On the 14th, in the KOSDAQ market, domestic bispecific-antibody specialty corporations ABL Bio at one point traded at 195,500 won intraday, hitting a 52-week high. After hitting the upper limit for two consecutive days on the 12th and 13th, its market capitalization jumped by about 3.6 trillion won in a flash, bringing total market cap to 9 trillion won. It has been only half a year since it topped 3 trillion won in market cap in May.
The reason is the successive "mega deals" signed with global pharmaceutical companies this year. ABL Bio disclosed on the 12th that it signed a bispecific-antibody platform technology transfer and joint research and development contract worth up to 3.807 trillion won with U.S. drugmaker Eli Lilly. Under the deal, ABL Bio is slated to receive a $40 million (about 58.5 billion won) upfront payment within 10 business days after completing administrative procedures such as the U.S. Hart-Scott-Rodino Antitrust Improvements Act (HSR Act). In addition to the upfront, it is also eligible to receive up to $2.562 billion (about 3.7487 trillion won) in development, approval, and commercialization milestones (running royalties). It will also receive tiered royalties based on product net sales.
Simply put, platform technology is a foundational technology that can be applied to existing drug development processes to rapidly generate multiple new drug candidates. A bispecific antibody is a protein designed to recognize and bind two different antigens simultaneously, and a bispecific platform is a core technology that enables efficient production and combination of such antibodies.
The target of this contract, "Grabody-B," is a technology that helps drugs cross the blood-brain barrier (BBB). While the BBB serves as a protective barrier that prevents harmful external substances from penetrating the brain, it acts as an obstacle to drug delivery in treatments for neurodegenerative diseases. Grabody-B is designed to selectively pass through this barrier and is regarded as a technology that can overcome the limitations of existing therapies.
Above all, Grabody-B is designed to be applicable to multiple target candidates. According to Shinhan Investment Corp., not only antibody therapies such as Kisunla (ingredient name donanemab) in Eli Lilly's central nervous system (CNS) pipeline but also gene-based therapies are cited as at least five or more candidate applications.
Heo Hye-min, a Kiwoom Securities analyst, said, "ABL Bio's platform is expected to play a key role in Eli Lilly's strategy for developing treatments for brain diseases," adding, "If Grabody-B is grafted onto Kisunla, not only efficacy and safety improvements but also patent extension could be possible."
Chief Executive Lee Sang-hoon of ABL Bio said, "The global standing of the Grabody platform is currently very high," and noted, "We will expand its scope of application into areas with large unmet medical needs such as obesity and muscle diseases."
◇ Proven technology through a second "mega deal"… Grabody platform commercialization on track
ABL Bio signed a 4.1104 trillion won deal with U.K. pharmaceutical company GSK in April. The deal transferred exclusive rights to develop and commercialize new drug candidates for a new target using Grabody-B. At the time, it received a total of 77.10 million pounds (about 148.1 billion won) in upfront and short-term milestones, including an upfront payment of 38.50 million pounds (about 73.9 billion won). Depending on performance, it could secure an additional 2.063 billion pounds (about 3.9623 trillion won).
Earlier in 2022, it signed a technology transfer deal worth $1.06 billion (about 1.272 trillion won) with France's Sanofi and received $75 million (about 90 billion won) as an upfront payment. That deal transferred development rights for candidates derived by applying the Grabody platform.
Whereas the Sanofi deal focused on "individual candidate" transfer, the GSK deal granted a "platform license," and in scale the GSK deal was even larger. The subsequent Eli Lilly contract furthered this, and there is assessment that ABL Bio's platform commercialization strategy has entered full swing.
◇ Establishment of U.S. subsidiary NEOK Bio… launch of global ADC development
ABL Bio is ramping up its push into global markets with the establishment of U.S. subsidiary NEOK Bio. NEOK Bio is a standalone entity 100% owned by ABL Bio, and will independently carry out the clinical development and commercialization rights for two bispecific-antibody-based Antibody-Drug Conjugate (ADC) candidates, ABL206 and ABL209. It means NEOK Bio itself will hold the initiative in global new drug development and commercialization.
ABL Bio aims to submit investigational new drug (IND) applications for the two candidates to the U.S. Food and Drug Administration (FDA) within the year and to begin phase 1 trials in the middle of next year.
ADCs are next-generation anticancer drugs that connect an antibody targeting cancer cells with a potent cytotoxic chemotherapeutic via a linker. When the antibody, like a guided missile, finds only the cancer cells and delivers the drug, the drug selectively destroys those cells, increasing treatment efficacy and reducing side effects on normal cells. According to market research firm Evaluate, the global ADC market is expected to grow from about 1.455 trillion won in 2023 to about 4.074 trillion won in 2028.
Lee said, "As entry into phase 1 for ABL206 and ABL209 is imminent, we transferred the development rights to NEOK Bio," adding, "NEOK Bio plans to independently pursue key strategies in the global market, including clinical development, mergers and acquisitions (M&A), and an initial public offering (IPO)."
◇ Milestones are "conditional" payments… concerns about front-loaded expectations for technology exports
Still, there are concerns that ABL Bio's share-price surge may have priced in expectations for the aggregate value of the technology-export deals. In most technology-export contracts, milestones are conditional payments depending on success at each clinical stage, so if new drug development stalls midway, there is a high possibility that no additional revenue will be received beyond the upfront. As the past Hanmi Pharmaceutical case showed, even when technology-export deals worth trillions of won were announced, actual proceeds sometimes amounted to only one-tenth of the disclosed size.
Currently, domestic securities firms often value corporations by including not only development milestones but also potential future sales milestones and royalties in projected earnings.
Jeong Do-jin, a professor in the business administration department at Chung-Ang University, said, "The technology-export industry pulls future performance forward into present value," adding, "Milestones should be considered future cash flows, but the risk should not be underestimated. It is necessary to check whether the recent share-price surge has adequately reflected these risks."
In response, an ABL Bio official said, "Since listing, we have steadily delivered technology transfer results and we also have our own development pipeline, which appears to be prompting positive assessments," while also emphasizing that development costs are being treated as expenses. Because they are not recognized as assets, the implication is that this is far from an accounting overvaluation.
The official said, "For substances for which the company is independently conducting trials, this is up to phase 1," adding, "Under Financial Supervisory Service guidelines, stages prior to phase 3 are treated as expenses."