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[New Year Special] Investors vulnerable to risky biotech business[Facts about Biotech Boom①]‘Arbitrary interpretation’ of trials confuses investors
  • By Kim Yun-mi
  • Published 2020.01.02 17:35
  • Updated 2020.01.03 15:04
  • comments 0

Investors are rushing to bet on new drug development, which is often called the goose that lays golden eggs. The government picked the biohealth industry as one of the future growth industries and vowed to support the sector aggressively. In this situation, many domestic drugmakers and biotech venture firms increasingly joined new drug development to target the global market. However, some companies have exaggerated the results of clinical trials to boost the value of their pipelines, taking advantage of the fact that it usually takes a long time to commercialize a new drug. Such acts led investors to suffer losses. In this regard, Korea Biomedical Review checked the current status and problems of global biopharmaceutical development of Korean biotech venture companies in a series of two articles. – Ed.

President Moon Jae-in announced in May that the government would designate the biohealth industry as one of the three new sectors for future growth, help the industry account for at least 6 percent of the global pharmaceutical and medical device market share by 2030, achieve $50 billion biohealth exports, and nurture the sector as one of the five major export industries.

The announcement came during his visit to Osong, North Chungcheong Province, which has a cluster of biotech research firms.

To achieve these goals, the government said it would spend 4 trillion won ($3.45 million) a year for the biohealth sector by 2025, utilize “Scale-up Fund” to spend more than 2 trillion won for the industry over the next five years, and enhance financial and tax support for corporate R&D and expenses in facilities.

“Even at this time, Korean companies are conducting several clinical trials in many parts of the world. Shortly, they will produce a Korean-made blockbuster drug,” Moon said at the time.

As analysts categorized new drug development as “a business that makes money,” the biohealth sector is drawing an enormous amount of investment. Not only the government and institutional investors but retail investors are betting big on Korean-made blockbuster drugs.

As some pharmaceutical firms pulled off massive licensing deals with multinational companies based on R&D capabilities and technological power, the birth of a Korea-developed global new drug might be near.

Pharmas inked W8.7 trillion licensing deals in 2019

Domestic pharmaceutical and biotech companies clinched 13 licensing-out deals worth 8.76 trillion won in 2019.

Yuhan Corp. agreed with Boehringer Ingelheim to co-develop a candidate drug for nonalcoholic steatohepatitis (NASH) in 2019, following the out-licensing deal with Janssen Biotech over Lazertinib, an investigational drug for lung cancer, in 2018. Both deals were worth more than 1 trillion won each.

Biotech venture Alteogen signed a non-exclusive global license agreement with one of the top 10 pharmaceutical companies for the human hyaluronidase (ALT-B4) platform technology. The deal was worth 1.61 trillion won.

Bridge Biotherapeutics licensed out BBT-877, idiopathic pulmonary fibrosis (IPF) treatment candidate, to Boehringer Ingelheim, for 1.51 trillion won.

Quratis licensed out QTP1010, a tuberculosis vaccine candidate, to Indonesia’s Bio Farma for 1.2 trillion won.

Recently, GI Innovation licensed out GI-101, a bispecific fusion protein for treating solid tumors, to Chinese pharmaceutical company Simcere for 939.3 billion won.

Besides, SK Biopharm obtained the U.S. Food and Drug Administration’s approval for its antiepileptic drug Xcopri (ingredient: cenobamate), without partnering or licensing out to other multinational pharmaceutical companies. The company plans to sell the drug directly in the U.S., beginning the marketing and sales in earnest in the second quarter of this year.

Surging investment in biotech ventures, with trials and errors

As local companies continued signing massive licensing deals, investors are aggressively investing in biotech firms. Midsize local pharmaceutical companies are also investing in biotech ventures through technology screenings, based on their own new drug development experience.
Some have formed an investment fund through a joint venture with professional investment firms. Medytox, Dongwha Pharm, and Celltrion are good examples.

Medytox and Korea Venture Investment Corp. put together 30 billion won by investing 15 billion won each to establish a biotech venture investment fund, “Medytox Investment Association No. 1.” Dongwha Pharm invested 5 billion won in making “Dongwha-Krypton Entrepreneurship Fund No. 1.” Celltrion and Mirae Asset spent 100 billion won each to operate a 200 billion-won fund.

Midsize drugmakers are actively investing in biotech venture firms to reduce their R&D costs and have their investment returns at the same time.

Aggressive investment in the biotech sector has become a new normal for individual investors. However, retail investors are more vulnerable to losses because they lack expertise and make decisions solely on companies’ unilateral information.

Global trials are outside of local regulator’s monitoring

Some companies are providing misinformation that can blur the judgment of investors who lack expertise. They exaggerate the results of clinical trials by taking advantage of the fact that global clinical trials are excluded from domestic regulatory agencies' surveillance networks.

Many domestic biotech ventures receive funds based on one technology and one drug candidate. Thus, a single clinical failure could make the company shut the business. However, investors are overlooking this issue, observers said.

An official at a multinational drug company said that in clinical trials, the primary endpoint’s purpose is to prove the efficacy and safety of a drug candidate. “Clinical trials that failed to demonstrate significance in the primary endpoint are failed ones. It is not ethical to use the secondary endpoint results and say ‘clinical success’ or ‘securing clinical significance,’” he emphasized.

The problem is that such unethical behaviors could increase amid the rise of local investments and global clinical trials.

Korea Research-based Pharma Industry Association (KRPIA), Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA), and Korea Medical Devices Industry Association (KMDIA) use their fair competition regulations to crack down on unfair label advertising.

However, many biotech venture firms do not belong to any of them, meaning they are under no industrial regulations.

Drug and financial regulators say biotech ventures are ‘not their jurisdiction’

The government cannot take any measure against a global clinical trial.

Locally conducted studies are under the regulation of the Ministry of Food and Drug Safety. However, global ones are regulated by the agencies that belong to the state where studies are conducted.

“We have no authority to intervene in clinical trials conducted in foreign countries. There is no legal ground to request global trial data to a local biotech venture,” a ministry spokesman said.

The Financial Supervisory Service also said, “If a local biotech venture firm’s such misconduct is confirmed as a result of stock price manipulation or crime, we might take further action. For now, however, the FSS cannot take a preemptive measure.”

The situation is not much different from the Korea Exchange. The stock market operator said that the issue of interpreting global clinical trial results is within the market surveillance area of the KRX. Still, there were limitations in confirming the authenticity of clinical results published by biotech ventures.

"If we can check that a whistleblower revealed an illegal act and doing so affected stock prices, we can take actions. But due to the limitation to check the facts, it is difficult for the KRX to take preemptive measures,” the stock market regulator said.

Even if some biotech venture firms take unfair actions and cause investors’ losses, there is no measure that the government can take because they are outside the regulations.

The pharmaceutical industry is concerned that the provision of wrong information could undermine the credibility of Korean biotech ventures and overall investment climate.


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