The South Korean biotechnology industry stands at a pivotal moment. While the media frequently highlights achievements such as 'technology exports reaching trillions of won' and 'founders from prestigious universities,' the K-Bio sector struggles to find new growth momentum on the global stage. To achieve results befitting a next-generation growth industry, it is essential to critically reassess the growth formulas and manufacturing-centered evaluation criteria that have supported the ecosystem thus far.
The most urgent task is to redefine the evaluation criteria by which national policies, financial authorities, capital markets, and the general public view the biotechnology industry.
There remains a perception that 'technology exports are an unconditional success' and 'companies must show strong short-term sales performance to be considered good.' However, biotechnology differs fundamentally from manufacturing. The commercialization of a new drug typically requires over ten years and substantial research and development (R&D) costs. Demanding short-term results from companies that require ongoing R&D does not adequately reflect the characteristics of the industry.
Another concern is the lack of precision in the industry's 'subclassification system.' Biopharmaceuticals, synthetic drugs, formulation and delivery technologies, medical devices, and contract development and manufacturing organizations (CDMOs) have different business structures and characteristics, yet they are still evaluated under the same 'biotech company' label. This leads to repeated inconsistencies in evaluation and regulatory operations due to the application of uniform manufacturing standards.
According to a recent McKinsey report cited at the world's largest biotech event (BIO USA), South Korea has approximately 3,000 new drug pipelines. This is a high concentration globally, following the United States (over 11,000) and China (7,000).
While the increase in pipelines indicates industry dynamism, it also presents challenges related to the dispersion of capital and specialized talent. Policy funding and private investments are spread across thousands of companies, making it difficult for individual firms to secure the large-scale funding necessary to complete late-stage clinical trials, such as Phase 2b and 3.
At the same time, specialized talent has also become fragmented across various companies. It is now essential to shift from policies that encourage quantitative startups to a paradigm focused on qualitative enhancement through selection, concentration, and integration.
Requiring early technology exports or specific sales levels from early-stage drug development companies may lead them to transfer core pipelines prematurely to achieve public listing. This can dilute their growth potential at the time of listing by relinquishing their most promising assets too early.
Moreover, the reliance on initial public offerings (IPOs) for investment recovery presents limitations. As the focus shifts to meeting listing criteria, the ownership structure becomes complicated, making it challenging for global pharmaceutical companies or foreign investors to consider acquisitions due to the absence of core assets and dispersed shares. It is crucial to recognize that a short-term performance focus centered on technology exports can paradoxically hinder substantial corporate growth.
For sustainable growth, the organic influx of foreign capital is essential. This requires not only an overhaul of the corporate valuation system but also advancements in governance and communication culture. Global venture capitalists place significant importance on 'horizontal communication centered around the board of directors and professional management systems' as much as on technological capabilities. They seek to participate in strategy formulation and risk management as board members rather than merely as fund providers.
In contrast, domestic biotech ventures often exhibit researcher-centered decision-making or closed governance structures. There are instances of reluctance to adopt professional management (CEOs) or an inability to respond flexibly to market changes. Establishing 'software-like global standards' of horizontal communication and flexible governance is a key to attracting substantial foreign capital.
The government's and local governments' establishment of biotech funds is a meaningful policy. However, the method of fund execution needs redesign. Global new drug development requires investments ranging from hundreds of millions to trillions of won. Distributing policy funds in small amounts across dozens of companies limits the potential for fundamental structural improvement.
What is crucial is the division of roles between policy funding and private capital. Policy funding should act as a 'catalyst' that shares risks at the very early stages of technology validation, where private capital may find it difficult to engage. The government must absorb initial risks to encourage private investment. Conversely, if policy funding concentrates on late-stage or large companies, early-stage innovative firms may lose growth opportunities. Public funds should focus on high-risk innovation areas while facilitating connections between mature companies and private or foreign capital.
* This article has been translated by AI.
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