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Investors Pour Money into Korean Biotech Ventures
Foreign Bio Firms Flocking to Korea
Investors Pour Money into Korean Biotech Ventures
  • By Choi Moon-hee
  • August 29, 2018, 15:54
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Korean biotech companies with technological prowess are hot among investors.

Korean biotechnology venture companies with technological power are gaining a lot of investment.

The Korea Biotechnology Industry Organization (Korea BIO) announced on August 27 that ABL Bio attracted a total of 70 billion won (US$58 million) from 10 domestic venture capital companies in June, the biggest investment that a Korean bio venture won from venture capital firms in the first seven months of the year.

ABL Bio, which is developing anticancer drugs and Parkinson's disease treatments based on dual antibody technology, has 29 new drug candidates in its pipeline, which is almost equivalent to Hanmi Pharm. ABL Bio is considered to be the forerunner in double antibody technology that aims at two targets simultaneously.

According to the Korea BIO, there are a total of 13 biotech ventures that have attracted investments of more than 10 billion won (US$8.3 million) by July. It includes ABL Bio; SCM Life Science (38.6 billion won), which is developing five stem cell treatments including acute pancreatitis medicine; ToolGen (30 billion won) with genetic scissors; Eubiologics (30 billion won), which is developing vaccines for infectious diseases; DiNonA Inc. (25 billion won), a developer of anticancer medicine; TiumBio (23 billion won), a developer of anticancer and diabetes medicine; D&D Pharmatech (20 billion won), which is developing degenerative brain disease treatments.

Last year, only four biotech ventures attracted more than 10 billion won (US$8.3 million) from venture capital companies. They were Bridge Bio, ABL Bio, Exocobio and TiumBio.

Venture capital's bio investment is the highest ever. In the first half of this year, venture capital's fresh investment in the bio-medical sector reached 413.9 billion won (US$344 million), which surpasses last year’s total investment of 378.8 billion won (US$315 million), and is 2.7 times the amount of the same period last year (153.8 billion won, US$128 million). Despite negative factors such as controversy over R&D expenses and plunging share prices of listed bio companies, investments in biotech ventures are not declining. Venture capital's new investments in the bio industry were 293.8 billion won (US$244 million) in 2014, 317 billion won (US$264 million) in 2015, 468.6 billion won (US$390 million) in 2016, and 378.8 billion won (US$315.6 million) in 2017.

The success rate of new drug development by biotech companies is less than 1%. Nevertheless, investment dollars are flowing into bio companies. The main reason is that the bio industry is emerging as the next generation growth engine. According to data released by the Ministry of Science and Technology last year, the global bio market is expected to grow from US$1.6 trillion in 2015 to US$4.4 trillion in 2030. It is bigger than the total of the semiconductor, automobile, and chemical industries combined,.

Lee Seung-gyu, vice chairman of the Korea BIO, said, "In the past, the Korean bio industry was at the stage of R&D, so there was a great doubt about its growth potential. Recently, however, investment in R&D has created tangible achievements, such as technology exports, boosting investment in the bio sector.”

Market analysts say that the strengthened accounting standards for biotechnology firms will not affect investors’ sentiment negatively. A stock anlayst said, "Investors invest in biotech companies with a long-term view of more than three years. It is not likely that investor sentiment will be affected by short-term issues."

The investment boom fuels expectations that it will not be long that the Korean bio industry takes a step forward. To develop new drugs, hundreds of billions of won is needed. The more funds a company secures, the sooner it is likely to develop new medicine.

Some say that the Korean bio sector is overheating. There are many cases that bio ventures attracted more than 10 billion won (US$8.3 million) in the first phase of clinical trials, which typically cost between 1 billion to 2 billion won. "Some biotech companies want to conduct clinical trials with sufficient funding," said Lee. "Companies hope to secure investments in advance and the market has a demand for highly profitable investment. The two factors are fueling the investment boom.”

Meanwhile, overseas biotechnology companies are flocking to Korea. An increasing number of foreign companies are collaborating with domestic bio companies to promote technology commercialization or to raise funds. They are attracted by the favorable investment environment in Korea and the enhanced R&D capacity of domestic companies.

Yozma Bioscience Holdings, which was established in Korea last month, plans to import Israeli pharmaceutical and bioengineering technologies into Korea for commercialization. Yozma Bioscience Holdings is a joint venture established by Yozma Group Korea, a Korean subsidiary of Yozma Group, a global start-up investment company, and Mirae SCI Co., a domestic petrochemical company. Yosuma Group Korea owns the right to transfer the bioengineering technologies of Israel's Wiseman Research Institute, one of the world's top five basic science research institutes, to Korea.

Lee Won-jae, CEO of Yozma Group Korea, said, "In South Korea, where investment in biotechnology and pharmaceuticals is hot, it is relatively easy to attract funds. Outstanding hospital systems with optimal conditions for clinical trials of new drugs are also attractive.”

Domestic companies are increasingly taking over overseas bio companies or introducing foreign technologies to commercialize them. An information technology (IT) company, TOBESOFT, is jointly developing new drugs with the Insect Research Institute of Saint Petersburg University in Russia. The company plans to conduct clinical trials in Korea and in the United States for Alloferon, an immunological substance derived from fruit flies. Alloferon is expected to be commercialized soon as it was approved in Russia as a treatment for herpes virus (HSV), acute hepatitis B virus, and HPV.

Dongyang Networks acquired German bio venture Medigene in May. It will acquire the rights for the immunochemotherapeutic drug in Asia that Medigene is developing and will commercialize it. Medigene has also signed a technology export contract on six T-cell receptor–modified T-cell (TCR-T) cancer immunotherapies, which is worth a total of 1.5 trillion won (US$ 1.25 billion), with Bluebird Bio of the US.

SFC has also invested in AIVITA Biomedical, an American firm developing immune cell therapeutic medicine, to develop treatments for brain diseases.

The number of overseas bio companies trying to go public in the Korean stock market is also increasing. Singapore’s Prestigebio Pharma and US’ Avellino Lab have selected Samsung Securities as the lead manager for listing their stocks on the KOSDAQ market. Vietnam's number one producer of biosimilars (a biologic medical product that is almost an identical copy of an original product), NanoZen, is also planning to be listed on KOSDAQ.

The reason for overseas bio companies to go public in the Korean stock market is that Korea appreciates the corporate value of bio companies relatively highly. Currently, the forward price earnings ratio (PER) of the KOSPI Pharmaceuticals Index, an index of the pharmaceutical sector’s likely earnings per share for the next 12 months, is 65 times. It means that pharmaceutical and biotech companies are valued 65 times the expected net profit over the next year. The MSCI Japan Pharmaceutical Biotech Index is 26.9 times, the MSCI Europe Pharmaceutical Index is 21.4 times, and the US S&P Pharmaceutical Index is 20.4 times.