Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Equity Capital Markets

* In Part 2 (as below), I summarized the growth potential and appropriate valuation level of SillaJen.Apparently, not many people are doubtful about the growth potential of SillaJen's anti-cancer drug "Pexa-Vec". According to IMS Health MIDAS, the global anti-cancer market is expected to grow to US$117bil - US$147bil (₩135tril - ₩169tril) in 2018 at a CAGR of 6-8%. Obviously, the anti-cancer drugs account for the largest portion (US$92bil in 2014). However, as in the case of Samsung BioLogics, investors are again being asked to make an investment decision based on future revenue stream (the year of 2020 and onwards). Although it seems quite certain that SillaJen's Pexa-Vec has widely gained huge popularity among medical professionals who are specialized in liver cancer treatment, there is a substantial level of risk.There is always a possibility that something unexpected can go wrong during commercialization phase even after successfully completing Phase 3 clinical test (just as we evidenced in the case of Hanmi). However at the same time, Pexa-Vec's immunotherapy nature is generally considered more valuable than those targeted agent drugs. That is, SillaJen is a kind of high risk-high return stock which has a pretty solid track record. If we really accept SillaJen's argument that it can generate more than ₩100bil in net profits in 2020, then to me a valuation of slightly higher than ₩1tril is a bargain. Its value will certainly soar above ₩1tril level if it successfully commercialize Pexa-Vec. So, I would not recommend buying SillaJen to those risk-averters. In contrast, if you are a risk taker, then SillaJen may be a relatively safer target.

* In Part 2 (as below), I summarized the growth potential and appropriate valuation level of SillaJen.Apparently, not many people are doubtful about the growth potential of SillaJen's anti-cancer drug "Pexa-Vec". According to IMS Health MIDAS, the global anti-cancer market is expected to grow to US$117bil - US$147bil (₩135tril - ₩169tril) in 2018 at a CAGR of 6-8%. Obviously, the anti-cancer drugs account for the largest portion (US$92bil in 2014). However, as in the case of Samsung BioLogics, investors are again being asked to make an investment decision based on future revenue stream (the year of 2020 and onwards). Although it seems quite certain that SillaJen's Pexa-Vec has widely gained huge popularity among medical professionals who are specialized in liver cancer treatment, there is a substantial level of risk.There is always a possibility that something unexpected can go wrong during commercialization phase even after successfully completing Phase 3 clinical test (just as we evidenced in the case of Hanmi). However at the same time, Pexa-Vec's immunotherapy nature is generally considered more valuable than those targeted agent drugs. That is, SillaJen is a kind of high risk-high return stock which has a pretty solid track record. If we really accept SillaJen's argument that it can generate more than ₩100bil in net profits in 2020, then to me a valuation of slightly higher than ₩1tril is a bargain. Its value will certainly soar above ₩1tril level if it successfully commercialize Pexa-Vec. So, I would not recommend buying SillaJen to those risk-averters. In contrast, if you are a risk taker, then SillaJen may be a relatively safer target.

SillaJen IPO Part 2 - Growth Potential & Appropriate Valuation Level

SillaJen Biotherapeutics (established in 2006) submitted the IPO report. The company develops potent multi-functional immunotherapeutics for cancer. In other words, it makes a virus ("Pexa-Vec") that only kills cancer cells. It is currently doing a global Phase 3 clinical trial in over 15 countries for patients with HCC. SillaJen reached an agreement with the U.S. FDA and now holds a special protocol assessment relating this Phase 3 trial. SillaJen's "Pexa-Vec" is the first engineered oncolytic virus with demonstrated intravenous delivery to tumors and induction of cancer targeting antibodies (thereby leading to improved survival rate).SillaJen has virtually no revenue at this point. Nonetheless, SillaJen was qualified for the fast-track IPO program exclusive for biotech companies. SillaJan actually passed the technology evaluation (conducted by the KRX) in May, which is required for a biotech company who wants to go public through the fast-track IPO program. In this evaluation, SillaJen got AA grade, just one notch lower than the highest grade of AAA. SillaJen is currently Korea's biggest over-the-counter company. SillaJen's Pexa-Vec was proved to be highly effective after being administered to 35 late-stage liver cancer patients in Phase 2 trial. As a result, there are high expectations that Pexa-Vec will successfully pass Phase 3 trial for commercialization.In particular, SillaJen already partnered with some of the global big players such as Transgene (Europe) and Lee's Pharmaceuticals (Hong Kong) for marketing and distribution. This is a rare case for a biotech start-up like SillaJen. SillaJen plans to complete Phase 3 trial by October 2019. The global market size of anticancer virus treatment is estimated at ₩1tril. More importantly, Pexa-Vec's real competitor in the liver cancer treatment market segment is only German drug maker Bayer's "Nexavar". Of course, SillaJen's value at this point still depends on several unknown future factors. But what seems certain at this point is that SillaJen's anticancer virus treatment drug itself is a proven product and unlikely to fail.* In Part 1 (as below), I summarized the overview of this IPO with the financials and valuation. In Part 2, I will analyze the company's growth potential and appropriate valuation level.

SillaJen Biotherapeutics (established in 2006) submitted the IPO report. The company develops potent multi-functional immunotherapeutics for cancer. In other words, it makes a virus ("Pexa-Vec") that only kills cancer cells. It is currently doing a global Phase 3 clinical trial in over 15 countries for patients with HCC. SillaJen reached an agreement with the U.S. FDA and now holds a special protocol assessment relating this Phase 3 trial. SillaJen's "Pexa-Vec" is the first engineered oncolytic virus with demonstrated intravenous delivery to tumors and induction of cancer targeting antibodies (thereby leading to improved survival rate).SillaJen has virtually no revenue at this point. Nonetheless, SillaJen was qualified for the fast-track IPO program exclusive for biotech companies. SillaJan actually passed the technology evaluation (conducted by the KRX) in May, which is required for a biotech company who wants to go public through the fast-track IPO program. In this evaluation, SillaJen got AA grade, just one notch lower than the highest grade of AAA. SillaJen is currently Korea's biggest over-the-counter company. SillaJen's Pexa-Vec was proved to be highly effective after being administered to 35 late-stage liver cancer patients in Phase 2 trial. As a result, there are high expectations that Pexa-Vec will successfully pass Phase 3 trial for commercialization.In particular, SillaJen already partnered with some of the global big players such as Transgene (Europe) and Lee's Pharmaceuticals (Hong Kong) for marketing and distribution. This is a rare case for a biotech start-up like SillaJen. SillaJen plans to complete Phase 3 trial by October 2019. The global market size of anticancer virus treatment is estimated at ₩1tril. More importantly, Pexa-Vec's real competitor in the liver cancer treatment market segment is only German drug maker Bayer's "Nexavar". Of course, SillaJen's value at this point still depends on several unknown future factors. But what seems certain at this point is that SillaJen's anticancer virus treatment drug itself is a proven product and unlikely to fail.* In Part 1 (as below), I summarized the overview of this IPO with the financials and valuation. In Part 2, I will analyze the company's growth potential and appropriate valuation level.

SillaJen IPO Part 1 - Schedule, Financials & Valuation

South Korea

SillaJen, Inc. provides medical research and development services. The Company researches and develops treatment of cancer based on genetic recombination virus. SillaJen conducts its business in South Korea and the United States.

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SillaJen Inc (215600 KS)

SillaJen IPO Part 2 - Growth Potential & Appropriate Valuation Level

* In Part 2 (as below), I summarized the growth potential and appropriate valuation level of SillaJen.Apparently, not many people are doubtful...

Sanghyun Park

SillaJen IPO Part 1 - Schedule, Financials & Valuation

SillaJen Biotherapeutics (established in 2006) submitted the IPO report. The company develops potent multi-functional immunotherapeutics for...

Sanghyun Park

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