[This Week's Focus] Ligachem Bio, Developer of "Precision-Guided Rockets" for Cancer Treatment

Sticking to ADC Until the Niche Becomes Mainstream: A Big Win
Massive Cash Holdings...Continuous Pipeline Discovery

Ligachem Bio (formerly LegoChem Bio), which has been highlighted as a company leading the future of K-new drug development, has not shown a clear upward trend in its stock price since hitting a 52-week high in November last year. This is because the outlook for a U.S. interest rate cut, which has a significant impact on biotech stocks, remains uncertain.

However, the outlook from securities analysts for Ligachem Bio remains positive, as the company turned a profit last year solely from upfront and milestone payments related to new drug development. The average earnings forecast for this year is 204.1 billion KRW in sales and 57.8 billion KRW in net profit. The consensus target stock price is 161,000 KRW. This is due to the fact that the company has signed technology transfer and joint research and development agreements for more than 10 pipelines, with a series of clinical trial results expected to be announced in the second half of the year.

Sticking to ADC Until the Niche Becomes Mainstream: A Big Win

Ligachem Bio was founded in 2006 by CEO Kim Yongju, a former head of research at LG Chem. Since a time when the concept of ADC (Antibody-Drug Conjugate) was unfamiliar both domestically and internationally, the company has focused its efforts on ADC research and development. At the end of March last year, Orion Group acquired shares from CEO Kim and other executives, and became the largest shareholder (25.6% stake) through a third-party allocation capital increase. Kim Yongju continues to lead the company's R&D.

ADC is similar to a precision-guided rocket. A precision-guided rocket delivers its payload exactly to its intended target. ADCs utilize the property of antibodies that allows them to bind only to specific antigens. By attaching a toxic substance (toxin) or a therapeutic protein as a payload to the antibody, the ADC delivers it to cancer cells. The linker is the substance that connects the antibody and the payload. When the antibody finds the cancer cell antigen, the payload is also brought inside the cancer cell due to endocytosis. As a result, the payload acts on the cancer cell to produce a therapeutic effect. This approach reduces the major drawback of traditional small-molecule drugs, which can affect not only cancer cells but also normal cells, leading to significant side effects.

Ligachem Bio has long researched payloads, linkers, and methods of connecting antibodies and linkers, and has developed its own proprietary ADC platform technology called "ConjuALL." Using ConjuALL, the company has discovered a variety of candidate substances, and more than 10 pipelines are currently undergoing clinical trials or joint R&D through technology transfer agreements with global pharmaceutical companies. Analyst Jung Jaewon of iM Securities commented, "The company has established a virtuous cycle in which upfront and milestone payments increase as each pipeline progresses through clinical stages."

Massive Cash Holdings...Continuous Pipeline Discovery

According to GlobalData, the global ADC market was worth about 22 trillion KRW last year and is expected to grow to 81 trillion KRW by 2030, representing an average annual growth rate of 24%. For Ligachem Bio, which holds multiple pipelines, the company's value is bound to increase as clinical stages progress over time.

Various clinical events are scheduled for the second half of this year. A notable example is the breast cancer treatment HER2 ADC (product name LCB-14), for which technology was transferred to Fosun Pharma in China and Iksuda in the UK. Fosun Pharma, which holds the rights in China, is expected to apply for a Biologics License Application (BLA) in the second half of the year, aiming for commercialization in 2027. Iksuda, which holds global rights excluding China, is also expected to announce Phase 1a clinical data. There is a possibility that LCB-14 could be used as a treatment for patients who develop resistance after receiving Enhertu, which is growing as a blockbuster breast cancer therapy. Mirae Asset Securities analyzed, "As of May this year, interim results from the Phase 1 trial showed partial remission in 4 out of 5 patients treated with Enhertu," and added, "At the European Society for Medical Oncology (ESMO) meeting in October, attention should be paid to the overall Phase 1 results as well as the outcomes for patients previously treated with Enhertu."

ROR1 ADC (LCB-71), for which technology was transferred to CStone Pharmaceuticals in China, is expected to present data from its ongoing Phase 1b trial at the American Society of Hematology in the second half of the year and complete Phase 1 in the first half of next year. A key advantage is that it shows fewer side effects compared to existing substances, as it applies a PBD prodrug as the payload. LCB-71 is currently being developed as a treatment for diffuse large B-cell lymphoma (DLBCL), but there is potential for expansion to other indications such as non-Hodgkin lymphoma and Hodgkin lymphoma in the future.

The TROP2 ADC pipeline LCB-84, which was licensed out to J&J in 2023, is also expected to complete Phase 1 trials in the second half of the year. J&J is currently conducting trials for solid tumors. If the program enters Phase 2 in the second half, milestone payments can be expected. In addition, if J&J exercises its option to switch from joint development to sole development, additional revenue may be generated.

Ligachem Bio is one of the few new drug development companies to have turned a profit and is holding more than 500 billion KRW in cash. New ADC pipelines based on novel protein targets and payloads, such as B7-H4 and STING, could further increase the company's value in the mid- to long-term. For example, the B7-H4-targeting ADC LNCB-74, which is being co-developed with NextCure in the United States, is currently in Phase 1 clinical trials. Unlike other pipelines held by Ligachem Bio, its development speed is not lagging behind global peers.