Shares of Korea-listed Caregen surged on hope its diabetes-weight loss supplement could give the little-known biotech company an Ozempic-like boost. But then the stock crashed.
In the U.S., Eli Lilly’s Mounjaro, a diabetes drug that also helps with weight loss, helped boost the insulin pioneer’s share price by about 80% over the past year to a market cap of around $600 billion, making it the most valuable standalone pharmaceutical company in the country.
Over in Denmark, shares of Novo Nordisk have soared more than 50% in the same period, thanks to its blockbuster diabetes-weight loss drug Ozempic, briefly overtaking Bernard Arnault’s LVMH as the most valuable company in Europe in September. For comparison, Pfizer is down about 37%, Johnson & Johnson is down roughly 4% and Merck is up 8%.
And in South Korea, investors hoped a little-known biotech company could become the country’s Eli Lilly or Novo Nordisk. The company, called Caregen, developed a powdered supplement that it claims also helps with diabetes and weight loss, which almost quintupled its share price to an all-time high in July and made its founder, Chung Yong-ji, a billionaire. But since then, Caregen shares have slid more than 50%, leading Chung to lose his billionaire title, while South Korea’s benchmark Kospi index is roughly flat over the same period, showing just how hard it is to ride the weight-loss wave.
Based in Anyang, south of Seoul, Caregen announced in March 2022 that the U.S. Food and Drug Administration approved its Deglusterol as a new dietary ingredient that can help control blood-glucose levels. Two months later, Caregen launched ProGsterol, a powdered supplement based on Deglusterol. Since the approval, its shares have surged as much as 390% to an all-time high in July. Chung, Caregen’s founder and CEO, who owns more than 60% of the company, became a billionaire in February last year, despite a downturn in Korea’s stock market at the time.
In a video interview from Caregen’s office in July, when its shares were riding high, Chung says ProGsterol also helps with weight loss, like Ozempic. But unlike Ozempic and Mounjaro, which are taken by injection, ProGsterol is taken by mixing the powder with water and drinking it, like a protein shake. “Compared to injectables, the efficacy will be lower, but ours is safer,” claims Chung, who holds a doctorate in animal science at Cornell University and a master’s degree in biology at Texas State University. “That’s why investors are very excited.”
Nomura analyst Cara Song wrote in an April research report that Deglusterol lowered fasting blood-sugar levels by 5.5% at 12 weeks, citing a clinical trial by Hallym University in South Korea and Korea University Hospital. The study involved 58 “high-risk subjects” aged 40 or older, according to the report, which did not provide other details about how the study was conducted.
“ProGsterol is a general functional drink that anyone can consume to prevent diabetes as well as can be consumed by diabetic patients with limited food intake,” Song wrote in the report. “It is considered safe as it is decomposed in the body, as the main ingredient is peptide, and helps increase insulin receptor sensitivity to prevent resistance issues and hypoglycaemic (low blood sugar) shock.”
Song said in the report that Deglusterol is also effective for weight loss. “The original use of peptide complex Deglusterol was for weight-loss purpose,” she noted, “but the company noticed that it helped to lower blood glucose levels.” After 10 weeks of a high-fat diet, the amount of subcutaneous fat, or fat under the skin in places like the hips and lower belly, was about four times less with Deglusterol than without the supplement, according to the Nomura report, citing its own research and Caregen data. For comparison, Eli Lilly’s Mounjaro can help people lose up to 22.5% of their body weight over 72 weeks.
Song added in the report that there are no reported side effects of ProGsterol reported to the FDA. That’s one of the advantages of ProGsterol, says Chung. “It’s not only for the diabetic patients, but also for normal people,” he says. “They can take it because there are no side effects at all.”
To be sure, Caregen does not have to prove ProGsterol’s efficacy or substantiate claims of weight loss because it’s a dietary supplement, not a drug. “Dietary supplement is a much looser term, so they can make a lot of claims,” says a chemistry expert who requested anonymity to speak freely. “It’s up to the consumer. It’s kind of like facial cream claiming to rejuvenate your skin.”
When asked why Caregen didn’t register Deglusterol as a drug, a spokesman for the company said: “In the initial development stage, it was approached as an obesity treatment, but during preclinical testing, it was confirmed that it quickly lowered blood sugar levels, and the R&D direction was changed to a food supplement as a way to quickly commercialize it. As you know, drug development requires a considerable amount of time.”
Still, people were buying ProGsterol, which boosted Caregen’s sales. The company reported revenues of 62 billion won ($47 million) in the January-to-September period, up 24% from a year earlier, while net income rose 48% to 31 billion won. ProGsterol contributed 13.8% of total revenue for the period, up from 0.3% for the whole of 2022. The remaining revenue came from injectable dermal fillers that treat wrinkles and other cosmetics and healthcare products based on peptides. Caregen says it sells and ships its products to more than 130 countries, and its biggest markets are in the Middle East and North Africa, Europe and Asia Pacific regions.
According to a separate report by Nomura’s Song issued in May, ProGsterol sales could hit $66 million this year and rise to $112 million in 2027. Since July 2022, Caregen booked $610 million of multiyear contracts for ProGsterol to about 10 countries, including Iran, Saudi Arabia, Bangladesh, Turkey and the Philippines, according to the report. And in October, the company announced it expanded into the European Union market with a supply contract with Finao Biotech in Portugal.
But those figures are dwarfed by makers of proven weight-loss drugs. For comparison, Novo Nordisk reported revenue of 166 billion Danish kroner ($24 billion) for the first nine months of this year, up 29% from a year ago, driven by Ozempic and obesity drug Wegovy. Eli Lilly, meanwhile, had revenues of $25 billion in the same period, a 17% increase from the previous year. “Lilly had another strong quarter in Q3 as Mounjaro and [breast cancer drug] Verzenio continued to gain momentum,” Lilly CEO David Ricks said in an earnings call.
The chemistry expert adds that because Caregen is selling ProGsterol as a dietary supplement, it is likely not as effective as Ozempic or Mounjaro. “If it works the same way [as Ozempic or Mounjaro], or even better, the company would definitely turn it into a drug and make so much more money,” the expert explains. Over the past six months, shares of Eli Lilly and Novo Nordisk each rose roughly 40%, while Caregen shares have slumped 50%.
When asked about Caregen’s stock price decline, a spokesman for the company said: “In early 2023, Caregen announced its annual sales forecast of 150 billion won, including the sales forecast of ProGsterol. However, due to delays in registration of products and raw materials and customer preparations for initial market entry being slower than expected, so the annual sales forecast was revised to 80 billion won in December 2023. I think this may have influenced investors.”
The spokesperson added, “Caregen is working closely with customers to achieve ProGsterol sales, which were postponed from 2023 to 2024, and is making efforts to achieve sales.”
Still, the dietary supplement market is huge and growing. The global vitamins and dietary supplement market was estimated at roughly $130 billion last year and could grow to up to $170 billion by 2027, according to Euromonitor International data cited by the International Alliance of Dietary/Food Supplement Associations. “Consumers now perceive health as the new wealth and are increasingly investing in their health,” the report said, adding that vitamins and dietary supplements surpassed over-the-counter drugs.
And Caregen is not betting everything on weight loss. By 2027, Caregen aims to diversify its portfolio and is eyeing other disease areas, such as wet age-related macular degeneration (AMD), a leading cause of vision loss in the elderly. The company is currently developing an eye drop treatment to replace the current treatment regimen of monthly eye injections. “It’ll be very helpful for the many patients who don’t want to get an injection,” says Chung. “Some people have needle phobia.” In July, Caregen announced it had started a 16-month phase 1 clinical trial for its wet AMD treatment in the U.S.
Another product in the pipeline is a nasal spray to treat Covid-19 patients. Though Covid-19 cases have declined sharply, Chung says the drug could also potentially be used to treat liver fibrosis, the harmful buildup of scar tissue, as it uses the same ingredients. Caregen said in August it will begin a phase 2 trial of its Covid-19 drug in Israel.
Funding all of Caregen’s research and development is the company’s current cash cow: anti-wrinkle shots. Caregen’s injectable dermal filler that treats wrinkles brought in 32.7 billion won ($25 million) in 2022, accounting for 47.6% of total revenue. “Anti-aging is kind of the nature of human beings,” says Chung. “Everybody wants to look younger than their age.”
Update: January 22, 2024
This article has been updated to include responses from Caregen about the company’s stock decline and why it didn’t register Deglusterol as a drug.
