen
Genomics &
Drug discovery
Bioneer
Chemical Synthesis
Description
*Received a clearance from Korea Food and Drug Administration to initiate the
first human clinical trial for its first gene-based drug
*VMDA3601 for patients suffering from critical limb ischemia
*In phase II trial
*G-protein coupled receptor-related contract research
*Very efficient protein expression system with adeno & vaculo virus
*GeneGrip® Zinc finger protein technology
*The development of artificial transcription factors to be used as genetic switches
in microbial, plant, animal, and human cells
*Oligotide systhesis & custom service
*2003 revenue: USD 9 millions
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V. KOSDAQ market & Survival Strategy for Bio-Ventures
 The guidelines of the KOSDAQ market are very tough & conservative.
 The positive EPS is required almost absolutely despite the industry’s early status.
 Virtual hurdle  Revenue: USD 5 million +, NI: 10%+
 It is very difficult to raise money through the public market.
 In 2003, only 2 biotech companies were listed.
 Estech pharma, JoongAng vaccine
 In 2004, 1~2 companies are expected to be on the KOSDAQ market.
 Most investors are oriented toward “Large Caps” in IT.
 Korean preference to IT makes biotech smaller.
 “New drug companies” are almost impossible to be listed at the present.
 They must change strategies or business models.
Some companies have a hybrid biz model of
“functional food”, “research reagent”, “research service”, and “new drug” for their survivals.
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VI-1. Korean Pharmaceutical Market/Industry
 Market size: USD 5.6 billions(3rd largest in Asia, 1.4% of the world)
 Market growth: CAGR 9.0% from 1997 to 2007(USD 7.9 billions)
 ETC(Prescription): 60%(Generics-17%), OTC: 40%
 The enactment of the “Separation of Prescription & Dispensing Act” in 2000
 Pharmacy: 66%, Hospital: 27%, Others: 7%
Source:
UBS
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VI-2. Korean Pharmaceutical Market/Industry
 Highly fragmented with 250+ players including 35+ MNCs
 After the SPD enactment, MNCs’ share expanded from 17% to 30% in 2002.
 Medical community has favored brands.
 The Top 10 companies has 34% market share.
 The domestic top 10 companies have only 3.7% market share.
 The market will be consolidated in the near future.
Source:
UBS
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VI-3. Behavior of Korean Pharmaceutical Companies
 Until 1990s, most companies had been focused on in-licensing and generics.
 Just acting as channels to Korean pharma market
 Little investment for building R&D infrastructure and value chain
 After MNCs established their own offices in Korea, R&D activity has increased.
 The first US FDA-approved drug, Factive from LG Life Science, came out in 2003 after over 10-year R&D.
 But, still below 10% compared with revenue
 During early 2000s, pharma started to provide money and collaborate with bio-ventures to fill their pipelines.
 Focuses on API (Active Pharmaceutical Ingredients) & generics
 During the last decade, some companies succeeded in launching APIs & generics.
 Yuhan corp.: 5 import certificates (US DMF), Supply contract for Gilead’s HIV drug
 Hanmi pharmaceutical: Cephalosporin APIs
 Chong Kun Dang, Boryung, Choongwae Pharma Corp, and CJ Corp: Targeting EU API market
 General attitudes toward Korean bio-ventures
 Still, want to be the 1st Korean licensee of the blockbusters or technologies for short-term profit.
 Low level of favor to native biotechs due to their low credits
 The 2 group must make a lot of communication to understand each other.
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VII-1. Biotech Human Resource in Korea
 10,000+ people are working in the biotech industry in Korea as of 2002.
 Only in the R&D and manufacturing fields
 60%+ are in universities or non-for-profits, but moving into industry gradually.
 80%+ have advanced degree education.
 By 2003, the number is expected to grow to 30,000.
PhD
4,427
(47.2%)
University & Institute
5,895
(62.8%)
Total: 9,392
MS
3,431
(36.5%)
Company
3,497
(37.2%)
BS
1,534
(16.3%)
Source: Ministry of Commerce, Industry, and Energy(2002)
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VII-2. Technology Development – Paper Publication
 The number of the scientific journal publication(Scientific Citation Index)
has been increased steadily for the last 5 years.
<Number of paper publication by Korean Biologists>
1200
1000
Biology &
Biochemistry
Microbiology
800
600
Molecular Biology
& Genetics
400
200
0
1998 1999 2000 2001 2002
Source: Korean Biotech Industry 2003, Ministry of Science & Technology
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Korean Biotech Industry in 2004
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VII-3. Technology Development – Paper Publication
 The number of the scientific journal publication(Scientific Citation Index)
has been increased remarkably for the last 20 years.
<Number of paper publication by Korean Biologists>
Biology & Biochemistry
Microbiology
Molecular Biology & Genetics
Source: Korean Biotech Industry 2003, Ministry of Science & Technology
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VII-4. Technology Development – Paper Publication
 Korea’ share of the paper publication is about 1.4% compared with the total
world publication.
<Number of paper publication by country, 1998-2002>
Biology & Biochemistry
Microbiology
Molecular Biology & Genetics
US JP
UK DE FR CN KR
Source: Korean Biotech Industry 2003, Ministry of Science & Technology
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VII-5. Biotech Intellectual Properites
 The number of PCT patent applications by Korea has been very low.
 Around 1% of the world PCT number
 Nonetheless, it has been growing steadily.
<No. of Patent Application (Category: C12N)>
US
Germany
Japan
Korea
Source: Korean Biotech Industry 2003, Ministry of Science & Technology
Korean Biotech Industry in 2004
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Byong Seung Cho
VIII. Competitive Edges of Korean Bio-Ventures
 The overall biotech industry is at early stage and has a long way to go.
 Excellent frontiers must accelerate the progress.
Positives
People
Technology
Biz-Opportunity
Negatives
Very strong entrepreneurship
A lot of young & capable scientists
Mostly First-time CEOs
50% researchers, 40% professors
Little biz-experience
A few world-class ventures
Strong chemistry, fermentation, stem cell
Approval of Factive by US FDA(11th nation)
Gaps along pharmaceutical R&D chain
Low level of clinical trials
No US GMP facility
Relatively big pharma/food market
Proximity to Japanese pharma maket
High preference to functional foods
No multi-national pharma
Largely generics market
Low alliance activity
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Korean Biotech Industry in 2004
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IX. Nutraceuticals & Bio-Ventures in Korea
 Market size: USD 3 billion (as of 2003)
 Market growth: CAGR 20% expected until 2007
 Market drivers
 Aging population: 65+ old people  over 10% in 2003
 Well-being culture: promotion of Korean consumers’ buying
 GDP per capita: USD 10,000+ as a critical threshold (like in US & Japan)
 New regulation: The enactment of the “Health & Functional Food Act” in 2004
 New player’s entry: Big biz groups, pharmaceutical companies, and bio-ventures
 Bio-ventures’ strategy in the functional food market
 Big enough
 Short-term profit
 Bridge to new drug development
 Contract research organization’s growth
 Experience about clinical trials
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Korean Biotech Industry in 2004
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X. Problems to Be Solved
Bio-ventures
Investors
*Critical mass
*7 year+ VC fund
*New niche market & product development
*Co-investment with big foreign VCs
*Customer-driven strategy
*Facilitating cross border co-work
Pharmaceutical companies
Government
*More R&D for new products
*Investment into Bio-infrastructure(GMP/GLP)
*Co-work with bio-ventures for education
*Korea FDA’s expansion & level-up
*Consolidation
*More funds for biotech products
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XI. What is the Realistic Model for the Asian Bio-Ventures?
 Most Korean biotechs have been approaching US & EU pharmas so far.
 However, the efforts have not been successful due to the lack of credits.
 The model proposed by Mr. Morita is an excellent idea.
 Korean biotechs must give more consideration to the 2 nd largest market & Asia.
 If some modification is added, Korean biotechs can use two-fold strategy according to their technology
& products.
US
Korea
Japan
Biotech
Class 1
Pharma
Pharma
Worldwide Market
Class 2
Biotech
Biotech
Asian Market
Class 1: Biotechs targeting worldwide market and blockbusters
Class 2: Biotechs targeting Asian market and niche drugs  Asian-specific and(or) genetic diseases
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Thank you!
Q & A
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Korean Biotech Industry in 2004
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