[Dong-A Business Review/Case Study]
Targeting US market with new diverse pipeline
ViroMed - 1st generation Bio-Venture in Korea and its growth strategy
Seoul, Korea - Developing new medicine is often likened to “playing lotto” as successfully developing and launching a new medicine onto the market can easily lead you to an annual revenue of more than KRW 10 trillion. Humira for rheumatoid arthritis, Herceptin by Roche for breast cancer, and Enbrel by Amgen are all innovative medicines that are generating some KRW 10 trillion of annual revenue respectively. However, massive time and money has to be poured into for new drug development; more than ten years of research and about KRW 3 trillion of monetary investment is needed, and, as if that were not enough, the tremendous time and money invested tends to be met by success rates that hardly go beyond 10%. No wonder few bio firms in Korea have achieved meaningful success in drug development for the past two decades. As such, the case of ViroMed, a leading Korean bio-venture company, has significant implications to the bio industry in Korea; its US Food and Drug Administration (FDA) approved phase 3 studies are underway in the US following the successful phase 2, in which the firm’s proprietary technology is used. The firm has mobilized fund on its own to finance all of its clinical trials. The following is a summary of a case study featured in the May 2017 edition of Dong-A Business Review, which describes the driving force of the firm’s success and its implications to large biopharmaceutical companies in Korea.
○ To meet unmet medical needs
ViroMed is the first Korean venture company founded on university campus. Dr. Sunyoung Kim, the founder, and two other researchers started the firm in a small lab on the campus of Seoul National University, who decided to establish a company after coming up with marketable results during research. At first, they were not thinking about starting a company. What Dr. Kim had in mind was to look for investment to help continue his research. He talked to 5-6 big local pharmaceutical companies himself to no avail. The big companies by no means believed he, with only one small lab, could manage new drug development that requires huge investment capital. So, Dr. Kim decided to do R & D himself. He mobilized KRW 50 million, and established a company, “ViroMedica Pacific,” the matrix of ViroMed today.
Pharmaceutical companies tend to focus on a single product when carrying out new drug development as developing multiple drugs require enormous resources. However, ViroMed managed to diversify its product pipeline, potential new drugs under development, thanks to its platform technology, pCK vector. The more potential products a bio company has in its pipeline, the more likely it is for the company to launch a new drug. The company’s proprietary pCK vector serves as a platform based on which various drugs can be developed. For instance, depending on the different therapeutic genes inserted into the platform, you can develop diabetic neuropathy treatment or breast cancer vaccine.
Based on the platform was developed ViroMed’s flagship product, VM202. VM202-DPN for diabetic neuropathy was developed by inserting hepatocyte growth factor (HGF) into the pCK vector, whose phase 2 clinical trial was successfully completed in the US and phase 3 is underway. Currently, the annual DPN pain reliever market is estimated at about KRW 5 trillion globally. In addition to VM202-DPN, ViroMed is developing medicines for other indications utilizing VM202; VM202-PAD for ischemic limb disease, for instance, is going through phase 3 in the US. “VM202 has outstanding efficacy, and there shouldn’t be any problem for the drug to be launched onto the market,” explained Dr. Kim.
○ Targeting major markets from the onset
ViroMed has targeted entering the United States market ever since its inception. The US accounts for about 40% of the global pharmaceutical market, and clinical trials and market approval in the US makes it easier to advance into other markets. However, most local pharmaceutical companies in Korea were not aggressive enough to make an attempt, since it is very difficult to get approval from the US FDA, a hurdle many pharmaceutical companies find themselves faced with. For ten years between 2006 and 2015, only 9.6% of the FDA approved clinical trials that were completed or underway got market approval by the FDA. The clinical trial expenses could go well beyond KRW 1 trillion, which most companies can hardly afford, not to mention a small bio-venture company.
Since it is hard to carry out clinical trials on their own, it is a general practice not only for small bio-ventures but also for big pharmas to outsource their clinical studies and trials to contract research organizations (CRO), whom they pay for patient recruitment, clinical research management, and regulatory process. On the contrary, ViroMed has been conducting all clinical trials itself targeting global markets including the US and Europe. There were trials and errors, of course, from which the company learned and taught itself know-hows. Through its own efforts, ViroMed has been able to conduct clinical trials in the US at 30% of the cost it would have paid to CROs.
○ Expertise ?business management and R & D
Around the beginning of the 21st century, there was an entrepreneurial boom in the bio industry in Korea. Researchers dreamed of a promising future with their technologies only to tumble while faced with barriers in reality, such as business administration, financial & risk management, and marketing. This was not the case with ViroMed. The founder left management to a professional manager, Yongsoo Kim, former Samsung C&T corporation employee and CEO of Locus Technologies, who joined the company in 2009. Dr. Kim has been leading R&D since then.
For the stability of company operation, ViroMed merged with Helixir, a botanical drug company, in October 2009. In general, bio-ventures tend to look for cash cows in areas distant from the bio pharmaceutical field such as real estate lease or resources development in order to fund their research, which consequently could undermine their market credibility. ViroMed, instead, merged with a botanical drug company, seeking to leverage synergies between the primary and the secondary businesses. After the acquisition, the company developed an osteoarthritis drug, Layla, and licensed it out to PMG Pharm from which ViroMed gets a 7% loyalty.
“It may be too early to call it a full success, but ViroMed certainly has an implication for many bio pharmaceutical companies if you think about the fact that it has become a company with KRW 1.5 trillion market cap purely relying on its own technology,” Dongwon Kim, professor of global business administration at Sangmyung University went on to say that, “going forward, out-licensing the company’s technology to big multinational pharmaceutical companies will be a barometer of its success.”
Translated version by English Editor, firstname.lastname@example.org
Original text: [DBR/Case Study]美시장에 과감히 도전… 신약개발 품목 다변화 : 뉴스 : 동아닷컴 (Korean)