[Reporter's view] What corporates expect from entering pharm

Denmark's Novo Nordisk, the maker of the obesity drug 'Wegovy,' became Europe's No.1 in market capitalization in September last year.

 

It topped France's luxury goods group LVMH Moët Hennessy Louis Vuitton SE (LVMH).

 

At that time, Novo Nordisk's market cap was approximately KRW 790 trillion, exceeding Denmark's gross domestic product (GDP) last year.

 

In other words, 'a well-brought-up new drug' is feeding the country.

 

Because the pharmaceutical industry is difficult to enter, it could be a source of stable economic growth.

 

Based on 'The Fortune 500,' American business magazine Fortune's annual ranking of the world's 500 largest companies, a big difference exits between the top 20s in the 2000s and those in the 2020s.

 

In contrast, there is no change between the top 20 ranking of the big pharma in the 2000s and 2020s.

 

It means that well-established pharmaceutical business is likely to be a key business that could be a foundation of the country's economy.

 

A government provides significant support for the country's future income source.

 

However, government-led support is not enough for the pharmaceutical business.

 

New drug development has uncertainty in nature.

 

This area requires concentrated investment, but it is challenging for a government or a public authority to concentrate funds on a particular company.

 

The pharmaceutical industry is different from the government's strategically supported electronics·heavy·chemistry·steel manufacture· ·auto industries.

 

Therefore, it is good news that Korean conglomerates are entering the pharmaceutical industry.

 

As HD Hyundai jumps into launching a new drug development business, eight out of 10 top Korean companies have entered the pharmaceutical business, excluding Hyundai Motor Company and Posco.

 

In addition to early starters, Samsung, SK Corp, LG Corp, Lotte Corp, GS Corp, and CJ Corp have joined the industry lately.

 

Besides these companies, Orion Corp and OCI Company have selected the pharmaceutical business as their new growth engines.

 

Conglomerates have the advantage in running a pharmaceutical business in their cash power.

 

Conglomerates can initiate a large-scale investment based on their proprietary cash source.

 

A parent company with a stable financial structure can act as a supplier of liquidity to its subsidiary running a pharmaceutical business.

 

For instance, Lotte Biologics procured KRW 900 billion at once through utilizing a debt guarantee from Lotte proprietor.

 

Of course, success in the pharmaceutical industry cannot be achieved merely through funding.

 

The numerous failures encountered by Korean conglomerates in the past support this claim.

 

Hanwha Group and Amorepacific Corporation had jumped into the medicine business but withdrew from the market after failures.

 

Lotte and CJ, who recently entered the biotech industry, have already experienced bitterness.

 

However, a different approach can be observed by looking into the paths of conglomerates entering the pharmaceutical industry lately.

 

In the past, conglomerates focusing on short-term accomplishments were pointed out as one of the reasons for their failure.

 

Analysis suggests that the market entry strategy became more precise.

 

For instance, HD Hyundai is reported to have prepared for a new drug business under the water after establishing AMC Bio three years ago.

 

Group owners leading the pharmaceutical business are drawing attention.

 

SK Corp, Lotte Corp, Orion, HD Hyundai, and GS Corp have positioned their owners who are undergoing owner business takeover to the pharmaceutical business.

 

Given the high risk of the field and the difficulty in achieving short-term results, strong ownership is expected to influence ongoing investment in the business positively.

 

It has been reported that South Korea will no longer depend on the semiconductor market.

 

The pharmaceutical industry may be a new growth power to the country's growth.

 

Besides being rationed for saving humankind, the pharmaceutical industry is practically a nationwide project that must succeed for the country's future.

 

We wish the best for Korean conglomerates that have experienced multiple failures to achieve success shortly.