[Bio Story]②Will Policy Finance Bridge the Phase 3 Drug Trial Funding Gap? "Government R&D Linkage Needed"

National Growth Fund as Main Source of Phase 3 Clinical Funding
Yet to See Selection Cases Supporting Small and Medium Bio Firms
"The Role of Government New Drug R&D Support Agencies Is Crucial"

The National New Drug Development Project is a large-scale initiative with an investment of 2.1758 trillion won over ten years. However, there are limitations to supporting global Phase 3 clinical trials, which can each cost from several billion to hundreds of billions of won. Therefore, it is crucial to link the project to policy finance to ensure that new drug candidates supported by the National New Drug Development Project Group do not face development delays due to lack of funding in subsequent clinical stages.

The pace of new drug development in South Korea slows significantly in the later stages of clinical trials. According to the National New Drug Development Foundation, as of last year, there were 57 new drug pipelines undergoing Phase 3 clinical trials domestically. More than 3,000 domestic pipelines remain at Phase 1 or 2 stages.

If clinical trials are delayed, the upfront payments received from technology transfer agreements also decrease. In the first half of this year, the total value of the eight technology transfer agreements signed by Korean companies was about USD 9.4 billion (around 12.7887 trillion won), but upfront payments amounted to only about USD 225 million (about 306.1 billion won), making up just 2.4%. Upfront payments tend to be much lower for early-stage substances lacking late-stage clinical data. This is why there is growing recognition that Korean companies need to directly develop drugs through late-phase clinical trials in order to receive fair value.

Park Youngmin, head of the National New Drug Development Project Group, stated, “Recently, the National Growth Fund has also begun direct investment in companies pursuing global Phase 3 clinical trials. The project group believes that strengthening the linkage with policy finance will help lower the risks of early and mid-stage research and development, and it is preferable to establish a support system in which large-scale funding needs are met by both the private sector and policy finance.”

The National Growth Fund is also seen as a potential source of late-stage clinical trial funding for biotech companies. Launched in December last year, the National Growth Fund totals 150 trillion won and is designed to invest in advanced strategic industries such as artificial intelligence (AI), semiconductors, and biotechnology. In April, the Financial Services Commission included the biotech sector in its “second megaproject” and decided to provide direct investment and loans to companies entering global Phase 3 trials. Investment candidates are selected by organizations such as the Korea Development Bank after recommendations from the Ministry of Health and Welfare and the Ministry of Food and Drug Safety.

Investments in the biotech sector started this year. Beginning with 85 billion won for Vtgen in April, the National Growth Fund provided support to SK Bioscience (300 billion won) in May, LegoChem Biosciences (250 billion won) in June, and Kyongbo Pharmaceutical (20 billion won) in August. The total amounts to 655 billion won. SK Bioscience is allocating funds to global Phase 3 trials for its pneumococcal vaccine and manufacturing facility construction, while LegoChem Biosciences is using funds for antibody-drug conjugate (ADC) new drug development. Vtgen and Kyongbo Pharmaceutical are spending their funds on expanding and building manufacturing facilities. In July, the Ministry of Health and Welfare also selected Korea Investment Partners as the management firm to establish a Phase 3 clinical trial–focused fund worth 170 billion won.

Going forward, a key challenge will be expanding support to small and medium-sized biotech companies preparing for Phase 3 trials. Up to now, all four recipients of the National Growth Fund’s support have been affiliates of major companies or pharmaceutical groups. Industry voices argue that late-stage clinical funding must reach smaller biotech firms in order to reduce dependency on early-stage technology transfers.

If full-scale Phase 3 support from the National Growth Fund becomes a reality, the role of government R&D support organizations such as the National New Drug Development Project Group is expected to grow. The project group has about 2,000 external evaluators and 150 investment review committee members who assess projects. If projects verified up to Phase 2 by the project group are reflected in the National Growth Fund’s investment review, it may establish a system where government R&D and policy finance divide responsibilities across the stages of new drug development.

This content was produced with the assistance of AI translation services.