SEOUL -- After successfully penetrating the European market, South Korean pharmaceutical company Celltrion has set its sights on a new target: China.
Celltrion is poised to break into the Chinese market as early as 2020 via a joint venture that will allow it to sell biopharmaceuticals in the world's most-populous market.
This and other global business plans were unveiled to Nikkei and other organizations by Celltrion Chairman Seo Jung-jin, who founded the company in 2002 after leaving the auto industry.
Celltrion's China plans come amid fears that the company's biosimilars' penetration into Europe has run its course. Seo said Celltrion will also cut costs by building a new plant overseas.
Under Seo's leadership and by focusing on biosimilars, Celltrion was able to grow into a major pharmaceutical company in a dozen years.
Seo said Celltrion "has started preparing to apply to Chinese authorities for approval to sell" three biosimilars, including Remsima, a rheumatoid arthritis drug and a cut-price copy of Remicade, originally produced by Janssen of the U.S.
Celltrion plans to choose a Chinese partner in the first half of this year and start selling products in the country in 2020, Seo said. When asked if the partner will be a state-run or private company, South Korea's leading entrepreneur said "both are possible."
He went on: "It will be difficult to sell drugs in China at the same price levels as in Western nations, given the medical insurance system there. We need to think about ways to sell drugs at prices suitable for China."
Noting that Western nations account for only 16% of the global population, Seo emphasized that approaching the remaining 84% "will lead to future growth."
Celltrion commercialized three biosimilars -- Remsima, in 2012; Herzuma, a breast and stomach cancer drug, in 2014; and Truxima, a rheumatoid arthritis drug, in 2016.
Thanks to these biosimilars, Celltrion's annual sales surged 2.7 times to 949 billion won ($840 million) in 2017, from 350.1 billion won in 2012.
Western medical institutions have taken a liking to Remsima. As of September in the U.K., the biosimilar commanded 89% of its particular market. Remsima holds big shares in other major European markets as well.
In 2019, Celltrion can expect some growth as Truxima is to fully enter the U.S., the world's largest pharmaceutical market. But the company's fortunes in 2020 and beyond are uncertain.
To cope, Seo said Celltrion will review its production and distribution costs.
As for production, the company "will cut costs by building a new plant in a country where generous support, such as subsidies, are available for plant construction," he said. There is a possibility that the company will make a decision on the matter by the end of the year, he said.
As for distribution, Seo expressed a desire to see his company reduce its heavy reliance on major overseas peers for sales in Western markets.
Seo said Celltrion pays commissions to partners that equal 30% to 50% of the gross profits the company earns from selling its drugs overseas. If Celltrion finds it difficult to directly sell its products in Western markets, the company will seek to renegotiate lower commissions, he said.
Seo refrained from commenting on Celltrion Healthcare, a group medical product sales company that is now embroiled in an accounting fraud scandal. A senior Celltrion executive denied there is a problem, though, saying, "Accounting data has been processed properly in accordance with laws and regulations."
The administration of former President Park Geun-hye was eager to help South Korea's pharmaceutical industry develop. Partly as a result, promising pharmaceuticals like Celltrion and Hanmi Pharmaceutical made their presence felt in Japan and the West.
South Korean pharmaceuticals have also entered into joint ventures with their Western peers. But a spate of these projects have ended in failure, or what leading South Korean media outlets have called "birth pangs."
Samsung Bioepis, a Samsung group company, in 2014 signed a contract with major U.S. pharmaceutical Merck. to jointly develop a biosimilar for diabetes. But Samsung Bioepis announced in October that Merck had canceled the contract. According to Samsung Bioepis, Merck decided the move was appropriate after reviewing the project's feasibility.
Last February, Hanmi Pharmaceutical announced it was halting the clinical trial of a rheumatoid arthritis drug being conducted in partnership with U.S.-based Eli Lilly.
And in 2016, Hanmi's alliance with major French maker Sanofi partially fell through.