pharm edaily

[Kim Jin-soo, Edaily Reporter] “Immuno-oncology drugs see a significant increase in value after passing Phase 1 clinical trials. In the case of the GENA-104 technology export agreement, we determined that securing future revenues would be far more beneficial than focusing on the initial contract payment.”

YooSeok Hong CEO of Genome&Company.(Genome&Company)

On Feb. 18, at the company’s headquarters in Gwanggyo, YooSeok Hong, CEO of Genome & Company, spoke with Edaily, stating, “If Ellipses proceeds with the Phase 1 trial as planned, we expect to secure data sufficient for technology re-export (technology transfer or sub-licensing) in as early as a year and a half.”

Genome & Company signed a technology export agreement with the U.K.-based Ellipses Pharma on Feb. 10 for the immuno-oncology drug GENA-104. GENA-104 is an immuno-oncology drug candidate targeting the protein CNTN4, which is found in various tumors. Ellipses plans to initiate Phase 1 clinical trials in South Korea this year and later expand trials to the United States and Europe.

Despite the announcement of this agreement, Genome & Company’s stock price has not seen a significant rise, largely due to the absence of an upfront payment. In technology export deals, upfront payments are nonrefundable even if the technology is returned, making them a key measure of a pipeline’s value. Companies acquiring a pipeline bear the risk of paying an upfront fee. However, in this contract, the upfront payment was set at zero, and Genome & Company did not make a disclosure about it.

Although there is no upfront payment, Genome & Company has agreed to receive revenue sharing based on a predetermined ratio with Ellipses from all future profits generated from the commercialization of GENA-104.

Regarding the upfront payment, Hong explained, “In technology export deals, larger upfront payments generally lead to lower milestone payments and royalties, while smaller upfront payments result in greater potential earnings through milestones and royalties. Although this contract does not include an upfront payment, it is structured to maximize revenue during the development process.”

He added, “The total contract size has not been finalized. As development progresses, the final contract scale will be determined. This is a new type of deal where the final value is shaped over time. Although we did not receive an upfront payment, Ellipses expanding clinical trials to the global stage has resulted in benefits that outweigh receiving an initial payment.”

According to Hong, oncology drugs require significant costs starting from toxicity testing. Genome & Company estimated that conducting a domestic clinical trial for GENA-104 would cost approximately 10 billion won (around $7.5 million). Ellipses plans to conduct global clinical trials in the U.S. and Europe, which could push costs up to 30 billion to 50 billion won (around $22.5 million to $37.5 million). From Genome & Company’s perspective, this contract has allowed the company to save the entire cost of expanding clinical trials to the global stage.

Regarding the contract partner, Ellipses, Hong stated, “There are pros and cons to partnering with a big pharma company versus a specialized biotech company. Ellipses has a strong focus on oncology drug development and can move faster in research compared to big pharma.”

Big pharmaceutical companies manage numerous pipelines, and early-stage drug candidates may be deprioritized based on development strategies. In contrast, Ellipses dedicates a specialized advisory group of more than 300 oncology experts when adopting external drug candidates, ensuring focused oncology drug development. Additionally, its key investor, the UAE sovereign wealth fund Mubadala Investment Company, ensures financial stability.

Hong stated, “Ellipses plans to conduct clinical trials for GENA-104 and then re-export the technology. In immuno-oncology, once a drug enters pivotal clinical trials and demonstrates efficacy, its value can increase by dozens of times, raising expectations for future milestone payments and royalties.”

In immuno-oncology, even if a drug shows promise in preclinical trials (animal testing), it may not elicit the desired response in the human immune system. Therefore, demonstrating efficacy in clinical trials is the most critical factor. Past cases of immuno-oncology technology export deals support this. For example, when GSK acquired iTeos’ anti-TIGIT monoclonal antibody EOS-448 while it was in Phase 1 trials, the total contract value reached 3 trillion won (approximately $2.2 billion).

The fact that Ellipses is a No Research, Development Only (NRDO) company further increases the likelihood of technology re-export. NRDO companies do not conduct fundamental research but focus on drug development. They acquire drug candidates from other companies, enhance their value, and then re-export the technology to third parties.

Hong concluded, “Big pharma companies prefer to acquire immuno-oncology drugs once they have demonstrated some efficacy in human trials. In about a year and a half, we expect to obtain data from Phase 1 dose escalation studies, at which point we anticipate opportunities for technology re-export to big pharma.”