Licenses out ADC Platform Technology to Amgen
The authors are analysts of Shinhan Securities. They can be reached at shawn1225@shinhan.com and sehunjang@shinhan.com, respectively. – Ed.
ADC platform tech transfer deal worth KRW1.6tr sealed with Amgen
LegoChem Biosciences disclosed on December 23 that it has signed an antibody-drug conjugate (ADC) platform technology licensing deal with global big pharma Amgen. Worth up to USD1.25bn in total, the deal aims to develop and commercialize ADC candidates directed against up to five targets using LegoChem Biosciences’ ConjuAll platform technology. Amgen will select the targets and LegoChem Biosciences will provide site-specific conjugation, linker, and payload technologies. Although agreement details are undisclosed, upfront payment is likely to account for a limited share of the total amount. Instead, we believe LegoChem Biosciences will see significant inflows upon the selection of candidates, starting from approximately 2024. The company's shares have been trading at a discount in the absence of large deals with global big pharmas, despite the announcement of several technology transfer agreements. Going forward, we expect shares to benefit from the removal of concerns following the announcement of the large-scale deal signed with Amgen.
Bright outlook on opportunities for additional licensing deals
We believe the Amgen deal is just the beginning for LegoChem Biosciences, with the company likely to see more opportunities for new licensing deals going forward. The company has already sealed material transfer agreements with several global pharmaceuticals this year, and is expected to see faster progress on additional partnership deals with the strengths of its ConjuAll platform technology proved through the big pharma deal. In addition to partnership agreements for its platform technology, the company is expected to seal partnership deals for proprietary products from 2023 with discussions on co-development and licensing option deals currently underway. Upon the signing of a partnership agreement, LegoChem Biosciences will take charge of the initial phase of clinical trials for the product, with costs covered by the partner company. Once initial clinical trials are completed, the partner company can choose to go ahead with the option deal for the transfer of technology at a redetermined amount. Amid stiffening competition for TROP2-targeting ADCs, LegoChem Biosciences’ LCB84 (TROP2-MMAE) is poised to attract increasing attention from global pharmas going forward. The company is set to file an Investigational New Drug application for the phase I clinical trial of LCB84 within 1H23.
Target price raised to KRW68,000 on expectations for cash inflows
We raise our target price for LegoChem Biosciences to KRW68,000 in reflection of the value of the technology transfer deal with Amgen. Considering milestone payments from existing licensing deals and upfront payments from new agreements, the company is expected to enjoy cash inflows worth tens of billions of KRW from 2023. The company is unlikely to need additional capital with cash holdings reaching KRW170bn as of end-3Q22, and is set to turn profitable upon the inflow of milestone payments from the Amgen deal. Going forward, we expect the company to enter a virtuous cycle driven by ample cash flows secured through licensing deals.