3:38 PM
Nov 21, 2016
 |  BioCentury  |  Strategy

LG’s biotech legacy

How LG's shifting focus helped spawn a new biotech industry in South Korea

LG Life Sciences Ltd. was a pioneer, producing the first globally approved drugs developed by a South Korean company. A shift in priorities all but stopped the flow of innovative new drugs to the world market during the past decade, yet the pharma’s legacy of innovation lives on in a stable of biotech companies developing first-in-class and best-in-class molecules.

The pharma’s role in sparking the development of a Korean biotech industry has less to do with the specific research programs it developed, and everything to do with the environment it created for its scientists. James Lee, former LG researcher and CEO of autoimmune and inflammatory company Bridge Biotherapeutics Inc., estimates that 25-30% of the innovative biotechs in Korea founded since 1997 are led by ex-LG scientists.

BioCentury’s BCIQ database lists 73 biotechs founded in Korea since then.

BioCentury identified 12 of the companies that were founded by former LG researchers and spoke with seven of the founders.

Several said they were inspired to tackle novel drug development while working as scientists under LG’s Nam Choi, who helped launch the company’s genetic engineering and biotech research and later, as head of life sciences research, instilled a culture of learning, experimentation and debate.

The first few start-ups launched by former LG scientists began to appear after Choi departed in 1998.

These were followed by another handful in the late 2000s, after a new CEO took the helm at LG and the pharma’s emphasis on growing revenues resulted in discontinuing its cancer programs in 2006.

These early start-ups founded by LG alumni had difficulty raising money, thanks in large part to the bad luck of launching into unfavorable markets for biotech or the global economic crisis. The 12 start-ups on BioCentury’s list have raised about $200 million since inception.
Four of the 12 companies are public, with a combined market cap of W1.2 trillion ($999.1 million), edging out LG Life Sciences, with a market cap of W988 billion ($790.4 million) (see “All Grown Up.”)

Some of the 12 used licensing deals or government grants to keep themselves afloat during the lean years, and two now have marketed drugs to show for it.
The ability of the first-generation biotechs to move their products through the clinic, the growing valuations of the public companies and recent international approvals of biosimilars developed by large Korean companies are now piquing the interest of local venture investors.
This in turn is attracting a new generation of biopharma entrepreneurs - returnees with experience at multinational pharma companies - to launch a fresh crop of biotechs.

At least three new Korean biopharma companies launched in the past year have been started by researchers with experience in the U.S., two of whom also had research stints at LG.

Figure: All grown up

Four public companies founded by alumni from LG Life Sciences Ltd. (KSE:068870) today have a combined market cap exceeding that of LG Life Sciences itself. At Nov. 18, the combined value of CrystalGenomics Inc. (KOSDAQ:083790), LegoChem BioSciences Inc. (KOSDAQ:141080), Peptron Inc. (KOSDAQ:087010) and Alteogen Inc. (KOSDAQ:196170) was W1.2 trillion ($999.1 milllion), compared with W988 billion ($790.4 million) for LG. Source: Bloomberg

First wave

The first wave of entrepreneurs to emerge from LG were incubated in a culture of innovation and scientific debate that Choi encouraged - a culture that stood apart from other Korean conglomerates.

“LG was really a front-runner among the conglomerates that got into life sciences with this kind of adventurous atmosphere to compete with the big multinational pharmas, and that inspired people to do something new,” said Bridge’s Lee.

Lee was a structure-based drug discovery scientist and a member of the business development team at LG, who left to co-found chemoproteomics company CrystalGenomics Inc.

LG was the first Korean company with a globally approved and marketed antibiotic in Factive gemifloxacin, and the first Korean company with a globally approved biologic, Valtropin somatropin.

“Most other pharma companies or conglomerates in Korea had...

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