The biologic drug manufacturing division of Samsung Group has concluded plans to float its initial public offering in South Korea as it works towards becoming one of the leaders in the biological medicine space.
Samsung Biologics Co revealed in a regulatory filing Tuesday that it is seeking to raise up to 2.25 trillion won ($2 billion) in its South Korean IPO. It will offer 16.5 million shares at a price between 113,000 won and 136,000 won apiece. The listing values the Samsung drug-making arm at about $8.2 million.
Samsung Electronics Co. controls a 46.8 percent stake in the biological drug manufacturing company which is 51 percent owned by Samsung C&T Corp, the holding company of the Samsung Group. Pharmaceuticals constitute one of the areas the group hopes would continue to drive its growth potential into the future, as smartphone sales look to suffer.
As the name suggests, Samsung Biologics is into production of complex drugs which are known as biologics. The research process of these drugs, which are made of organic substances, is more complex than other traditional medications – so also is the manufacturing process. However, biologics are considered more potent and have fewer side effects compared to other drugs.
The market for biologics is expected to witness impressive growth over the next few years. In a report funded by Novartis, healthcare strategy consulting firm IMS Consulting Group estimated global market value to exceed $390 billion by 2020.
The Samsung Biologics IPO is one of the biggest ever in South Korea. It looks to become the third-largest IPO in the history of the Asian country, according to Dealogic. The biologic drug manufacturer said proceeds from the offer will be used for capacity expansion and investment in new technologies. Part of the proceeds would also be used for debt repayment to enhance the company’s financial structure.
Lead managers for the IPO are Korea Investment & Securities Co. and Citigroup Inc. JPMorgan Chase & Co., NH Investment & Securities Co., and Credit Suisse Group AG are also assisting with the handling of the IPO.
There is plan for an IPO road show launch on October 17. Demand for the share sale would be assessed by Samsung Biologics from October 26 to 27 before revealing final share price on October 28. The company plans to list on the Korea stock exchange’s main board on November 10.
The company started the construction of its third large-scale manufacturing plant (valued at 850 billion Korean won) in December. It disclosed its intention was to become the largest biologics contract manufacturer in the world. The IPO is expected to help in making that goal reality. Samsung Biologics expects to attain 1 trillion won in operating profit when the plant becomes operational.
The drug-making business is a contract biological drug manufacturer for companies such as Bristol-Myers Squibb Co. and Roche Holding AG. It controls majority 91.2 percent stake in Samsung Bioepis, a company that develops biosimilars, or near-replicas, of existing biologic drugs with expired or soon-to-expire patents. Part of the IPO proceeds would be used for additional investment in the biosimilar maker, which has submitted a near-replica of the rave-making breast cancer medication Herceptin to European regulators for approval.