SK Biopharmaceuticals, Co., Ltd. under limelight for its growing power to compete in the global market is intent to make its Kospi debut a blockbuster to shore up its ammunitions for M&As.

For SK Biopharm CEO Cho Jeong-woo, the IPO is the company’s first step to become a global player. He said the IPO proceeds will fuel the company’s rapid growth through business acquisitions based on SK’s notable track record in the M&A market, adding he is eager on potential targets during a recent interview with Maeil Business Newspaper. The following is the excerpt of the interview.

Q: There were rumors that the IPO plan could be delayed due to the impact of COVID-19.

A: I have never heard about that internally. We are confident about our business value. Our IPO plan will not be affected by COVID-19. In February, we prepared for an online investor conference both at home and abroad. Later, we had a video conference by connecting SK subsidiaries in Hong Kong and the United States.

Q: What made SK Group take on novel drugs rather than less risky biosimilars?

A: There were no novel biologic drugs at the time. Many companies were engaged in research projects to treat infectious disease or cancer. SK, which started investments in this field in 1993, had drugs to treat diabetes, obesity and cancer in its pipeline. We made a roadmap for focused drug development after prioritization. It took time, but we thought it was inevitable. In 2002, drug development plan was finalized and pushed at the group-wide level, and the large business group system was very helpful. The reason SK Biopharm was put under the arm of SK Holdings as a subsidiary was for long-term investment for future growth rather than for immediate profit realization. Today’s milestone is the culmination of our decision in the past.

Q: Despite your confidence in valuation, the IPO price band seems too wide. Is it too conservative?

A: Frankly, we don`t look at the bottom-end in the IPO price range. I was a bit upset about the wide price range when I was first briefed by our finance team, but later I decided to follow because it was decided by experts.

Q: How do you evaluate the market value of Xcopri (cenobamate tablets), an antiepileptic drug launched in the United States on May 11?

A: Xcopri is a first-in-class drug with no competitor in the market. Patients continue to have seizures despite treatment with standard-of-care therapy, but Xcopri is a new treatment option for partial-onset seizures. The U.S. market for epilepsy drugs is valued at about $3.5 billion, and approximately 40% of adults with partial-onset seizures are not able to control their seizures, even after treatment with two other AEDs.

Q: Usually, when launching into the global market, Korean pharmaceutical companies join hands with local partners. But it was not the case for Xcopri because SK Biopharm’s local distributor is selling it directly in the U.S. Isn`t it risky?

A: It is our strategy that was selected when the first treatment in our pipeline was decided to be an epilepsy med. As target routes reaching out to doctors and patients for the treatment of epilepsy are limited, our sales network of only some 120 people will suffice to cover their needs. We have 234 target centers in the U.S. where there are 1,600 specialists. And our prime targets span 12,000 to 13,000 people in total, for which we thought our direct sales model will work. We will have to expand our network step by step for the future to cover potential general-purpose drugs as well in the future.

Q: You company has eight candidates in the pipeline. What is the most promising among them?

A: We have carisbamate, a new carbamate for the treatment of pediatric epilepsy, which is a rare disease characterized by five to 10 seizures a day. The FDA granted orphan drug designation for it with seven-year marketing exclusivity. We expect a meaningful market to be created with this expensive drug. The current phase 2 study will gain speed.

Q: Innovative novel drugs sometimes fail in the clinical research process.

A: We saw many failures over the past 20 years. That has made us stronger. The key is to bounce back through the lessons from failures. You must learn through failures and know what went wrong and how to change a clinical study design. Sunoshi failed once but we tried it again with a redesigned study. We have reduced the probability of failure in our pipeline to almost 50 percent.

Q: How will you use the proceeds from the IPO?

A: We will go active in business acquisitions by leveraging SK’s track record in the M&A market. I am passionate about many companies in the list. It is important to expand a product lineup by scaling up the pipeline through M&A. We will continue to seek such deals. We don`t need to buy 100 percent of a company. We can make investments in various ways. We have meetings with fund managers, and some assets are being reviewed overseas. We will also use the proceeds to finance ongoing clinical development programs and marketing activities for Xcopri. We need to prepare for entering the Japanese or Chinese market and speed up efforts to develop anticancer drugs. There is so much to do.

Q: I heard global long-only funds have paid growing attention.

A: We will have full-scale meetings from June 10. We are already in discussion with five to six global funds. Their interest is no small feat. We plan to conduct 10 or more calls per day for about two weeks from June 10.

Q: The IPO is the culmination of 20 years of efforts. What will SK Biopharm look like after 20 years?

A: I hope we are seeing the start of enrichment on our pharmaceutical soil in Korea. We have Samsung Biologics and Celltrion, but the much bigger market lies in chemical drugs. It was a pity that that we have no significant company in this area and young researchers lost their interest. Making this soil fertile is the most important contribution by SK Biopharm.



■ SK Biopharm likely to be added to Kospi 200 on its IPO next month

SK Biopharm is close to become an uncommon blockbuster IPO deal where its company value could be among the country’s 50 largest in terms of market cap. If its current upper-end IPO price of over 49,000 won ($40.23) is met, its market cap will reach nearly 4 trillion won. Market analysts expect SK Biopharm’s stock price would hit 70,000 won within two months after IPO.

If SK Biopharm remains above the upper band of its IPO price, it will be likely to be added to the Kospi 200 index early on under current exchange rules. The threshold is 3.8 trillion won in market cap with a stock price of over 48,055 won, according to Eugene Investment & Securities which seems to be easily achievable given the company’s IPO price band.

The stock is more likely to attract investments from passive funds as a Kospi 200 member. Assuming KOSPI 200 index tracking funds amount to about 60 trillion won and the stock belongs to the index in early September, an additional 100 billion won will flow into the stock from passive funds, Eugene Investment & Securities said.

Moreover, SK Biopharm stocks tradable on the market are limited, which is a favorable condition for a price increase over time.

SK Biopharm’s statement on security registration, the largest shareholder SK Holdings owns 75 percent of the company after IPO, with 5 percent for employees, 5 percent for individual subscribers, and 15 percent for institutional investors.

SK Biopharm will have book building for its IPO in Korea and overseas on June 17-18. Subscriptions will take place on June 23-24 and first trading of its stocks is expected to begin early July.

By Kim Ki-chul, Park Jae-young, Park In-hye and Minu Kim

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