[Edaily Reporter SONG YOUNG-DOO ] The government has, for the first time, injected large-scale policy funds into late-stage clinical trials for new drug development. This comes as the National Growth Fund has decided to make a direct investment of 500 billion won in LigaChem Biosciences, a KOSDAQ-listed new drug development company. Unlike previous instances where policy funds were limited to expanding production facilities or supporting companies in the commercialization phase, this marks the first instance of supplying “patient capital” to an R&D-focused biotech company. The industry is watching closely to see if this investment will serve as a turning point not only for restoring investor confidence in K-Bio but also for strengthening late-stage clinical capabilities.

On the 25th of last month, the Financial Services Commission convened a meeting of the National Growth Fund’s Investment Review Committee and approved a 500 billion won direct investment in LigaChem Biosciences(141080).

This investment is structured as a joint effort involving 250 billion won from the Advanced Strategic Industries Fund, 250 billion won from ORION (the largest shareholder), and 250 billion won from domestic institutional investors. The funds will be raised through a third-party allocation of 170 billion won in convertible bonds (CBs) and 330 billion won in convertible preferred shares (CPSs)—not through a general rights offering—with a 10-year maturity. Since these securities are not common stock at the time of issuance, there will be no immediate dilution of equity.

LigaChem Biosciences will focus the secured funds on research and development (R&D) rather than mergers and acquisitions (M&A). The company plans to sequentially allocate 90 billion won this year, 180 billion won in 2027, and 230 billion won from 2028 onward to late-stage clinical development, including Phase 2 and 3 trials. As the National Growth Fund is a financial investor (FI) with limited voting rights, it will not participate in management.

“First Direct Investment in New Drug Development” More Important Than 500 billion won

Previous instances of the National Growth Fund supporting the biotech sector include an 85 billion won low-interest loan to BTGen (formerly STGen Bio) and a 300 billion won low-interest loan to SK BIOSCIENCE. However, both cases were loans intended for expanding production facilities or vaccine projects in the commercialization phase.

In contrast, LigaChem Biosciences marks the first instance where policy funds are directly injected as equity capital. This support differs in nature from previous cases, particularly because LigaChem Biosciences is a new drug development company that has not yet generated commercial revenue from its in-house developed drugs.

This aligns with the direction outlined by the Financial Services Commission (FSC) at the National Growth Fund Strategy Committee meeting last April. At that time, the FSC announced its plan to support vaccine companies in Phase 3 clinical trials and new drug development companies, respectively, as part of the “Next-Generation Bio and Vaccine Facility Construction” initiative. If SK BIOSCIENCE represents the first case in the vaccine sector, LigaChem Biosciences is effectively the first case of direct investment in the new drug development sector.

The industry is paying close attention to this decision because it marks the first time the government has provided long-term patient capital for late-stage clinical trials in new drug development. New drug development requires hundreds of billions of won in development costs as clinical trials progress to later stages, yet this is also the phase with the highest risk of failure. It is often referred to as “Death Valley.” Until now, domestic biotech ventures have raised funds through repeated capital increases or the issuance of convertible bonds, which has frequently led to falling stock prices and dilution of existing shareholders’ value.

With the National Growth Fund providing long-term funding with a 10-year maturity, significant changes are expected in the fundraising environment for companies advancing to late-stage clinical trials. The market is watching to see whether this investment will bring about a shift in investment sentiment not only for LigaChem Biosciences but also for the domestic new drug development sector as a whole.

An investment industry official stated, “Domestic new drug development companies have historically been valued lower than their global competitors due to prolonged periods without revenue and the risk of clinical trial failure, and in the recent high-interest-rate environment, investment from venture capital firms and institutional investors has also significantly contracted.” The official added, “In this context, the very fact that the government has directly verified the company’s technological capabilities and growth potential and decided to make a large-scale investment could serve as a positive signal to the market.”

Based on its antibody-drug conjugate (ADC) platform, LigaChem Biosciences has established itself as a leading domestic technology exporter by signing a total of 15 technology export agreements with global big pharma companies, amounting to a cumulative 9.6 trillion won. The industry views these achievements in technology commercialization and the company’s competitiveness in late-stage clinical trials as the primary factors behind this investment decision.

“Late-Stage Clinical Experience Is the Competitive Edge of K-Bio”

This investment is significant not only as a source of funding but also as an opportunity to strengthen late-stage clinical capabilities—an area that has long been considered a weakness of K-Bio.

In fact, Han Jeong-hyun, Head of BD&L at Boehringer Ingelheim Korea, who was interviewed by Edaily during the recent BioUSA conference in San Diego, acknowledged that the research and development (R&D) competitiveness of Korean biotech companies is world-class, but emphasized that accumulating late-stage clinical experience is essential to taking their global competitiveness to the next level.

Han stated, “Even when global big pharma companies acquire preclinical-stage candidates, they ultimately make investment and technology transfer decisions with Phase 3 clinical trials and successful commercialization in mind,” adding, “Actively collaborating with global pharmaceutical companies to accumulate late-stage development experience even after technology transfer is a critical task for the Korean biotech ecosystem to take a leap forward.”

Industry experts unanimously agree that long-term funding is essential to accumulate late-stage clinical experience. Given that late-stage clinical trials require development costs in the hundreds of billions of won, the current structure leaves companies with no choice but to opt for technology transfer or slow down development without long-term capital. There is hope that if this investment from the National Growth Fund serves as a catalyst for accumulating late-stage clinical experience, it will help establish a virtuous cycle that moves beyond technology exports to include in-house new drug development and commercialization, thereby laying the groundwork for domestic companies to compete more evenly with Big Pharma on the global stage.

Follow-up funds are also needed to nurture companies around the Phase 2 clinical trial stage

The market is also paying close attention to the possibility that this investment will not be limited to LigaChem Biosciences. According to the investment industry, the National Growth Fund is reportedly considering additional investments in R&D-focused biotech companies besides LigaChem Biosciences. There are forecasts that if direct government investment expands, investor sentiment in the biotech sector—which has been sluggish—could gradually recover.

However, the industry emphasizes the need for follow-up policies, noting that this investment alone will not be enough to complete the domestic new drug development ecosystem.

Lee Seung-kyu, Vice Chairman of the Korea Bio Association, said in a phone interview with E-Daily, “Since global clinical trials require massive funds, it is very positive that the National Growth Fund has injected large-scale funding into companies in late-stage clinical trials,” adding, “This is highly symbolic, given that the funds and experience needed to conduct late-stage clinical trials have been the areas where domestic biotech companies have been most lacking.”

However, he noted, “This single investment does not complete the ecosystem,” adding, “Follow-up funds must also be established to enable companies around the Phase 2 clinical trial stage—those that have completed proof of concept (PoC)—to grow, so that greater synergy can be achieved.”

In particular, Vice Chairman Lee emphasized, “While most Chinese companies hold business development (BD) meetings with global pharmaceutical firms after securing clinical data, it has not been uncommon for domestic companies to present their technologies while still in the preclinical stage. Ultimately, global competitiveness depends on how boldly companies invest in the stages following proof of concept (PoC).”