Samchundang Pharm, which recently plummeted from the top spot in Kosdaq market capitalization, dropped nearly 20% again, wiping out approximately 13 trillion won in market cap compared to March 30.
The adverse events originating from Samchundang Pharm have impacted the entire biotech sector, leading to a continued slump in biotech indices and Kosdaq active exchange-traded funds (ETFs).
Ligachem Biosciences announced the return of a previously licensed-in substance, but the stock saw a sharp decline in the afternoon due to some investors mistakenly interpreting it as the return of a substance the company had licensed out.
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◇Samchundang Pharm plunges 50% from peak
According to KG Zeroin's MP Doctor, Samchundang Pharm shares closed at 609,000 won, down 18.15% from the previous day. The stock has fallen for three consecutive trading days, plunging 48.56% from its closing price of 1,184,000 won on March 30. It also plummeted 50.61% compared to its 52-week high of 1,233,000 won recorded on the same day. Consequently, the company's market capitalization evaporated by about 13 trillion won, dropping from 27 trillion won to 14 trillion won.
The stock's decline is attributed to the ongoing aftermath of controversies related to its research and development and allegations of stock manipulation.
On March 30, Samchundang Pharm announced a U.S. exclusive sales agreement for oral semaglutide worth approximately 15 trillion won. However, it drew strong skepticism from the market due to the undisclosed partner, low initial milestone payments relative to the contract size, and an unusually high 90% profit-sharing ratio. Subsequently, the need for additional generic clinical trials was raised the following day, and the Korea Exchange previewed its designation as an unfaithful disclosure corporation, causing investors to turn away.
On Thursday, news broke that the Financial Supervisory Service is closely monitoring the volatility of Samchundang Pharm's stock and hinted at an internal investigation, extending the stock's losing streak to a third day.
Pharm Edaily, Edaily's premium biotech content platform, reported in-depth on the controversy and suspicions through articles titled "Blind faith in technology, the 'cruel history of stock prices'... Is it Samchundang Pharm's turn?" and "Samchundang's inflated contract, market skipped verification."
Pharm Edaily cited the "uncertainty of S-PASS technology" as the core of the Samchundang Pharm crisis. The company first unveiled S-PASS to the market in February 2020. Since then, multiple pipelines, including oral insulin and GLP-1, were introduced simultaneously.
In 2021 it emphasized the platform's scalability by announcing news of partner selection and contract discussions in the U.S., Japan, and China. However during that period, the company may have been aware of patent risks, and although it filed a Patent Cooperation Treaty (PCT) patent related to S-PASS, negative judgments regarding patentability were made during the international search process.
Meanwhile, Samchundang Pharm plans to hold a press conference on the 6th to resolve the ongoing suspicions.
◇K-bio slumps in the wake of Samchundang Pharm
The stock decline resulting from the Samchundang Pharm controversy negatively impacted the broader biotech industry. On Thursday, 22 biotech companies listed on the Kosdaq market recorded declines of more than 10%. Notably, Optus Pharm dropped 21.57%, Cytogen fell 16.34%, and TiumBio lost 14.65%. The KRX Health Care Index fell 5.98%, or 303.44 points, to close at 4,875.65 from the previous day's 5,072.81.
ETFs holding Samchundang Pharm also failed to avoid the decline. The company is included in a total of 69 ETFs. Timefolio Asset Management's TIME Kosdaq Active ETF fell 6.85% from the previous day to 10,340 won.
The ETF has a significantly high weighting of Samchundang Pharm at 8.95%. Samsung Active Asset Management's KoAct Bio Healthcare Active ETF, which has a 3.58% weighting in the stock, dropped 7.45% to 21,770 won.
Funds channeled into Samchundang Pharm through ETFs are known to be around 1.4 trillion won. Concerns are rising that funds could see a chain of outflows if the situation continues to worsen or if the company fails to provide a proper explanation.
The securities industry points out that this incident reveals the structural vulnerabilities and realities of the biotech industry. Similar cases like SillaJen have occurred in the past, but there has been no improvement, observers say.
"Problems or negative issues with biotech companies arise just when you start to forget about them," a pharmaceutical and biotech industry official said. "If this situation continues, trust in biotech companies will inevitably decline."
◇Ligachem Biosciences drops on 'misunderstanding' over technology return disclosure
Shares of Ligachem Biosciences closed down 11.73% at 181,400 won on Thursday. During afternoon trading, the stock dropped to as low as 167,000 won. The decline is analyzed to have stemmed from a misunderstanding, as some investors misinterpreted the company's disclosure regarding the return of technology.
On Thursday, Ligachem Biosciences announced it would terminate part of its antibody in-licensing agreement with U.S. biotech firm NovaRock. From June last year to this year, Ligachem had signed licensing agreements for a total of three antibodies from NovaRock. The terminated contract applies only to one antibody that was in the preclinical stage.
"This contract termination concerns a preclinical stage project under joint research, and we have not paid any money to NovaRock as the milestone requirements under the contract were not met," Ligachem Biosciences stated.
Ligachem is focusing on competitive pipelines among its various holdings, and this contract termination was decided as part of that process.
However, regarding Ligachem's contract termination, a misunderstanding occurred in some parts of the market, mistakenly judging that the company had received back a substance it had licensed out. As a result, the stock saw a sharp temporary decline after the news of the contract termination was announced.
"It's a somewhat baffling situation that the stock price fell due to a misunderstanding, as it was not the return of a pipeline licensed out to another company, but rather the return of an antibody we had licensed in from the outside" a Ligachem Biosciences official said.
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