“The pharmaceutical and biotech industry will lead our economy soon. Even now, Korean companies are conducting several clinical trials around the world. In the near future, we might have a new blockbuster drug.”

President Moon Jae-in made the remark when he announced the government’s five-year plan to support 4 trillion won ($3.46 billion) for the pharmaceutical and biotech sector, on June 22.

The high anticipation for the pharmaceutical and biotech industry as the next growth engine for the Korean economy comes as Korean companies have either released a new drug or nearly reached to win approval in the global market.

Will Korea produce a blockbuster drug?

In February, Daewoong Pharmaceutical obtained the license of the U.S. Food and Drug Administration for its botulinum toxin and rolled it out under the brand name Jeuveau in America.

In March, SK Biopharmaceutical’s partner firm Jazz Pharmaceuticals received the FDA approval for soliamfetol (brand name: Sunosi) and is about to sell the treatment for excessive sleepiness in the U.S. In 2011, SK Biopharmaceutical out-licensed soliamfetol to Jazz Pharmaceuticals.

Celltrion’s HIV treatment Temixys, which gained the FDA’s nod in November last year, is expected to be sold in July.

SK Biopharmaceutical’s cenobamate, an experimental epilepsy treatment, is highly likely to follow suit. The result of the FDA review on cenobamate is expected to come out in November.

Several other pharmaceuticals have nearly finished new drug development.

Hanmi Pharmaceutical’s partner firm Athenex is to reveal the result of the phase-3 trial on Oraxol, an oral breast cancer drug candidate, in the third quarter.

Mezzion Pharma and Helixmith (formerly Viromed) are also soon to announce phase-3 trial results on congenital heart disease treatment udenafil in late July, and diabetic neuropathy gene therapy VM202-DPN in late this year, respectively.

SillaJen will unveil the result of the futility analysis on Pexa-Vec, an oncolytic virus against liver cancer, in August. Whether it will continue the phase-3 study will depend on the outcome.

Biotech shares tank amid fears of research failure

However, a recent series of negative issues in the pharmaceutical sector might discourage the overall sentiment for new drug development, observers said.

Kolon Life Science and its subsidiary Kolon TissueGene once drew the industry’s keen attention after developing the nation’s 29th new drug Invossa-K, gene therapy for knee osteoarthritis. It was the world’s first of its kind.

In late March, however, the company revealed that it had mislabeled one of the cell ingredients as cartilage-derived cells, instead of kidney-derived GP2-293 cells. The error led to the suspension of the global phase-3 trial.

Kolon wishes to resume the trial after submitting additional data to the FDA. It is unclear whether the FDA will accept it, as the company failed to explain fully to the Korean authorities about how the mislabeling happened precisely.

HLB’s latest announcement that its phase-3 trial on rivoceranib was unlikely to meet the endpoint threw cold water on hopes for new drug development. Rivoceranib is an oral anticancer drug inhibiting the growth of new blood vessels that help cancer cells proliferate. Because it was already sold in China, it was significantly credible.

As a series of drug study failures occurred just before winning approval, fears of failure in new drug development spread across the local stock market.

Mezzion Pharma’s shares on Thursday plummeted 28.02 percent after rumors circulated that its phase-3 trial failed.

Even though the company said the rumors were “groundless” and held an urgent investor relations briefing the following day, stock prices tanked again 30 minutes before the market closing.

On Friday, Mezzion shares dropped 23.82 percent to close at 63,000 won. In just two days, the value of its shares almost halved.

During the two days, other major biotech shares, including SillaJen and Helixmith, had to slide just because they were soon to announce phase-3 trial results.

‘New drug development advanced, but excessive hope will backfire’

The recent slides in biotech stocks were part of trial and error that Korean drugmakers have to go through because they lack experience of conducting global trials, analysts said. Most of the Korean pharmaceuticals either have the local trial experience only or have never tried a global study.

“The overall level of Korean companies’ R&D capabilities has risen significantly. But as they don’t have much experience in global studies, they tend to find it difficult to design a global trial or analyze global data,” an official at a biotech firm said. “The issues of rivoceranib and Mezzion appear to have stemmed from lack of global trial experience, rather than the drug candidates.”

Other observers said businesses should soothe investors’ excessive anticipation or fear because new drug development and failure frequently occur in multinational pharmaceuticals, too.

AbbVie, MSD, Gilead Sciences, Teva, and AstraZeneca have recently discontinued trials due to safety issues or poor efficacy results.

Usually, only one candidate out of 5,000 drug pipelines can be commercialized as a product, and this theory also applies to Korean companies, industry officials said.

“When a clinical trial fails, it is better for companies and investors to pay attention to the possibility the pipeline can go in another direction, or focus on the next study, rather than suffer from the jittery market sentiment,” an industry executive said.

Companies also need to provide transparent and reliable facts for investors, rather than exaggerating as if they could make a big success out of a single pipeline, the executive added. “The biotech market seems to have overheated recently,” he said.