Lotte Biologics has once again moved to a paid-in capital increase to build a bio manufacturing facility in Songdo, Incheon. It is the seventh paid-in capital increase since its launch. The cumulative investment is approaching 1.5 trillion won. The company's strategy is to expand capacity and secure orders from big global pharmaceutical companies ("big pharma") within the year, but some say it is uncertain whether the additional capacity will translate into actual orders when even the utilization rate at its existing U.S. plant has plunged.
On the 9th, according to the industry, Lotte Biologics will conduct a shareholder-allotted paid-in capital increase worth 255.3 billion won to raise funds for the construction of Songdo Biocampus Plant 1. Songdo Plant 1 received building approval on the 22nd of last month, two years after breaking ground, and is slated to begin pilot runs in the second half and start commercial production next year.
Songdo Plant 1 is an antibody drug manufacturing facility with a capacity of 120,000 liters (L). Including the U.S. Syracuse plant (40,000 L) acquired in 2023 from Bristol Myers Squibb (BMS), Lotte Bio's total capacity will expand to 160,000 L.
◇ 1.5 trillion won invested over 4 years…"big pharma" orders still out of reach
This paid-in capital increase is the seventh since launch. After Lotte Corporation invested 13 billion won in June 2022 to establish the company, Lotte Biologics has carried out paid-in capital increases targeting Lotte Corporation, Lotte Holdings, and Hotel Lotte as follows: ▲ December 2022, 210.6 billion won ▲ March 2023, 212.5 billion won ▲ June 2024, 150.1 billion won ▲ March 2025, 210 billion won ▲ December 2025, 270 billion won ▲ March 2026, 150.1 billion won, and this round, totaling seven paid-in capital increases. The funds raised amount to 1.4716 trillion won in total.
In addition to paid-in capital increases, the Lotte Group has continued to provide funding support in the form of debt guarantees. Lotte Corporation entered into a liquidity support agreement in November 2024 for Lotte Biologics' 900 billion won loan. It agreed to support the entire amount, including not only the 900 billion won principal but also interest and fees.
However, order performance falls short of expectations relative to the investment scale. As of the end of the first quarter this year, the company disclosed a cumulative order backlog of $564.7 million (about 856.8 billion won). The industry believes a significant portion of this consists of existing manufacturing contracts that were assumed along with the Syracuse plant when it was acquired from BMS in 2022.
Securing new customers beyond BMS also remains limited. This year, it signed contracts with Japan's Rakuten Medical, a U.S. oncology-focused biotech, and the U.K.'s Otimo Pharma, but most are for clinical drug manufacturing or process development. It has yet to secure any large-scale commercial manufacturing contracts.
With existing volumes declining, utilization at the Syracuse plant in the United States is falling rapidly. The utilization rate dropped from 81% in 2024 to 74% last year, and plunged to 14% in the first quarter this year. According to Lotte Corporation's business report, first-quarter capacity this year was 22 batches (Batch, a unit for one production run of a biopharmaceutical), but actual production was three batches.
The company said utilization temporarily fell as it carried out performance upgrades (spec-up) at the Syracuse plant to meet recent new customer requirements. CEO Park James attended Bio USA last month in San Diego and said, "Existing BMS production volumes in the U.S. are being maintained, and we expect one or two large orders within the year."
◇ Losses widen on order delays…what matters more than capacity is "large orders"
As order intake is slower than expected, performance pressures are mounting.
Lotte Biologics swung to a loss in 2024, and last year revenue fell while operating loss widened to 132.6 billion won and net loss to 141.4 billion won. The first-quarter loss this year was 56.2 billion won, about three times larger than the same period last year (20.8 billion won).
Depreciation burdens are also growing. First-quarter depreciation in the pharmaceutical manufacturing segment was 11.4 billion won, up 35.7% from 8.4 billion won a year earlier. Once Songdo Plant 1 is fully operational, depreciation is expected to increase further. If fixed costs from running the Songdo plant are added, losses are likely to deepen for the time being.
Ultimately, the company lowered its 2030 revenue target from 1.5 trillion won to "over 1 trillion won." Plans to build Songdo Plants 2 and 3 also inevitably face a slower pace due to the funding burden.
The industry believes Lotte Bio must prove differentiated technology and service capabilities, rather than simply expanding capacity, to win large orders.
Lotte Bio is touting a "Dual Site" strategy linking the Syracuse plant in the United States with the Songdo plant in Korea. The Syracuse plant has experience with more than 62 regulatory approvals from agencies such as the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA), while the Songdo plant will handle large-scale production to generate synergies.
However, contract development and manufacturing organization (CDMO) competitors already have similar strategies. Celltrion secured the Branchburg, New Jersey, manufacturing facility (66,000 L) from Eli Lilly and Company in December last year, and Samsung Biologics acquired the Rockville, Maryland, plant (60,000 L) from GSK plc in April.
Production scale is also smaller than competitors. Even when Songdo Plant 1 is completed, Lotte Bio's capacity will be 160,000 L, short of Samsung Biologics (845,000 L) and Celltrion (250,000 L).
An industry official said, "It is true that Lotte Bio's 'Dual Site' strategy alone makes it hard to differentiate immediately from competitors," adding, "In the end, whether it can prove unrivaled technological strength and service competitiveness will decide the success or failure of large orders from big pharma."
Meanwhile, Shin Yoo-yeol, Lotte Corporation's head of future growth (executive vice president), who serves as Lotte Biologics' co-CEO alongside CEO Park James, did not appear at Bio USA, the world's largest biotech event this year.
Shin has until now met global clients directly at major biotech events such as the J.P. Morgan Healthcare Conference (JPM) and Bio USA to support order intake. During Bio USA this year, Shin reportedly attended a launch event in Singapore for a joint venture to integrate the Asia businesses of Lotte Wellfood and Japan's Lotte Confectionery.