Established from the legacy of R.P. Scherer, the prolific soft capsule CDMO, RP Bio, leverages its proprietary technologies to advance the health functional food market.
South Korea is currently facing a unique demographic shift, becoming one of the first super-aging societies in the world. While this presents challenges, it also offers opportunities for the health functional food sector. How do health functional foods contribute to lifelong health, and what are the key opportunities in both the health functional food and pharmaceutical markets?
While everyone desires a long life, it's essential that people live long and healthy lives. Health functional foods are becoming an integral part of achieving this goal, evolving into essential supplements for maintaining well-being. Although we're advancing towards treatments like monoclonal antibodies, pharmaceuticals alone may not cover all aspects of health. In the past, alternative medicines could address some gaps, but now the market for health functional foods is expanding rapidly, positioning them as key supplements in maintaining lifelong health.
As South Korea transitions into a super-aging society faster than anticipated, we're witnessing a sharp increase in healthcare expenses, particularly in what is known as "catastrophic medical costs"—with 80% of healthcare spending typically occurring at the end of life. This situation poses a serious challenge to the Korean government from an insurance and fiscal perspective. To address and possibly delay this surge in costs, the government is creating a favorable environment for the expansion of the health functional food market. Despite the strict regulations in the Korean pharmaceutical industry, we see the government taking a more hands-off approach to health functional foods, recognizing their importance in promoting long-term health and well-being.
Although there are still challenges related to raw materials, health functional foods are increasingly seen as a fiscal alternative, helping to reduce the burden on healthcare systems by promoting preventive health measures.
As a B2B company, we don't sell directly to consumers, but we are leveraging market trends by focusing on our strengths in formulation and proprietary technology. In doing so, we aim to positively contribute to society's health and well-being.
I’d like to follow up on your last statement, where you mentioned leveraging your technologies and capabilities in both health functional foods and pharmaceuticals. Today, CDMOs (Contract Development and Manufacturing Organizations) play a crucial role in the medical and health sectors. First, they help bring innovative solutions to market for companies lacking production capabilities. Second, they help reduce costs, as you noted. How do you balance R&D development and production to support the growth of health functional foods and pharmaceutical products? How are you building upon your proprietary technology, and how do you balance that with your manufacturing capabilities as a CDMO to offer a competitive edge to your clients?
We operate in both the generic drug and health functional food sectors simultaneously. Generic drugs provide us with a stable revenue stream, as their formulations are relatively simplified, forming the foundation of our company. However, our health functional foods are not just standard formulations; they are more specialized, like the sustained-release Vitamin C products we’ve introduced to the market. These innovations allow us to position ourselves as market leaders. When I mention "generic drugs," I’m referring specifically to over-the-counter (OTC) products.
I’d like to shift to an international perspective, especially in terms of industry trends. For example, the global health functional food market is projected to reach nearly $600 billion in revenue by 2030, with growing interest from consumers in the US and Europe. Looking beyond Korea, how do you see this market evolving, and where do you think the potential lies for health functional foods?
The health functional food industry is quite similar to the fashion industry in that it’s seen as having high growth potential, but it hasn’t fully matured yet. We’ve seen companies valued at 200 billion KRW that were once the hype, only to go bankrupt overnight. Unlike other industries where a few major players dominate, this market is still fragmented, which makes it even more interesting.
While I can’t point to specific trends in the US or Europe, I’ve noticed an overall shift—from the popularity of Omega-3 supplements to the rise of sustained-release Vitamin C products. This is a significant paradigm shift. Overall, while the market clearly has high growth potential, it’s still unpredictable in terms of where it will head next.
Korea’s industry is highly decentralized, especially compared to regions like Europe and the US, where massive multinational corporations dominate markets with $30 to $40 billion in revenue. Why do you think Korea is more open to having small and medium-sized enterprises (SMEs)? Do you believe this broader pool of medium-sized companies allows the market to be more innovative and agile?
Like in many organizations, the bigger you grow, the slower you become at adapting to change. The strength of startups lies in their quick decision-making and rapid execution. I believe the success formula for Korean cosmetics SMEs has been their unique marketing strategies, particularly in targeting niche markets. This has allowed them to be more responsive to market changes and customer demands. Koreans, unlike some other cultures, are naturally drawn to social media trends and viral news, which creates an opportunity for these smaller companies to engage directly with what's popular. Korean MNCs (multinational corporations), on the other hand, are too large to keep up with such trends. The cosmetics industry, in particular, is a "red ocean," but new brands are constantly emerging and gaining market share in addition to the dominant companies that drive the overall market. A similar trend is observed in the health functional food sector. Korean consumers check their health status and always think, “What should I eat to improve my health?” (even when dieting), and companies can maintain continuity when they can continuously launch brands that clearly organize these consumer needs into a concept.
Established in 1983, RP Bio specializes in the development and production of pharmaceuticals and health functional foods, holding CDMO contracts with around 400 brands, including Daewoong Pharmaceutical, Chong Kun Dang, Green Cross, Yuhan Corporation, JW Pharmaceutical, and Amway Korea. Additionally, RP Bio supplies 80% of South Korea’s cold medicine and painkillers. What factors have contributed to this success?
To be honest, I believe we were naturally positioned to become the best in class when it comes to softgels. It might sound like luck, but the complexity of producing softgels set us apart. Unlike hard capsules or tablets, where you simply compress powdered ingredients into a solid preparation, softgels require much more sophisticated production. The liquid inside is encapsulated in gelatin, and this double processing requires a high level of expertise and quality control. There must be absolutely no interaction between the liquid and the gelatin shell. If the liquid starts to harden or anything goes wrong during production, it’s considered a failure or contamination.
This level of quality control creates a high entry barrier, meaning only those with the right knowledge and technology can succeed in producing softgels. In terms of formulation, softgels are highly effective due to their superior absorption rate, and they provide better patient convenience compared to other formulation. This makes them the most preferred type of capsule, both in the US and Korea. In a survey conducted in the US, softgels were ranked as the most preferred type of solid preparation among patients. They hold the same position in Korea, especially among pharmaceutical companies.
You have the technology, but to remain competitive and affordable, I know you’ve implemented an automated production line. Can you explain the advantages of your production processes over your competitors?
It all comes down to reducing labor costs, maintaining strict quality control, and earning the trust of our patients and clients. Automation is crucial because even a single human touch can introduce defects, contamination, or variability in quality. Humans simply can't be as precise as an automated system. With manual labor, there's always a risk of fluctuation in quality, but automation eliminates that risk. Additionally, since we produce various drugs on a single assembly line, we also handle processes like imprinting and packaging, each with its own set of standards. These specifications are meticulously followed by the automated systems. Our clients trust us because they know that by adhering strictly to these standards, we consistently deliver high-quality products.
In the presentation, we discussed how, in the medical sector, a company’s competitiveness often stems more from its reputation than from its technology. How does your current production capability and technology position you to compete internationally? You mentioned that you have a single production line capable of handling different types of products and meeting multiple standards. What is your current situation in terms of targeting the international market?
To be honest, I think we’re still in the early stages of our global expansion. We’re taking our first steps, almost like “baby walking,” on the international stage. There was a time when RP Scherer Corporation, a U.S.-based company, supplied 70% of the world’s softgels, and it became a household name. Many people still remember those days and trust the quality of RP Scherer products. In the pharmaceutical industry, we are respected for the high quality of our softgels, but beyond that legacy, we face the challenge of making our proprietary technology and innovations—such as extending the shelf life of softgels —known to a wider audience.
I believe that everyone would welcome longer shelf life for softgels. And now, with the global focus on ESG (Environmental, Social, and Governance) practices, which is becoming increasingly important worldwide, we are aligning ourselves with these trends and creating even greater value. With the convergence of ESG principles and our proprietary technology in formulation and production processes, I’m confident that we are on the path to generating significant synergies with a far-reaching impact on the global market.
Building on your proprietary technology, I understand you've extended the shelf life of your softgels from 24 to 36 months. While your market share in Korea is impressive, with 60-80% in painkillers and generic drugs, growth opportunities within Korea seem limited. How critical is international expansion for you, and how are you working with partners both in Korea and abroad to develop custom solutions for your clients?
I have to be cautious here, as this involves sensitive information. First, we’re collaborating with major pharmaceutical companies while also advancing our own R&D. Softgels are highly effective due to their superior absorption rates, especially for drugs that lose effectiveness when taken orally—sometimes dropping below 1%. These capsules can even replace injectable forms in certain cases. We’ve recently signed a CDMO agreement with a partner, and we’re moving forward with global clinical trials, funded in part by the RIGHT Foundation, supported by the Korean Ministry of Health and Welfare and the Bill & Melinda Gates Foundation. We’re seeing growth potential in developing regions, particularly where contamination-free solutions are critical due to logistical challenges. With the likelihood of future pandemics, we’re preparing for these outbreaks alongside major pharmaceutical companies through our expanding logistics network.
Let’s dive deeper into your technology. You’ve mentioned softgels and are known for two innovations: Neogel and Neosol. Can you explain these technologies and how softgels might outperform tablets in certain applications?
We’ve patented New Neosol® and New Neogel®, the upgrade version of Neosol and Neogel. A compact liquid form solution that offers superior absorption compared to tablets, which are typically in powder form. New Neosol® provides strong effects by increasing bioavailability through rapid initial dissolution. In addition, the capsule size is reduced, making it convenient for consumers to swallow. New Neogel® prevents softgels from hardening or slow leaking, thereby increasing stability. This patented technology allows the shelf life to be extended from the existing 24 months to 36 months.
In addition, soft capsules are made of oil-based liquid contents, so they are more effective and cause less gastrointestinal problems as they flow through the stomach. Tablets and other solids are powder-based, so they take longer to become a solution and can cause gastrointestinal problems. In addition, soft capsules prevent patient discomfort such as bad odor or foreign body sensation when taking them because the contents are surrounded by a soft gelatin shell. It also removes unpleasant odors associated with products such as omega-3 and natural extracts.
One of the future growth engines is the natural soft capsule. My understanding is that all the ingredients are derived from natural sources rather than synthetic chemicals. This seems like an evolution of the soft capsule technology you mentioned earlier. Could you share how this will impact your company’s development and its importance to your business strategy?
Consumer preferences are shifting towards disease prevention, with a growing focus on what types of food or products can enhance health. This awareness isn't just among middle-aged people; even teenagers and those in their 20s are increasingly conscious of health supplements and products that promote well-being. There’s a clear demand in the market for products made from natural sources, such as plant and animal extracts, rather than synthetic chemicals. We've always prioritized formulations that enhance user experience and improve patient compliance. Fortunately, softgels, which are our area of expertise, are ideally suited for long-term use. They offer superior absorption and significantly improve patient compliance. With these market trends aligning with our proprietary soft gel technology, we see a tremendous opportunity to promote our products directly to consumers. Our marketing team is fully committed to this initiative.
Those are fascinating technologies. You also mentioned earlier a shift from Omega-3 to Vitamin C. Recently, the South Korean government implemented new regulations, and I understand your company was the first to respond to the long-acting vitamin regulation. Could you elaborate on the progress you’ve made and the current stage of development?
Our key advantage lies in our ability to respond swiftly to regulatory changes, thanks to our long-standing experience in the pharmaceutical sector. We already had an internal dataset on the efficacy of long-acting vitamins, which allowed us to submit the necessary data to the Ministry of Food and Drug Safety. In fact, the MFDS held informal seminars during the process of establishing new regulations and guidelines, asking for test methods and advice for specific documents, and we guided them on this. This collaboration helped us quickly adapt to the evolving regulatory landscape.
Regarding vitamins, many people, especially seniors, have experienced stomach discomfort when taking large doses at once. There was a trend where senior citizens were advised to take mega doses, like 6,000 milligrams of vitamins, all in one go, which often led to adverse effects. The development of long-acting vitamins offers a solution by reducing the need for multiple doses throughout the day. A single dose can be effective for an extended period, minimizing side effects and improving patient compliance.
I’d like to dive a bit deeper into your business. You mentioned earlier that 50% of your revenue comes from the food and health industry, while the pharmaceutical business helps stabilize your revenue. Looking ahead over the next three to five years, how do you see the balance between pharmaceutical products and health functional foods evolving within your company? How do you foresee your company’s growth?
As I mentioned, OTC drugs will continue to provide a stable revenue stream for us. However, about three to four years ago, OTC drugs accounted for 70% of our total revenue, with health supplements making up only 30%. But after COVID-19, we’ve seen exponential growth in the health supplements market, which has significantly shifted the balance. Moving forward, I believe the revenue gap between health supplements and OTC drugs will continue to widen. Currently, the ratio stands at roughly 55:45 in favor of health supplements, but in the future, I anticipate it could shift to 70:30 or even 80:20.
Part of your business is the CDMO, but you also launch your own products, particularly in the food and supplements sector. How do you see that trend evolving? Will CDMO remain your priority, or will your own products, such as those based on black ginseng, take precedence?
Over the next two to three years, my team and I expect black ginseng to become a significant growth driver. Our softgels, made using our proprietary technology, as well as our blister jelly and sustained-release Vitamin C products, black ginseng for respiratory health, and raw material targeting the diet industry are expected to account for 50% of our future revenue. If black ginseng, known for its anti-inflammatory effects on the respiratory system, is officially recognized by the Ministry of Food and Drug Safety (MFDS), we plan to accelerate its promotion. Internally and externally, we believe that these four product categories—black ginseng, softgels, sustained-release vitamins, and blister jelly—will become milestones for our company. We are also working to nimbly comply with MFDS regulations to capitalize on these opportunities.
In terms of revenue, the success of these products will also enhance our R&D efforts, preparing us for the next stage of growth. For reference, black ginseng may be commercialized under our own brand. However, for sustained-release Vitamin C, we plan to let established pharmaceutical companies’ health functional food divisions handle sales while we focus on production and regulatory approvals. So, for that product, it will remain a CDMO business. The key factor for black ginseng, though, will be its official registration as a functional ingredient by the MFDS.
Your strategy and innovation in Korea, along with the R&D capabilities you've developed over the past few years, are very clear. What can the international market expect from you in the next two to three years? What kind of positioning would you like to achieve, and what is your strategy to reach those goals?
The key to success in the overseas market lies in securing a stable supply network. In 2019, we built a new plant, which significantly increased our production capacity, allowing us to meet the growing international demand for our products. Since our technology and quality are highly regarded globally, we’re confident that we can accelerate collaborations with major global pharmaceutical companies and expand internationally. With our legacy brand, RP Scherer, we’re modernizing to align with our vision of becoming a K-medical leader, aiming to capture more international market share. Once we establish strong trust with our local partners, we expect to drive profitability. Even if we face a period of lower profitability initially, we are well-positioned with the infrastructure to weather it. After this phase, we’ll adopt a more aggressive strategy to increase our market share abroad.
This report will be distributed across 59 countries, reaching 70 million readers. For their benefit, how would you define your company today in just two sentences?
Our vision is encapsulated in the slogan "RP," which stands for Real Partner for a healthy life. We emphasize two key values: "togetherness" and "happiness." While it’s difficult to capture the breadth of our technology and products in one sentence, I would summarize it as our commitment to promoting a healthy and happy life for all.
For more details, explore their website at: http://www.rpskorea.com/html/ko/main.php
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