D&D Pharmatech DD01: Market Focus Shifts from Licensing Prospects to Valuation

Statistical Significance Achieved in Key Indicators in U.S. Phase 2 Biopsy Results
Negotiating Power Highlighted by the Rarity of MASH Candidates
Comparison with GSK’s KRW 3 Trillion Deal... Upfront Payment Draws Attention

Market attention is currently focused on the licensing (L/O) deal terms surrounding D&D Pharmatech's metabolic dysfunction-associated steatohepatitis (MASH) treatment candidate, Zafpegdutide (DD01). Following the recent release of positive 48-week liver biopsy results from a Phase 2 clinical trial in the United States, expectations for a licensing deal have risen. The key issue is whether the rarity of MASH candidates and the data competitiveness of DD01 compared to rival drugs will translate into stronger negotiating power in the future.

According to the pharmaceutical and biotech industry on June 12, D&D Pharmatech presented detailed 48-week Phase 2 clinical data for DD01 and announced its future business strategy at a corporate IR session held the previous day. While it is difficult to specify the exact timing of a licensing deal, the company is accelerating global partnering efforts, including face-to-face meetings with major big pharma companies and MASH-related firms at an international conference later this month.

DD01 is a MASH treatment candidate in the GLP (glucagon-like peptide)-1/glucagon receptor dual agonist class. The company believes that DD01, through a glucagon mechanism acting directly on the liver, induces reductions in fat accumulation and improves fibrosis, while its GLP-1 action is expected to contribute to weight loss and blood sugar control.

The primary driver of heightened licensing expectations is the recently disclosed Phase 2 trial results. According to the 48-week liver biopsy data from the U.S. Phase 2 trial, DD01 achieved statistical significance in key endpoints as interpreted by pathologists. In a per-protocol (PP) analysis of 35 patients, the placebo-adjusted rates were 57% for "MASH resolution without worsening of fibrosis," 34% for "improvement in fibrosis without worsening of MASH," and 32% for "simultaneous achievement of MASH resolution and fibrosis improvement." The respective p-values were 0.0003, 0.032, and 0.019. Despite the small trial size, the fact that both MASH resolution and fibrosis improvement were confirmed simultaneously is considered meaningful.

The market is paying close attention to the scale of the licensing deal for DD01. The company believes that while MASH is an indication of high interest among global pharmaceutical companies, there are not many competitive candidates available for partnering in the actual market. As the scarcity of assets that can enter late-stage clinical trials increases, it is analyzed that clinical data could influence both the size of the deal and the upfront payment terms.

A relevant comparison is the deal between GSK and Boston Pharmaceuticals for Epimosermin. Last year, GSK acquired Boston Pharmaceuticals' MASH candidate, Epimosermin, for a total of USD 2 billion (approximately KRW 3.034 trillion). The upfront payment was USD 1.2 billion (about KRW 1.82 trillion), accounting for a high proportion of the total contract value. It should be noted that this was an asset acquisition deal, not a typical licensing deal, so there were no royalty payments, which increased the proportion of the upfront payment. Notably, while Epimosermin failed to achieve statistical significance in the composite endpoint of MASH resolution and fibrosis improvement (p=0.07), DD01 achieved significance in this endpoint as well.

Sunah Kim, an analyst at Hana Securities, commented, "Recently, upfront payments have tended to be around 6% of the total contract value, but since DD01 has cleared the difficult hurdle of a liver biopsy endpoint, it may be reasonable to demand a higher upfront payment." She added, "A confidential deck for licensing is currently being prepared, and as there have been potential candidates who have provided steady feedback since the release of the initial primary endpoint data in June last year, the due diligence process is not expected to take long."

D&D Pharmatech has stated that, in selecting a partner, it will prioritize not only the size of the deal but also the partner's capability to rapidly and reliably execute global Phase 3 clinical trials. CEO Lee Seulgi said, "We are reviewing partners that can enable the fastest and most efficient development and conduct global clinical trials concurrently. We will comprehensively consider development capabilities, business strategy, and other factors to make the choice that provides the greatest value to the company."

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