[This Week's Industry Insight] LegoChem Bio, 'ADC Technology' Recognized as Global Top-Tier

Global Big Pharma Janssen Acquires Technology Transfer Worth 2.2 Trillion KRW
Largest Single-Substance Deal Valuation for Domestic Pharmaceutical Company
Pipeline Value Reassessment Drives Concurrent Increase in Corporate Value

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LegoChem Biosciences is a leading domestic research and development (R&D) company in the ADC (Antibody-Drug Conjugate) field, one of the most spotlighted therapeutic technologies recently. Global big pharmaceutical companies (Big Pharma) recognize its technology worldwide to the extent that they are eager to receive technology transfers from LegoChem Biosciences in the ADC field. Recently, it attracted attention by signing a large-scale technology transfer contract with Janssen, a pharmaceutical subsidiary of Johnson & Johnson. Amid soaring stock prices, securities firms have unanimously raised the company's valuation and target price.

Domestic Bio Company Chosen by Global Big Pharma, Largest Single-Substance Technology Transfer Amount

LegoChem Biosciences is a research-focused pharmaceutical company developing anticancer drugs and others. Founded in 2006 as a synthetic drug company, it was listed on KOSDAQ in 2013. It is currently recognized globally for its technology in ADC. About 80% of the company's employees are R&D personnel, operating as a research-centered company. The current major shareholder and CEO, Yongju Kim, previously served as head of the new drug research institute at LG Life Sciences and led the development of Pactiv (a respiratory treatment drug), the first domestically FDA-approved drug in the U.S. Despite large deficits, the company has continuously increased R&D expenses to secure technology in the ADC field.

Thanks to this, it now stands shoulder to shoulder with the world's top players in ADC development. ADC refers to Antibody-Drug Conjugates, a technology recently gaining the most attention in the pharmaceutical and bio industries. ADCs are structured by conjugating a potent cytotoxic anticancer drug (payload) to an antibody that selectively binds to specific cancer cells (antigens). When the antibody attaches to the antigen in the patient's body, the drug conjugated to the antibody is delivered inside the cancer cells. This treatment method attacks only cancer cells without harming normal cells. It is emerging as a next-generation anticancer drug by enhancing therapeutic effects while reducing side effects. The new drug candidate developed by LegoChem Biosciences, 'LCB84,' targets the cleaved form of the 'Trop2' antigen, which is expressed only in cancer cells.

LegoChem Biosciences recently announced that it signed a technology transfer contract with Janssen for the development and commercialization of LCB84. Under this contract, LegoChem Biosciences will receive an upfront payment of $100 million (approximately 130 billion KRW) and, if Janssen exercises the exclusive development rights, up to $200 million (approximately 260 billion KRW) plus additional milestone payments during development stages, totaling up to $1.7 billion (about 2.24 trillion KRW). This is the largest contract for a single substance in the history of technology transfers by domestic bio companies.

To date, LegoChem Biosciences has signed a total of 12 technology transfer contracts, with total contract amounts reaching 6.5 trillion KRW. The company signed technology transfer agreements for its ADC platform technology with Millennium Pharma, a subsidiary of Japan's Takeda, in 2019; with UK-based Exscientia Therapeutics in 2020; and with Czech company Sotio Biotech in 2021. Recently, 'LCB14,' licensed to Fosun Pharma in China, has entered Phase 3 clinical trials.

Minyong Eom, a researcher at Hyundai Motor Securities, evaluated, "The fact that global Big Pharma Janssen chose a domestic company to secure an ADC pipeline for first-line treatment markets in various indications such as non-small cell lung cancer and breast cancer means that LegoChem Biosciences' technology is recognized worldwide."

LegoChem Biosciences is jointly conducting Phase 1/2 clinical trials with Janssen. If Janssen exercises the exclusive development option, Janssen will be fully responsible for clinical development and commercialization. Industry insiders expect Janssen to exercise this option around 2025?2026. Although the upfront payment from this technology transfer contract is only 130 billion KRW, cash flow could increase rapidly in later development stages.

Pipeline Value Rises Despite Poor Performance... Corporate Value Reassessment

LegoChem Biosciences is an R&D-focused company and has not yet generated significant sales. It recorded sales in the low 30 billion KRW range in 2021 and 2022, and sales are estimated to have slightly increased last year compared to the previous year. Despite limited sales, it has continuously invested in R&D expenses, resulting in operating losses for several years. Last year, it recorded a loss of 55 billion KRW, more than twice its sales, through the third quarter.

Nevertheless, LegoChem Biosciences is considered a financially solid company. Its borrowings are close to zero, and it holds a large amount of cash. While current assets, including cash equivalents worth 130 billion KRW, total 155 billion KRW, current liabilities due within a short period amount to only 29 billion KRW. Net current assets exceed 130 billion KRW.

Considering annual R&D expenses of 50 to 60 billion KRW, the company can sustain itself for more than two years with cash equivalents alone. Cash flow is likely to improve further with incoming technology transfer fees. Haesoon Kwon, a researcher at Eugene Investment & Securities, predicted, "Considering technology transfer fees for LCB84 and others, the company will be able to cover R&D expenses for the next three years on its own."

The securities industry is raising LegoChem Biosciences' corporate value and stock price despite poor performance. Analysts say that as LegoChem Biosciences gains recognition for its technology from global Big Pharma, the value of its pipeline is being highly evaluated. SK Securities valued LCB84 at 670.9 billion KRW, the combined value of other pipelines IKSO14 and CS5001 at 741.2 billion KRW, and the value of four ADC platform technology transfers at 510.2 billion KRW. Adding these together amounts to 1.9 trillion KRW.

Adding the current net cash held, the corporate value is expected to be around 2 trillion KRW. Analyst Donggeon Lee of SK Securities forecasted, "This year, as additional ADC platforms or candidate substances undergo technology transfers and clinical pipeline development results are sequentially confirmed, the corporate value will continue to be re-evaluated."

The stock price has also recently shown a steep upward trend. The stock price, which fell to the low 30,000 KRW range in October, began to rise significantly in the fourth quarter of last year and surged in December when the technology transfer to Janssen was made. As of the 2nd, the stock price stands at the mid-60,000 KRW range, nearly doubling in about three months.

Analyst Minyong Eom said, "In December 2022, LegoChem Biosciences signed a platform technology transfer contract worth 1.6 trillion KRW with global pharmaceutical company Amgen," adding, "Combined with the recent technology transfer to Janssen, this proves how highly LegoChem Biosciences' clinical-stage pipelines can be valued."

This content was produced with the assistance of AI translation services.