The Korean Federation of Community Credit Cooperatives (KFCC) has made high returns on its investments in the biotech space, which has been shunned by other South Korean institutions due to perceptions of a big investment risk.
The KFCC is expected to earn a 2.5 times return on its investment in Cognate BioServices, a U.S.-based cell and gene therapy contract development and manufacturing organization (CDMO), as Charles River Laboratories announced last week that it had agreed to acquire the company in a $875 million cash deal.
The valuation represents a nearly seven-fold growth from February 2018, when Cognate BioServices raised money from global investors at a $125 valuation. They included Seoul-based private equity firm Medivate Partners, which invested 47 billion won ($42.3 million) in the company, with half the amount raised from KFCC.
At the time, Medivate Partners struggled to raise capital despite Cognate BioServices’ technology and the fast-growing pharmaceutical CDMO market, because many South Korean institutional investors were unfamiliar with the biotech sector and they were also concerned about cross-border transaction risks.
However, KFCC made the bold decision to put 23 billion won into Medivate Partners’ 47 billion won fund, marking the federation’s first equity investment in a foreign biotech company. The three-year investment is expected to generate an internal rate of return of about 25% after the acquisition is completed.
Industry watchers said the confidence KFCC gained from its biotech experience might have encouraged it to invest in Cognate BioServices. The organization previously invested in South Korean biotech company Celltrion, which gave a return of nearly three times on its investment. (Reporting by Se-hun Jo)