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Author : adminDate : 2021-12-27 17:00

HLB's acquisition of non-clinical CRO ‘Knotus’, Completed New Drug Development Value Chain

HLB is acquiring the largest contract research organization(CRO), ‘Knotus’, which is specializing in non-clinical testing in Korea.

 

HLB announced in a public announcement on the 27th that it has signed a total of 96.2 billion won in acquisition of Knotus shares with financial investors (FI). As Knotus' largest shareholders agreed to replace 42 billion won of them with BW, which HLB is scheduled to issue in the future, HLB's actual cash burden is worth 14.2 billion won. This reflects Knotus' willingness to participate as a major shareholder of HLB and grow together.

 

Founded in 2012, Knotus is the largest CRO in Korea that can conduct non-clinical efficacy test evaluation at the level of advanced countries and toxicity test evaluation. Non-clinical tests are to find out side-effects, toxicity, and effects by testing newly developed new drug candidate substances on animals before using them in humans.

 

Non-clinical processes are essential for the development of new drugs, and demand for non-clinical tests is also increasing rapidly due to the recent rapid growth of the bio and new drug development industries. According to the Korea Advanced Institute of Science and Technology Planning and Evaluation, the pharmaceutical industry's R&D investment stood at 1.9697 trillion won as of 2019, up 12.1% year-on-year, and growth is expected to grow steeper over the next few years. In fact, Knotus' annual sales are increasing more than 20% every year from 37 billion won in 2018 to 46 billion won in 2019 and 60 billion won in 2020.

 

Knotus is also conducting animal bio-businesses other than non-clinical tests. Based on partnerships with leading animal hospital groups in Korea, it operates R&D and distribution of animal medicines and functional feed and has recently expanded its business area to animal care products. Research firm Alum predicts that the domestic pet market will increase by more than 50% annually. In the U.S., "Pet Care ETF" recorded an annual return of 22% for 21 years, and leading companies such as Chewy and PetCo have grown significantly, with market capitalization reaching 65 trillion won and 28 trillion won, respectively. Knotus, a KOSDAQ-listed company, has a market capitalization of 260 billion won.

 

The M&A was based on deep trust between HLB Chairman Jin Yang-gon and Knotus CEO Kim Do-hyung. The two agreed that the completion of the integrated "Value Chain" from R&D to non-clinical test, development, manufacturing, and distribution would create a great synergy.

 

Kim Do-hyung, the existing major shareholder of Knotus, will continue to represent Knotus even after the acquisition by HLB to oversee the business. Based on cooperation with HLB, the company plans to expand its pipeline for developing anticancer drugs and medicines for animals and expand the group of pet care products.

 

Kim said, "We are happy to work with HLB, which already secured the first, second, and third generation anticancer drug pipelines, and set to launch new drugs in large markets such as the U.S. and Europe," adding, "With a help of HLB, we will quickly enter the global CRO market, where demand is soaring."

 

Companies incorporated into HLB Group through M&A are recently making successive results.

HLB Pharmaceutical, which was acquired in September 2020, had monthly sales of about 2 billion won at the time of the acquisition, but exceeded 5 billion won at the beginning of 2021 and sales rose vertically to 8 billion won per month at the end of the year.

 

HLB Therapeutics is also spurring the development of ongoing dry eye syndrome treatments and glioblastoma treatments in the United States by securing more than 100 billion won in cash liquidity with the acquisition of the HLB consortium. In fact, a pre-BLA meeting with the U.S. FDA is scheduled on February 28 for "RGN-259," a treatment for dry eye syndrome that has completed phase 3 clinical trials.

 

FA, an in vitro diagnostic medical device company that was merged with HLB, is also expected to perform the best in the first quarter of 2022. FA, which posted sales of around 60 billion won in 2020, is expected to generate 120 billion won worth of sales this year, doubling its size in a year. Growth is expected to continue as the aftermath of COVID-19 continues, including the Omicron mutation.

 

An HLB official said, "The acquisition of Knotus, Korea's No. 1 CRO in non-clinical testing, opened the gateway to new drug development. It will further strengthen HLB Group's momentum to develop new drugs."