Factory First, Profits Later? Group-Wide Push Raises Pressure on Lotte Bio’s CDMO Performance

Delays at Songdo plant extend revenue gap
CDMO requires trial-and-error and long-term investment
Mid-sized and smaller players enter, intensifying competition

Lotte Biologics has brought Hotel Lotte, an affiliate within the group, on board as a new shareholder, securing group-level backing. With large-scale facility investment already committed ahead of the completion of its Songdo plant in Incheon, the key variable determining business success has become whether the company can secure commercial manufacturing volumes. While Lotte Bio announced its first contract wins last year, these remain limited to clinical-stage production, constraining near-term revenue realization.

Slow Progress in Securing Orders

According to the investment banking industry, Lotte Biologics sold a significant portion of unsubscribed shares from its capital increase late last year—shares not taken up by Lotte Corp.—to Hotel Lotte, bringing in a new shareholder. Previously, Lotte Corp and Lotte Holdings held 80% and 20% stakes, respectively. Through this capital increase, Hotel Lotte invested about $150 million, securing roughly a 19% stake. Market commentary has been split between views that the move “reconfirms Lotte Group’s commitment to the bio business” and assessments that “the investment burden has merely shifted to Hotel Lotte, without fundamentally easing the group’s overall financial load.”

Large-scale group support is accelerating in step with the pace of Lotte Bio’s business rollout. The first plant of its bio campus under construction in the KI20 block of Songdo’s 11th district was initially slated for completion by the end of last year, but after two delays, the schedule has been revised to a test run in August. As a result, full commercial production is now expected only after 2027. CDMO is characterized by heavy upfront fixed costs, and industry consensus holds that Lotte Bio’s capital increase is intended to bolster financial endurance during this interim period.

The company’s loss-making financials underscore the challenge. In 2024, Lotte Bio posted an operating loss of about $56 million and a net loss of $63 million. On a quarterly basis, net losses amounted to $158 million in the first quarter, $97 million in the second, and $167 million in the third, failing to show consistent improvement. While CDMO players are generally expected to endure early losses while building production track records and client trust, prolonged deficits risk weakening execution momentum without additional capital injections.

Some visible changes have nonetheless emerged. Since CEO James Park took office in January last year, Lotte Bio has announced three consecutive CMO contracts. All, however, involve production for clinical-stage drugs. Such contracts tend to be small in scale and short in duration, limiting their impact on plant utilization rates and profitability. This backdrop explains why group-level support—manifested through Hotel Lotte’s participation in the capital increase—is widely seen as merely buying time until plant completion and commercial contracts materialize.

Samsung’s “Super Gap” vs. Lotte’s “Compressed Growth”

Samsung Biologics, which Lotte Bio has positioned as its key competitor, did not enjoy a smooth trajectory in its early years either. Samsung entered the CDMO business in 2011, at a time when global leaders such as Switzerland’s Lonza and Germany’s Boehringer Ingelheim had already locked in long-term contracts with major pharmaceutical companies. As a latecomer, Samsung faced the dual burden of heavy upfront investment and sluggish early order intake, with utilization lagging capacity expansion for an extended period.

In 2017, Samsung Biologics generated revenue of $325 million and operating profit of $46 million, a modest outcome considering its sustained capital investment. Still, the company did not retreat from its “scale competition” strategy centered on expanding production capacity. Within six years of launch, it secured annual capacity exceeding 360,000 liters, placing it on par with top global CDMO peers then operating at around 300,000 liters. This approach prioritized long-term trust building over short-term profitability.

The strategy began delivering tangible results in the 2020s under CEO John Rim. Samsung Biologics steadily expanded production partnerships with major global drugmakers, improving its earnings structure. Last year, the company posted revenue of $3.19 billion and operating profit of $1.45 billion, while annual order intake reached a record $4.77 billion. Notably, the number of customers among the world’s top 20 pharmaceutical companies rose from three in 2018 to 17 recently, underscoring a level of accumulated trust difficult to replicate quickly.

Lotte has outlined a blueprint to catch up through “compressed growth.” The plan places Shin Yoo-yeol—son of Lotte Group Chairman Shin Dong-bin and former vice president and global strategy head of Lotte Bio—as co-CEO alongside James Park. In parallel, Lotte has moved to expand North American operations by building antibody-drug conjugate (ADC) production facilities at its Syracuse plant in the United States. Industry observers note that the third-generation heir’s frontline involvement signals Lotte’s intention to position bio not as a short-term experiment, but as a long-term core growth engine.

Diverging Survival Strategies

The challenge is that competition in the CDMO market has intensified markedly as numerous smaller players have entered in recent years. Rising uncertainty in new drug development and pressure from drug pricing regulations have made contract-based CDMO revenue an increasingly pragmatic choice across the pharmaceutical and biotech sectors. The scope of outsourcing has expanded beyond biologics to include chemically synthesized drugs, active pharmaceutical ingredients (APIs), and finished formulations, broadening the field of entrants. Unlike large-scale biologics CDMO, some segments allow participation through conversion of existing facilities, accelerating entry by small and mid-sized firms.

Celltrion, for instance, has formally expanded into CDMO leveraging its biosimilar manufacturing experience, setting a target of $2.1 billion in CDMO revenue by 2035, anchored around U.S. production bases. SK Pharmtech is pursuing differentiation by focusing on complex processes such as small-molecule APIs and ADCs, expanding collaboration with global drugmakers through multinational manufacturing hubs across the U.S. and Europe. These companies highlight process development capability, quality responsiveness, and early compliance with global regulatory standards as competitive strengths.

Traditional pharmaceutical affiliates are also moving into CDMO. Daewoong Bio is preparing microbial-based biologics CDMO at its Hyangnam bio plant, restructuring production systems to achieve global GMP certification. Dasan Pharmaceutical is likewise pushing toward global CDMO by expanding export portfolios and enlarging manufacturing capacity. While these firms lag large-scale biologics CDMO players in facility size, they are targeting niche demand through flexible decision-making and specialization in specific processes.

Chinese players add another layer of competitive pressure. WuXi Biologics, for example, recently had five pre-filled syringe production facilities pass U.S. FDA pre-license inspections, demonstrating quality and regulatory readiness. Despite geopolitical risks including U.S.–China tensions, Chinese CDMOs continue to gain ground on price competitiveness and production speed, expanding global pharma companies’ options. This environment suggests that Lotte Bio cannot secure competitiveness through capacity expansion or group backing alone, further underscoring the importance of early order wins and differentiated strategy.