"To develop the 'next Leclaza,' securing funding is crucial. For now, I believe the most ideal approach is to raise capital internally by making it a 100% subsidiary. Ultimately, our goal is to complete a domestically developed new drug from start to finish with our own capabilities, but we will deliver results through technology transfer if needed."
On Jan. 6 at Oscotec's headquarters in Pangyo, Gyeonggi Province, CEO Go Jong-seong said, "The success or failure of the next new drug hinges on the competitiveness of the compound, marketability, and the timing and funding of development."
◇ 'a second Leclaza' is needed, but… funding is the biggest challenge
CEO Go is a leading researcher who has driven the development of domestically developed new drugs in the pharmaceutical and biotech industry. He led the development of LG CHEM's "Zemiglo (ingredient name gemigliptin)," Korea's first diabetes treatment launched in 2012, and in Aug. last year, he brought the first domestically developed anticancer drug "Leclaza (Lazertinib)" to market.
After serving as head of the new drug research institute at LG CHEM, he joined ZenoScand, a subsidiary established in Boston by former Oscotec CEO Kim Jeong-geun in 2008.
The Leclaza candidate developed at ZenoScand was transferred to Yuhan Corporation in 2015, and in 2018 it was out-licensed again to Johnson & Johnson (J&J) in the United States. Currently, royalties from Leclaza sales are structured so that Yuhan Corporation receives 60%, and Oscotec and ZenoScand each receive 20%.
So far, the total royalties Yuhan Corporation has received from J&J amount to 314 billion won, with Oscotec and ZenoScand each receiving 62.8 billion won, or 20% of that.
The two companies plan to move beyond reliance on Leclaza alone by creating a second and third Leclaza to sustain growth. The challenge is how to secure funding for large-scale research and development (R&D).
As of the third quarter of last year, Oscotec's cash and cash equivalents stood at 14.9 billion won, and current assets, including other financial assets, were about 125.4 billion won. However, even considering only the clinical trials underway or slated to begin within the year, the calculation shows that more than 50 billion won in R&D investment will be needed.
The company has explored various funding options. A KOSDAQ listing of ZenoScand had been pursued earlier, but shareholders opposed it over concerns about value dilution from a split listing, and the Korea Exchange (KRX) did not approve the technology-special listing review.
Subsequently, Oscotec's attempt to make ZenoScand a 100% subsidiary also met shareholder opposition. Oscotec currently holds a 59.12% equity stake in ZenoScand. The company has proposed to unify milestone and royalty revenue from Leclaza's global commercialization through making it a subsidiary, streamline the governance structure, and, after obtaining shareholder consent, inject the secured funds into ZenoScand.
However, some shareholders questioned the timing and rationale for making it a subsidiary, saying it was "hard to trust," and raised suspicions that the company "might pursue funding that involves value dilution, such as a rights offering, afterward."
In response, Go expressed regret. He said, "If shareholders fully understand what ZenoScand is developing and the level of competitiveness of its compounds, I believe they will lend their support." He added, "If the two companies are combined, the asset size itself grows and becomes a meaningful funding source on its own," and explained, "As the organization grows, the potential to leap to the global level and the completeness of the development platform also increase."
He also said, "A company ultimately comes down to how efficiently it turns input into output," emphasizing, "A structure that integrates dispersed functions to improve efficiency can sufficiently benefit shareholders as well."
However, he drew a line by saying, "If resolving this internally through making it a subsidiary becomes difficult, we are reviewing various options, including attracting external investment," while adding that, as for a U.S. Nasdaq listing being discussed in the industry, "We are not considering it."
◇"We want to commercialize the pulmonary fibrosis and DAC new drugs ourselves, but technology transfer is also an option"
The key pipeline Go is nurturing as the "next Leclaza" is "GNS-3545," a candidate treatment for idiopathic pulmonary fibrosis (IPF). IPF is a progressive disease in which fibrotic tissue accumulates in the lungs, gradually reducing lung function, and only three treatments have received approval from the U.S. Food and Drug Administration (FDA).
GNS-3545 is a compound discovered through ZenoScand's in-house new drug development platform "GEN0-K," and it selectively inhibits ROCK2 kinase, a signaling protein involved in fibrosis and inflammatory responses. While existing treatments have only slowed the progression of fibrosis, it is being evaluated as a next-generation candidate that could replace them.
Phase 1, which began in the United States in Dec. last year, is underway with about 70 participants, and about one-third has been completed. Go explained, "In pharmacokinetic (PK) measures, absorption was better than expected, and the half-life was confirmed to allow once-daily dosing." All dosing is scheduled to end by late June, and once the final report comes out in Sep., the company plans to immediately move into Phase 2.
The company plans to apply to the FDA for orphan drug designation (ODD) this week. If designated as an orphan drug, it receives various benefits in the clinical and approval process, including priority review, potential conditional approval based on Phase 2 alone, waiver of application fees, and R&D support. After marketing approval, up to 10 years of exclusivity in the U.S. market is also guaranteed.
Go said, "We strongly want to complete a domestically developed new drug from start to finish with our own capabilities," but added, "Depending on realistic conditions, we plan to pursue technology transfer at the Phase 2 stage." He emphasized, however, that the company would at least secure commercialization rights in Asia.
Another key pipeline is an anticancer drug based on a drug-antibody conjugate (DAC). While conventional antibody-drug conjugates (ADCs) attach a cytotoxic drug (payload) to an antibody that homes in on cancer cells to kill them, DACs use target protein degraders (TPDs) as the payload attached to the antibody. This next-generation technology selectively removes specific proteins within cancer cells. Cell studies are currently underway, and development will be accelerated after animal studies.
Go is also considering monetizing the DAC payload platform individually through technology transfer based on the research.
Go emphasized, "ADC is considered the best anticancer therapy right now, but it has drawbacks where mutations can occur at the binding site of the drug, or efficacy fades over time," adding, "Now is the golden time to develop DACs, a next-generation anticancer therapy that will replace ADCs in the future." He plans to develop the DAC compound under development into next-generation treatments for lung cancer and breast cancer.
However, DAC is still an early-stage technology that even global pharmaceutical companies have not yet taken into full-scale clinical trials, so considerable time and capital are inevitably required from candidate discovery through preclinical and clinical stages. The company's basic direction is in-house development, but it believes strategic choices will be necessary depending on the development stage and financial conditions.
Even so, Go says he will not lose his focus as a researcher. "Watching the U.S. biotech industry while staying in Boston, I found disputes of this level to be common," he said. "Still, what a researcher must not lose is passion and energy for new drug development."
He added, "If shareholders and investors understand, we will show results," and "We will focus on growing the company into a biotech at a global level."