Drug developer Oscotec said on the 27th that it is reviewing a plan to buy Genosco's equity and make it a wholly owned subsidiary. Genosco developed Leclaza, a new lung cancer drug that became the first domestically developed anticancer drug to enter the U.S. market.
Earlier, Genosco sought a listing on the Kosdaq, but the plan fell through at the preliminary review stage by the Korea Exchange. That was because both Genosco and Oscotec generate sales from Leclaza, raising concerns about duplicate listings. Oscotec holds 59% equity in Genosco.
Shin Dong-jun, Oscotec's chief financial officer (CFO), said, "We are prioritizing the conversion of Genosco into a wholly owned subsidiary," adding, "We will change the governance structure so that the subsidiary's profits flow directly to the parent company in a way that aligns with shareholder interests." The plan is to purchase the remaining 41% equity and secure 100% equity in Genosco.
Oscotec established Genosco in the U.S. in 2000. Genosco developed Leclaza and transferred the technology to Yuhan Corporation in 2015. Leclaza won approval from the Ministry of Food and Drug Safety in January 2021, and received U.S. Food and Drug Administration (FDA) approval in Aug. last year for combination therapy with Johnson & Johnson's (J&J) anticancer drug Rybrevant.
In 2018, Yuhan Corporation transferred the global exclusive rights to Leclaza to J&J's subsidiary Janssen in a deal worth up to 1.4 trillion won. Under the agreement at the time, Oscotec and Genosco receive a certain portion of Leclaza sales from J&J as royalties (running royalties). The two companies each receive 20% of the royalties, and Yuhan Corporation receives the remaining 60%.
Minority shareholders of Oscotec opposed Genosco's listing on the grounds that sales are generated from the same product, Leclaza, which would dilute the company's value. Expecting Oscotec's share price to fall with Genosco's listing, minority shareholders took collective action and dismissed CEO Kim Jeong-geun at the shareholders meeting in Mar. The proportion of Oscotec minority shareholders reached 66% of the total in the first half of this year. Minority shareholders demanded a full conversion of Genosco into a subsidiary and a merger, among other measures. Shin, Oscotec's CFO, explained, "Merging the two companies is also an option, but it is not easy because Genosco is a U.S. entity."
Oscotec said converting Genosco into a wholly owned subsidiary would create synergies in new drug development. CFO Shin said, "We plan to streamline overlapping pipelines (drug candidates) between the two companies and combine their strengths to expand new drug development." Oscotec is developing candidate substances for Alzheimer's dementia and solid tumor treatments. Genosco is also developing a candidate substance for a pulmonary fibrosis treatment.
Shin said the company is also considering shareholder dividends after accumulated deficits are resolved. "Investing in new drug development is akin to venture capital," he said. "Many minority shareholders have invested in the company for years, and we will communicate with them and raise corporate value in a way they can accept."
Oscotec was founded in 1998. In the first half of this year, it posted 11.953 billion won in consolidation sales. Operating loss was 8.954 billion won, and research and development expenses were 12.463 billion won.