[Reporter’s View] LG Chem’s global two-track strategy

to advance into the global market

LG Chem announced the acquisition of a US biotech firm on the 18th.

 

LG Chem will invest KRW 800 billion to acquire a 100% stake in AVEO Pharmaceuticals.

 

This is the third-largest in the history of M&As made by domestic pharmaceutical companies.

 

It is also the largest single-company investment along with SK's acquisition of Ampac.

 

AVEO Pharmaceuticals is a 20-year-old biotech specializing in anticancer drugs.

 

The company developed a vascular endothelial growth factor (VEGF) inhibitor and received FDA approval.

 

Although its new drug, ‘Fotivda (tivozanib)’ is not a first-in-class drug, therefore not the first drug with that mechanism of action, it has much potential.

 

Rather than directly attacking the tumor cells, VEGF inhibitors starve the tumor cells of the nutrition required for tumor cell growth by blocking the nutrition supply pathway.

 

Due to this mechanism of action, it goes well with other anticancer drugs and also pairs well with the cancer immunotherapies that are expanding influence in the anticancer drug market.

 

LG Chem has long been interested in advancing into the global market through new drug development.

 

For this, the company established a local research center in the US 22 years ago, and also invested USD 5 million in a US bioventure for the development of an anticancer drug.

 

Also, the company has spared no amount in R&D, with its company’s R&D-to-Total-revenue ratio reaching nearly 20%.

 

The company was also the first Korean company to obtain approval for a new drug from the U.S.

 

FDA.

 

However, with new drug development being quite challenging in itself and management problems, LG Chem could not succeed in global expansions.

 

LG Chem’s Life Sciences division was unable to continue the development of new drugs in the process of spin-offs, restructuring, and statutory mergers, and also lost a large number of professional personnel.

 

Then, after absorbing LG Life Sciences in 2016, LG Chem restarted its attempt to advance into the global pharmaceutical market.

 

The company secured cash cows – diabetes treatments, fillers, vaccines – to invest in new drug pipelines for autoimmune diseases, anticancer drugs, nonalcoholic steatohepatitis, etc.

 

LG Chem owns 23 new drug and vaccine pipelines.

 

Also, the company has recently started a global Phase III trial for a new gout drug candidate it has been developing.

 

The trial is set to be conducted in the US, China, and Europe.

 

In the field of oncology, the company opted to acquire a biotech.

 

Of course, LG Chem already owns an in-house oncology drug pipeline that consists of 7 candidate substances.

 

However, their development is not so easy as all are in the early stages of Phase I trials, and the company does not have much experience in developing anticancer drugs.

 

Aside from the huge cost, even big pharmas with extensive commercialization experience, often discontinue the development of anticancer drugs midway.

 

The acquisition of AVEO Pharmaceuticals will be an opportunity for LG Chem to understand all areas of anticancer drug development, approval, and sales.

 

In addition to acquiring expert personnel that develops anticancer drugs, the company will be able to acquire the development know-how of big pharmas that have been conducting joint research with Aveo.

 

Also, by transferring its own cancer pipeline to AVEO in the future, the company will be able to conduct global clinical trials more effectively.

 

With the initiation of a global Phase III trial and the acquisition of AVEO this year, LG Chem made a big leap forward in advancing into the global market.

 

Whether LG Chem's two-track strategy will bear fruit will remain to be seen.