SOUTH KOREA'S DRUG SECTOR LACKS NATIONAL CHAMPION

As South Korean drugmakers attempt to boost sales, mainly by expanding historically weak R&D activity and launching new, export-friendly generics, prospects for the sector remain hampered by the lack of a clear domestic industry leader.

South Korean drug companies, although expanding at a steady pace, are dwarfed by their multinational peers. A sales comparison between South Korea's leading firm and the leading multinational illustrates that the differential between the two widened from 38 times in 1995 to 96 times in 2003.

There are some 79 domestic firms in South Korea, but only about 17 are capable of generating sales of more than KRW100bn (US$98.3mn). It is naturally difficult for local firms to match R&D investment with that of the leading global companies. However, local drug firms' research spending is now approaching between 4% and 6%, with approximately 12% of employees working in research activities.

Other weaknesses appear structural. Although the sector remains strong in chemical synthesis, it is still considered less competitive in areas of drug screening, safety evaluation, clinical trial development and marketing. Given these shortcomings, South Korean pharmaceutical companies have found partnering to be the most efficient means to enhancing their R&D capabilities.

New products have been launched by domestic firms in recent years, although these have tended to be so-called "me-too" drugs. For its part, the government hopes the country's appeal as a clinical trials centre and potential location for biotechnology development will allow the country to leapfrog the usually slow and arduous process of building a national drug R&D infrastructure. Whether this process yields a global pharmaceutical competitor remains to be seen.