Yuhan Corp. recently made headlines by signing an $870 million licensing deal with Boehringer Ingelheim.

Industry watchers attribute the drugmaker’s success in clinching four out-licensing agreements in one year to a steady expansion of R&D and active engagement in open innovation.

Yuhan announced Monday that it agreed with Boehringer Ingelheim to develop YH25724, a candidate drug for nonalcoholic steatohepatitis (NASH), jointly.

Yuhan will receive an upfront payment of $40 million, of which $10 million comes after a preclinical toxicity test. The company will also get the other $830 million in potential milestone payments upon achievement of drug development, approval, and sales. If the drug is commercialized, the company will receive additional royalties depending on net sales.

Yuhan has been performing well in licensing deals since last year.

In July last year, the company licensed out the global sales rights of YH14618, a drug candidate for degenerative disc disease, to U.S. firm Spine Biopharma, for $218 million. As Spine Biopharma is expected to enter a phase-2 trial in the U.S. within this year, Yuhan received the second down payment of $1 million.

In November, Yuhan had a $1.2 billion out-licensing deal with Janssen Biotech over Lazertinib, an investigational drug for lung cancer. It was the biggest among the four recent deals. Yuhan received $50 million in an upfront payment.

In January, the company agreed with Gilead Sciences to develop a potential drug that works on two targets for the treatment of NASH jointly. Although the company was in the stage of substance candidate discovery without a project name, it was able to ink the $785 million deal, which included $15 million down payment.

The four deals are worth $3.12 billion in total. Combined upfront payments reached $105.6 million, which is over twice the company’s operating profit last year.

The company’s continuous investment in R&D and aggressive open innovation led to the successful licensing deals, observers said.

Yuhan has been a “bridge” between startup biotech ventures and multinational pharmaceutical firms, by introducing early tasks from the ventures, conducting early clinical trials and pulling off licensing deals.

Yuhan initially brought YH14618, which Yuhan licensed out to Spine Biopharma, from Ensol Biosciences. It also introduced Lazertinib from Genosco, a subsidiary of Oscotec, in 2015.

This year, new drug candidates developed by Yuhan for the treatment of NASH drew attention.

The pharma industry regards NASH as a blue ocean market because there is no effective treatment yet. The number of NASH patients is rising due to increased obesity and type-2 diabetes. According to Global Data, the global NASH treatment market is expected to grow 45 percent per year on average from $618 million in 2016 to $25.3 billion in 2026.

Multinationals are waging all-out war to secure first-in-class drugs in the NASH market. According to Biomedtracker, a clinical assessment firm, 55 clinical trials have been registered to test NASH treatments, and four of them are phase 3.

Due to unexpected adverse events or poor efficacy in trials, pharmaceutical companies are trying out various combination therapies. It was for this reason that Gilead decided to introduce Yuhan’s technology although the multinational firm has three candidate substances for NASH.

Boehringer Ingelheim, too, appears to have decided to use Yuhan’s candidate substance as targeting only one feature of NASH could make it challenging to improve symptoms of severe NASH.

Yuhan has four NASH-related pipelines and successfully licensed out three of them. The latest experimental drug YH25724 is Yuhan’s first licensing out of a biopharmaceutical agent. The company’s discovery of a candidate substance -- that was both in high need of multinationals and could create synergy effects – worked well.

Yuhan has expanded R&D in recent years. The ratio of R&D to sales went up from 5.7 percent in 2015 to over 7 percent in 2017. The amount of R&D increased to 112.6 billion won ($96.7 million), which accounted for 7.4 percent of sales, in 2018.

The spending on R&D reached 34.3 billion won in the first quarter, up by 11 billion won from a year earlier. Yuhan earlier said it would spend 150 billion won on R&D in 2019.