Rivoceranib, a new liver cancer drug that HLB(028300) has developed for more than 20 years, has cleared the first hurdle to reapply for U.S. Food and Drug Administration (FDA) approval. The raw material production facility for Rivoceranib at Chinese partner Jiangsu Hengrui Medicine recently received a "voluntary action indicated (VAI)" rating in an FDA inspection.
VAI is a grade given when some improvements are needed but no immediate administrative action is deemed necessary. It means the direct cause of the third approval failure has, for now, been resolved.
But the approval process is now back at the starting line. There is no shortage of tasks to tackle, including the results of the finished drug production facility inspection, the resubmission strategy, fundraising, diversification of production bases, and a U.S. liver cancer treatment market that has changed during the delay.
The market's response also remains cold. HLB shares fell about 46% from a closing price of 52,200 won on the 9th, the day before news broke that it had received a third complete response letter (CRL — an official letter in which the FDA withholds approval and requests additional information), to 28,300 won on the 22nd.
Jin Yang-gon, chair of the HLB Group board, is moving to defend the stock price by buying affiliate shares in succession. Jin bought 34,081 shares of HLB Therapeutics(115450) on the 20th and then purchased, on the market, 50,428 shares of HLB Genex(187420) and 58,000 shares of HLB Panagene(046210) on the 20th–21st. So far this year alone, he has bought more than 1.1 million affiliate shares over 50 transactions.
◇The raw materials issue is resolved, but the finished drug isn't yet…approval variables remain
The new drug application (NDA) for Rivoceranib includes Hengrui's raw material production site, the "Jinqiao facility," and the finished drug production site, the "Dongjin facility." During approval review, the FDA also examines whether the manufacturing and quality control standards (cGMP) are met at the facilities listed in the application.
The third CRL was triggered by cGMP findings identified at the Jinqiao facility. The company said, "Under the U.S. Code of Federal Regulations, a CRL must specify all deficiencies identified by the FDA," adding, "This CRL did not note any deficiencies other than those at the Jinqiao facility."
However, variables remain. The Dongjin facility recently completed an FDA inspection and is awaiting the result. Considering standard procedures, the industry expects a final result around October.
HLB says there are no issues. A company official noted, "This CRL did not include any deficiencies or requests for remediation related to the Dongjin facility," emphasizing that the recent inspection is a general cGMP review separate from the approval process.
The official added, "Finished pharmaceuticals have simpler processes than active pharmaceutical ingredients, so they tend to attract relatively fewer observations," and "Given that some commonalities were identified in the earlier Form 483 notices (documents the FDA sends to a firm when observations are made during an inspection) issued to both facilities, we expect the Dongjin facility can address them without much difficulty."
If the Dongjin facility receives a VAI or better rating, HLB can speed up the resubmission process. But if it receives an "official action indicated (OAI)" rating, which signals significant violations, additional remediation and a reinspection will be unavoidable, likely delaying the approval timeline again. Hengrui is expected to submit a corrective and preventive action (CAPA) plan to the FDA by the 24th.
◇Timing of resubmission is key…funding pressure looms before approval
As a result, HLB faces a strategic choice on when to resubmit. The key question is whether to resubmit first reflecting the Jinqiao facility's VAI outcome, or to submit once after confirming the Dongjin facility's inspection result as well.
Resubmitting based only on the Jinqiao facility's outcome could move up the start of the approval review. Conversely, resubmitting after securing the Dongjin facility's inspection result could delay the timeline somewhat, but has the advantage of reducing uncertainty related to manufacturing sites.
However, this is not a matter HLB can decide unilaterally. It must consult with the FDA on the scope and procedure of the resubmission, and coordinate the schedule with Hengrui, which owns the manufacturing facilities. The company said, "We are currently in discussions with the FDA and Hengrui."
In a continuing deficit, approval delays can increase the company's financial burden. HLB posted, on a consolidation basis last year, sales of 83.9 billion won, an operating loss of 106.9 billion won, and a net loss of 241.5 billion won. In 2024, it also recorded an operating loss of 118.5 billion won.
Warning lights are also flashing for the fundraising plan being pursued through HLB Pharmaceutical to diversify production bases.
HLB Pharmaceutical's share price fell about 35% from a closing price of 12,240 won on the 9th to 8,000 won on the 22nd. If the current price level holds, the actual amount raised could be significantly lower than the initial plan (120 billion won). There are also concerns that what happened after the first CRL in 2024 could repeat, when HLB Life Science raised only about half of its original target through a paid-in capital increase.
◇Homework left by three CRLs…"to cut manufacturing risk, invest"
HLB plans to invest 55 billion won of the funds raised in building a new plant in Hyangnam. The company believes that, since Rivoceranib has been sold in China for more than 10 years and Hengrui's manufacturing processes are sufficiently validated, using existing production facilities will be efficient in the early U.S. market. However, if sales regions expand to Korea and Asia in the future, it plans to disperse production bases to enhance supply stability.
This strategy has become more necessary as all three CRLs HLB received are directly or indirectly tied to Hengrui.
In particular, because the latest inspection was a general cGMP review targeting other Hengrui medicines, HLB did not receive prior sharing of the inspection's progress or the issuance of the Form 483. The company said that, prompted by this incident, it decided to expand the scope of information sharing to include regulatory inspections not directly related to Rivoceranib.
For the production base diversification strategy to proceed as planned, sufficient investment resources must back it up. However, the company said, "There are currently no additional fundraising plans," and that "the paid-in capital increase will proceed as scheduled."
◇The market and the follow-up pipeline are both a race against time
As Rivoceranib's entry into the U.S. market is delayed, the competitive landscape of the liver cancer treatment market is changing rapidly.
The "Rivoceranib–Camrelizumab" combination therapy demonstrated an overall survival (OS) benefit as a first-line liver cancer treatment in a global phase 3 trial in 2023. But while approval was denied three times, Roche's "Tecentriq–Avastin" combination and AstraZeneca's "Imfinzi–Imjudo" combination became standards of care. For HLB, a latecomer, the longer market entry is delayed, the greater the burden of competing with existing therapies.
Follow-up pipeline operations are also a variable. In December, HLB in-licensed from Relay Therapeutics the global development and commercialization rights to "Rilapugratinib," a cholangiocarcinoma treatment. The deal is worth up to $425 million (about 630 billion won), and the FDA approval decision is scheduled for Sept. 9.
The company says there will be no problem responding, as the Rivoceranib resubmission and the Rilapugratinib approval review follow different regulatory pathways. However, if Rivoceranib's approval drags on, financial burdens could grow further because it would have to push ahead with the development and commercialization of two late-stage pipelines at the same time.