Roche Bets Advance Payments Of 262.9 Billion On Phase 1 Clinical SubstancesSecurities Price Target Stock Up, Up To KRW 800,000
A next-generation obesity treatment that protects muscles while losing weight has raised Hanmi Pharmaceutical’s stock price again. As global pharmaceutical company Roche buys new drug candidates, which are still in phase 1 clinical trials, for up to 3.2 trillion won, the market’s attention is going beyond a single technology export to the entire obesity new drug pipeline of Hanmi Pharmaceutical
According to the Korea Exchange on the 28th, Hanmi Pharmaceutical closed at 509,000 won, up 0.99% from the previous day. Compared to the closing price of 415,500 won on the 21st, the last trading day of last week, it rose 22.5% this week. It is the large-scale technology exports announced on the 24th that have raised stock prices at once. Hanmi Pharmaceutical announced that it had transferred its technology to Genentech, a subsidiary of Roche Group, for the treatment of obesity and metabolic diseases, and as the news spread, the stock price soared 29.96% in a day to close at 540,000 won.
What the market paid attention to is the “quality” of the contract rather than the size of the contract. The contract with Genentech is up to $2.35 billion (about 3.1892 trillion won), of which the advance payment alone, which is not obligated to return, is $190 million (about 262.9 billion won). It will receive an additional milestone of about 2.9263 trillion won depending on the clinical development and approval and commercialization stage, and will also separately collect royalties linked to sales after the product is released.
What surprised the stock market is that HM17321 is still in phase 1 clinical trials. This is because Global Big Pharma decided to pay more than 260 billion won first before the drug’s effectiveness was proven in earnest for people. According to Shinhan Investment & Securities, advance payments account for 8.2 percent of all contracts, more than double the average advance payment ratio of technology export contracts signed by local pharmaceutical companies with Big Pharma, or about 4 percent
Behind the unusual ransom is a new competitive structure in the obesity treatment market. If the existing treatment represented by Hugo Bee and Mountaineer competed over “how much weight you lose,” the topic of the next-generation market is shifting to “What do you lose?” Complementing the limitations of existing treatments that lose not only fat but also muscles when they lose weight has emerged as a new showdown
HM17321 is a UCN2 analog that selectively activates the CRF2 receptor, unlike the conventional GLP-1 family. Hanmi Pharmaceutical confirmed in a preclinical study that when administered, the amount of fat decreased, while the amount of fat and muscle increased. It is also characterized by the fact that it can simultaneously aim for weight loss and body composition improvement when used in combination with existing Incretin-based treatments
This is why Roche bet a lot of money on this material. Roche is developing eniseptide, a GLP-1 and GIP double agent, and RG6652, an oral GLP-1 treatment, but a differentiated mechanism is urgently needed to catch up with Eli Lilly and Novo Nordisk, which have already dominated the market. The candidate materials for muscle preservation, which were developed on their own, did not meet expectations. Myostatin inhibitor RG6237 failed to demonstrate efficacy in two clinical Phase 2 cases this year in spinal muscular dystrophy and facial scapular myodystrophy. Although the clinical practice of obesity is continuing, the need to secure a new muscle preservation mechanism has increased.
After all, Roche HM17321 is a card that will reverse the weaknesses of latecomers. If you create a combination therapy that reduces weight and preserves muscles as much as possible in combination with the incremental drugs you already have, you can create a different competitive composition than Lily and Novo Nordisk. This is why it is evaluated that this contract goes beyond a single new drug candidate transaction and shows the next direction of competition in the global obesity market
In the market, Hanmi Pharmaceutical’s rest of the obesity pipeline has begun to be viewed again. Hanmi Pharmaceutical is developing several mechanisms of obesity treatment through the “H.O.P.” project, and the GLP-1, GIP, and Glucagon triple agent HM15275 and myostatin inhibitor HM-500197, which are undergoing phase 2 global clinical trials, are representative. The reason why this contract is meaningful is that these candidate materials can also have a “Big Pharma verification premium.” Hanmi Pharmaceutical re-provened its R&D capabilities by exporting its short bowel syndrome treatment to Eli Lilly for about 1.9 trillion won in June and winning a trillion-dollar contract again in just three months.
Securities firms are also recalculating their ransom. Shinhan Investment & Securities raised its target price by 27.5% from 510,000 won to 650,000 won, valuing HM17321’s new drug at 1.722 trillion won and raising the overall pipeline value to 4.938 trillion won. Other securities firms have a higher eye level. NH Investment & Securities raised its target stock price 33% to 760,000 won, Mirae Asset Securities offered 730,000 won and DS Investment & Securities offered 720,000 won. Some took out up to 800,000 won. In the existing method of discounting and evaluating the possibility of success of the pipeline in the early stages of clinical trials, when the actual amount paid by Big Pharma was confirmed, the value of the new drug itself began to be increased.
Technology exports are also directly reflected in this year’s performance. Shinhan Investment & Securities predicted that the advance payment of about 270 billion won will be set in the fourth quarter’s performance. HM17321 is a pipeline developed by Hanmi Pharmaceutical after the human division with Hanmi Science, so Hanmi Pharmaceutical can recognize the full amount without dividing the down payment. As a result, this year’s operating profit forecast is 549.4 billion won, more than double last year’s 257.8 billion won.
Lee Ho-chul, a senior researcher at Shinhan Investment & Securities, said, “The advance payment ratio of 8.2% is more than twice the average of Korean pharmaceutical companies’ Big Pharma technology exports,” adding, “The value of HM17321’s new drugs was reflected at 1.7 trillion won, and the possibility of further technology exports of HM15275 and HM-500197 has increased.”
