Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Orion seeks new growth engine via majority stake in LegoChem Biosciences
LegoChem Biosciences’ headquarters in Daejeon / Courtesy of LegoChem Biosciences
By Baek Byung-yeul
Orion announced Tuesday it has become the majority shareholder of the local cancer drug developer LegoChem Biosciences, in an apparent move to strengthen its bio business.
Dam Seo-won, managing director of Orion / Courtesy of Orion
On Monday, the confectionery and beverage company announced that it would invest 550 billion won ($414 million) to acquire a 25 percent stake in LegoChem. It will secure the stake by participating in LegoChem’s paid-in capital increase and acquiring shares from major shareholders. The payment is due on March 29.
LegoChem is an antibody-drug conjugate (ADC) developer. ADC treatment is considered a next-generation drug as it is made by conjugating antibodies that bind to a specific target antigen on the surface of a cancel cell with a drug that has potent cell-killing properties. Consequently, the treatment can increase therapeutic efficacy and minimize side effects.
Orion said the two agreed that LegoChem will maintain its current management and operating structure, including its CEO, even after the largest shareholder changes.
The acquisition of LegoChem’s stake is seen as an effort to speed up its bio business led by Orion Group’s scion Dam Seo-won, managing director of Orion and oldest son of Orion Group Chairman Dam Chul-gon, who is pushing this sector as the group’s new growth engine.
In 2020, Orion jumped into the bio business as Orion Holdings, the holding company of the group, established a joint venture with Shandong Lukang Pharmaceutical GroupMedicine of China. In 2022, Orion Holdings also launched Orion Biologics as its bio subsidiary and the scion, who was in charge of discovering new businesses for the group, was promoted to managing director at the end of the year.
Orion said its acquisition of the LegoChem stake was to diversity the portfolio of its bio business.
"We have decided to make a large investment for global new drug development with LegoChem Biosciences, which is on course to grow into a global bio company," said Hur Inn-chul, vice chairman of Orion. "As the largest shareholder, we will actively support its business to grow stably."
Kim Yong-zu, CEO of LegoChem, also announced in his letter to shareholders on Tuesday that he decided on the M&A with Orion to become the world's best ADC company with Orion, which has abundant capital.
“We have been making efforts to find a long-term and friendly strategic partner who understands the high-risk and high-profit nature of new drug development. Orion is the optimal strategic partner we were looking for," Kim said in the letter.
"Orion Group had a goal to find new growth engines through entering the bio industry, and showed a strong interest in gathering strength with deep trust in the way LegoChem has walked for the past 18 years."
Analysts predicted that Orion’s operating profit would be adjusted downwardly by more than 10 percent as LegoChem has been recording losses consistently since its establishment in 2006, except in 2019.
“LegoChem’s profits and losses will be reflected in Orion’s accounting records from the second quarter. The operating loss of LegoChem is expected to be around between 40 billion won or 50 billion won due to R&D investment costs,” said Park Sang-jun, an analyst at Kiwoom Securities, adding that the corporate value of Orion, which has a stable portfolio as a confectionery company, could be destabilized.