Overcoming the New Drug Development "Funding Cliff"... 150 Billion Won "Phase 3 Clinical Trial Specialized Fund" Created

Ministry of Health and Welfare and State-run Banks Commit 90 Billion Won in Public Funding
Focused Investment in High-risk Sectors Avoided by Private Capital

The government is establishing a large-scale specialized fund to address the funding shortage in Phase 3 clinical trials, which is known as the final gateway to new drug development and is often referred to as the "valley of death."

On May 11, the Ministry of Health and Welfare announced that it will accept applications for fund management firms via Korea Venture Investment Corp., the parent fund, until June 5, in order to create a "Phase 3 Clinical Trial Specialized Fund" worth 150 billion won.

Phase 3 clinical trials in new drug research and development require enormous investment, have long payback periods, and carry high risks of failure and regulatory hurdles, making it extremely difficult to attract private capital. As of now, there are a total of 57 new drug pipelines undergoing Phase 3 clinical trials in Korea, including 12 for metabolic diseases, 12 for cancer, and 7 for central nervous system diseases, among others.

This fund was created to resolve the investment blind spot in this high-risk segment, which private capital tends to avoid. The Ministry of Health and Welfare will contribute 70 billion won, including 60 billion won from the government budget and 10 billion won from returns on existing funds. IBK Industrial Bank of Korea and Export-Import Bank of Korea will each contribute 10 billion won, bringing the total public funding to 90 billion won.

The government will invest the entire committed amount regardless of the final fund size, and if 80% (120 billion won) or more of the target 150 billion won is raised, management firms will be allowed to start investing early through a priority formation process.

The primary investment targets for the fund are companies in the pharmaceutical and biotechnology sectors that are conducting Phase 3 clinical trials. Management firms are required to invest at least 60% of the committed capital in these companies. The fund's duration is set at eight years, with a possible extension of up to two years, to support the long-term nature of new drug development.

Jung Eunyoung, Director General for Health Industry Policy at the Ministry of Health and Welfare, stated, "We hope that capable fund managers will actively participate so that this Phase 3 clinical trial fund can serve as a catalyst for successful clinical completion and global market entry of innovative new drugs. We will ensure smooth fund creation and rapid investment execution to help domestic pharmaceutical and biotech companies bridge their funding gaps and create global new drugs."

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