[Bio Shaking the Market]② GemVax, Crying and Laughing Over Pancreatic Cancer Treatment

GemVax & Kael, Transition to a Bio Company After Acquiring Norwegian Cancer Vaccine Firm GemVax in 2008
Expectations for Pancreatic Cancer Drug Success... Market Cap Surpasses 1 Trillion Won in Less Than 3 Years Since Acquisition

Since 2015, the market capitalization share of the bio sector in the KOSDAQ market has grown dramatically. As the bio boom continued for several years, the valuation of listed companies with new drug pipelines soared to unprecedented heights. Many companies took advantage of the stock price surge to raise funds for new drug development. Some bio-listed companies 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 have increased. Since the end of last year, as clinical results of new drugs that failed to meet expectations were consecutively disclosed, expectations have been lowered. Asia Economy aims to re-examine the growth story of emerging bio groups.

[Asia Economy Reporter Yoo Hyun-seok] GemVax & Kael (hereinafter GemVax) is a company that was previously highlighted for its pipeline 'GV1001.' Expectations rose as the new drug candidate progressed to phase 3 clinical trials for pancreatic cancer. Due to the anticipation for the new drug, the market capitalization once exceeded 1 trillion KRW, but the clinical outcome was not favorable.

◆Market capitalization surpasses 1 trillion KRW with phase 3 pancreatic cancer clinical trial

GemVax's original name was Kael. The company was established on March 10, 1998, primarily for the manufacture and sale of coating resin for semiconductors and displays, as well as filters. It was listed on KOSDAQ in June 2005. The company changed its name to the current one in 2009.

Three years after listing, in May 2008, GemVax's largest shareholder changed from Huigeun Lee and one other to Sangjae Kim, the current chairman of the GemVax Group. In January 2009, the largest shareholder changed to Tongyeong Guilchil (which changed its name to Gem & Company in April 2013), an unlisted corporation wholly owned by Chairman Kim. As of the third quarter of last year, Gem & Company held an 11.79% stake in GemVax, and Chairman Kim also held 3.41%.

GemVax officially entered the new drug development field in October 2008 by adding an affiliate company, Kael GemVax, which focused on the development and manufacture and sale of anticancer vaccines. Notably, Kael GemVax acquired 100% of the shares of the Norwegian anticancer vaccine development specialist company GemVax from Pharmexa AS (now Affitech) for 10 million USD. GemVax possessed the GV1001 anticancer vaccine pipeline for treating pancreatic, liver, and lung cancers. The reason Chairman Kim acquired GemVax is still talked about. While searching for treatments for his mother battling liver cancer, he learned about the existence of anticancer vaccines, which led to the rapid advancement of the bio business.

Stock price trend chart of GemVax from 2011 to May 2013.
Photo by Daishin Securities HTS capture

The GV1001 acquired by GemVax's Kael GemVax had already completed phases 1 and 2 clinical trials and was progressing to phase 3. According to GemVax's 2010 business report, Affitech led the phase 3 clinical trial for pancreatic cancer by signing supply and R&D contracts with the University of Liverpool, Royal Liverpool, and Broadgreen University Hospital NHS Trust in the UK. Clinical phase 3 trials were underway, and preparations for phase 3 trials for other cancers were ongoing. The report stated that as of the submission date, phase 3 clinical trials for pancreatic cancer were being conducted at 53 hospitals in the UK with 999 patients (90%), and patient recruitment was expected to be completed within the year.

The market reaction was cold when GemVax entered the bio business. In early October 2008, GemVax's stock price was 3,480 KRW, but it fell to 2,260 KRW on November 28 and 2,530 KRW on December 30, showing a decline after entering the bio business.

However, from 2009, GemVax's stock price began to rise. In particular, in April 2011, the British BBC broadcast reported on GemVax's anticancer vaccine technology, and in May of the same year, a US clinical journal published phase 1/2 clinical results for melanoma. In June, news of the completion of phase 3 patient recruitment and a 30 million USD convertible bond (CB) investment by the US private equity firm SIG brought continuous good news. The stock price, which was in the 2,000 KRW range in January 2009, surpassed 48,000 KRW in August 2011, pushing the market capitalization over 1 trillion KRW. This was less than three years after acquiring the bio company. Subsequently, GemVax's stock price rose to 50,200 KRW in April 2013 and maintained a steady range of 30,000 to 40,000 KRW until May 2013.

◆Four consecutive days of limit-down after clinical failure

Stock price trend chart of GemVax from June 2013 to 2015.
Photo by Daishin Securities HTS capture

However, GemVax's pancreatic cancer clinical trial ultimately ended in failure. In June 2013, GemVax received clinical results for 'TeloVAc (pancreatic cancer phase 3)' and anticancer anti-inflammatory drugs from the American Society of Clinical Oncology (ASCO). At that time, Professor John Neotholomus of Royal Liverpool University Hospital, the lead researcher, stated, "Although there was no significant improvement in survival rates compared to the chemotherapy group, there were no major side effects from the vaccine." Following these clinical results, GemVax's stock price plummeted. On June 3, 2013, the stock price was 37,700 KRW but dropped sharply to 32,050 KRW the next day, and from June 4 to 10, it recorded limit-down prices for four consecutive trading days. On June 10, the stock price was 19,750 KRW. Particularly on June 25, it fell to as low as 10,640 KRW, continuing to decline helplessly.

Until early May 2015, GemVax's stock price hovered around 15,000 to 20,000 KRW before successfully rebounding. The cause was unrelated to new drugs but was a China-related issue. At that time, GemVax announced an investment contract to establish a joint venture, Hualian GemVax, with Hualian Xingguang Brand Operation Management (Tianjin) Co., Ltd. Through this, GemVax explained that it would supply pharmaceutical and bio products, cosmetics, and health foods affiliated with GemVax to all department stores, supermarkets, and online malls using the 'Hualian' brand throughout China. Following this news, the stock price rose from 18,500 KRW on May 4 to 43,750 KRW on July 3 of the same year. Although Hualian GemVax dramatically boosted GemVax's stock price, its performance was poor. In 2016, Hualian GemVax recorded a net loss of 2.4 billion KRW, 19 million KRW in 2017, and 1.817 billion KRW in 2018.

GemVax's stock price began to decline. In December 2015, GemVax announced that it had completed the IND approval application for phase 2 clinical trials of 'GV1001' for Alzheimer's disease with the Ministry of Food and Drug Safety, but the stock price did not rise significantly. Instead, in February 2016, the termination of the contract with China's Guzhou Tong Pharmaceutical Group Co., Ltd. acted as a negative factor. The stock price remained sluggish until the phase 2 clinical trial results for Alzheimer's disease were released.