Why Samsung Is Getting Into Pharma

Samsung Electronics (SSNLF) is best known for churning out widely popular smartphones, appliances, televisions and other consumer electronics devices, but the South Korean conglomerate is also making a push into the pharmaceuticals market with the launch of a generic version of Johnson & Johnson’s (JNJ) rheumatoid arthritis drug Remicade.

According to a report in The Wall Street Journal, the drug, which will come with a lower price tag than Johnson and Johnson’s blockbuster medicine, will be marketed to health care providers via Merck & Co. Inc. (MRK). It is expected to sell for 35% less than the current list price for Remicade. Samsung got approval from the Food and Drug Administration for the generic drug in April, and the launch marks the company’s first push into the pharmaceutical market under its new Samsung Bioepis Co. unit. The biotech arm is going after generic versions of branded drugs that are made from living cells and will address complex diseases like arthritis and cancer, reported the Journal. The brand-name treatments can often cost as much as tens of thousands of dollars a year, presenting a big opportunity for lower-cost players to grab market share. (See also: Samsung Poised to Surpass Intel in Second Quarter.)

Potential Patent Issues

The J&J unit Janssen Biotech had tried to prevent Samsung’s drug from hitting the market in the U.S., seeking a preliminary or permanent injunction, arguing it violated three of J&J’s patents, reported Reuters. A hearing on the case has yet to be scheduled. Samsung is the second company to roll out a lower-cost version of Remicade, which has hurt J&J’s sales.

With the smartphone market around the globe getting saturated, and Samsung seeing increased competition from U.S. and Chinese technology firms, the company is seeking ways to diversify beyond consumer electronics, and the pharmaceutical industry is one area it has set its sights on.

It’s also becoming the world’s largest manufacturer of semiconductors and is creating a new contract chip manufacturing unit that will be charged with making mobile chips and other non-memory semiconductors for customers. According to a report by Reuters in May, the new contract chip manufacturing business will be headed by Kim Ki-nam, president in charge of the semiconductor business for the South Korean conglomerate. By making it a stand-alone business, Samsung will likely draw more customers given concerns that it could get a hold of client secrets that would aid its own chips are diminished.

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