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."