In the Wake of SillaJen Debacle
A considerable number of Korean biotech ventures are shifting the focus of their new drug development efforts from technology exports to phase-3 clinical trials following SillaJen’s aborted global phase 3 clinical trial for its highly anticipated liver cancer treatment.
Sillajen announced on Aug. 4 that it will halt the global phase 3 clinical trial for Pexa-Vec, an oncolytic viral drug, after it was advised by the Independent Data Monitoring Committee (DMC) to stop the trial.
Most Korean biotech companies, including large pharmaceutical companies that invest hundreds of billions of won in research and development (R&D), tend to license out their new drug candidates before entering phase-3 trials.
Industry watchers say that biotech companies now think that they join the ranks of global pharmaceutical firms at a stroke if they succeed in commercialization after completing their own phase-3 trials.
Some point out that the recent crisis of Korea’s biotech industry is attributable to the unique R&D practice of Korean biotech firms.
For instance, phase-3 trials for new drugs require a minimum of 100 billion won (US$82.24 million) of money, which is about 10 times higher than the cost for phase-2 trials. This is why large pharmaceutical companies which spend approximately 200 billion won (US$164.47 million) a year on R&D decide to export their technologies after completing phase-2 trials. They differ from global pharmaceutical companies which invest trillions of won in R&D a year.
To be sure, drug developers can make astronomical profits if they release new blockbuster drugs after completing their own phase-3 clinical trials and receiving approval from the United States Food and Drug Administration (FDA). This is the reason why many biotech ventures seek to conduct their own phase-3 trials. Gilead Sciences Inc., which started as a bio venture in 1987, suffered losses for 15 years after its founding. However, the firm has turned into one of the top 10 global pharmaceutical companies with annual sales of 24 trillion won (US$19.74 billion) after it developed mega blockbuster influenza treatment Tamiflu. Its market capitalization has also grown from 220 billion won (US$180.92 million) in 2002 to 100 trillion won (US$82.24 billion) this year.
In addition, undertaking a phase-3 clinical trial can also boost a company’s stock price. The company’s stock price can go up on expectations before trial results come out. Companies can realize handsome profits if they retrieve some of their initial investments. In case of SillaJen Inc., the company’s CEO Moon Eun-Sang and his relatives cashed in more than 200 billion won (US$164.47 million) worth of stocks from the end of 2017 to early last year, and an executive sold off 9 billion won (US$7.40 million) worth of stocks a month before the announcement of the evaluation results on Pexa-Vec.
On the other hand, companies will not be able to survive if they fail to commercialize a new drug as phase-3 clinical trials take an astronomical amount of investment. It is widely known in the industry that a pharmaceutical firm under a conglomerate merged into another affiliate after it failed to generate a significant amount of sales, though it succeeded in releasing a new drug after phase-3 trials.
Domestic bio ventures could conduct phase-3 clinical trials over the last three years with massive investments amid the venture boom. Some analysts say that the firms would do well to pursue technology exports and pipeline diversification, rather than focus on phase-3 clinical trials. A CEO of a bio venture said, “It is said that bio ventures’ main job is R&D, but they should carry out R&D within their ability. Companies should not encourage excessive expectations and investors should make an investment with an accurate analysis instead of excessive expectations.”