As South Korean pharmaceutical and biotech companies achieve successive technology export successes, they are approaching the status of a 'technology export powerhouse.' However, cost burdens and a lack of experience in late-stage development are identified as bottlenecks for Korean new drugs.
According to a report by the Korea Health Industry Development Institute titled 'Bottlenecks and Improvement Directions for the Global Leap of Domestic New Drugs,' the biggest obstacles in domestic drug development are late-stage clinical trials and commercialization. While technology exports serve as a practical strategy to demonstrate the research and development (R&D) capabilities of domestic companies, they also come with the limitation of not accumulating experience in new drug development.
Late-stage development involves managing both costs and the risk of failure. A report published by the Korea Bio Association, citing clinical trial data from Biomed Tracker, indicates that phase 2 trials have the lowest success rate in the entire development process. From 2011 to 2020, the average success rate from phase 1 trials to product approval was 7.9%, with only 28.9% of candidates progressing from phase 2 to phase 3. This is significantly lower than the success rates for phase 1 (52%) and phase 3 (57.8%).
While phase 1 trials confirm safety, phase 2 trials are the first step in validating the efficacy of candidate substances in patients. The decision to enter phase 3 trials, which require substantial funding, also involves assessing the potential for commercialization, making this stage particularly challenging.
This burden is influencing the development strategies of domestic companies. There is a continued trend of opting for technology exports in the early stages of clinical trials, where risks are relatively lower. The significant added value generated during the commercialization process often returns to the global pharmaceutical companies that acquire the technology.
The challenges of late-stage clinical trials cannot be attributed solely to funding. With fewer opportunities to complete trials, companies are unable to sufficiently accumulate regulatory responses, approval strategies, and commercialization capabilities. While attention is focused on contract success and the scale of technology exports, the data and know-how accumulated during negotiation failures or clinical trial setbacks do not translate into industry assets. In the global market, even experiences of failure are utilized as assets for future development, but domestically, evaluations remain centered on success stories.
Hwang Joo-ri, head of the External Cooperation Division at the Korea Bio Association, expressed concern that technology exports could limit opportunities to accumulate independent development experience. She suggested that a foundation should be established to ensure that data from trial and error, as well as failures, are accumulated as assets for the entire industry.
Looking ahead, the second half of this year is expected to serve as a litmus test for the late-stage development capabilities of domestic companies. Kolon TissueGene is set to announce the topline results of its phase 3 clinical trial for the osteoarthritis gene therapy 'TG-C' in the U.S. this month. If the results are positive, it could confirm the potential for the world's first disease-modifying osteoarthritis drug (DMOAD) and enhance the overall credibility of the domestic bio industry.
Aribio is conducting a global phase 3 trial for its oral Alzheimer's treatment 'AR1001' and is expected to announce key results within the year, generating increasing market anticipation.
However, it is not easy to enhance late-stage development capabilities solely through corporate efforts. Jeong Yoon-taek, head of the Pharmaceutical Industry Strategy Research Institute, noted that while the U.S. has a structure where venture capital, large-scale funding, and tax incentives work together to distribute the risk of failure in the market, South Korea's funding cycle centered on technology special listings has weakened. He emphasized the need for the National Growth Fund, success-based loans, and the expansion of mega funds, as burdens such as legal losses and revenue maintenance requirements post-listing are acting as obstacles.
Hwang Joo-ri believes that policies should shift to support both early research and late-stage development. He stated, 'A bold challenge through proof of concept (PoC) in the early stages and risk-sharing in late-stage clinical trials (phase 3) must occur together to create a bio-ecosystem where experiences can be accumulated without fear of failure.'
* This article has been translated by AI.
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