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US President Joe Biden speaks at the John F. Kennedy Presidential Library and Museum in Boston on Sept. 12. (AP/Yonhap)

US President Joe Biden recently signed an executive order aimed at building a US-centered supply chain for the biotechnology industry, which joins previous ones for semiconductors and electric vehicles.

With the US representing the world’s biggest market for biopharmaceuticals, South Korea’s pharmaceutical and biotechnology industries are on the alert over its introduction of policies favoring development and production within its borders.

On Monday, the White House announced that Biden had signed an executive order for the launch of a National Biotechnology and Biomanufacturing Initiative.

The White House explained that the order had the aim of advancing biotechnology across multiple industries, including agriculture and energy as well as healthcare, adding that it would yield effects with new job creation, stronger supply chains and lower prices.

In response, many analysts interpreted the move as the US working to shore up its dominance in the field of biopharmaceuticals in the wake of its enactment of other legislation meant to protect US industries and jobs while discriminating against foreign companies, such as its recent Inflation Reduction Act.

Bloomberg explained that the executive order was part of a strategy developed by the US executive to reduce dependence on China at a time of concerns over advanced bioengineering-related technology and the overseas relocation of production facilities.

The White House planned to share more details about the scale and methods of support at a meeting Wednesday, with industry representatives in attendance.

South Korea’s government and pharmaceutical and biotechnology industries have been on the alert. Even if the main purpose of the executive order is to keep China in check, it could also work to the disadvantage of South Korean companies if it includes subsidies and other measures that discriminate against foreign products, as is the case of electric vehicles.

Among the businesses that stand to be most directly affected are South Korean biotechnology companies that produce biopharmaceuticals as contract manufacturing organizations (CMOs) or contract development and manufacturing organizations (CDMOs).

Currently, the South Korean company Samsung Biologics is contracted to produce biopharmaceuticals for numerous US and European pharmaceutical companies, including the COVID-19 vaccine by Moderna. SK Bioscience also manufactures the Novavax COVID-19 domestically from the undiluted solution stage.

An SK Bioscience official explained, “None of the domestically produced vaccine at present is being exported to the US, and the contract manufacturing is unlikely to be severely impacted because it involves manufacturing undiluted solution for supply to US companies.”

A source at another biotechnology company said, “This is disadvantageous to South Korean companies that are in contract manufacturing organization arrangements.”

“But it could also work to our advantage as Chinese biotechnology competitors like WuXi Biologics are shut out,” the source predicted.

One thing that appears certain is that South Korean companies will face greater pressure to venture into the US market. The National Biotech Policy Research Center in Korea predicted that by 2027, the US bioindustry market would reach US$430.1 billion (around 511 trillion won) in scale — roughly 1.8 times larger than the European market, where the total was US$232.7 billion.

Many South Korean biotechnology companies have already acquired local businesses in the US. SK acquired Ampac Fine Chemicals, a manufacturer of active pharmaceutical ingredients, in 2018, while SK Pharmteco is the second-largest shareholder in CBM, a US company making cell and gene therapy treatments.

While there has been constant demand for local production among customers, analysts predict the likelihood of companies expanding in the US could increase further with guarantees on production volumes and incentives.

“We’ll have to wait and see what sorts of incentives are offered for biotechnology production in the US, but this seems like it could be good news for the operation and expansion of the Syracuse plant we acquired,” said an official with Lotte Biologics, which acquired a Bristol Myers Squibb biopharmaceutical plant earlier this year.

A South Korean Ministry of Trade, Industry and Energy official said, “We will work on analyzing the impact and developing response measures once we see the implementation plan, including the actual incentives.”

By Kim Hoe-seung, senior staff writer; Kim Young-bae, senior staff writer; Lee Bon-young, Washington correspondent

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