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Visible Growth Pathways for Korean CMOs

Biologic drugs have distinctive characteristics from traditional chemical drugs (living protein vs. chemical synthesis). Even though chemical synthetics still represent the majority of share within global pharma companies, biologics still account for almost one-third of the global market, according to Evaluate Pharma.

The complicated manufacturing requirements of biologics is driving pharma to outsource manufacturing to bio-CMOs (contract manufacturing organisations). @Ray Kim and team ponder how much CAGR can the bio-CDMO market deliver in the next 3-5 years?

Korean CMOs are uniquely positioned within the value chain, focusing on biologic drug substances on a commercial scale. Lately, COVID-19 has reshaped the CMO industry with increased manufacturing partnerships, geographical diversification, and emerging importance in downstream drug product (DP) services.

The CMO industry could be in the middle of a pivotal transition with a new capex cycle, investment in new modalities, and expansion to end-to-end service.

There are various factors augmenting entry barriers in the CMO industry. These barriers to entry include stringent regulations, capital requirements, the sticky nature of contacts, and industry track records.

Despite a promising industry outlook and materialising growth momentum, we assess the market as cautious on the segment given recent pullbacks (>20~40%). After conducting a subsegment analysis for each coverage stock’s potential addressable market, we have increased visibility on their respective growth pathways thanks to favourable market supply-demand dynamics.

@Ray Kim