AprilBio(397030) shares plunged on news that development of "APB-A1," the core technology export asset for thyroid eye disease (TED), hit a snag. Development has not been fully halted and the technology has not been returned, but uncertainty has grown over the future timeline and milestone payments because development as a TED treatment, which had been the original plan, fell through.
TKG Huchems(069260), which recently took over management control, also faced its first test as a variable emerged in a key pipeline right after the acquisition.
◇Shares down 19% on news of "seeking a new indication, not TED"
On the 21st in the Korea stock market, AprilBio closed at 21,250 won, down 19.20% from the previous session.
Earlier, Denmark-based drugmaker Lundbeck said on the 19th (local time) in its second-quarter earnings release that an analysis of phase 1b data for "Lu AG22515 (APB-A1)" "did not confirm the anticipated clinical effect in thyroid eye disease (TED)." Thyroid eye disease is an autoimmune disorder in which autoantibodies attack the muscles and fat around the eyes, causing abnormal reactions.
Accordingly, it will not proceed with further development in TED, and the plan is to continue development by finding a new disease that better fits CD40L, the mechanism of action of APB-A1. CD40L is a protein that activates immune responses by enabling immune cells to exchange signals. APB-A1 blocks this to suppress excessive immune responses.
AprilBio exported the technology for APB-A1 to Lundbeck in 2021 in a deal worth about 560 billion won. Lundbeck has since been developing the compound as a TED treatment and conducting a phase 1b trial.
In an earlier interim analysis, Lundbeck observed positive signals such as reduced proptosis in some patients and a decrease in thyroid-stimulating hormone receptor (TSHR) autoantibodies. However, after reviewing the full dataset, it changed course because it did not confirm the level of clinical effect anticipated in TED.
Following the news, AprilBio shares fell more than 10% after hours on the 19th and then plunged more than 20% in regular trading on the 20th.
The issue is the weight APB-A1 holds within AprilBio's business structure.
AprilBio has built a business model of developing candidates through preclinical and early clinical stages and then out-licensing them to global drugmakers. It secures upfront payments, milestone payments, and royalties, and reinvests them in follow-up research and development (R&D).
APB-A1 and "APB-R3," an anti-inflammatory disease candidate out-licensed to U.S.-based EvoImmune in 2024, are the core assets that represent this strategy.
In particular, APB-A1 carries greater pressure because it is the most advanced asset in AprilBio's pipeline with clinical development led by a global drugmaker. With the shift from TED to another disease, variables have also arisen in the original development timeline. As a new disease must be selected and clinical and development plans reset, there is a possibility that subsequent trials and milestone timing will be delayed.
However, AprilBio expects that any delay will not be significant even if the development direction shifts to a new disease.
A company representative said, "Since APB-A1 secured human safety and pharmacology data in phase 1b, once a new indication is selected, we can proceed from phase 2 without repeating phase 1," adding, "We can also use the existing clinical data for subsequent development."
Lundbeck has previously mentioned potential applicability across various diseases, including neuroimmunological disorders such as myasthenia gravis (MG) and multiple sclerosis (MS).
◇TKG Huchems faces first test right after taking control
This setback is also expected to be the first test for TKG Huchems, which recently took over management control of AprilBio.
In June, TKG Huchems, together with IMM Investment and IMM Asset Management affiliates, participated in a third-party allotment paid-in capital increase, injecting a total of 346.8 billion won into AprilBio. Through this, TKG Huchems secured effective management control, and with payment completed in July, the transfer of control procedures were finalized.
From TKG Huchems' perspective, a variable has emerged in the development strategy of a key pipeline right after committing substantial capital to enter the biotech business. TKG Group plans to use this investment as a springboard to foster the biotech business as a new growth pillar.
However, one opportunity is that AprilBio can accelerate expansion of its in-house pipeline with the capital secured. With this investment, available funds, including existing cash on hand, increased to about 437 billion won. The company plans to use the funds for research and development (R&D), external technology in-licensing, and strategic equity investments.
In fact, last month AprilBio in-licensed a metabolic disease drug candidate based on a short interfering RNA (siRNA) platform from domestic biotech Curigin, securing its first in-house pipeline and directly entering the RNA therapeutics market. AprilBio will handle subsequent development.
AprilBio also plans to expand RNA drug development using Curigin's technology. The two companies have conducted joint research since Jan. on RNA-based multi-target antibody-oligonucleotide conjugates (AOCs) and are said to be searching for candidates targeting various diseases, including cancer.
Ultimately, after this investment, AprilBio's task is to translate the secured capital into tangible pipeline and business results. Since APB-A1 did not deliver the expected outcome in TED, analysts say the company needs to demonstrate clinical value in a new disease or clinch additional out-licensing deals to fill gaps in the existing pipeline.
In particular, because AprilBio has built a business model of securing cash through out-licensing and reinvesting it in new drug development, the importance of subsequent technology exports has grown. TKG Huchems also needs to prove the value of this investment not merely with capital injection but through expansion of AprilBio's pipeline and out-licensing results.
An investment banking industry source said, "It is not a return of APB-A1's rights, but it is clearly a negative for the company that development of the previously anticipated TED treatment has fallen through," adding, "Only by proving clinical value in a new indication or producing business results such as additional out-licensing can the company overcome this variable."