Dr. Tae Han (TH) Kim played a key role in establishing Samsung BioLogics in 2011 when he was serving as executive vice president of strategic business development at Samsung Group, tasked with finding new generation business opportunities—the new growth engine for Samsung. He holds a Ph.D. in chemical engineering from The University of Texas at Austin and joined Samsung Group back in 1979, holding various positions in different industries including electronics and petrochemicals.

With his broad experiences, he felt he could converge Samsung’s expertise and competitiveness in other industries synergistically with the bio industry. He convinced Samsung’s board members to invest $3 billion in the new business and has led Samsung BioLogics as the president and chief executive ever since.

In just six short years with Dr. Kim at the helm, Samsung Biologics has grown to become one of the top global CMOs in the biopharma industry. He was gracious enough recently to sit down and talk with Contract Pharma about the company’s beginnings, where it stands today and what we can expect in the future.

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Contract Pharma: Tell me a little about the beginning of Samsung BioLogics and how you came to be chief executive of the company.
TH Kim: My background is in chemical engineering. I joined Samsung a long time ago in 1979 and had various roles in many industries including the electronics and chemical industries. My responsibilities ranged from R&D researcher to plant construction, business development and even finance. It was 10 years ago, in 2007, when I was nominated by Samsung headquarters to be responsible for finding new growth areas for the company. I led a dozen junior staff for three years and we reviewed numerous types of new business opportunities.

I was strongly attracted to the biopharma industry. At the time, Samsung was operating one of the largest hospitals in Korea that included an oncology research center, but it did not have a biotech business at all. While I was strongly attracted to the biopharma industry, I was not confident that we could compete with global biopharma companies in drug discovery, marketing and sales. So I thought that by utilizing Samsung’s experience and expertise in plant design and construction, along with a stellar track record of achieving high levels of quality and compliance, I could provide manufacturing services for global Big BioPharma companies as well as smaller biotechs that don’t have in-house manufacturing capabilities. So that was the genesis of Samsung BioLogics, which came to fruition in 2011, the first year of operations.

CP: Did Samsung purchase an existing company and/or facilities at the time to get started?
TH Kim: No, not at all. We started from nothing. I purchased the land and started to hire staff. We worked with an American engineering company to design a standard type of manufacturing plant at normal scale. What really made a big difference though was relying on Samsung’s long history and experience in non-pharma industries including semiconductors, chemicals and petrochemicals. By leveraging Samsung’s expertise in these non-pharma fields, I was able to accelerate operations and cut the construction time of our first plant in half. Our first plant was completed in only 25 months and was inaugurated in 2011.

CP: Was it hard attracting clients as a new contract manufacturing organization (CMO) without any experience?
TH Kim: As a new CMO without a track record in the industry, attracting clients was very challenging. Probably the most challenging aspect of starting this business. I visited more than 20 potential pharma partners. They really appreciated Samsung’s commitment to the industry with its long-term, large-scale investment and also appreciated Samsung’s experience in non-pharma industries. However, the majority of them were not confident we could meet their global standards of quality and compliance without direct experience. They were understandably hesitant. They wanted a partner with a track record.

Eventually, after a long process of patiently educating and trying to persuade potential clients that they could trust us to provide really good quality and competitive manufacturing services, I was very fortunate to attract BMS and Roche to partner with us. They felt confident that Samsung could provide high quality manufacturing services that were up to their quality standards even without direct experience at first.

CP: What are some other challenges and/or success factors that were important to getting Samsung BioLogics off the ground?
TH Kim: In general I think there are three key success factors for a new CMO. The first is having the ability to design and construct a manufacturing facility that meets global regulatory standards. Even though we had never built a bio-manufacturing plant before, Samsung has built more than 24 semiconductor plants. The companies aggregated capital expenditure in plant construction at the time was greater than $100 billion dollars. This track record also brought with it a lot of experience in designing and maintaining cleanrooms. I was confident I could build a plant very well.

The second component is meeting FDA compliance requirements. Again, because Samsung did not have direct experience in the industry, I started this business by hiring about 100 American inspectors all of whom had 20-30 years of direct experience in the biopharma industry. Their combined experience and expertise assured us that once the plant was complete, we could operate meeting FDA regulatory compliance requirements. So I hired them and relocated them to Korea. More than 50% of our senior management are former inspectors. Some are European but the majority are American. They have direct experience in quality systems and quality culture. This way the young Koreans we hired could learn from them.

But again, the most challenging aspect of beginning the business was definitely how to convince potential clients to choose Samsung. Even if I hired American inspectors, even though I proved we could build a plant very well, it was still a daunting task to convince pharma companies that we could meet FDA guidelines without a track record. When Roche and BMS were considering partnering with us, they had a series of in-depth due diligence tasks to perform, including a quality system and culture review that included interviews with our employees. As time went on they became confident that Samsung could meet their requirements. Also, an important factor to note is that these companies we eventually partnered with helped us a lot. They visited us like an FDA inspector would and forced us to be prepared.

So, four or five years ago in the beginning it was really challenging. But we successfully built our first plant and our first two clients—Roche and BMS—occupied the majority of the capacity.

Once we had a track record, it was much easier to attract other clients who then encouraged me to build more capacity. Our second plant began GMP operation in 2016. And we began construction on plant number three in 2015 and it is still being built. We are expecting mechanical completion by November 2017 and to be GMP ready by 4Q18.

CP: What are the advantages for pharma companies to partner with CMOs like Samsung?
TH Kim: CMOs offer an attractive option because we can build and operate plants more efficiently and we also offer economy of scale benefits. For example, our second plant was built with a 150,000-liter capacity. At the time, the industry thought a 90,000-liter plant was the limit for mammalian cell culture capacity. When we built the 150,000-liter plant clients were very nervous. They felt it was too risky to build a pharma plant that exceeded 90,000 liters. At the time, the single largest one was 80,000 liters.

The 150,000-liter plant proved to be very successful and clients are happy with the economy of scale benefits it offers. Economy of scale is effective not only to reduce capital expenditure per capacity but it also helps to reduce labor costs because the number of people in a large plant is not much greater than a smaller scale plant. For example, our first plant was built for 30,000-liter capacity. The second 150,000-liter plant is five times bigger. However, the number of operators in plant number two is only 1.5 times greater, not three to four times. By building a plant in large-scale we can reduce the cost for goods and share the benefit of this profit with the client.

For this reason I see so much upside potential for current biopharma companies to increase their outsourcing. But many are still reluctant to outsource because they don’t want to share profits with CMO partners. So they choose to keep operations in-house and fail to recognize the long-term benefits economy of scale offers.

CP: Do you think this mindset will change?
TH Kim: Well, it is slowly. The demand for outsourcing continues to grow. Current statistics in the case of mammalian cell culture capacity globally is about four million liters. The portion covered by CMOs is only about one million liters. So only one quarter of the current capacity is being outsourced.

In the case of the semiconductor industry, for example, 30-40 years ago just 10% of manufacturing operations were outsourced. Today this number hovers around 50%. During the past 30-40 years the global economy was led by the IT industry. But moving forward I think the health care and biotech industries are going to lead the global economy. I’m sure the biotech and biopharma industry will grow further.

I also think that the majority of biopharma companies moving forward will concentrate on improving the drug development process and also focus on the marketing and sales of drugs. More and more they will turn to CMOs for manufacturing plant design, construction and operation. This area of the business is relatively less valuated from their point of view. If a CMO can aggregate all those small pieces of manufacturing demand, build plants in large scale so that we can minimize cost of good, it’s a win-win.

In a lot of cases it doesn’t make sense for them to build their own plants, considering their captive demand. They cannot build greater than 90,000 liters because it may be too big. They cannot fully run the large plant at all. Considering working together I think there is a lot of potential for biopharma companies and biotech companies to outsource more. My estimation is that in the long-term future the CMO portion of the biopharma manufacturing market will grow from where it stands currently at 25% up to 50%.

CP: What are the key trends driving the industry forward?
TH Kim: I think there are two key trends. One is the move towards personalized medicine in small-scale. Also, in addition to conventional monoclonal antibody therapies, we’re seeing many diverse types of therapies that are being developed like cell therapy and DNA therapy.

Another trend, or rather issue, is that the industry still needs to dramatically reduce the cost of goods. Monoclonal antibodies are still way too expensive for global patients to afford these valuable therapies. Ultimately, the industry has to work together to reduce the cost of goods. One of the most efficient ways is through economy of scale.

CP: How has Samsung evolved over the years in terms of services it offers?
TH Kim: In addition to the large-scale manufacturing services we began with, we completed a 2,000 liter small-scale manufacturing facility and started to provide manufacturing services of clinical material in small-scale. As clients move towards clinical studies we can provide the clinical materials and if they get approval for commercialization we start to provide manufacturing service of drug substance as well as drug product at the same site. And now we can also provide the labeling and packaging and warehouse service and logistics.

In addition, we are seeing many clients of ours expecting services not only for manufacturing but also on the development side. The one-stop services model is a growing trend as clients are looking for a more integrated outsourcing model to reduce risk in the supply chain.

For the past five years we just focused on manufacturing services, but from the very beginning of this year we started to provide development services as well, including cell line development and process development services. We did this primarily to maximize the satisfaction of our clients.

The idea is to provide one-stop services from cell line, to process development, clinical material manufacturing, large-scale drug substance API manufacturing as well as drug product fill/finish services. So Samsung continues to extend the scope of its services so that clients can be more satisfied.

CP: Can a CMO become too big and run the risk of losing personalized service?
TH Kim: The goal is to be in the sweet spot. I think we’re in that range. The number of employees at Samsung BioLogics is about 1,700 at the same site and we find this very manageable. Also, we already have economy of scale. We are going to have one of the largest manufacturing capacities as well capability in the biomanufacturing industry. There are not many CMO service providers who provide drug substance and drug product manufacturing at the same site, as well as cell line development and so on. So I don’t think we are too big. Even if we grow, I pay a lot of attention to the fact that we have to meet the sophisticated needs of our clients.

CP: How has Samsung’s client base evolved since its inception?
TH Kim: The majority of our clients used to be Big Pharma like Roche and BMS. Now we are attracting small biotech companies as well. Whether its Big Pharma or small biotech, I always emphasize client satisfaction. 

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Note: Dr. Kim will be participating at CPhI Worldwide as a keynote speaker at the Pre-Connect Congress at 10:20 am on October 23rd.