Discussion with Big Pharma Finally Visible

Lunit

Investment Point

Discussion with Big Pharma Finally Visible

Clear direction, importantly unit price and penetration rate

It has signed a strategic collaboration agreement with AstraZeneca to develop AI pathology solutions. It is the first contract with Big Pharma since the launch of the AI biomarker platform Lunit Scope in early 23. The specific solution is called 'Lunit Scope Genotype Predictor', which predicts the potential for mutation of EGFR (epithelial cell growth factor receptor).

It is necessary to understand the diagnosis and prescription process of lung cancer in order to know the specific use of the Lunitscope Genotype Predicator. Patients diagnosed with non-small cell lung cancer are 1) subjected to an H&E staining slide test to determine a specific treatment. Through this test, it is possible to check the carcinoma of non-small cell lung cancer such as adenocarcinoma and squamous cell carcinoma and the expression of EGFR. 2) Pathologists analyze H&E staining slides to select patients with EGFR mutations. 3) The possibility of administering anticancer drugs such as tagriso to selected patients is finally diagnosed through the NGS test.

The Lunitscope Genotype Predictor assists pathologists in the diagnosis of H&E staining slides during the above steps (2). Not only can pathologists find EGFR mutations that can be missed, but also dramatically shortens the diagnosis time. H&E staining slide analysis, which took about 1-2 weeks, can be shortened to minutes at the earliest.

Non-small cell lung cancer accounts for 85% of all lung cancer. The number of patients is expected to increase from 520,000 in 2020 to 600,000 over 30 years. The market size is constantly increasing. Pharmaceutical companies' needs are also clear. After all, in order to prescribe a lot of drugs, it is important to find more patients who can prescribe them. The Lunitscope Genotype Predictor assists pathologists at the forefront of finding patients with EGFR mutations and suggests the possibility of finding more patients with EGFR mutations. This is being discussed at the same time for application to treatments other than AstraZeneca's Tagrisso, so growth is expected in the future

belief in the possibilities

It is still too early to estimate sales. The structure of revenue per H&E staining slide analysis has not been discussed. In addition, the replacement rate cannot be weighed because it is a pathologist diagnostic aid solution for H&E staining tests, not an alternative solution to H&E staining tests or NGS tests.

There are certainly positives. 1) The number of diagnoses is much higher because it assists in the diagnosis of H&E staining slides rather than the NGS test. The NGS test is a $3,000 test for patients suspected of having an EGFR mutation. The H&E test is a $200-300 test conducted by most patients diagnosed with lung cancer, with a much higher number of tests. 2) The same algorithm can be applied to various treatments as well as to Tagrisso. It will also collaborate on predicting cancer mutations other than EGFR.

The reason why the companion diagnostic market is interesting is that the cooperation between pharmaceutical and diagnostic is possible. This is why the market has been waiting for the collaboration between Lunit Scope and Big Pharma. For a drug to be used, companion diagnosis facilitates drug development, and a companion diagnosis is essential. As the companion diagnostic test determines the drug target group, the diagnosis itself determines the market size of the drug. The growth of Keytruda is an example.
Tagrisso 40 mg oral medication costs about $18,000 for 30 tablets. Each lung cancer patient purchases more than $70,000 of Tagrisso on average. AstraZeneca's sales rise exponentially even if the Lunitscope Genotype Predictor finds only 10% more patients than before. This is why we can expect high sales per test

Beyond diagnosis, to the realm of treatment, Lunitscope

Lunit Scope explains Lunit's market capitalization. It has neither recorded overwhelming sales nor made a surplus in the medical AI sector. Nevertheless, the highest corporate value was always recognized because it suggested the possibility that medical AI companies could advance into the field of treatment. Lunit Scope is a companion diagnostic solution that presents which drugs can actually be administered and fit cancer patients. Although there are competitors in the AI cancer diagnosis market, Lunit is unique in AI-based immuno-cancer drug biomarker technology. Although immuno-cancer drugs have made remarkable progress over the years, there is still a lot of unmet demand because drug-accompanied diagnostic biomarkers have not been developed yet. The FDA also recommends that biomarkers be used before immuno-cancer drugs. Up to 100 million won per dose of immuno-cancer drugs is incurred, but it is difficult to identify patients who are effective in the drug.

The reason there are not many biomarkers for immuno-oncology drugs is that it is necessary to grasp a vast amount of information. An analysis of images of about 4 gigabytes of immune cells and tissues must be performed to find a biomarker. It is a structure that is difficult for pathologists to grasp one by one. Lunit's AI large-capacity image processing technology has shone in a situation where it is difficult to find a biomarker through images. If you develop resistance while administering gefitinib or apitinib in Korea, you can only be prescribed osmutinib or laser tinib as a benefit by identifying the mutation using accompanying diagnosis.

The Lunitscope has the same logic. AI directly identifies immune cells in tumors and selects subjects to be immuno-cancer drugs. It can be analyzed in 16 carcinomas including cervical cancer and stomach cancer. Compared to the lung cancer immuno-cancer drug PD-L1, Lunitscope recorded better levels.
Lunitscope recorded 76%, while PD-L1 had an accuracy of 55%. The probability of administering Keytruda increased when further testing with Lunitscope in patients who were PD-L1 Native. Only 10% of PD-L1 could receive Keytruda, whereas 42% of Lunitscope could be prescribed Keytruda. Approximately 3 out of 10 patients had more opportunities for treatment.

In the case of Lunits scope, full-fledged research sales are generated by collaborating with AstraZeneca and others. In fact, if you sign a contract with a pharmaceutical company and use it for companion diagnosis, it can increase sales explosively, but it is still only research sales. Currently, a number of foreign pharmaceutical companies and Lu