Korean biotechs target US labs to speed up regulatory approval for tests

South Korean molecular diagnostics companies are increasingly buying high-quality laboratories in the US that meet federal regulatory standards in a bid to accelerate clinical studies.

NGeneBio Co., a Seoul-based next-generation sequencing (NGS) services provider, biotech Abion Inc. and a liquid biopsy company have injected a combined 2 billion won ($1.6 million) as strategic investors in a fund created by Luha Private Equity.

Luha PE, specializing in bio venture capital, has formed the fund to acquire management rights of local diagnostics firm LabGenomics Co. 

In August, the PE firm signed an agreement to inject a combined 184 billion won in LabGenomics. The deal was to purchase 94 billion won worth of new shares and convertible bonds and 90 billion won of existing shares.

Through the transaction, Luha PE is set to own a 36.01% stake in LabGenomics, becoming the largest shareholder.

LabGenomics will use the proceeds to acquire a California-based lab certified by the US Clinical Laboratory Improvement Amendments (CLIA). CLIA-certified labs meet the US government standards to test human specimens for diagnosis or treatment. 

Under CLIA, the US Food and Drug Administration (FDA) categorizes in vitro diagnostic (IVD) tests by their degree of complexity. The tests with the least complexity are categorized as "waived," speeding up the processes for US government approval.

LabGenomics is planning to buy the California-based lab, which makes annual revenue of 50 billion-100 billion won, as early as the first quarter of 2023.

Once the deal is clinched, NGeneBio and the other strategic investors are planning to use the lab for diagnostics and clinical tests in the US. Earlier this month, NGeneBio and LabGenomics signed a memorandum of understanding to collaborate in NGS and laboratory-developed tests via a CLIA-certified lab. 

Cytogen Inc. a Korean liquid biopsy company, has also acquired a 100% stake in US-based toxicology and molecular testing company ExperTox Inc. for $7.3 million, according to a disclosure on Dec. 12.

The US diagnostics company runs a CLIA-certified lab, which provides test results to around 100 medical institutions across Houston. Cytogen expects to start revenue generation from the US via the lab in April 2023.

Cytogen is aiming to acquire more CLIA-certified labs in Florida and Georgia, where medical service prices are higher than in other states, in a year or two.

Write to Jae-Young Han at jyhan@hankyung.com
Jihyun Kim edited this article.