[Edaily Reporter Hong Ju-yeon ] Regulatory changes in both South Korea and the United States are simultaneously shaking up the business environment for domestic Contract Development and Manufacturing Organizations (CDMOs). In South Korea, draft subordinate regulations for a special law designating the CDMO industry as a separate policy target have been announced, while in the United States, South Korea has secured a relatively advantageous position amid a system of high tariffs on pharmaceuticals. With administrative burdens decreasing and conditions for exports to the U.S. remaining stable, attention is focused on SAMSUNG BIOLOGICS(207940), the country’s largest CDMO operator.

Approval Times Shorten, While Certifications Continue

On the 24th of last month, the Ministry of Food and Drug Safety announced a public notice for the draft enforcement decree and rules of the “Special Act on Regulatory Support for Contract Development and Manufacturing Organizations (CDMOs) of Biopharmaceuticals” (CDMO Special Act). The public comment period runs until September 4, and the subordinate regulations will take effect on December 31, the same day the Special Act goes into force. Until now, companies had to obtain a manufacturing license under the Pharmaceutical Affairs Act to produce biopharmaceuticals, regardless of whether the products were sold domestically. This meant that even companies exporting their entire production were subject to procedures designed for domestic distribution. The Special Act establishes an “export manufacturing registration system” for companies that manufacture exclusively for export, and the licensing period is expected to be shortened from the current 12 to 18 months to approximately 6 to 9 months through streamlined procedures. The subordinate regulations include provisions to grant flexibility in reflecting the facility regulations of importing countries, exemptions from duplicate submissions of status assessment data, and simplified customs clearance procedures for active pharmaceutical ingredients and raw materials.

The quality certification system is also being restructured. Procedures, validity periods, and renewal requirements for GMP compliance certification targeting CDMO manufacturing sites have been separately stipulated, and a national certification system for cell lines, vectors, and active pharmaceutical ingredients (APIs) will be introduced. The Ministry of Food and Drug Safety (MFDS) stated that, in accordance with the supplementary provisions of the Special Act, companies that received GMP compliance determinations under existing guidelines at the time of the Act’s enforcement and still have a remaining validity period will be deemed to have obtained compliance certification. This means they will not need to submit a separate application or undergo another review. The criteria for calculating the validity period upon renewal have been revised to be three years starting from the day after the original expiration date, and the production performance requirement—which previously mandated at least three production batches within the last three years—has been relaxed to at least one batch, provided there are no changes to the facilities or manufacturing methods. Specialized contract manufacturers without their own approved products previously faced difficulties in obtaining compliance certificates based on product approvals, which limited their ability to present objective evaluation results to overseas clients.

Possible Exceptions for CDMO Volumes in the Era of 100% Tariffs

Conditions for exports to the U.S. have also been revised in favor of domestic CDMOs. Last April, U.S. President Donald Trump signed an executive order imposing tariffs of up to 100% on imported patented drugs and raw materials under Section 232 of the Trade Expansion Act. South Korea is subject to a 15% tariff rate under a trade agreement. The U.S. plans to impose a 100% tariff on generic drugs and biosimilars imported into the U.S. starting in 2028, following a two-year grace period, and a 200% tariff starting in 2029. Of South Korea’s $3.98 billion in pharmaceutical exports to the U.S. in 2024, biopharmaceuticals accounted for $3.74 billion, or 94.2% of the total.

However, the CDMO industry is focusing on a different aspect. The Bioeconomy Research Center of the Korea Bio Association analyzed that duty-free treatment may also apply to cases where pharmaceuticals commissioned by the U.S. are manufactured in South Korea and exported to the U.S. This implies that contract manufacturing volumes themselves could fall outside the tariff system. Furthermore, as the U.S. Congress passed bills last month to restrict patent thickets and ease biosimilar approval requirements, the potential for an increase in contract manufacturing volumes is growing.

What Samsung BioScience Sells Is “Speed” and “Predictability”

Accordingly, domestic CDMO companies explain that the 15% tariff rate under the Korea-U.S. trade agreement offers more favorable conditions compared to the 100% tariff imposed on countries without such an agreement. They argue that the formal trade agreement provides predictability, allowing clients to maintain stable production, and that, since they operate production facilities in both South Korea and the U.S., they are well-positioned to respond to cross-border regulatory deadlocks.

SAMSUNG BIOLOGICS completed the acquisition of the 60,000-liter Rockville plant in the U.S. last April, establishing a global dual supply system. As a result, total production capacity has increased to 845,000 liters, and cumulative order value as of the first quarter of this year reached $21.4 billion (30.495 trillion won). The company also highlights its construction speed as a competitive advantage. SAMSUNG BIOLOGICS has built production facilities at a pace 40% faster than the industry average, and it highlights its ability to complete projects—from groundbreaking to GMP operation—within 24 months as a key competitive advantage that attracts global clients. Another strength is its end-to-end service, which covers everything from research to production through the CRDMO model—a combination of Contract Research Organization (CRO), Contract Development Organization (CDO), and Contract Manufacturing Organization (CMO).

The securities industry is focusing on the value of proven local production capacity amid the U.S. reshoring trend. Kim Seung-min, an analyst at MIRAE ASSET SECURITIES, noted that while it takes several years for Big Pharma to build its own facilities—from groundbreaking to validation and commercial operation—the demand for contract manufacturing arising from supply chain restructuring is immediate. Consequently, he predicted that the initial benefits will be concentrated on CDMOs capable of providing local capacity right away. He also pointed out that a favorable environment for non-Chinese CDMOs is emerging, driven by the push for the U.S. Biosecurity Act and WuXi AppTec’s inclusion on the 1260H list. Researcher Kim stated, “SAMSUNG BIOLOGICS has expanded its growth drivers through securing the Rockville production facility, the push for the Biosecurity Act, and the benefits for non-Chinese CDMOs resulting from supply chain localization,” adding, “The sluggish order intake in the first half was a temporary effect caused by delays in client decision-making, and a recovery is highly likely in the second half.”

However, the company maintains a cautious stance regarding domestic regulations. A SAMSUNG BIOLOGICS official said, “We are reviewing whether operational improvements can be achieved through GMP compliance certification and the implementation of special provisions for import procedures related to active pharmaceutical ingredients (APIs),” adding, “We are currently gathering internal feedback to submit comments, if necessary, by the deadline for the legislative notice.” Celltrion and Lotte Biologics are also aligning their strategies with U.S. production hubs and end-to-end services, so the key factor will likely be which company is first to convert changes in the tariff and regulatory environment into new orders.