Korea's pharmaceutical, biotech, and medical device sectors are on edge over the possibility of a prolonged blockade of the Strait of Hormuz by Iran. Industry officials say a combination of disruptions in active pharmaceutical ingredient (API) supplies, higher logistics costs, and export delays could erode corporations' profitability. There is also concern that if global instability spreads, the pharmaceutical supply chain, which had regained stability after COVID-19, and the recovering medical device export performance could be shaken again.
According to the Korea Customs Service on the 4th, exports of domestically made pharmaceuticals to 15 Middle Eastern countries totaled $569.07 million (about 840 billion won) last year. According to the Korea Health Industry Development Institute (KHIDI), as of 2024, exports of domestically made medical devices to the United Arab Emirates (UAE) are $145 million, and to Saudi Arabia are $81 million, growing at an average annual rate of 10% and 2%, respectively, since 2020.
Although total exports to the Middle East are not large, there is an outlook that corporations in pharmaceuticals, biotech, and medical devices that have entered overseas markets, including Middle Eastern countries, could also be hit.
Concerns are particularly high about shortages in API supplies. As of 2024, Korea's API self-sufficiency rate is only 11.9%. About 90% is imported from China, India, Japan, and France. While the direct share from the Middle East is small, if higher sea freight, increased insurance premiums, and a surging exchange rate overlap, import costs could rise sharply.
The Strait of Hormuz is a strategic chokepoint through which about 20% of the world's seaborne crude oil passes. If a blockade becomes reality, a rise in international oil prices and the won-dollar exchange rate will be unavoidable, which could lead to higher manufacturing costs for drugmakers. The burden could grow for some drugmakers that rely heavily on overseas sources for essential drug ingredients such as antibiotics, antipyretic analgesics, and hypertension medications.
An official at a pharmaceutical company said, "During COVID-19, some drugs went out of stock when supplies of certain ingredients were cut off," and added, "If the situation drags on, supply imbalances could reemerge, centered on essential medicines."
Biologics depend more on air logistics than synthetic drugs because maintaining the cold chain is essential. If flights on Middle Eastern routes are reduced or detours increase, a surge in freight rates will be unavoidable. Corporations conducting clinical trials or licensing collaborations in the Middle East also face new variables that could delay schedules.
An industry official said, "If flight reductions or surging sea freight become reality, disruptions across supply schedules will be unavoidable," and added, "Also, Middle Eastern countries have a high proportion of government tenders, so contract risks could rise if delivery deadlines are missed."
There is also concern that geopolitical instability and route disruptions could sap the growth momentum of corporations at a time when the Middle East was emerging as a key export market for Korean companies.
Daewoong Pharmaceutical secured marketing approval for its botulinum toxin "Nabota" in 10 major Middle Eastern countries, including Saudi Arabia, the United Arab Emirates, and Kuwait, and has pursued a strategy to expand in the Middle Eastern market. Hugel also obtained marketing approval for its botulinum toxin product in the United Arab Emirates last year, opening the way to enter the Middle East. Medytox is targeting Middle Eastern countries as a core market for its botulinum toxin "NEWLUX" and its hyaluronic acid filler product "Neuramis." In December last year, the company also signed an exclusive supply agreement for botulinum toxin and fillers with AMICO GROUP, the largest medical device distributor in the Middle East.
Medical device companies in areas such as MRI, ultrasound, and implants are also closely watching the situation. If the war drags on and Middle Eastern countries tighten restrictions on foreign currency outflows, delayed payment collection could become a variable. A medical device company official said, "There is no immediate direct impact, but if flight reductions, route changes, or port call avoidance occur, product supply schedules could be disrupted."
Stocks are also volatile. Although pharmaceutical and biotech shares are classified as defensive, investor sentiment is weakening on concerns that earnings uncertainty could grow if higher costs coincide with a surging exchange rate.
Experts are also watching whether this situation will remain a short-term shock or lead to a restructuring of supply chains. Lee Seung-gyu, vice chair at the Korea Biotechnology Industry Organization, said, "After COVID-19, the war in Ukraine, and U.S.-China tensions, pharmaceuticals and biotechnology have been reappraised as 'security assets,' not 'industrial goods,'" and added, "The need for domestic production of medicines and strategic stockpiles could also draw renewed attention."
Meanwhile, the Ministry of Health and Welfare set this year's biohealth industry export target, including pharmaceuticals, biotech, medical devices, and cosmetics, at $30.4 billion (about 45 trillion won), up 9.1% from last year. Last year, Korea's biohealth industry exports totaled $27.9 billion (about 41 trillion won), up 10.3% from a year earlier.