SEOUL – After a decade of steady increases, venture capital (VC) investments in South Korea's biotech sector are more active. But for the country's strategic financial plan to be sustainable, it will have to further strengthen its science capabilities, according to experts at the Korea Bio Investment Conference (KBIC) last week in Seoul.

VC investment in the biotech sector jumped from 2% of all VC invested in the country in 2000 to about 25% in 2018, according to the Korean Venture Capital Association. Last year, venture capital in biotech totaled ₩842 billion (US$693 million). A total of ₩2 trillion (US$1.6 billion) from all investors, including individuals and institutions, went to biotech companies last year.

Despite the long-term growth trend, 2019 has been more difficult. A series of failed trials have shaken investor confidence and hit share prices.

This was good news for institutional investors at KBIC, but these same investors warned of the importance of strengthening the country's science infrastructure. The conference was organized by the Korea Economic Daily and the Korea Biotechnology Industry Organization.

What's more, biotech ventures in South Korea have become more attractive for investors in recent years, said Jung-seob Shin, executive managing director at the Life Science and Healthcare Investment Group at KB Investment Co. Ltd., a major Seoul-based investment company.

Many first-generation biotech ventures in South Korea, mostly founded in the early 2000s, have successfully launched IPOs over the past few years. At the same time, there have been a lot of new no-research-development-only (NRDO) ventures in recent years.

"This has raised the market expectation of a shortening payback period, and early stage funding has increased up to 30%," Shin told BioWorld on the sidelines of the conference. "The majority of early stage investment is in new drug development even though the field accounts for less than 10 percent in the entire bio industry."

There are four unique characteristics of this rising trend in South Korea's biotech investments:

  • • There are more early stage funds with more than ₩10 billion (US$8.2 million) in funds for investments.

  • • The capital needed for one round of investment has increased and consortium investments have become more widely used.

  • • Strategic investments have increased, and they are increasingly targeting open innovations between big pharmaceutical companies and biotech ventures.

  • • Investment securities companies and asset management firms are actively injecting money into biotech ventures, both listed and unlisted. And investment companies with biotech experts tend to be more active.

"Technology evaluation must be set up well to measure the company's potential. The evaluation also needs to be based on transparency to make a smart investment," said Bongcheol Kim, CEO of Nuracle Science Co. Ltd., of Seoul.

Shin said there are some critical points that require consideration in any long-term investments. The most important is the strength of the science capabilities of the firms.

"Ventures should think about investors' viewpoint when pitching. They need to tell their future investors the cash-cow strategies with specific timeline, not only focusing on R&D," said Mik Park, deputy CEO and managing partner at STIC Ventures based in Seoul.

Park emphasized some of the basics of building strong companies – quite familiar to most Western firms – such as bringing aboard experienced financial executives and having more than one key asset in the pipeline.

"Bio firms need a strong basis of science to build a great platform. If academy-based technologies are well commercialized, they can be huge strength of the firm," Shin noted.

Despite the growth of VC investments, there have been a series of reverses this year that have slowed down the expansion:

  • • HLB Life Science Co. Ltd., of Seongnam, reported that its phase III clinical trial for its cancer drug rivoceranib failed to meet the endpoints.

  • • Janssen Pharmaceutica NV, of Beerse, Belgium, canceled its $915 million in-licensing deal for its diabetes drug from Hanmi Pharmaceutical Co. Ltd., of Seoul.

  • • Sillajen Inc., of Busan, is on the verge of aborting its phase III trial for its liver cancer treatment pexa-vec based on advice of the Independent Data Monitoring Committee.

And though the share prices of many Korean biotech companies have fallen this year, biopharmas have options to deal with the current headwinds.

"The bio industry in Korea has been a little overestimated, and it brought a big impact on the market after the negative events. The bio corporates need to be more transparent in sharing their activities publicly," said Bob Shin, managing director of Premier Partners LLC, of Seoul. "Then, investors would trust the market more."

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