Large-Scale Funding Rises In Korea Amid Biotech Investment Boom
Interest Persists After Record VC Investment In 2020
Executive Summary
After record venture capital activity around South Korean biotechs last year, the strong investment interest has persisted so far this year, with an increased number of companies receiving large-scale funding as the promising sector emerges amid the pandemic.
Venture capital investment fervor in South Korea continued in the first quarter after reaching its biggest amount ever in 2020, despite the pandemic.
According to the country's Ministry of SMEs (small and medium-sized enterprises) and Startups, the biotech and medical sector was one of three industries receiving the highest VC investment in the first quarter of this year. This surged 40% from a year earlier to KRW348.5bn ($311m) in the three-month period, accounting for the single-largest portion of total venture capital investment.
Biotechs continued to be a key target as investors focused on the importance of new drug development amid the prolonged COVID-19 outbreak. A series of large-scale biopharma initial public offerings including SK Biopharmaceuticals Co., Ltd and SK Bioscience since last year, and a general rally in biotech stocks, have also drawn strong interest in the sector. (Also see "SK Bioscience Readies $1.3bn IPO Amid Rosy Vaccine Outlook" - Scrip, 24 Feb, 2021.)
Samsung Securities’ Investment Bank team head Won Je Kim told a recent online forum that the country’s healthcare stocks now account for about 14% of total stock market capitalization, rising more than 10-fold in the past 10 years. Such growth is expected to continue, partly on the back of more entries into the sector and the expansion of biotech businesses at large South Korean corporate groups.
“Biotech IPOs have largely been priced at the higher end of stock price bands since June last year as many retail investors have rushed into the IPO market,” noted Kim. This year as well, several large biotech/pharma IPOs are expected following those of Prestige Biopharma and SK Bioscience.
While the robust appetite from South Korean investors also reflects global VC investment trends, the domestic situation is somewhat different versus that in major countries, where biotech investment has remained steadily strong for the past few decades. While VC investment in US biotechs has consistently accounted for about 30% of the total since 2002, in South Korea it made up less than 5% in the early 2000s and less than 10% until 2012. But it then surged to the 30% level and more than KRW1tn in 2020.
“This trend is in line with possible changes in flagship industries in the country. It predicts an emergence of the biotech economy era and a decline in core investment sectors such as IT and manufacturing,” said a Biotech Policy Research Center report, “Investment Trends in Post COVID-19 Era” by Stic Ventures' chief information officer Minsik Park.
Within the biotech industry, biopharma, health tech and devices were among the most favored investment targets by venture capital globally, within which oncology, platform technology, CNS disorders, rare diseases and anti-infectives were of particular interest. In addition, demand for innovative new drugs such as cell and gene therapies, and immuno-oncology treatments, continued to rise, the report said.
Standigm, iN Therapeutics Among List Of Big Fundraisers
In recent months, another noticeable trend in South Korea has been an increase in larger-scale biotech fundings, many involving subsidiary companies affiliated with large domestic pharma groups or innovative technologies.
The SMEs ministry said the number of companies that received investments of more than KRW10bn had increased to 23 in the first quarter of this year, up from 10 in the same period a year earlier.
One example is Standigm Inc., a leading artificial intelligence drug discovery venture, which closed a $44.5m pre-IPO funding round. Its AI platforms range from new target discovery to novel lead generation, enabling pharmaceutical companies to save time and cost. Based on an automated and all-encompassing AI approach, Standigm currently collaborates with more than 10 pharmaceutical or academic partners.
iN Therapeutics, a subsidiary of major firm Daewoong Pharmaceutical Company Ltd., completed a KRW14bn Series A financing. The ion channel platform venture is developing several pipeline assets including Nav1.7, a non-opioid analgesic candidate progressing in a Phase I study in Australia.
AffyXell Therapeutics, a joint venture between Daewoong Pharmaceutical and Avacta, has also closed a Series A venture capital investment of $7.3m to further develop its pipeline of next-generation cell and gene therapies.
AffyXell was established in January 2020 to develop novel mesenchymal stem cell (MSC) therapies and is combining Avacta’s Affimer platform with Daewoong’s MSC platform, such that the stem cells are genetically modified to produce and secrete therapeutic Affimer proteins in situ in the patient. The Affimer proteins are designed to enhance the therapeutic effects of the MSCs.
Meanwhile, the GC Group’s US-based affiliate Artiva Biotherapeutics, Inc. has closed a $120m Series B financing to advance its pipeline of allogeneic NK cell therapies. The oncology-focused biopharma is developing therapies based on primary allogeneic natural killer cells that have been optimized for their ability to kill tumors.
In addition, Alteogen Inc.’s subsidiary Altos Biologics Inc. has completed a KRW60.5bn Series A round to progress global clinical trials with its biosimilar aflibercept product.
Rounding out the recent active financing activity, Idience Co. Ltd., the new drug development subsidiary of Ildong Pharmaceutical Co., Ltd., has completed a KRW40bn financing to progress its pipeline, which includes IDX-1197, a novel potent PARP inhibitor. This acts to prevent the repair of DNA single-strand breaks and promote the conversion of these to double-stranded breaks, which ultimately leads to synthetic lethality in cancer cells. IDX-1197 is in clinical development as a monotherapy for multiple solid tumor types.
Global VC Trends
The robust VC investment trends in South Korea so far this year largely reflect the biotech boom worldwide.
Between 2019 and 2020, the sector saw double-digit annual growth in fundraising from VCs and other deals such as partnerships, co-development and joint ventures. It also saw triple-digit growth in IPOs, said global consultancy McKinsey & Co. in a recent article, “What’s ahead for biotech: Another wave or low tide?”
VC activity in biotech grew by 45% in a year, taking the 2020 global total to $36.6bn; US biotechs still led on investments although Europe and China were not far behind.
As the pandemic spread across the globe in early 2020, biotech leaders were initially pessimistic, reassessing their cash position and financing constraints. Belying this downbeat mood, biotech in fact went on to have one of its best years so far. By January 2021, venture capitalists had invested some 60% more than they had in January 2020, totaling more than $3bn worldwide in January 2021 alone, McKinsey noted.