[E-Daily Reporter KIM SAE-MI ] As global Big Pharma companies embark on large-scale mergers and acquisitions (M&A) to overcome the patent cliff and growth limitations, there are increasing instances of Chinese biotech companies being acquired in their entirety by global Big Pharma. Within South Korea’s pharmaceutical and biotech industry, there are growing calls to move beyond “every man for himself” or “survival-oriented M&A” toward “growth-oriented M&A” that combines capital, clinical development capabilities, and new drug platforms.

Big Pharma on a Biotech Shopping Spree... Biotech Companies Left to Fend for Themselves

Recently, the global pharmaceutical industry was abuzz with rumors of a merger between AstraZeneca and Bristol-Myers Squibb (BMS), with an estimated enterprise value of approximately $400 billion (about 570 trillion won). If the merger goes through, it would create the world’s largest pharmaceutical company by revenue and the fourth-largest by market capitalization. This marks the dawn of an era where even global Big Pharma companies are joining forces to ensure survival and growth.

Such a major deal offers significant implications for the domestic pharmaceutical and biotech industry, which has been forced to fend for itself. A significant number of domestic biotech companies lack the financial resources to conduct late-stage clinical trials and therefore focus on early-stage technology transfers. While this helps with short-term survival and recouping investment, it limits their ability to independently build the clinical trial, regulatory approval, and commercialization capabilities needed to grow into global pharmaceutical companies. Consequently, there have been persistent calls for companies to combine capital and R&D capabilities through mergers and acquisitions (M&A).

However, the reality is far from straightforward. Given the financial conditions of domestic publicly traded biotech companies, they lack the capital to pursue acquisitions. From the perspective of Big Pharma, there is little incentive to acquire an entire company—bearing the additional costs of clinical trials, maintaining research organizations, and addressing regulatory and listing requirements—when they can simply secure the necessary technology through licensing. A biotech industry official noted, “We are no longer in an era where companies are acquired in their entirety based solely on the potential of their technology,” adding, “Unless Korean biotech companies increase the number of assets that have demonstrated proof of concept (PoC) in the clinical stage, it will be difficult for them to even emerge as M&A candidates.”

In China, however, there has been a string of cases where global Big Pharma companies have acquired biotech firms in their entirety. Between late 2023 and 2024, Gracell Biotechnologies, ProfoundBio, and Biotheus were acquired by AstraZeneca, Genmab, and BioNTech, respectively.

Analysts attribute this disparity ultimately to the competitiveness of new drug pipelines. China not only has a much richer pipeline of new drugs than South Korea but also possesses numerous assets that have secured proof of concept (PoC) in the clinical stage. According to Citeline, a global pharmaceutical data firm, as of January of this year, China had 7,141 drugs in development—approximately 2.3 times that of South Korea (3,159).

Synergy Over Scale… What It Takes for K-Bio to Pursue “Growth-Oriented M&A”

If getting acquired by a foreign company proves difficult, M&A between domestic firms could serve as an alternative. There have been notable M&A cases within South Korea as well. ORION(271560)invested 548.5 billion won in 2024 to secure a 25.73% stake in #LigaChem Biosciences, and recently, TKG Huchems and an investment vehicle affiliated with IMM invested 346.8 billion won in AprilBio Co.,Ltd.(397030). These are examples where the financial strength and commercialization capabilities of large corporations have been combined with new drug development companies that have a track record of successful global technology transfers. DongKoo Bio & Pharma Co., Ltd.(006620)also expanded its investment after becoming the largest shareholder by participating in a capital increase by Qurient Co., Ltd.(115180).

However, the prevailing view in the industry is that it will be difficult for large-scale M&A deals to continue in South Korea. This is because there are few buyers capable of mobilizing trillions of won, and founders and owners tend to be reluctant to relinquish management control. The merger between the #HanmiPharm Group and the #OCI Group also fell through as conflicts of interest among the owner families and disputes over management control came to the surface. The fact that generic-focused pharmaceutical companies can survive and generate a certain level of profit even under their existing structures is another factor that weakens the incentive to pursue mergers.

Industry consensus is that, rather than M&A deals that merely combine the scale of pharmaceutical companies, there is a need for partnerships between pharmaceutical companies with capital and commercialization capabilities and biotech ventures with new drug pipelines. The proposal is to create a mutually beneficial structure where pharmaceutical companies secure new drug pipelines and R&D capabilities through M&A, while biotech ventures can secure stable development funding without relying solely on initial public offerings (IPOs).

Yoon Seon-ju, CEO of APIT Bio, stated, “Substantial synergies can only be achieved by complementing each other’s lacking capabilities,” adding, “If the costs associated with a pharmaceutical company’s acquisition of or strategic investment in a biotech venture are broadly recognized as R&D expenses—thereby enabling the company to be certified as an innovative pharmaceutical firm—the incentive to pursue M&A will increase.”

Which Domestic Biotech Companies Are ‘Potential M&A Targets’?

So, which domestic biotech companies are potential

candidates

for M&A, both domestically and internationally? The first company mentioned by industry insiders and outsiders as a likely M&A target was Alteogen Inc.(196170).

Alteogen Inc. is a biotech company that owns the “ALT-B4” human hyaluronidase platform, which converts intravenous (IV) drugs into subcutaneous (SC) formulations. It was assessed that the company’s appeal lies in its possession of a platform technology—which can be repeatedly applied to multiple drugs rather than a single specific drug candidate—along with a track record of successful global technology transfers and progress toward commercialization. However, the fact that its market capitalization was nearing 15 trillion won as of the 5th, coupled with the need to account for a control premium, is cited as a constraint due to the significant cost of acquisition.

An industry insider noted, “Among biotech companies worth considering for M&A by domestic and international firms, Alteogen Inc.—as a platform company—stands out,” but added, “Given that its market capitalization exceeds 10 trillion won, it’s worth considering whether it’s worth spending that much to acquire the entire company.” From the perspective of Big Pharma, since they can secure only the necessary technologies through licensing agreements, there is little economic incentive to spend a massive sum to acquire the entire company.

There is also speculation that as a company’s value grows to the trillion-won level, foreign capital is more likely to be the realistic acquirer than domestic capital. This is because there aren’t many strategic investors (SIs) or financial investors (FIs) in Korea capable of handling transactions worth several trillion won, and major pharmaceutical companies also lack the financial capacity to actively pursue large-scale acquisitions.

Hugel, Inc.(145020)and CLASSYS Inc.(214150)are cited as representative examples. While the possibility of GS Holdings, Hugel, Inc.’s largest shareholder, recouping its investment is frequently discussed, the prevailing view is that it will be difficult to find a suitable domestic buyer given the company’s enterprise value in the trillions of won. Similarly, as CLASSYS Inc.’s enterprise value has grown to around 3 to 4 trillion won, the possibility of a deal with global private equity funds (PEFs) or overseas strategic investors is consistently being raised, rather than with domestic acquisition candidates. Industry observers predict that for domestic biotech and healthcare companies, as they grow in size, deals with overseas capital will ultimately become inevitable.

In fact, J-Sys Medical, a company specializing in aesthetic medical devices, was acquired in 2024 by ARCHIMED, a French healthcare-focused private equity fund, for approximately 990 billion won, after which it voluntarily delisted from the stock exchange. The industry believes that the more a domestic biotech or healthcare company possesses global commercialization competitiveness, the more likely it is that foreign capital—rather than domestic investors—will become a realistic acquirer.

Among new drug developers, biotech companies possessing proprietary platform technologies have been cited as potential M&A candidates. Companies such as ABL Bio Inc.(298380), Olix Pharmaceuticals, Inc.(226950), Orum Therapeutics, Inc., and D&D Pharmatech Inc.(347850) were highlighted for their shared characteristic of having secured differentiated core platforms in their respective fields and accumulated experience in global technology transactions and joint development.

The reason platform companies are valued relatively highly is that their corporate value is not entirely dependent on the success of any single new drug candidate. If a single core technology can generate multiple candidates, an acquirer can secure not only the pipeline but also the research personnel and follow-up development capabilities.

However, the industry’s consensus is that the competitiveness of platform technology does not automatically translate into a corporate acquisition. A biotech industry official advised, “While there may be domestic biotech companies that attract the interest of Big Pharma, it is important to recognize that technological appeal and the actual likelihood of an acquisition are two separate matters.”