[Edaily NA EUN-KYUNG KIM HYE-SEON Reporter] Investors bought shares immediately after the announcement of a 1.9 trillion won technology export deal, but five days later, they were left with a 21.1% paper loss. This refers to investors who invested in HanmiPharm(128940), which signed a major technology export contract with Eli Lilly last June. An investor who bought shares at the closing price on the day of the announcement ended up losing more than one-fifth of their investment five trading days later. On that same day, the stock price was 13.7% lower than it had been before the announcement. The formula—where positive news of a contract worth trillions of won guarantees investment returns—did not hold true.

As recently as last year, major technology licensing deals were a powerful catalyst that continued to attract buying interest even after the announcement. Of the four technology licensing deals last year with a total contract value of over 1 trillion won, three saw their stock prices rise five trading days after the announcement compared to the day of the announcement. However, this year, the buying base in the pharmaceutical and biotech sectors has weakened. Furthermore, as investors have witnessed various setbacks—such as development halts and delayed payments—following major contracts, it has become difficult to be optimistic about future results based solely on the announcement of a contract. Now, investors can only expect returns by looking beyond the scale of the technology export to assess the conditions that will lead to actual development and cash inflows.

Last Year, Stocks Soared Even Five Days Later… This Year, Gains Were Given Up

According to this newspaper’s analysis, in three of the four major technology export deals last year, stock prices rose by more than 75% five trading days after the announcement compared to pre-announcement levels. These included two contracts by ABL Bio Inc.(298380)and one by ABION Inc.(203400). All four deals analyzed from 2022 to 2023 also saw stock prices rise five trading days after the announcement and outperformed their respective market indices during the same period.

In contrast, all five technology export contracts this year—with a total value exceeding 1 trillion won—saw a “flash” rise on the day of the announcement, but only HanmiPharm’s contract from last August remained above its pre-announcement stock price five trading days later. While positive news regarding technology exports has not entirely lost its impact, the upward trend no longer continues unconditionally simply because the total contract value is large, as it did in the past.

Behind this shift in market reaction this year lies a weakening of supply and demand across the entire sector. In a report last June, KIWOOM Securities analyzed that while the KOSDAQ Pharmaceutical Index had fallen 41% over approximately two months since late March, the U.S. Nasdaq Biotechnology Index (NBI) and the biotech exchange-traded fund (ETF) XBI rose by 5% and 8%, respectively, during the same period. The assessment is that, rather than a decline in the competitiveness of the global biotech industry, the deterioration of domestic supply and demand and a shift of capital toward other sectors played a major role. Consequently, investors have become more discerning when evaluating technology export agreements.

‘Epe’ Returned but Approved… BMS Halts Development Despite Expanding Clinical Trials

Looking at the post-contract trajectory makes it even clearer why it is difficult to judge the success or failure of a technology export based solely on the total contract value. HanmiPharm’s obesity treatment “Epe” and #Orum Therapeutics, Inc.’s “ORM-6151” are examples illustrating that the initial assessment at the time of contract return or signing does not necessarily determine the final outcome of development.

In 2015, Sanofi licensed “Epe” from HanmiPharm to develop it as a diabetes treatment but returned the rights in 2020. On May 14, 2020, when Sanofi’s intention to return the rights was made public, HanmiPharm’s stock price fell 9.5% in a single day. However, HanmiPharm continued development and secured domestic approval approximately six years later. The global clinical data accumulated through trials conducted with Sanofi involving approximately 6,000 patients with type 2 diabetes also served as the foundation for its in-house development.

While the return of the rights was a burden in that it meant losing a partner, it did not imply that the candidate’s value had completely vanished. It was the remaining clinical evidence and HanmiPharm’s ability to pursue further development—rather than the fact of the return itself—that determined its future value.

Conversely, Orum Therapeutics, Inc. transferred ORM-6151 to BMS and secured an upfront payment of $100 million (approximately 130 billion won), but the opportunity to receive additional milestone payments vanished when follow-up development was halted. With the company’s sole clinical asset also stalled, the opportunity to demonstrate its technological capabilities as a leader in proteolytic agents and antibody-conjugates (DACs) in clinical trials was also postponed.

Last year, BMS added a combination therapy and increased the expected enrollment from 35 to 105 participants. In April of this year, it also added a clinical site in Spain. Yet, in just five months, it shifted course by halting development. Although the specific grounds for this decision were not disclosed, this case demonstrates that expanding the number of clinical sites and the enrollment size does not necessarily guarantee smooth progress in development.

Whether it’s a deal with a “Newco” or a multi-billion-won agreement with a major pharma company, the “next step” must be verified

D&D Pharmatech Inc.(347850)is a case that demonstrated how a deal

with

an undervalued “Newco” could turn out to be a “masterstroke.” A “Newco” refers to a newly established company that develops new drugs primarily based on externally acquired technologies. Due to their short development track record and uncertainties regarding follow-up funding, they tend to receive more conservative valuations compared to deals with major pharma companies.

D&D Pharmatech Inc. transferred technology for six oral obesity treatment candidates to the NCO Metcera in 2023–2024 for a total of $803.5 million (approximately 1 trillion won). At the time, the market questioned whether this then-unknown startup could successfully continue development, but its standing changed as major pharmaceutical companies—Pfizer and Novo Nordisk—engaged in a bidding war to acquire Metcera. Ultimately, when Pfizer acquired Metcera, the assets transferred by D&D Pharmatech Inc. were also integrated into the major pharmaceutical company’s development system.

D&D Pharmatech Inc.’s stock price rose by 105.2% in about two months, climbing from 41,525 won on September 19 of last year—before Pfizer’s official announcement of the Metcera acquisition—to 85,200 won on November 14, when the acquisition was finalized. In particular, the stock surged 61.1% in just five trading days (from 49,710 won on October 29 to 80,096 won on November 5) after reports emerged that Novo Nordisk had made a competing bid for Metcera.

However, this does not guarantee a smooth path ahead. Last August, Pfizer announced the discontinuation of development for MET-224o, which utilized D&D Pharmatech Inc.’s oral delivery technology “Oralink.” D&D Pharmatech Inc. explained that this decision was based on candidate selection strategy rather than an issue with the technology itself. The next key evaluation point will be whether the currently confirmed collaborations will lead to assets that demonstrate efficacy in clinical trials.

Nor can a large total contract value necessarily be considered a successful technology export. ABION Inc.(203400)announced a technology export deal worth up to 1.8 trillion won last June, but as of now—approximately 16 months later—there has been no public disclosure regarding the receipt of an upfront payment. With last year’s revenue totaling approximately 880 million won, the company is required to disclose the transaction if it receives technology transfer fees exceeding 88 million won—which corresponds to 10% of its revenue. Given the lack of a related disclosure, it is presumed that the company has not yet secured the advance payment originally proposed. While the failure to receive an advance payment cannot be immediately interpreted as a contract termination, investors must examine how specifically the payment terms and performance schedule are defined if they are to evaluate the total contract amount as part of the company’s enterprise value.

In the United States, pharmaceutical and biotech stocks that had plummeted are showing signs of recovery. On May 14 of last year, Merck (MSD) saw its stock price drop to $73.47 (approximately 98,000 won), a 45.4% decline from its 52-week high at the time. However, its closing price on October 15 of this year was $145.19 (approximately 193,000 won), having recovered to roughly double its low from last May. The XBI, a U.S. biotech exchange-traded fund (ETF), also fell to $66.66 (approximately 89,000 won) during trading in April of last year but subsequently rebounded, closing at $149.78 (approximately 200,000 won) on October 15 of this year. This represents an increase of approximately 125% from its April low last year.

An analyst covering the pharmaceutical and biotech sectors said, “U.S. biotech stocks are showing signs of recovery after a slump, and the domestic market may follow suit with a time lag, so we expect a better trend early next year compared to this year.” He added, “Rather than reacting to every short-term piece of good or bad news, we need to wait for the rebound while selecting companies that can prove their competitiveness through clinical trials and cash inflows.”