South Korea: the rise of a new medtech giant? 

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t the start of the Covid-19 pandemic, South Korea was widely praised for its response. Without resorting to a full-scale lockdown, the country was able to control the outbreak far more successfully than many countries with a similar population size.

To give a particularly stark example, as of 25 June, South Korea (population 51.6 million) had registered 282 coronavirus deaths, compared to 43,081 for England (population 56 million).

Its success has been attributed to a watertight system of contact tracing and targeted testing, among other factors. Previous disease outbreaks, such as Middle Eastern Respiratory Syndrome (MERS) in 2015, had sharpened its disease control system. And its domestic medical devices industry was ready to spring into action, producing testing kits and face masks without delay.

“In South Korea, around 140 domestic companies were producing over 10 million masks a day at the beginning of the outbreak,” says practice head of medical devices at GlobalData, Rohit Anand. “Meanwhile, over 20 domestic companies were producing Covid-19 test kits that could test about 135,000 people a day. Strong domestic production capability has helped the South Korean Government to control the Covid-19 pandemic quickly and effectively.”

It is perhaps no wonder that the government, buoyed by these successes, is looking to boost the competitiveness of its medtech sector. On 13 May, a number of ministries announced the launch of a joint medical device R&D project with a target budget of ₩1.2tn ($0.98 bn) in the years up to 2025.

The project will take advantage of increased trust in Korean-made devices and health services. Spearheaded by the Ministry of Trade, Industry and Energy (MOTIE), the Ministry of Science and ICT, and the Ministry of Food and Drug Safety, it will further improve the country’s fight against infectious diseases like Covid-19.

As Anand points out, South Korea is already a prolific exporter of medical devices. In recent years, it has significantly increased exports to BRICS countries (Brazil, Russia, India, China and South Africa) as well as Europe and the US. The government has also been eyeing Middle Eastern countries as potential trading partners.

In the first quarter of 2020, its global export of medical devices surged by 4.4% – mostly fuelled by international demand for face masks.

All this said, high-end products are a different story. Here, the country is still heavily reliant on imports, which comprise around 60% of the total. The R&D project is likely to change that balance, creating a market for domestically produced ventilators and in vitro diagnostics.

“At the moment, the country imports a large number of high-end medical devices from the US, Europe and Japan, with domestic manufacturers mostly involved in manufacturing low and mid-technology medical devices,” says Anand. “The increased funding will be used to develop, manufacture and market innovative and high-end medical devices domestically.”

There is another issue too, in that the country has very stringent regulatory policies. All medical devices, whether domestic or foreign, are subject to pre-market licenses from the Ministry of Drug and Safety before they can be sold. There is also a long reimbursement approval lead-time – it takes at least 150 days, which can delay patient access to new technologies.

Anand thinks these issues will need to be addressed before South Korea can truly show its mettle on a world stage.

“Reducing the time and cost to market, reducing reimbursement approval lead-time and reducing import dependence will give the South Korean medical device industry a competitive edge,” he says.

Co-head of life sciences at Fieldfisher, Janita Good, points out that financial backing from a government to a particular sector is always a positive development.

“It’s a clear signal that an area of business is up and coming,” she says. “This support from the South Korean Government is undoubtedly likely to be met with venture capital investment, which will really unlock the potential of the medical devices industry in South Korea, allowing them to expand the work they do and get their products onto international markets."

Anand agrees that VC funding may lead to new deals as we move into the latter half of 2020. As part of the R&D project, the government has established a task force, which will play a key role in helping private companies enter the market.

“South Korean medical device manufacturers are expected to be on the radar of VC investors, and investments are likely to increase in the next few quarters,” he says. “The government is also planning to relax financial regulations by allowing conglomerates to own start-up venture capital firms. This indicates that the VC funding may go up in times to come.”

According to GlobalData’s research, the South Korean medical devices market is expected to grow at a compound annual growth rate of 4.9% through 2025. Already, South Korea contributes about 4% of the global medical devices market and 7% of the Asia-Pacific medical devices market – a figure that could be poised to rise in future.

“South Korea has a fully formed life sciences industry, but it has tended to focus on serving the local market, so there is a real need to break into the international market and collaborate more globally,” remarks Adrian Dawkes, managing director of PharmaVentures. “South Korea is already a global leader in mobile phones, technology and car manufacturing, so it's clear that a focus on the life sciences is bound to yield excellent results. It could see South Korea rivaling the US and Germany, global leaders in medical devices."

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