South Korean drug developers are facing steeper hurdles to going public this year, as the Korea Exchange (KRX) tightens delisting rules and applies stricter scrutiny to new listing candidates. Industry officials warn that IPO failures or delays could disrupt drug development schedules and weaken negotiating power in technology licensing deals, given the industry's need for large-scale research and development funding.
According to industry sources on Monday, only two drug developers — NextGen Biosciences and Ingenia Therapeutics — have currently filed preliminary listing reviews with the Korea Exchange and entered the formal IPO process. Companies that had been preparing IPOs since last year have successively withdrawn or postponed their plans. Ubix Therapeutics, which filed for preliminary review last November, voluntarily withdrew its review in March, and First Bio postponed its technology evaluation originally scheduled for the first quarter. Companies pursuing the KOSDAQ technology special listing track must receive grades of "A, BBB" or higher in the technology evaluation before they can file a preliminary review with the exchange.
Sovargen's failure in the technology evaluation in February is seen as a factor behind the trend. Sovargen, which develops novel drugs for intractable brain diseases based on RNA therapeutics, proved its technological competitiveness in the global market by signing a 550 million dollar (approximately 770 billion won) licensing agreement with Angelini Pharma last September. However, Sovargen received "BBB, BBB" in the February technology evaluation, failing to meet the requirements to file a preliminary review for technology special listing. The main reason for the rejection was reportedly significant uncertainty regarding commercialization, as the licensing took place at the preclinical stage.
Reviews for companies that have filed for preliminary examination are also being delayed. NextGen Biosciences filed for preliminary review last December and Ingenia filed in January, but there has been no word from the exchange for four to five months. In principle, the Korea Exchange is required to notify review results within 60 days of a company's preliminary review filing. "We have not been recommended to voluntarily withdraw by the exchange, and we have been preparing step by step according to their requests," an Ingenia official said. "We are waiting for the exchange's announcement."
This is analyzed as related to the Korea Exchange's push to activate delistings. Since the second half of last year, the exchange has effectively restricted listings of companies whose market capitalization would fall short of 100 billion won after going public. That is because the KOSDAQ delisting market cap threshold will be strengthened to "less than 20 billion won" starting in July. A plan to remove "penny stocks" trading below 1,000 won from the market will also take effect. "As listing standards become stricter, drug developers can only challenge a listing if they have trillion-won-scale licensing deals along with substances that have entered clinical trials," an official in the biotech industry said.
In fact, drug developers with trillion-won-scale licensing records have shown high stock price gains after listing. AimedBio's share price rose from its IPO price of 11,000 won to 43,400 won (as of Monday's closing price), while Rznomics' share price climbed from its IPO price of 22,500 won to 171,800 won. They rank 43rd and 52nd respectively by market capitalization on the KOSDAQ. Kanaph Therapeutics, which listed earlier this year, was up 49.50% from its IPO price as of Sunday's close, while IMBiologics was up 50.58%.
In contrast, medical device companies, which face less uncertainty than drug developers, are actively pursuing listings. Among the biotech companies that have currently filed for preliminary review, Remedi, Sky Labs and MS Bio are all medical device companies. Medical device firms have the advantage of requiring smaller investment scales and generating revenue more easily than drug developers.
Concerns are emerging among drug developers attempting IPOs again this year. PinotBio, Adel and Novelty Nobility, which have previously failed in IPO attempts, are preparing to try again this year. "Companies that had planned clinical trials and other schedules in line with their IPO push could face disruptions in their drug development plans due to IPO failures or delays," an official in the biotech industry said. "There is also concern that negotiating power could weaken in the process of signing contracts with global pharmaceutical companies to generate licensing records that meet exchange standards."
