HONG KONG – The South Korean Ministry of Health and Welfare (MHW) is seeking a manager for its new ₩100 billion (US$81.63 million) private equity fund, which aims to help domestic biotech and medical device companies, as well as medical institutions, expand into overseas markets.
MHW said April 27 the fund’s investments would help the companies to attract foreign investment, expand their overseas markets share and enhance their international competitiveness as the COVID-19 pandemic shines a global spotlight on Korea’s bio-health industry.
Although Korea was the source of the biggest global COVID-19 outbreak after China at one point, the country’s focus on testing led to two Korean companies receiving emergency use authorization from the U.S. FDA for their COVID-19 test kits on April 18.
MHW has mandated Korea Eximbank (KEXIM) and Korea Venture Investment Corp. (KVIC) to select a manager for the K-Bio New Growth Fund number six. A source close to the matter explained that applications would be accepted in two rounds, with applications for the KVIC round open from April 28 to May 20 and those for the KEXIM round open from May 13 to May 20.
The duo aims to select the manager by May or June and to complete the fund formation by September, or the end of this year at the latest.
Considering the current economic turbulence unleashed by COVID-19, the MHW source said, “If at all possible, we want to select and invest in these companies within this year. But, unfortunately, we have this thing called protocol.”
KVIC has committed to ₩15 million through an MHW fund of funds account, and KEXIM will invest the remaining ₩25 billion. The K-Bio New Growth Fund number six will thus start with ₩40 million in seed capital and aims to raise up to ₩100 million through private investors.
“KEXIM’s investment decision was finalized in April,” according to the MHW source. KVIC’s decision was a continuation of its commitments to the ministry’s previous earlier five funds in the series.
The fund will invest 60% or more in domestic health care small- and medium-sized enterprises (SMEs), ventures and midsized companies to help them launch overseas. Of that investment, 40% or more will be invested into unlisted SMEs.
The companies can use the funds to set up overseas subsidiaries or joint ventures, expand their exports or overseas business, and attract foreign investment as well as execute overseas M&As.
The fund targets a return of up to 7% and will pay its manager a performance fee amounting to 20% of the excess earnings.
KEXIM is participating in the K-Bio New Growth Fund Number Six as it seeks up to three managers for its separate ₩400 billion Global Bio-healthcare-KFund.
A KEXIM source told BioWorld that the bank decided to participate in the Sixth K-Bio New Growth Fund to “invest in more sectors in the Korean medical field. Our fund [Global Bio-healthcare-KFund] will concentrate on funding immunotherapy, gene therapy, health care systems, diagnostic kits and medical device companies’ overseas expansion; whereas this new fund [K-Bio New Growth Fund number six] concentrates on biotech and medical devices.
“Another difference is the [K-Bio New Growth Fund number six]’s concentration on funding small and medium enterprises.”
KEXIM is currently looking through the applications submitted to its Global Bio-healthcare-KFund by the April 17 deadline, but declined to specify the number of applications it received. “We expect to appoint a manager during May, but it is hard to specify on which day,” said the KEXIM source.
As the fund is MHW’s sixth set up to continue its nurture of homegrown biotech and health companies, the ministry plans to unify the names of its earlier five funds to K-BIO New Growth Fund numbers one to five. MHW has invested ₩98 billion to manage ₩465 billion through its five funds since 2013, with the funds used to help companies that had technical skills but were having difficulty attracting funding.
Recipients of the funds’ investments over the years include Genome & Co.; ABL Bio; JLK Inspection to develop the first artificial intelligence-based real time security inspection solution; and Genomictree to develop a colorectal cancer test kit as well as the Accuradtect SARS Cov-2 RT-qPCR kit to detect COVID-19.
Genomictree’s kit is currently awaiting emergency use authorization from the FDA.
MHW said that it has recovered ₩51 billion of its investments through the five funds so far.
Whether a seventh fund will materialize “depends on whether there is any money left in the fund for funding” according to the MHW source.