HLB(028300) was recently expelled from the Morgan Stanley Capital International (MSCI) Korea Index. The reason was that its liver cancer drug candidate failed to win U.S. approval. With investor sentiment weakened, HLB is expected to learn next month whether its bile duct cancer drug candidate will be approved. Some say the company's fate hinges on the outcome.
According to the pharmaceutical and biotech industry on the 27th, MSCI recently removed HLB from the Korea Index constituents. It comes eight years after HLB was added to the MSCI Korea Index in 2018. After the market close on the 31st, the index rebalancing will be carried out, and the stock is expected to be excluded from the index starting next month.
MSCI conducts a regular quarterly review to adjust index constituents based on total market capitalization and free-float market capitalization (market capitalization calculated using only shares actually available for transaction in the market, excluding treasury shares). Because MSCI indexes serve as a benchmark for global capital, newly added stocks can see inflows of passive (index-tracking) funds and share price gains. Conversely, when a particular stock is removed, outflows can occur.
HLB's new liver cancer drug Rivoceranib failed to pass the U.S. Food and Drug Administration (FDA), and the ensuing share price plunge is seen as the reason it was excluded from the MSCI Korea Index.
Previously, HLB sought approval for a regimen used in combination with Camrelizumab, an anticancer drug from China's Hansoh Pharmaceutical, but failed. News on the 10th of last month that the company did not win U.S. approval on its third attempt sent HLB shares down more than 28% from the previous trading day in a single session. The company says it plans a fourth attempt with the liver cancer drug, but investor fatigue has grown.
Amid this, HLB is seeking U.S. FDA approval for its bile duct cancer candidate lirafugratinib. The FDA is set to decide on approval on the 25th of next month (local time). If it succeeds in winning U.S. approval, the company could rebound through commercialization, but failure would likely further dampen investor sentiment.
Earlier, on the 24th of last month, HLB said it held a final meeting with the FDA. The company said it reviewed the remaining issues at the end of the lirafugratinib approval review and found no significant problems. An HLB official said, "We plan to complete the follow-up procedures without a hitch."
Bile duct cancer is a cancer that develops in the bile ducts, the channels through which bile produced in the liver flows. Lirafugratinib is a targeted anticancer drug that inhibits the FGFR2 protein, which promotes cancer cell growth. In 2022, it was designated an orphan drug by the FDA and the following year as a breakthrough therapy. HLB applied to the FDA for approval of lirafugratinib in January this year, and it was granted priority review. The review period, which usually takes 10 months, was shortened.
In the first half of this year, HLB posted 46.7 billion won in consolidation sales and an operating loss of 45.7 billion won. Sales rose 40% from the same period last year and the loss narrowed. An HLB official said, "We plan to develop lirafugratinib so it can be used to treat cancers regardless of the site of tumor occurrence, not just bile duct cancer."