K-biotech firms break free from big pharma dependence with direct global sales

South Korean pharmaceutical and biotech companies are breaking away from their longstanding reliance on global big pharma and local partners for distribution, building their own overseas direct-sales networks and beginning to reap the rewards.

As frontrunners that weathered steep early costs post record earnings one after another, whether a company controls its own global distribution network has emerged as a defining factor in the structural transformation and valuation of K-biotech.

Overseas direct sales have long been blamed for punishing selling, general and administrative expenses, given the astronomical upfront fixed costs of hiring local sales staff, securing regulatory approvals and establishing subsidiaries. But the pioneers that survived the early gauntlet are now stabilizing their SG&A ratios and demonstrating the strength of the resulting profit structure.

Celltrion, which has embedded a direct-sales model centered on its European and US subsidiaries, posted record first-half sales of 2.54 trillion won ($1.78 billion) and operating profit of 773.7 billion won. SK Biopharm also entered a virtuous cycle, recording second-quarter operating profit of 97.1 billion won on the back of direct US sales of its epilepsy treatment cenobamate — sold in the United States as Xcopri — while simultaneously expanding R&D investment.

The push to upgrade direct sales — once focused on hospitals and public procurement — is now expanding into pharmacy networks, direct-to-consumer marketing and proprietary hybrid distribution models. Celltrion has been aggressively widening its European pharmacy footprint by acquiring local distributors, including Ziphrel in France and Ikon in Switzerland. SK Biopharm, meanwhile, has been running TV and digital DTC advertising campaigns to raise awareness of cenobamate in the United States, driving prescription momentum to 49,155 monthly prescriptions in June.

Hugel, a botulinum toxin maker, has also joined the direct-sales shift by launching a proprietary hybrid sales model for the US market. The company is pursuing a strategy that pairs distribution through its existing local partner Benev with direct sales through its US subsidiary Hugel America, and is gradually hiring local sales and marketing staff to build out its direct-sales organization.

Hugel's first-quarter botulinum toxin sales reached 65.4 billion won, up 60.6 percent from a year earlier, with revenue from North and South America jumping more than 420 percent, driven particularly by expanded shipments to the United States and Brazil. By combining direct sales with the partner-led approach that built its initial market penetration — cutting distribution margins and sharpening its clinic and hospital network management — Hugel aims to capture a 10 percent share of the US market and achieve annual sales of 900 billion won by 2028.

Hugel's Geodu factory in Chuncheon. [Hugel]

Industry observers say that owning a proprietary overseas distribution network has become a powerful bargaining chip that can shift the dynamics of partnership talks, M&A negotiations and technology licensing deals with global big pharma. Companies without distribution networks must hand over global rights to big pharma in licensing deals and accept lower royalty rates, while those with local direct-sales operations can retain development control and maximize margins. From a big pharma perspective, acquiring a biotech with an established local sales infrastructure means immediately usable commercial assets — a dynamic that is steadily lifting the valuation premium commanded by companies with direct-sales networks.

"Building a proprietary direct-sales network is a double-edged sword that squeezes profitability for years in the early stages, but once it takes hold it becomes a core asset that delivers high-margin returns and dramatically strengthens negotiating power in global markets," an industry official said. "The gap in earnings and corporate value between large players with their own distribution networks and smaller biotechs that rely on outsourced distribution will only widen."

silverpaper@heraldcorp.com