Samsung BioLogics Aims to Raise Up to $2.5 Billion From IPO

Initial public offering would value Samsung’s contract drug manufacturing unit at $10 billion

Samsung BioLogics Co., the contract drug-manufacturing unit of South Korean conglomerate Samsung Group, is planning to raise as much as $2.5 billion from an initial public offering that would value it at roughly $10 billion, according to people familiar with the matter.

The company, which makes biologic drugs on behalf of clients like Bristol-Myers Squibb Co. and Roche Holding AG, expects to file this week for approval to list shares in South Korea, one of the people said. It expects to complete the share offering in the fourth quarter of this year, the person said.

Samsung BioLogics is expected to offer between 10% and 25% of its shares to the public based on South Korean listing requirements and investor demand, meaning the company would raise between $1 billion and $2.5 billion, one of the people said.

The biggest IPO globally this year was in June, when Danish utility Dong Energy AS raised $2.61 billion.

Samsung in April announced plans to list the unit, without giving details on the exact timing or size of the IPO.

While Samsung is best known for its crown jewel, smartphone and semiconductor maker Samsung Electronics Co., Lee Jae-yong, the vice chairman and heir apparent of the conglomerate, has poured billions of dollars into the emerging field of biologic drugs. Such drugs are complex to make because they are based on living cells—used to treat a variety of illnesses, including cancer and arthritis—differentiating them from simpler, chemically synthesized drugs like aspirin.

Mr. Lee is betting that biologic drugs can become a new growth engine for Samsung as the long-term outlook for smartphones and semiconductors becomes more uncertain.

In addition to manufacturing biologic drugs on behalf of other companies, Samsung has another affiliate, Samsung Bioepis Co., which develops near-replicas of existing biologic drugs that are soon to lose patent protection, called biosimilars. Samsung Bioepis was on track for an IPO on the Nasdaq Stock Market earlier this year, but the offering was shelved amid market volatility.

Samsung BioLogics is 51% owned by the Samsung Group’s de facto holding company, Samsung C&T Corp. Samsung Electronics owns about 47%. Samsung BioLogics owns 91.2% of Samsung Bioepis.

Samsung BioLogics said in May that Korea Investment Holdings Co. Ltd. and NH Investment & Securities Co. Ltd. will lead the share sale domestically, while overseas duties will be handled by Citigroup Inc., J.P. Morgan Chase & Co. and Credit Suisse GroupAG.

Samsung BioLogics is one of the world’s largest manufacturers of biologic drugs by capacity. Late last year, the company broke ground on a third plant, which is expected to have the world’s largest production capacity of 180,000 liters. Samsung BioLogics also is already considering additional plants.

When the third plant begins operations, expected in late 2018, Samsung BioLogics will have a drug-manufacturing capacity of 360,000 liters, putting it ahead of rivals Lonza Group of Switzerland and Germany’s Boehringer Ingelheim GmbH.

By ALEC MACFARLANE in Hong Kong and JONATHAN CHENG in Seoul Updated Aug. 10, 2016 2:57 a.m. ET