[At the Crossroads] Synergy Innovation ② The Reality Behind the Record 6.5 Trillion Won New Drug Export Surpassing Alteogen

Effectively a 70 Billion Won Deal...
Contract Size Inflated by Uncertain Sales Royalties
Counterparty Is a 60 Billion Won Company...
Upfront Payment Not Yet Received

Neurobiogen, a subsidiary of the KOSDAQ-listed company Synergy Innovation, has announced a new drug technology export deal worth 6.5 trillion won. On the surface, this is the largest contract in the history of the Korean bio industry, surpassing previous deals by Alteogen and ABL Bio.

Following the announcement, Synergy Innovation's stock price hit its upper limit and experienced significant volatility. However, doubts are growing in the market regarding the size and structure of the contract. At the same time, controversy has arisen as Synergy Innovation's convertible bond (CB) investors have begun converting their bonds into shares.

On April 16, Neurobiogen announced that it had signed a global license and collaboration agreement with U.S. pharmaceutical company Scilex Bio Inc. for the development and commercialization of "Tisolaziline (KDS2010)." The total value of the contract was stated to be 6.5 trillion won.

If Neurobiogen's announcement is accurate, this would be the largest technology export deal in the history of the Korean bio industry. Currently, Alteogen, the largest company by KOSDAQ market capitalization, signed a technology transfer agreement for its "ALT-B4" platform with Merck (MSD) in 2020, valued at 4.7 trillion won. Earlier this month, ABL Bio transferred its degenerative brain disease treatment platform "Grabody-B" to the UK-based pharmaceutical giant GlaxoSmithKline (GSK) for approximately 4.1 trillion won. Even among new drug deals alone, this far exceeds the 1 to 2 trillion won scale of previous technology exports by LegoChem Biosciences, Yuhan Corporation, and Chong Kun Dang.

Following this news, Synergy Innovation's stock price hit its upper limit. Synergy Innovation is the largest shareholder of Neurobiogen, holding a 54.9% stake. As the stock price surged, Synergy Innovation's CB investors began to request conversion to shares. Although conversion had been possible since the end of last year, the stock price had hovered around the conversion price (2,799 won), preventing conversions until now.

The new drug Tisolaziline, exported by Neurobiogen, is an oral treatment for obesity and Alzheimer's disease. It has completed Phase 1 clinical trials and is preparing for Phase 2a trials in both Korea and the United States. According to the bio industry, Phase 1 clinical trials evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of a new drug to determine if it can be administered to humans. Once this stage is passed, the drug moves on to Phase 2 trials to confirm efficacy. Neurobiogen has promoted the export of a new drug substance that has not even entered Phase 2 trials, valuing the deal at 6.5 trillion won.

Neurobiogen stated that the 6.5 trillion won valuation of Tisolaziline includes the upfront payment, milestone payments, and sales royalties. The upfront payment is 30 billion won, and milestone payments up to NDA (New Drug Application) total 40 billion won. The remaining 6.43 trillion won is attributed to sales royalties.

An industry insider commented, "It is standard practice not to include sales royalties in the announced size of a new drug technology export deal, as it is difficult to estimate sales after new drug approval. Typically, only milestone payments up to NDA are included." The insider further explained, "When Yuhan Corporation announced a 1.4 trillion won technology export, it referred only to milestone payments up to NDA approval." In reality, the contract signed by Neurobiogen may be considered to be worth 70 billion won.

There are also differing opinions regarding the estimated sales royalties. Neurobiogen projects that Tisolaziline will generate 13.5 billion dollars (approximately 1.9 trillion won) in sales as an obesity treatment by 2032, and 300 billion dollars (about 42.6 trillion won) as a dementia treatment by 2038.

According to global market research firm Fortune Business Insights, the global obesity treatment market is expected to grow from 4.5 billion dollars in 2023 to 37.9 billion dollars by 2032. The current obesity treatment market is dominated by Novo Nordisk's "Wegovy" and Eli Lilly's "Zepbound." For Neurobiogen's Tisolaziline to achieve 13.5 billion dollars in sales by 2032, it would need to capture a 35% market share, surpassing both Wegovy and Zepbound.

In the case of dementia treatments, the global market was estimated at about 18 billion dollars last year and is projected to exceed 53 billion dollars by 2038. A Neurobiogen representative stated, "Different market research firms provide different figures, and it is difficult to determine the exact market size for dementia treatments. We estimated 300 billion dollars in sales by 2038 based on a research paper projecting the growth rate of dementia patients."

The papers cited by Neurobiogen are "Global Burden of Disease Study 2019," published in The Lancet Public Health in February 2022, and "Global, regional, and national burden of Alzheimer's disease and other dementias, 1990?2019," published in The Lancet Neurology in September 2021. According to these papers, the number of dementia patients worldwide is expected to increase from about 57.4 million in 2019 to 152.8 million in 2050. However, the papers did not provide specific market size figures.

It has also been found that Neurobiogen has not yet received the 30 billion won upfront payment it announced. Neurobiogen's contract partner, U.S.-based Scilex Bio, is a joint venture between Nasdaq-listed Scilex Holdings and the International Precision Medicine Center (IPMC) under the Bio Open Innovation Council (BOIC) in Korea. Scilex Holdings is a company with a market capitalization of 60 billion won and total assets of 140 billion won. This is small compared to Merck and GSK, whose total assets are approximately 160 trillion won and 100 trillion won, respectively.

A Neurobiogen representative stated, "Scilex Bio owns a company called Semnur Pharmaceuticals, which is preparing for a Nasdaq listing. We understand that they plan to liquidate shares in this company in the future to pay the upfront and milestone payments." The representative added, "Tisolaziline is a new drug that does not have the side effects of existing obesity and dementia treatments, and its high technological value is being recognized."