[Bio Shaking the Market] ① Gemvax, Once Again from Pancreatic Cancer to Dementia Treatment

Dementia Treatment Drug Clinical Trial Expectations Drive 3-4x Increase in 3 Months
"Commercialization Uncertainty Remains" Concerns Raised

Since 2015, the market capitalization share of the bio sector in the KOSDAQ market has grown dramatically. As the bio boom has continued for several years, the valuation of listed companies with new drug pipelines has soared to unprecedented heights. Many companies have taken advantage of the stock price surge to raise funds for new drug development. Some bio-listed companies have raised capital through mergers and acquisitions (M&A). Cases where the clinical results of a single new drug candidate affect the stock prices of 3 to 4 listed companies are increasing. Since the end of last year, expectations have been lowered as clinical results of new drugs that failed to meet expectations have been disclosed one after another. Asia Economy aims to re-examine the growth story of emerging bio groups.

[Asia Economy Reporter Lim Jeong-su] KOSDAQ bio company GemVax & Kael (GemVax) has recently become a hot topic in the stock market. After producing successful results in domestic Phase 2 clinical trials, its stock price surged 3 to 4 times over three months. However, there is still uncertainty as it must overcome hurdles such as Phase 2 and Phase 3 clinical trials in the United States. Taking advantage of the stock price surge, key company executives also converted a large amount of convertible bonds (CB) into shares.

◆Encouraged by Alzheimer's Treatment Clinical Results

GemVax's stock price, which had remained in the 10,000 KRW range for years, began to surge from October last year. Early this year, it soared to 43,550 KRW per share. Although it has recently shown some correction, it is stabilizing in the 35,000 KRW to 40,000 KRW range. Major affiliates such as GemVax Geo and Samsung Pharm also showed similar trends, surging and then undergoing some correction after the rise.

The expectation was driven by the new drug candidate for Alzheimer's treatment, 'GV1001.' GemVax originally developed GV1001 as a pancreatic cancer treatment (LiaVax). It successfully passed Phase 2 clinical trials but failed in Phase 3, preventing full commercialization. Later, during non-clinical toxicity testing of GV1001, GemVax confirmed its potential as an Alzheimer's treatment. Since 2017, clinical trials have been conducted on 96 patients across 12 hospitals, including Hanyang University Guri Hospital.

The results were successful. In December last year, GemVax announced that it confirmed the safety and efficacy of GV1001 in a domestic Phase 2 clinical trial for Alzheimer's dementia. This was revealed at the Clinical Trials on Alzheimer's Disease (CTAD) conference held in San Diego, USA. Compared to commonly used Alzheimer's treatments donepezil and rivastigmine, GV1001 significantly slowed the progression of dementia symptoms. GemVax will present the final results of the domestic Phase 2 trial at the International Alzheimer's Association (ADI) conference in Singapore this March.

It is reported that major global pharmaceutical companies (big pharma) have shown considerable interest in the clinical results. If GV1001 is successfully commercialized, its economic value is expected to be substantial. KB Securities researcher Lee Tae-young evaluated, "Even assuming the most conservative price and market share, the value of GV1001 exceeds 2.1 trillion KRW," adding, "The estimated value assuming maximum price and market share reaches 6.8692 trillion KRW."

◆Hurdles Remain, Including U.S. Clinical Trials

However, many voices caution against getting carried away by the stock price surge. There are still many hurdles to overcome before generating profits through commercialization. Uncertainties remain large regarding passing U.S. Phase 2 and Phase 3 clinical trials and new drug commercialization.

The recent Phase 2 success and stock price surge resemble the situation in 2011 when pancreatic cancer treatment trials were underway. At that time, GemVax also showed successful results up to Phase 2 but failed in overseas Phase 3 trials. The stock price fluctuated accordingly. From 2010, when clinical trials began in earnest, the stock price surged, approaching 50,000 KRW between 2011 and 2013. However, after the final clinical failure, it plummeted back to the 10,000 KRW level.

A bio industry insider said, "Even if domestic Phase 2 trials pass smoothly, it is rare for clinical designs differing in U.S. Phase 2 and Phase 3 trials to lead to new drug development," adding, "It has not been confirmed whether GemVax's clinical results are statistically significant, and there is still uncertainty as there are no multi-ethnic clinical results yet."

(From left) Song Hyung-gon, CEO of GemVax; Moon Chan-il, Director of Central Research Institute

Key executives seized the opportunity to realize profits. Song Hyung-gon, CEO of GemVax, converted 36,075 shares into stock at 11,088 KRW per share on the 10th through exercising convertible bond (CB) call options and conversion rights. Applying the recent market price, the value of the shares held reaches 1.3 to 1.5 billion KRW. Selling these shares could realize a profit of around 1 billion KRW. Samsung Pharm CEO Kim Ki-ho and GemVax Central Research Institute Director Moon Chan-il, affiliates, also converted CBs of similar scale into shares.

Seoyoung-woon, CEO of affiliate Philink, converted all CBs obtained through exercising call options into shares, holding 61,075 shares. Among these, 11,075 shares were sold at 40,950 KRW per share. Currently, 50,000 common shares remain. The stock volume held by four executives through CB conversion rights is estimated to be worth 5.7 billion KRW at market price.

Although the amount is considerable, they are not expected to realize profits immediately. A senior GemVax official emphasized, "The executives who converted shares this time will not sell them but continue to hold the stocks."