[Top K-Pharma Analysis ⑫] Alteogen to start reaping benefits from its licensing agreements
Korea Biomedical Review is publishing a series of articles to analyze the top 10 Korean pharmaceutical and biopharma companies with the largest market capitalizations listed on the main bourse, Kospi, and the tech-heavy Kosdaq. The series aims to reflect key industrial issues and the flow of the capital market in the Korean pharmaceutical and biopharma industry. This is the twelfth installment. -- Ed.
Alteogen is on track to break even this year thanks to a surge in milestone payments from technology transfer agreements.
According to industry sources, Alteogen is expected to receive approximately 50.8 billion won ($38.4 million) in milestone and service fees this year.
Since 2017, Alteogen has signed a total of seven technology transfer agreements. Six are with global companies, and one is with its subsidiary Altos Biologics.
Of the seven contracts, the company will be able to reap the rewards of three contracts signed in 2019 and 2020, industry watchers said.
The 2019 contract is for the transfer of ALT-B4, the company's human hyaluronidase proprietary technology, to a big global pharmaceutical company, whose name is kept confidential due to contractual reasons.
While the contract is worth up to $1.6 trillion, the company may receive up to $3 million in milestone payments this year.
In 2020, Alteogen signed a non-exclusive technology transfer agreement with a different global pharmaceutical company, rumored to be Merck, also known as MSD outside of the U.S. and Canada, for its ALT-B4 technology. The total contract value is about $3.86 billion.
Alteogen is set to receive $13 million in milestone payment when its partner enters phase 3 clinical trial product using Alteogen's Hybrozyme technology, a subcutaneous (SC) formulation modification platform, with ALT-B4.
In addition to the technology transfer agreement, Alteogen also signed a service to provide its services in helping an unnamed partner validate the ALT-B4 production process.
The service contract totaled 40 billion won, and Alteogen invoiced the first installment of 6 billion won on March 10. The company estimates that it will be able to receive up to 30 billion won, assuming the service fee is received in each quarter of the year.
Reinvesting in new drugs with earned milestones
Alteogen plans to utilize the milestone payments to conduct large-scale clinical trials this year.
The top priority is the global phase 3 trial of ALT-L9, a biosimilar to Eyela, a blockbuster ophthalmic drug developed by Regeneron that treats wet age-related macular degeneration (wAMD) and diabetic macular edema (DME).
Eylea is expected to reach substance patent expiration in the U.S. in June 2023 and in Europe in May 2025.
Altos Biologics is conducting the trial, and the company completed the recruitment of 431 patients in 12 countries in February, and Alteogen aims to launch ALT-L9 in 2025 when the patent expires in Asia.
New products also on the horizon
The company also has several new product launches on the horizon that are expected to drive profitability next year.
Notably, the company submitted a product approval application for Tergase, a finished human hyaluronidase product, to the Ministry of Food and Drug Safety in February and expects to receive approval in September this year.
Tergase is indicated for the relief of post-surgical pain and edema. Currently, animal-derived products used in dermatology and plastic surgery are known to have relatively large side effects, and the company aims to replace them with Tergase.
The domestic market is estimated to be around 50 billion won, and Alteogen expects that the revenue from commercializing Tergase will be recognized in 2024.
Analyst highly favorable toward purchasing Alteogen stocks
With Alteogen showing high growth prospects, an analyst at Yujin Investment & Securities evaluated that Alteogen is so promising that investors should consider it as a stock that they should consider gifting to their children.
"The trend of switching to subcutaneous (SC) formulations of high-dose biopharmaceuticals is likely to continue, and the market for Alteogen's platform technology, Hybrozyme, is currently considered to be in the early growth stage," said Kwon Hae-soon, an analyst at Yujin Investment & Securities. Kwon stressed that the switch to SC formulations is needed not only for the convenience of dosing for patients but also to reduce medical costs borne by society.
"Aside from its competitor Halozyme, Alteogen's Hybrozyme is the only company in the world that can convert intravenous (IV) therapeutics to subcutaneous (SC) dosage forms," Kwons said. "The technology is also highly scalable as Alteogen has been signing non-exclusive agreements."
Based on the major contracts that Alteogen has signed, we estimate that milestone payments and milestone inflows will increase rapidly each year, he added.
Kwon stressed that his brokerage maintained a "Buy" opinion on the company and a target price of 70,000 won.
As of the market open on Thursday, Alteogen's shares stood at 44,850 won, up 1.47 percent from the previous trading day.