[Edaily Reporter KIM SUNG-JIN ] Attention is focusing on the dual royalty structure after #SK Biopharm—which licensed the new epilepsy drug candidate “Opacalym” (BHV-7000) from U.S. biotech firm Biohaven—agreed to pay royalties to the original developer, Knopp Biosciences, as well. SK Biopharm is estimated to pay royalties of approximately 15–22% of sales to Biohaven and 4–6% to Knopp Biosciences. If net sales reach 100 billion won, the company would have to spend more than 20 billion won on royalties alone.

SK Biopharm has made a massive investment of $795 million (approximately 1.1 trillion won) to diversify beyond its current revenue structure, which is heavily reliant on the new epilepsy drug “cenobamate” (known as Xcopri in the U.S.). The plan is to launch the product as early as 2029 and develop it into a second cash cow following Xcopri; however, analysts note that ensuring profitability under this dual royalty structure will remain a key challenge, even if Opakalim is successfully commercialized.

SK Biopharm Sets Out to Break Free from Dependence on Excofry

SK Biopharm’s agreement to secure the exclusive global license for Opakalim is one of the largest investments in the history of South Korea’s pharmaceutical and biotech industry. The total value of this agreement reaches up to $795 million, making it the largest instance of a South Korean company acquiring technology for a new drug candidate from a foreign firm. The upfront payment alone amounts to $400 million (approximately 550 billion won), accounting for half of the total contract value.

The reason SK Biopharm has made such a large-scale investment is to diversify the company’s revenue structure, which is currently heavily concentrated on Excofry. Looking at the second-quarter results alone, Excofry (224.4 billion won) accounted for 90% of the company’s total revenue of 247.4 billion won. It is no exaggeration to say that the company’s entire fate hinges on a single product: Excofry.

It is also noteworthy that the candidate compound selected as the next-generation growth engine is a new epilepsy drug in the same class as the company’s proprietary drug, Excofry. SK Biopharm is the only pharmaceutical and biotech company in South Korea to have independently carried out the entire process of new drug development—from candidate discovery to distribution and sales following approval by the U.S. Food and Drug Administration (FDA). Analysts suggest that if Opakalim is successfully commercialized, the company plans to leverage the existing U.S. sales and distribution network for Excofry to create synergies. In particular, securing two flagship products in the epilepsy market is expected to help counter Xenon Pharmaceuticals, which is considered the top competitor in the next-generation epilepsy drug market.

Opakalim is an epilepsy drug candidate that selectively activates the Kv7.2 and Kv7.3 potassium channels. It is being developed as a once-daily oral medication, and two late-stage clinical trials (RISE 2 and 3) are currently underway to secure approval. The company plans to announce the first topline results from the RISE3 trial by the end of this year, followed by the release of the second set of clinical results in 2028, with the goal of launching the product in the U.S. market as early as 2029. Another positive factor is that its mechanism of action differs from that of Excorpri, which selectively inhibits persistent sodium currents that trigger seizures to block excessive electrical signals.

A Rare Dual Royalty Structure…Paying Up to 28%

While SK Biopharm is expected to take a significant step forward as a global pharmaceutical company if it successfully commercializes Opacalym, the expenses associated with the royalty agreement are also expected to be substantial.

In its press release announcing the introduction of Opacalym, SK Biopharm briefly stated, “Under the agreement, certain milestones and royalties will be paid to the original developer, Nop Biosciences.” However, a press release issued by Biohaven on the same day and filings on the U.S. Securities and Exchange Commission’s (SEC) electronic disclosure system, EDGAR, provide more specific details regarding the royalty structure.

First, SK Biopharm agreed to pay Biohaven royalties in the “mid-teens to low twenties” range on Opakalim sales generated in the United States. Based on standard terminology, this is understood to be approximately 15–22%. The royalty rate applicable to sales generated outside the U.S. is lower than this; the royalty paid to Biohaven was set at a “mid-single-digit” level. Converted to a general range, this amounts to approximately 4–6%.

A separate royalty will also be paid to Nop Biosciences. The royalty rate for Nop has also been set at a “mid-single-digit” level (approximately 4–6%). Since the majority of SK Biopharm’s Excofry sales currently come from the U.S., and assuming that sales of Opacalym will also be centered on the U.S., royalties ranging from a minimum of 19% to a maximum of 28% will be incurred. SK Biopharm’s annual Excofry sales totaled 438.7 billion won last year; based on this figure, the annual royalty payments would range from a minimum of 83.3 billion won to a maximum of 122.8 billion won.

The size of the milestone payments SK Biopharm will make to Nop Biosciences is also specifically outlined in Biohaven’s press release. According to the release, SK Biopharm is obligated to pay Nop Biosciences up to $185 million (approximately 250 billion won) in milestone payments if Opakalim receives approval as a new drug in the U.S. and Europe.

The prevailing view in the industry is that this agreement does not follow a standard structure. A lawyer specializing in technology transfer within the pharmaceutical and biotech sectors stated, “While a dual-royalty agreement—where royalties are paid even to the original developer—is not impossible, it’s difficult to call it a typical contract,” adding, “The royalty rate is also quite high at this level.”

Some observers suggest that this indicates SK Biopharm has placed a high degree of confidence in Opakalim’s potential. An industry insider remarked, “In other words, SK Biopharm views Opakalim’s chances of success as very high,” adding, “Betting $400 million in upfront payments alone is a decision that would be difficult to make without strong conviction.”

An SK Biopharm official explained, “Since the proportion of royalties varies depending on the scale and nature of the contract, it is premature to judge whether the royalty rate is high or low based on this single factor.”

Provisions Addressing IRA Price Cuts Also Included

This agreement

also includes provisions

favorable to SK Biopharm. Under the Inflation Reduction Act (IRA), the U.S. government is now authorized to negotiate prices for certain high-cost drugs directly with pharmaceutical companies. The key provision stipulates that if Opakalim is subject to a price reduction and its U.S. sales fall below a certain threshold, the royalties paid to Biohaven will also be reduced.

U.S. Medicare has selected 10 drugs used to treat chronic conditions such as diabetes, cardiovascular disease, autoimmune disorders, and cancer, and has been providing these drugs at reduced prices since January of this year. A phased expansion is planned, with 15 additional drugs to be added next year and the year after.

An industry official commented, “Ultimately, the structure will inevitably lead to blockbuster drugs being included in the list over the long term,” but added, “Rather than anticipating that Opakalim would be included in this list immediately, it’s more accurate to view this as putting a safeguard in place.”