It’s no secret that diagnostics companies around the globe have benefited from the COVID pandemic by supplying testing equipment and other related products. South Korean companies are no exception - in fact, they have fared even better than many of their international peers. And, having generated unprecedented revenues, many are now looking to take advantage of their cash position by seeking strategic partnerships and investments in the west.
At the same time, new Korean regulations now class in-vitro diagnostics (IVD) products as medical devices and require clinical trial results which many players don’t have. This has eliminated several Korean and global products from the market, creating significant opportunities for companies with strong product portfolios backed by clinical trials to fill the resulting gaps.
‘COVID-backed’ Korean diagnostics companies
Back in 2019, as reports first emerged of the virus escalating in China, Korean diagnostics companies like Seegene, SD Biosensor and Boditech were quick to design and develop COVID-19 testing kits and to obtain approvals from the Korean Ministry of Food & Drug Safety. And, when COVID hit the west, the whole world relied on Korean firms for diagnostics kits, certain medical devices and pharmaceuticals, as well as PPE and ventilators.
Building on the successes and reputation chalked up during this period, Korean diagnostics and pharma companies have become ambitious. And many have big plans to expand overseas through joint ventures, acquisitions, and direct investments in foreign markets.
One recent case is SD Biosensor, Korea’s largest exporter of diagnostics kits and devices – with US $2.3 billion of medical device exports representing 26% of Korea’s total. Along with SJL Partners, SD Biosensor has agreed to acquire US-headquartered Meridian Bioscience, a provider of testing solutions and life science raw materials, for US $1.53 billion. Another supplier of diagnostic products for the point-of-care and clinical laboratory markets, the Irish firm Trinity Biotech, successfully closed a US $45 million strategic investment and partnership with MiCo Ltd, a KOSDAQ-listed Korean company.
Companies in other Asian countries including China and Japan are following Korea’s suit. And we expect to see more of this kind of multi-territory expansion in the coming months – not only to maximize their manufacturing capacity, but to get closer to their global clients.
This is creating significant opportunities for western companies in the space looking for investment or strategic partnerships. And investees don’t have to be developing solutions in the same area as the investors: Korean companies are looking at any and all technology companies with innovative solutions in the life sciences, medtech and biotech arenas.
A market with history and future potential
Korean IVD companies’ global ambitions – and early signs of their success – also come from cutting their teeth on a highly competitive and dynamic home turf. And it’s a market we mustn’t forget is commercially attractive to medtech and life sciences companies – local and international alike.
The IVD market in Korea alone is expected to surpass US $2 billion by 2026. Its growth is driven by rapid increases in chronic diseases, the growing number of independent testing laboratories, increased government investment in the medical sector, technological advances, and a fast-aging population. IVD products used in the infectious diseases area constitute the largest share of the market, followed by oncology.
Regulatory catching-up
There is also a renewed focus on quality and standards in South Korea. To ensure all the IVD solutions on the market are compliant with safety and performance requirements, and that their quality meets international standards, in April 2020, the MFDS revised the Medical Devices Act. This means medical device authorizations will now only remain valid for five years, and all medical devices on sale must be reviewed regularly for safety and efficacy.
This long-anticipated new law tightening government control over the quality of medical devices came into effect in October 2020 and requires all manufacturers to re-register their IVD kits by July 2023.
Due to the high cost and tight timelines of compliance, a good number of global and Korean IVD companies operating in the Korean market find themselves lacking suitable clinical data and are forced to give up on certain products. This reduces the competition in the market overall, but it opens up opportunities for those companies who did their homework early and have sufficient clinical data.
And, while tougher regulations make life difficult for entrants from less strictly regulated countries, they present significant opportunities for players from the EU, US, and Australia.
Partnering to grow
Korean companies have become global leaders in IVD over the last few years. They’re cash-rich and ready to expand – especially since the domestic market is becoming increasingly competitive and challenging from the regulatory perspective. But, to grow rapidly, they need to tap into global tech innovators’ IP and networks.
This means that foreign companies developing or manufacturing innovative IVD solutions - backed by solid clinical trial results - and those supplying raw materials (including sensors, enzymes and other spare parts) are in a great position to find two-way-street opportunities with the Korean IVD sector (“We’ll help you overseas if you help us in Korea”). These could include strategic partnerships, CDMOs, investments, and joint-development agreements – with an overarching goal to build better products and to sell them globally.
If you’d like to chat about finding partners and developing the Korean market, get in touch with Ruslan Tursunov at Ruslan.Tursunov@intralinkgroup.com.